Canadian National's Second-Quarter 2001 Net Income Rises Four Per Cent to $240 Million, Excluding Non-Recurring Items.Business Editors MONTREAL--(BUSINESS WIRE)--July 23, 2001 First-half 2001 Net Income Increases Four Per Cent CENT, money. A copper coin of the United States of the value of ten mills; ten of them are equal to a dime, and one hundred, to one dollar. Each cent is required to contain one hundred and sixty-eight grains. Act of January 18th, 1837, 4 Sharsw. cont. of Story',s L. U. S. 2524. to $442 Million, Excluding One-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. Items in 2001 and 2000 Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. National (NYSE NYSE See: New York Stock Exchange :CNI (1) (Certified NetWare Instructor) See Novell certification. (2) (Coalition for Networked Information, Washington, DC, www.cni.org) A partnership of the Association of Research Libraries, CAUSE and EDUCOM, founded in 1990. ) (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :CNR See riser card. CNR - Communication and Network Riser .) today reported second-quarter 2001 net income of $240 million, excluding non-recurring items. For the comparable quarter of 2000, net income was $230 million.
Excluding non-recurring items, diluted earnings per share for the
quarter ended June 30, 2001, were $1.21, a five per cent increase over
diluted earnings per share of $1.15 for the same period of 2000. CN
recorded three non-recurring items in second-quarter 2001:
- A $62-million after-tax charge (31 cents per share) to operations
to recognize the costs of a workforce adjustment program that will
continue into 2002. A total of 690 positions are affected - about
three per cent of the system-wide workforce - as a result of CN's
continuing drive to improve productivity. To date, about 50 per
cent of the job reductions have already been completed. The charge
includes severance and other payments for affected employees;
- A $71-million after-tax charge (35 cents per share) to write down
CN's net investment in 360networks Inc.;
- A $110-million deferred income tax recovery (55 cents per share)
resulting from the enactment of lower corporate tax rates in
Canada.
Including non-recurring items, net income for second-quarter 2001 was $217 million, or $1.10 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the most recent quarter, excluding the workforce adjustment charge, rose six per cent to $444 million, while CN's operating ratio Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: , excluding this charge, improved by half a point to 68.1 per cent. Carloadings increased one per cent to 947 thousand. Revenues increased by four per cent to $1,392 million. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , excluding the workforce adjustment charge, rose by less than four per cent to $948 million. CN President and Chief Executive Officer Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. M. Tellier said: "The fundamental structure of CN's business remains strong, and I am satisfied with the company's revenue and earnings performance this quarter in the face of continuing high fuel costs and weakness in automotive production. Five of CN's seven business units recorded revenue gains during the period, with particular strength in our metals and minerals, grain and fertilizers, intermodal in·ter·mod·al adj. Relating to transportation by more than one means of conveyance, as by truck and rail: intermodal transport. , and forest products business units. "I realize CN's workforce adjustment program may concern employees. However, our company operates in a highly-competitive environment and it must strive continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. to improve productivity for the benefit of our customers and shareholders. The job reductions, the majority of which are non-union, result from the streamlining of administrative functions, more efficient management of scheduled freight The price or compensation paid for the transportation of goods by a carrier. Freight is also applied to the goods transported by such carriers. The liability of a carrier for freight damaged, lost, or destroyed during shipment is determined by contract, statute, or operations and other productivity improvements across the network." 360networks' court filings for protection from creditors in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. last month prompted CN to write down its net investment in 360networks during the second quarter. CN's deferred income tax recovery flowed from lower corporate tax rates recently enacted by the Government of Canada The Government of Canada is the federal government of Canada. The powers and structure of the federal government are set out in the Constitution of Canada. In modern Canadian use, the term "government" (or "federal government") refers broadly to the cabinet of the day and . The four per cent rise in CN's revenues in the most recent quarter reflected revenue gains in metals and minerals (13 per cent); grain and fertilizers (10 per cent); intermodal (nine per cent); forest products (seven per cent); and coal (one per cent). Revenues declined for automotive (9 per cent) and petroleum and chemicals (one per cent). Excluding the workforce adjustment charge, operating expenses increased during the second quarter mainly because of higher costs for fuel and material, partially offset by lower expenses for operating taxes and purchased services. Net income for the first half of 2001 was $442 million, excluding the non-recurring second-quarter items and a first-quarter $73-million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. gain (36 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. ) from the sale of CN's 50 per cent interest in the Detroit River Detroit River River, southeastern Michigan, U.S. Forming part of the boundary between Michigan and Ontario, Can., it connects Lake St. Clair with Lake Erie. It flows south for 32 mi (51 km) past Detroit and Windsor, Ont., where a bridge and tunnel connect the two cities. Tunnel tunnel, underground passage usually made without removing the overlying rock or soil. Although tunnels are approximately horizontal, they must be built with sufficient gradient for proper drainage. Company. Including these items, net income was $492 million. For the comparable period of 2000, net income was $426 million, excluding a $58-million after-tax gain (28 cents per share) related to CN's investment in 360networks. Including it, net income was $484 million. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the first six months of 2001 were $2.24, excluding non-recurring items. Including them, diluted earnings per share were $2.49. First-half 2000 diluted earnings per share were $2.11, excluding the one-time gain of 28 cents per share related to CN's investment in 360networks. Including it, diluted earnings per share were $2.39. Operating income for the first six months of 2001, excluding the workforce adjustment charge, rose four per cent to $829 million, while CN's operating ratio, excluding this charge, improved slightly to 70.3 per cent from 70.4 per cent in 2000. Carloadings were flat at 1,899 thousand. First-half 2001 revenues increased by three per cent to $2,790 million. Revenues increased at six business units: intermodal (11 per cent); metals and minerals (eight per cent); grain and fertilizers (five per cent); petroleum and chemicals (two per cent); forest products (two per cent), and coal (one per cent). Automotive revenue declined by 12 per cent. Operating expenses, excluding the workforce adjustment charge, increased three per cent in the first half of 2001 to $1,961 million. The financial results in this press release are reported in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents and were determined on the basis of United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). Canadian National Railway Company Canadian National Railway Company (NYSE: CNI, TSX: CNR) is a Canadian rail transportation company that operates the Canadian National Railway. It was created in December, 1918 as a Crown corporation of the Government of Canada to nationalize several bankrupt rail systems spans Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east , serving the ports of Vancouver Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , Prince Rupert Prince Rupert, city (1991 pop. 16,620), W British Columbia, Canada, on Kaien Island, in Chatham Sound near the mouth of the Skeena River, S of the Alaska border. , B.C., Montreal Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. , Halifax Halifax, city, Canada Halifax, city (1991 pop. 114,455), provincial capital, S central N.S., Canada, on the Atlantic Ocean. It is the largest city in the Maritime Provinces and is one of Canada's principal ice-free Atlantic ports. , New Orleans New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded , and Mobile, Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. ., and the key cities of Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing , Buffalo, Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. , Detroit Detroit, city, United States Detroit (dĭtroit`), city (1990 pop. 1,027,974), seat of Wayne co., SE Mich., on the Detroit River and between lakes St. Clair and Erie; inc. as a city 1815. , Memphis, St. Louis Louis, titular duke of Burgundy Louis, 1682–1712, titular duke of Burgundy; grandson of King Louis XIV of France. He became heir to the throne on the death (1711) of his father, Louis the Great Dauphin. , Jackson Jackson. 1 City (1990 pop. 37,446), seat of Jackson co., S Mich., on the Grand River; inc. 1857. It is an industrial and commercial center in a farm region. , Miss., with connections to all points in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. .
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(In millions, except per share data)
Three months ended Six months ended
June 30 June 30
------------------ ------------------
2001 2000 2001 2000
---------------------------------------------------------------------
(Unaudited)
Revenues $1,392 $1,333 $2,790 $2,705
---------------------------------------------------------------------
Operating expenses
excluding special charge 948 915 1,961 1,905
Special charge (Note 3) 98 - 98 -
---------------------------------------------------------------------
Total operating expenses 1,046 915 2,059 1,905
Operating income 346 418 731 800
Interest expense (78) (78) (158) (154)
Other income (loss) (Note 4) (90) 20 22 109
---------------------------------------------------------------------
Income before income taxes 178 360 595 755
Income tax recovery
(expense) (Note 7) 39 (130) (103) (271)
---------------------------------------------------------------------
Net income $217 $230 $492 $484
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings
per share (Note 8)
Basic earnings
per share $1.13 $1.18 $2.57 $2.45
Diluted earnings
per share $1.10 $1.15 $2.49 $2.39
Weighted average
number of shares
Basic 192.0 195.3 191.7 197.7
Diluted 200.9 203.2 200.4 205.2
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See accompanying notes to consolidated financial statements.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF OPERATING INCOME (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(In millions)
Three months ended Six months ended
June 30 June 30
------------------------- -------------------------
Variance Variance
Fav Fav
2001 2000 (Unfav) 2001 2000 (Unfav)
---------------------------------------------------------------------
(Unaudited)
Revenues
Petroleum and
chemicals $212 $215 (1%) $443 $434 2%
Metals and
minerals 117 104 13% 214 199 8%
Forest products 269 252 7% 514 502 2%
Coal 88 87 1% 173 172 1%
Grain and
fertilizers 275 250 10% 596 566 5%
Intermodal 244 223 9% 481 432 11%
Automotive 139 153 (9%) 266 301 (12%)
Other items 48 49 (2%) 103 99 4%
----------------------------- --------------
1,392 1,333 4% 2,790 2,705 3%
Operating
expenses
Labor and
fringe
benefits 370 362 (2%) 748 753 1%
Purchased
services 132 134 1% 265 274 3%
Depreciation and
amortization 131 129 (2%) 263 261 (1%)
Fuel 121 104 (16%) 264 213 (24%)
Equipment rents 75 70 (7%) 151 140 (8%)
Material 51 42 (21%) 114 104 (10%)
Operating taxes 37 43 14% 81 84 4%
Casualty and
other 31 31 - 75 76 1%
Special charge
(Note 3) 98 - (100%) 98 - (100%)
----------------------------- --------------
1,046 915 (14%) 2,059 1,905 (8%)
----------------------------- --------------
Operating
income $346 $418 (17%) $731 $800 (9%)
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating ratio
(excluding
special
charge) 68.1% 68.6% 0.5 70.3% 70.4% 0.1
---------------------------------------------------------------------
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See accompanying notes to consolidated financial statements.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED BALANCE SHEET (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(In millions)
June 30 December 31 June 30
2001 2000 2000
---------------------------------------------------------------------
(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash
equivalents $30 $15 $73
Accounts receivable
(Note 5) 662 726 841
Material and supplies 136 110 148
Deferred income taxes
(Note 7) 140 114 132
Other 142 143 179
---------------------------------------------------------------------
1,110 1,108 1,373
Properties 15,880 15,638 14,997
Other assets and
deferred charges 382 568 549
---------------------------------------------------------------------
Total assets $17,372 $17,314 $16,919
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities and
shareholders' equity
Current liabilities:
Accounts payable
and accrued charges $1,272 $1,389 $1,308
Current portion of
long-term debt 281 434 372
Other 82 82 78
---------------------------------------------------------------------
1,635 1,905 1,758
Deferred income taxes
(Note 7) 3,404 3,375 3,276
Other liabilities and
deferred credits 1,159 1,205 1,270
Long-term debt 3,873 3,886 3,951
Convertible preferred
securities 348 345 341
Shareholders' equity:
Common shares (Note 5) 4,402 4,349 4,399
Accumulated other
comprehensive income 36 151 131
Retained earnings 2,515 2,098 1,793
---------------------------------------------------------------------
6,953 6,598 6,323
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $17,372 $17,314 $16,919
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(In millions)
Three months ended Six months ended
June 30 June 30
------------------ ------------------
2001 2000 2001 2000
---------------------------------------------------------------------
(Unaudited)
Common shares (1)
Balance, beginning
of period $4,385 $4,482 $4,349 $4,597
Stock options exercised
and employee share plans 17 10 53 16
Share repurchase program - (93) - (214)
---------------------------------------------------------------------
Balance, end of period $4,402 $4,399 $4,402 $4,399
---------------------------------------------------------------------
---------------------------------------------------------------------
Accumulated other
comprehensive
income (loss)
Balance, beginning
of period $97 $(5) $151 $(6)
Other comprehensive income (loss):
Unrealized foreign exchange
gain (loss) on
translation of U.S.
dollar denominated
long-term debt
designated as a hedge
of the net investment
in U.S. subsidiaries 123 (56) (29) (59)
Unrealized foreign exchange
gain (loss) on translation
of the net investment
in U.S. subsidiaries (196) 73 51 78
Unrealized holding gain
(loss) on investment in
360networks Inc. (Note 4) 22 171 (129) 171
Unrealized holding gain
(loss) on fuel derivative
instruments (Note 6) 2 - (5) -
---------------------------------------------------------------------
Other comprehensive
income (loss) before
income taxes (49) 188 (112) 190
Income tax expense on
other comprehensive
income (loss) items
(Note 7) (12) (52) (3) (53)
---------------------------------------------------------------------
Other comprehensive
income (loss) (61) 136 (115) 137
---------------------------------------------------------------------
Balance, end of period $36 $131 $36 $131
---------------------------------------------------------------------
---------------------------------------------------------------------
Retained earnings
Balance, beginning
of period $2,335 $1,676 $2,098 $1,531
Net income 217 230 492 484
Share repurchase program - (78) - (152)
Dividends (37) (35) (75) (70)
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Balance, end of period $2,515 $1,793 $2,515 $1,793
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---------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
(1) The Company issued 0.5 million and 1.6 million shares for the
three and six months ended June 30, 2001, respectively, as a
result of stock options exercised. At June 30, 2001, the Company
had 192.2 million common shares outstanding.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(In millions)
Three months ended Six months ended
June 30 June 30
------------------ -------------------
2001 2000 2001 2000
---------------------------------------------------------------------
(Unaudited)
Operating activities
Net income $217 $230 $492 $484
Non-cash items in income:
Depreciation and
amortization 132 129 266 264
Deferred income taxes
(Note 7) (70) 82 17 174
Gain on sale of
investments (Note 4) - - (101) (84)
Write-down of investment
(Note 4) 99 - 99 -
Special charge (Note 3) 98 - 98 -
Changes in:
Accounts receivable
(Note 5) 51 (86) 51 (37)
Material and supplies (1) (6) (26) (32)
Accounts payable and
accrued charges 56 11 (107) (41)
Other net current assets
and liabilities (6) 2 (3) (71)
Payments for workforce
reductions (40) (42) (89) (103)
Other (49) 3 (105) 20
---------------------------------------------------------------------
Cash provided from
operating activities 487 323 592 574
---------------------------------------------------------------------
Investing activities
Net additions to
properties (269) (232) (398) (369)
Net proceeds (costs) from
disposal of properties (17) (5) (23) 6
Other 5 - 112 -
---------------------------------------------------------------------
Cash used by investing
activities (281) (237) (309) (363)
---------------------------------------------------------------------
Dividends paid to
shareholders (37) (35) (75) (70)
Financing activities
Issuance of long-term debt 236 282 504 282
Reduction of long-term debt (430) (260) (742) (301)
Issuance of common shares 15 6 45 10
Repurchase of common shares
(Note 5) - (186) - (364)
---------------------------------------------------------------------
Cash used by financing
activities (179) (158) (193) (373)
---------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents (10) (107) 15 (232)
Cash and cash equivalents,
beginning of period 40 180 15 305
---------------------------------------------------------------------
Cash and cash equivalents,
end of period $30 $73 $30 $73
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
CANADIAN NATIONAL RAILWAY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
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Note 1 - Basis of presentation
In the opinion of management, the accompanying unaudited interim
consolidated financial statements, prepared in accordance with U.S.
generally accepted accounting principles (U.S. GAAP), contain all
adjustments (consisting of normal recurring accruals) necessary to
present fairly the Company's financial position as at June 30, 2001,
December 31 and June 30, 2000, its results of operations and cash
flows for the three and six months ended June 30, 2001 and 2000.
While management believes that the disclosures presented are
adequate to make the information not misleading, these consolidated
financial statements and notes should be read in conjunction with the
Company's Annual Consolidated Financial Statements.
Note 2 - Acquisition of Wisconsin Central Transportation Corporation
On January 29, 2001, the Company, through an indirect wholly owned
subsidiary, and Wisconsin Central Transportation Corporation (WC)
entered into a merger agreement (the Merger), providing for the
acquisition of all of the shares of WC by the Company for a purchase
price of approximately $1,200 million (U.S.$800 million or U.S.$17.15
per share) payable in cash. The acquisition will be financed by debt
and cash on hand.
The Merger was approved by the shareholders of WC at a special
meeting held on April 4, 2001. In accordance with the terms of the
Merger, the Company's obligation to consummate the Merger is subject
to the Company having obtained from the U.S. Surface Transportation
Board (STB) a final, unappealable decision that approves the Merger or
exempts it from regulation and does not impose on the parties
conditions that would significantly and adversely affect the
anticipated economic benefits of the Merger to the Company.
On April 9, 2001, the Company and WC filed a common control
application with the STB seeking regulatory approval of the proposed
Merger. On May 9, 2001, the STB ruled that the proposed Merger would
be treated as a "minor" transaction for regulatory review purposes.
The STB has established a schedule anticipating a final agency
decision by September 7, 2001, if no environmental assessment is
required and if there is no oral argument.
If the acquisition is completed, the Company will account for the
acquisition of WC using the purchase method of accounting. Under this
method, the Company will prepare its financial statements reflecting
the allocation of the purchase price to acquire the WC shares based on
the relative fair values of the assets and liabilities of WC. The
results of operations of the Company will reflect the effects of the
acquisition following the consummation of the Merger.
Note 3 - Special charge
The Company recorded a charge of $98 million, $62 million after
tax, in the second quarter of 2001 for the reduction of 690 positions
by the end of 2002. The charge includes severance and other payments
to be made to affected employees.
Note 4 - Other income (loss)
In June 2001, the Company recorded a charge of $99 million, $71
million after tax, to write down its net investment in 360networks
Inc. In March 2000, the Company had recorded a gain of $84 million,
$58 million after tax, related to the exchange of its minority equity
investments in certain joint venture companies for 11.4 million shares
of 360networks Inc.
Prior to the write-down, the Company accounted for its investment
in 360networks Inc. in accordance with the Financial Accounting
Standards Board's (FASB) Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." The shares held were classified as "available-for-sale
securities" whereby the investment was carried at market value on the
balance sheet as part of Other assets and deferred charges. The change
in the value of the investment was recorded in Other comprehensive
income as an unrealized holding gain (loss). As a result of the
write-down, the Company eliminated all marked-to-market adjustments
related to its investment in 360networks Inc., previously recorded in
Other comprehensive income.
In the first quarter of 2001, the Company completed the sale of
its 50 percent interest in the Detroit River Tunnel Company (DRT) and
recorded a gain of $101 million, $73 million after tax. The DRT is a
1.6-mile rail-only tunnel crossing the Canada-U.S. border between
Detroit and Windsor, Ontario.
Note 5 - Financing activities
On January 23, 2001, the Board of Directors of the Company
approved a share repurchase program which allows for the repurchase of
up to 10 million common shares between January 31, 2001 and January
30, 2002 pursuant to a normal course issuer bid, at prevailing market
prices. At June 30, 2001, the Company had not repurchased any common
shares under the share repurchase program.
In 1998, the Company entered into a five-year revolving agreement
to sell eligible freight trade receivables up to a maximum of $250
million of receivables outstanding at any point in time. At June 30,
2001, pursuant to the agreement, $147 million and U.S.$40 million
(Cdn$62 million) had been sold on a limited recourse basis compared to
$147 million and U.S.$40 million (Cdn$61 million) at December 31,
2000.
Note 6 - Derivative instruments
On January 1, 2001, the Company adopted SFAS No. 133 "Accounting
for Derivative Instruments and Hedging Activities", as amended by SFAS
No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities". At June 30, 2001, a portion of the Company's fuel
requirements is being hedged using derivative instruments which are
being carried at market value on the balance sheet. The effective
portion of the cumulative change in the market value of the derivative
instruments has been recorded in Other comprehensive income. Since the
Company's derivative instruments have been highly effective in hedging
the changes in cash flows associated with forecasted purchases of
diesel fuel, these pronouncements have not had a material impact on
the statement of income. At June 30, 2001, Accumulated other
comprehensive income included an unrealized loss of $5 million, of
which $4 million relates to derivative transactions that will mature
within the next twelve months.
Note 7 - Income taxes
In June 2001, the Company recorded a reduction of $78 million to
its net deferred income tax liability resulting from the enactment of
lower corporate tax rates in Canada. As a result, for the current
quarter and six-month period ended June 30, 2001, a deferred income
tax recovery of $110 million was recorded in the Consolidated
statement of income and a deferred income tax expense of $32 million
was recorded in Other comprehensive income.
CANADIAN NATIONAL RAILWAY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
Note 8 - Net income and earnings per share
Net income for 2001 and 2000 include items of a non-recurring
nature as outlined in the following table:
Three months ended Six months ended
June 30 June 30
-----------------------------------------
2001 2000 2001 2000
---------------------------------------------------------------------
(In millions) (Unaudited)
Income before income taxes,
excluding non-recurring
items $375 $360 $691 $671
Income tax expense (135) (130) (249) (245)
---------------------------------------------------------------------
Net income, excluding
non-recurring items 240 230 442 426
Non-recurring items,
net of tax:
Special charge for
workforce reductions (62) - (62) -
Write-down of net
investment in
360networks Inc. (71) - (71) -
Deferred income tax
recovery 110 - 110 -
Gain on sale of Detroit
River Tunnel Company - - 73 -
Gain on 360networks Inc.
transaction - - - 58
---------------------------------------------------------------------
(23) - 50 58
Net income $217 $230 $492 $484
---------------------------------------------------------------------
---------------------------------------------------------------------
The following table provides a reconciliation between basic and
diluted earnings per share:
Three months ended Six months ended
June 30 June 30
-----------------------------------------
2001 2000 2001 2000
---------------------------------------------------------------------
(In millions, except per (Unaudited)
share data)
Net income $217 $230 $492 $484
Income impact on assumed
conversion of preferred
securities 3 3 6 6
---------------------------------------------------------------------
$220 $233 $498 $490
Weighted-average shares
outstanding 192.0 195.3 191.7 197.7
Effect of dilutive
securities and
stock options 8.9 7.9 8.7 7.5
---------------------------------------------------------------------
Weighted-average
diluted shares
outstanding 200.9 203.2 200.4 205.2
Basic earnings
per share $1.13 $1.18 $2.57 $2.45
Diluted earnings
per share $1.10 $1.15 $2.49 $2.39
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CANADIAN NATIONAL RAILWAY COMPANY
SELECTED RAILROAD STATISTICS (U.S. GAAP)
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Three months ended Six months ended
June 30 June 30
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2001 2000 2001 2000
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(Unaudited)
Rail operations
Freight revenues
($ millions) 1,344 1,284 2,687 2,606
Gross ton miles
(millions) 73,077 70,693 147,455 144,298
Revenue ton miles
(RTM) (millions) 38,104 36,537 77,358 75,122
Route miles
(includes Canada
and the U.S.) 15,479 15,649 15,479 15,649
Operating expenses
per RTM (cents) * 2.49 2.50 2.53 2.54
Freight revenue
per RTM (cents) 3.53 3.51 3.47 3.47
Carloads (thousands) 947 939 1,899 1,891
Freight revenue
per carload ($) 1,419 1,367 1,415 1,378
Diesel fuel consumed
(Liters in millions) 328 315 682 659
Average fuel price
($/Liter) 0.36 0.32 0.37 0.31
Revenue ton miles
per liter of fuel
consumed 116 116 113 114
Gross ton miles
per liter of fuel
consumed 223 224 216 219
Diesel fuel consumed
(U.S. gallons
in millions) 87 83 180 174
Average fuel price
($/U.S. gallon) 1.30 1.19 1.36 1.18
Revenue ton miles
per U.S. gallon of
fuel consumed 438 440 430 432
Gross ton miles per
U.S. gallon of
fuel consumed 840 852 819 829
Locomotive bad order
ratio (%) 6.4 6.0 6.6 6.3
Freight car bad order
ratio (%) 5.4 4.6 5.9 5.2
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Productivity
Operating ratio (%)* 68.1 68.6 70.3 70.4
Freight revenue per
route mile ($ thousands) 87 82 174 167
Revenue ton miles per
route mile (thousands) 2,462 2,335 4,998 4,800
Freight revenue per
average number of
employees ($ thousands) 60 57 122 117
Revenue ton miles per
average number of
employees (thousands) 1,694 1,616 3,509 3,387
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Employees
Number at end of period 22,817 22,987 22,817 22,987
Average number
during period 22,499 22,603 22,047 22,180
Labor and fringe benefits
expense per RTM (cents) 0.97 0.99 0.97 1.00
Injury frequency rate
per 200,000 person hours 4.0 5.8 4.3 6.1
Accident rate per million
train miles 2.0 2.8 1.8 2.6
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Financial
Debt to total
capitalization
ratio (% at end of period) 39.3 42.5 39.3 42.5
Return on assets
(% at end of period) 1.5 1.6 3.4 3.4
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* 2001 figures exclude special charge
CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY INFORMATION (U.S. GAAP)
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Three months ended Six months ended
June 30 June 30
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Variance Variance
Fav Fav
2001 2000 (Unfav) 2001 2000 (Unfav)
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(Unaudited)
Revenue ton miles
(millions)
Petroleum and
chemicals 5,745 6,027 (5%) 12,118 12,237 (1%)
Metals and
minerals 2,736 2,614 5% 5,094 4,837 5%
Forest
products 7,521 7,344 2% 14,506 14,519 -
Coal 4,058 4,007 1% 7,994 8,254 (3%)
Grain and
fertilizers 10,492 9,413 11% 22,951 21,416 7%
Intermodal 6,773 6,264 8% 13,205 12,144 9%
Automotive 779 868 (10%) 1,490 1,715 (13%)
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38,104 36,537 4% 77,358 75,122 3%
Freight revenue
/ RTM (cents)
Petroleum and
chemicals 3.69 3.57 3% 3.66 3.55 3%
Metals and
minerals 4.28 3.98 8% 4.20 4.11 2%
Forest
products 3.58 3.43 4% 3.54 3.46 2%
Coal 2.17 2.17 - 2.16 2.08 4%
Grain and
fertilizers 2.62 2.66 (2%) 2.60 2.64 (2%)
Intermodal 3.60 3.56 1% 3.64 3.56 2%
Automotive 17.84 17.63 1% 17.85 17.55 2%
Total 3.53 3.51 1% 3.47 3.47 -
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Carloads
(thousands)
Petroleum and
chemicals 123 126 (2%) 257 254 1%
Metals and
minerals 67 70 (4%) 126 133 (5%)
Forest
products 124 123 1% 243 246 (1%)
Coal 128 127 1% 266 262 2%
Grain and
fertilizers 144 128 13% 298 277 8%
Intermodal 282 278 1% 555 544 2%
Automotive 79 87 (9%) 154 175 (12%)
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947 939 1% 1,899 1,891 -
Freight revenue /
carload (dollars)
Petroleum and
chemicals 1,724 1,706 1% 1,724 1,709 1%
Metals and
minerals 1,746 1,486 17% 1,698 1,496 14%
Forest
products 2,169 2,049 6% 2,115 2,041 4%
Coal 688 685 - 650 656 (1%)
Grain and
fertilizers 1,910 1,953 (2%) 2,000 2,043 (2%)
Intermodal 865 802 8% 867 794 9%
Automotive 1,759 1,759 - 1,727 1,720 -
Total 1,419 1,367 4% 1,415 1,378 3%
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