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Last updated on April 20, 2014 at 14:04 EDT

CN reports Q4-2012 net income of C$610 million, or C$1.41 per diluted share

January 22, 2013

Adjusted diluted EPS for full-year 2012 increased 16 per cent to C$5.61 ((1))

Full-year 2012 volumes and earnings highest in Company history

MONTREAL, Jan. 22, 2013 /PRNewswire/ – CN (TSX: CNR) (NYSE: CNI) today
reported its financial and operating results for the fourth quarter and
year ended Dec. 31, 2012.

Fourth-quarter and full-year 2012 financial highlights

        --  Record fourth-quarter and full-year 2012 carloads, revenues and
            revenue ton-miles.
        --  Fourth-quarter 2012 net income was C$610 million, or C$1.41 per
            diluted share, compared with net income of C$592 million or,
            C$1.32 per diluted share, for the year-earlier quarter.
        --  Q4-2012 diluted earnings per share (EPS) of C$1.41 increased
            eight per cent over year-earlier adjusted diluted EPS of C$1.30
            (adjusted net income of C$581 million), which excluded an
            income tax recovery. (1)
        --  Full-year 2012 net income was C$2,680 million, or C$6.12 per
            diluted share, compared with net income of C$2,457 million, or
            C$5.41 per diluted share, for 2011.
        --  Full-year 2012 adjusted diluted EPS increased 16 per cent to
            C$5.61, with adjusted 2012 net income of C$2,456 million versus
            adjusted net income of C$2,194 million in 2011.(1)
        --  Q4-2012 operating income increased 10 per cent to C$922
            million, while full-year 2012 operating income rose 12 per cent
            to C$3,685 million.
        --  Fourth-quarter 2012 operating ratio improved by 1.1 points to
            63.6 per cent; full-year 2012 operating ratio was 62.9 per
            cent, a 0.6-point improvement.
        --  2012 free cash flow totalled C$1,006 million, after voluntary
            pension plan contributions of C$700 million, compared with free
            cash flow of C$1,175 million for 2011. (1)

Claude Mongeau, president and chief executive officer, said: “CN’s team
of railroaders delivered impressive fourth-quarter results on the
strength of a seven per cent increase in revenues, capping a very
strong 2012 performance.

“Thanks to our supply chain collaboration focus and solid execution,
CN’s growth last year continued to outpace that of the overall economy,
generating the highest volumes and earnings in Company history.

“In 2012, we experienced strong growth in commodities related to oil and
gas, particularly crude oil, and saw continued market share gains in
overseas and domestic intermodal. CN also benefited from strong coal
and petroleum coke exports, increased wheat and soybean exports, as
well as higher lumber and panels shipments to the United States.”

Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large portion of
its revenues and expenses is denominated in U.S. dollars. As such, the
Company’s results are affected by exchange-rate fluctuations. On a
constant currency basis that excludes the impact of fluctuations in
foreign currency exchange rates, CN’s fourth-quarter 2012 net income
would have been higher by C$11 million, or C$0.03 per diluted share,
while its 2012 net income would have been lower by C$14 million, or
C$0.03 per diluted share.( (1))

Positive 2013 outlook, increased dividend ((2))
Mongeau said: “For 2013, CN anticipates continued gradual improvement in
the economy and further growth opportunities in intermodal, energy and
other resource markets. Despite the challenge of an approximate
C$150-million headwind related to increased pension expense and the
impact of depreciation studies, CN is aiming for high single-digit
growth in 2013 diluted earnings per share over adjusted diluted
earnings per share of C$5.61 for 2012. CN also expects to generate 2013
free cash flow in the range of C$800 million to C$900 million,
including a normalized, higher level of cash taxes. ((1))

“Given CN’s strong balance sheet and its solid outlook for earnings and
free cash flow generation, I am pleased to announce that the Company’s
Board of Directors has approved a 15 per cent increase in CN’s 2013
quarterly common-share dividend.”

Fourth-quarter 2012 revenues, traffic volumes and expenses
Revenues for the fourth quarter of 2012 increased by seven per cent to
C$2,534 million. Revenues increased for coal (15 per cent), petroleum
and chemicals (13 per cent), grain and fertilizers (11 per cent),
intermodal (seven per cent), and automotive (five per cent). Revenues
declined for forest products (two per cent), and metals and minerals
(one per cent).

Carloadings for the quarter rose three per cent to 1,270 thousand.

Revenue ton-miles, measuring the relative weight and distance of rail
freight transported by CN, increased by eight per cent over the
year-earlier quarter.

Rail freight revenue per revenue ton-mile, a measurement of yield
defined as revenue earned on the movement of a ton of freight over one
mile, declined by one per cent.

Total operating expenses increased by five per cent to C$1,612 million.

Full-year 2012 revenues, traffic volumes and expenses
2012 revenues increased 10 per cent to C$9,920 million, with all
business units registering gains: petroleum and chemicals (15 per
cent), coal (15 per cent), metals and minerals (13 per cent),
intermodal (11 per cent), automotive (11 per cent), forest products
(five per cent), and grain and fertilizers (four per cent).

The rise in total revenues was largely attributable to higher freight
volumes, due in part to growth in North American and Asian economies,
and the Company’s performance above market conditions in a number of
segments, as well as increased volumes in the second quarter as a
result of a labor disruption at a key competitor; freight rate
increases; the impact of a higher fuel surcharge as a result of
year-over-year increases in applicable fuel prices and higher volumes;
and the positive translation impact of the weaker Canadian dollar on
U.S. dollar-denominated revenues.

Carloadings for the year increased four per cent to 5,059 thousand.

Revenue ton-miles increased by seven per cent over 2011, while rail
freight revenue per revenue ton-mile increased by three per cent.

Total operating expenses for 2012 increased by nine per cent to C$6,235
million, mainly due to higher labor and fringe benefits expense,
increased purchased services and material expense, as well as increased
fuel costs.

Forward-Looking Statements
Certain information included in this news release constitutes
“forward-looking statements” within the meaning of the United States
Private Securities Litigation Reform Act of 1995 and under Canadian
securities laws. CN cautions that, by their nature, these
forward-looking statements involve risks, uncertainties and
assumptions. The Company cautions that its assumptions may not
materialize and that current economic conditions render such
assumptions, although reasonable at the time they were made, subject to
greater uncertainty. Such forward-looking statements are not guarantees
of future performance and involve known and unknown risks,
uncertainties and other factors which may cause the actual results or
performance of the Company or the rail industry to be materially
different from the outlook or any future results or performance implied
by such statements. To the extent that CN has provided guidance that
are non-GAAP financial measures, the Company may not be able to provide
a reconciliation to the GAAP measures, due to unknown variables and
uncertainty related to future results. Key assumptions used in
determining forward-looking information are set forth below.

Key assumptions
CN has made a number of economic and market assumptions in preparing its
2013 outlook. The Company is forecasting that North American industrial
production for the year will increase by about 2.0 per cent. CN also
expects U.S. housing starts to be in the range of 950,000 units and
U.S. motor vehicles sales to be approximately 15 million units. In
addition, CN is assuming that 2013/2014 grain crop production in both
Canada and the U.S. will be in-line with their respective five-year
averages. With respect to the 2012/2013 crop, production in Canada was
slightly above the five-year average while production in the U.S. was
below the five-year average. With these assumptions, CN assumes carload
growth of three to four per cent, along with continued pricing
improvement above inflation. CN also assumes the Canadian-U.S. exchange
rate to be around parity for 2013 and that the price of crude oil (West
Texas Intermediate) for the year to be in the range of US$90-$100 per
barrel. In 2013, CN plans to invest approximately C$1.9 billion in
capital programs, of which more than C$1 billion will be targeted on
track infrastructure to maintain a safe and fluid railway network. In
addition, the Company will invest in projects to support a number of
productivity and growth initiatives.

Important risk factors that could affect the forward-looking statements
include, but are not limited to, the effects of general economic and
business conditions, industry competition, inflation, currency and
interest rate fluctuations, changes in fuel prices, legislative and/or
regulatory developments, compliance with environmental laws and
regulations, actions by regulators, various events which could disrupt
operations, including natural events such as severe weather, droughts,
floods and earthquakes, labor negotiations and disruptions,
environmental claims, uncertainties of investigations, proceedings or
other types of claims and litigation, risks and liabilities arising
from derailments, and other risks detailed from time to time in reports
filed by CN with securities regulators in Canada and the United States.
Reference should be made to “Management’s Discussion and Analysis” in
CN’s annual and interim reports, Annual Information Form and Form 40-F
filed with Canadian and U.S. securities regulators, available on CN’s
website, for a summary of major risk factors.

CN assumes no obligation to update or revise forward-looking statements
to reflect future events, changes in circumstances, or changes in
beliefs, unless required by applicable Canadian securities laws. In the
event CN does update any forward-looking statement, no inference should
be made that CN will make additional updates with respect to that
statement, related matters, or any other forward-looking statement.


    1) See discussion and reconciliation of non-GAAP adjusted
       performance-measures in the attached supplementary schedule,
       Non-GAAP Measures.

    2) See Forward-Looking statements for a summary of the key assumptions
       and risks regarding CN's 2013 outlook.

CN – Canadian National Railway Company and its operating railway
subsidiaries – spans Canada and mid-America, from the Atlantic and
Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver,
Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala.,
and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit,
Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul,
Memphis, and Jackson, Miss., with connections to all points in North
America. For more information on CN, visit the Company’s website at www.cn.ca.


    CANADIAN NATIONAL RAILWAY COMPANY

    CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP) - unaudited

    (In millions, except per share data)

                                   Three months ended          Year ended

                                        December 31           December 31

                                         2012      2011      2012      2011

    Revenues                  $         2,534   $ 2,377   $ 9,920   $ 9,028

    Operating expenses                                                     

             Labor and fringe             463       511     1,952     1,812
             benefits

             Purchased                    340       295     1,248     1,120
             services and
             material

             Fuel                         400       382     1,524     1,412

             Depreciation and             237       231       924       884
             amortization

             Equipment rents               64        63       249       228

             Casualty and                 108        56       338       276
             other

    Total operating expenses            1,612     1,538     6,235     5,732

    Operating income                      922       839     3,685     3,296

    Interest expense                     (86)      (85)     (342)     (341)

    Other income (loss)                   (5)       21       315       401 

    Income before income                  831       775     3,658     3,356
    taxes

    Income tax expense                  (221)     (183)     (978)     (899)

    Net income                $           610   $   592   $ 2,680   $ 2,457

    Earnings per share                                                     

             Basic            $          1.42   $  1.33   $  6.15   $  5.45

             Diluted          $          1.41   $  1.32   $  6.12   $  5.41

    Weighted-average number
    of shares

             Basic                      430.3     444.3     435.6     451.1

             Diluted                    432.0     447.3     437.7     454.4

These unaudited interim consolidated financial statements, expressed in
Canadian dollars, and 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
Canadian National Railway Company’s (the Company) financial position as
at December 31, 2012 and December 31, 2011, and its results of
operations, comprehensive income, changes in shareholders’ equity and
cash flows for the three months and years ended December 31, 2012 and
2011. These consolidated financial statements have been prepared using
accounting policies consistent with those used in preparing the
Company’s 2012 Annual Consolidated Financial Statements and should be
read in conjunction with such statements, notes thereto and
Management’s Discussion and Analysis (MD&A).


    CANADIAN NATIONAL RAILWAY COMPANY

    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (U.S. GAAP) -unaudited

    (In millions)

                                     Three months ended        Year ended

                                          December 31         December 31

                                        2012       2011      2012      2011

    Net income                       $   610 $      592   $ 2,680 $   2,457

    Other comprehensive income
    (loss)

      Foreign exchange gain (loss)
      on:

        Translation of the net            71      (185)     (128)       130
        investment in foreign
        operations

        Translation of US
        dollar-denominated long-term
        debt designated  as a hedge
        of the net investment in
        U.S. subsidiaries               (66)        180       123     (122)

      Pension and other
      postretirement benefit plans

        Net actuarial loss arising     (660)    (1,541)     (660)   (1,541)
        during the year

        Prior service cost arising       (6)       (28)       (6)      (28)
        during the year

        Amortization of net               27         2        119         8
        actuarial loss included in
        net periodic  benefit cost
        (income)

        Amortization of prior              2         2          7         4
        service cost included in net
        periodic benefit cost
        (income)

      Derivative instruments               -        (1)         -       (2)

    Other comprehensive loss before    (632)    (1,571)     (545)   (1,551)
    income taxes

    Income tax recovery                  178        379       127       421

    Other comprehensive loss           (454)    (1,192)     (418)   (1,130)

    Comprehensive income (loss)      $   156 $    (600)   $ 2,262 $   1,327


    CANADIAN NATIONAL RAILWAY COMPANY

    CONSOLIDATED BALANCE SHEET (U.S. GAAP) -unaudited

    (In millions)

                                               December 31   December 31

                                                      2012          2011

    Assets                                                              

    Current assets:                                                     

      Cash and cash equivalents                $       155   $       101

      Restricted cash and cash equivalents             521           499

      Accounts receivable                              831           820

      Material and supplies                            230           201

      Deferred and receivable income taxes              43           122

      Other                                             89           105

    Total current assets                             1,869         1,848

    Properties                                      24,541        23,917

    Intangible and other assets                        249           261

    Total assets                               $    26,659   $    26,026

    Liabilities and shareholders' equity                                

    Current liabilities:                                                

      Accounts payable and other               $     1,626   $     1,580

      Current portion of long-term debt                577           135

    Total current liabilities                        2,203         1,715

    Deferred income taxes                            5,555         5,333

    Pension and other postretirement benefits,         784         1,095
    net of current portion

    Other liabilities and deferred credits             776           762

    Long-term debt                                   6,323         6,441

    Shareholders' equity:                                               

      Common shares                                  4,108         4,141

      Accumulated other comprehensive loss         (3,257)       (2,839)

      Retained earnings                             10,167         9,378

    Total shareholders' equity                      11,018        10,680

    Total liabilities and shareholders' equity $    26,659   $    26,026

These unaudited interim consolidated financial statements, expressed in
Canadian dollars, and prepared in accordance with U.S. GAAP, contain
all adjustments (consisting of normal recurring accruals) necessary to
present fairly the Company’s financial position as at December 31, 2012
and December 31, 2011, and its results of operations, comprehensive
income, changes in shareholders’ equity and cash flows for the three
months and years ended December 31, 2012 and 2011. These consolidated
financial statements have been prepared using accounting policies
consistent with those used in preparing the Company’s 2012 Annual
Consolidated Financial Statements and should be read in conjunction
with such statements, notes thereto and MD&A.


    CANADIAN NATIONAL RAILWAY COMPANY

    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP)
    -unaudited

    (In millions)

                                Three months ended            Year ended

                                     December 31             December 31

                                   2012        2011        2012        2011

    Common shares(1)                                                       

    Balance, beginning of     $   4,120   $   4,149   $   4,141   $   4,252
    period

      Stock options exercised        23          24         128          74
      and other

      Share repurchase             (35)        (32)       (161)       (185)
      programs

    Balance, end of period    $   4,108   $   4,141   $   4,108   $   4,141

    Accumulated other
    comprehensive loss

    Balance, beginning of     $ (2,803)   $ (1,647)   $ (2,839)   $ (1,709)
    period

      Other comprehensive         (454)     (1,192)       (418)     (1,130)
      loss

    Balance, end of period    $ (3,257)   $ (2,839)   $ (3,257)   $ (2,839)

    Retained earnings                                                      

    Balance, beginning of     $   9,988   $   9,154   $   9,378   $   8,741
    period

      Net income                    610         592       2,680       2,457

      Share repurchase            (270)       (224)     (1,239)     (1,235)
      programs

      Dividends                   (161)       (144)       (652)       (585)

    Balance, end of period    $  10,167   $   9,378   $  10,167   $   9,378

    (1) During the three months and year ended December 31, 2012, the
        Company issued 0.5 million and 3.2 million common shares,
        respectively, as a result of stock options exercised and
        repurchased 3.6 million and 16.9 million common shares,
        respectively, under its share repurchase programs. At December 31,
        2012, the Company had 428.4 million common shares outstanding.


    CANADIAN NATIONAL RAILWAY COMPANY

    CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP) -unaudited

    (In millions)

                                Three months ended            Year ended

                                     December 31             December 31

                                   2012        2011        2012        2011

    Operating activities                                                   

    Net income                $     610   $     592   $   2,680   $   2,457

    Adjustments to reconcile
    net income to net cash
    provided by operating
    activities:

      Depreciation and              237         231         924         884
      amortization

      Deferred income taxes         120         204         451         531

      Gain on disposal of             -           -       (281)       (348)
      property

    Changes in operating
    assets and liabilities:

      Accounts receivable            17        (34)        (20)        (51)

      Material and supplies          43          70        (30)          11

      Accounts payable and         (11)        (68)         129          34
      other

      Other current assets          (7)        (11)        (13)         (2)

    Pensions and other, net       (285)       (393)       (780)       (540)

    Net cash provided by            724         591       3,060       2,976
    operating activities

    Investing activities                                                   

    Property additions            (610)       (613)     (1,731)     (1,625)

    Disposal of property              -           -         311         369

    Change in restricted cash       (3)        (10)        (22)       (499)
    and cash equivalents

    Other, net                       16           4          21          26

    Net cash used in              (597)       (619)     (1,421)     (1,729)
    investing activities

    Financing activities                                                   

    Issuance of debt                493       1,165       2,354       1,361

    Repayment of debt             (195)       (858)     (2,001)     (1,083)

    Issuance of common shares
    due to exercise of stock
    options and related
    excess tax benefits
    realized                         20          21         117          77

    Repurchase of common          (305)       (256)     (1,400)     (1,420)
    shares

    Dividends paid                (161)       (144)       (652)       (585)

    Net cash used in              (148)        (72)     (1,582)     (1,650)
    financing activities

    Effect of foreign
    exchange fluctuations on
    US dollar-denominated
    cash and cash equivalents         1           9         (3)          14

    Net increase (decrease)        (20)        (91)          54       (389)
    in cash and cash
    equivalents

    Cash and cash                   175         192         101         490
    equivalents, beginning of
    period

    Cash and cash             $     155   $     101   $     155   $     101
    equivalents, end of
    period

    Supplemental cash flow
    information

      Net cash receipts from  $   2,481   $   2,336   $   9,877   $   8,995
      customers and other

      Net cash payments for:                                               

        Employee services,      (1,239)     (1,092)     (5,241)     (4,643)
        suppliers and other
        expenses

        Interest                   (89)        (80)       (364)       (329)

        Personal injury and        (22)        (49)        (79)        (97)
        other claims

        Pensions                  (257)       (365)       (844)       (468)

        Income taxes              (150)       (159)       (289)       (482)

    Net cash provided by      $     724   $     591   $   3,060   $   2,976
    operating activities


    CANADIAN NATIONAL RAILWAY COMPANY

    SELECTED RAILROAD STATISTICS (U.S. GAAP) -unaudited

                                     Three months ended        Year ended

                                          December 31         December 31

                                       2012        2011      2012      2011

    Statistical operating data                                             

    Rail freight revenues ($
    millions)                         2,280       2,132     8,938     8,111

    Gross ton miles (GTM) (millions) 97,873      92,128   383,754   357,927

    Revenue ton miles (RTM)
    (millions)                       52,124      48,156   201,496   187,753

    Carloads (thousands)              1,270       1,232     5,059     4,873

    Route miles (includes Canada and
    the U.S.) (1)                    20,100      20,000    20,100    20,000

    Employees (end of period)        23,430      23,339    23,430    23,339

    Employees (average for the
    period)                          23,532      23,433    23,466    23,079

    Productivity                                                           

    Operating ratio (%)                63.6        64.7      62.9      63.5

    Rail freight revenue per RTM
    (cents)                            4.37        4.43      4.44      4.32

    Rail freight revenue per carload
    ($)                               1,795       1,731     1,767     1,664

    Operating expenses per GTM
    (cents)                            1.65        1.67      1.62      1.60

    Labor and fringe benefits
    expense per GTM (cents)            0.47        0.55      0.51      0.51

    GTMs per average number of
    employees (thousands)             4,159       3,932    16,354    15,509

    Diesel fuel consumed (US gallons
    in millions)                       99.9        94.3     388.7     367.7

    Average fuel price ($/US gallon)   3.53        3.55      3.47      3.39

    GTMs per US gallon of fuel
    consumed                            980         977       987       973

    Safety indicators                                                      

    Injury frequency rate per
    200,000 person hours(2)            1.34        1.32      1.31      1.55

    Accident rate per million train
    miles (2)                          1.77        1.96      2.10      2.25

    Financial ratio                                                        

    Debt-to-total capitalization
    ratio (% at end of period) (3)     38.5        38.1      38.5      38.1

    (1)   Rounded to the nearest hundred miles.

    (2)   Based on Federal Railroad Administration (FRA) reporting
          criteria.

    (3)   Debt-to-total capitalization is calculated as total long-term
          debt plus current portion of long-term debt, divided by the sum
          of total debt plus total shareholders' equity.

Certain of the 2011 comparative figures have been restated to conform
with the 2012 presentation. Such statistical data and related
productivity measures are based on estimated data available at such
time and are subject to change as more complete information becomes
available.


    CANADIAN NATIONAL RAILWAY COMPANY

    SUPPLEMENTARY INFORMATION (U.S. GAAP) -unaudited

                 Three months ended December 31             Year ended December 31

                                        % Change                             % Change
                                              at                                   at
                                        constant                             constant
                                    %   currency                         %   currency
                               Change       Fav                     Change       Fav
                                 Fav    (Unfav)                       Fav    (Unfav)
                  2012   2011 (Unfav)        (1)      2012    2011 (Unfav)        (1)

    Revenues
    (millions
    of dollars)

    Petroleum      427    377     13%        16%     1,640   1,420     15%        15%
    and
    chemicals

    Metals and     274    278    (1%)         1%     1,133   1,006     13%        12%
    minerals

    Forest         323    329    (2%)          -     1,331   1,270      5%         4%
    products

    Coal           171    149     15%        17%       712     618     15%        15%

    Grain and      459    413     11%        13%     1,590   1,523      4%         4%
    fertilizers

    Intermodal     498    464      7%         8%     1,994   1,790     11%        11%

    Automotive     128    122      5%         7%       538     484     11%        10%

    Total rail   2,280  2,132      7%         9%     8,938   8,111     10%        10%
    freight
    revenues

    Other          254    245      4%         5%       982     917      7%         6%
    revenues

    Total        2,534  2,377      7%         8%     9,920   9,028     10%         9%
    revenues

    Revenue ton
    miles
    (millions)

    Petroleum   10,154  8,532     19%        19%    37,449  32,962     14%        14%
    and
    chemicals

    Metals and   5,000  5,119    (2%)       (2%)    20,236  18,899      7%         7%
    minerals

    Forest       7,141  7,345    (3%)       (3%)    29,674  29,336      1%         1%
    products

    Coal         5,754  4,685     23%        23%    23,570  19,980     18%        18%

    Grain and   12,826 11,900      8%         8%    45,417  45,468      -          -
    fertilizers

    Intermodal  10,614  9,950      7%         7%    42,396  38,563     10%        10%

    Automotive     635    625      2%         2%     2,754   2,545      8%         8%

                52,124 48,156      8%         8%   201,496 187,753      7%         7%

    Rail
    freight
    revenue /
    RTM (cents)

    Total rail    4.37   4.43    (1%)          -      4.44    4.32      3%         2%
    freight
    revenue per
    RTM

    Commodity
    groups:

    Petroleum     4.21   4.42    (5%)       (3%)      4.38    4.31      2%         1%
    and
    chemicals

    Metals and    5.48   5.43      1%         3%      5.60    5.32      5%         4%
    minerals

    Forest        4.52   4.48      1%         3%      4.49    4.33      4%         3%
    products

    Coal          2.97   3.18    (7%)       (5%)      3.02    3.09    (2%)       (3%)

    Grain and     3.58   3.47      3%         5%      3.50    3.35      4%         4%
    fertilizers

    Intermodal    4.69   4.66      1%         2%      4.70    4.64      1%         1%

    Automotive   20.16  19.52      3%         6%     19.54   19.02      3%         2%

    Carloads
    (thousands)

    Petroleum      150    139      8%         8%       594     560      6%         6%
    and
    chemicals

    Metals and     246    261    (6%)       (6%)     1,024   1,013      1%         1%
    minerals

    Forest         109    109       -          -       445     443       -          -
    products

    Coal           103    110    (6%)       (6%)       435     464    (6%)       (6%)

    Grain and      171    152     13%        13%       597     592      1%         1%
    fertilizers

    Intermodal     437    408      7%         7%     1,742   1,584     10%        10%

    Automotive      54     53      2%         2%       222     217      2%         2%

                 1,270  1,232      3%         3%     5,059   4,873      4%         4%

    Rail
    freight
    revenue /
    carload
    (dollars)

    Total rail   1,795  1,731      4%         6%     1,767   1,664      6%         6%
    freight
    revenue per
    carload

    Commodity
    groups:

    Petroleum    2,847  2,712      5%         7%     2,761   2,536      9%         8%
    and
    chemicals

    Metals and   1,114  1,065      5%         7%     1,106     993     11%        10%
    minerals

    Forest       2,963  3,018    (2%)          -     2,991   2,867      4%         4%
    products

    Coal         1,660  1,355     23%        25%     1,637   1,332     23%        22%

    Grain and    2,684  2,717    (1%)         1%     2,663   2,573      3%         3%
    fertilizers

    Intermodal   1,140  1,137       -         1%     1,145   1,130      1%         1%

    Automotive   2,370  2,302      3%         5%     2,423   2,230      9%         8%

    (1) See supplementary schedule entitled Non-GAAP Measures for an explanation of
    this Non-GAAP measure.

Such statistical data and related productivity measures are based on
estimated data available at such time and are subject to change as more
complete information becomes available.


    CANADIAN NATIONAL RAILWAY COMPANY

    NON-GAAP MEASURES - unaudited

 

Adjusted performance measures

For the three months and year ended December 31, 2012, the Company
reported adjusted net income of $610 million, or $1.41 per diluted
share and $2,456 million, or $5.61 per diluted share, respectively. The
adjusted figures for the year ended December 31, 2012 exclude a gain on
disposal of a segment of the Bala and a segment of the Oakville
subdivisions, together with the rail fixtures and certain passenger
agreements, of $281 million, or $252 million after-tax ($0.57 per
diluted share); and a net income tax expense of $28 million ($0.06 per
diluted share) consisting of a $35 million income tax expense resulting
from the enactment of higher provincial corporate income tax rates that
was partly offset by a $7 million income tax recovery resulting from
the recapitalization of a foreign investment.

For the three months and year ended December 31, 2011, the Company
reported adjusted net income of $581 million, or $1.30 per diluted
share and $2,194 million, or $4.84 per diluted share, respectively. The
adjusted figures for the three months and year ended December 31, 2011
exclude an income tax recovery of $11 million ($0.02 per diluted share)
relating to certain fuel costs attributed to various wholly owned
subsidiaries in prior periods. The adjusted figures for the year ended
December 31, 2011 also exclude a net income tax expense of $40 million
($0.08 per diluted share) resulting from the enactment of state
corporate income tax rate changes and other legislated state tax
revisions; a gain on disposal of a segment of the Company’s Kingston
subdivision, together with the rail fixtures and certain passenger
agreements, of $288 million, or $254 million after-tax ($0.55 per
diluted share); and a gain on disposal of substantially all of the
assets of IC RailMarine Terminal Company of $60 million, or $38 million
after-tax ($0.08 per diluted share).

Management believes that adjusted net income and adjusted earnings per
share are useful measures of performance that can facilitate
period-to-period comparisons, as they exclude items that do not
necessarily arise as part of the normal day-to-day operations of the
Company and could distort the analysis of trends in business
performance. The exclusion of such items in adjusted net income and
adjusted earnings per share does not, however, imply that such items
are necessarily non-recurring. These adjusted measures do not have any
standardized meaning prescribed by GAAP and may, therefore, not be
comparable to similar measures presented by other companies. The reader
is advised to read all information provided in the Company’s 2012
Annual Consolidated Financial Statements, Notes thereto and
Management’s Discussion and Analysis (MD&A). The following tables
provide a reconciliation of net income and earnings per share, as
reported for the three months and year ended December 31, 2012 and
2011, to the adjusted performance measures presented herein.


                          Three months ended                          Year ended

                           December 31, 2012                     December 31, 2012

    In          Reported   Adjustments   Adjusted     Reported   Adjustments   Adjusted
    millions,
    except
    per share
    data

    Revenues  $    2,534 $           - $    2,534   $    9,920 $           - $    9,920

    Operating      1,612             -      1,612        6,235             -      6,235
    expenses

    Operating        922             -        922        3,685             -      3,685
    income

    Interest        (86)             -       (86)        (342)             -      (342)
    expense

    Other            (5)             -        (5)          315         (281)         34
    income
    (loss)

    Income           831             -        831        3,658         (281)      3,377
    before
    income
    taxes

    Income         (221)             -      (221)        (978)            57      (921)
    tax
    expense

    Net       $      610 $           - $      610   $    2,680 $       (224) $    2,456
    income

    Operating      63.6%                    63.6%        62.9%                    62.9%
    ratio

    Effective      26.6%                    26.6%        26.7%                    27.3%
    tax rate

    Basic     $     1.42 $           - $     1.42   $     6.15 $      (0.51) $     5.64
    earnings
    per share

    Diluted   $     1.41 $           - $     1.41   $     6.12 $      (0.51) $     5.61
    earnings
    per share

                          Three months ended                          Year ended

                           December 31, 2011                     December 31, 2011

    In          Reported   Adjustments   Adjusted     Reported   Adjustments   Adjusted
    millions,
    except
    per share
    data

    Revenues  $    2,377 $           - $    2,377   $    9,028 $           - $    9,028

    Operating      1,538             -      1,538        5,732             -      5,732
    expenses

    Operating        839             -        839        3,296             -      3,296
    income

    Interest        (85)             -       (85)        (341)             -      (341)
    expense

    Other             21             -         21          401         (348)         53
    income

    Income           775             -        775        3,356         (348)      3,008
    before
    income
    taxes

    Income         (183)          (11)      (194)        (899)            85      (814)
    tax
    expense

    Net       $      592 $        (11) $      581   $    2,457 $       (263) $    2,194
    income

    Operating      64.7%                    64.7%        63.5%                    63.5%
    ratio

    Effective      23.6%                    25.0%        26.8%                    27.1%
    tax rate

    Basic     $     1.33 $      (0.02) $     1.31   $     5.45 $      (0.57) $     4.88
    earnings
    per share

    Diluted   $     1.32 $      (0.02) $     1.30   $     5.41 $      (0.57) $     4.84
    earnings
    per share

Constant currency

Although CN conducts its business and reports its earnings in Canadian
dollars, a large portion of revenues and expenses is denominated in US
dollars. As such, the Company’s results are affected by exchange-rate
fluctuations.

Financial results at “constant currency” allow results to be viewed
without the impact of fluctuations in foreign currency exchange rates,
thereby facilitating period-to-period comparisons in the analysis of
trends in business performance. Measures at constant currency are
considered non-GAAP measures and do not have any standardized meaning
prescribed by GAAP and may, therefore, not be comparable to similar
measures presented by other companies. Financial results at constant
currency are obtained by translating the current period results
denominated in US dollars at the foreign exchange rates of the
comparable period of the prior year. The average foreign exchange rates
were $0.99 and $1.00 per US$1.00, respectively, for the three months
and year ended December 31, 2012, and $1.02 and $0.99 per US$1.00,
respectively, for the three months and year ended December 31, 2011.

On a constant currency basis, the Company’s 2012 fourth quarter net
income would have been higher by $11 million, or $0.03 per diluted
share, and the 2012 twelve-month net income would have been lower by
$14 million, or $0.03 per diluted share, respectively. The following
table presents a reconciliation of 2012 net income as reported to net
income on a constant currency basis:


                                       Three months ended      Year ended

    In millions                        December 31, 2012  December 31, 2012

    Net income, as reported            $              610 $           2,680

    Add back:                                                              

      Negative (positive) impact due
      to the strengthening (weakening)
      Canadian dollar included in net
      income                                            9              (11)

    Add:                                                                   

      Increase (decrease) due to the
      strengthening (weakening)
      Canadian dollar on additional
      year-over-year US$ net income                     2               (3)

    Impact of foreign exchange using                   11              (14)
    constant currency rates

    Net income, on a constant currency $              621 $           2,666
    basis

Free cash flow

The Company utilized $30 million and generated $1,006 million of free
cash flow for the three months and year ended December 31, 2012,
respectively, compared to utilized $153 million and generated $1,175
million for the same periods in 2011, respectively. Free cash flow does
not have any standardized meaning prescribed by GAAP and may,
therefore, not be comparable to similar measures presented by other
companies. The Company believes that free cash flow is a useful measure
of performance as it demonstrates the Company’s ability to generate
cash after the payment of capital expenditures and dividends. The
Company defines free cash flow as the sum of net cash provided by
operating activities, adjusted for changes in cash and cash equivalents
resulting from foreign exchange fluctuations; and net cash used in
investing activities, adjusted for changes in restricted cash and cash
equivalents, if any, the impact of major acquisitions, if any; and the
payment of dividends, calculated as follows:


                                 Three months ended           Year ended

                                      December 31            December 31

    In                              2012       2011        2012        2011
    millions                  

    Net cash provided by         $   724   $    591   $   3,060   $   2,976
    operating activities

    Net cash used in investing     (597)      (619)     (1,421)     (1,729)
    activities

    Net cash provided                127       (28)       1,639       1,247
    (utilized) before
    financing activities

    Adjustments:                                                           

      Dividends paid               (161)      (144)       (652)       (585)

      Change in restricted             3         10          22         499
      cash and cash
      equivalents

      Effect of foreign
      exchange fluctuations on
      US
      dollar-denominated cash
      and cash equivalents             1          9         (3)          14

    Free cash flow               $  (30)   $  (153)   $   1,006   $   1,175

 

 

 

 

SOURCE CN


Source: PR Newswire