CN reports Q4-2008 net income of C$573 million, or C$1.21 per diluted share, including deferred income tax recovery of C$0.09
Fourth-quarter 2008 highlights
- Net income was C$573 million, or C$1.21 per diluted share, including a
deferred income tax recovery of C$42 million, or C$0.09 per diluted
share.
- Revenues increased 13 per cent over Q4-2007 to C$2,200 million, while
operating expenses rose 15 per cent to C$1,380 million.
- Operating income was C$820 million, an increase of 11 per cent from the
year earlier results, with the operating ratio increasing six-tenths of
a point to 62.7 per cent.
- Strong full-year 2008 free cash flow of C$794 million. (1)
Net income for the fourth quarter of 2008 was
Net income for the comparable quarter of 2007 was
“The North American economy is in recession, and we do not know how long or deep it will be,” said Harrison. “And, although overall freight demand is much weaker, the basic driver of our business – demand for reliable, efficient, cost-effective transportation – remains intact. To meet our long-term objectives, we will continue to maintain pricing discipline and pursue opportunities that extend beyond business-cycle considerations.
“At the same time we will continue to do what’s necessary to manage our assets and costs effectively in response to lower traffic volumes. CN, as one of the rail industry’s most efficient operators, is well positioned to face the challenges of the current economic environment, and we are committed to making additional productivity improvements.”
Harrison added: “CN has a very resilient business model and a highly talented and dedicated team of railroaders, as demonstrated by our 2008 results. Looking ahead, 2009 will present even greater challenges, but we expect to continue to deliver value to our customers and shareholders.”
Fourth-quarter 2008 results
Fourth-quarter 2008 results from operations were affected by significant weakness in almost all markets, primarily as a result of the current economic environment.
Revenue ton-miles, a measurement of the relative weight and distance of rail freight transported by the Company, declined by 10 per cent during the quarter versus the comparable period of 2007.
Revenues for the final quarter of 2008 increased 13 per cent to
Operating expenses for the fourth quarter increased by 15 per cent to
Operating income increased 11 per cent to
The fluctuation of the Canadian dollar relative to the U.S. dollar, which affects the conversion of the Company’s U.S. dollar-denominated revenues and expenses, increased fourth-quarter 2008 net income by approximately
Full-year 2008 results
Net income for 2008 was
CN’s 2008 net income included a deferred income tax recovery of
Included in 2007 net income was a net deferred income tax recovery of
Operating income for 2008 increased to
Revenues for 2008 increased by seven per cent to
These gains were partly offset by lower volumes due to weakness in specific markets, particularly forest products and automotive, the impact of harsh weather conditions in
In the first nine months of the year, CN experienced a
Revenue ton-miles, a measurement of the relative weight and distance of rail freight transported by the Company, declined by three per cent in 2008 from the 2007 level.
CN’s 2008 operating expenses increased by 11 per cent, to
In the first nine months of the year, CN experienced a positive
The operating ratio was 65.9 per cent in 2008, compared with 63.6 per cent in 2007, a 2.3-point increase.
The fluctuation of the Canadian dollar relative to the U.S. dollar reduced 2008 net income by approximately
The financial results in this news release were determined on the basis of U.S. Generally Accepted Accounting Principles (U.S. GAAP).
(1) Please see discussion and reconciliation of non-GAAP adjusted
performance measures in the attached supplementary schedule, Non-GAAP
Measures.
Forward-Looking Statements
This news release contains forward-looking statements. CN cautions that, by their nature, forward-looking statements involve risk, uncertainties and assumptions. Implicit in these statements, particularly in respect of long-term growth opportunities, is the Company’s assumption that such growth opportunities are less affected by the current situation in the North American and global economies. 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. The current situation in financial markets is adding a substantial amount of risk to the North American economy, which is already in a recession, and to the global economy, which is significantly slowing down. The Company cautions that its results could differ materially from those expressed or implied in such forward-looking statements. Important factors that could cause such differences include, but are not limited to, industry competition, legislative and/or regulatory developments, compliance with environmental laws and regulations, various events which could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes, the effects of adverse general economic and business conditions, inflation, currency fluctuations, changes in fuel prices, labor disruptions, environmental claims, investigations or proceedings, other types of claims and litigation, and other risks detailed from time to time in reports filed by CN with securities regulators in
CN – Canadian National Railway Company and its operating railway subsidiaries – spans
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In millions, except per share data)
Three months ended Year ended
December 31 December 31
---------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
(Unaudited)
Revenues $ 2,200 $ 1,941 $ 8,482 $ 7,897
-------------------------------------------------------------------------
Operating expenses
Labor and fringe
benefits 397 340 1,674 1,701
Purchased services and
material 301 259 1,137 1,045
Fuel 304 307 1,403 1,026
Depreciation and
amortization 197 173 725 677
Equipment rents 79 60 262 247
Casualty and other 102 66 387 325
-------------------------------------------------------------------------
Total operating expenses 1,380 1,205 5,588 5,021
-------------------------------------------------------------------------
Operating income 820 736 2,894 2,876
Interest expense (110) (85) (375) (336)
Other income 19 159 26 166
-------------------------------------------------------------------------
Income before income taxes 729 810 2,545 2,706
Income tax recovery (expense) (156) 23 (650) (548)
-------------------------------------------------------------------------
Net income $ 573 $ 833 $ 1,895 $ 2,158
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share
Basic $ 1.22 $ 1.70 $ 3.99 $ 4.31
Diluted $ 1.21 $ 1.68 $ 3.95 $ 4.25
Weighted-average number
of shares
Basic 468.1 489.8 474.7 501.2
Diluted 472.5 495.9 480.0 508.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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, 2008 and
December 31, 2007, and its results of operations, changes in shareholders'
equity and cash flows for the three months and years ended December 31, 2008
and 2007. These consolidated financial statements have been prepared using
accounting policies consistent with those used in preparing the Company's 2008
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 BALANCE SHEET (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In millions)
December 31 December 31
2008 2007
-------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 413 $ 310
Accounts receivable 913 370
Material and supplies 200 162
Deferred income taxes 98 68
Other 132 138
-------------------------------------------------------------------------
1,756 1,048
Properties 23,203 20,413
Intangible and other assets 1,761 1,999
-------------------------------------------------------------------------
Total assets $ 26,720 $ 23,460
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other $ 1,386 $ 1,336
Current portion of long-term debt 506 254
-------------------------------------------------------------------------
1,892 1,590
Deferred income taxes 5,511 4,908
Other liabilities and deferred credits 1,353 1,422
Long-term debt 7,405 5,363
Shareholders' equity:
Common shares 4,179 4,283
Accumulated other comprehensive loss (155) (31)
Retained earnings 6,535 5,925
-------------------------------------------------------------------------
10,559 10,177
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 26,720 $ 23,460
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain of the 2007 figures have been restated to conform to the 2008
presentation.
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, 2008 and December
31, 2007, and its results of operations, changes in shareholders' equity and
cash flows for the three months and years ended December 31, 2008 and 2007.
These consolidated financial statements have been prepared using accounting
policies consistent with those used in preparing the Company's 2008 Annual
Consolidated Financial Statements and should be read in conjunction with such
statements, notes thereto and MD&A.
Subsequent event
The Company's agreement to acquire the principal lines of Elgin, Joliet
and Eastern Railway Company (EJ&E) for a purchase price of approximately
U.S.$300 million received all necessary regulatory approvals, including the
U.S. Surface Transportation Board (STB) ruling rendered on December 24, 2008.
The STB's decision will become effective on January 23, 2009 and the Company
expects to close the transaction shortly thereafter and pay the purchase price
with cash on hand. The Company will account for the acquisition using the
purchase method of accounting pursuant to Statement of Financial Accounting
Standards (SFAS) # 141(R), "Business Combinations," which became effective
for acquisitions closing on or after January 1, 2009.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In millions)
Three months ended Year ended
December 31 December 31
---------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
(Unaudited)
Common shares
Balance, beginning of
period $ 4,171 $ 4,359 $ 4,283 $ 4,459
Stock options exercised
and other 9 6 68 89
Share repurchase programs (1) (82) (172) (265)
------------------------------------------------------------------------
Balance, end of period $ 4,179 $ 4,283 $ 4,179 $ 4,283
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated other
comprehensive loss
Balance, beginning of
period $ 54 $ (257) $ (31) $ (44)
Other comprehensive
income (loss):
Unrealized foreign
exchange gain (loss) on:
Translation of the net
investment in foreign
operations 860 (90) 1,259 (1,004)
Translation of
U.S. dollar-denominated
long-term debt
designated as a hedge
of the net investment
in U.S. subsidiaries (877) 22 (1,266) 788
Pension and other
postretirement benefit
plans:
Net actuarial gain (loss)
arising during the
period (452) 391 (452) 391
Prior service cost
arising during the
period (3) (12) (3) (12)
Amortization of net
actuarial loss (gain)
included in net periodic
benefit cost - 11 (2) 49
Amortization of prior
service cost included in
net periodic benefit cost 3 5 21 21
Derivative instruments - (1) - (1)
-------------------------------------------------------------------------
Other comprehensive income
(loss) before income taxes (469) 326 (443) 232
Income tax recovery (expense) 260 (100) 319 (219)
-------------------------------------------------------------------------
Other comprehensive income
(loss) (209) 226 (124) 13
-------------------------------------------------------------------------
Balance, end of period $ (155) $ (31) $ (155) $ (31)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained earnings
Balance, beginning of
period $ 6,073 $ 5,557 $ 5,925 $ 5,409
Adoption of new
accounting
pronouncements(1) - - - 95
-------------------------------------------------------------------------
Restated balance,
beginning of period 6,073 5,557 5,925 5,504
Net income 573 833 1,895 2,158
Share repurchase programs (3) (363) (849) (1,319)
Dividends (108) (102) (436) (418)
-------------------------------------------------------------------------
Balance, end of period $ 6,535 $ 5,925 $ 6,535 $ 5,925
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) On January 1, 2007, the Company adopted Financial Accounting
Standards Board (FASB) Interpretation (FIN) # 48, "Accounting for
Uncertainty in Income Taxes," and early adopted the measurement date
provisions of Statement of Financial Accounting Standards (SFAS)
# 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements # 87, 88,
106, and 132(R)." The application of FIN # 48 on January 1, 2007
had the effect of decreasing the net deferred income tax liability
and increasing Retained earnings by $98 million. The application of
SFAS # 158 on January 1, 2007 had the effect of decreasing Retained
earnings by $3 million.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In millions)
Three months ended Year ended
December 31 December 31
---------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
(Unaudited)
Operating activities
Net income $ 573 $ 833 $ 1,895 $ 2,158
Adjustments to reconcile
net income to net cash
provided from operating
activities:
Depreciation and
amortization 197 172 725 678
Deferred income taxes 43 (207) 230 (82)
Gain on sale of Central
Station Complex - (92) - (92)
Gain on sale of
investment in English
Welsh and Scottish
Railway - (61) - (61)
Other changes in:
Accounts receivable (173) 267 (432) 229
Material and supplies 25 44 (23) 18
Accounts payable and
other (28) 99 (127) (396)
Other current assets 2 (9) 37 84
Other (139) (122) (274) (119)
-------------------------------------------------------------------------
Cash provided from
operating activities 500 942 2,031 2,417
-------------------------------------------------------------------------
Investing activities
Property additions (480) (490) (1,424) (1,387)
Acquisitions, net of
cash acquired (50) (25) (50) (25)
Sale of Central Station
Complex - 351 - 351
Sale of investment in
English Welsh and
Scottish Railway - 114 - 114
Other, net 32 26 74 52
-------------------------------------------------------------------------
Cash used by investing
activities (498) (24) (1,400) (895)
-------------------------------------------------------------------------
Financing activities
Issuance of long-term debt 1,003 846 4,433 4,171
Reduction of long-term debt (793) (1,120) (3,589) (3,589)
Issuance of common shares
due to exercise of stock
options and related excess
tax benefits realized 6 4 54 77
Repurchase of common shares (4) (445) (1,021) (1,584)
Dividends paid (108) (102) (436) (418)
-------------------------------------------------------------------------
Cash provided from (used by)
financing activities 104 (817) (559) (1,343)
-------------------------------------------------------------------------
Effect of foreign exchange
fluctuations on
U.S. dollar-denominated
cash and cash equivalents 19 (5) 31 (48)
-------------------------------------------------------------------------
Net increase in cash and
cash equivalents 125 96 103 131
Cash and cash equivalents,
beginning of period 288 214 310 179
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 413 $ 310 $ 413 $ 310
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow
information
Net cash receipts from
customers and other $ 1,987 $ 2,209 $ 8,012 $ 8,139
Net cash payments for:
Employee services,
suppliers and other
expenses (1,171) (979) (4,920) (4,323)
Interest (124) (67) (396) (340)
Workforce reductions (5) (7) (22) (31)
Personal injury and
other claims (29) (28) (91) (86)
Pensions (50) (25) (127) (75)
Income taxes (108) (161) (425) (867)
-------------------------------------------------------------------------
Cash provided from
operating activities $ 500 $ 942 $ 2,031 $ 2,417
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain of the 2007 figures have been restated to conform to the 2008
presentation.
CANADIAN NATIONAL RAILWAY COMPANY
SELECTED RAILROAD STATISTICS(1) (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
---------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
(Unaudited)
Statistical operating data
Rail freight revenues
($ millions) 1,977 1,763 7,641 7,186
Gross ton miles (GTM)
(millions) 81,871 89,315 339,854 347,898
Revenue ton miles (RTM)
(millions) 42,382 47,151 177,951 184,148
Carloads (thousands) 1,078 1,205 4,615 4,744
Route miles (includes
Canada and the U.S.) 20,961 20,421 20,961 20,421
Employees (end of period) 22,227 22,696 22,227 22,696
Employees (average for
the period) 22,461 22,796 22,695 22,389
-------------------------------------------------------------------------
Productivity
Operating ratio (%) 62.7 62.1 65.9 63.6
Rail freight revenue per
RTM (cents) 4.66 3.74 4.29 3.90
Rail freight revenue per
carload ($) 1,834 1,463 1,656 1,515
Operating expenses per
GTM (cents) 1.69 1.35 1.64 1.44
Labor and fringe benefits
expense per GTM (cents) 0.48 0.38 0.49 0.49
GTMs per average number
of employees (thousands) 3,645 3,918 14,975 15,539
Diesel fuel consumed
(U.S. gallons in millions) 93 102 380 392
Average fuel price
($/U.S. gallon) 2.88 2.70 3.39 2.40
GTMs per U.S. gallon of
fuel consumed 880 876 894 887
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Safety indicators
Injury frequency rate per
200,000 person hours(2) 1.7 2.1 1.8 1.9
Accident rate per million
train miles(2) 2.8 3.6 2.6 2.7
-------------------------------------------------------------------------
Financial ratio
Debt to total capitalization
ratio (% at end of period) 42.8 35.6 42.8 35.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes data relating to companies acquired as of the date of
acquisition.
(2) Based on Federal Railroad Administration (FRA) reporting criteria.
Certain 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)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
----------------------- -------------------------
Variance Variance
Fav Fav
2008 2007 (Unfav) 2008 2007 (Unfav)
-------------------------------------------------------------------------
(Unaudited)
Revenues (millions of
dollars)
Petroleum and
chemicals 359 306 17% 1,346 1,226 10%
Metals and minerals 237 195 22% 950 826 15%
Forest products 366 336 9% 1,436 1,552 (7%)
Coal 132 98 35% 478 385 24%
Grain and fertilizers 381 350 9% 1,382 1,311 5%
Intermodal 390 362 8% 1,580 1,382 14%
Automotive 112 116 (3%) 469 504 (7%)
-------------------------------------- -----------------
Total rail freight
revenue 1,977 1,763 12% 7,641 7,186 6%
Other revenues 223 178 25% 841 711 18%
-------------------------------------- -----------------
Total revenues 2,200 1,941 13% 8,482 7,897 7%
-------------------------------------------------------------------------
Revenue ton miles
(millions)
Petroleum and
chemicals 7,678 8,473 (9%) 32,346 32,761 (1%)
Metals and minerals 3,982 4,305 (8%) 17,953 16,719 7%
Forest products 7,848 9,156 (14%) 33,847 39,808 (15%)
Coal 3,697 3,432 8% 14,886 13,776 8%
Grain and fertilizers 10,592 12,550 (16%) 42,507 45,359 (6%)
Intermodal 8,027 8,493 (5%) 33,822 32,607 4%
Automotive 558 742 (25%) 2,590 3,118 (17%)
-------------------------------------- -----------------
42,382 47,151 (10%) 177,951 184,148 (3%)
Rail freight revenue /
RTM (cents)
Total rail freight
revenue per RTM 4.66 3.74 25% 4.29 3.90 10%
Commodity groups:
Petroleum and
chemicals 4.68 3.61 30% 4.16 3.74 11%
Metals and minerals 5.95 4.53 31% 5.29 4.94 7%
Forest products 4.66 3.67 27% 4.24 3.90 9%
Coal 3.57 2.86 25% 3.21 2.79 15%
Grain and fertilizers 3.60 2.79 29% 3.25 2.89 12%
Intermodal 4.86 4.26 14% 4.67 4.24 10%
Automotive 20.07 15.63 28% 18.11 16.16 12%
-------------------------------------- -----------------
Carloads (thousands)
Petroleum and
chemicals 123 151 (19%) 547 599 (9%)
Metals and minerals 228 261 (13%) 1,025 1,010 1%
Forest products 116 134 (13%) 511 584 (13%)
Coal 95 86 10% 375 361 4%
Grain and fertilizers 143 162 (12%) 579 601 (4%)
Intermodal 332 346 (4%) 1,377 1,324 4%
Automotive 41 65 (37%) 201 265 (24%)
-------------------------------------- -----------------
1,078 1,205 (11%) 4,615 4,744 (3%)
Rail freight revenue /
carload (dollars)
Total rail freight
revenue per carload 1,834 1,463 25% 1,656 1,515 9%
Commodity groups:
Petroleum and
chemicals 2,919 2,026 44% 2,461 2,047 20%
Metals and minerals 1,039 747 39% 927 818 13%
Forest products 3,155 2,507 26% 2,810 2,658 6%
Coal 1,389 1,140 22% 1,275 1,066 20%
Grain and fertilizers 2,664 2,160 23% 2,387 2,181 9%
Intermodal 1,175 1,046 12% 1,147 1,044 10%
Automotive 2,732 1,785 53% 2,333 1,902 23%
-------------------------------------------------------------------------
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
During the three months and year ended December 31, 2008, the Company
reported adjusted net income of $531 million, or $1.12 per diluted share, and
$1,778 million, or $3.71 per diluted share, respectively. The fourth quarter
adjusted figures exclude the impact of a net deferred income tax recovery of
$42 million ($0.09 per diluted share) resulting from the resolution of various
income tax matters and adjustments related to tax filings of prior years. The
year-to-date December 31, 2008 adjusted figures exclude a deferred income tax
recovery of $117 million ($0.24 per diluted share), of which $83 million was
due to the resolution of various income tax matters and adjustments related to
tax filings of prior years, $23 million was due to the enactment of corporate
income tax rate changes in Canada and $11 million was due to net capital
losses arising from the reorganization of a subsidiary.
During the three months and year ended December 31, 2007, the Company
reported adjusted net income of $444 million, or $0.90 per diluted share, and
$1,725 million, or $3.40 per diluted share, respectively. These adjusted
figures exclude the impact of a net deferred income tax recovery of $284
million ($0.57 per diluted share) in the fourth quarter and $328 million
($0.64 per diluted share) for the year ended December 31, 2007 that resulted
mainly from the enactment of corporate income tax rate changes in Canada. Also
excluded from adjusted net income for both the three- and twelve-month periods
were the gains on sale of the Central Station Complex of $92 million or $64
million after-tax ($0.13 per diluted share) and the Company's investment in
English Welsh and Scottish Railway of $61 million or $41 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 2008 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 years ended December
31, 2008 and 2007, to the adjusted performance measures presented herein.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Year ended
December 31, 2008 December 31, 2008
---------------------------- -----------------------------
In millions,
except per Adjust- Adjust-
share data Reported ments Adjusted Reported ments Adjusted
-------------------------------------------------------------------------
Revenues $ 2,200 $ - $ 2,200 $ 8,482 $ - $ 8,482
Operating
expenses 1,380 - 1,380 5,588 - 5,588
-------------------------------------------------------------------------
Operating income 820 - 820 2,894 - 2,894
Interest
expense (110) - (110) (375) - (375)
Other income 19 - 19 26 - 26
-------------------------------------------------------------------------
Income before
income taxes 729 - 729 2,545 - 2,545
Income tax
expense (156) (42) (198) (650) (117) (767)
-------------------------------------------------------------------------
Net income $ 573 $ (42) $ 531 $ 1,895 $ (117) $ 1,778
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings
per share $ 1.22 $ (0.09) $ 1.13 $ 3.99 $ (0.24) $ 3.75
Diluted earnings
per share $ 1.21 $ (0.09) $ 1.12 $ 3.95 $ (0.24) $ 3.71
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Year ended
December 31, 2007 December 31, 2007
---------------------------- -----------------------------
In millions,
except per Adjust- Adjust-
share data Reported ments Adjusted Reported ments Adjusted
-------------------------------------------------------------------------
Revenues $ 1,941 $ - $ 1,941 $ 7,897 $ - $ 7,897
Operating
expenses 1,205 - 1,205 5,021 - 5,021
-------------------------------------------------------------------------
Operating income 736 - 736 2,876 - 2,876
Interest expense (85) - (85) (336) - (336)
Other income 159 (153) 6 166 (153) 13
-------------------------------------------------------------------------
Income before
income taxes 810 (153) 657 2,706 (153) 2,553
Income tax
recovery
(expense) 23 (236) (213) (548) (280) (828)
-------------------------------------------------------------------------
Net income $ 833 $ (389) $ 444 $ 2,158 $ (433) $ 1,725
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings
per share $ 1.70 $ (0.79) $ 0.91 $ 4.31 $ (0.87) $ 3.44
Diluted earnings
per share $ 1.68 $ (0.78) $ 0.90 $ 4.25 $ (0.85) $ 3.40
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Free cash flow
The Company generated $311 million and $794 million of free cash flow for
the three months and year ended December 31, 2008, respectively, compared to
$635 million and $828 million of free cash flow for the same periods in 2007.
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 cash provided from operating activities, excluding changes in the
accounts receivable securitization program and changes in cash and cash
equivalents resulting from foreign exchange fluctuations, less cash used by
investing activities and the payment of dividends, calculated as follows:
-------------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
---------------------- -----------------------
In millions 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash provided from
operating activities $ 500 $ 942 $ 2,031 $ 2,417
Cash used by investing
activities (498) (24) (1,400) (895)
-------------------------------------------------------------------------
Cash provided before
financing activities 2 918 631 1,522
-------------------------------------------------------------------------
Adjustments:
Change in accounts
receivable
securitization 398 (176) 568 (228)
Dividends paid (108) (102) (436) (418)
Effect of foreign
exchange fluctuations
on U.S. dollar-
denominated cash and
cash equivalents 19 (5) 31 (48)
-------------------------------------------------------------------------
Free cash flow $ 311 $ 635 $ 794 $ 828
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SOURCE CN