CN Reports Third-Quarter 2002 Financial Results
MONTREAL, Quebec--Oct. 22, 2002--Canadian National (TSX:CNR):| -- | Third-quarter 2002 net income and diluted earnings per share of $268 million and $1.32, respectively, compared with adjusted net income and diluted EPS (1) of $240 million and $1.21 for third-quarter 2001 |
| -- | Revenues of $1,503 million, up 13 per cent on WC acquisition and solid merchandise revenue performance |
| -- | Nine-month free cash flow of $444 million |
Canadian National today reported third-quarter 2002 net income of $268 million, a 12 per cent increase over adjusted net income (1) of $240 million for the same quarter of 2001.
Diluted earnings per share for the quarter ended Sept. 30, 2002, were $1.32, up nine per cent from adjusted diluted earnings per share (1) of $1.21 for the comparable period of 2001. Reported net income for third-quarter 2001 was $252 million, or $1.27 per diluted share.
Third-quarter 2002 operating income increased 13 per cent to $484 million. Revenues for the period rose 13 per cent to $1,503 million, while operating expenses were $1,019 million.
CN President and Chief Executive Officer Paul M. Tellier said: "CN met the challenge this quarter, turning in good financial results in the face of devastating drought conditions that continue to weigh heavily on our Western Canadian grain franchise. Solid gains in our service-sensitive businesses - automotive, petroleum and chemicals, intermodal and forest products - and the consolidation of Wisconsin Central revenues more than offset depressed bulk commodity revenues. The performance of our merchandise and intermodal units is particularly satisfying because they will continue to drive much of CN's growth.
"In addition, we are gratified by CN's strong free cash flow performance. We generated $444 million in free cash flow for the first nine months of 2002 and $88 million for the quarter - right on company target.
"For the latest quarter, increased automotive revenues reflected stronger motor vehicle production in Canada and the United States, while petroleum and chemicals revenues benefited from the inclusion of WC revenues and continued strength in the petroleum segment, which experienced higher sulfur shipments and market share gains in various sectors. Increased intermodal revenues reflected improved domestic performance from growing markets in Canada and the U.S., and growth in the overseas segment despite stagnant trade. Forest products revenue gains were driven by the inclusion of WC revenues and increased lumber and panels traffic, in line with a strong North American housing market. Improved market conditions in the Canadian pulp and paper industry also contributed to third-quarter forest products revenue growth.
"CN will continue to drive productivity improvements and leverage its strong service capabilities to generate growth, but it remains cautious about near-term business prospects. Tough conditions will continue to prevail in our grain and coal businesses. Despite this, CN is determined to deliver improved results in 2003."
Six of CN's seven business units registered revenue gains during the most recent quarter: forest products (30 per cent); petroleum and chemicals (22 per cent); automotive (20 per cent); metals and minerals (17 per cent); intermodal (12 per cent), and coal (six per cent). Grain and fertilizers revenues declined by 15 per cent.
Total carloadings for the third quarter of 2002 rose 14 per cent to 1,043 thousand.
CN's operating ratio for the most recent three-month period was 67.8 per cent, compared with 67.5 per cent for the year-earlier quarter.
The increase in operating expenses for third-quarter 2002 was largely attributable to the consolidation of WC expenses and higher expenses for labor and fringe benefits and equipment rents, which were partially offset by lower fuel costs.
Results for the first nine months of 2002
Net income for the first nine months of 2002 increased 14 per cent to $778 million from adjusted net income (1) of $682 million for the comparable period of 2001.
Diluted earnings per share for the nine-month period ended Sept. 30, 2002, were $3.86, up 12 per cent from adjusted diluted earnings per share (1) of $3.44 for the year-earlier period. Reported net income for the first nine months of 2001 was $744 million, or $3.75 per diluted share.
Operating income for the first nine months of 2002 was $1,380 million, compared with $1,259 million - excluding the effect of a special charge to operations to recognize the costs of a workforce adjustment program - for the same period of 2001. Including the charge, operating income was $1,161 million for last year's nine-month period.
Nine-month 2002 revenues increased 11 per cent to $4,563 million, while operating expenses were $3,183 million. Excluding the special charge, operating expenses for the first nine months of 2001 were $2,856 million; including it, they were $2,954 million.
Five of CN's seven business units reported increased revenues for the first nine months of 2002: forest products (29 per cent); petroleum and chemicals (23 per cent); metals and minerals (20 per cent); automotive (18 per cent), and intermodal (six per cent). Grain and fertilizers revenues declined 13 per cent, and coal revenues declined four per cent.
Total carloadings for the first nine months of 2002 increased 10 per cent to 3,101 thousand.
The financial results in this press release are reported in Canadian dollars and were determined on the basis of U.S. GAAP.
(1) Adjusted net income and diluted earnings per share for the third quarter of 2001 exclude a deferred income tax recovery of $12 million, or six cents per share, resulting from the enactment of lower corporate tax rates in Canada.
For the first nine months of 2001, adjusted net income and diluted earnings per share exclude an after-tax gain of $73 million (36 cents per share) from the sale of CN's 50 per cent interest in the Detroit River Tunnel Company; a $62-million after-tax charge (31 cents per share) to operations for a workforce adjustment program; a $71-million after-tax charge (35 cents per share) to write down CN's net investment in 360networks Inc.; and a $122-million deferred income tax recovery (61 cents per share) resulting from the enactment of lower corporate tax rates in Canada.
Note 10 to the accompanying financial statements provides a reconciliation of adjusted net income to the Company's net income reported in accordance with United States generally accepted accounting principles (U.S. GAAP).
This news release contains forward-looking statements. CN cautions that, by their nature, forward-looking statements involve risk and uncertainties and that its results could differ materially from those expressed or implied in such statements. Reference should be made to CN's most recent Form 40-F filed with the United States Securities and Exchange Commission, and the Annual Information Form filed with the Canadian securities regulators, for a summary of major risks.
Canadian National Railway Company 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 cities of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP)
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(In millions, except per share data)
Three months ended Nine months ended
September 30 September 30
--------------- ---------------
2002 2001 2002 2001
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(Unaudited)
Revenues $ 1,503 $ 1,325 $ 4,563 $ 4,115
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Operating expenses excluding
special charge 1,019 895 3,183 2,856
Special charge (Note 3) - - - 98
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Total operating expenses 1,019 895 3,183 2,954
Operating income 484 430 1,380 1,161
Interest expense (89) (73) (276) (231)
Other income (Note 4) 8 12 69 34
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Income before income taxes 403 369 1,173 964
Income tax expense (Note 5) (135) (117) (395) (220)
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Net income (Note 10) $ 268 $ 252 $ 778 $ 744
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Earnings per share (Note 10)
Basic $ 1.34 $ 1.31 $ 3.98 $ 3.88
Diluted $ 1.32 $ 1.27 $ 3.86 $ 3.75
Weighted-average
number of shares
Basic 200.3 192.4 195.7 191.9
Diluted 203.0 201.4 203.1 200.7
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See accompanying notes to consolidated financial statements.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF OPERATING INCOME (U.S. GAAP)
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(In millions)
Three months ended Nine months ended
September 30 September 30
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Variance Variance
2002 2001 Fav 2002 2001 Fav
(Unfav) (Unfav)
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(Unaudited)
Revenues
Petroleum and chemicals $ 275 $ 225 22% $ 819 $ 668 23%
Metals and minerals 138 118 17% 398 332 20%
Forest products 337 260 30% 996 774 29%
Coal 85 80 6% 243 253 (4%)
Grain and fertilizers 217 254 (15%) 741 850 (13%)
Intermodal 273 243 12% 769 724 6%
Automotive 130 108 20% 440 374 18%
Other items 48 37 30% 157 140 12%
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1,503 1,325 13% 4,563 4,115 11%
Operating expenses
Labor and fringe benefits 410 352 (16%) 1,301 1,100 (18%)
Purchased services 148 121 (22%) 428 386 (11%)
Depreciation and
amortization 149 131 (14%) 434 394 (10%)
Fuel 109 111 2% 335 375 11%
Equipment rents 85 70 (21%) 264 221 (19%)
Material 48 43 (12%) 166 157 (6%)
Operating taxes 39 34 (15%) 122 115 (6%)
Casualty and other 31 33 6% 133 108 (23%)
Special charge (Note 3) - - - - 98 100%
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1,019 895 (14%) 3,183 2,954 (8%)
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Operating income $ 484 $ 430 13% $1,380 $1,161 19%
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Operating ratio
(excluding special charge) 67.8% 67.5% (0.3) 69.8% 69.4% (0.4)
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See accompanying notes to consolidated financial statements.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED BALANCE SHEET (U.S. GAAP)
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(In millions)
September 30 December 31 September 30
2002 2001 2001
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(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 24 $ 53 $ 830
Accounts receivable (Note 6) 715 645 759
Material and supplies 150 133 124
Deferred income taxes (Note 5) 120 153 142
Other 179 180 154
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1,188 1,164 2,009
Properties 19,348 19,145 16,395
Other assets and deferred
charges (Note 2) 903 914 397
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Total assets $ 21,439 $ 21,223 $ 18,801
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Liabilities and
shareholders' equity
Current liabilities:
Accounts payable and
accrued charges $ 1,377 $ 1,374 $ 1,297
Current portion of
long-term debt (Note 6) 699 163 148
Other 71 132 93
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2,147 1,669 1,538
Deferred income taxes (Note 5) 4,798 4,591 3,572
Other liabilities and
deferred credits 1,205 1,345 1,148
Long-term debt (Note 6) 4,699 5,764 4,968
Convertible preferred
securities (Note 7) - 366 363
Shareholders' equity:
Common shares (Note 7) 4,848 4,442 4,415
Accumulated other
comprehensive income 102 58 68
Retained earnings 3,640 2,988 2,729
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8,590 7,488 7,212
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Total liabilities and
shareholders' equity $ 21,439 $ 21,223 $ 18,801
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See accompanying notes to consolidated financial statements.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP)
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(In millions)
Three months ended Nine months ended
September 30 September 30
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2002 2001 2002 2001
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(Unaudited)
Common shares(1)
Balance, beginning of period $ 4,499 $ 4,402 $ 4,442 $ 4,349
Stock options exercised 10 13 66 66
Conversion of
convertible preferred
securities (Note 7) 339 - 340 -
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Balance, end of period $ 4,848 $ 4,415 $ 4,848 $ 4,415
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Accumulated other
comprehensive income
Balance, beginning of period $ 31 $ 36 $ 58 $ 151
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 (158) (134) 50 (163)
Unrealized foreign
exchange gain (loss) on
translation of the net
investment in foreign
operations 251 197 (52) 248
Unrealized holding loss on
investment in
360networks Inc. - - - (129)
Unrealized holding gain
(loss) on fuel derivative
instruments (Note 8) 14 (13) 69 (18)
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Other comprehensive income
(loss) before income taxes 107 50 67 (62)
Income tax expense on
other comprehensive
income (loss) (Note 5) (36) (18) (23) (21)
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Other comprehensive
income (loss) 71 32 44 (83)
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Balance, end of period $ 102 $ 68 $ 102 $ 68
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Retained earnings
Balance, beginning
of period $ 3,415 $ 2,515 $ 2,988 $ 2,098
Net income 268 252 778 744
Dividends (43) (38) (126) (113)
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Balance, end of period $ 3,640 $ 2,729 $ 3,640 $ 2,729
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See accompanying notes to consolidated financial statements.
(1) The Company issued 6.2 million and 7.6 million shares for the
three and nine months ended September 30, 2002, respectively,
as a result of stock options exercised and the conversion of
convertible preferred securities. At September 30, 2002, the
Company had 200.3 million common shares outstanding.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)
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(In millions)
Three months ended Nine months ended
September 30 September 30
-------------- --------------
2002 2001 2002 2001
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(Unaudited)
Operating activities
Net income $ 268 $ 252 $ 778 $ 744
Non-cash items in income:
Depreciation
and amortization 151 132 439 398
Deferred income
taxes (Note 5) 81 46 237 63
Equity in earnings of
English Welsh and
Scottish Railway (4) - (19) -
Gain on sale of
investment (Note 4) - - - (101)
Write-down of
investment (Note 4) - - - 99
Special charge (Note 3) - - - 98
Changes in:
Accounts receivable (2) (95) (43) (44)
Material and supplies 16 13 (17) (13)
Accounts payable and
accrued charges 12 6 32 (101)
Other net current
assets and liabilities 8 (12) (4) (15)
Payments for
workforce reductions (36) (39) (130) (128)
Other (63) 12 (85) (93)
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Cash provided from operating
activities 431 315 1,188 907
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Investing activities
Net additions to properties (271) (264) (633) (662)
Other, net (29) (23) 15 66
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Cash used by
investing activities (300) (287) (618) (596)
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Dividends paid (43) (38) (126) (113)
Financing activities
Issuance of long-term debt 642 2,034 2,532 2,538
Reduction of long-term debt (807) (1,231) (3,067) (1,973)
Issuance of common shares 8 7 62 52
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Cash provided from (used by)
financing activities (157) 810 (473) 617
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Net increase (decrease) in
cash and cash equivalents (69) 800 (29) 815
Cash and cash equivalents,
beginning of period 93 30 53 15
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Cash and cash equivalents,
end of period $ 24 $ 830 $ 24 $ 830
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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 management's opinion, 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 Canadian National Railway Company's (the Company) financial position as at September 30, 2002, December 31 and September 30, 2001, its results of operations, changes in shareholders' equity and cash flows for the three and nine months ended September 30, 2002 and 2001.
These consolidated financial statements and notes have been prepared using accounting policies consistent with those used in preparing the Company's 2001 Annual Consolidated Financial Statements. 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
Wisconsin Central Transportation Corporation (WC) was consolidated effective October 9, 2001, the date the Company acquired control of WC. Accordingly, the Company's results of operations for the three and nine months ended September 30, 2001 exclude the results of operations of WC. For comparative purposes only, if the Company had acquired WC on January 1, 2001, based on the historical amounts reported by WC, revenues, net income, basic and diluted earnings per share would have been $1,470 million, $275 million, $1.43 per basic share and $1.38 per diluted share, respectively, for the three months ended September 30, 2001 and $4,539 million, $793 million, $4.13 per basic share and $4.00 per diluted share, respectively, for the nine months ended September 30, 2001. These pro forma figures do not reflect synergies, and accordingly, do not account for any potential increases in operating income, any estimated cost savings or facilities consolidation.
In the first quarter of 2002, the Company sold its investment in Tranz Rail Holdings Limited (Tranz Rail), for net proceeds of $68 million. The Company had acquired Tranz Rail, a company which operates a 2,400-route mile freight and passenger rail business in New Zealand, through its acquisition of WC, and had accounted for it as "available for sale" in accordance with the Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (EITF) 87-11, "Allocation of Purchase Price to Assets to be Sold." The difference between the carrying amount of the investment and the proceeds from sale was not significant.
Note 3 - Special charge
In the second quarter of 2001, the Company recorded a charge of $98 million, $62 million after tax, for the reduction of 690 positions by the end of 2002. The charge included severance and other payments to be made to affected employees.
Note 4 - Other income
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 the first quarter of 2001, the Company recorded a gain of $101 million, $73 million after tax, from the sale of its 50 percent interest in the Detroit River Tunnel Company (DRT). The DRT is a 1.6-mile rail-only tunnel crossing the Canada-U.S. border between Detroit and Windsor, Ontario.
Note 5 - Income taxes
In the second and third quarter of 2001, the Company recorded a reduction of $78 million and $12 million, respectively, to its net deferred income tax liability, resulting from the enactment of lower corporate tax rates in Canada. As a result, for the three and nine months ended September 30, 2001, a deferred income tax recovery of $12 million and $122 million, respectively, was recorded in the Consolidated statement of income. For the nine months ended September 30, 2001, a deferred income tax expense of $32 million was recorded in Other comprehensive income.
Note 6 - Financing activities
Share repurchase program
On October 22, 2002, the Board of Directors of the Company approved a share repurchase program which allows for the repurchase of up to 13 million common shares between October 25, 2002 and October 24, 2003 pursuant to a normal course issuer bid, at prevailing market prices.
Revolving credit facilities
The Company has U.S.$1,000 million revolving credit facilities that expire in March 2003. The credit facility agreements contain customary financial covenants with which the Company has been in full compliance since the inception of the agreements. The Company's borrowings of U.S.$172 million (Cdn$273 million) outstanding at December 31, 2001 were entirely repaid in the first quarter of 2002 and since then, the credit facilities have not been drawn upon. At September 30, 2002, letters of credit under the revolving credit facilities amounted to $295 million. The Company currently expects to renew the existing facilities and to complete the refinancing before their maturity.
Commercial paper
The Company has a commercial paper program, which is backed by a portion of its revolving credit facilities, enabling it to issue commercial paper up to a maximum aggregate principal amount of $600 million, or the U.S. dollar equivalent. The revolving credit facilities will mature in March 2003 and while the Company's intent is to renew the existing revolving credit facilities, the refinancing has not been completed and, as such, the outstanding balance of U.S.$117 million (Cdn$184 million) of commercial paper has been included in the current portion of long-term debt at September 30, 2002.
Accounts receivable securitization
The Company has a revolving agreement, expiring in June 2003, to sell eligible freight trade receivables up to a maximum of $350 million of receivables outstanding at any point in time. At September 30, 2002, pursuant to the agreement, $168 million and U.S.$113 million (Cdn$178 million) had been sold on a limited recourse basis reflecting no change in the level of accounts receivable sold since December 31, 2001.
Note 7 - Termination of conversion rights of 5.25% Convertible preferred securities ("Securities")
On May 6, 2002, the Company announced that it had met the conditions required to terminate the Securities holders' right to convert their Securities into common shares of the Company, and set the conversion termination date as July 3, 2002. The conditions were met when the Company's common share price exceeded 120% of the conversion price of U.S.$38.48 per share (as adjusted, following the Company's two-for-one common stock split in September 1999) for a specified period, and all accrued interest on the Securities had been paid.
On July 3, 2002, the closing price of the Company's common shares exceeded the conversion price of U.S.$38.48 per share. As a result, Securities that had not been previously surrendered for conversion were converted, resulting in the issuance of approximately 6 million common shares of the Company.
Note 8 - Derivative instruments
At September 30, 2002, a portion of the Company's fuel requirement has been hedged using derivative instruments that are carried at market value on the balance sheet. These fuel hedges are accounted for as cash flow hedges whereby the effective portion of the change in the market value of the derivative instruments has been recorded in Other comprehensive income. At September 30, 2002, Accumulated other comprehensive income included an unrealized holding gain of $31 million, $21 million after tax, ($38 million unrealized holding loss, $25 million after tax at December 31, 2001) of which $29 million relates to derivative instruments that will mature within the next twelve months.
Note 9 - Commitments
At September 30, 2002, the Company had commitments to acquire railroad ties, rail, freight cars and locomotives at an aggregate cost of $223 million ($52 million at December 31, 2001).
Note 10 - Net income and earnings per share
In addition to the consolidation of the WC results of operations for the three and nine months ended September 30, 2002 as explained in Note 2, the comparability of the results of operations for the three and nine months ended September 30, 2002 and 2001 is also impacted by the following items:
Three months ended Nine months ended
September 30 September 30
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2002 2001 2001 2002 2001 2001
pro pro
forma(1) forma(1)
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(In millions) (Unaudited)
Income before income
taxes, excluding
undernoted items $ 403 $ 369 $ 407 $ 1,173 $ 1,060 $ 1,136
Income tax expense (135) (129) (144) (395) (378) (405)
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Adjusted net income 268 240 263 778 682 731
Undernoted 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 - 12 12 - 122 122
Gain on sale of
Detroit River Tunnel
Company - - - - 73 73
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- 12 12 - 62 62
Net income $ 268 $ 252 $ 275 $ 778 $ 744 $ 793
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The following table provides a reconciliation between basic and
diluted earnings per share:
Three months ended Nine months ended
September 30 September 30
-------------------- --------------------
2002 2001 2001 2002 2001 2001
pro pro
forma(1) forma(1)
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(In millions, except per share data) (Unaudited)
Net income $ 268 $ 252 $ 275 $ 778 $ 744 $ 793
Income impact on
assumed conversion
of preferred
securities (Note 7) - 3 3 6 9 9
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$ 268 $ 255 $ 278 $ 784 $ 753 $ 802
Weighted-average
shares outstanding 200.3 192.4 192.4 195.7 191.9 191.9
Effect of dilutive
securities and stock
options 2.7 9.0 9.0 7.4 8.8 8.8
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Weighted-average
diluted shares
outstanding 203.0 201.4 201.4 203.1 200.7 200.7
Basic earnings
per share $ 1.34 $ 1.31 $ 1.43 $ 3.98 $ 3.88 $ 4.13
Diluted earnings
per share $ 1.32 $ 1.27 $ 1.38 $ 3.86 $ 3.75 $ 4.00
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(1) The pro forma figures reflect the Company's results of
operations as if the Company had acquired WC on January 1, 2001.
Note 11 - Stock-based compensation expense
Compensation expense for certain performance-based stock-option awards under the Company's various stock option plans is determined by the options' intrinsic value in accordance with Accounting Principles Board Opinion (APB) 25, "Accounting for Stock Issued to Employees," and related interpretations. Had compensation expense been determined based upon fair values at the date of grant for awards under all plans, consistent with the methods of Statement of Financial Accounting Standards (SFAS) No.123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share for the three and nine months ended September 30, 2002 and 2001 would have been as follows:
Three months ended Nine months ended
September 30 September 30
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2002 2001 2002 2001
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Net income (in millions) $ 254 $ 247 $ 751 $ 729
Basic earnings per share $ 1.27 $ 1.28 $ 3.84 $ 3.80
Diluted earnings per share $ 1.25 $ 1.24 $ 3.73 $ 3.68
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These amounts include compensation cost as calculated using the
Black-Scholes option-pricing model with the following assumptions:
Three months ended Nine months ended
September 30 September 30
--------------- -------------
2002(1) 2001 2002 2001
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Expected option life (years) - 7.0 7.0 7.0
Risk-free interest rate - 5.36% 5.79% 5.36%
Expected stock price volatility - 30% 30% 30%
Average dividend per share - $0.78 $0.86 $0.78
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Three months ended Nine months ended
September 30 September 30
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2002(1) 2001 2002 2001
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Weighted average fair value
of options granted $ - $ 23.42 $ 30.98 $ 18.76
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(1) In the third quarter of 2002, the Company did not grant any
stock-option awards.
CANADIAN NATIONAL RAILWAY COMPANY
SELECTED RAILROAD STATISTICS (U.S. GAAP)
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Three months ended Nine months ended
September 30 September 30
--------------- ---------------
2002 2001(1) 2002 2001(1)
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(Unaudited)
Rail operations
Freight revenues ($ millions) 1,455 1,288 4,406 3,975
Gross ton miles (millions) 75,687 69,408 229,677 216,863
Revenue ton miles
(RTM) (millions) 39,460 35,909 119,081 113,267
Route miles (includes Canada
and the U.S.) 17,843 15,476 17,843 15,476
Operating expenses
per RTM (cents)(2) 2.58 2.49 2.67 2.52
Freight revenue
per RTM (cents) 3.69 3.59 3.70 3.51
Carloads (thousands) 1,043 915 3,101 2,814
Freight revenue
per carload ($) 1,395 1,408 1,421 1,413
Diesel fuel consumed
(Liters in millions) 334 305 1,047 987
Average fuel price ($/Liter) 0.32 0.35 0.31 0.36
Revenue ton miles per
liter of fuel consumed 118 118 114 115
Gross ton miles per liter
of fuel consumed 227 228 219 220
Diesel fuel consumed
(U.S. gallons in millions) 89 81 277 261
Average fuel price
($/U.S. gallon) 1.23 1.28 1.19 1.33
Revenue ton miles per U.S.
gallon of fuel consumed 443 443 430 434
Gross ton miles per U.S.
gallon of fuel consumed 850 857 829 831
Locomotive bad
order ratio (%)(3) 6.9 6.6 6.9 7.2
Freight car bad
order ratio (%) 5.9 5.6 6.0 5.8
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Productivity
Operating ratio (%)(2) 67.8 67.5 69.8 69.4
Freight revenue per
route mile ($ thousands) 82 83 247 257
Revenue ton miles per
route mile (thousands) 2,212 2,320 6,674 7,319
Freight revenue per
average number of
employees ($ thousands) 62 57 190 179
Revenue ton miles per
average number of
employees (thousands) 1,669 1,586 5,126 5,096
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Employees
Number at end of period 23,484 22,410 23,484 22,410
Average number during period 23,647 22,646 23,231 22,227
Labor and fringe benefits
expense per RTM (cents) 1.04 0.98 1.09 0.97
Injury frequency rate
per 200,000 person hours 3.4 4.2 3.1 4.3
Accident rate per million
train miles 2.2 1.7 2.2 1.8
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Financial
Debt to total capitalization
ratio (% at end of period) 38.6 43.2 38.6 43.2
Return on assets
(% at end of period) 1.5 1.6 4.4 4.7
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(1) 2001 data exclude WC which was acquired and consolidated
effective October 9, 2001.
(2) 2001 figures exclude special charge.
(3) In 2002, the Company expanded its measure of bad order
locomotives to include all those not available for service,
including on-line failures. The 2001 figures have been
restated accordingly.
CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY INFORMATION (U.S. GAAP)
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Three months ended Nine months ended
September 30 September 30
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Variance Variance
2002 2001(1) Fav 2002 2001(1) Fav
(Unfav) (Unfav)
--------------------------------------------------------------------
(Unaudited)
Revenue ton miles (millions)
Petroleum and chemicals 7,538 6,181 22% 22,222 18,299 21%
Metals and minerals 3,574 2,618 37% 10,012 7,712 30%
Forest products 8,508 7,193 18% 25,200 21,699 16%
Coal 3,872 3,795 2% 10,786 11,789 (9%)
Grain and fertilizers 7,800 8,982 (13%) 26,913 31,933 (16%)
Intermodal 7,429 6,481 15% 21,500 19,686 9%
Automotive 739 659 12% 2,448 2,149 14%
---------------------------------------- ---------------
39,460 35,909 10% 119,081 113,267 5%
Freight revenue / RTM (cents)
Total freight revenue
per RTM 3.69 3.59 3% 3.70 3.51 5%
Business units:
Petroleum and chemicals 3.65 3.64 - 3.69 3.65 1%
Metals and minerals 3.86 4.51 (14%) 3.98 4.30 (7%)
Forest products 3.96 3.61 10% 3.95 3.57 11%
Coal 2.20 2.11 4% 2.25 2.15 5%
Grain and fertilizers 2.78 2.83 (2%) 2.75 2.66 3%
Intermodal 3.67 3.75 (2%) 3.58 3.68 (3%)
Automotive 17.59 16.39 7% 17.97 17.40 3%
---------------------------------------- ---------------
Carloads (thousands)
Petroleum and chemicals 147 126 17% 438 383 14%
Metals and minerals 104 69 51% 294 195 51%
Forest products 151 116 30% 452 359 26%
Coal 127 125 2% 374 391 (4%)
Grain and fertilizers 123 136 (10%) 400 434 (8%)
Intermodal 319 273 17% 904 828 9%
Automotive 72 70 3% 239 224 7%
---------------------------------------- ---------------
1,043 915 14% 3,101 2,814 10%
Freight revenue / carload (dollars)
Total freight revenue
per carload 1,395 1,408 (1%) 1,421 1,413 1%
Business units:
Petroleum and chemicals 1,871 1,786 5% 1,870 1,744 7%
Metals and minerals 1,327 1,710 (22%) 1,354 1,703 (20%)
Forest products 2,232 2,241 - 2,204 2,156 2%
Coal 669 640 5% 650 647 -
Grain and fertilizers 1,764 1,868 (6%) 1,853 1,959 (5%)
Intermodal 856 890 (4%) 851 874 (3%)
Automotive 1,806 1,543 17% 1,841 1,670 10%
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---------------------------------------------------------------------
(1) 2001 data exclude WC which was acquired and consolidated
effective October 9, 2001.
CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY INFORMATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(In millions, except per share data)
Three months ended Nine months ended
September 30 September 30
--------------------- --------------------
2002 2001 Variance 2002 2001 Variance
pro Fav pro Fav
forma(1)(Unfav) forma(1)(Unfav)
----------------------------------------------------------------------
(Unaudited)
Revenues
Petroleum and chemicals $ 275 $ 248 11% $ 819 $ 736 11%
Metals and minerals 138 149 (7%) 398 413 (4%)
Forest products 337 319 6% 996 954 4%
Coal 85 87 (2%) 243 275 (12%)
Grain and fertilizers 217 267 (19%) 741 893 (17%)
Intermodal 273 252 8% 769 747 3%
Automotive 130 108 20% 440 374 18%
Other items 48 40 20% 157 147 7%
-------------------------------------- --------------
1,503 1,470 2% 4,563 4,539 1%
Operating expenses
Labor and fringe
benefits 410 395 (4%) 1,301 1,235 (5%)
Purchased services 148 129 (15%) 428 416 (3%)
Depreciation and
amortization 149 143 (4%) 434 426 (2%)
Fuel 109 122 11% 335 409 18%
Equipment rents 85 77 (10%) 264 243 (9%)
Material 48 47 (2%) 166 178 7%
Operating taxes 39 36 (8%) 122 121 (1%)
Casualty and other 31 34 9% 133 120 (11%)
Special charge - - - - 98 100%
-------------------------------------- --------------
1,019 983 (4%) 3,183 3,246 2%
Operating income 484 487 (1%) 1,380 1,293 7%
Interest expense (89) (99) (276) (310)
Other income 8 19 69 57
-------------------------------------- --------------
Income before income
taxes 403 407 1,173 1,040
Income tax expense (135) (132) (395) (247)
-------------------------------------- --------------
Net income $ 268 $ 275 $ 778 $ 793
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating ratio
(excluding special
charge) 67.8% 66.9% (0.9) 69.8% 69.4% (0.4)
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings
per share $ 1.32 $ 1.38 $ 3.86 $ 4.00
Adjusted diluted
earnings per share(2) $ 1.32 $ 1.32 $ 3.86 $ 3.69
Diluted
weighted-average
number of shares 203.0 201.4 203.1 200.7
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) The pro forma figures reflect the Company's results of
operations as if the Company had acquired WC on January 1,
2001.
(2) Adjusted diluted earnings per share for 2001 exclude the gain
on sale of DRT, the special charge for workforce reductions,
the charge to write down the net investment in 360networks
Inc., and the deferred income tax recovery resulting from the
enactment of lower corporate tax rates in Canada.
CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY PRO FORMA INFORMATION (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
--------------------- --------------------
2002 2001 Variance 2002 2001 Variance
pro Fav pro Fav
forma(1)(Unfav) forma(1)(Unfav)
----------------------------------------------------------------------
(Unaudited)
Revenue ton miles (millions)
Petroleum and chemicals 7,538 6,484 16% 22,222 19,222 16%
Metals and minerals 3,574 3,448 4% 10,012 10,189 (2%)
Forest products 8,508 8,052 6% 25,200 24,331 4%
Coal 3,872 4,153 (7%) 10,786 12,797 (16%)
Grain and fertilizers 7,800 9,183 (15%) 26,913 32,627 (18%)
Intermodal 7,429 6,535 14% 21,500 19,840 8%
Automotive 739 660 12% 2,448 2,153 14%
--------------------------------------- ---------------
39,460 38,515 2% 119,081 121,159 (2%)
Freight revenue / RTM (cents)
Total freight revenue
per RTM 3.69 3.71 (1%) 3.70 3.62 2%
Business units:
Petroleum and
chemicals 3.65 3.82 (4%) 3.69 3.83 (4%)
Metals and minerals 3.86 4.32 (11%) 3.98 4.05 (2%)
Forest products 3.96 3.96 - 3.95 3.92 1%
Coal 2.20 2.09 5% 2.25 2.15 5%
Grain and fertilizers 2.78 2.91 (4%) 2.75 2.74 -
Intermodal 3.67 3.86 (5%) 3.58 3.77 (5%)
Automotive 17.59 16.36 8% 17.97 17.37 3%
--------------------------------------- ---------------
Carloads (thousands)
Petroleum and
chemicals 147 135 9% 438 410 7%
Metals and minerals 104 120 (13%) 294 328 (10%)
Forest products 151 147 3% 452 456 (1%)
Coal 127 135 (6%) 374 420 (11%)
Grain and fertilizers 123 143 (14%) 400 455 (12%)
Intermodal 319 288 11% 904 871 4%
Automotive 72 70 3% 239 224 7%
--------------------------------------- ---------------
1,043 1,038 - 3,101 3,164 (2%)
Freight revenue / carload (dollars)
Total freight revenue
per carload 1,395 1,378 1% 1,421 1,388 2%
Business units:
Petroleum and
chemicals 1,871 1,837 2% 1,870 1,795 4%
Metals and minerals 1,327 1,242 7% 1,354 1,259 8%
Forest products 2,232 2,170 3% 2,204 2,092 5%
Coal 669 644 4% 650 655 (1%)
Grain and fertilizers 1,764 1,867 (6%) 1,853 1,963 (6%)
Intermodal 856 875 (2%) 851 858 (1%)
Automotive 1,806 1,543 17% 1,841 1,670 10%
----------------------------------------------------------------------
---------------------------------------------------------------------
(1) The pro forma data has been prepared assuming the Company had
acquired WC on January 1, 2001.