CN
TSX : CNR
NYSE : CNI

CN

January 23, 2007 16:01 ET

CN reports 15 per cent rise in adjusted Q4 2006 diluted EPS (1) and record 2006 annual revenues, operating ratio and free cash flow (1)

MONTREAL, QUEBEC--(CCNMatthews - Jan. 23, 2007) - CN today reported its financial and operating results for the fourth quarter and year ended Dec. 31, 2006.

Fourth-quarter and 2006 annual financial highlights

- Quarterly net income up 16 per cent to C$499 million, with diluted earnings per share rising 22 per cent to C$0.95. Included in the 2006 results was a deferred income tax recovery of C$27 million (C$0.05 per diluted share) attributable to the resolution of matters relating to prior years' income taxes;

- Adjusted fourth-quarter net income, excluding the deferred income tax recovery, was C$472 million, or C$0.90 per diluted share - a 10 per cent increase in adjusted net income and 15 per cent rise in adjusted diluted EPS; (1)

- 2006 net income of C$2,087 million, an increase of 34 per cent, with diluted EPS rising 41 per cent to C$3.91. Included in the 2006 results was a deferred income tax recovery of C$277 million, or C$0.51 per diluted share, attributable to lower corporate tax rates in Canada and to the resolution of matters relating to prior years' income taxes;

- Adjusted 2006 net income, excluding the deferred income tax recovery, was C$1,810 million, or C$3.40 per diluted share - a 16 per cent increase in adjusted net income and 23 per cent increase in adjusted diluted EPS; (1)

- Record annual revenues of C$7,716 million and operating ratio of 60.7 per cent, and

- Record annual free cash flow of C$1,343 million. (1)

E. Hunter Harrison, president and chief executive officer of CN, said: "The year 2006 was a strong one for CN, with the company generating record revenues and free cash flow and its best-ever annual operating ratio.

"These accomplishments were achieved in the face of some severe weather conditions during the fourth quarter of the year that disrupted our main lines and the operations of key customers in western Canada.

"The strength of 2006 positions CN well for 2007. The year ahead is one of opportunity for the company, and we'll have the people, network capacity, locomotives and freight cars in place to take advantage of new traffic."

Net income for the quarter was C$499 million, or C$0.95 per diluted share, including a deferred income tax recovery of C$27 million (C$0.05 per diluted share) attributable to the resolution of matters relating to prior years' income taxes. Excluding the deferred income tax recovery, adjusted quarterly net income was C$472 million, or C$0.90 per diluted share. (1)

Fourth-quarter operating income rose by five per cent to C$756 million, while CN's operating ratio for the period was 61.1 per cent, an improvement of seven-tenths of a point.

Fourth-quarter 2006 revenues increased three per cent to C$1,942 million. Revenues benefited from strength in coal, grain and fertilizers, petroleum and chemicals, and intermodal groups. Fourth-quarter revenues were affected by the unfavourable C$35-million translation impact of the stronger Canadian dollar on U.S. dollar-denominated revenues.

Revenue ton-miles, a measurement of the relative weight and distance of rail freight transported by the company, increased by one per cent in fourth-quarter 2006 compared with the same period in 2005. Freight revenue per revenue ton-mile, a measurement of yield, defined as revenue earned from the movement of a ton of freight over one mile, increased by two per cent in fourth-quarter 2006 compared with the same period of 2005.

Operating expenses for the quarter increased by two per cent to C$1,186 million, and benefited from the favourable C$20-million impact of the stronger Canadian dollar on U.S. dollar-denominated operating expenses.

The stronger Canadian dollar reduced fourth-quarter net income by approximately C$10 million, or C$0.02 per diluted share.

2006 results

Net income for the year increased 34 per cent to C$2,087 million, with diluted earnings per share rising 41 per cent to C$3.91. Included in the 2006 results was a deferred income tax recovery of C$277 million (C$0.51 per diluted share), resulting from the enactment of lower federal and provincial corporate tax rates in Canada, and the resolution of matters pertaining to prior years' income taxes.

Adjusted 2006 net income, excluding the deferred income tax recovery, was C$1,810 million, or C$3.40 per diluted share. (1)

Operating income for the year grew by 15 per cent to C$3,030 million, while CN's operating ratio for the year improved by 3.1 points to 60.7 per cent.

Revenues for 2006 increased seven per cent to C$7,716 million. Revenues benefited from strength in coal, grain and fertilizers, intermodal, petroleum and chemicals, and metals and minerals. Revenues for 2006 were affected by the unfavourable C$255-million translation impact of the stronger Canadian dollar on U.S. dollar-denominated revenues.

Revenue ton-miles and freight revenue per revenue ton-mile both increased by three per cent in 2006 compared with 2005.

Operating expenses for 2006 increased by two per cent to C$4,686 million, largely because of increased fuel costs, purchased services and material expense, and depreciation. Partly offsetting these factors was the favourable C$150-million translation impact of the stronger Canadian dollar on U.S. dollar-denominated expenses, and lower casualty and other expense.

The stronger Canadian dollar reduced 2006 net income by approximately C$60 million, or C$0.11 per diluted share.

The financial results in this press release were determined on the basis of U.S. generally accepted accounting principles (U.S. GAAP).

(1) Please see discussion and reconciliation of these non-GAAP measures in the attached supplementary schedule, Non-GAAP Measures.

This news release contains forward-looking statements. CN cautions that, by their nature, forward-looking statements involve risk and uncertainties, including the assumption that while CN expects a moderate slowdown in the North American economy in the near term, its business prospects assume positive economic conditions in North America and globally, and that its results could differ materially from those expressed or implied in such 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, labour 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 Canada and the United States. Reference should be made to CN's most recent Form 40-F filed with the United States Securities and Exchange Commission, its Annual Information Form filed with the Canadian securities regulators, its 2005 Annual Consolidated Financial Statements and Notes thereto and Management's Discussion and Analysis (MD&A), as well as its 2006 quarterly consolidated financial statements and MD&A, for a summary of major risks.

CN - 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 Year ended
December 31 December 31
------------------ -----------------
2006 2005 2006 2005
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(Unaudited)

Revenues $ 1,942 $ 1,886 $ 7,716 $ 7,240
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Operating expenses 1,186 1,166 4,686 4,616
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Operating income 756 720 3,030 2,624

Interest expense (80) (74) (312) (299)

Other income 27 10 11 12
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Income before income taxes 703 656 2,729 2,337

Income tax expense (204) (226) (642) (781)
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Net income $ 499 $ 430 $ 2,087 $ 1,556
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Earnings per share

Basic $ 0.97 $ 0.80 $ 3.97 $ 2.82

Diluted $ 0.95 $ 0.78 $ 3.91 $ 2.77

Weighted-average number of shares

Basic 515.5 539.9 525.9 551.7

Diluted 523.6 550.8 534.3 562.2
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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, 2006
and December 31, 2005, and its results of operations, changes in
shareholders' equity and cash flows for the three months and years ended
December 31, 2006 and 2005. These consolidated financial statements have
been prepared using accounting policies consistent with those used in
preparing the Company's 2006 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 OPERATING INCOME (U.S. GAAP)
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(In millions)


Three months ended Year ended
December 31 December 31
-------------------- ---------------------
Variance Variance
Fav Fav
2006 2005 (Unfav) 2006 2005 (Unfav)
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(Unaudited)

Revenues

Petroleum and chemicals $ 301 $ 283 6% $1,173 $1,096 7%
Metals and minerals 204 215 (5%) 885 837 6%
Forest products 414 436 (5%) 1,745 1,738 -
Coal 93 75 24% 375 331 13%
Grain and fertilizers 352 310 14% 1,259 1,119 13%
Intermodal 358 339 6% 1,420 1,270 12%
Automotive 131 139 (6%) 514 514 -
Other items 89 89 - 345 335 3%
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1,942 1,886 3% 7,716 7,240 7%

Operating expenses

Labor and fringe
benefits 466 453 (3%) 1,800 1,841 2%
Purchased services
and material 222 224 1% 845 814 (4%)
Depreciation and
amortization 167 157 (6%) 650 627 (4%)
Fuel 227 199 (14%) 890 725 (23%)
Equipment rents 63 46 (37%) 198 192 (3%)
Casualty and other 41 87 53% 303 417 27%
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1,186 1,166 (2%) 4,686 4,616 (2%)
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Operating income $ 756 $ 720 5% $3,030 $2,624 15%
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Operating ratio 61.1% 61.8% 0.7 60.7% 63.8% 3.1
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CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED BALANCE SHEET (U.S. GAAP)
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(In millions)


December 31 December 31
2006 2005
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(Unaudited)

Assets

Current assets:
Cash and cash equivalents $ 179 $ 62
Accounts receivable 692 623
Material and supplies 189 151
Deferred income taxes 84 65
Other 192 248
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1,336 1,149
Properties 21,053 20,078
Intangible and other assets (1) 1,615 961
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Total assets $ 24,004 $ 22,188
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Liabilities and shareholders' equity

Current liabilities:
Accounts payable and accrued charges $ 1,823 $ 1,478
Current portion of long-term debt 218 408
Other 73 72
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2,114 1,958

Deferred income taxes (1) 5,215 4,817
Other liabilities and deferred credits (1) 1,465 1,487
Long-term debt 5,386 4,677

Shareholders' equity:
Common shares 4,459 4,580
Accumulated other comprehensive loss (1) (44) (222)
Retained earnings 5,409 4,891
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9,824 9,249
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Total liabilities and shareholders' equity $ 24,004 $ 22,188
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(1) On December 31, 2006, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106, and 132(R )," which requires the Company to
recognize the over or underfunded position of its various benefit plans in
its Consolidated Balance Sheet. As such, on December 31, 2006, the Company
increased its pension asset by $599 million, to $1,275 million, and
decreased its pension and other post-retirement benefits liability by $7
million, to $481 million. The Company will recognize changes in the funded
status in the year in which the changes occur, through other comprehensive
income. The actuarial gains/losses and prior service costs/credits that
arise during the period but are not recognized as components of net
periodic benefit cost will be recognized as a component of Other
comprehensive loss, net of tax. These amounts recognized in Accumulated
other comprehensive loss will be adjusted as they are subsequently
recognized as components of net periodic benefit cost. Prior to December
31, 2006, actuarial gains/losses and prior service costs/credits were
deferred in their recognition, and amortized into net periodic benefit cost
over the expected average remaining service life of the employee group
covered by the plans. The adoption of SFAS No. 158 had no impact on years
prior to 2006 as retrospective application was not allowed. This standard
had no effect on the 2006 computation of net periodic benefit cost for
pensions and post-retirement benefits.


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, 2006
and December 31, 2005, and its results of operations, changes in
shareholders' equity and cash flows for the three months and years ended
December 31, 2006 and 2005. These consolidated financial statements have
been prepared using accounting policies consistent with those used in
preparing the Company's 2006 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)
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(In millions)


Three months ended Year ended
December 31 December 31
------------------ -----------------
2006 2005 2006 2005
---------------------------------------------------------------------------
(Unaudited)

Common shares (1)

Balance, beginning of period $ 4,476 $ 4,605 $ 4,580 $ 4,706

Stock options exercised and
other 43 30 133 176

Share repurchase programs (2) (60) (55) (254) (302)

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Balance, end of period $ 4,459 $ 4,580 $ 4,459 $ 4,580
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Accumulated other comprehensive loss

Balance, beginning of period $ (520) $ (169) $ (222) $ (148)

Other comprehensive income (loss):

Unrealized foreign exchange
gain (loss) on:
Translation of the net
investment in foreign
operations 246 (43) 32 (233)
Translation of U.S.
dollar-denominated long-term
debt designated as a hedge of
the net investment in U.S.
subsidiaries (196) 29 (33) 152

Post-retirement and pension
benefit plans adjustment:
Minimum pension liability
adjustment 1 4 1 4

Derivative instruments:
Decrease in unrealized
holding gains on fuel
derivative instruments - (70) (57) (35)

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Other comprehensive income
(loss) before income taxes 51 (80) (57) (112)

Income tax recovery (expense) 11 27 (179) 38
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Other comprehensive income (loss) 62 (53) (236) (74)

Adjustment to reflect the funded
status of benefit plans: (3)
Net actuarial gain (net of
income tax expense of ($200)
for 2006) 434 - 434 -
Prior service cost (net of
income tax recovery of $14
for 2006) (31) - (31) -
Reversal of minimum pension
liability adjustment (net of
income tax expense of ($6)
for 2006) 11 - 11 -

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Balance, end of period $ (44) $ (222) $ (44) $ (222)
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Retained earnings

Balance, beginning of period $ 5,306 $ 4,763 $ 4,891 $ 4,726

Net income 499 430 2,087 1,556

Share repurchase programs (2) (313) (235) (1,229) (1,116)

Dividends (83) (67) (340) (275)

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Balance, end of period $ 5,409 $ 4,891 $ 5,409 $ 4,891
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(1) For the three months and year ended December 31, 2006, the Company
issued 1.7 million and 5.1 million common shares, respectively, as a
result of stock options exercised. At December 31, 2006, the Company
had 512.4 million common shares outstanding.

(2) In 2006, the Company repurchased 29.5 million common shares under its
share repurchase programs; 15.5 million common shares for $766 million
(average price of $49.43 per share) under its new 28.0 million share
repurchase program and 14.0 million common shares for $717 million
(average price of $51.24 per share) under its previous 32.0 million
share repurchase program which ended in the second quarter of 2006.

(3) Pursuant to the adoption of SFAS No. 158.


CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)
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(In millions)


Three months ended Year ended
December 31 December 31
------------------ ----------------
2006 2005 2006 2005
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(Unaudited)

Operating activities

Net income $ 499 $ 430 $ 2,087 $ 1,556
Adjustments to reconcile net
income to net cash provided
from operating activities:
Depreciation and amortization 167 157 653 630
Deferred income taxes 23 103 3 547
Other changes in:
Accounts receivable 403 18 (17) 142
Material and supplies 18 25 (36) (25)
Accounts payable and accrued
charges 48 28 197 (156)
Other net current assets and
liabilities (34) (75) 58 8
Other (52) 8 5 3
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Cash provided from operating
activities 1,072 694 2,950 2,705
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Investing activities

Property additions (472) (388) (1,298) (1,180)
Acquisitions, net of
cash acquired (26) - (84) -
Other, net 14 15 33 105
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Cash used by investing activities (484) (373) (1,349) (1,075)
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Financing activities

Issuance of long-term debt 183 987 3,308 2,728
Reduction of long-term debt (234) (1,019) (3,089) (2,865)
Issuance of common shares
due to exercise of stock
options and related excess
tax benefits realized 42 11 120 115
Repurchase of common shares (373) (290) (1,483) (1,418)
Dividends paid (83) (67) (340) (275)
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Cash used by financing activities (465) (378) (1,484) (1,715)
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Net increase (decrease) in
cash and cash equivalents 123 (57) 117 (85)

Cash and cash equivalents,
beginning of period 56 119 62 147
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Cash and cash equivalents,
end of period $ 179 $ 62 $ 179 $ 62
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Supplemental cash flow information
Net cash receipts from
customers and other $ 2,367 $ 1,830 $ 7,733 $ 7,375
Net cash payments for:
Employee services, suppliers
and other expenses (954) (921) (3,896) (3,872)
Interest (89) (70) (316) (306)
Workforce reductions (8) (15) (45) (87)
Personal injury and other
claims (47) (21) (107) (92)
Pensions (66) (54) (112) (127)
Income taxes (131) (55) (307) (186)
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Cash provided from operating
activities $ 1,072 $ 694 $ 2,950 $ 2,705
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Certain of the 2005 comparative figures have been reclassified in order to
be consistent with the 2006 presentation.


CANADIAN NATIONAL RAILWAY COMPANY
SELECTED RAILROAD STATISTICS (U.S. GAAP)
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Three months ended Year ended
December 31 December 31
------------------ -----------------
2006 2005 2006 2005
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(Unaudited)

Statistical operating data

Freight revenues ($ millions) 1,853 1,797 7,371 6,905
Gross ton miles (GTM)
(millions) 88,407 87,828 352,972 342,894
Revenue ton miles (RTM)
(millions) 45,966 45,598 185,610 179,701
Carloads (thousands) 1,146 1,208 4,824 4,841
Route miles (includes Canada
and the U.S.) 20,264 19,221 20,264 19,221
Employees (end of period) 21,811 21,540 21,811 21,540
Employees (average during
period) 21,755 21,862 21,685 22,246
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Productivity

Operating ratio (%) 61.1 61.8 60.7 63.8
Freight revenue per RTM (cents) 4.03 3.94 3.97 3.84
Freight revenue per carload ($) 1,617 1,488 1,528 1,426
Operating expenses per GTM
(cents) 1.34 1.33 1.33 1.35
Labor and fringe benefits
expense per GTM (cents) 0.53 0.52 0.51 0.54
GTMs per average number of
employees (thousands) 4,064 4,017 16,277 15,414
Diesel fuel consumed (U.S.
gallons in millions) 101 101 401 403
Average fuel price ($/U.S.
gallon) (1) 2.16 1.89 2.13 1.72
GTMs per U.S. gallon of
fuel consumed 875 870 880 851
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Safety indicators

Injury frequency rate per
200,000 person hours (2) 2.0 2.3 2.1 2.4
Accident rate per million
train miles (2) 2.0 2.8 2.2 1.8
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Financial ratio

Debt to total capitalization ratio
(% at end of period) 36.3 35.5 36.3 35.5
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(1) Includes the impact of the Company's fuel hedging program until
September 30, 2006.

(2) As reported to the Federal Railroad Administration.

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)
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Three months ended Year ended
December 31 December 31
---------------------- ---------------------
Variance Variance
Fav Fav
2006 2005 (Unfav) 2006 2005 (Unfav)
---------------------------------------------------------------------------
(Unaudited)

Revenue ton miles (millions)

Petroleum and chemicals 7,930 7,949 - 31,868 31,235 2%
Metals and minerals 4,026 4,245 (5%) 17,467 16,848 4%
Forest products 10,049 10,581 (5%) 42,488 42,330 -
Coal 3,209 3,003 7% 13,727 13,576 1%
Grain and fertilizers 11,791 10,918 8% 44,096 40,393 9%
Intermodal 8,237 8,094 2% 32,922 32,184 2%
Automotive 724 808 (10%) 3,042 3,135 (3%)
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45,966 45,598 1% 185,610 179,701 3%

Freight revenue / RTM (cents)

Total freight revenue
per RTM 4.03 3.94 2% 3.97 3.84 3%

Commodity groups:
Petroleum and chemicals 3.80 3.56 7% 3.68 3.51 5%
Metals and minerals 5.07 5.06 - 5.07 4.97 2%
Forest products 4.12 4.12 - 4.11 4.11 -
Coal 2.90 2.50 16% 2.73 2.44 12%
Grain and fertilizers 2.99 2.84 5% 2.86 2.77 3%
Intermodal 4.35 4.19 4% 4.31 3.95 9%
Automotive 18.09 17.20 5% 16.90 16.40 3%
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Carloads (thousands)

Petroleum and chemicals 145 146 (1%) 590 594 (1%)
Metals and minerals 203 246 (17%) 981 994 (1%)
Forest products 154 172 (10%) 667 712 (6%)
Coal 94 101 (7%) 411 448 (8%)
Grain and fertilizers 157 151 4% 594 566 5%
Intermodal 332 322 3% 1,326 1,248 6%
Automotive 61 70 (13%) 255 279 (9%)
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1,146 1,208 (5%) 4,824 4,841 -

Freight revenue / carload (dollars)

Total freight revenue
per carload 1,617 1,488 9% 1,528 1,426 7%

Commodity groups:
Petroleum and chemicals 2,076 1,938 7% 1,988 1,845 8%
Metals and minerals 1,005 874 15% 902 842 7%
Forest products 2,688 2,535 6% 2,616 2,441 7%
Coal 989 743 33% 912 739 23%
Grain and fertilizers 2,242 2,053 9% 2,120 1,977 7%
Intermodal 1,078 1,053 2% 1,071 1,018 5%
Automotive 2,148 1,986 8% 2,016 1,842 9%
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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
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Adjusted performance measures
During the three and twelve months ended December 31, 2006, the Company
reported adjusted net income of $472 million, or $0.90 per diluted share
and $1,810 million, or $3.40 per diluted share, respectively. These
adjusted figures exclude the impact of a deferred income tax recovery of
$27 million ($0.05 per diluted share) in the fourth quarter and $277
million ($0.51 per diluted share) in the twelve-month period ended December
31, 2006 that resulted from the enactment of lower federal and provincial
corporate tax rates in Canada and the resolution of matters pertaining to
prior years' income taxes. 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 an item, such as
the deferred income tax recovery that resulted from the enactment of lower
federal and provincial corporate tax rates in Canada and the resolution of
matters pertaining to prior years' income taxes, that does 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 item in adjusted net income and adjusted earnings per share does not,
however, imply that such item is 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 2006 Annual Consolidated Financial Statements, Notes thereto and
Management's Discussion and Analysis (MD&A). The following table provides a
reconciliation of net income and earnings per share, as reported for the
three and twelve months ended December 31, 2006, to the adjusted
performance measures presented herein.

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Three months ended Year ended
December 31, 2006 December 31, 2006
---------------------------- -----------------------------
In millions, Deferred Deferred
except per tax tax
share data Reported recovery Adjusted Reported recovery Adjusted
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Revenues $ 1,942 $ - $ 1,942 $ 7,716 $ - $ 7,716
Operating
expenses 1,186 - 1,186 4,686 - 4,686
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Operating
income 756 - 756 3,030 - 3,030
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Interest
expense (80) - (80) (312) - (312)
Other income 27 - 27 11 - 11
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Income before
income taxes 703 - 703 2,729 - 2,729
Income tax
expense (204) (27) (231) (642) (277) (919)
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Net income $ 499 $ (27) $ 472 $ 2,087 $ (277) $ 1,810
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Basic earnings
per share $ 0.97 $ (0.05) $ 0.92 $ 3.97 $ (0.53) $ 3.44
Diluted earnings
per share $ 0.95 $ (0.05) $ 0.90 $ 3.91 $ (0.51) $ 3.40
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Free cash flow
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. 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
defines free cash flow as cash provided from operating activities,
excluding changes in the level of accounts receivable sold under the
securitization program, less investing activities, and after the payment of
dividends, calculated as follows:

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Three months ended Year ended
December 31 December 31
------------------ ----------------
In millions 2006 2005 2006 2005
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Cash provided from operating
activities $ 1,072 $ 694 $ 2,950 $ 2,705

Less:
Investing activities (484) (373) (1,349) (1,075)
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Cash provided before financing
activities 588 321 1,601 1,630
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Adjustments:
Change in level of accounts
receivable sold (1) (293) (11) 82 (54)
Dividends paid (83) (67) (340) (275)
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Free cash flow $ 212 $ 243 $ 1,343 $ 1,301
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(1) Changes in the level of accounts receivable sold under the Company's
accounts receivable securitization program are considered a financing
activity.

www.cn.ca

Contact Information

  • CN
    Mark Hallman (Media)
    System Director, Media Relations
    (905) 669-3384
    or
    CN
    Robert Noorigian (Investment Community)
    Vice-President, Investor Relations
    (514) 399-0052