Edgar Filing: CANADIAN NATIONAL RAILWAY CO

FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of June, 2014

Commission File Number: 001-02413

Canadian National Railway Company
(Translation of registrant’s name into English)

935 de la Gauchetiere Street West
Montreal, Quebec
Canada H3B 2M9
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

Form 40-F X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

No X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

No X

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes

No X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

Canadian National Railway Company

Table of Contents

Item

1.	CN Investor Fact Book – 2014 Update

Item 1

Except where otherwise indicated, all financial information reflected in this document is expressed in Canadian dollars and determined on the basis of United States generally accepted accounting principles (U.S. GAAP). All share and per share data presented herein reflect the impact of the November 2013 stock split.

Revenues by commodity group presented herein reflect the impact of the 2014 reclassification of Other revenues. In order to better represent rail freight and related revenues within the commodity groups and to maintain non-rail services that support CN’s rail business within Other revenues, certain other revenues were reclassified to the commodity groups within rail freight revenues. Revenues earned from trucking intermodal goods were reclassified from Other revenues to the Intermodal commodity group and services that relate to the movement of rail freight were reclassified from Other revenues to the related commodity groups. The 2011, 2012, and 2013 figures have been reclassified in order to be consistent with the 2014 presentation. This change had no impact on the Company’s previously reported results of operations as total revenues remains unchanged.

The reader is advised to read all information provided in this document in conjunction with the Company’s audited annual and unaudited interim Consolidated Financial Statements and Notes thereto as well as Management’s Discussion and Analysis filed on SEDAR and EDGAR and posted on the Company’s website (www.cn.ca).

This document contains forward-looking statements. The Company cautions that, by their nature, forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and assumptions.

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FINANCIAL & STATISTICAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

$ in millions, except per share data, or unless otherwise indicated	2010		2011		2012		2013

Financial results
Revenues	$	8,297	$	9,028	$	9,920	$	10,575
Operating income		3,024		3,296		3,685		3,873
Adjusted net income*		1,973		2,194		2,456		2,582
Adjusted diluted earnings per share*		2.10		2.41		2.81		3.06
Weighted-average number of diluted share (millions)		940.3		908.9		875.4		846.1

Financial ratios
Operating ratio (%)		63.6		63.5		62.9		63.4
Debt-to-total capitalization (%)		35.0		38.1		38.5		37.7

Other information
Dividend per share	$	0.54	$	0.65	$	0.75	$	0.86
Net capital expenditures		1,586		1,625		1,731		1,973
Free cash flow*		1,616		1,746		1,661		1,623
* See Appendix for a reconciliation of non-GAAP measures.

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FINANCIAL & STATISTICAL HIGHLIGHTS

STATISTICAL HIGHLIGHTS

	2010		2011		2012		2013
Statistical operating data
Route miles (includes Canada and the U.S.)		20,600		20,000		20,100		20,000
Carloads (thousands)		4,696		4,873		5,059		5,190
Gross ton miles (GTMs) (millions)		341,219		357,927		383,754		401,390
Revenue ton miles (RTMs) (millions)		179,232		187,753		201,496		210,133
Employees (end of year)		22,444		23,339		23,430		23,721
Employees (average for the year)		22,055		23,079		23,466		23,705
Diesel fuel consumed (US gallons in millions)		355.7		367.7		388.7		403.7
Average fuel price ($/US gallon)	$	2.64	$	3.39	$	3.47	$	3.55
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, as such certain of the 2010, 2011 and 2012 comparative statistical data and related productivity measures have been restated.

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CANADIAN NATIONAL RAILWAY COMPANY

QUARTERLY CONSOLIDATED STATEMENT OF INCOME 2011 – 2013

$ in millions, unless otherwise indicated							2011															2012															2013
		Q1			Q2			Q3			Q4		Year				Q1			Q2			Q3			Q4		Year				Q1			Q2			Q3			Q4		Year

Revenues	$	2,084		$	2,260		$	2,307		$	2,377		$	9,028		$	2,346		$	2,543		$	2,497		$	2,534		$	9,920		$	2,466		$	2,666		$	2,698		$	2,745		$	10,575

Operating expenses
Labor and fringe benefits		473			432			396			511			1,812			509			504			476			463			1,952			569			498			521			594			2,182
Purchased services and material		286			268			271			295			1,120			299			305			304			340			1,248			328			341			318			364			1,351
Fuel		327			353			350			382			1,412			376			379			369			400			1,524			405			402			390			422			1,619
Depreciation and amortization		218			217			218			231			884			230			230			227			237			924			235			250			241			254			980
Equipment rents		51			54			60			63			228			62			59			64			64			249			68			68			68			71			275
Casualty and other		84			62			74			56			276			77			81			72			108			338			81			65			76			73			295
Total operating expenses		1,439			1,386			1,369			1,538			5,732			1,553			1,558			1,512			1,612			6,235			1,686			1,624			1,614			1,778			6,702

Operating income		645			874			938			839			3,296			793			985			985			922			3,685			780			1,042			1,084			967			3,873
Interest expense		(86	)		(85	)		(85	)		(85	)		(341	)		(86	)		(86	)		(84	)		(86	)		(342	)		(89	)		(88	)		(89	)		(91	)		(357	)
Other income (loss)		300			10			70			21			401			293			9			18			(5	)		315			42			28			5			(2	)		73

Income before income taxes		859			799			923			775			3,356			1,000			908			919			831			3,658			733			982			1,000			874			3,589

Income tax expense		(191	)		(261	)		(264	)		(183	)		(899	)		(225	)		(277	)		(255	)		(221	)		(978	)		(178	)		(265	)		(295	)		(239	)		(977	)

Net income	$	668		$	538		$	659		$	592		$	2,457		$	775		$	631		$	664		$	610		$	2,680		$	555		$	717		$	705		$	635		$	2,612

Operating ratio		69.0	%		61.3	%		59.3	%		64.7	%		63.5	%		66.2	%		61.3	%		60.6	%		63.6	%		62.9	%		68.4	%		60.9	%		59.8	%		64.8	%		63.4	%

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CANADIAN NATIONAL RAILWAY COMPANY

QUARTERLY CONSOLIDATED BALANCE SHEET 2011 – 2013

$ in millions					2011								2012								2013
		Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4

Assets
Current assets
Cash and cash equivalents	$	593	$	175	$	192	$	101	$	182	$	345	$	175	$	155	$	128	$	87	$	182	$	214
Restricted cash and cash equivalents		–		467		489		499		499		472		518		521		512		497		529		448
Accounts receivable		770		825		801		820		769		833		845		831		900		876		868		815
Material and supplies		228		240		272		201		261		277		272		230		289		330		317		274
Deferred and receivable income taxes		50		50		52		122		80		47		37		43		75		34		74		137
Other		73		84		62		105		102		85		78		89		95		81		67		89
Total current assets		1,714		1,841		1,868		1,848		1,893		2,059		1,925		1,869		1,999		1,905		2,037		1,977

Properties		22,677		22,789		23,800		23,917		23,681		24,078		24,004		24,541		24,733		25,305		25,383		26,227
Intangible and other assets		821		840		899		261		299		329		349		249		260		335		377		1,959
Total assets	$	25,212	$	25,470	$	26,567	$	26,026	$	25,873	$	26,466	$	26,278	$	26,659	$	26,992	$	27,545	$	27,797	$	30,163

continued

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CANADIAN NATIONAL RAILWAY COMPANY

QUARTERLY CONSOLIDATED BALANCE SHEET 2011 – 2013

continued from page 9

$ in millions							2011												2012												2013
		Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4

Liabilities and shareholders’ equity
Current liabilities
Accounts payable and other	$	1,341		$	1,452		$	1,565		$	1,580		$	1,342		$	1,609		$	1,631		$	1,626		$	1,332		$	1,469		$	1,499		$	1,477
Current portion of long-term debt		474			530			525			135			895			784			678			577			1,466			1,322			1,488			1,021
Total current liabilities		1,815			1,982			2,090			1,715			2,237			2,393			2,309			2,203			2,798			2,791			2,987			2,498

Deferred income taxes		5,201			5,301			5,613			5,333			5,494			5,629			5,603			5,555			5,700			5,867			5,884			6,537
Pension and other postretirement benefits, net of current portion		508			510			530			1,095			569			576			553			784			659			594			589			541
Other liabilities and deferred credits		779			774			800			762			683			713			738			776			778			767			760			815
Long-term debt		5,451			5,432			5,878			6,441			5,892			5,991			5,770			6,323			5,945			6,141			6,010			6,819

Shareholders’ equity
Common shares		4,228			4,211			4,149			4,141			4,153			4,132			4,120			4,108			4,088			4,063			4,036			4,015
Accumulated other comprehensive loss		(1,736	)		(1,741	)		(1,647	)		(2,839	)		(2,834	)		(2,789	)		(2,803	)		(3,257	)		(3,187	)		(3,094	)		(3,080	)		(1,850	)
Retained earnings		8,966			9,001			9,154			9,378			9,679			9,821			9,988			10,167			10,211			10,416			10,611			10,788
Total shareholders’ equity		11,458			11,471			11,656			10,680			10,998			11,164			11,305			11,018			11,112			11,385			11,567			12,953
Total liabilities and shareholders’ equity	$	25,212		$	25,470		$	26,567		$	26,026		$	25,873		$	26,466		$	26,278		$	26,659		$	26,992		$	27,545		$	27,797		$	30,163

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CANADIAN NATIONAL RAILWAY COMPANY

QUARTERLY CONSOLIDATED STATEMENT OF CASH FLOWS 2011 – 2013

$ in millions							2011															2012															2013
		Q1			Q2			Q3			Q4		Year				Q1			Q2			Q3			Q4		Year				Q1			Q2			Q3			Q4		Year

Operating activities
Net income	$	668		$	538		$	659		$	592		$	2,457		$	775		$	631		$	664		$	610		$	2,680		$	555		$	717		$	705		$	635		$	2,612
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		218			217			218			231			884			230			230			227			237			924			235			250			241			254			980
Deferred income taxes		104			119			104			204			531			194			78			59			120			451			83			73			13			162			331
Gain on disposal of property		(288	)		–			(60	)		–			(348	)		(281	)		–			–			–			(281	)		(40	)		(29	)		–			–			(69	)
Changes in operating assets and liabilities:
Accounts receivable		(18	)		(54	)		55			(34	)		(51	)		44			(56	)		(25	)		17			(20	)		(59	)		39			(3	)		55			32
Material and supplies		(19	)		(13	)		(27	)		70			11			(61	)		(15	)		3			43			(30	)		(57	)		(38	)		11			46			(38	)
Accounts payable and other		(64	)		106			60			(68	)		34			(200	)		290			50			(11	)		129			(321	)		118			57			(99	)		(245	)
Other current assets		(10	)		3			16			(11	)		(2	)		(30	)		19			5			(7	)		(13	)		(3	)		14			17			(15	)		13
Pensions and other, net		(92	)		(17	)		(38	)		(393	)		(540	)		(546	)		34			17			(285	)		(780	)		(72	)		(81	)		25			60			(68	)
Net cash provided by operating activities		499			899			987			591			2,976			125			1,211			1,000			724			3,060			321			1,063			1,066			1,098			3,548

Investing activities
Property additions		(220	)		(377	)		(415	)		(613	)		(1,625	)		(224	)		(389	)		(508	)		(610	)		(1,731	)		(228	)		(418	)		(539	)		(788	)		(1,973	)
Disposal of property		299			–			70			–			369			311			–			–			–			311			52			–			–			–			52
Change in restricted cash and cash equivalents		–			(467	)		(22	)		(10	)		(499	)		–			27			(46	)		(3	)		(22	)		9			15			(32	)		81			73
Other, net		14			3			5			4			26			2			(4	)		7			16			21			6			(8	)		(8	)		6			(4	)
Net cash provided by (used in) investing activities		93			(841	)		(362	)		(619	)		(1,729	)		89			(366	)		(547	)		(597	)		(1,421	)		(161	)		(411	)		(579	)		(701	)		(1,852	)

continued

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CANADIAN NATIONAL RAILWAY COMPANY

QUARTERLY CONSOLIDATED STATEMENT OF CASH FLOWS 2011 – 2013

continued from page 11

$ in millions							2011															2012															2013
		Q1			Q2			Q3			Q4		Year				Q1			Q2			Q3			Q4		Year				Q1			Q2			Q3			Q4		Year

Financing activities
Issuance of debt,
excluding commercial paper		–			–			–			703			703			–			–			–			493			493			505			–			210			867			1,582
Repayment of debt,
excluding commercial paper		(22	)		(17	)		(12	)		(458	)		(509	)		(14	)		(11	)		(9	)		(24	)		(58	)		(740	)		(156	)		(104	)		(413	)		(1,413	)
Net issuance (repayment) of commercial
paper (1)		–			64			(42	)		62			84			346			(158	)		(99	)		(171	)		(82	)		566			(15	)		58			(341	)		268
Issuance of common shares due to exercise of stock options and related excess tax benefits realized		20			31			5			21			77			54			19			24			20			117			14			9			5			3			31
Repurchase of common shares		(340	)		(407	)		(417	)		(256	)		(1,420	)		(353	)		(369	)		(373	)		(305	)		(1,400	)		(361	)		(351	)		(383	)		(305	)		(1,400	)
Dividends paid		(149	)		(147	)		(145	)		(144	)		(585	)		(165	)		(163	)		(163	)		(161	)		(652	)		(183	)		(182	)		(180	)		(179	)		(724	)
Net cash used in financing activities		(491	)		(476	)		(611	)		(72	)		(1,650	)		(132	)		(682	)		(620	)		(148	)		(1,582	)		(199	)		(695	)		(394	)		(368	)		(1,656	)
Effect of foreign exchange fluctuations on US dollar-denominated cash and cash equivalents		2			–			3			9			14			(1	)		–			(3	)		1			(3	)		12			2			2			3			19
Net increase (decrease) in cash and cash equivalents		103			(418	)		17			(91	)		(389	)		81			163			(170	)		(20	)		54			(27	)		(41	)		95			32			59
Cash and cash equivalents, beginning of period		490			593			175			192			490			101			182			345			175			101			155			128			87			182			155
Cash and cash equivalents, end of period	$	593		$	175		$	192		$	101		$	101		$	182		$	345		$	175		$	155		$	155		$	128		$	87		$	182		$	214		$	214
Supplemental cash flow information
Net cash receipts from customers and other		2,105			2,228			2,326			2,336			8,995			2,379			2,541			2,476			2,481			9,877			2,509			2,656			2,633			2,842			10,640
Net cash payments for:

Employee services, suppliers and other expenses		(1,271	)		(1,156	)		(1,124	)		(1,092	)		(4,643	)		(1,534	)		(1,233	)		(1,235	)		(1,239	)		(5,241	)		(1,672	)		(1,241	)		(1,256	)		(1,389	)		(5,558	)
Interest		(87	)		(75	)		(87	)		(80	)		(329	)		(110	)		(76	)		(89	)		(89	)		(364	)		(90	)		(84	)		(85	)		(85	)		(344	)
Personal injury and other claims		(17	)		(16	)		(15	)		(49	)		(97	)		(30	)		(14	)		(13	)		(22	)		(79	)		(14	)		(14	)		(16	)		(17	)		(61	)
Pensions		(93	)		(5	)		(5	)		(365	)		(468	)		(553	)		(5	)		(29	)		(257	)		(844	)		(101	)		(109	)		(11	)		(18	)		(239	)
Income taxes		(138	)		(77	)		(108	)		(159	)		(482	)		(27	)		(2	)		(110	)		(150	)		(289	)		(311	)		(145	)		(199	)		(235	)		(890	)
Net cash provided by operating activities	$	499		$	899		$	987		$	591		$	2,976		$	125		$	1,211		$	1,000		$	724		$	3,060		$	321		$	1,063		$	1,066		$	1,098		$	3,548

(1) Issuances and repayments of commercial paper, all of which have a maturity of less than 90 days, are presented on a net basis.

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CANADIAN NATIONAL RAILWAY COMPANY

QUARTERLY FINANCIAL & STATISTICAL DATA 2011 – 2013

			2011							2012							2013
	Q1	Q2		Q3	Q4	Year		Q1	Q2		Q3	Q4	Year		Q1	Q2		Q3	Q4	Year

Revenues ($ in millions) (1)
Petroleum and chemicals	345	344		365	381		1,435	396	408		420	431		1,655	461	481		489	521		1,952
Metals and minerals	217	251		281	283		1,032	280	300		299	280		1,159	288	309		332	311		1,240
Forest products	302	319		327	331		1,279	331	346		338	326		1,341	338	361		365	360		1,424
Coal	145	167		169	154		635	172	191		192	176		731	170	192		191	160		713
Grain and fertilizers	412	374		342	420		1,548	403	371		374	465		1,613	408	391		363	476		1,638
Intermodal	447	515		542	526		2,030	522	597		576	566		2,261	556	610		642	621		2,429
Automotive	117	131		119	124		491	131	156		129	130		546	134	149		137	135		555
Total rail freight revenues	1,985	2,101		2,145	2,219		8,450	2,235	2,369		2,328	2,374		9,306	2,355	2,493		2,519	2,584		9,951
Other revenues	99	159		162	158		578	111	174		169	160		614	111	173		179	161		624
Total revenues	2,084	2,260		2,307	2,377		9,028	2,346	2,543		2,497	2,534		9,920	2,466	2,666		2,698	2,745		10,575

Statistical operating data
Gross ton miles (GTMs) (millions)	86,667	89,615		89,517	92,128		357,927	92,593	96,886		96,402	97,873		383,754	96,301	101,547		100,321	103,221		401,390
Revenue ton miles (RTMs) (millions)	46,153	46,683		46,761	48,156		187,753	49,049	50,324		49,999	52,124		201,496	50,576	52,702		52,188	54,667		210,133
Carloads (thousands)	1,146	1,234		1,261	1,232		4,873	1,205	1,286		1,298	1,270		5,059	1,231	1,316		1,333	1,310		5,190
Route miles
(includes Canada and the U.S.) (2)	20,400	20,500		20,500	20,000		20,000	20,000	20,000		20,000	20,100		20,100	20,100	20,000		20,000	20,000		20,000
Employees (end of period)	22,692	23,430		23,441	23,339		23,339	23,303	23,667		23,610	23,430		23,430	23,624	23,925		23,664	23,721		23,721
Employees (average during period)	22,389	23,177		23,318	23,433		23,079	23,156	23,603		23,573	23,532		23,466	23,435	23,926		23,756	23,703		23,705

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, as such certain of the 2011 and 2012 comparative statistical data and related productivity measures have been restated.

(1)	Revenues by commodity groups reflect the impact of the 2014 reclassification.

(2)	Rounded to the nearest hundred miles.

continued

2014 CN I FB UPDATE | 13

CANADIAN NATIONAL RAILWAY COMPANY

QUARTERLY FINANCIAL & STATISTICAL DATA 2011 – 2013

continued from page 13

			2011							2012							2013
	Q1	Q2		Q3	Q4	Year		Q1	Q2		Q3	Q4	Year		Q1	Q2		Q3	Q4	Year

Productivity
Rail freight revenue per RTM (cents) (1)	4.30	4.50		4.59	4.61		4.50	4.56	4.71		4.66	4.55		4.62	4.66	4.73		4.83	4.73		4.74
Rail freight revenue per carload ($) (1)	1,732	1,703		1,701	1,801		1,734	1,855	1,842		1,794	1,869		1,839	1,913	1,894		1,890	1,973		1,917
Operating expenses per GTM (cents)	1.66	1.55		1.53	1.67		1.60	1.68	1.61		1.57	1.65		1.62	1.75	1.60		1.61	1.72		1.67
Labor and fringe benefits expense per GTM (cents)	0.55	0.48		0.44	0.55		0.51	0.55	0.52		0.49	0.47		0.51	0.59	0.49		0.52	0.58		0.54

GTMs per average number of employees (thousands)	3,871	3,867		3,839	3,932		15,509	3,999	4,105		4,090	4,159		16,354	4,109	4,244		4,223	4,355		16,933

Diesel fuel consumed (US gallons in millions)	92.9	91.3		89.2	94.3		367.7	96.9	97.4		94.5	99.9		388.7	101.7	103.5		96.8	101.7		403.7
Average fuel price ($/US gallon)	3.20	3.42		3.37	3.55		3.39	3.54	3.41		3.40	3.53		3.47	3.61	3.43		3.52	3.65		3.55
GTMs per US gallon of fuel consumed	933	982		1,004	977		973	956	995		1,020	980		987	947	981		1,036	1,015		994

Safety indicators
Injury frequency rate (per 200,000 person hours) (2)	1.44	1.71		1.73	1.32		1.55	1.34	1.46		1.40	1.48		1.42	1.41	1.43		1.67	2.27		1.69
Accident rate (per million train miles) (2)	2.28	2.44		2.33	1.96		2.25	2.17	2.19		2.30	1.77		2.10	2.12	2.10		1.31	2.14		1.92

(1)	Revenues by commodity groups reflect the impact of the 2014 reclassification.

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

2014 CN I FB UPDATE | 14

CANADIAN NATIONAL RAILWAY COMPANY

RECONCILIATION OF NON-GAAP MEASURES 2010 – 2013

Management believes that Adjusted net income and Adjusted diluted 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 the adjusted measures do not, however, imply that such items are necessarily non-recurring.

Management believes that Free cash flow is a useful measure of performance as it demonstrates the Company’s ability to generate cash for debt obligations and for discretionary uses such as payment of dividends and strategic opportunities. The Company defines its free cash flow measure as the difference between net cash provided by operating activities and net cash used in investing activities; adjusted for changes in restricted cash and cash equivalents and the impact of major acquisitions, if any. Free cash flow numbers for prior years have been restated for purposes of comparability.

These non-GAAP measures do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies. A reconciliation of the differences between these non-GAAP measures and their comparable financial measures calculated in accordance with U.S. GAAP are provided herein.

Adjusted performance measures

In millions, except per share data, or unless otherwise indicated				2010									2011
	Reported			Adjustments (1)			Adjusted			Reported			Adjustments (2)			Adjusted
Revenues	$	8,297			–		$	8,297		$	9,028			–		$	9,028
Operating expenses		5,273			–			5,273			5,732			–			5,732
Operating income		3,024			–			3,024			3,296			–			3,296
Interest expense		(360	)		–			(360	)		(341	)		–			(341	)
Other income		212			(152	)		60			401			(348	)		53
Income before income taxes		2,876			(152	)		2,724			3,356			(348	)		3,008
Income tax expense		(772	)		21			(751	)		(899	)		85			(814	)
Net income	$	2,104		$	(131	)	$	1,973		$	2,457		$	(263	)	$	2,194
Operating ratio		63.6	%					63.6	%		63.5	%					63.5	%
Diluted earnings per share	$	2.24		$	(0.14	)	$	2.10		$	2.70		$	(0.29	)	$	2.41

(1)	Adjusted to exclude a gain on sale of the Oakville subdivision, together with the rail fixtures and certain passenger agreements, of $152 million, or $131 million after-tax ($0.14 per diluted share).

(2)

Adjusted to exclude a gain on disposal of a segment of the Kingston subdivision, together with the rail fixtures and certain passenger agreements, of $288 million, or $254 million after-tax ($0.28 per diluted share); a gain on disposal of substantially all of the assets of IC RailMarine Terminal Company of $60 million, or $38 million after-tax ($0.04 per diluted share); a net deferred income tax expense of $40 million ($0.04 per diluted share) resulting from the enactment of state corporate income tax rate changes and other legislated state tax revisions; and an income tax recovery of $11 million ($0.01 per diluted share) relating to certain fuel costs attributed to various wholly owned subsidiaries in prior periods.

continued

2014 CN I FB UPDATE | 15

CANADIAN NATIONAL RAILWAY COMPANY

RECONCILIATION OF NON-GAAP MEASURES 2010 – 2013

continued from page 15

Adjusted performance measures

In millions, except per share data, or unless otherwise indicated				2012									2013
	Reported			Adjustments (1)			Adjusted			Reported			Adjustments (2)			Adjusted
Revenues	$	9,920			–		$	9,920		$	10,575			–		$	10,575
Operating expenses		6,235			–			6,235			6,702			–			6,702
Operating income		3,685			–			3,685			3,873			–			3,873
Interest expense		(342	)		–			(342	)		(357	)		–			(357	)
Other income		315			(281	)		34			73			(69	)		4
Income before income taxes		3,658			(281	)		3,377			3,589			(69	)		3,520
Income tax expense		(978	)		57			(921	)		(977	)		39			(938	)
Net income	$	2,680		$	(224	)	$	2,456		$	2,612		$	(30	)	$	2,582
Operating ratio		62.9	%					62.9	%		63.4	%					63.4	%
Diluted earnings per share	$	3.06		$	(0.25	)	$	2.81		$	3.09		$	(0.03	)	$	3.06

(1)

Adjusted to exclude a gain on disposal of a segment of the Bala and a segment of the Oakville subdivisions, together with the rail fixtures and certain passenger agreements, of $281 million, or $252 million after-tax ($0.28 per diluted share); and a net income tax expense of $28 million ($0.03 per diluted share) consisting of a $35 million income tax expense resulting from the enactment of higher provincial corporate income tax rates that was partly offset by a $7 million income tax recovery resulting from the recapitalization of a foreign investment.

(2)

Adjusted to exclude a gain on disposal of a segment of the Oakville subdivision, together with the rail fixtures and certain passenger agreements, of $40 million, or $36 million after-tax ($0.04 per diluted share); a gain on exchange of perpetual railroad operating easements including the track and roadway assets on specific rail lines, of $29 million, or $18 million after-tax ($0.02 per diluted share); and an income tax expense of $24 million ($0.03 per diluted share) resulting from the enactment of higher provincial corporate income tax rates.

2014 CN I FB UPDATE | 16

CANADIAN NATIONAL RAILWAY COMPANY

RECONCILIATION OF NON-GAAP MEASURES 2010 – 2013

Free cash flow

$ in millions	2010			2011			2012			2013
Net cash provided by operating activities	$	2,999		$	2,976		$	3,060		$	3,548
Net cash used in investing activities		(1,383	)		(1,729	)		(1,421	)		(1,852	)
Net cash provided before financing activities	$	1,616		$	1,247		$	1,639		$	1,696
Adjustment:
Change in restricted cash and cash equivalents		–			499			22			(73	)
Free cash flow	$	1,616		$	1,746		$	1,661		$	1,623

2014 CN I FB UPDATE | 17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Canadian National Railway Company



Date: June 25, 2014	By:	/s/ Cristina Circelli
		Name:	Cristina Circelli
		Title:	Deputy Corporate Secretary and General Counsel