Form 20-F
|
Form 40-F
|
X
|
Yes
|
No
|
X
|
Yes
|
No
|
X
|
Yes
|
No
|
X
|
Canadian National Railway Company
|
|||||
Date:
|
January 31, 2018
|
By:
|
/s/ Cristina Circelli
|
||
Name:
|
Cristina Circelli
|
||||
Title:
|
Deputy Corporate Secretary and General Counsel
|
2017
|
2016
|
2015
|
||
Financial
|
||||
Key financial performance indicators
|
||||
Total revenues
($ millions)
|
13,041
|
12,037
|
12,611
|
|
Rail freight revenues
($ millions)
|
12,293
|
11,326
|
11,905
|
|
Operating income
($ millions)
|
5,558
|
5,312
|
5,266
|
|
Net income
($ millions)
|
5,484
|
3,640
|
3,538
|
|
Diluted earnings per share
($)
|
7.24
|
4.67
|
4.39
|
|
Adjusted diluted earnings per share
($)
(1)
|
4.99
|
4.59
|
4.44
|
|
Free cash flow
($ millions)
(2)
|
2,778
|
2,520
|
2,373
|
|
Gross property additions
($ millions)
|
2,703
|
2,752
|
2,706
|
|
Share repurchases
($ millions)
|
2,000
|
2,000
|
1,750
|
|
Dividends per share
($)
|
1.65
|
1.50
|
1.25
|
|
Financial position
|
||||
Total assets
($ millions)
|
37,629
|
37,057
|
36,402
|
|
Total liabilities
($ millions)
|
20,973
|
22,216
|
21,452
|
|
Shareholders' equity
($ millions)
|
16,656
|
14,841
|
14,950
|
|
Financial ratios
|
||||
Operating ratio
(%)
|
57.4
|
55.9
|
58.2
|
|
Adjusted debt-to-adjusted EBITDA
(times)
(3)
|
1.65
|
1.75
|
1.71
|
|
Operations
(4)
|
||||
Statistical operating data
|
||||
Gross ton miles (GTMs)
(millions)
|
469,200
|
423,426
|
442,084
|
|
Revenue ton miles
(RTMs)
(millions)
|
237,098
|
214,327
|
224,710
|
|
Carloads
(thousands)
|
5,737
|
5,205
|
5,485
|
|
Route miles
(includes Canada and the U.S.)
|
19,500
|
19,600
|
19,600
|
|
Employees
(end of year)
|
23,945
|
22,249
|
23,066
|
|
Employees
(average for the year)
|
23,074
|
22,322
|
24,406
|
|
Key operating measures
|
||||
Rail freight revenue per RTM
(cents)
|
5.18
|
5.28
|
5.30
|
|
Rail freight revenue per carload
($)
|
2,143
|
2,176
|
2,170
|
|
GTMs per average number of employees
(thousands)
|
20,335
|
18,969
|
18,114
|
|
Operating expenses per GTM
(cents)
|
1.59
|
1.59
|
1.66
|
|
Labor and fringe benefits expense per GTM
(cents)
|
0.47
|
0.50
|
0.54
|
|
Diesel fuel consumed
(US gallons in millions)
|
441.4
|
398.9
|
425.0
|
|
Average fuel price
($/US gallon)
|
2.74
|
2.34
|
2.68
|
|
GTMs per US gallon of fuel consumed
|
1,063
|
1,061
|
1,040
|
|
Terminal dwell
(hours)
|
16.2
|
14.0
|
15.0
|
|
Train velocity
(miles per hour)
|
25.3
|
27.3
|
26.3
|
|
Safety indicators
(5)
|
||||
Injury frequency rate
(per 200,000 person hours)
|
1.83
|
1.70
|
1.63
|
|
Accident rate
(per million train miles)
|
1.83
|
1.42
|
2.06
|
|
(1)
|
See the section entitled Adjusted performance measures in the MD&A for an explanation of this non-GAAP measure.
|
|||
(2)
|
See the section entitled Liquidity and capital resources - Free cash flow in the MD&A for an explanation of this non-GAAP measure.
|
|||
(3)
|
See the section entitled Liquidity and capital resources - Adjusted debt-to-adjusted EBITDA multiple in the MD&A for an explanation of this non-GAAP measure.
|
|||
(4)
|
Statistical operating data, key operating measures and safety indicators are unaudited and based on estimated data available at such time and are subject to change as more complete information becomes available. Definitions of these indicators are provided on our website,
www.cn.ca/glossary
.
|
|||
(5)
|
Based on Federal Railroad Administration (FRA) reporting criteria.
|
Contents
|
|
Business profile
|
3
|
Corporate organization
|
3
|
Strategy overview
|
3
|
Forward-looking statements
|
7
|
Financial outlook
|
8
|
Financial highlights
|
8
|
2017 compared to 2016
|
8
|
Non-GAAP measures
|
8
|
Adjusted performance measures
|
9
|
Constant currency
|
9
|
Revenues
|
10
|
Operating expenses
|
15
|
Other income and expenses
|
16
|
2016 compared to 2015
|
17
|
Summary of quarterly financial data
|
22
|
Summary of fourth quarter 2017
|
22
|
Financial position
|
23
|
Liquidity and capital resources
|
24
|
Off balance sheet arrangements
|
31
|
Outstanding share data
|
31
|
Financial instruments
|
31
|
Recent accounting pronouncements
|
33
|
Critical accounting estimates
|
35
|
Business risks
|
44
|
Controls and procedures
|
53
|
·
|
CN attained record revenues and operating income, as well as record reported and adjusted net income and earnings per share in 2017.
(1)
|
·
|
Net income increased by $1,844 million, or 51%, to $5,484 million, and diluted earnings per share increased by 55% to $7.24, in 2017 compared to the prior year.
|
·
|
Adjusted net income increased by $197 million, or 6%, to $3,778 million, and adjusted diluted earnings per share increased by 9% to $4.99, in 2017 compared to the prior year.
(1)
|
·
|
Operating income increased by $246 million, or 5%, to $5,558 million in 2017.
|
·
|
Operating ratio of 57.4%, an increase of 1.5 points over 2016.
|
·
|
Revenues increased by $1,004 million, or 8%, to $13,041 million in 2017, compared to the prior year.
|
·
|
Operating expenses increased by $758 million, or 11%, to $7,483 million in 2017.
|
·
|
The Company generated record free cash flow of $2,778 million, a 10% increase over 2016.
(2)
|
Forward-looking statements
|
Key assumptions
|
Statements relating to revenue growth opportunities, including
|
·
North American and global economic growth
|
those referring to general economic and business conditions
|
·
Long-term growth opportunities being less affected by current economic
|
conditions
|
|
Statements relating to the Company's ability to meet debt
|
·
North American and global economic growth
|
repayments and future obligations in the foreseeable future,
|
·
Adequate credit ratios
|
including income tax payments, and capital spending
|
·
Investment-grade credit ratings
|
·
Access to capital markets
|
|
·
Adequate cash generated from operations and other sources of financing
|
|
·
Reasonable interpretations of existing or future tax laws and
|
|
regulations
|
|
Statements relating to pension contributions
|
·
Adequate cash generated from operations and other sources of financing
|
·
Adequate long-term return on investment on pension plan assets
|
|
·
Level of funding as determined by actuarial valuations, particularly
|
|
influenced by discount rates for funding purposes
|
|
Financial highlights
|
|||||||||
Change
|
|||||||||
Favorable/(Unfavorable)
|
|||||||||
In millions, except percentage and per share data
|
2017
|
2016
|
2015
|
2017 vs 2016
|
2016 vs 2015
|
||||
Revenues
|
$
|
13,041
|
$
|
12,037
|
$
|
12,611
|
8%
|
(5%)
|
|
Operating income
|
$
|
5,558
|
$
|
5,312
|
$
|
5,266
|
5%
|
1%
|
|
Net income
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
51%
|
3%
|
|
Adjusted net income
(1)
|
$
|
3,778
|
$
|
3,581
|
$
|
3,580
|
6%
|
-
|
|
Basic earnings per share
|
$
|
7.28
|
$
|
4.69
|
$
|
4.42
|
55%
|
6%
|
|
Adjusted basic earnings per share
(1)
|
$
|
5.02
|
$
|
4.61
|
$
|
4.47
|
9%
|
3%
|
|
Diluted earnings per share
|
$
|
7.24
|
$
|
4.67
|
$
|
4.39
|
55%
|
6%
|
|
Adjusted diluted earnings per share
(1)
|
$
|
4.99
|
$
|
4.59
|
$
|
4.44
|
9%
|
3%
|
|
Dividends declared per share
|
$
|
1.65
|
$
|
1.50
|
$
|
1.25
|
10%
|
20%
|
|
Total assets
|
$
|
37,629
|
$
|
37,057
|
$
|
36,402
|
2%
|
2%
|
|
Total long-term liabilities
|
$
|
16,990
|
$
|
19,208
|
$
|
18,454
|
12%
|
(4%)
|
|
Operating ratio
|
57.4%
|
55.9%
|
58.2%
|
(1.5)-pts
|
2.3-pts
|
||||
Free cash flow
(2)
|
$
|
2,778
|
$
|
2,520
|
$
|
2,373
|
10%
|
6%
|
|
(1)
|
See the section of this MD&A entitled Adjusted performance measures for an explanation of this non-GAAP measure.
|
||||||||
(2)
|
See the section of this MD&A entitled Liquidity and capital resources – Free cash flow for an explanation of this non-GAAP measure.
|
·
|
in the fourth quarter, a deferred income tax recovery of $1,764 million ($2.33 per diluted share) resulting from the enactment of the U.S. Tax Reform and a deferred income tax expense of $50 million ($0.07 per diluted share) resulting from the enactment of higher provincial corporate income tax rates;
|
·
|
in the third quarter, a deferred income tax expense of $31 million ($0.04 per diluted share) resulting from the enactment of a higher state corporate income tax rate;
|
·
|
in the second quarter, a deferred income tax recovery of $18 million ($0.02 per diluted share) resulting from the enactment of a lower provincial corporate income tax rate; and
|
·
|
in the first quarter, a deferred income tax recovery of $5 million ($0.01 per diluted share) resulting from the enactment of a lower provincial corporate income tax rate.
|
In millions, except per share data
|
Year ended December 31,
|
2017
|
2016
|
2015
|
||||
Net income as reported
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
||
Adjustments:
|
||||||||
Other income
|
-
|
(76)
|
-
|
|||||
Income tax expense (recovery)
|
(1,706)
|
17
|
42
|
|||||
Adjusted net income
|
$
|
3,778
|
$
|
3,581
|
$
|
3,580
|
||
Basic earnings per share as reported
|
$
|
7.28
|
$
|
4.69
|
$
|
4.42
|
||
Impact of adjustments, per share
|
(2.26)
|
(0.08)
|
0.05
|
|||||
Adjusted basic earnings per share
|
$
|
5.02
|
$
|
4.61
|
$
|
4.47
|
||
Diluted earnings per share as reported
|
$
|
7.24
|
$
|
4.67
|
$
|
4.39
|
||
Impact of adjustments, per share
|
(2.25)
|
(0.08)
|
0.05
|
|||||
Adjusted diluted earnings per share
|
$
|
4.99
|
$
|
4.59
|
$
|
4.44
|
Revenues
|
|||||||||
In millions, unless otherwise indicated
|
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
||||
Rail freight revenues
|
$
|
12,293
|
$
|
11,326
|
9%
|
10%
|
|||
Other revenues
|
748
|
711
|
5%
|
6%
|
|||||
Total revenues
|
$
|
13,041
|
$
|
12,037
|
8%
|
10%
|
|||
Rail freight revenues
|
|||||||||
Petroleum and chemicals
|
$
|
2,208
|
$
|
2,174
|
2%
|
3%
|
|||
Metals and minerals
|
1,523
|
1,218
|
25%
|
27%
|
|||||
Forest products
|
1,788
|
1,797
|
(1%)
|
1%
|
|||||
Coal
|
535
|
434
|
23%
|
25%
|
|||||
Grain and fertilizers
|
2,214
|
2,098
|
6%
|
7%
|
|||||
Intermodal
|
3,200
|
2,846
|
12%
|
13%
|
|||||
Automotive
|
825
|
759
|
9%
|
10%
|
|||||
Total rail freight revenues
|
$
|
12,293
|
$
|
11,326
|
9%
|
10%
|
|||
Revenue ton miles (RTMs)
(millions)
|
237,098
|
214,327
|
11%
|
11%
|
|||||
Rail freight revenue/RTM
(cents)
|
5.18
|
5.28
|
(2%)
|
(1%)
|
|||||
Carloads
(thousands)
|
5,737
|
5,205
|
10%
|
10%
|
|||||
Rail freight revenue/carload
(dollars)
|
2,143
|
2,176
|
(2%)
|
-
|
Petroleum and chemicals
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
2,208
|
$
|
2,174
|
2%
|
3%
|
|
RTMs
(millions)
|
44,375
|
43,395
|
2%
|
2%
|
|||
Revenue/RTM
(cents)
|
4.98
|
5.01
|
(1%)
|
1%
|
|||
Carloads
(thousands)
|
614
|
599
|
3%
|
3%
|
Percentage of commodity group revenues
|
2017
|
2016
|
|
Chemicals and plastics
|
45%
|
46%
|
|
Refined petroleum products
|
36%
|
33%
|
|
Crude and condensate
|
15%
|
17%
|
|
Sulfur
|
4%
|
4%
|
Metals and minerals
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
1,523
|
$
|
1,218
|
25%
|
27%
|
|
RTMs
(millions)
|
27,938
|
20,233
|
38%
|
38%
|
|||
Revenue/RTM
(cents)
|
5.45
|
6.02
|
(9%)
|
(8%)
|
|||
Carloads
(thousands)
|
995
|
807
|
23%
|
23%
|
Percentage of commodity group revenues
|
2017
|
2016
|
|
Energy materials
|
32%
|
21%
|
|
Metals
|
29%
|
33%
|
|
Minerals
|
23%
|
27%
|
|
Iron ore
|
16%
|
19%
|
Forest products
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
1,788
|
$
|
1,797
|
(1%)
|
1%
|
|
RTMs
(millions)
|
30,510
|
31,401
|
(3%)
|
(3%)
|
|||
Revenue/RTM
(cents)
|
5.86
|
5.72
|
2%
|
4%
|
|||
Carloads
(thousands)
|
424
|
440
|
(4%)
|
(4%)
|
Percentage of commodity group revenues
|
2017
|
2016
|
|
Lumber
|
41%
|
41%
|
|
Pulp
|
30%
|
31%
|
|
Paper
|
17%
|
16%
|
|
Panels
|
12%
|
12%
|
Coal
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
535
|
$
|
434
|
23%
|
25%
|
|
RTMs
(millions)
|
14,539
|
11,032
|
32%
|
32%
|
|||
Revenue/RTM
(cents)
|
3.68
|
3.93
|
(6%)
|
(5%)
|
|||
Carloads
(thousands)
|
303
|
333
|
(9%)
|
(9%)
|
Percentage of commodity group revenues
|
2017
|
2016
|
|
Canadian coal - export
|
28%
|
23%
|
|
U.S. coal - export
|
27%
|
23%
|
|
Petroleum coke
|
26%
|
22%
|
|
U.S. coal - domestic
|
19%
|
32%
|
Grain and fertilizers
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
2,214
|
$
|
2,098
|
6%
|
7%
|
|
RTMs
(millions)
|
56,123
|
51,485
|
9%
|
9%
|
|||
Revenue/RTM
(cents)
|
3.94
|
4.07
|
(3%)
|
(2%)
|
|||
Carloads
(thousands)
|
619
|
602
|
3%
|
3%
|
Percentage of commodity group revenues
|
2017
|
2016
|
Canadian grain - regulated
|
39%
|
38%
|
U.S. grain - domestic
|
20%
|
21%
|
Canadian grain - commercial
|
14%
|
14%
|
Fertilizers - potash
|
12%
|
11%
|
Fertilizers - other
|
10%
|
9%
|
U.S. grain - exports
|
5%
|
7%
|
Intermodal
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
3,200
|
$
|
2,846
|
12%
|
13%
|
|
RTMs
(millions)
|
59,356
|
53,056
|
12%
|
12%
|
|||
Revenue/RTM
(cents)
|
5.39
|
5.36
|
1%
|
1%
|
|||
Carloads
(thousands)
|
2,514
|
2,163
|
16%
|
16%
|
Percentage of commodity group revenues
|
2017
|
2016
|
|
International
|
66%
|
63%
|
|
Domestic
|
34%
|
37%
|
Automotive
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
825
|
$
|
759
|
9%
|
10%
|
|
RTMs
(millions)
|
4,257
|
3,725
|
14%
|
14%
|
|||
Revenue/RTM
(cents)
|
19.38
|
20.38
|
(5%)
|
(3%)
|
|||
Carloads
(thousands)
|
268
|
261
|
3%
|
3%
|
Percentage of commodity group revenues
|
2017
|
2016
|
Finished vehicles
|
94%
|
93%
|
Auto parts
|
6%
|
7%
|
Other revenues
|
|||||||
Year ended December 31,
|
2017
|
2016
|
% Change
|
% Change
at constant
currency
|
|||
Revenues
(millions)
|
$
|
748
|
$
|
711
|
5%
|
6%
|
Percentage of other revenues
|
2017
|
2016
|
|
Vessels and docks
|
50%
|
50%
|
|
Other non-rail services
|
40%
|
39%
|
|
Other revenues
|
10%
|
11%
|
% Change
|
% Change
at constant
currency
|
||||||
In millions
|
Year ended December 31,
|
2017
|
2016
|
||||
Labor and fringe benefits
|
$
|
2,221
|
$
|
2,119
|
(5%)
|
(6%)
|
|
Purchased services and material
|
1,769
|
1,592
|
(11%)
|
(12%)
|
|||
Fuel
|
1,362
|
1,051
|
(30%)
|
(32%)
|
|||
Depreciation and amortization
|
1,281
|
1,225
|
(5%)
|
(5%)
|
|||
Equipment rents
|
418
|
375
|
(11%)
|
(14%)
|
|||
Casualty and other
|
432
|
363
|
(19%)
|
(21%)
|
|||
Total operating expenses
|
$
|
7,483
|
$
|
6,725
|
(11%)
|
(13%)
|
In millions, unless otherwise indicated
|
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
||
Rail freight revenues
|
$
|
11,326
|
$
|
11,905
|
(5%)
|
(7%)
|
|
Other revenues
|
711
|
706
|
1%
|
(1%)
|
|||
Total revenues
|
$
|
12,037
|
$
|
12,611
|
(5%)
|
(7%)
|
|
Rail freight revenues
|
|||||||
Petroleum and chemicals
|
$
|
2,174
|
$
|
2,442
|
(11%)
|
(13%)
|
|
Metals and minerals
|
1,218
|
1,437
|
(15%)
|
(17%)
|
|||
Forest products
|
1,797
|
1,728
|
4%
|
1%
|
|||
Coal
|
434
|
612
|
(29%)
|
(30%)
|
|||
Grain and fertilizers
|
2,098
|
2,071
|
1%
|
-
|
|||
Intermodal
|
2,846
|
2,896
|
(2%)
|
(3%)
|
|||
Automotive
|
759
|
719
|
6%
|
3%
|
|||
Total rail freight revenues
|
$
|
11,326
|
$
|
11,905
|
(5%)
|
(7%)
|
|
Revenue ton miles (RTMs)
(millions)
|
214,327
|
224,710
|
(5%)
|
(5%)
|
|||
Rail freight revenue/RTM
(cents)
|
5.28
|
5.30
|
-
|
(2%)
|
|||
Carloads
(thousands)
|
5,205
|
5,485
|
(5%)
|
(5%)
|
|||
Rail freight revenue/carload
(dollars)
|
2,176
|
2,170
|
-
|
(2%)
|
Petroleum and chemicals
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
2,174
|
$
|
2,442
|
(11%)
|
(13%)
|
|
RTMs (millions)
|
43,395
|
51,103
|
(15%)
|
(15%)
|
|||
Revenue/RTM (cents)
|
5.01
|
4.78
|
5%
|
2%
|
|||
Carloads (thousands)
|
599
|
640
|
(6%)
|
(6%)
|
Metals and minerals
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
1,218
|
$
|
1,437
|
(15%)
|
(17%)
|
|
RTMs (millions)
|
20,233
|
21,828
|
(7%)
|
(7%)
|
|||
Revenue/RTM (cents)
|
6.02
|
6.58
|
(9%)
|
(11%)
|
|||
Carloads (thousands)
|
807
|
886
|
(9%)
|
(9%)
|
Forest products
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
1,797
|
$
|
1,728
|
4%
|
1%
|
|
RTMs (millions)
|
31,401
|
30,097
|
4%
|
4%
|
|||
Revenue/RTM (cents)
|
5.72
|
5.74
|
-
|
(3%)
|
|||
Carloads (thousands)
|
440
|
441
|
-
|
-
|
Coal
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
434
|
$
|
612
|
(29%)
|
(30%)
|
|
RTMs (millions)
|
11,032
|
15,956
|
(31%)
|
(31%)
|
|||
Revenue/RTM (cents)
|
3.93
|
3.84
|
2%
|
1%
|
|||
Carloads (thousands)
|
333
|
438
|
(24%)
|
(24%)
|
Grain and fertilizers
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
2,098
|
$
|
2,071
|
1%
|
-
|
|
RTMs (millions)
|
51,485
|
50,001
|
3%
|
3%
|
|||
Revenue/RTM (cents)
|
4.07
|
4.14
|
(2%)
|
(3%)
|
|||
Carloads (thousands)
|
602
|
607
|
(1%)
|
(1%)
|
Intermodal
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
2,846
|
$
|
2,896
|
(2%)
|
(3%)
|
|
RTMs (millions)
|
53,056
|
52,144
|
2%
|
2%
|
|||
Revenue/RTM (cents)
|
5.36
|
5.55
|
(3%)
|
(5%)
|
|||
Carloads (thousands)
|
2,163
|
2,232
|
(3%)
|
(3%)
|
Automotive
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
759
|
$
|
719
|
6%
|
3%
|
|
RTMs (millions)
|
3,725
|
3,581
|
4%
|
4%
|
|||
Revenue/RTM (cents)
|
20.38
|
20.08
|
1%
|
(1%)
|
|||
Carloads (thousands)
|
261
|
241
|
8%
|
8%
|
Other revenues
|
|||||||
Year ended December 31,
|
2016
|
2015
|
% Change
|
% Change
at constant
currency
|
|||
Revenues (millions)
|
$
|
711
|
$
|
706
|
1%
|
(1%)
|
% Change
|
% Change
at constant
currency
|
||||||
In millions
|
Year ended December 31,
|
2016
|
2015
|
||||
Labor and fringe benefits
|
$
|
2,119
|
$
|
2,406
|
12%
|
13%
|
|
Purchased services and material
|
1,592
|
1,729
|
8%
|
9%
|
|||
Fuel
|
1,051
|
1,285
|
18%
|
20%
|
|||
Depreciation and amortization
|
1,225
|
1,158
|
(6%)
|
(4%)
|
|||
Equipment rents
|
375
|
373
|
(1%)
|
3%
|
|||
Casualty and other
|
363
|
394
|
8%
|
11%
|
|||
Total operating expenses
|
$
|
6,725
|
$
|
7,345
|
8%
|
10%
|
2017
Quarters
|
2016
Quarters
|
|||||||||||||||||
In millions, except per share data
|
Fourth
(1)
|
Third
(2)
|
Second
(3)
|
First
(4)
|
Fourth
(5)
|
Third
|
Second
(6)
|
First
|
||||||||||
Revenues
|
$
|
3,285
|
$
|
3,221
|
$
|
3,329
|
$
|
3,206
|
$
|
3,217
|
$
|
3,014
|
$
|
2,842
|
$
|
2,964
|
||
Operating income
|
$
|
1,301
|
$
|
1,459
|
$
|
1,495
|
$
|
1,303
|
$
|
1,395
|
$
|
1,407
|
$
|
1,293
|
$
|
1,217
|
||
Net income
|
$
|
2,611
|
$
|
958
|
$
|
1,031
|
$
|
884
|
$
|
1,018
|
$
|
972
|
$
|
858
|
$
|
792
|
||
Basic earnings per share
|
$
|
3.50
|
$
|
1.28
|
$
|
1.36
|
$
|
1.16
|
$
|
1.33
|
$
|
1.26
|
$
|
1.10
|
$
|
1.01
|
||
Diluted earnings per share
|
$
|
3.48
|
$
|
1.27
|
$
|
1.36
|
$
|
1.16
|
$
|
1.32
|
$
|
1.25
|
$
|
1.10
|
$
|
1.00
|
||
Dividends per share
|
$
|
0.4125
|
$
|
0.4125
|
$
|
0.4125
|
$
|
0.4125
|
$
|
0.3750
|
$
|
0.3750
|
$
|
0.3750
|
$
|
0.3750
|
||
(1)
|
Included in Net income was a deferred income tax recovery of $1,764 million that resulted from the enactment of the U.S. Tax Reform and a deferred income tax expense of $50 million that resulted from the enactment of higher provincial corporate income tax rates.
|
|||||||||||||||||
(2)
|
Included in Net income was a deferred income tax expense of $31 million that resulted from the enactment of a higher state corporate income tax rate.
|
|||||||||||||||||
(3)
|
Included in Net income was a deferred income tax recovery of $18 million that resulted from the enactment of a lower provincial corporate income tax rate.
|
|||||||||||||||||
(4)
|
Included in Net income was a deferred income tax recovery of $5 million that resulted from the enactment of a lower provincial corporate income tax rate.
|
|||||||||||||||||
(5)
|
Included in Net income was a gain on disposal of the Viaduc du Sud of $76 million, or $66 million after-tax, which was recorded in Other income.
|
|||||||||||||||||
(6)
|
Included in Net income was a deferred income tax expense of $7 million that resulted from the enactment of a higher provincial corporate income tax rate.
|
In millions
|
December 31,
|
2017
|
2016
|
Foreign
exchange
impact
|
Variance excluding foreign exchange
|
Explanation of variance,
other than foreign exchange impact
|
|||||||||
Total assets
|
$
|
37,629
|
$
|
37,057
|
$
|
(1,104)
|
$
|
1,676
|
|||||||
Variance mainly due to:
|
|||||||||||||||
Properties
|
34,189
|
33,755
|
(1,053)
|
1,487
|
Increase primarily due to gross property additions of $2,703 million, partly offset by depreciation of $1,281 million.
|
||||||||||
Pension asset
|
994
|
907
|
-
|
87
|
Increase primarily due to higher actual returns partly offset by the decrease in the year-end discount rate from 3.81% in 2016 to 3.51% in 2017.
|
||||||||||
Total liabilities
|
$
|
20,973
|
$
|
22,216
|
$
|
(910)
|
$
|
(333)
|
|||||||
Variance mainly due to:
|
|||||||||||||||
Deferred income taxes
|
6,953
|
8,473
|
(312)
|
(1,208)
|
Decrease primarily due to deferred income tax recovery of $1,195 million, recorded in Net income, mostly attributable to the U.S. Tax Reform, partly offset by deferred income tax expense on new temporary differences generated during the year.
|
||||||||||
Pension and other postretirement benefits
|
699
|
694
|
(12)
|
17
|
Increase primarily due to the decrease in the year-end discount rate from 3.81% in 2016 to 3.51% in 2017.
|
||||||||||
Total long-term debt, including the current portion
|
10,828
|
10,937
|
(609)
|
500
|
Increase primarily due to issuance of notes of $493 million, proceeds from accounts receivable securitization program of $423 million and net issuance of commercial paper of $379 million, partly offset by repayment of notes of $635 million and debt related to capital leases of $206 million.
|
||||||||||
In millions
|
December 31,
|
2017
|
2016
|
Variance
|
Explanation of variance
|
||||||||||
Total shareholders' equity
|
$
|
16,656
|
$
|
14,841
|
$
|
1,815
|
|||||||||
Variance mainly due to:
|
|||||||||||||||
Additional paid-in capital
|
242
|
364
|
(122)
|
Decrease primarily due to the settlement of equity settled awards.
|
|||||||||||
Accumulated other comprehensive loss
|
(2,784)
|
(2,358)
|
(426)
|
Increase in comprehensive loss due to after-tax amounts of $264 million from net foreign exchange losses, and $162 million resulting from actuarial loss arising during the year and amortization of net actuarial loss and prior service costs for the Company's defined benefit pension and other postretirement benefit plans.
|
|||||||||||
Retained earnings
|
15,586
|
13,242
|
2,344
|
Increase due to current year net income of $5,484 million, partly offset by share repurchases of $1,898 million and dividends paid of $1,239 million.
|
Long-term debt rating
|
Commercial paper rating
|
|
Dominion Bond Rating Service
|
A
|
R-1 (low)
|
Moody's Investors Service
|
A2
|
P-1
|
Standard & Poor's
|
A
|
A-1
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
Variance
|
||||
Net cash provided by operating activities
|
$
|
5,516
|
$
|
5,202
|
$
|
314
|
||
Net cash used in investing activities
(1)
|
(2,738)
|
(2,682)
|
(56)
|
|||||
Net cash used in financing activities
|
(2,895)
|
(2,539)
|
(356)
|
|||||
Effect of foreign exchange fluctuations on US dollar-denominated cash, cash equivalents,
|
||||||||
restricted cash, and restricted cash equivalents
|
(2)
|
15
|
(17)
|
|||||
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents
(1)
|
(119)
|
(4)
|
(115)
|
|||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period
(1)
|
672
|
676
|
(4)
|
|||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period
(1)
|
$
|
553
|
$
|
672
|
$
|
(119)
|
||
(1)
|
The Company adopted Accounting Standards Update 2016-18 in the first quarter of 2017 on a retrospective basis. Comparative balances have been reclassified to conform to the current presentation. Additional information is provided in the section of this MD&A entitled Recent accounting pronouncements.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
|||
Track and roadway
(1)
|
$
|
1,927
|
$
|
1,834
|
||
Rolling stock
|
226
|
494
|
||||
Buildings
|
70
|
85
|
||||
Information technology
|
290
|
176
|
||||
Other
|
190
|
163
|
||||
Gross property additions
|
2,703
|
2,752
|
||||
Less:
Capital leases
|
30
|
57
|
||||
Property additions
(2)
|
$
|
2,673
|
$
|
2,695
|
||
(1)
|
In 2017, approximately 80% (2016 - 80%) of the Track and roadway property additions were incurred to renew the basic infrastructure. Costs relating to normal repairs and maintenance of Track and roadway properties are expensed as incurred, and amounted to approximately 12% of the Company's total operating expenses in 2017 (2016 - 13%).
|
|||||
(2)
|
Includes $417 million and $313 million associated with the U.S. federal government legislative PTC implementation in 2017 and 2016, respectively.
|
·
|
$1.6 billion on track and railway infrastructure maintenance to support safe and efficient operations; including the replacement of rail and ties, bridge improvements, as well as other general track maintenance;
|
·
|
$0.8 billion on initiatives to increase capacity and enable growth, such as track infrastructure expansion; investments in yards and intermodal terminals; and on information technology to improve safety performance, operational efficiency and customer service;
|
·
|
$0.4 billion associated with the U.S. federal government legislative PTC implementation; and
|
·
|
$0.4 billion on equipment capital expenditures, allowing the Company to tap growth opportunities and improve the quality of the fleet, and in order to handle expected traffic increase and improve operational efficiency, CN expects to take delivery of 60 new high-horsepower locomotives.
|
·
|
On November 15, 2017, repayment of US$250 million ($318 million) 5.85% Notes due 2017 upon maturity;
|
·
|
On November 14, 2017, repayment of US$250 million ($317 million) Floating Rate Notes due 2017 upon maturity;
|
·
|
On August 1, 2017, issuance of $500 million 3.60% Notes due 2047 in the Canadian capital markets, which resulted in net proceeds of $493 million;
|
·
|
Proceeds from the accounts receivable securitization program of $423 million;
|
·
|
Net issuance of commercial paper of $379 million; and
|
·
|
Repayment of debt related to capital leases of $206 million.
|
·
|
On December 15, 2016, repayment of US$300 million ($398 million) 1.45% Notes due 2016 upon maturity;
|
·
|
On August 2, 2016, issuance of US$650 million ($848 million) 3.20% Notes due 2046 in the U.S. capital markets, which resulted in net proceeds of $832 million;
|
·
|
On June 1, 2016, repayment of US$250 million ($328 million) 5.80% Notes due 2016 upon maturity;
|
·
|
On February 23, 2016, issuance of US$500 million ($686 million) 2.75% Notes due 2026 in the U.S. capital markets, which resulted in net proceeds of $677 million;
|
·
|
Repayment of debt related to capital leases of $229 million; and
|
·
|
Net issuance of commercial paper of $137 million.
|
In millions, except per share data
|
Year ended December 31,
|
2017
|
2016
|
2015
|
||||
Share purchases by Share Trusts
|
||||||||
Number of common shares
|
0.5
|
0.7
|
1.4
|
|||||
Weighted-average price per share
(1)
|
$
|
102.17
|
$
|
84.99
|
$
|
73.31
|
||
Amount of purchase
|
$
|
55
|
$
|
60
|
$
|
100
|
||
Share settlements by Share Trusts
|
||||||||
Number of common shares
|
0.3
|
0.3
|
-
|
|||||
Weighted-average price per share
|
$
|
77.99
|
$
|
73.31
|
$
|
-
|
||
Amount of settlement
|
$
|
24
|
$
|
23
|
$
|
-
|
||
(1)
|
Includes brokerage fees where applicable.
|
In millions, unless otherwise indicated
|
As at and for the year ended December 31,
|
2017
|
2016
|
2015
|
||||
Debt
|
$
|
10,828
|
$
|
10,937
|
$
|
10,427
|
||
Adjustment:
Present value of operating lease commitments
(1)
|
478
|
533
|
607
|
|||||
Adjusted debt
|
$
|
11,306
|
$
|
11,470
|
$
|
11,034
|
||
Net income
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
||
Interest expense
|
481
|
480
|
439
|
|||||
Income tax expense (recovery)
|
(395)
|
1,287
|
1,336
|
|||||
Depreciation and amortization
|
1,281
|
1,225
|
1,158
|
|||||
EBITDA
|
6,851
|
6,632
|
6,471
|
|||||
Adjustments:
|
||||||||
Other income
|
(12)
|
(95)
|
(47)
|
|||||
Deemed interest on operating leases
|
22
|
24
|
29
|
|||||
Adjusted EBITDA
|
$
|
6,861
|
$
|
6,561
|
$
|
6,453
|
||
Adjusted debt-to-adjusted EBITDA multiple (times)
|
1.65
|
1.75
|
1.71
|
|||||
(1)
|
The operating lease commitments have been discounted using the Company's implicit interest rate for each of the periods presented.
|
Level 1
Quoted prices for identical instruments in
active markets
|
The carrying amounts of Cash and cash equivalents and Restricted cash and cash equivalents approximate fair value. These financial instruments include highly liquid investments purchased three months or less from maturity, for which the fair value is determined by reference to quoted prices in active markets.
|
Level 2
Significant inputs (other than quoted prices
included in Level 1) are observable
|
The carrying amounts of Accounts receivable, Other current assets, and Accounts payable and other approximate fair value. The fair value of these financial instruments is not determined using quoted prices, but rather from market observable information. The fair value of derivative financial instruments used to manage the Company's exposure to foreign currency risk and included in Other current assets and Accounts payable and other is measured by discounting future cash flows using a discount rate derived from market data for financial instruments subject to similar risks and maturities.
|
The carrying amount of the Company's debt does not approximate fair value. The fair value is estimated based on quoted market prices for the same or similar debt instruments, as well as discounted cash flows using current interest rates for debt with similar terms, company rating, and remaining maturity. As at December 31, 2017, the Company's debt had a carrying amount of $10,828 million (2016 - $10,937 million) and a fair value of $12,164 million (2016 - $12,084 million).
|
|
Level 3
Significant inputs are unobservable
|
The carrying amounts of investments included in Intangible and other assets approximate fair value, with the exception of certain cost investments for which significant inputs are unobservable and fair value is estimated based on the Company's proportionate share of the underlying net assets. As at December 31, 2017, the Company's investments had a carrying amount of $73 million (2016 - $68 million) and a fair value of $225 million (2016 - $220 million).
|
Standard
|
Description
|
Impact
|
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
|
Requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
|
The Company elected to early adopt the amendments of this ASU in the first quarter of 2017 on a retrospective basis. As a result of the adoption of this ASU, changes in restricted cash and cash equivalents are no longer classified as investing activities, and the Company's Consolidated Statements of Cash Flows now explain the change during the period in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents.
|
In millions
|
December 31,
|
2017
|
2016
|
||
Pension asset
|
$
|
994
|
$
|
907
|
|
Pension liability
|
$
|
455
|
$
|
442
|
|
Other postretirement benefits liability
|
$
|
261
|
$
|
270
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||
Net periodic benefit cost (income) for pensions
|
$
|
(190)
|
$
|
(161)
|
$
|
34
|
|
Net periodic benefit cost for other postretirement benefits
|
$
|
7
|
$
|
7
|
$
|
10
|
In millions
|
December 31,
|
2017
|
2016
|
||
Projected pension benefit obligation
|
$
|
18,025
|
$
|
17,366
|
|
Accumulated other postretirement benefit obligation
|
$
|
261
|
$
|
270
|
2017
|
2016
|
2015
|
2014
|
2013
|
||
Actual
|
9.2%
|
4.4%
|
5.5%
|
10.1%
|
11.2%
|
|
Market-related value
|
9.1%
|
8.2%
|
7.0%
|
7.6%
|
7.3%
|
|
Expected
|
7.00%
|
7.00%
|
7.00%
|
7.00%
|
7.00%
|
In millions
|
2017
|
2016
|
2015
|
||||||
Beginning of year
|
$
|
183
|
$
|
191
|
$
|
203
|
|||
Accruals and other
|
38
|
24
|
17
|
||||||
Payments
|
(38)
|
(32)
|
(29)
|
||||||
End of year
|
$
|
183
|
$
|
183
|
$
|
191
|
|||
Current portion - End of year
|
$
|
40
|
$
|
39
|
$
|
27
|
In millions
|
2017
|
2016
|
2015
|
||||||
Beginning of year
|
$
|
118
|
$
|
105
|
$
|
95
|
|||
Accruals and other
|
46
|
51
|
22
|
||||||
Payments
|
(41)
|
(34)
|
(30)
|
||||||
Foreign exchange
|
(7)
|
(4)
|
18
|
||||||
End of year
|
$
|
116
|
$
|
118
|
$
|
105
|
|||
Current portion - End of year
|
$
|
25
|
$
|
37
|
$
|
24
|
In millions
|
2017
|
2016
|
2015
|
||||||
Beginning of year
|
$
|
86
|
$
|
110
|
$
|
114
|
|||
Accruals and other
|
16
|
6
|
81
|
||||||
Payments
|
(23)
|
(29)
|
(91)
|
||||||
Foreign exchange
|
(1)
|
(1)
|
6
|
||||||
End of year
|
$
|
78
|
$
|
86
|
$
|
110
|
|||
Current portion - End of year
|
$
|
57
|
$
|
50
|
$
|
51
|
·
|
the lack of specific technical information available with respect to many sites;
|
·
|
the absence of any government authority, third-party orders, or claims with respect to particular sites;
|
·
|
the potential for new or changed laws and regulations and for development of new remediation technologies and uncertainty regarding the timing of the work with respect to particular sites; and
|
·
|
the determination of the Company's liability in proportion to other potentially
responsible parties and the ability to recover costs from any third parties with respect to particular sites.
|
·
|
expand the Governor in Council's powers to make regulations requiring major railway companies to provide to the Minister and the Agency information relating to rates, service and performance;
|
·
|
clarify the factors that must be applied in determining whether railway companies are fulfilling their service obligations;
|
·
|
enable shippers to obtain terms in their contracts dealing with amounts to be paid in relation to a failure to comply with conditions related to railway companies' service obligations;
|
·
|
create a new remedy for shippers who have access to the lines of only one railway company at the point of origin or destination of the movement of traffic in circumstances where interswitching is not available, also called "long-haul interswitching";
|
·
|
change the process for the transfer and discontinuance of railway lines to, among other things, require railway companies to make certain information available to the Minister and the public and establish a remedy for non-compliance with the process; and
|
·
|
change provisions respecting the maximum revenue entitlement for the movement of Western grain and require certain railway companies to provide to the Minister and the public information respecting the movement of grain.
|
·
|
Border security arrangements, pursuant to an agreement the Company and CP entered into with the CBP and the CBSA.
|
·
|
The CBP's Customs-Trade Partnership Against Terrorism (C-TPAT) program and designation as a low-risk carrier under CBSA's Customs Self-Assessment (CSA) program.
|
·
|
Regulations imposed by the CBP requiring advance notification by all modes of transportation for all shipments into the U.S. The CBSA is also working on similar requirements for Canada-bound traffic.
|
·
|
Inspection for imported fruits and vegetables grown in Canada and the agricultural quarantine and inspection (AQI) user fee for all traffic entering the U.S. from Canada.
|
·
|
Gamma ray screening of cargo entering the U.S. from Canada, and potential security and agricultural inspections at the Canada/U.S. border.
|
*
CPA
auditor, CA, public accountancy permit No. A123145
|
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.
|
KPMG Canada provides services to KPMG LLP. |
*
CPA
auditor, CA, public accountancy permit No. A123145
|
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.
|
KPMG Canada provides services to KPMG LLP. |
In millions, except per share data
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||||||
Revenues
|
$
|
13,041
|
$
|
12,037
|
$
|
12,611
|
|||||
Operating expenses
|
|||||||||||
Labor and fringe benefits
|
2,221
|
2,119
|
2,406
|
||||||||
Purchased services and material
|
1,769
|
1,592
|
1,729
|
||||||||
Fuel
|
1,362
|
1,051
|
1,285
|
||||||||
Depreciation and amortization
|
1,281
|
1,225
|
1,158
|
||||||||
Equipment rents
|
418
|
375
|
373
|
||||||||
Casualty and other
|
432
|
363
|
394
|
||||||||
Total operating expenses
|
7,483
|
6,725
|
7,345
|
||||||||
Operating income
|
5,558
|
5,312
|
5,266
|
||||||||
Interest expense
|
(481)
|
(480)
|
(439)
|
||||||||
Other income
(Note 3)
|
12
|
95
|
47
|
||||||||
Income before income taxes
|
5,089
|
4,927
|
4,874
|
||||||||
Income tax recovery (expense)
(Note 4)
|
395
|
(1,287)
|
(1,336)
|
||||||||
Net income
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
|||||
Earnings per share
(Note 5)
|
|||||||||||
Basic
|
$
|
7.28
|
$
|
4.69
|
$
|
4.42
|
|||||
Diluted
|
$
|
7.24
|
$
|
4.67
|
$
|
4.39
|
|||||
Weighted-average number of shares
(Note 5)
|
|||||||||||
Basic
|
753.6
|
776.0
|
800.7
|
||||||||
Diluted
|
757.3
|
779.2
|
805.1
|
||||||||
See accompanying notes to consolidated financial statements.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||||||
Net income
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
|||||
Other comprehensive income (loss)
(Note 15)
|
|||||||||||
Net gain (loss) on foreign currency translation
|
(197)
|
(45)
|
249
|
||||||||
Net change in pension and other postretirement benefit plans
(Note 12)
|
(224)
|
(694)
|
306
|
||||||||
Other comprehensive income (loss) before income taxes
|
(421)
|
(739)
|
555
|
||||||||
Income tax recovery (expense)
|
(5)
|
148
|
105
|
||||||||
Other comprehensive income (loss)
|
(426)
|
(591)
|
660
|
||||||||
Comprehensive income
|
$
|
5,058
|
$
|
3,049
|
$
|
4,198
|
|||||
See accompanying notes to consolidated financial statements.
|
In millions
|
December 31,
|
2017
|
2016
|
|||
Assets
|
||||||
Current assets
|
||||||
Cash and cash equivalents
|
$
|
70
|
$
|
176
|
||
Restricted cash and cash equivalents
(Note 10)
|
483
|
496
|
||||
Accounts receivable
(Note 6)
|
984
|
875
|
||||
Material and supplies
|
424
|
363
|
||||
Other current assets
|
229
|
197
|
||||
Total current assets
|
2,190
|
2,107
|
||||
Properties
(Note 7)
|
34,189
|
33,755
|
||||
Pension asset
(Note 12)
|
994
|
907
|
||||
Intangible and other assets
(Note 8)
|
256
|
288
|
||||
Total assets
|
$
|
37,629
|
$
|
37,057
|
||
Liabilities and shareholders' equity
|
||||||
Current liabilities
|
||||||
Accounts payable and other
(Note 9)
|
$
|
1,903
|
$
|
1,519
|
||
Current portion of long-term debt
(Note 10)
|
2,080
|
1,489
|
||||
Total current liabilities
|
3,983
|
3,008
|
||||
Deferred income taxes
(Note 4)
|
6,953
|
8,473
|
||||
Other liabilities and deferred credits
(Note 11)
|
590
|
593
|
||||
Pension and other postretirement benefits
(Note 12)
|
699
|
694
|
||||
Long-term debt
(Note 10)
|
8,748
|
9,448
|
||||
Shareholders' equity
|
||||||
Common shares
(Note 13)
|
3,780
|
3,730
|
||||
Common shares in Share Trusts
(Note 13)
|
(168)
|
(137)
|
||||
Additional paid-in capital
(Note 13)
|
242
|
364
|
||||
Accumulated other comprehensive loss
(Note 15)
|
(2,784)
|
(2,358)
|
||||
Retained earnings
|
15,586
|
13,242
|
||||
Total shareholders' equity
|
16,656
|
14,841
|
||||
Total liabilities and shareholders' equity
|
$
|
37,629
|
$
|
37,057
|
||
See accompanying notes to consolidated financial statements.
|
||||||
On behalf of the Board of Directors:
|
||||||
(s) Robert Pace
|
(s) Luc Jobin
|
|||||
Director
|
Director
|
|||||
Number of
|
Common
|
Accumulated
|
|||||||||||||||||
common shares
|
shares
|
Additional
|
other
|
Total
|
|||||||||||||||
Share
|
Common
|
in Share
|
paid-in
|
comprehensive
|
Retained
|
shareholders'
|
|||||||||||||
In millions
|
Outstanding
|
Trusts
|
shares
|
Trusts
|
capital
|
loss
|
earnings
|
equity
|
|||||||||||
Balance at December 31, 2014
|
809.4
|
-
|
$
|
3,718
|
$
|
-
|
$
|
439
|
$
|
(2,427)
|
$
|
11,740
|
$
|
13,470
|
|||||
Net income
|
3,538
|
3,538
|
|||||||||||||||||
Stock options exercised
|
2.5
|
91
|
(17)
|
74
|
|||||||||||||||
Settlement of equity settled awards
|
4
|
(8)
|
(4)
|
||||||||||||||||
Stock-based compensation expense
|
|||||||||||||||||||
and other
|
61
|
(3)
|
58
|
||||||||||||||||
Repurchase of common shares
(Note 13)
|
(23.3)
|
(108)
|
(1,642)
|
(1,750)
|
|||||||||||||||
Share purchases by Share Trusts
(Note 13)
|
(1.4)
|
1.4
|
(100)
|
(100)
|
|||||||||||||||
Other comprehensive income
(Note 15)
|
660
|
660
|
|||||||||||||||||
Dividends ($1.25 per share)
|
(996)
|
(996)
|
|||||||||||||||||
Balance at December 31, 2015
|
787.2
|
1.4
|
3,705
|
(100)
|
475
|
(1,767)
|
12,637
|
14,950
|
|||||||||||
Net income
|
3,640
|
3,640
|
|||||||||||||||||
Stock options exercised
|
1.6
|
73
|
(12)
|
61
|
|||||||||||||||
Settlement of equity settled awards
|
79
|
(138)
|
(59)
|
||||||||||||||||
Stock-based compensation expense
|
|||||||||||||||||||
and other
|
62
|
(3)
|
59
|
||||||||||||||||
Repurchase of common shares
(Note 13)
|
(26.4)
|
(127)
|
(1,873)
|
(2,000)
|
|||||||||||||||
Share purchases by Share Trusts
(Note 13)
|
(0.7)
|
0.7
|
(60)
|
(60)
|
|||||||||||||||
Share settlements by Share Trusts
(Note 13)
|
0.3
|
(0.3)
|
23
|
(23)
|
-
|
||||||||||||||
Other comprehensive loss
(Note 15)
|
(591)
|
(591)
|
|||||||||||||||||
Dividends ($1.50 per share)
|
(1,159)
|
(1,159)
|
|||||||||||||||||
Balance at December 31, 2016
|
762.0
|
1.8
|
3,730
|
(137)
|
364
|
(2,358)
|
13,242
|
14,841
|
|||||||||||
Net income
|
5,484
|
5,484
|
|||||||||||||||||
Stock options exercised
|
1.2
|
68
|
(10)
|
58
|
|||||||||||||||
Settlement of equity settled awards
|
84
|
(166)
|
(82)
|
||||||||||||||||
Stock-based compensation expense
|
|||||||||||||||||||
and other
|
78
|
(3)
|
75
|
||||||||||||||||
Repurchase of common shares
(Note 13)
|
(20.4)
|
(102)
|
(1,898)
|
(2,000)
|
|||||||||||||||
Share purchases by Share Trusts
(Note 13)
|
(0.5)
|
0.5
|
(55)
|
(55)
|
|||||||||||||||
Share settlements by Share Trusts
(Note 13)
|
0.3
|
(0.3)
|
24
|
(24)
|
-
|
||||||||||||||
Other comprehensive loss
(Note 15)
|
(426)
|
(426)
|
|||||||||||||||||
Dividends ($1.65 per share)
|
(1,239)
|
(1,239)
|
|||||||||||||||||
Balance at December 31, 2017
|
742.6
|
2.0
|
$
|
3,780
|
$
|
(168)
|
$
|
242
|
$
|
(2,784)
|
$
|
15,586
|
$
|
16,656
|
|||||
See accompanying notes to consolidated financial statements.
|
In millions Year ended December 31,
|
2017
|
2016
|
2015
|
||||
Operating activities
|
|||||||
Net income
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||
Depreciation and amortization
|
1,281
|
1,225
|
1,158
|
||||
Deferred income taxes
(Note 4)
|
(1,195)
|
704
|
600
|
||||
Gain on disposal of property
(Note 3)
|
|
-
|
(76)
|
-
|
|||
Changes in operating assets and liabilities:
|
|||||||
Accounts receivable
|
(125)
|
(3)
|
188
|
||||
Material and supplies
|
(70)
|
(2)
|
4
|
||||
Accounts payable and other
|
418
|
(51)
|
(282)
|
||||
Other current assets
|
(80)
|
21
|
46
|
||||
Pensions and other, net
|
(197)
|
(256)
|
(112)
|
||||
Net cash provided by operating activities
|
5,516
|
5,202
|
5,140
|
||||
Investing activities
|
|||||||
Property additions
|
(2,673)
|
(2,695)
|
(2,706)
|
||||
Disposal of property
(Note 3)
|
-
|
85
|
-
|
||||
Other, net
|
(65)
|
(72)
|
(61)
|
||||
Net cash used in investing activities
(1)
|
(2,738)
|
(2,682)
|
(2,767)
|
||||
Financing activities
|
|||||||
Issuance of debt
(Note 10)
|
916
|
1,509
|
841
|
||||
Repayment of debt
(Note 10)
|
(841)
|
(955)
|
(752)
|
||||
Net issuance of commercial paper
(Note 10)
|
379
|
137
|
451
|
||||
Settlement of foreign exchange forward contracts on long-term debt
|
(15)
|
(21)
|
-
|
||||
Issuance of common shares for stock options exercised
(Note 14)
|
58
|
61
|
79
|
||||
Withholding taxes remitted on the net settlement of equity settled awards
(Note 14)
|
(57)
|
(44)
|
(2)
|
||||
Repurchase of common shares
(Note 13)
|
(2,016)
|
(1,992)
|
(1,742)
|
||||
Purchase of common shares for settlement of equity settled awards
|
(25)
|
(15)
|
(2)
|
||||
Purchase of common shares by Share Trusts
(Note 13)
|
(55)
|
(60)
|
(100)
|
||||
Dividends paid
|
(1,239)
|
(1,159)
|
(996)
|
||||
Net cash used in financing activities
|
(2,895)
|
(2,539)
|
(2,223)
|
||||
Effect of foreign exchange fluctuations on US dollar-denominated cash, cash
|
|||||||
equivalents, restricted cash, and restricted cash equivalents
|
(2)
|
15
|
11
|
||||
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash
|
|||||||
equivalents
(1)
|
(119)
|
(4)
|
161
|
||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning
|
|||||||
of year
(1)
|
672
|
676
|
515
|
||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end
|
|||||||
of year
(1)
|
$
|
553
|
$
|
672
|
$
|
676
|
|
Cash and cash equivalents, end of year
|
$
|
70
|
$
|
176
|
$
|
153
|
|
Restricted cash and cash equivalents, end of year
|
483
|
496
|
523
|
||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end
|
|||||||
of year
(1)
|
$
|
553
|
$
|
672
|
$
|
676
|
|
Supplemental cash flow information
|
|||||||
Interest paid
|
$
|
(477)
|
$
|
(470)
|
$
|
(432)
|
|
Income taxes paid
(Note 4)
|
$
|
(712)
|
$
|
(653)
|
$
|
(725)
|
|
(1) The Company adopted Accounting Standards Update 2016-18 in the first quarter of 2017 on a retrospective basis. Comparative balances have been reclassified to conform to the current presentation. See Note 2 – Recent accounting pronouncements for additional information.
See accompanying notes to consolidated financial statements.
|
Contents | |
1 Summary of significant accounting policies
|
62
|
2 Recent accounting pronouncements
|
66
|
3 Other income
|
68
|
4 Income taxes
|
68
|
5 Earnings per share
|
70
|
6 Accounts receivable
|
71
|
7 Properties
|
71
|
8 Intangible and other assets
|
72
|
9 Accounts payable and other
|
72
|
10 Long-term debt
|
73
|
11 Other liabilities and deferred credits
|
75
|
12 Pensions and other postretirement benefits
|
75
|
13 Share capital
|
83
|
14 Stock-based compensation
|
84
|
15 Accumulated other comprehensive loss
|
89
|
16 Major commitments and contingencies
|
90
|
17 Financial instruments
|
94
|
18 Segmented information
|
95
|
19 Subsequent event
|
96
|
·
|
grading:
installation of road bed, retaining walls, and drainage structures;
|
·
|
rail and related track material:
installation of 39 or more continuous feet of rail;
|
·
|
ties:
installation of 5 or more ties per 39 feet; and
|
·
|
ballast:
installation of 171 cubic yards of ballast per mile.
|
·
|
the cost of pension benefits provided in exchange for employees' services rendered during the year;
|
·
|
the interest cost of pension obligations;
|
·
|
the expected long-term return on pension fund assets;
|
·
|
the amortization of prior service costs and amendments over the expected average remaining service life of the employee group covered by the plans; and
|
·
|
the amortization of cumulative net actuarial gains and losses in excess of 10% of the greater of the beginning of year balances of the projected benefit obligation or market-related value of plan assets, over the expected average remaining service life of the employee group covered by the plans.
|
Standard
|
Description
|
Impact
|
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
|
Requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
|
The Company elected to early adopt the amendments of this ASU in the first quarter of 2017 on a retrospective basis. As a result of the adoption of this ASU, changes in restricted cash and cash equivalents are no longer classified as investing activities, and the Company's Consolidated Statements of Cash Flows now explain the change during the period in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents.
|
Standard
(1)
|
Description
|
Impact
|
Effective date
(2)
|
ASU 2017-07 Compensation –Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
|
Requires employers that sponsor defined benefit pension plans and/or other postretirement benefit plans to report the service cost component in the same line item or items as other compensation costs. The other components of net periodic benefit cost are required to be presented in the statement of income separately from the service cost component and outside a subtotal of income from operations. The new guidance allows only the service cost component to be eligible for capitalization.
The guidance must be applied retrospectively for the presentation of the service cost component and other components of net periodic benefit cost in the statement of income and prospectively for the capitalization of the service cost component of net periodic benefit cost.
|
The amendments will affect the classification of the components of pension and postretirement benefit costs other than service cost which will be shown outside of income from operations in a separate caption in the Company's Consolidated Statements of Income.
Had the ASU been applicable for the year ended December 31, 2017, Operating income would have been reduced by approximately $315 million (2016 - $280 million; 2015 - $111 million) with a corresponding increase presented in a new caption below Operating income with no impact on Net income.
The guidance allowing only the service cost component to be eligible for capitalization is not expected to have a significant impact on the Company's Consolidated Financial Statements.
CN will adopt the requirements of the ASU effective January 1, 2018.
|
December 15, 2017. Early adoption is permitted.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||||
Gain on disposal of property
|
$
|
-
|
$
|
76
|
$
|
-
|
|||
Gain on disposal of land
|
22
|
17
|
52
|
||||||
Other
(1)
|
(10)
|
2
|
(5)
|
||||||
Total other income
|
$
|
12
|
$
|
95
|
$
|
47
|
|||
(1)
|
Includes foreign exchange gains and losses related to foreign exchange forward contracts and the re-measurement of other US dollar-denominated monetary assets and liabilities. See Note 17 – Financial instruments.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||
Income before income taxes
|
|||||||
Domestic
|
$
|
3,964
|
$
|
3,726
|
$
|
3,437
|
|
Foreign
|
1,125
|
1,201
|
1,437
|
||||
Total income before income taxes
|
$
|
5,089
|
$
|
4,927
|
$
|
4,874
|
|
Current income tax expense
|
|||||||
Domestic
|
$
|
758
|
$
|
568
|
$
|
640
|
|
Foreign
|
42
|
15
|
96
|
||||
Total current income tax expense
|
$
|
800
|
$
|
583
|
$
|
736
|
|
Deferred income tax expense (recovery)
|
|||||||
Domestic
|
$
|
349
|
$
|
450
|
$
|
328
|
|
Foreign
|
(1,544)
|
254
|
272
|
||||
Total deferred income tax expense (recovery)
|
$
|
(1,195)
|
$
|
704
|
$
|
600
|
In millions
|
December 31,
|
2017
|
2016
|
|||
Deferred income tax assets
|
||||||
Pension liability
|
$
|
121
|
$
|
130
|
||
Personal injury and legal claims
|
50
|
66
|
||||
Environmental and other reserves
|
128
|
166
|
||||
Other postretirement benefits liability
|
70
|
83
|
||||
Unrealized foreign exchange losses
|
-
|
58
|
||||
Net operating losses and tax credit carryforwards
(1)
|
32
|
23
|
||||
Total deferred income tax assets
|
$
|
401
|
$
|
526
|
||
Deferred income tax liabilities
|
||||||
Properties
|
$
|
6,975
|
$
|
8,673
|
||
Pension asset
|
268
|
243
|
||||
Unrealized foreign exchange gains
|
34
|
-
|
||||
Other
|
77
|
83
|
||||
Total deferred income tax liabilities
|
$
|
7,354
|
$
|
8,999
|
||
Total net deferred income tax liability
|
$
|
6,953
|
$
|
8,473
|
||
Total net deferred income tax liability
|
||||||
Domestic
|
$
|
3,677
|
$
|
3,334
|
||
Foreign
|
3,276
|
5,139
|
||||
Total net deferred income tax liability
|
$
|
6,953
|
$
|
8,473
|
||
(1)
|
Net operating losses and tax credit carryforwards will expire between the years 2018 and 2036.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
||||
Gross unrecognized tax benefits at beginning of year
|
$
|
61
|
$
|
27
|
$
|
35
|
||
Increases for:
|
||||||||
Tax positions related to the current year
|
13
|
16
|
4
|
|||||
Tax positions related to prior years
|
2
|
24
|
8
|
|||||
Decreases for:
|
||||||||
Settlements
|
(1)
|
(2)
|
(14)
|
|||||
Lapse of the applicable statute of limitations
|
(1)
|
(4)
|
(6)
|
|||||
Gross unrecognized tax benefits at end of year
|
$
|
74
|
$
|
61
|
$
|
27
|
||
Adjustments to reflect tax treaties and other arrangements
|
(5)
|
(7)
|
(8)
|
|||||
Net unrecognized tax benefits at end of year
|
$
|
69
|
$
|
54
|
$
|
19
|
In millions, except per share data
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||
Net income
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
|
Weighted-average basic shares outstanding
|
753.6
|
776.0
|
800.7
|
||||
Dilutive effect of stock-based compensation
|
3.7
|
3.2
|
4.4
|
||||
Weighted-average diluted shares outstanding
|
757.3
|
779.2
|
805.1
|
||||
Basic earnings per share
|
$
|
7.28
|
$
|
4.69
|
$
|
4.42
|
|
Diluted earnings per share
|
$
|
7.24
|
$
|
4.67
|
$
|
4.39
|
|
Units excluded from the calculation as their inclusion would not have a dilutive effect:
|
|||||||
Stock options
|
0.4
|
1.2
|
0.8
|
||||
Performance share units
|
0.1
|
0.2
|
-
|
In millions
|
December 31,
|
2017
|
2016
|
|||
Freight
|
$
|
828
|
$
|
752
|
||
Non-freight
|
172
|
151
|
||||
Gross accounts receivable
|
1,000
|
903
|
||||
Allowance for doubtful accounts
|
(16)
|
(28)
|
||||
Net accounts receivable
|
$
|
984
|
$
|
875
|
In millions
|
December 31,
|
2017
|
2016
|
||||
Investments
(1)
|
$
|
73
|
$
|
68
|
|||
Intangible assets
|
62
|
67
|
|||||
Deferred costs
|
61
|
73
|
|||||
Long-term receivables
|
26
|
33
|
|||||
Other long-term assets
|
34
|
47
|
|||||
Total intangible and other assets
|
$
|
256
|
$
|
288
|
|||
(1)
|
As at December 31, 2017, the Company had $58 million (2016 - $54 million) of investments accounted for under the equity method and $15 million (2016 - $14 million) of investments accounted for under the cost method. See Note 17 - Financial instruments for the fair value of investments.
|
In millions
|
December 31,
|
2017
|
2016
|
|||
Trade payables
|
$
|
738
|
$
|
484
|
||
Payroll-related accruals
|
388
|
327
|
||||
Income and other taxes
|
201
|
122
|
||||
Accrued charges
|
144
|
141
|
||||
Accrued interest
|
126
|
129
|
||||
Personal injury and other claims provisions
(Note 16)
|
65
|
76
|
||||
Environmental provisions
(Note 16)
|
57
|
50
|
||||
Other postretirement benefits liability
(Note 12)
|
17
|
18
|
||||
Stock-based compensation liability
(Note 14)
|
7
|
45
|
||||
Other
|
160
|
127
|
||||
Total accounts payable and other
|
$
|
1,903
|
$
|
1,519
|
US dollar-
denominated
amount
|
|||||||||||||
In millions
|
Maturity
|
December 31,
|
2017
|
2016
|
|||||||||
Notes and debentures
(1)
|
|||||||||||||
Canadian National series:
|
|||||||||||||
-
|
3-year floating rate notes
(2)
|
Nov. 14, 2017
|
US$
|
250
|
$
|
-
|
$
|
336
|
|||||
5.85%
|
10-year notes
(3)
|
Nov. 15, 2017
|
US$
|
250
|
-
|
336
|
|||||||
5.55%
|
10-year notes
(3)
|
May 15, 2018
|
US$
|
325
|
409
|
436
|
|||||||
6.80%
|
20-year notes
(3)
|
July 15, 2018
|
US$
|
200
|
251
|
269
|
|||||||
5.55%
|
10-year notes
(3)
|
Mar. 1, 2019
|
US$
|
550
|
692
|
738
|
|||||||
2.75%
|
7-year notes
(3)
|
Feb. 18, 2021
|
250
|
250
|
|||||||||
2.85%
|
10-year notes
(3)
|
Dec. 15, 2021
|
US$
|
400
|
503
|
537
|
|||||||
2.25%
|
10-year notes
(3)
|
Nov. 15, 2022
|
US$
|
250
|
314
|
336
|
|||||||
7.63%
|
30-year debentures
|
May 15, 2023
|
US$
|
150
|
189
|
201
|
|||||||
2.95%
|
10-year notes
(3)
|
Nov. 21, 2024
|
US$
|
350
|
440
|
470
|
|||||||
2.80%
|
10-year notes
(3)
|
Sep. 22, 2025
|
350
|
350
|
|||||||||
2.75%
|
10-year notes
(3)
|
Mar. 1, 2026
|
US$
|
500
|
629
|
671
|
|||||||
6.90%
|
30-year notes
(3)
|
July 15, 2028
|
US$
|
475
|
597
|
638
|
|||||||
7.38%
|
30-year debentures
(3)
|
Oct. 15, 2031
|
US$
|
200
|
251
|
269
|
|||||||
6.25%
|
30-year notes
(3)
|
Aug. 1, 2034
|
US$
|
500
|
629
|
671
|
|||||||
6.20%
|
30-year notes
(3)
|
June 1, 2036
|
US$
|
450
|
566
|
604
|
|||||||
6.71%
|
Puttable Reset Securities PURS
SM (3)
|
July 15, 2036
|
US$
|
250
|
314
|
336
|
|||||||
6.38%
|
30-year debentures
(3)
|
Nov. 15, 2037
|
US$
|
300
|
377
|
403
|
|||||||
3.50%
|
30-year notes
(3)
|
Nov. 15, 2042
|
US$
|
250
|
314
|
336
|
|||||||
4.50%
|
30-year notes
(3)
|
Nov. 7, 2043
|
US$
|
250
|
314
|
336
|
|||||||
3.95%
|
30-year notes
(3)
|
Sep. 22, 2045
|
400
|
400
|
|||||||||
3.20%
|
30-year notes
(3)
|
Aug. 2, 2046
|
US$
|
650
|
817
|
872
|
|||||||
3.60%
|
30-year notes
(3)
|
Aug. 1, 2047
|
500
|
-
|
|||||||||
4.00%
|
50-year notes
(3)
|
Sep. 22, 2065
|
100
|
100
|
|||||||||
Illinois Central series:
|
|||||||||||||
7.70%
|
100-year debentures
|
Sep. 15, 2096
|
US$
|
125
|
157
|
168
|
|||||||
BC Rail series:
|
|||||||||||||
Non-interest bearing 90-year subordinated notes
(4)
|
July 14, 2094
|
842
|
842
|
||||||||||
Total notes and debentures
|
$
|
10,205
|
$
|
10,905
|
|||||||||
Other
|
|||||||||||||
Commercial paper
|
955
|
605
|
|||||||||||
Accounts receivable securitization
|
421
|
-
|
|||||||||||
Capital lease obligations
|
158
|
344
|
|||||||||||
Total debt, gross
|
11,739
|
11,854
|
|||||||||||
Net unamortized discount and debt issuance costs
(4)
|
(911)
|
(917)
|
|||||||||||
Total debt
(5)
|
10,828
|
10,937
|
|||||||||||
Less:
Current portion of long-term debt
|
2,080
|
1,489
|
|||||||||||
Total long-term debt
|
$
|
8,748
|
$
|
9,448
|
|||||||||
(1)
|
The Company's notes and debentures are unsecured.
|
||||||||||||
(2)
|
This floating rate note bore interest at the three-month London Interbank Offered Rate (LIBOR) plus 0.17%. The interest rate as at the date of maturity of this floating rate note was 1.48% (December 31, 2016 - 1.07%).
|
||||||||||||
(3)
|
The fixed rate debt securities are redeemable, in whole or in part, at the option of the Company, at any time, at the greater of par and a formula price based on interest rates prevailing at the time of redemption.
|
||||||||||||
(4)
|
As at December 31, 2017, these notes were recorded as a discounted debt of $11 million (2016 - $10 million) using an imputed interest rate of 5.75% (2016 - 5.75%). The discount of $831 million (2016 - $832 million) is included in Net unamortized discount and debt issuance costs.
|
||||||||||||
(5)
|
See Note 17 - Financial instruments for the fair value of debt.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||
Issuances of commercial paper
|
$
|
4,539
|
$
|
3,656
|
$
|
2,624
|
|
Repayments of commercial paper
|
(4,160)
|
(3,519)
|
(2,173)
|
||||
Net issuance of commercial paper
|
$
|
379
|
$
|
137
|
$
|
451
|
In millions
|
Capital leases
|
Debt
(1)
|
Total
|
|||||
2018
(2)
|
$
|
44
|
$
|
2,036
|
$
|
2,080
|
||
2019
|
10
|
684
|
694
|
|||||
2020
|
15
|
-
|
15
|
|||||
2021
|
6
|
747
|
753
|
|||||
2022
|
2
|
308
|
310
|
|||||
2023 and thereafter
|
81
|
6,895
|
6,976
|
|||||
Total
|
$
|
158
|
$
|
10,670
|
$
|
10,828
|
||
(1) | Presented net of unamortized discounts and debt issuance costs. | |||||||
(2)
|
Current portion of long-term debt.
|
In millions
|
December 31,
|
2017
|
2016
|
||
Notes and debentures
|
US$
|
6,175
|
US$
|
6,675
|
|
Commercial paper
|
760
|
451
|
|||
Accounts receivable securitization
|
80
|
-
|
|||
Capital lease obligations
|
46
|
158
|
|||
Total amount of US dollar-denominated debt in US$
|
US$
|
7,061
|
US$
|
7,284
|
|
Total amount of US dollar-denominated debt in C$
|
$
|
8,876
|
$
|
9,780
|
In millions
|
December 31,
|
2017
|
2016
|
||||
Personal injury and other claims provisions
(Note 16)
(1)
|
$
|
234
|
$
|
225
|
|||
Stock-based compensation liability
(Note 14)
(1)
|
26
|
35
|
|||||
Environmental provisions
(Note 16)
(1)
|
21
|
36
|
|||||
Deferred credits and other
|
309
|
297
|
|||||
Total other liabilities and deferred credits
|
$
|
590
|
$
|
593
|
|||
(1)
|
See Note 9 – Accounts payable and other for the related current portion.
|
·
|
Cash and short-term investments consist primarily of highly liquid securities which ensure adequate cash flows are available to cover near-term benefit payments. Short-term investments are mainly obligations issued by Canadian chartered banks.
|
·
|
Bonds include bond instruments, issued or guaranteed by governments and corporate entities, as well as corporate notes and investments in emerging market debt funds. As at December 31, 2017, 67% (2016 - 66%) of bonds were issued or guaranteed by Canadian, U.S. or other governments. Mortgages consist of mortgage products which are primarily conventional or participating loans secured by commercial properties.
|
·
|
Equity investments include primarily publicly traded securities, well diversified by country, issuer and industry sector and participations in private equity funds, comprised of investments in diversified sectors such as energy and health care. As at December 31, 2017, the most significant allocation to an individual issuer of a publicly traded security was approximately 2% (2016 - 2%) and the most significant allocation to an industry sector was approximately 22% (2016 - 21%).
|
·
|
Real estate is a diversified portfolio of Canadian land and commercial properties and investments in real estate private equity funds.
|
·
|
Oil and gas investments include petroleum and natural gas properties and listed and non-listed securities of oil and gas companies.
|
·
|
Infrastructure investments include participations in private infrastructure funds, term loans and notes of infrastructure companies. Private debt includes participations in private debt funds focused on generating steady yields.
|
·
|
Absolute return investments are primarily a portfolio of units of externally managed hedge funds, which are invested in various long/short strategies within multi-strategy, fixed income, equities and global macro funds. Managers are monitored on a continuous basis through investment and operational due diligence.
|
·
|
Risk-factor allocation investments are a portfolio of units of externally managed funds and internally managed strategies in order to capture alternative risk premiums.
|
·
|
Risk-based allocation investments are a portfolio of units of externally managed funds where the asset class exposures are managed on a risk-adjusted basis in order to capture asset class premiums.
|
Fair value measurements at December 31, 2017
|
||||||||||
In millions
|
Total
|
Level 1
|
Level 2
|
Level 3
|
NAV
|
|||||
Cash and short-term investments
(1)
|
$
|
836
|
$
|
17
|
$
|
819
|
$
|
-
|
$
|
-
|
Bonds
(2)
|
||||||||||
Canada, U.S. and supranational
|
1,792
|
-
|
1,792
|
-
|
-
|
|||||
Provinces of Canada and municipalities
|
2,459
|
-
|
2,459
|
-
|
-
|
|||||
Corporate
|
1,587
|
-
|
1,587
|
-
|
-
|
|||||
Emerging market debt
|
530
|
-
|
530
|
-
|
-
|
|||||
Mortgages
(3)
|
97
|
-
|
97
|
-
|
-
|
|||||
Private debt
(4)
|
242
|
-
|
-
|
-
|
242
|
|||||
Equities
(5)
|
||||||||||
Canadian
|
1,867
|
1,848
|
-
|
-
|
19
|
|||||
U.S.
|
989
|
775
|
-
|
-
|
214
|
|||||
International
|
3,947
|
3,883
|
-
|
-
|
64
|
|||||
Real estate
(6)
|
410
|
-
|
-
|
332
|
78
|
|||||
Oil and gas
(7)
|
1,120
|
333
|
18
|
769
|
-
|
|||||
Infrastructure
(8)
|
682
|
-
|
84
|
-
|
598
|
|||||
Absolute return funds
(9)
|
-
|
-
|
-
|
-
|
||||||
Multi-strategy
|
897
|
-
|
-
|
-
|
897
|
|||||
Fixed income
|
224
|
-
|
-
|
-
|
224
|
|||||
Equity
|
32
|
-
|
-
|
-
|
32
|
|||||
Global macro
|
444
|
-
|
-
|
-
|
444
|
|||||
Risk-factor allocation
(10)
|
345
|
-
|
-
|
-
|
345
|
|||||
Total
|
$
|
18,500
|
$
|
6,856
|
$
|
7,386
|
$
|
1,101
|
$
|
3,157
|
Other
(11)
|
64
|
|||||||||
Total plan assets
|
$
|
18,564
|
||||||||
Fair value measurements at December 31, 2016
|
||||||||||
In millions
|
Total
|
Level 1
|
Level 2
|
Level 3
|
NAV
|
|||||
Cash and short-term investments
(1)
|
$
|
571
|
$
|
83
|
$
|
488
|
$
|
-
|
$
|
-
|
Bonds
(2)
|
||||||||||
Canada, U.S. and supranational
|
1,418
|
-
|
1,418
|
-
|
-
|
|||||
Provinces of Canada and municipalities
|
2,384
|
-
|
2,384
|
-
|
-
|
|||||
Corporate
|
1,475
|
-
|
1,475
|
-
|
-
|
|||||
Emerging market debt
|
509
|
-
|
509
|
-
|
-
|
|||||
Mortgages
(3)
|
106
|
-
|
106
|
-
|
-
|
|||||
Private debt
(4)
|
226
|
-
|
-
|
-
|
226
|
|||||
Equities
(5)
|
||||||||||
Canadian
|
1,846
|
1,670
|
-
|
-
|
176
|
|||||
U.S.
|
997
|
949
|
-
|
-
|
48
|
|||||
International
|
3,853
|
3,853
|
-
|
-
|
-
|
|||||
Real estate
(6)
|
383
|
-
|
-
|
324
|
59
|
|||||
Oil and gas
(7)
|
1,076
|
336
|
18
|
722
|
-
|
|||||
Infrastructure
(8)
|
805
|
-
|
92
|
-
|
713
|
|||||
Absolute return funds
(9)
|
||||||||||
Multi-strategy
|
1,005
|
-
|
-
|
-
|
1,005
|
|||||
Fixed income
|
304
|
-
|
-
|
-
|
304
|
|||||
Equity
|
35
|
-
|
-
|
-
|
35
|
|||||
Global macro
|
428
|
-
|
-
|
-
|
428
|
|||||
Risk-based allocation
(12)
|
311
|
-
|
-
|
-
|
311
|
|||||
Total
|
$
|
17,732
|
$
|
6,891
|
$
|
6,490
|
$
|
1,046
|
$
|
3,305
|
Other
(11)
|
99
|
|||||||||
Total plan assets
|
$
|
17,831
|
||||||||
Level 1: Fair value based on quoted prices in active markets for identical assets.
|
||||||||||
Level 2: Fair value based on other significant observable inputs.
|
||||||||||
Level 3: Fair value based on significant unobservable inputs.
|
||||||||||
NAV: Investments measured at net asset value as a practical expedient.
|
||||||||||
Footnotes to the table follow on the next page.
|
The following table reconciles the beginning and ending balances of the fair value of investments classified as Level 3:
|
|||||||||
Fair value measurements based on significant unobservable inputs (Level 3)
|
|||||||||
In millions
|
Real estate
(6)
|
Oil and gas
(7)
|
Total
|
||||||
Balance at December 31, 2015
|
$
|
331
|
$
|
766
|
$
|
1,097
|
|||
Actual return relating to assets still held at the reporting date
|
15
|
(24)
|
(9)
|
||||||
Purchases
|
1
|
-
|
1
|
||||||
Disbursements
|
(23)
|
(20)
|
(43)
|
||||||
Balance at December 31, 2016
|
$
|
324
|
$
|
722
|
$
|
1,046
|
|||
Actual return relating to assets still held at the reporting date
|
19
|
88
|
107
|
||||||
Disbursements
|
(11)
|
(41)
|
(52)
|
||||||
Balance at December 31, 2017
|
$
|
332
|
$
|
769
|
$
|
1,101
|
|||
(1)
|
Cash and short-term investments with related accrued interest are valued at cost, which approximates fair value, and are categorized as Level 1 and Level 2 respectively.
|
||||||||
(2)
|
Bonds, excluding emerging market debt funds, are valued using mid-market prices obtained from independent pricing data suppliers. When prices are not available from independent sources, the fair value is based on the present value of future cash flows using current market yields for comparable instruments. Emerging market debt funds are valued based on the net asset value which is readily available and published by each fund's independent administrator.
|
||||||||
(3)
|
Mortgages are valued based on the present value of future net cash flows using current market yields for comparable instruments.
|
||||||||
(4)
|
Private debt investments are valued based on the net asset value as reported by each fund's manager, generally using a discounted cash flow analysis.
|
||||||||
(5)
|
The fair value of equity investments categorized as Level 1 is based on quoted prices in active markets for identical assets. The fair value of Canadian equity investments categorized as NAV consist mainly of investments in energy related private equity funds and is based on the net asset value as reported by each fund's manager. The fair value of U.S. equity investments categorized as NAV consist of an investment in a U.S. private equity fund and is based on the net asset value as reported by the fund's manager.
|
||||||||
(6)
|
The fair value of real estate investments categorized as Level 3 includes land and buildings. Land is valued based on the fair value of comparable assets, and buildings are valued based on the present value of estimated future net cash flows or the fair value of comparable assets. Independent valuations of land and buildings are performed triennially on a rotational basis. The fair value of real estate investments categorized as NAV consists mainly of investments in real estate private equity funds and is based on the net asset value as reported by each fund's manager, generally using a discounted cash flow analysis or earnings multiples.
|
||||||||
(7)
|
Oil and gas investments categorized as Level 1 are valued based on quoted prices in active markets. Investments in oil and gas equities traded on a secondary market are valued based on the most recent transaction price and are categorized as Level 2. Investments in oil and gas categorized as Level 3 consist of operating oil and gas properties and the fair value is based on estimated future net cash flows that are discounted using prevailing market rates for transactions in similar assets. Estimated future net cash flows are based on forecasted oil and gas prices and projected future annual production and costs.
|
||||||||
(8)
|
The fair value of infrastructure investments categorized as Level 2 includes term loans and notes of infrastructure companies and is based on the present value of future cash flows using current market yields for comparable instruments. The fair value of infrastructure funds categorized as NAV is based on the net asset value as reported by each fund's manager, generally using a discounted cash flow analysis or earnings multiples.
|
||||||||
(9)
|
Absolute return investments are valued using the net asset value as reported by each fund's independent administrator. All absolute return investments have contractual redemption frequencies, ranging from monthly to annually, and redemption notice periods varying from 5 to 90 days.
|
||||||||
(10)
|
Risk-factor allocation investments are valued using the net asset value as reported by each fund's independent administrator or fund manager. All funds have contractual redemptions frequencies ranging from daily to annually, and redemption notice periods varying from 5 to 60 days.
|
||||||||
(11)
|
Other consists of operating assets of $94 million (2016 - $163 million) and liabilities of $30 million (2016 - $64 million) required to administer the Trusts' investment assets and the plans' benefit and funding activities. Such assets are valued at cost and have not been assigned to a fair value category.
|
||||||||
(12)
|
Risk-based allocation investments are valued using the net asset value as reported by each fund's independent administrator. All funds have contractual redemption frequencies ranging from daily to annually, and redemption notice periods varying from 5 to 60 days.
|
Information for the pension plans with an accumulated benefit obligation in excess of plan assets
|
||||||||||||||
Pensions
|
Other postretirement benefits
|
|||||||||||||
In millions
|
December 31,
|
2017
|
2016
|
2017
|
2016
|
|||||||||
Projected benefit obligation
|
$
|
661
|
$
|
637
|
N/A
|
N/A
|
||||||||
Accumulated benefit obligation
|
$
|
601
|
$
|
574
|
N/A
|
N/A
|
||||||||
Fair value of plan assets
|
$
|
215
|
$
|
207
|
N/A
|
N/A
|
||||||||
Expected future benefit payments | |||||||||
The following table provides the expected benefit payments for pensions and other postretirement benefits for the next five years and the subsequent five-year period:
|
|||||||||
In millions
|
Pensions
|
Other postretirement benefits
|
|||||||
2018
|
$
|
1,041
|
$
|
17
|
|||||
2019
|
$
|
1,046
|
$
|
17
|
|||||
2020
|
$
|
1,049
|
$
|
16
|
|||||
2021
|
$
|
1,051
|
$
|
16
|
|||||
2022
|
$
|
1,051
|
$
|
15
|
|||||
Years 2023 to 2027
|
$
|
5,178
|
$
|
72
|
·
|
Unlimited number of Common Shares, without par value
|
·
|
Unlimited number of Class A Preferred Shares, without par value, issuable in series
|
·
|
Unlimited number of Class B Preferred Shares, without par value, issuable in series
|
In millions
|
December 31,
|
2017
|
2016
|
2015
|
||||
Issued common shares
|
744.6
|
763.8
|
788.6
|
|||||
Common shares in Share Trusts
|
(2.0)
|
(1.8)
|
(1.4)
|
|||||
Outstanding common shares
|
742.6
|
762.0
|
787.2
|
In millions, except per share data
|
Year ended December 31,
|
2017
|
2016
|
2015
|
||||
Share purchases by Share Trusts
|
||||||||
Number of common shares
|
0.5
|
0.7
|
1.4
|
|||||
Weighted-average price per share
(1)
|
$
|
102.17
|
$
|
84.99
|
$
|
73.31
|
||
Amount of purchase
|
$
|
55
|
$
|
60
|
$
|
100
|
||
Share settlements by Share Trusts
|
||||||||
Number of common shares
|
0.3
|
0.3
|
-
|
|||||
Weighted-average price per share
|
$
|
77.99
|
$
|
73.31
|
$
|
-
|
||
Amount of settlement
|
$
|
24
|
$
|
23
|
$
|
-
|
||
(1)
|
Includes brokerage fees where applicable.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
||||
Share Units Plan
|
||||||||
Equity settled awards
|
$
|
54
|
$
|
42
|
$
|
39
|
||
Cash settled awards
|
1
|
16
|
14
|
|||||
Total Share Units Plan expense
|
$
|
55
|
$
|
58
|
$
|
53
|
||
Voluntary Incentive Deferral Plan (VIDP)
|
||||||||
Equity settled awards
|
$
|
1
|
$
|
1
|
$
|
-
|
||
Cash settled awards
|
6
|
5
|
(3)
|
|||||
Total VIDP expense (recovery)
|
$
|
7
|
$
|
6
|
$
|
(3)
|
||
Stock option awards
|
$
|
13
|
$
|
12
|
$
|
11
|
||
Total stock-based compensation expense
|
$
|
75
|
$
|
76
|
$
|
61
|
||
Tax benefit recognized in income
|
$
|
18
|
$
|
17
|
$
|
14
|
||
Excess tax benefit recognized in income
(1)
|
$
|
13
|
$
|
5
|
N/A
|
|||
(1)
|
Effective January 1, 2016, the excess tax benefit is recognized in income in accordance with ASU 2016-09.
|
Options outstanding
|
Nonvested options
|
|||||||
Number of options
|
Weighted-average exercise price
|
Number of options
|
Weighted-average grant date fair value
|
|||||
In millions
|
In millions
|
|||||||
Outstanding at December 31, 2016
(1)
|
5.3
|
$
|
61.07
|
2.4
|
$
|
11.16
|
||
Granted
(2)
|
1.0
|
$
|
92.16
|
1.0
|
$
|
14.44
|
||
Forfeited/Cancelled
|
-
|
$
|
78.00
|
-
|
$
|
12.06
|
||
Exercised
(3)
|
(1.2)
|
$
|
48.75
|
N/A
|
N/A
|
|||
Vested
(4)
|
N/A
|
N/A
|
(1.0)
|
$
|
10.77
|
|||
Outstanding at December 31, 2017
(1)
|
5.1
|
$
|
66.78
|
2.4
|
$
|
12.62
|
||
Exercisable at December 31, 2017
(1)
|
2.7
|
$
|
54.97
|
N/A
|
N/A
|
|||
(1)
|
Stock options with a US dollar exercise price have been translated to Canadian dollars using the foreign exchange rate in effect at the balance sheet date.
|
|||||||
(2)
|
The grant date fair value of options awarded in 2017 of $14 million is calculated using the Black-Scholes option-pricing model. As at December 31, 2017, total unrecognized compensation cost related to nonvested options outstanding was $7 million and is expected to be recognized over a weighted-average period of 2.6 years.
|
|||||||
(3)
|
The total intrinsic value of options exercised in 2017 was $62 million (2016 - $73 million; 2015 - $127 million). The cash received upon exercise of options in 2017 was $58 million (2016 - $61 million; 2015 - $74 million) and the related excess tax benefit realized in 2017 was $5 million (2016 - $5 million; 2015 - $5 million).
|
|||||||
(4)
|
The grant date fair value of options vested in 2017 was $10 million (2016 - $10 million; 2015 - $9 million).
|
Year of grant
|
2017
|
2016
|
2015
|
||||
Assumptions
|
|||||||
Grant price
($)
|
92.16
|
75.16
|
84.47
|
||||
Expected stock price volatility
(1)
|
20%
|
20%
|
20%
|
||||
Expected term
(years)
(2)
|
5.5
|
5.5
|
5.5
|
||||
Risk-free interest rate
(3)
|
1.24%
|
0.76%
|
0.78%
|
||||
Dividend rate
($)
(4)
|
1.65
|
1.50
|
1.25
|
||||
Weighted-average grant date fair value
($)
|
14.44
|
10.57
|
13.21
|
||||
.
|
|||||||
(1)
|
Based on the historical volatility of the Company's stock over a period commensurate with the expected term of the award.
|
||||||
(2)
|
Represents the period of time that awards are expected to be outstanding. The Company uses historical data to predict option exercise behavior.
|
||||||
(3)
|
Based on the implied yield available on zero-coupon government issues with an equivalent term commensurate with the expected term of the awards.
|
||||||
(4)
|
Based on the annualized dividend rate.
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||
Number of participants holding shares
|
19,642
|
19,108
|
19,728
|
|||
Total number of ESIP shares purchased on behalf of employees
(millions)
|
1.7
|
1.9
|
2.0
|
|||
Expense for Company contribution
(millions)
|
$
|
36
|
$
|
37
|
$
|
38
|
In millions
|
Foreign
currency
translation
adjustments
|
Pension
and other
postretirement
benefit plans
|
Total
before
tax
|
Income tax
recovery
(expense)
|
Total
net of
tax
|
|||||||||||
Balance at December 31, 2014
|
$
|
(451)
|
$
|
(2,510)
|
$
|
(2,961)
|
$
|
534
|
$
|
(2,427)
|
||||||
Other comprehensive income (loss)
|
||||||||||||||||
before reclassifications:
|
||||||||||||||||
Foreign exchange gain on translation of net
|
||||||||||||||||
investment in foreign operations
|
1,607
|
1,607
|
-
|
1,607
|
||||||||||||
Foreign exchange loss on translation of
|
||||||||||||||||
US dollar-denominated debt designated
|
||||||||||||||||
as a hedge of the net investment in
|
||||||||||||||||
foreign operations
|
(1,358)
|
(1,358)
|
181
|
(1,177)
|
||||||||||||
Actuarial gain arising during the year
|
74
|
74
|
(18)
|
56
|
||||||||||||
Prior service cost from plan
|
||||||||||||||||
amendment arising during the year
|
(1)
|
(1)
|
-
|
(1)
|
||||||||||||
Amounts reclassified from Accumulated
|
||||||||||||||||
other comprehensive loss:
|
||||||||||||||||
Amortization of net actuarial loss
|
224
|
224
|
(1)
|
(56)
|
(2)
|
168
|
||||||||||
Amortization of prior service costs
|
5
|
5
|
(1)
|
(1)
|
(2)
|
4
|
||||||||||
Settlement loss arising during the year
|
4
|
4
|
(1)
|
(1)
|
(2)
|
3
|
||||||||||
Other comprehensive income
|
249
|
306
|
555
|
105
|
660
|
|||||||||||
Balance at December 31, 2015
|
$
|
(202)
|
$
|
(2,204)
|
$
|
(2,406)
|
$
|
639
|
$
|
(1,767)
|
||||||
Other comprehensive income (loss)
|
||||||||||||||||
before reclassifications:
|
||||||||||||||||
Foreign exchange loss on translation of net
|
||||||||||||||||
investment in foreign operations
|
(310)
|
(310)
|
-
|
(310)
|
||||||||||||
Foreign exchange gain on translation of
|
||||||||||||||||
US dollar-denominated debt designated
|
||||||||||||||||
as a hedge of the net investment in
|
||||||||||||||||
foreign operations
|
265
|
265
|
(35)
|
230
|
||||||||||||
Actuarial loss arising during the year
|
(881)
|
(881)
|
235
|
(646)
|
||||||||||||
Amounts reclassified from Accumulated
|
||||||||||||||||
other comprehensive loss:
|
||||||||||||||||
Amortization of net actuarial loss
|
172
|
172
|
(1)
|
(47)
|
(2)
|
125
|
||||||||||
Amortization of prior service costs
|
5
|
5
|
(1)
|
(1)
|
(2)
|
4
|
||||||||||
Settlement loss arising during the year
|
10
|
10
|
(1)
|
(4)
|
(2)
|
6
|
||||||||||
Other comprehensive income (loss)
|
(45)
|
(694)
|
(739)
|
148
|
(591)
|
|||||||||||
Balance at December 31, 2016
|
$
|
(247)
|
$
|
(2,898)
|
$
|
(3,145)
|
$
|
787
|
$
|
(2,358)
|
||||||
(1)
|
Reclassified to Labor and fringe benefits in the Consolidated Statements of Income and included in components of net periodic benefit cost. See Note 12 - Pensions and other postretirement benefits.
|
|||||||||||||||
(2)
|
Included in Income tax recovery (expense) in the Consolidated Statements of Income.
|
In millions
|
Foreign
currency
translation
adjustments
|
Pension
and other
postretirement
benefit plans
|
Total
before
tax
|
Income tax
recovery
(expense)
|
Total
net of
tax
|
|||||||||||
Balance at December 31, 2016
|
$
|
(247)
|
$
|
(2,898)
|
$
|
(3,145)
|
$
|
787
|
$
|
(2,358)
|
||||||
Other comprehensive income (loss)
|
||||||||||||||||
before reclassifications:
|
||||||||||||||||
Foreign exchange loss on translation of net
|
||||||||||||||||
investment in foreign operations
|
(701)
|
(701)
|
-
|
(701)
|
||||||||||||
Foreign exchange gain on translation of
|
||||||||||||||||
US dollar-denominated debt designated
|
||||||||||||||||
as a hedge of the net investment in
|
||||||||||||||||
foreign operations
|
504
|
504
|
(67)
|
437
|
||||||||||||
Actuarial loss arising during the year
|
(408)
|
(408)
|
110
|
(298)
|
||||||||||||
Amounts reclassified from Accumulated
|
||||||||||||||||
other comprehensive loss:
|
||||||||||||||||
Amortization of net actuarial loss
|
179
|
179
|
(1)
|
(47)
|
(2)
|
132
|
||||||||||
Amortization of prior service costs
|
5
|
5
|
(1)
|
(1)
|
(2)
|
4
|
||||||||||
Other comprehensive loss
|
(197)
|
(224)
|
(421)
|
(5)
|
(426)
|
|||||||||||
Balance at December 31, 2017
|
$
|
(444)
|
$
|
(3,122)
|
$
|
(3,566)
|
$
|
782
|
$
|
(2,784)
|
||||||
(1)
|
Reclassified to Labor and fringe benefits in the Consolidated Statements of Income and included in components of net periodic benefit cost. See Note 12 - Pensions and other postretirement benefits.
|
|||||||||||||||
(2)
|
Included in Income tax recovery (expense) in the Consolidated Statements of Income.
|
In millions
|
Operating
|
Capital
|
||||
2018
|
$
|
139
|
$
|
52
|
||
2019
|
109
|
17
|
||||
2020
|
77
|
21
|
||||
2021
|
59
|
12
|
||||
2022
|
38
|
7
|
||||
2023 and thereafter
|
139
|
132
|
||||
Total
|
$
|
561
|
241
|
|||
Less:
|
Imputed interest on capital leases at rates ranging from approximately 1.0% to 6.8%
|
83
|
||||
Present value of minimum lease payments included in debt (Note 10)
|
$
|
158
|
In millions
|
2017
|
2016
|
2015
|
||||||
Beginning of year
|
$
|
183
|
$
|
191
|
$
|
203
|
|||
Accruals and other
|
38
|
24
|
17
|
||||||
Payments
|
(38)
|
(32)
|
(29)
|
||||||
End of year
|
$
|
183
|
$
|
183
|
$
|
191
|
|||
Current portion - End of year
|
$
|
40
|
$
|
39
|
$
|
27
|
In millions
|
2017
|
2016
|
2015
|
||||||
Beginning of year
|
$
|
118
|
$
|
105
|
$
|
95
|
|||
Accruals and other
|
46
|
51
|
22
|
||||||
Payments
|
(41)
|
(34)
|
(30)
|
||||||
Foreign exchange
|
(7)
|
(4)
|
18
|
||||||
End of year
|
$
|
116
|
$
|
118
|
$
|
105
|
|||
Current portion - End of year
|
$
|
25
|
$
|
37
|
$
|
24
|
In millions
|
2017
|
2016
|
2015
|
||||||
Beginning of year
|
$
|
86
|
$
|
110
|
$
|
114
|
|||
Accruals and other
|
16
|
6
|
81
|
||||||
Payments
|
(23)
|
(29)
|
(91)
|
||||||
Foreign exchange
|
(1)
|
(1)
|
6
|
||||||
End of year
|
$
|
78
|
$
|
86
|
$
|
110
|
|||
Current portion - End of year
|
$
|
57
|
$
|
50
|
$
|
51
|
·
|
the lack of specific technical information available with respect to many sites;
|
·
|
the absence of any government authority, third-party orders, or claims with respect to particular sites;
|
·
|
the potential for new or changed laws and regulations and for development of new remediation technologies and uncertainty regarding the timing of the work with respect to particular sites; and
|
·
|
the determination of the Company's liability in proportion to other potentially
responsible parties and the ability to recover costs from any third parties with respect to particular sites.
|
Level 1
Quoted prices for identical instruments in
active markets
|
The carrying amounts of Cash and cash equivalents and Restricted cash and cash equivalents approximate fair value. These financial instruments include highly liquid investments purchased three months or less from maturity, for which the fair value is determined by reference to quoted prices in active markets.
|
Level 2
Significant inputs (other than quoted prices
included in Level 1) are observable
|
The carrying amounts of Accounts receivable, Other current assets, and Accounts payable and other approximate fair value. The fair value of these financial instruments is not determined using quoted prices, but rather from market observable information. The fair value of derivative financial instruments used to manage the Company's exposure to foreign currency risk and included in Other current assets and Accounts payable and other is measured by discounting future cash flows using a discount rate derived from market data for financial instruments subject to similar risks and maturities.
|
The carrying amount of the Company's debt does not approximate fair value. The fair value is estimated based on quoted market prices for the same or similar debt instruments, as well as discounted cash flows using current interest rates for debt with similar terms, company rating, and remaining maturity. As at December 31, 2017, the Company's debt had a carrying amount of $10,828 million (2016 - $10,937 million) and a fair value of $12,164 million (2016 - $12,084 million).
|
|
Level 3
Significant inputs are unobservable
|
The carrying amounts of investments included in Intangible and other assets approximate fair value, with the exception of certain cost investments for which significant inputs are unobservable and fair value is estimated based on the Company's proportionate share of the underlying net assets. As at December 31, 2017, the Company's investments had a carrying amount of $73 million (2016 - $68 million) and a fair value of $225 million (2016 - $220 million).
|
·
|
each region's sole business activity is the transportation of freight over the Company's extensive rail network;
|
·
|
the regions service national accounts that extend over the Company's various commodity groups and across its rail network;
|
·
|
the services offered by the Company stem predominantly from the transportation of freight by rail with the goal of optimizing the rail network as a whole; and
|
·
|
the Company and its subsidiaries, not its regions, are subject to regulatory regimes in both Canada and the U.S.
|
In millions
|
Year ended December 31,
|
2017
|
2016
|
2015
|
|||||
Revenues
|
|||||||||
Canada
|
$
|
8,794
|
$
|
7,971
|
$
|
8,283
|
|||
U.S.
|
4,247
|
4,066
|
4,328
|
||||||
Total revenues
|
$
|
13,041
|
$
|
12,037
|
$
|
12,611
|
Net income
|
|||||||||
Canada
|
$
|
2,857
|
$
|
2,708
|
$
|
2,469
|
|||
U.S.
|
2,627
|
932
|
1,069
|
||||||
Total net income
|
$
|
5,484
|
$
|
3,640
|
$
|
3,538
|
|||
In millions
|
December 31,
|
2017
|
2016
|
||||||
Properties
|
|||||||||
Canada
|
$
|
18,305
|
$
|
17,445
|
|||||
U.S.
|
15,884
|
16,310
|
|||||||
Total properties
|
$
|
34,189
|
$
|
33,755
|
(1)
|
I have reviewed this report on Form 6-K of Canadian National Railway Company;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d‑15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(5) |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
(1)
|
I have reviewed this report on Form 6-K of Canadian National Railway Company;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d‑15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(5) |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|