CN reports record results, strong core business growth. Two sections.

[CliqueofOne]

For a railway that is making money hand over fist you'd think the employees would be treated a little more humanely.
Signal Mechanic. Signal Department. Canadian National Railways.


News Releases

2004 Third Quarter Results

CN reports record results, strong core business growth

MONTREAL, Oct. 27, 2004 — CN today reported its financial results for the third quarter and nine-month period ended Sept. 30, 2004.

Third-quarter 2004 highlights

* Net income of $346 million, an 18 per cent increase from 2003;
* Diluted earnings per share of $1.19, a 17 per cent improvement over third-quarter 2003 results;
* Operating income of $591 million, up 30 per cent year-over-year;
* Operating ratio of 65.4 per cent, 2.5 percentage points better than the prior year’s quarterly performance;
* Nine-month 2004 free cash flow of $754 million, compared with $455 million for the same period of 2003. (1)

E. Hunter Harrison[}:)][:o)][:p][D)], president and chief executive officer of CN[V], said: “These results demonstrate the power of CN’s business model, franchise and people. Our success is built on solid railroading execution, a strong merchandise traffic base, productivity and pricing discipline, and a proven ability to leverage new acquisitions for the benefit of customers and shareholders.

“Third-quarter revenues grew 21 per cent, reflecting core business growth in a strong North American economy and the acquisitions of BC Rail and the railroad and related holdings of Great Lakes Transportation (GLT). The integration of these carriers into our network continues in seamless fashion, and we believe anticipated merger benefits will outpace our original expectations.

“I am particularly proud of our nine-month 2004 free cash flow of $754 million. This cash generation ability is one of CN’s key strengths, giving it the financial flexibility to reward shareholders now and in the future.”

Revenues for the latest quarter increased to a record $1,709 million despite a stronger Canadian dollar. Factors driving the improved performance were increased merchandise traffic revenues, the inclusion of $148 million of GLT and BC Rail revenues, a solid intermodal performance, and an improved Canadian grain crop. CN began to record the operations of GLT as of May 10, 2004, and BC Rail as of July 14, 2004.

All seven CN business units registered revenue gains: metals and minerals (56 per cent); forest products (25 per cent); coal (25 per cent); petroleum and chemicals (17 per cent); automotive (nine per cent); intermodal (eight per cent); and grain and fertilizers (five per cent).

Operating expenses for the most recent quarter increased by 17 per cent to $1,118 million. The rise reflected the inclusion of $93 million of GLT and BC Rail expenses, increased fuel costs, and higher expenses for personal injuries, labor and fringe benefits, and purchased services.

The stronger Canadian dollar affected the conversion of CN’s U.S. dollar denominated revenues and expenses, and accordingly, reduced the company’s third-quarter revenues, operating income and net income by approximately $45 million, $15 million and $7 million, respectively.

Nine-month 2004 financial results

Net income for the first nine months of 2004 was $882 million, or $3.05 per diluted share, compared with net income of $790 million, or $2.71 per diluted share, for the same period of 2003.

Nine-month 2003 net income included a cumulative benefit of $48 million after tax, resulting from a change in the accounting for removal costs for certain track structure assets. Excluding the effect of this change, net income for the first nine months of 2004 increased 19 per cent, with diluted earnings per share rising 20 per cent.

Operating income for the first nine months of this year increased 23 per cent to $1,561 million. Revenues rose by 10 per cent to $4,812 million, while operating expenses increased by five per cent to $3,251 million.

CN’s operating ratio for the first nine months of 2004 was 67.6 per cent, a 3.5-percentage point improvement over the year-earlier performance.

The translation impact of the stronger Canadian dollar reduced nine-month 2004 revenues, operating income and net income by approximately $195 million, $70 million and $37 million, respectively.

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

(1) Please see discussion and reconciliation of this non-GAAP adjusted performance measure in the attached supplementary schedule, Non-GAAP Measures.
This news release contains forward-looking statements. CN cautions that, by their nature, forward-looking statements involve risk and uncertainties and that its results could differ materially from those expressed or implied in such statements. Reference should be made to CN’s most recent Form 40-F filed with the United States Securities and Exchange Commission, and the Annual Information Form filed with the Canadian securities regulators, for a summary of major risks.

Canadian National Railway Company spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key cities of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.


Contacts:
Media
Mark Hallman
System Director, Media Relations
[phone] Investment Community
Robert Noorigian
Vice-President, Investor Relations
[phone]

http://www.cn.ca/news/newsreleases/2004/en_News20041027.shtml




UTU GO-105 RESPONDS TO CN 10/29/2004
October 29th, 2004

ALL UTU GO-105 MEMBERS AT CN RAIL

I have recently returned from vacation and have reviewed the latest material issued by Mr. Becker on behalf of CN Management. The following is our response to that material.

First, it is extremely important that a distinction be made between ensuring the financial viability of the Company and the personal goals and ideologies of the present Management.

Clearly, it is not in the interests of this Union or our membership to have the Company not succeed as a viable and profitable business entity. To the contrary, the continued success of the Company provides a legitimate opportunity for the membership to obtain enhanced benefits and working conditions, without detriment to their present situation. This is a fair and equitable concept which is enshrined in the Canada Labour Code. Your Union has approached these negotiations consistent with these beliefs.

As you are well aware for the past several years CN has been very successful. Consider the 2004 third quarter announcement indicating a profit of 364 million dollars, this up from 294 million as compared to the same period last year. CN has been able to achieve this success under the present Collective Agreements. It is not our intent to jeopardize this success, however, further gains should not be achieved at the expense of our membership.

Unfortunately it appears the present Management ideologies do not respect the principles of fairness and equity for all. These new ideologies until recently were foreign to Canadian National, your negotiating team and our membership.

The comments, positions and objectives of CN Management, as recently articulated must be viewed on the basis of facts not creative imagination; on the basis of reality not fiction.

CN Management continues to aggressively pursue goals and objectives detrimental to the Union and our membership. Management continues to obtain gains from this Union and our membership by the continued abuse, manipulation and violation of the Collective Agreements. These are matters of factual record. This is evident by the many grievances, arbitration proceedings and Labour Board complaints that the Union has been required to pursue to deal with the Company's actions and decisions over the years.

As examples, consider the Arbitrator's award on CN Management's attendance policy. Consider the Arbitrator's award on CN Management's abuse of Article 82 (investigations). Consider CN Management's approach to discipline. Consider CN Management's continued violations of Articles 41 and 51 (this in the face of cease and desist orders). Consider the continued use of CN Management to perform Bargaining Unit work. Consider the continued forced relocation of employees. Consider the continued abuse of the Conductor Only provisions of the Collective Agreement. Consider the continued harassment and intimidation of the membership. Consider the fact that the deals the Union makes in good faith are continually violated. The list goes on and on.

This is the "status quo" to which Management believes is fair and equitable. This is the "status quo" Management believes should be maintained. All of the above undermines the position of Management as recently expressed to our membership. Consider where the truth lies.

Management continues to deny the Union and our membership a fair and equitable share of the "fruits of your labour" unless we first agree to considerable concessions.

Consider Mr. Becker's comments regarding but one of the UnionÃs issues (scheduling). Mr. Becker submits that the Union, to achieve a resolution to this issue, must first concede to the following "flexibilities" to Management.

1. Removal of Road/Yard Distinctions.
2. Perform other work while "waiting for your train".
3. Removal of mileage caps.

Consider the many changes to the Collective Agreements that would be required to achieve these "flexibilities". Consider these demanded "flexibilities" in light of the present abuse, manipulation and violation of the Collective Agreements.

Since Mr. Becker claims that the Company has " ....not been pursuing Option 2 for quite some time..." we make only the following cursory comments.

First, it should be noted that Mr. Becker confirms Management's "philosophy" (as stated in November 2002 and reiterated in July 2003) with respect to achieving "breakthrough labour agreements". A philosophy which includes the stated "stick and carrot approach to changing behaviors". Consider this "philosophy" in light of the present circumstances at CN.

Second, the premise of "Option 2" as stated by the Company is to "simplify and modernize both the language of the contract and the nature of the employment relationship". This, according to CN Management, would create less complexity and therefore decrease controversies between labour and management.

On this issue, to a certain degree, Management is correct if you accept the premise that a lack of protections in the Collective Agreements will result in less challenges to Management decisions and actions. If these demands are allowed, the actions of Management, which presently are the focus of many grievances, arbitration proceedings and Labour Board complaints, would be difficult to challenge. The directives of Management which may be morally wrong, inequitable or unfair, would be very difficult to challenge or change. The controversial "do now, grieve later" principle would be replaced with Management's "do now, or else" principle.

Sadly and regrettably Management has misunderstood or ignored the reality of today's labour relations environment. Management has misunderstood or ignored the principle of fair and equitable negotiations. Management either does not understand or appreciate the character and will of this Union and our membership. Management continues to make choices (including present demands) without understanding (or simply ignoring) the inevitable negative consequences of such.

This Union remains steadfast in its objectives to achieve a fair and equitable contract. A contract that will address the many instances of Management abuse and manipulation. Your Union remains steadfast in achieving a contract which enhances the present financial and benefit provisions of the Collective Agreements. A contract that will ensure an enhanced quality of work life (free of harassment and intimidation). A contract that will ensure the continued successful financial viability of our Company. A contract that will foster future sound and positive Management/Labour Relations. A contract that our membership will feel comfortable in ratifying.

We do not expect to achieve all of our demands or obtain perfect Collective Agreements. We simply want our fair share in these times of unprecedented Company prosperity, stability and security.

As most of you are aware we are presently in conciliation with Management. This process has deadlines which are fast approaching. Although your Union remains guardedly optimistic about achieving a negotiated settlement, we cannot ignore reality, history or current Management ideologies. To ignore such would be a violation of our sacred trust to our membership.

It is our intention to attend each Local to clearly explain the Union's position on each demand and to answer any and all questions from our membership with respect to these matters. In the interim however, should you have any questions do not hesitate to contact your Local Representatives as our Office routinely provides updates to them as to the status of these negotiations.

Fraternally yours,
Signed
R. A. BEATTY
General Chairperson
UTU - GO-105

http://www.utueast.org/index.lasso?-token.page=newsdetail&-token.id=86

[Junctionfan]

I am not impressed with the meager increase in profits in the intermodal unit. What is CN doing?

When is their BLE purchase going to kick in and contribute to the departments? I hope hasn't already been included because than it would also be meager.