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Canadian National Railway Corporation (



Q4 and Year End 2010 Earnings Conference Call

January 25, 2011 2 PM ET


Robert Noorigian – VP, IR

Claude Mongeau – President and CEO

Keith Creel – EVP and COO

J.J. Ruest – EVP and Chief Marketing Officer

Luc Jobin – EVP and CFO


David Newman – Cormark Securities

Bill Greene – Morgan Stanley

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All participants please standby. This is the forward-looking disclosure. CN’s Q4 2010 financial results conference call will begin momentarily. I would like to remind you that today’s remarks contain forward-looking statements within the meaning of applicable securities laws. Such statements are based on assumptions that may not materialize and are subject to risks described in CN’s Q4 2010 financial results press release and analyst presentation documents that can be found on CN’s website. As such actual results may differ materially. Reconciliations for any non-GAAP measures are also posted on CN’s webcast at Please standby, your call will begin shortly.

All participants please standby, your conference is ready to begin. Welcome to the CN Q4 2010 Financial Results Conference Call. I would now like to turn the meeting over the Mr. Robert Noorigian, Vice President, Investor Relations. Ladies and gentleman, Mr. Noorigian.

Robert Noorigian

Thank you for joining us for CN’s Q4 and total year 2010 results. I’d like to remind you again about the statements we’ve already read about forward-looking statements. With me today is Claude Mongeau, the President and Chief Executive Officer; Luc Jobin, Executive Vice President and Chief Financial Officer; Keith Creel, Executive Vice President and Chief Operating Officer; J.J. Ruest, Executive Vice President and Chief Marketing Officer.

After our presentation today we’ll take questions from those of you who are listening on the call. Could you please identify yourself when you’re asking the questions? And in order to be fair, and also I realize that we’re doing this in the middle of the day and you have other calls that you’re going to have afterwards, we’re going to limit this to one hour and could you limit your questions to one?

With that brief introduction, I’d like to introduce Mr. Claude Mongeau, CN’s President and Chief Executive Officer. Claude?

Claude Mongeau

Thank you, Bob, and thank you all for taking time to listen to our call. We have the full CN leadership team here today to give you a good update on our results, and they are good results. Our Q4 came in with solid performance across the board, both from an operational service and unfolding of our strategic agenda, and the results are showing that. We’re capping a very good 2010 year and basically I’m very, very pleased with the Q4 performance.

Our revenues were up basically 15% if you adjust for currency on strong double digit volume growth. J.J. will give you the details, but we’ve had growth across all of our commodity group and it’s actually quite encouraging. The level of performance in terms of volumes, during the Q4 are not only good for results, but they bode well for volumes into 2011. Our efficiency, our ability to grow at low incremental cost allowed us to finish the year with an operating ratio of 63.4. That’s almost 2 percentage points less than last year, and so we’re continuing to show that we are able to grow a top line and accommodate it with very good margins and bringing it to the bottom line.

Bottom line is $1.08 in terms of EPS. If I adjust for last year’s non-recurring items, the EPS growth is a full 20% on a year-over-year basis adjusted. Luc will give you some details, but I think it just continues to confirm the thesis and the ability we’ve had during the year to transform top line growth into solid profitability, both earnings and free cash flow. Free cash flow for the year – $1.1 billion, a very strong performance, and all of this, including our prospects into 2011, give us the confidence- our Board this morning, or yesterday actually, agreed to a 20% dividend increase, Clearly an indication of our confidence in the future of this company and a recovering economy.

Similarly, in terms of rewarding our shareholders, we have a solid balance sheet. Luc will give you the details, but we are launching another share buyback program with 16.5 million shares. So all in all, a very solid Q4 and capping off a great year.

Let me just spend a moment before I turn it over to my leadership team for more details, to take a bit of time on the year overall and how the transition has taken place. I’m very pleased with the chemistry of our leadership team, how we’re coming together, and how our basic unfolding agenda is being carried out. We’ve discussed this with you earlier in the year at an analyst meeting – what we’re trying to achieve is clear, the vision is well articulated, and we are delivering on it. And I think the proof points are coming through across a number of areas.

In short, we had the benefit in 2010 and that’s the (inaudible) that was helping in terms of transition, of having an economy that came in stronger than anybody expected last fall. But this story is a lot more than taking full advantage of this economic recovery. It’s about our agenda. Operational and service excellence are coming through. In the year we have the strongest car load growth of any railroad in the industry. And if you look at the metric that Keith will describe in a minute, we have maintained or improved all of our core operating metrics.

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