EX-99.2 4 ex-99_2.htm CN Q4 2015 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO ex-99_2.htm
 
 
 
Selected Railroad Statistics - unaudited
       
   
Three months ended December 31
Year ended December 31
 
2015
2014
  
2015
2014
           
Financial measures
          
           
Key financial performance indicators (1)
          
Total revenues ($ millions)
3,166
3,207
  
12,611
12,134
Rail freight revenues ($ millions)
2,987
3,015
  
11,905
11,455
Operating income ($ millions)
1,354
1,260
  
5,266
4,624
Net income ($ millions)
941
844
  
3,538
3,167
Diluted earnings per share ($)
1.18
1.03
  
4.39
3.85
Adjusted diluted earnings per share ($) (2)
1.18
1.03
  
4.44
3.76
Free cash flow ($ millions) (2)
632
175
  
2,373
2,220
Gross property additions ($ millions)
642
947
  
2,706
2,297
Share repurchases ($ millions)
500
410
  
1,750
1,505
Dividends per share ($)
0.3125
0.2500
  
1.2500
1.0000
           
Financial position (1)
          
Total assets ($ millions) (3)
36,402
31,687
  
36,402
31,687
Total liabilities ($ millions) (3)
21,452
18,217
  
21,452
18,217
Shareholders' equity ($ millions)
14,950
13,470
  
14,950
13,470
           
Financial ratio
          
Operating ratio (%)
57.2
60.7
  
58.2
61.9
           
Operational measures (4)
          
           
Statistical operating data
          
Gross ton miles (GTMs) (millions)
110,245
115,698
  
442,084
448,765
Revenue ton miles (RTMs) (millions)
56,534
59,777
  
224,710
232,138
Carloads (thousands)
1,325
1,448
  
5,485
5,625
Route miles (includes Canada and the U.S.)
19,600
19,600
  
19,600
19,600
Employees (end of period)
23,172
25,530
  
23,172
25,530
Employees (average for the period)
23,583
25,304
  
24,575
24,635
           
Key operating measures
          
Rail freight revenue per RTM (cents)
5.28
5.04
  
5.30
4.93
Rail freight revenue per carload ($)
2,254
2,082
  
2,170
2,036
GTMs per average number of employees (thousands)
4,675
4,572
  
17,989
18,217
Operating expenses per GTM (cents)
1.64
1.68
  
1.66
1.67
Labor and fringe benefits expense per GTM (cents)
0.55
0.51
  
0.54
0.52
Diesel fuel consumed (US gallons in millions)
105.9
113.2
  
425.0
440.5
Average fuel price ($ per US gallon)
2.54
3.48
  
2.68
3.72
GTMs per US gallon of fuel consumed
1,041
1,022
  
1,040
1,019
Terminal dwell (hours)
14.3
16.9
  
15.0
16.9
Train velocity (miles per hour)
27.4
26.1
  
26.3
25.7
           
Safety indicators (5)
          
Injury frequency rate (per 200,000 person hours)
1.55
1.55
  
1.63
1.81
Accident rate (per million train miles)
1.48
2.83
  
2.06
2.73
             
(1)
Amounts expressed in Canadian dollars and prepared in accordance with United States generally accepted accounting principles, unless otherwise noted.
(2)
See supplementary schedule entitled Non-GAAP Measures for an explanation of this non-GAAP measure.
(3)
As a result of the retrospective adoption of new accounting standards in the fourth quarter of 2015, certain 2014 balances have been restated. See Note 2 – Accounting changes to the CN's 2015 unaudited Interim Consolidated Financial Statements for additional information.
(4)
Statistical operating data, key operating measures and safety indicators are based on estimated data available at such time and are subject to change as more complete information becomes available, as such, certain of the comparative data have been restated. Definitions of these indicators are provided on our website, www.cn.ca/glossary.
(5)
Based on Federal Railroad Administration (FRA) reporting criteria.
 
 
 
 
 
 
 
 
 
 
 
 
 

 
  CN | 2015 – Fourth Quarter
 
 
 
5
 
Supplementary Information - unaudited
 
       
 
Three months ended December 31
  
Year ended December 31
                       
 
2015
2014
% Change
Fav (Unfav)
  
% Change at
constant currency
Fav (Unfav) (2)
  
2015
2014
% Change
Fav (Unfav)
  
% Change at
constant currency
Fav (Unfav) (2)
Revenues ($ millions) (1)
                      
Petroleum and chemicals
604
628
(4%)
  
(13%)
  
2,442
2,354
4%
  
(6%)
Metals and minerals
332
418
(21%)
  
(29%)
  
1,437
1,484
(3%)
  
(13%)
Forest products
445
398
12%
  
(1%)
  
1,728
1,523
13%
  
2%
Coal
144
172
(16%)
  
(24%)
  
612
740
(17%)
  
(25%)
Grain and fertilizers
568
560
1%
  
(6%)
  
2,071
1,986
4%
  
(3%)
Intermodal
715
680
5%
  
(1%)
  
2,896
2,748
5%
  
-
Automotive
179
159
13%
  
(1%)
  
719
620
16%
  
4%
Total rail freight revenues
2,987
3,015
(1%)
  
(10%)
  
11,905
11,455
4%
  
(4%)
Other revenues
179
192
(7%)
  
(17%)
  
706
679
4%
  
(6%)
Total revenues
3,166
3,207
(1%)
  
(10%)
  
12,611
12,134
4%
  
(5%)
Revenue ton miles (RTMs) (millions)
                      
Petroleum and chemicals
12,616
13,935
(9%)
  
(9%)
  
51,103
53,169
(4%)
  
(4%)
Metals and minerals
5,061
6,995
(28%)
  
(28%)
  
21,828
24,686
(12%)
  
(12%)
Forest products
7,603
7,352
3%
  
3%
  
30,097
29,070
4%
  
4%
Coal
3,708
4,831
(23%)
  
(23%)
  
15,956
21,147
(25%)
  
(25%)
Grain and fertilizers
13,875
13,824
-
  
-
  
50,001
51,326
(3%)
  
(3%)
Intermodal
12,837
12,004
7%
  
7%
  
52,144
49,581
5%
  
5%
Automotive
834
836
-
  
-
  
3,581
3,159
13%
  
13%
Total revenue ton miles
56,534
59,777
(5%)
  
(5%)
  
224,710
232,138
(3%)
  
(3%)
Rail freight revenue / RTM (cents)
                      
Petroleum and chemicals
4.79
4.51
6%
  
(4%)
  
4.78
4.43
8%
  
(2%)
Metals and minerals
6.56
5.98
10%
  
(3%)
  
6.58
6.01
9%
  
(2%)
Forest products
5.85
5.41
8%
  
(4%)
  
5.74
5.24
10%
  
(2%)
Coal
3.88
3.56
9%
  
(1%)
  
3.84
3.50
10%
  
(1%)
Grain and fertilizers
4.09
4.05
1%
  
(6%)
  
4.14
3.87
7%
  
-
Intermodal
5.57
5.66
(2%)
  
(7%)
  
5.55
5.54
-
  
(5%)
Automotive
21.46
19.02
13%
  
(1%)
  
20.08
19.63
2%
  
(9%)
Total rail freight revenue per RTM
5.28
5.04
5%
  
(5%)
  
5.30
4.93
8%
  
(1%)
Carloads (thousands)
                      
Petroleum and chemicals
157
166
(5%)
  
(5%)
  
640
655
(2%)
  
(2%)
Metals and minerals
185
294
(37%)
  
(37%)
  
886
1,063
(17%)
  
(17%)
Forest products
109
109
-
  
-
  
441
433
2%
  
2%
Coal
105
127
(17%)
  
(17%)
  
438
519
(16%)
  
(16%)
Grain and fertilizers
163
175
(7%)
  
(7%)
  
607
640
(5%)
  
(5%)
Intermodal
545
519
5%
  
5%
  
2,232
2,086
7%
  
7%
Automotive
61
58
5%
  
5%
  
241
229
5%
  
5%
Total carloads
1,325
1,448
(8%)
  
(8%)
  
5,485
5,625
(2%)
  
(2%)
Rail freight revenue / carload ($)
                      
Petroleum and chemicals
3,847
3,783
2%
  
(8%)
  
3,816
3,594
6%
  
(3%)
Metals and minerals
1,795
1,422
26%
  
12%
  
1,622
1,396
16%
  
4%
Forest products
4,083
3,651
12%
  
(1%)
  
3,918
3,517
11%
  
-
Coal
1,371
1,354
1%
  
(9%)
  
1,397
1,426
(2%)
  
(11%)
Grain and fertilizers
3,485
3,200
9%
  
1%
  
3,412
3,103
10%
  
3%
Intermodal
1,312
1,310
-
  
(6%)
  
1,297
1,317
(2%)
  
(7%)
Automotive
2,934
2,741
7%
  
(6%)
  
2,983
2,707
10%
  
(1%)
Total rail freight revenue per carload
2,254
2,082
8%
  
(1%)
  
2,170
2,036
7%
  
(2%)
                       
Statistical operating data and related key operating measures are based on estimated data available at such time and are subject to change as more complete information becomes available.
(1)  Amounts expressed in Canadian dollars.
(2)  See supplementary schedule entitled Non-GAAP Measures for an explanation of this non-GAAP measure.

 
 
 
 
 
 
 
 
 
 
 
 
  CN | 2015 – Fourth Quarter
 
 
6
 
Non-GAAP Measures - unaudited

 
All financial information included in this supplementary schedule is expressed in Canadian dollars, unless otherwise noted.
 
 
Adjusted performance measures
 
Management believes that adjusted net income and adjusted earnings per share are useful measures of performance that can facilitate period-to-period comparisons, as they exclude items that do not necessarily arise as part of the normal day-to-day operations of Canadian National Railway Company, together with its wholly-owned subsidiaries, collectively the “Company”, and could distort the analysis of trends in business performance. The exclusion of such items in adjusted net income and adjusted earnings per share does not, however, imply that such items are necessarily non-recurring. These adjusted measures do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies.
For the three months and year ended December 31, 2015, the Company reported adjusted net income of $941 million, or $1.18 per diluted share and $3,580 million, or $4.44 per diluted share, respectively. The adjusted figures for the year ended December 31, 2015 exclude a deferred income tax expense of $42 million ($0.05 per diluted share) resulting from the enactment of a higher provincial corporate income tax rate.
For the three months and year ended December 31, 2014, the Company reported adjusted net income of $844 million, or $1.03 per diluted share and $3,095 million, or $3.76 per diluted share, respectively. The adjusted figures for the year ended December 31, 2014 exclude a gain on disposal of the Deux-Montagnes subdivision, including the Mont-Royal tunnel, together with the rail fixtures, of $80 million, or $72 million after-tax ($0.09 per diluted share).
The following table provides a reconciliation of net income and earnings per share, as reported for the three months and year ended December 31, 2015 and 2014, to the adjusted performance measures presented herein.
         
   
Three months ended December 31
  
Year ended December 31
In millions, except per share data
  
2015
  
2014
    
2015
  
2014
Net income as reported
$
941
$
844
  
$
3,538
$
3,167
Adjustments:
                  
 
Other income
  
-
  
-
    
-
  
(80)
 
Income tax expense
  
-
  
-
    
42
  
8
Adjusted net income
$
941
$
844
  
$
3,580
$
3,095
Basic earnings per share as reported
$
1.19
$
1.04
  
$
4.42
$
3.86
Impact of adjustments, per share
  
-
  
-
    
0.05
  
(0.09)
Adjusted basic earnings per share
$
1.19
$
1.04
  
$
4.47
$
3.77
Diluted earnings per share as reported
$
1.18
$
1.03
  
$
4.39
$
3.85
Impact of adjustments, per share
  
-
  
-
    
0.05
  
(0.09)
Adjusted diluted earnings per share
$
1.18
$
1.03
  
$
4.44
$
3.76
 
 
 
 
 
 
 
 
 
 


  CN | 2015 – Fourth Quarter
 
 
7
 
Non-GAAP Measures - unaudited

 
Constant currency
 
Financial results at constant currency allow results to be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons in the analysis of trends in business performance. Measures at constant currency are considered non-GAAP measures and do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies. Financial results at constant currency are obtained by translating the current period results denominated in US dollars at the foreign exchange rates of the comparable period of the prior year. The average foreign exchange rates were $1.33 and $1.28 per US$1.00, respectively, for the three months and year ended December 31, 2015, and $1.14 and $1.10 per US$1.00, respectively, for the three months and year ended December 31, 2014.
On a constant currency basis, the Company’s net income for the three months and year ended December 31, 2015 would have been lower by $87 million ($0.11 per diluted share) and $314 million ($0.39 per diluted share), respectively.
 
 
Free cash flow
 
Free cash flow is a non-GAAP measure that is reported as a supplementary indicator of the Company’s performance. Management believes that free cash flow is a useful measure of performance as it demonstrates the Company’s ability to generate cash for debt obligations and for discretionary uses such as payment of dividends and strategic opportunities. The Company defines its free cash flow measure as the difference between net cash provided by operating activities and net cash used in investing activities; adjusted for changes in restricted cash and cash equivalents and the impact of major acquisitions, if any. Free cash flow does not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies.
       
 
Three months ended December 31
  
Year ended December 31
In millions
  
2015
  
2014
    
2015
  
2014
Net cash provided by operating activities
$
1,293
$
1,135
  
$
5,140
$
4,381
Net cash used in investing activities
  
(661)
  
(956)
    
(2,827)
  
(2,176)
Net cash provided before financing activities
  
632
  
179
    
2,313
  
2,205
                   
Adjustment: Change in restricted cash and cash equivalents
  
-
  
(4)
    
60
  
15
Free cash flow
$
632
$
175
  
$
2,373
$
2,220
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


  CN | 2015 – Fourth Quarter
 
 
8
 
Non-GAAP Measures - unaudited
 
 
Credit measures
 
Management believes that the adjusted debt-to-total capitalization ratio is a useful credit measure that aims to show the true leverage of the Company. Similarly, the adjusted debt-to-adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) multiple is another useful credit measure because it reflects the Company’s ability to service its debt. The Company excludes Other income in the calculation of EBITDA. These measures do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies.
 
Adjusted debt-to-total capitalization ratio

     
December 31,
  
2015
  
2014
Debt-to-total capitalization ratio (1) (2)
      
41.1%
  
38.3%
Add: Impact of present value of operating lease commitments (3)
    
1.4%
  
1.7%
Adjusted debt-to-total capitalization ratio
      
42.5%
  
40.0%
 
Adjusted debt-to-adjusted EBITDA multiple

In millions, unless otherwise indicated
  
Twelve months ended December 31,
  
2015
  
2014
Debt (2)
    
$
10,427
$
8,372
Add: Present value of operating lease commitments (3)
      
607
  
607
Adjusted debt
    
$
11,034
$
8,979
               
Operating income
    
$
5,266
$
4,624
Add: Depreciation and amortization
      
1,158
  
1,050
EBITDA (excluding Other income)
      
6,424
  
5,674
Add: Deemed interest on operating leases
      
29
  
28
Adjusted EBITDA
    
$
6,453
$
5,702
Adjusted debt-to-adjusted EBITDA multiple (times)
      
           1.71
  
           1.57
               
(1)
Debt-to-total capitalization is calculated as total Long-term debt plus Current portion of long-term debt, divided by the sum of total debt plus Total shareholders’ equity.
(2)
As a result of the retrospective adoption of a new accounting standard in the fourth quarter of 2015, the 2014 debt balance has been adjusted and the related financial ratios have been restated. See Note 2 – Accounting changes to the Company’s 2015 unaudited Interim Consolidated Financial Statements for additional information.
(3)
The operating lease commitments have been discounted using the Company’s implicit interest rate for each of the periods presented.
 
The increase in the Company’s adjusted debt-to-total capitalization ratio at December 31, 2015, as compared to 2014, was mainly due to an increased debt level, reflecting a weaker Canadian-to-US dollar foreign exchange rate in effect at the balance sheet date and the net issuance of commercial paper. The Company’s adjusted debt-to-adjusted EBITDA multiple also increased, which was driven by the increased debt level as at December 31, 2015, partly offset by a higher operating income earned during 2015, as compared to 2014.
 
 
 
 
 
 
 
 
 
 
 
 

 
  CN | 2015 – Fourth Quarter
 
 
9
 
Consolidated Statements of Income - unaudited

 
Three months ended
  
Year ended
 
December 31
  
December 31
In millions, except per share data
  
2015
    
2014
    
2015
    
2014
Revenues
$
3,166
  
$
3,207
  
$
12,611
  
$
12,134
                       
Operating expenses
                      
Labor and fringe benefits
  
608
    
592
    
2,406
    
2,319
Purchased services and material
  
437
    
442
    
1,729
    
1,598
Fuel
  
304
    
448
    
1,285
    
1,846
Depreciation and amortization
  
290
    
279
    
1,158
    
1,050
Equipment rents
  
103
    
85
    
373
    
329
Casualty and other
  
70
    
101
    
394
    
368
Total operating expenses
  
1,812
    
1,947
    
7,345
    
7,510
Operating income
  
1,354
    
1,260
    
5,266
    
4,624
Interest expense
  
(119)
    
(94)
    
(439)
    
(371)
Other income
  
16
    
13
    
47
    
107
Income before income taxes
  
1,251
    
1,179
    
4,874
    
4,360
Income tax expense
  
(310)
    
(335)
    
(1,336)
    
(1,193)
Net income
$
941
  
$
844
  
$
3,538
  
$
3,167
                       
                       
Earnings per share
                      
Basic
$
1.19
  
$
1.04
  
$
4.42
  
$
3.86
Diluted
$
1.18
  
$
1.03
  
$
4.39
  
$
3.85
                       
                       
Weighted-average number of shares
                      
Basic
  
792.4
    
813.0
    
800.7
    
819.9
Diluted
  
796.3
    
816.9
    
805.1
    
823.5
                       
See accompanying notes to unaudited consolidated financial statements.
 
 
Consolidated Statements of Comprehensive Income - unaudited

                 
         
Three months ended
    
Year ended
         
December 31
    
December 31
In millions
  
2015
    
2014
    
2015
    
2014
Net income
$
941
  
$
844
  
$
3,538
  
$
3,167
Other comprehensive income (loss)
                      
Net gain on foreign currency translation
  
73
    
36
    
249
    
75
Net change in pension and other postretirement benefit plans
  
134
    
(1,090)
    
306
    
(995)
Amortization of gain on treasury lock
  
-
    
-
    
-
    
(1)
Other comprehensive income (loss) before income taxes
  
207
    
(1,054)
    
555
    
(921)
Income tax recovery
  
9
    
326
    
105
    
344
Other comprehensive income (loss)
  
216
    
(728)
    
660
    
(577)
Comprehensive income
$
1,157
  
$
116
  
$
4,198
  
$
2,590
                             
See accompanying notes to unaudited consolidated financial statements.
                      
 
 
 
 
 
 
 
 
 
 
 
 
 

 
  CN | 2015 – Fourth Quarter
 
 
10
 
Consolidated Balance Sheets - unaudited

 
December 31
  
December 31
In millions
  
2015
    
2014
           
           
Assets
          
           
           
Current assets
          
Cash and cash equivalents
$
153
  
$
52
Restricted cash and cash equivalents
  
523
    
463
Accounts receivable
  
878
    
928
Material and supplies
  
355
    
335
Other
  
244
    
215
Total current assets
  
2,153
    
1,993
           
Properties
  
32,624
    
28,514
Pension asset
  
1,305
    
882
Intangible and other assets
  
320
    
298
Total assets
$
36,402
  
$
31,687
           
           
Liabilities and shareholders’ equity
          
           
           
Current liabilities
          
Accounts payable and other
$
1,556
  
$
1,657
Current portion of long-term debt
  
1,442
    
544
Total current liabilities
  
2,998
    
2,201
           
Deferred income taxes
  
8,105
    
6,834
Other liabilities and deferred credits
  
644
    
704
Pension and other postretirement benefits
  
720
    
650
Long-term debt
  
8,985
    
7,828
           
Shareholders’ equity
          
Common shares
  
3,705
    
3,718
Common shares in Share Trusts
  
(100)
    
-
Additional paid-in capital
  
475
    
439
Accumulated other comprehensive loss
  
(1,767)
    
(2,427)
Retained earnings
  
12,637
    
11,740
Total shareholders’ equity
  
14,950
    
13,470
Total liabilities and shareholders’ equity
$
36,402
  
$
31,687
           
See accompanying notes to unaudited financial statements.
          
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
  CN | 2015 – Fourth Quarter
 
 
11
 
Consolidated Statements of Changes in Shareholders’ Equity - unaudited

 
Number of
      
Common
      
Accumulated
            
 
common shares
          
shares
Additional
other
        
Total
   
Share
  
Common
  
in Share
  
paid-in
comprehensive
  
Retained
  
shareholders’
In millions
Outstanding
Trusts
  
shares
  (1)
Trusts
  
capital
  (1)
loss
  
earnings
  
equity
                                         
Balance at December 31, 2013
830.6
-
  
$
3,795
  
$
-
  
$
220
  
$
(1,850)
  
$
10,788
  
$
12,953
                                         
Net income
                                
3,167
    
3,167
Stock-based compensation
1.2
      
31
          
10
                
41
Modification of stock-based
                                        
     compensation awards
                    
209
                
209
Share repurchase programs
(22.4)
      
(108)
                      
(1,397)
    
(1,505)
Other comprehensive loss
                          
(577)
          
(577)
Dividends ($1.00 per share)
                                
(818)
    
(818)
                                         
Balance at December 31, 2014
809.4
-
    
3,718
    
-
    
439
    
(2,427)
    
11,740
    
13,470
                                         
Net income
                                
3,538
    
3,538
Stock-based compensation
2.5
      
95
          
36
          
(3)
    
128
Share repurchase programs
(23.3)
      
(108)
                      
(1,642)
    
(1,750)
Share purchases by Share Trusts
(1.4)
1.4
          
(100)
                      
(100)
Other comprehensive income
                          
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
                                         
See accompanying notes to unaudited consolidated financial statements.
(1)   The Company reclassified certain 2013 and 2014 balances from Common shares to Additional paid-in capital to conform with the 2015 presentation.
 
 
 
 
 
 
 
 
 
 
 
 
 

 
  CN | 2015 – Fourth Quarter
 
 
12
 
Consolidated Statements of Cash Flows - unaudited

   
Three months ended
  
Year ended
   
December 31
  
December 31
In millions
    
2015
    
2014
    
2015
    
2014
Operating activities
                        
Net income
  
$
941
  
$
844
  
$
3,538
  
$
3,167
Adjustments to reconcile net income to net cash
                        
  provided by operating activities:
                        
     Depreciation and amortization
    
290
    
279
    
1,158
    
1,050
     Deferred income taxes
    
237
    
201
    
600
    
416
     Gain on disposal of property
    
-
    
-
    
-
    
(80)
Changes in operating assets and liabilities:
                        
     Accounts receivable
    
93
    
14
    
188
    
(59)
     Material and supplies
    
77
    
41
    
4
    
(51)
     Accounts payable and other
    
(348)
    
(196)
    
(282)
    
-
     Other current assets
    
45
    
(19)
    
46
    
5
Pensions and other, net
    
(42)
    
(29)
    
(112)
    
(67)
Net cash provided by operating activities
    
1,293
    
1,135
    
5,140
    
4,381
Investing activities
                        
Property additions
    
(642)
    
(947)
    
(2,706)
    
(2,297)
Disposal of property
    
-
    
-
    
-
    
173
Change in restricted cash and cash equivalents
    
-
    
4
    
(60)
    
(15)
Other, net
    
(19)
    
(13)
    
(61)
    
(37)
Net cash used in investing activities
    
(661)
    
(956)
    
(2,827)
    
(2,176)
Financing activities
                        
Issuance of debt
    
-
    
675
    
841
    
1,022
Repayment of debt
    
(636)
    
(27)
    
(752)
    
(822)
Net issuance (repayment) of commercial paper
    
306
    
(350)
    
451
    
(277)
Common shares issued for stock options exercised,
                        
  excess tax benefits, and other
    
56
    
6
    
75
    
30
Repurchase of common shares
    
(498)
    
(410)
    
(1,742)
    
(1,505)
Purchase of common shares by Share Trusts
    
-
    
-
    
(100)
    
-
Dividends paid
    
(246)
    
(202)
    
(996)
    
(818)
Net cash used in financing activities
    
(1,018)
    
(308)
    
(2,223)
    
(2,370)
Effect of foreign exchange fluctuations on US
                        
   dollar-denominated cash and cash equivalents
    
2
    
5
    
11
    
3
Net increase (decrease) in cash and cash equivalents
    
(384)
    
(124)
    
101
    
(162)
Cash and cash equivalents, beginning of period
    
537
    
176
    
52
    
214
Cash and cash equivalents, end of period
  
$
153
  
$
52
  
$
153
  
$
52
Supplemental cash flow information
                        
Net cash receipts from customers and other
  
$
3,192
  
$
3,084
  
$
12,714
  
$
12,029
Net cash payments for:
                        
    Employee services, suppliers and other expenses
    
(1,582)
    
(1,576)
    
(6,232)
    
(6,333)
    Interest
    
(133)
    
(112)
    
(432)
    
(409)
    Personal injury and other claims
    
(15)
    
(19)
    
(59)
    
(57)
    Pensions
    
(25)
    
(21)
    
(126)
    
(127)
    Income taxes
    
(144)
    
(221)
    
(725)
    
(722)
Net cash provided by operating activities
  
$
1,293
  
$
1,135
  
$
5,140
  
$
4,381
                         
See accompanying notes to unaudited consolidated financial statements.
 
 
 
 
 
 
 
 

  CN | 2015 – Fourth Quarter
 
 
13
 
 Notes to Unaudited Consolidated Financial Statements

1 – Basis of presentation
 
The accompanying unaudited Interim Consolidated Financial Statements, expressed in Canadian dollars, have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial statements. Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.
These unaudited Interim Consolidated Financial Statements have been prepared using accounting policies consistent with those used in preparing Canadian National Railway Company’s (the “Company”) 2014  Annual Consolidated Financial Statements, except as disclosed in Note 2 - Accounting changes, and should be read in conjunction with such statements and Notes thereto.
 
 
2 – Accounting changes

The following recent Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) were adopted by the Company during the current period.

 
Standard
Description
  
Impact
ASU 2015-17 Income Taxes, Balance Sheet Classification of Deferred Taxes
Simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a statement of financial position, thus eliminating the requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts.
  
The Company adopted this standard during the fourth quarter of 2015 on a retrospective basis. The current deferred income tax asset was reclassified as noncurrent and netted against the related noncurrent deferred income tax liability in the amount $58 million and $68 million as at December 31, 2015 and 2014, respectively.
 
ASU 2015-03 Interest – Imputation of Interest
Simplifies the presentation of debt issuance costs by requiring that such costs be presented in the balance sheet as a deduction from the carrying amount of debt.
  
The Company adopted this standard during the fourth quarter of 2015 on a retrospective basis. Debt issuance costs have been reclassified from assets to Long-term debt in the amount of $42 million and $37 million as at December 31, 2015 and 2014, respectively.
 

 
 
 
 
 
 
 
 
 
  CN | 2015 – Fourth Quarter
 
 
14