CN reports Q1-2009 net income of C$424 million, or C$0.90 per diluted share, compared...

CN reports Q1-2009 net income of C$424 million, or C$0.90 per diluted share,
compared with net income of C$311 million or C$0.64 per share in 2008

MONTREAL, April 20 /PRNewswire-FirstCall/ - CN (TSX: CNR)(NYSE: CNI) today
reported its financial and operating results for the first quarter ended March
31, 2009.

First-quarter 2009 highlights

- Net income was C$424 million, or C$0.90 per diluted share, including
three items that generated net positive earnings of C$122 million
(C$0.26 per diluted share).
- Revenues declined four per cent from year-earlier levels to
C$1,859 million as a tough economic environment caused carloadings to
fall by 16 per cent.
- Operating expenses declined two per cent to C$1,378 million, driven by
lower fuel prices and management's quick response to lower workload.
- Operating income declined eight per cent to C$481 million, while the
operating ratio increased 1.2 points to 74.1 per cent.
- Free cash flow increased to C$207 million from C$61 million generated
in the comparable quarter of 2008.(1)

CN's first-quarter 2009 net income of C$424 million, or C$0.90 per diluted
share, included:

- A gain of C$157 million, or C$135 million after-tax (C$0.29 per diluted
share), from the sale of a railway corridor to GO Transit in Toronto.
- Expense of C$46 million, or C$28 million after-tax (C$0.06 per diluted
share), related to CN's acquisition of the principal rail lines of the
Elgin, Joliet and Eastern Railway Company (EJ&E), which closed on
Jan. 31, 2009; recorded pursuant to the adoption of a new accounting
policy for business combinations that became effective Jan. 1, 2009.
- A deferred income tax recovery of C$15 million (C$0.03 per diluted
share) resulting from the enactment of lower provincial corporate
income tax rates in Canada.

Excluding these items, adjusted first-quarter 2009 net income was C$302
million, or C$0.64 per diluted share.(1)
The strengthening of the U.S. dollar affected the conversion of the Company's
U.S. dollar-denominated revenues and expenses, increasing first-quarter 2009
net income by approximately C$30 million, or C$0.06 per diluted share.
Net income for first-quarter 2008, which was also adversely affected by severe
weather conditions, was C$311 million, or C$0.64 per diluted share, including
a deferred income tax recovery of C$11 million (C$0.02 per diluted share)
resulting from net capital losses arising from the reorganization of a
subsidiary. Excluding that item, adjusted first-quarter 2008 net income was
C$300 million, or C$0.62 per diluted share.(1)
E. Hunter Harrison, president and chief executive officer, said: "Economic
conditions during the first quarter of 2009 were challenging. Our traffic
declined sharply as production cuts and reduced imports and exports coursed
through the North American and global economies. But we responded quickly to
the downturn, using the discipline of our Precision Railroading model to
reduce expenses while maintaining quality service. Among other measures, we
reduced train starts and cut discretionary expenditures.
"Amid these challenges, the weakening of the Canadian dollar vis a vis the
U.S. dollar was a shock absorber, and we remained focused on generating
increased shareholder value through the sale of our Weston subdivision in
Toronto.
"While economic conditions remain uncertain for the foreseeable future, CN is
focused on growth opportunities that extend beyond the business cycle and on
continuing to deliver value to our customers.
"At the same time we are investing in the future. I am particularly proud that
we completed the acquisition of the EJ&E during the quarter. The
route-around-Chicago represented by the EJ&E, and the upgrades we plan for the
line in the next three years, will pay dividends to CN in the years ahead
through faster transit times, improved productivity and better service to
customers."

Quarterly revenues, traffic volumes and expenses

The four per cent decline in CN's first-quarter 2009 revenues was mainly due
to significantly lower volumes in almost all markets as a result of current
economic conditions in the North American and global economies, as well as a
lower fuel surcharge resulting from year-over-year decreases in applicable
fuel prices and reduced volumes. These factors were partly offset by the
positive translation impact of the weaker Canadian dollar on U.S.
dollar-denominated revenues, freight rate increases, and a positive change in
traffic mix.
Revenue ton-miles, measuring the relative weight and distance of rail freight
transported by CN, decreased 14 per cent from the same quarter of 2008.
Rail freight revenue per revenue ton-mile, a measurement of yield defined as
revenue earned on a movement of a ton of freight over one mile, increased by
12 per cent from the same quarter of 2008, mainly due to the positive
translation impact of the weaker Canadian dollar and freight rate increases
that were partly offset by the impact of a lower fuel surcharge.
First-quarter carloadings declined 16 per cent to 954 thousand from 1,132
thousand in the year-earlier period.
The two per cent decline in operating expenses was mainly due to lower fuel
costs and labor and fringe benefits expense that were partly offset by the
negative translation impact of the weaker Canadian dollar on U.S.
dollar-denominated expenses, as well as by higher casualty and other expense
mainly due to EJ&E acquisition-related costs.

(1) Please see discussion and reconciliation of non-GAAP adjusted
performance measures in the attached supplementary schedule, Non-GAAP
Measures.

Forward-Looking Statements

This news release contains forward-looking statements. CN cautions that, by
their nature, forward-looking statements involve risk, uncertainties and
assumptions. Implicit in these statements, particularly in respect of
long-term growth opportunities, is the Company's assumption that such growth
opportunities are less affected by the current situation in the North American
and global economies. The Company cautions that its assumptions may not
materialize and that the current economic conditions render such assumptions,
although reasonable at the time they were made, subject to greater
uncertainty. The Company cautions that its results could differ materially
from those expressed or implied in such forward-looking statements. Important
factors that could cause such differences include, but are not limited to, the
effects of adverse general economic and business conditions, including the
current deep recession in the North American economy and the possibility of a
global economic contraction in 2009, industry competition, inflation, currency
fluctuations, changes in fuel prices, legislative and/or regulatory
developments, compliance with environmental laws and regulations, various
events which could disrupt operations, including natural events such as severe
weather, droughts, floods and earthquakes, labor disruptions, environmental
claims, investigations or proceedings, other types of claims and litigation,
and other risks detailed from time to time in reports filed by CN with
securities regulators in Canada and the United States. Reference should be
made to "Management's Discussion and Analysis" in CN's annual and interim
reports, Annual Information Form and Form 40-F filed with Canadian and U.S.
securities regulators, available on CN's website, for a summary of major
risks.

CN - Canadian National Railway Company and its operating railway subsidiaries
- 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 metropolitan areas of
Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay,
Wis., Minneapolis/St. Paul, Memphis, and Jackson, Miss., with connections to
all points in North America. For more information on CN, visit the Company's
website at www.cn.ca.

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In millions, except per share data)

Three months ended
March 31
--------------------
2009 2008
-------------------------------------------------------------------------
(Unaudited)

Revenues $1,859 $1,927
-------------------------------------------------------------------------

Operating expenses
Labor and fringe benefits 454 461
Purchased services and material 291 285
Fuel 182 310
Depreciation and amortization 203 175
Equipment rents 82 64
Casualty and other 166 109
-------------------------------------------------------------------------
Total operating expenses 1,378 1,404
-------------------------------------------------------------------------

Operating income 481 523

Interest expense (112) (86)

Other income (loss) (Note 3) 161 (6)
-------------------------------------------------------------------------

Income before income taxes 530 431

Income tax expense (106) (120)
-------------------------------------------------------------------------

Net income $ 424 $ 311
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings per share (Note 9)

Basic $ 0.91 $ 0.64

Diluted $ 0.90 $ 0.64

Weighted-average number of shares

Basic 468.3 482.8

Diluted 472.3 488.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED BALANCE SHEET (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In millions)

March 31 December 31 March 31
2009 2008 2008
-------------------------------------------------------------------------
(Unaudited) (Unaudited)

Assets

Current assets:
Cash and cash equivalents $ 349 $ 413 $ 334
Accounts receivable (Note 4) 940 913 621
Material and supplies 273 200 212
Deferred income taxes 77 98 67
Other 138 132 111
-------------------------------------------------------------------------
1,777 1,756 1,345

Properties 23,947 23,203 20,754
Intangible and other assets 1,787 1,761 2,065
-------------------------------------------------------------------------

Total assets $27,511 $26,720 $24,164
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and shareholders' equity

Current liabilities:
Accounts payable and other $ 1,280 $ 1,386 $ 1,333
Current portion of long-term debt
(Note 4) 527 506 269
-------------------------------------------------------------------------
1,807 1,892 1,602

Deferred income taxes 5,594 5,511 5,021
Other liabilities and deferred
credits 1,371 1,353 1,404
Long-term debt (Note 4) 7,836 7,405 6,064

Shareholders' equity:
Common shares 4,188 4,179 4,241
Accumulated other comprehensive
income (loss) (126) (155) 9
Retained earnings 6,841 6,535 5,823
-------------------------------------------------------------------------
10,903 10,559 10,073
-------------------------------------------------------------------------

Total liabilities and shareholders'
equity $27,511 $26,720 $24,164
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In millions)

Three months ended
March 31
--------------------
2009 2008
-------------------------------------------------------------------------
(Unaudited)

Common shares(1)

Balance, beginning of period $4,179 $4,283
Stock options exercised and other 9 23
Share repurchase programs (Note 4) - (65)
-------------------------------------------------------------------------
Balance, end of period $4,188 $4,241
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Accumulated other comprehensive income (loss)
Balance, beginning of period $ (155) $ (31)
Other comprehensive income (loss):
Unrealized foreign exchange gain (loss) on:
Translation of the net investment in foreign
operations 251 187
Translation of U.S. dollar-denominated long-term
debt designated as a hedge of the net investment
in U.S. subsidiaries (258) (182)
Pension and other postretirement benefit plans:
Amortization of net actuarial gain included in net
periodic benefit cost - (1)
Amortization of prior service cost included in net
periodic benefit cost 1 6
-------------------------------------------------------------------------
Other comprehensive income (loss) before income taxes (6) 10
Income tax recovery 35 30
-------------------------------------------------------------------------
Other comprehensive income 29 40
-------------------------------------------------------------------------
Balance, end of period $ (126) $ 9
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Retained earnings

Balance, beginning of period $6,535 $5,925
Net income 424 311
Share repurchase programs - (302)
Dividends (118) (111)
-------------------------------------------------------------------------
Balance, end of period $6,841 $5,823
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.

(1) During the three months ended March 31, 2009, the Company issued
0.2 million common shares as a result of stock options exercised.
At March 31, 2009, the Company had 468.4 million common shares
outstanding.

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)
-------------------------------------------------------------------------
(In millions)

Three months ended
March 31
--------------------
2009 2008
-------------------------------------------------------------------------
(Unaudited)
Operating activities

Net income $ 424 $ 311
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization 203 175
Deferred income taxes 10 25
Gain on disposal of property (Note 3) (157) -
Other changes in:
Accounts receivable 1 (235)
Material and supplies (53) (48)
Accounts payable and other (132) (59)
Other current assets 36 29
Other (14) (33)
-------------------------------------------------------------------------
Cash provided from operating activities 318 165
-------------------------------------------------------------------------

Investing activities

Property additions (187) (177)
Acquisitions, net of cash acquired (Note 3) (373) -
Disposal of property (Note 3) 110 -
Other, net 4 11
-------------------------------------------------------------------------
Cash used by investing activities (446) (166)
-------------------------------------------------------------------------

Financing activities

Issuance of long-term debt 1,440 1,055
Reduction of long-term debt (1,272) (580)
Issuance of common shares due to exercise of stock
options and related excess tax benefits realized 2 18
Repurchase of common shares - (367)
Dividends paid (118) (111)
-------------------------------------------------------------------------
Cash provided from financing activities 52 15
-------------------------------------------------------------------------
Effect of foreign exchange fluctuations on U.S.
dollar-denominated cash and cash equivalents 12 10
-------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents (64) 24

Cash and cash equivalents, beginning of period 413 310
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 349 $ 334
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Supplemental cash flow information

Net cash receipts from customers and other $1,904 $1,748
Net cash payments for:
Employee services, suppliers and other expenses (1,362) (1,339)
Interest (106) (100)
Workforce reductions (4) (6)
Personal injury and other claims (30) (26)
Pensions - (22)
Income taxes (84) (90)
-------------------------------------------------------------------------
Cash provided from operating activities $ 318 $ 165
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.

CANADIAN NATIONAL RAILWAY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
-------------------------------------------------------------------------

Note 1 - Basis of presentation

In management's opinion, the accompanying unaudited Interim Consolidated
Financial Statements and Notes thereto, expressed in Canadian dollars, and
prepared in accordance with U.S. generally accepted accounting principles
(U.S. GAAP) for interim financial statements, contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly Canadian
National Railway Company's (the Company) financial position as at March 31,
2009, December 31, 2008, and March 31, 2008, and its results of operations,
changes in shareholders' equity and cash flows for the three months ended
March 31, 2009 and 2008.
These unaudited Interim Consolidated Financial Statements and Notes thereto
have been prepared using accounting policies consistent with those used in
preparing the Company's 2008 Annual Consolidated Financial Statements, except
as disclosed in Note 2 - Accounting change. While management believes that the
disclosures presented are adequate to make the information not misleading,
these unaudited Interim Consolidated Financial Statements and Notes thereto
should be read in conjunction with the Company's Interim Management's
Discussion and Analysis (MD&A) and Annual Consolidated Financial Statements
and Notes thereto.

Note 2 - Accounting change

On January 1, 2009, the Company adopted Statement of Financial Accounting
Standards (SFAS) # 141 (R), "Business Combinations," which became effective
for acquisitions with an acquisition date on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. Until
December 31, 2008, the Company was subject to the requirements of SFAS # 141,
"Business Combinations," which required that acquisition-related costs be
included as part of the purchase cost of an acquired business. As such, the
Company had reported acquisition-related costs in Other current assets pending
the closing of its acquisition of the Elgin, Joliet and Eastern Railway
Company (EJ&E), which had been subject to an extensive U.S. Surface
Transportation Board (STB) approval process. On January 31, 2009, the Company
completed its acquisition of the EJ&E and accounted for the acquisition under
SFAS # 141 (R). The acquisition-related costs incurred to acquire the EJ&E of
approximately $46 million, including costs to obtain regulatory approval, were
expensed and reported in Casualty and other in the Consolidated Statement of
Income for the three months ended March 31, 2009 pursuant to SFAS # 141 (R)
requirements. This change in accounting policy had the effect of decreasing
net income by $28 million ($0.06 per basic or diluted earnings per share) and
Other current assets by $46 million. This change had no effect on the
Consolidated Statement of Cash Flows. Disclosures prescribed by SFAS # 141 (R)
are presented in Note 3 - Acquisition and disposal of property.

Note 3 - Acquisition and disposal of property

Acquisition of Elgin, Joliet and Eastern Railway Company

On January 31, 2009, the Company acquired the principal rail lines of the EJ&E
for a total cash consideration of U.S.$300 million (Cdn$373 million), paid
with cash on hand. The EJ&E is a short-line railway previously owned by U.S.
Steel Corporation (U.S. Steel) that operates over 198 miles of track and
serves steel mills, petrochemical customers, utility plants and distribution
centers in Illinois and Indiana, as well as connects with all the major
railroads entering Chicago. Under the terms of the acquisition agreement, the
Company acquired substantially all of the railroad operations of EJ&E, except
those that support the Gary Works site in northwest Indiana and the
steelmaking operations of U.S. Steel. The acquisition is expected to drive new
efficiencies and operating improvements on CN's network as a result of
streamlined rail operations and reduced congestion in the Chicago area.
The Company and EJ&E had entered into the acquisition agreement on September
25, 2007, and the Company had filed an application for authorization of the
transaction with the STB on October 30, 2007. Following an extensive
regulatory approval process, which included an Environmental Impact Statement
(EIS) that resulted in conditions imposed to mitigate municipalities' concerns
regarding increased rail activity expected along the EJ&E line, the STB
approved the transaction on December 24, 2008. Over the next few years, the
Company has committed to spend approximately U.S.$100 million for railroad
infrastructure improvements and over U.S.$60 million under a series of
agreements with individual communities, a comprehensive voluntary mitigation
program that addresses municipalities' concerns, and additional STB-imposed
conditions that the Company has accepted with one exception. The Company has
filed an appeal challenging the STB's condition requiring the installation of
grade separations at two locations along the EJ&E at Company funding levels
significantly beyond prior STB practice. Although the STB granted the
Company's application to acquire control of the EJ&E on December 24, 2008,
challenges have since been made by certain communities as to the sufficiency
of the STB's EIS which, if successful, could result in reconsideration of the
STB's decision or further consideration of the environmental impact of the
transaction. The Company strongly disputes the merit of these challenges, and
has intervened in support of the STB's defense against them. The final outcome
of such challenges cannot be predicted with certainty, and therefore, there
can be no assurance that their resolution will not have a material adverse
effect on the Company's financial position or results of operations.
The Company has accounted for the acquisition using the purchase method of
accounting pursuant to SFAS # 141(R ), "Business Combinations," which the
Company adopted on January 1, 2009. As such, the consolidated financial
statements of the Company include the assets, liabilities and results of
operations of EJ&E as of January 31, 2009, the date of acquisition. The costs
incurred to acquire the EJ&E of approximately $46 million were expensed and
reported in Casualty and other in the Consolidated Statement of Income for the
three months ended March 31, 2009 (see Note 2 - Accounting change).
The following table summarizes the consideration paid for EJ&E and the
estimated fair value of the assets acquired and liabilities assumed that were
recognized at the acquisition date. The Company has not finalized its
valuation of such assets and liabilities. As such, the fair value is subject
to change, although no material change is anticipated.

At January 31, 2009
-------------------------------------------------------------------------
(In U.S. millions)

Consideration
Cash $ 300
-------------------------------------------------------------------------
Fair value of total consideration transferred $ 300
-------------------------------------------------------------------------

Recognized amounts of identifiable assets
acquired and liabilities assumed
Current assets $ 6
Other long-term assets 4
Property, plant and equipment 304
Current liabilities (4)
Other long-term liabilities (10)
-------------------------------------------------------------------------
Total identifiable net assets $ 300
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The amount of revenues and net income of EJ&E included in the Company's
Consolidated Statement of Income from the acquisition date to March 31, 2009,
were $14 million and $3 million, respectively. The Company has not provided
supplemental pro forma information relating to the pre-acquisition period as
it was not considered material to the results of operations of the Company.

Disposal of Weston subdivision

In March 2009, the Company entered into an agreement with GO Transit to sell
the property known as the Weston subdivision in Toronto, Ontario, together
with the rail fixtures and certain passenger agreements (collectively the
"Rail Property"), for cash proceeds of $110 million before transaction costs,
with a balance on sale of about $50 million to be placed in escrow on the
Company's behalf and released in accordance with the terms of the agreement
but no later than December 31, 2009. Under the agreement, the Company obtained
the perpetual right to operate freight trains over the Rail Property at the
current level of operating activity. The transaction resulted in a gain on
disposition of $157 million ($135 million after-tax), including amounts
related to the real estate as well as the retention of trackage and other
rights. The Company accounted for the transaction in Other income (loss) under
the full accrual method of accounting for real estate transactions.

Note 4 - Financing activities

Shelf prospectus and registration statement

In February 2009, the Company issued U.S.$550 million (Cdn$684 million) of
5.55% Notes due 2019. The debt offering was made under the Company's currently
effective shelf prospectus and registration statement, filed by the Company in
December 2007. Accordingly, the amount registered for offering under the shelf
prospectus and registration statement has been reduced to U.S.$1.3 billion.
The Company used the net proceeds of U.S.$540 million (Cdn$672 million) from
the offering to repay a portion of its outstanding commercial paper and to
reduce a portion of its accounts receivable securitization program.

Revolving credit facility

As at March 31, 2009, the Company had letters of credit drawn on its U.S.$1
billion revolving credit facility, expiring in October 2011, of $193 million
($181 million as at December 31, 2008). The Company also had total borrowings
under its commercial paper program of $166 million, of which $155 million was
denominated in Canadian dollars and $11 million was denominated in U.S.
dollars (U.S.$9 million). The weighted-average interest rate on these
borrowings was 1.24%. As at December 31, 2008, total borrowings under the
Company's commercial paper program were $626 million, of which $256 million
was denominated in Canadian dollars and $370 million was denominated in U.S.
dollars (U.S.$303 million). The weighted-average interest rate on these
borrowings was 2.42%.

Accounts receivable securitization

The Company has a five-year agreement, expiring in May 2011, to sell an
undivided co-ownership interest for maximum cash proceeds of $600 million in a
revolving pool of freight receivables to an unrelated trust. Pursuant to the
agreement, the Company sells an interest in its receivables and receives
proceeds net of the required reserve as stipulated in the agreement. The
required reserve represents an amount set aside to allow for possible credit
losses and is recognized by the Company as retained interest and recorded in
Other current assets in its Consolidated Balance Sheet. The eligible freight
receivables as defined in the agreement may not include delinquent or
defaulted receivables, or receivables that do not meet certain
obligor-specific criteria, including concentrations in excess of prescribed
limits with any one customer.
During the first quarter of 2009, proceeds from collections reinvested in the
securitization program were approximately $132 million and purchases of
previously transferred accounts receivable were approximately $4 million. At
March 31, 2009, the servicing asset and liability were not significant.
Subject to customary indemnifications, the trust's recourse is generally
limited to the receivables.
As at March 31, 2009, the Company had sold receivables that resulted in
proceeds of $2 million under this program ($71 million at December 31, 2008),
and recorded retained interest of approximately 10% of this amount in Other
current assets (retained interest of approximately 10% recorded as at December
31, 2008). The fair value of the retained interest approximated carrying value
as a result of the short collection cycle and negligible credit losses.

Share repurchase program

During the first quarter of 2009, the Company did not repurchase any common
shares under its current 25.0 million share repurchase program.
The Company has repurchased a total of 6.1 million common shares since July
2008, the inception of the program, for $331 million, at a weighted-average
price of $54.42 per share.

Note 5 - Stock plans

The Company has various stock-based incentive plans for eligible employees. A
description of the plans is provided in Note 11 - Stock plans, to the
Company's 2008 Annual Consolidated Financial Statements. For the three months
ended March 31, 2009 and 2008, the Company recorded total compensation expense
for awards under all plans of $15 million and $28 million, respectively. The
total tax benefit recognized in income in relation to stock-based compensation
expense for the three months ended March 31, 2009 and 2008 was $4 million and
$7 million, respectively.

Cash settled awards

Following approval by the Board of Directors in January 2009, the Company
granted 0.8 million restricted share units (RSUs) to designated management
employees entitling them to receive payout in cash based on the Company's
share price. The RSUs granted by the Company are generally scheduled for
payout in cash after three years ("plan period") and vest conditionally upon
the attainment of a target relating to return on invested capital over the
plan period. Payout is conditional upon the attainment of a minimum share
price calculated using the average of the last three months of the plan
period. As at March 31, 2009, 0.2 million RSUs remained authorized for future
issuance under this plan.
The following table provides the 2009 activity for all cash settled awards:

-------------------------------------------------------------------------
Voluntary Incentive
RSUs Deferral Plan (VIDP)
-------------------- ----------------------
In millions Nonvested Vested Nonvested Vested
-------------------------------------------------------------------------
Outstanding at December
31, 2008 1.3 0.9(1) 0.1 1.8
Granted 0.8 - - -
Transferred into plan - - - 0.1
Payout - (0.9) - (0.1)
-------------------------------------------------------------------------
Outstanding at March
31, 2009 2.1 - 0.1 1.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes 0.1 million of 2004 time-vested RSUs.

The following table provides valuation and expense information for all
cash settled awards:

-------------------------------------------------------------------------
In millions, unless
otherwise indicated RSUs(1) Vision(1) VIDP(2) Total
-------------------------------------------------------------------------
Year of 2003
grant 2009 2008 2007 2006 2004 2005 onwards
------------------------------------ ----- -------

Stock-based
compensation
expense
(recovery)
recognized
over
requisite
service
period
Three
months
ended
March
31, 2009 $ 9 $ 1 $ - $ (2) N/A N/A $ - $ 8
Three
months
ended
March
31, 2008 N/A $ 7 $ 2 $ 4 $ 1 $ 3 $ 6 $ 23
-------------------------------------------------------------------------

Liability
outstanding
March
31, 2009 $ 9 $ 9 $ 9 $ - $ - N/A $ 88 $ 115
December
31, 2008 N/A $ 8 $ 9 $ 53 $ 3 $ - $ 88 $ 161
-------------------------------------------------------------------------

Fair value
per unit
March
31, 2009
($) $25.44 $21.20 $16.61 N/A N/A N/A $45.20 N/A
-------------------------------------------------------------------------

Fair value
of awards
vested
during
period
Three
months
ended
March
31, 2009 $ - $ - $ - N/A N/A N/A $ 1 $ 1
Three
months
ended
March
31, 2008 N/A $ - $ - $ - $ - $ - $ 1 $ 1
-------------------------------------------------------------------------

Nonvested
awards
at March
31, 2009
Unrecognized
compensation
cost $ 10 $ 4 $ 2 N/A N/A N/A $ 3 $ 19
Remaining
recognition
period
(years) 2.75 1.75 0.75 N/A N/A N/A 3.75 N/A
-------------------------------------------------------------------------

Assumptions(3)
Stock
price($) $45.20 $45.20 $45.20 N/A N/A N/A $45.20 N/A
Expected
stock
price
volati-
lity(4) 29% 32% 37% N/A N/A N/A N/A N/A
Expected
term
(years)(5) 2.75 1.75 0.75 N/A N/A N/A N/A N/A
Risk-free
interest
rate(6) 1.28% 0.95% 0.53% N/A N/A N/A N/A N/A
Dividend
rate
($)(7) $ 1.01 $ 1.01 $ 1.01 N/A N/A N/A N/A N/A
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Compensation cost is based on the fair value of the awards at
period-end using the lattice-based valuation model that uses the
assumptions as presented herein.

(2) Compensation cost is based on intrinsic value.

(3) Assumptions used to determine fair value are at March 31, 2009.

(4) Based on the historical volatility of the Company's stock over a
period commensurate with the expected term of the award.

(5) Represents the remaining period of time that awards are expected to
be outstanding.

(6) Based on the implied yield available on zero-coupon government
issues with an equivalent term commensurate with the expected term
of the awards.

(7) Based on the annualized dividend rate.

Stock option awards

Following approval by the Board of Directors in January 2009, the Company
granted 1.2 million conventional stock options to designated senior management
employees. The stock option plan allows eligible employees to acquire common
shares of the Company upon vesting at a price equal to the market value of the
common shares at the date of grant. The options are exercisable during a
period not exceeding 10 years. The right to exercise options generally accrues
over a period of four years of continuous employment. Options are not
generally exercisable during the first 12 months after the date of grant. At
March 31, 2009, 12.3 million common shares remained authorized for future
issuances under this plan. The total number of options outstanding at March
31, 2009, including conventional, performance and performance-accelerated
options, was 10.9 million, 0.1 million and 3.2 million, respectively.
The following table provides the activity of stock option awards in 2009. The
table also provides the aggregate intrinsic value for in-the-money stock
options, which represents the amount that would have been received by option
holders had they exercised their options on March 31, 2009 at the Company's
closing stock price of $45.20.

-------------------------------------------------------------------------
Options outstanding
-------------------------------------------------------------------------
Weighted- Weighted-
Number average average Aggregate
of exercise years to intrinsic
options price expiration value
-------------------------------------------------------------------------
In In
millions millions
-------------------------------------------------------------------------
Outstanding at December
31, 2008(1) 13.2 $29.05
Granted 1.2 $41.92
Exercised (0.2) $16.45
-------------------------------------------------------------------------
Outstanding at March
31, 2009(1) 14.2 $30.67 4.6 $233
-------------------------------------------------------------------------
Exercisable at March
31, 2009(1) 11.6 $26.51 3.7 $230
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Stock options with a U.S. dollar exercise price have been translated
to Canadian dollars using the foreign exchange rate in effect at the
balance sheet date.

The following table provides valuation and expense information for all
stock option awards:

-------------------------------------------------------------------------
In millions, unless otherwise indicated
-------------------------------------------------------------------------
Year of grant 2009 2008 2007 2006 2005 Total
------------------------------------------------
Stock-based compensation
expense recognized over
requisite service period(1)
Three months ended March
31, 2009 $ 5 $ - $ 1 $ 1 $ - $ 7
Three months ended March
31, 2008 N/A $ 3 $ 1 $ - $ 1 $ 5
-------------------------------------------------------------------------

Fair value per unit
At grant date ($) $12.51 $12.44 $13.36 $13.80 $ 9.19 N/A
-------------------------------------------------------------------------

Fair value of awards
vested during period
Three months ended March
31, 2009 $ - $ 3 $ 3 $ 3 $ 3 $ 12
Three months ended March
31, 2008 N/A $ - $ 3 $ 3 $ 3 $ 9
-------------------------------------------------------------------------

Nonvested awards at March
31, 2009
Unrecognized compensation
cost $ 9 $ 4 $ 2 $ 1 $ - $ 16
Remaining recognition
period (years) 3.8 2.8 1.8 0.8 - N/A
-------------------------------------------------------------------------

Assumptions
Grant price ($) $41.92 $48.51 $52.79 $51.51 $36.33 N/A
Expected stock price
volatility(2) 39% 27% 24% 25% 25% N/A
Expected term (years)(3) 5.3 5.3 5.2 5.2 5.2 N/A
Risk-free interest rate(4) 1.95% 3.58% 4.12% 4.04% 3.50% N/A
Dividend rate ($)(5) $ 1.01 $ 0.92 $ 0.84 $ 0.65 $ 0.50 N/A
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Compensation cost is based on the grant date fair value using the
Black-Scholes option-pricing model that uses the assumptions at the
grant date.

(2) Based on the average of the historical volatility of the Company's
stock over a period commensurate with the expected term of the award
and the implied volatility from traded options on the Company's
stock.

(3) Represents the period of time that awards are expected to be
outstanding. The Company uses historical data to estimate option
exercise and employee termination, and groups of employees that have
similar historical exercise behavior are considered separately.

(4) Based on the implied yield available on zero-coupon government issues
with an equivalent term commensurate with the expected term of the
awards.

(5) Based on the annualized dividend rate.

Note 6 - Pensions and other postretirement benefits

For the three months ended March 31, 2009 and 2008, the components of net
periodic benefit cost (income) for pensions and other postretirement benefits
were as follows:

(a) Components of net periodic benefit income for pensions

-------------------------------------------------------------------------
Three months ended
March 31
--------------------
In millions 2009 2008
-------------------------------------------------------------------------
Service cost $ 22 $ 35
Interest cost 222 200
Expected return on plan assets (252) (251)
Amortization of prior service cost - 5
Recognized net actuarial loss 1 -
-------------------------------------------------------------------------
Net periodic benefit income $ (7) $ (11)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(b) Components of net periodic benefit cost for other postretirement
benefits

-------------------------------------------------------------------------
Three months ended
March 31
--------------------
In millions 2009 2008
-------------------------------------------------------------------------
Service cost $ 1 $ 1
Interest cost 4 4
Curtailment gain (3) (2)
Amortization of prior service cost 1 1
Recognized net actuarial gain (1) (1)
-------------------------------------------------------------------------
Net periodic benefit cost $ 2 $ 3
-------------------------------------------------------------------------
-------------------------------------------------------------------------

In 2009, the Company expects to make total contributions of approximately $130
million for all its defined benefit plans.

Note 7 - Income taxes

In the first quarter of 2009, the Company recorded a deferred income tax
recovery of $15 million in the Consolidated Statement of Income resulting from
the enactment of lower provincial corporate income tax rates.
In the first quarter of 2008, the Company recorded a deferred income tax
recovery of $11 million in the Consolidated Statement of Income that resulted
from net capital losses arising from the reorganization of a subsidiary.

Note 8 - Major commitments and contingencies

A. Commitments

As at March 31, 2009, the Company had commitments to acquire railroad ties,
rail, freight cars, locomotives, and other equipment and services, as well as
outstanding information technology service contracts and licenses, at an
aggregate cost of $917 million ($1,006 million at December 31, 2008). The
Company also has agreements with fuel suppliers to purchase approximately 85%
of the estimated remaining 2009 volume, 50% of its anticipated 2010 volume,
and 18% of its anticipated 2011 volume, at market prices prevailing on the
date of the purchase.

B. Contingencies

The Company becomes involved, from time to time, in various legal actions,
including actions brought on behalf of various purported classes of claimants
and claims relating to personal injuries, occupational disease, and property
damage, arising out of harm to individuals or property allegedly caused by
derailments or other accidents.

Canada

Employee injuries are governed by the workers' compensation legislation in
each province whereby employees may be awarded either a lump sum or future
stream of payments depending on the nature and severity of the injury.
Accordingly, the Company accounts for costs related to employee work-related
injuries based on actuarially developed estimates of the ultimate cost
associated with such injuries, including compensation, health care and
third-party administration costs. For all other legal actions, the Company
maintains, and regularly updates on a case-by-case basis, provisions for such
items when the expected loss is both probable and can be reasonably estimated
based on currently available information.

United States

Employee work-related injuries, including occupational disease claims, are
compensated according to the provisions of the Federal Employers' Liability
Act (FELA), which requires either the finding of fault through the U.S. jury
system or individual settlements, and represent a major liability for the
railroad industry. With limited exceptions where claims are evaluated on a
case-by-case basis, the Company follows an actuarial-based approach and
accrues the expected cost for personal injury and property damage claims and
asserted and unasserted occupational disease claims, based on actuarial
estimates of their ultimate cost. A comprehensive actuarial study is conducted
on an annual basis, in the fourth quarter, by an independent actuarial firm
for occupational disease claims and non-occupational disease claims. On an
ongoing basis, management reviews and compares the assumptions inherent in the
latest actuarial study with the current claim experience and, if required,
adjustments to the liability are recorded.
As at March 31, 2009, the Company had aggregate reserves for personal injury
and other claims of $461 million, of which $121 million was recorded as a
current liability ($454 million, of which $118 million was recorded as a
current liability at December 31, 2008). Although the Company considers such
provisions to be adequate for all its outstanding and pending claims, the
final outcome with respect to actions outstanding or pending at March 31,
2009, or with respect to future claims, cannot be predicted with certainty,
and therefore there can be no assurance that their resolution will not have a
material adverse effect on the Company's results of operations, financial
position or liquidity in a particular quarter or fiscal year.

C. Environmental matters

The Company's operations are subject to numerous federal, provincial, state,
municipal and local environmental laws and regulations in Canada and the
United States concerning, among other things, emissions into the air;
discharges into waters; the generation, handling, storage, transportation,
treatment and disposal of waste, hazardous substances, and other materials;
decommissioning of underground and aboveground storage tanks; and soil and
groundwater contamination. A risk of environmental liability is inherent in
railroad and related transportation operations; real estate ownership,
operation or control; and other commercial activities of the Company with
respect to both current and past operations.

Known existing environmental concerns

The Company has identified approximately 340 sites at which it is or may be
liable for remediation costs, in some cases along with other potentially
responsible parties, associated with alleged contamination and is subject to
environmental clean-up and enforcement actions, including those imposed by the
United States Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA), also known as the Superfund law, or analogous
state laws. CERCLA and similar state laws, in addition to other similar
Canadian and U.S. laws generally impose joint and several liability for
clean-up and enforcement costs on current and former owners and operators of a
site, as well as those whose waste is disposed of at the site, without regard
to fault or the legality of the original conduct. The Company has been
notified that it is a potentially responsible party for study and clean-up
costs at approximately 10 sites governed by the Superfund law (and analogous
state laws) for which investigation and remediation payments are or will be
made or are yet to be determined and, in many instances, is one of several
potentially responsible parties.
The ultimate cost of addressing these known contaminated sites cannot be
definitely established given that the estimated environmental liability for
any given site may vary depending on the nature and extent of the
contamination, the available clean-up techniques, the Company's share of the
costs and evolving regulatory standards governing environmental liability. As
a result, a liability is initially recorded when environmental assessments
occur and/or remedial efforts are probable, and when the costs, based on a
specific plan of action in terms of the technology to be used and the extent
of the corrective action required, can be reasonably estimated. Adjustments to
initial estimates are recorded as additional information becomes available.
The Company's provision for specific environmental sites is undiscounted, is
recorded net of potential and actual insurance recoveries, and includes costs
for remediation and restoration of sites, as well as significant monitoring
costs. Environmental accruals, which are classified as Casualty and other in
the Consolidated Statement of Income, include amounts for newly identified
sites or contaminants as well as adjustments to initial estimates.
As at March 31, 2009, the Company had aggregate accruals for environmental
costs of $125 million, of which $32 million was recorded as a current
liability ($125 million, of which $30 million was recorded as a current
liability as at December 31, 2008). Based on the information currently
available, the Company considers its provisions to be adequate.

Unknown existing environmental concerns

While the Company believes that it has identified the costs likely to be
incurred for environmental matters in the next several years, based on known
information, newly discovered facts, changes in law, the possibility of spills
and releases of hazardous materials into the environment and the Company's
ongoing efforts to identify potential environment liabilities that may be
associated with its properties may lead to future environmental
investigations, which may result in the identification of additional
environmental costs and liabilities and related costs. The magnitude of such
additional liabilities and the costs of complying with future environmental
laws and containing or remediating contamination cannot be reasonably
estimated due to many factors including:

(i) the lack of specific technical information available with respect
to many sites;
(ii) the absence of any government authority, third-party orders, or
claims with respect to particular sites;
(iii) 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;
(iv) the ability to recover costs from any third parties with respect to
particular sites; and

therefore, the likelihood of any such costs being incurred or whether such
costs would be material to the Company cannot be determined at this time.
There can thus be no assurance that material liabilities or costs related to
environmental matters will not be incurred in the future, or will not have a
material adverse effect on the Company's financial position or results of
operations in a particular quarter or fiscal year, or that the Company's
liquidity will not be adversely impacted by such liabilities or costs,
although management believes, based on current information, that the costs to
address environmental matters will not have a material adverse effect on the
Company's financial condition or liquidity. Costs related to any unknown
existing or future contamination remediation will be accrued in the period in
which they become probable and reasonably estimable.

D. Guarantees and indemnifications

In the normal course of business, the Company, including certain of its
subsidiaries, enters into agreements that may involve providing certain
guarantees or indemnifications to third parties and others, which may extend
beyond the term of the agreement. These include, but are not limited to,
residual value guarantees on operating leases, standby letters of credit and
surety and other bonds, and indemnifications that are customary for the type
of transaction or for the railway business.
The Company is required to recognize a liability for the fair value of the
obligation undertaken in issuing certain guarantees on the date the guarantee
is issued or modified. In addition, where the Company expects to make a
payment in respect of a guarantee, a liability will be recognized to the
extent that one has not yet been recognized.

(i) Guarantee of residual values of operating leases

The Company has guaranteed a portion of the residual values of certain of its
assets under operating leases with expiry dates between 2009 and 2020, for the
benefit of the lessor. If the fair value of the assets, at the end of their
respective lease term, is less than the fair value, as estimated at the
inception of the lease, then the Company must, under certain conditions,
compensate the lessor for the shortfall. At March 31, 2009, the maximum
exposure in respect of these guarantees was $245 million. There are no
recourse provisions to recover any amounts from third parties.

(ii) Other guarantees

The Company, including certain of its subsidiaries, has granted irrevocable
standby letters of credit and surety and other bonds, issued by highly rated
financial institutions, to third parties to indemnify them in the event the
Company does not perform its contractual obligations. As at March 31, 2009,
the maximum potential liability under these guarantees was $466 million, of
which $409 million was for workers' compensation and other employee benefits
and $57 million was for equipment under leases and other. During 2009, the
Company has granted guarantees for which no liability has been recorded, as
they relate to the Company's future performance.
As at March 31, 2009, the Company had not recorded any additional liability
with respect to these guarantees, as the Company does not expect to make any
additional payments associated with these guarantees. The majority of the
guarantee instruments mature at various dates between 2009 and 2012.

(iii) General indemnifications

In the normal course of business, the Company has provided indemnifications,
customary for the type of transaction or for the railway business, in various
agreements with third parties, including indemnification provisions where the
Company would be required to indemnify third parties and others.
Indemnifications are found in various types of contracts with third parties
which include, but are not limited to:

(a) contracts granting the Company the right to use or enter upon
property owned by third parties such as leases, easements, trackage
rights and sidetrack agreements;
(b) contracts granting rights to others to use the Company's property,
such as leases, licenses and easements;
(c) contracts for the sale of assets and securitization of accounts
receivable;
(d) contracts for the acquisition of services;
(e) financing agreements;
(f) trust indentures, fiscal agency agreements, underwriting agreements
or similar agreements relating to debt or equity securities of the
Company and engagement agreements with financial advisors;
(g) transfer agent and registrar agreements in respect of the Company's
securities;
(h) trust and other agreements relating to pension plans and other plans,
including those establishing trust funds to secure payment to certain
officers and senior employees of special retirement compensation
arrangements;
(i) pension transfer agreements;
(j) master agreements with financial institutions governing derivative
transactions; and
(k) settlement agreements with insurance companies or other third parties
whereby such insurer or third party has been indemnified for any
present or future claims relating to insurance policies, incidents or
events covered by the settlement agreements.

To the extent of any actual claims under these agreements, the Company
maintains provisions for such items, which it considers to be adequate. Due to
the nature of the indemnification clauses, the maximum exposure for future
payments may be material. However, such exposure cannot be determined with
certainty.
The Company has entered into various indemnification contracts with third
parties for which the maximum exposure for future payments cannot be
determined with certainty. As a result, the Company was unable to determine
the fair value of these guarantees and accordingly, no liability was recorded.
There are no recourse provisions to recover any amounts from third parties.

Note 9 - Earnings per share

The following table provides a reconciliation between basic and diluted
earnings per share:

-------------------------------------------------------------------------
Three months ended
March 31
In millions, except --------------------
per share data 2009 2008
-------------------------------------------------------------------------

Net income $ 424 $ 311

Weighted-average shares outstanding 468.3 482.8
Effect of stock options 4.0 5.8
-------------------------------------------------------------------------
Weighted-average diluted shares outstanding 472.3 488.6

Basic earnings per share $ 0.91 $ 0.64
Diluted earnings per share $ 0.90 $ 0.64
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The weighted-average number of stock options that were not included in the
calculation of diluted earnings per share, as their inclusion would have had
an anti-dilutive impact, was 1.1 million for the three months ended March 31,
2009, and 0.2 million for the corresponding period in 2008.

Note 10 - Comparative figures

Certain figures, previously reported in 2008, have been reclassified to
conform with the basis of presentation adopted in 2009.

CANADIAN NATIONAL RAILWAY COMPANY
SELECTED RAILROAD STATISTICS(1) (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended
March 31
--------------------
2009 2008
-------------------------------------------------------------------------
(Unaudited)
Statistical operating data

Rail freight revenues ($ millions) 1,696 1,760
Gross ton miles (GTM) (millions) 73,557 84,327
Revenue ton miles (RTM) (millions) 38,691 44,959
Carloads (thousands) 954 1,132
Route miles (includes Canada and the U.S.) 21,104 20,421
Employees (end of period) 22,083 22,703
Employees (average for the period) 22,260 22,636
-------------------------------------------------------------------------

Productivity

Operating ratio (%) 74.1 72.9
Rail freight revenue per RTM (cents) 4.38 3.91
Rail freight revenue per carload ($) 1,778 1,555
Operating expenses per GTM (cents) 1.87 1.66
Labor and fringe benefits expense per GTM (cents) 0.62 0.55
GTMs per average number of employees (thousands) 3,304 3,725
Diesel fuel consumed (U.S. gallons in millions) 85 99
Average fuel price ($/U.S. gallon) 1.98 3.02
GTMs per U.S. gallon of fuel consumed 865 852
-------------------------------------------------------------------------

Safety indicators

Injury frequency rate per 200,000 person hours(2) 1.29 2.11
Accident rate per million train miles(2) 2.13 2.66
-------------------------------------------------------------------------

Financial ratio

Debt to total capitalization ratio (% at end of period) 43.4 38.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes data relating to companies acquired as of the date of
acquisition.
(2) Based on Federal Railroad Administration (FRA) reporting criteria.

Certain statistical data and related productivity measures are based on
estimated data available at such time and are subject to change as more
complete information becomes available.

CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY INFORMATION (U.S. GAAP)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three months ended March 31
---------------------------------
Variance
Fav
2009 2008 (Unfav)
-------------------------------------------------------------------------
(Unaudited)

Revenues (millions of dollars)
Petroleum and chemicals 340 319 7%
Metals and minerals 198 205 (3%)
Forest products 302 330 (8%)
Coal 103 99 4%
Grain and fertilizers 357 340 5%
Intermodal 319 351 (9%)
Automotive 77 116 (34%)
------------------------------------------------------------
Total rail freight revenue 1,696 1,760 (4%)
Other revenues 163 167 (2%)
------------------------------------------------------------
Total revenues 1,859 1,927 (4%)
-------------------------------------------------------------------------

Revenue ton miles (millions)
Petroleum and chemicals 7,527 8,426 (11%)
Metals and minerals 3,252 4,091 (21%)
Forest products 6,614 8,458 (22%)
Coal 2,841 3,392 (16%)
Grain and fertilizers 10,558 11,829 (11%)
Intermodal 7,476 8,089 (8%)
Automotive 423 674 (37%)
------------------------------------------------------------
38,691 44,959 (14%)
Rail freight revenue/RTM (cents)
Total rail freight revenue per RTM 4.38 3.91 12%
Commodity groups:
Petroleum and chemicals 4.52 3.79 19%
Metals and minerals 6.09 5.01 22%
Forest products 4.57 3.90 17%
Coal 3.63 2.92 24%
Grain and fertilizers 3.38 2.87 18%
Intermodal 4.27 4.34 (2%)
Automotive 18.20 17.21 6%
------------------------------------------------------------

Carloads (thousands)
Petroleum and chemicals 128 145 (12%)
Metals and minerals 180 238 (24%)
Forest products 100 127 (21%)
Coal 90 87 3%
Grain and fertilizers 132 151 (13%)
Intermodal 292 327 (11%)
Automotive 32 57 (44%)
------------------------------------------------------------
954 1,132 (16%)
Rail freight revenue/carload (dollars)
Total rail freight revenue per carload 1,778 1,555 14%
Commodity groups:
Petroleum and chemicals 2,656 2,200 21%
Metals and minerals 1,100 861 28%
Forest products 3,020 2,598 16%
Coal 1,144 1,138 1%
Grain and fertilizers 2,705 2,252 20%
Intermodal 1,092 1,073 2%
Automotive 2,406 2,035 18%
-------------------------------------------------------------------------

Such statistical data and related productivity measures are based on
estimated data available at such time and are subject to change as more
complete information becomes available.

CANADIAN NATIONAL RAILWAY COMPANY
NON-GAAP MEASURES - unaudited
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Adjusted performance measures

During the three months ended March 31, 2009, the Company reported adjusted
net income of $302 million, or $0.64 per diluted share. The adjusted figures
exclude the EJ&E acquisition-related costs of $46 million or $28 million
after-tax ($0.06 per diluted share), the gain on sale of the Weston
subdivision of $157 million or $135 million after-tax ($0.29 per diluted
share) and a deferred income tax recovery of $15 million ($0.03 per diluted
share) resulting from the enactment of lower provincial corporate income tax
rates. During the three months ended March 31, 2008, the Company reported
adjusted net income of $300 million, or $0.62 per diluted share. The adjusted
figures exclude a deferred income tax recovery of $11 million ($0.02 per
diluted share) that resulted from net capital losses arising from the
reorganization of a subsidiary.
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 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 may, therefore, not be comparable
to similar measures presented by other companies. The reader is advised to
read all information provided in the Company's 2009 unaudited Interim
Consolidated Financial Statements and Notes thereto. The following tables
provide a reconciliation of net income and earnings per share, as reported for
the three months ended March 31, 2009 and 2008, to the adjusted performance
measures presented herein.

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Three months ended
March 31, 2009 March 31, 2008
In millions, ---------------------------- ----------------------------
except per Adjust- Adjust-
share data Reported ments Adjusted Reported ments Adjusted
-------------------------------------------------------------------------

Revenues $ 1,859 $ - $ 1,859 $ 1,927 $ - $ 1,927
Operating
expenses 1,378 (46) 1,332 1,404 - 1,404
-------------------------------------------------------------------------
Operating
income 481 46 527 523 - 523
Interest
expense (112) - (112) (86) - (86)
Other income
(loss) 161 (157) 4 (6) - (6)
-------------------------------------------------------------------------
Income before
income taxes 530 (111) 419 431 - 431
Income tax
expense (106) (11) (117) (120) (11) (131)
-------------------------------------------------------------------------
Net income $ 424 $ (122) $ 302 $ 311 $ (11) $ 300
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating
ratio 74.1% 71.7% 72.9% 72.9%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic
earnings
per share $ 0.91 $ (0.26) $ 0.65 $ 0.64 $ (0.02) $ 0.62

Diluted
earnings
per share $ 0.90 $ (0.26) $ 0.64 $ 0.64 $ (0.02) $ 0.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Free cash flow

The Company generated $207 million of free cash flow for the quarter ended
March 31, 2009 compared to $61 million for the same period in 2008. Free cash
flow does not have any standardized meaning prescribed by GAAP and may,
therefore, not be comparable to similar measures presented by other companies.
The Company believes that free cash flow is a useful measure of performance as
it demonstrates the Company's ability to generate cash after the payment of
capital expenditures and dividends. The Company defines free cash flow as cash
provided from operating activities, adjusted for changes in the accounts
receivable securitization program and in cash and cash equivalents resulting
from foreign exchange fluctuations, less cash used by investing activities,
adjusted for the impact of major acquisitions, and the payment of dividends,
calculated as follows:

-------------------------------------------------------------------------
Three months ended
March 31
--------------------
In millions 2009 2008
-------------------------------------------------------------------------

Cash provided from operating activities $ 318 $ 165
Cash used by investing activities (446) (166)
-------------------------------------------------------------------------
Cash used before financing activities (128) (1)
-------------------------------------------------------------------------

Adjustments:
Change in accounts receivable securitization 68 163
Dividends paid (118) (111)
Acquisition of EJ&E 373 -
Effect of foreign exchange fluctuations on U.S.
dollar-denominated cash and cash equivalents 12 10
-------------------------------------------------------------------------
Free cash flow $ 207 $ 61
-------------------------------------------------------------------------
-------------------------------------------------------------------------

SOURCE CN

Media: Mark Hallman, Director, Communications, Media, (905) 669-3384;
Investors: Robert Noorigian, Vice-President, Investor Relations, (514)
399-0052