CN reports 15 per cent rise in adjusted Q4 2006 diluted EPS (1) and record 2006 annual revenues, operating ratio and free cash flow (1)

CN reports 15 per cent rise in adjusted Q4 2006 diluted EPS (1) and record 2006 annual revenues, operating ratio and free cash flow (1) (CNR.TO)CCNMATTHEWSCNJanuary 23, 2007 - 04:01:58 PMCN reports 15 per cent rise in adjusted Q4 2006 diluted EPS (1) and record2006 annual revenues, operating ratio and free cash flow (1)MONTREAL, QUEBEC--(CCNMatthews - Jan. 23, 2007) - CN today reported itsfinancial and operating results for the fourth quarter and year ended Dec. 31,2006.Fourth-quarter and 2006 annual financial highlights- Quarterly net income up 16 per cent to C$499 million, with diluted earningsper share rising 22 per cent to C$0.95. Included in the 2006 results was adeferred income tax recovery of C$27 million (C$0.05 per diluted share)attributable to the resolution of matters relating to prior years' incometaxes;- Adjusted fourth-quarter net income, excluding the deferred income taxrecovery, was C$472 million, or C$0.90 per diluted share - a 10 per centincrease in adjusted net income and 15 per cent rise in adjusted diluted EPS;

(1)- 2006 net income of C$2,087 million, an increase of 34 per cent, with dilutedEPS rising 41 per cent to C$3.91. Included in the 2006 results was a deferredincome tax recovery of C$277 million, or C$0.51 per diluted share,attributable to lower corporate tax rates in Canada and to the resolution ofmatters relating to prior years' income taxes;- Adjusted 2006 net income, excluding the deferred income tax recovery, wasC$1,810 million, or C$3.40 per diluted share - a 16 per cent increase inadjusted net income and 23 per cent increase in adjusted diluted EPS; (1)- Record annual revenues of C$7,716 million and operating ratio of 60.7 percent, and- Record annual free cash flow of C$1,343 million. (1)E. Hunter Harrison, president and chief executive officer of CN, said: "Theyear 2006 was a strong one for CN, with the company generating record revenuesand free cash flow and its best-ever annual operating ratio."These accomplishments were achieved in the face of some severe weatherconditions during the fourth quarter of the year that disrupted our main linesand the operations of key customers in western Canada."The strength of 2006 positions CN well for 2007. The year ahead is one ofopportunity for the company, and we'll have the people, network capacity,locomotives and freight cars in place to take advantage of new traffic."Net income for the quarter was C$499 million, or C$0.95 per diluted share,including a deferred income tax recovery of C$27 million (C$0.05 per dilutedshare) attributable to the resolution of matters relating to prior years'income taxes. Excluding the deferred income tax recovery, adjusted quarterlynet income was C$472 million, or C$0.90 per diluted share. (1)Fourth-quarter operating income rose by five per cent to C$756 million, whileCN's operating ratio for the period was 61.1 per cent, an improvement ofseven-tenths of a point.Fourth-quarter 2006 revenues increased three per cent to C$1,942 million.Revenues benefited from strength in coal, grain and fertilizers, petroleum andchemicals, and intermodal groups. Fourth-quarter revenues were affected by theunfavourable C$35-million translation impact of the stronger Canadian dollaron U.S. dollar-denominated revenues.Revenue ton-miles, a measurement of the relative weight and distance of railfreight transported by the company, increased by one per cent infourth-quarter 2006 compared with the same period in 2005. Freight revenue perrevenue ton-mile, a measurement of yield, defined as revenue earned from themovement of a ton of freight over one mile, increased by two per cent infourth-quarter 2006 compared with the same period of 2005.Operating expenses for the quarter increased by two per cent to C$1,186million, and benefited from the favourable C$20-million impact of the strongerCanadian dollar on U.S. dollar-denominated operating expenses.The stronger Canadian dollar reduced fourth-quarter net income byapproximately C$10 million, or C$0.02 per diluted share.2006 resultsNet income for the year increased 34 per cent to C$2,087 million, with dilutedearnings per share rising 41 per cent to C$3.91. Included in the 2006 resultswas a deferred income tax recovery of C$277 million (C$0.51 per dilutedshare), resulting from the enactment of lower federal and provincial corporatetax rates in Canada, and the resolution of matters pertaining to prior years'income taxes.Adjusted 2006 net income, excluding the deferred income tax recovery, wasC$1,810 million, or C$3.40 per diluted share. (1)Operating income for the year grew by 15 per cent to C$3,030 million, whileCN's operating ratio for the year improved by 3.1 points to 60.7 per cent.Revenues for 2006 increased seven per cent to C$7,716 million. Revenuesbenefited from strength in coal, grain and fertilizers, intermodal, petroleumand chemicals, and metals and minerals. Revenues for 2006 were affected by theunfavourable C$255-million translation impact of the stronger Canadian dollaron U.S. dollar-denominated revenues.Revenue ton-miles and freight revenue per revenue ton-mile both increased bythree per cent in 2006 compared with 2005.Operating expenses for 2006 increased by two per cent to C$4,686 million,largely because of increased fuel costs, purchased services and materialexpense, and depreciation. Partly offsetting these factors was the favourableC$150-million translation impact of the stronger Canadian dollar on U.S.dollar-denominated expenses, and lower casualty and other expense.The stronger Canadian dollar reduced 2006 net income by approximately C$60million, or C$0.11 per diluted share.The financial results in this press release were determined on the basis ofU.S. generally accepted accounting principles (U.S. GAAP).

(1) Please see discussion and reconciliation of these non-GAAP measures in theattached supplementary schedule, Non-GAAP Measures.This news release contains forward-looking statements. CN cautions that, bytheir nature, forward-looking statements involve risk and uncertainties,including the assumption that while CN expects a moderate slowdown in theNorth American economy in the near term, its business prospects assumepositive economic conditions in North America and globally, and that itsresults could differ materially from those expressed or implied in suchstatements. Important factors that could cause such differences include, butare not limited to, industry competition, legislative and/or regulatorydevelopments, compliance with environmental laws and regulations, variousevents which could disrupt operations, including natural events such as severeweather, droughts, floods and earthquakes, the effects of adverse generaleconomic and business conditions, inflation, currency fluctuations, changes infuel prices, labour disruptions, environmental claims, investigations orproceedings, other types of claims and litigation, and other risks detailedfrom time to time in reports filed by CN with securities regulators in Canadaand the United States. Reference should be made to CN's most recent Form 40-Ffiled with the United States Securities and Exchange Commission, its AnnualInformation Form filed with the Canadian securities regulators, its 2005Annual Consolidated Financial Statements and Notes thereto and Management'sDiscussion and Analysis (MD&A), as well as its 2006 quarterly consolidatedfinancial statements and MD&A, for a summary of major risks.CN - Canadian National Railway Company - spans Canada and mid-America, fromthe Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports ofVancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile,Ala., and the key cities of Toronto, Buffalo, Chicago, Detroit, Duluth,Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St.Louis, and Jackson, Miss., with connections to all points in North America.CANADIAN NATIONAL RAILWAY COMPANYCONSOLIDATED STATEMENT OF INCOME (U.S. GAAP)

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(In millions, except per share data) Three months ended Year ended December 31 December 31 ------------------ ----------------- 2006 2005 2006 2005------------------------------------------------------------------------------------------------------------------------------------------------------ (Unaudited)Revenues $ 1,942 $ 1,886 $ 7,716 $ 7,240------------------------------------------------------------------------------------------------------------------------------------------------------Operating expenses 1,186 1,166 4,686 4,616------------------------------------------------------------------------------------------------------------------------------------------------------Operating income 756 720 3,030 2,624Interest expense (80) (74) (312) (299)Other income 27 10 11 12------------------------------------------------------------------------------------------------------------------------------------------------------Income before income taxes 703 656 2,729 2,337Income tax expense (204) (226) (642) (781)------------------------------------------------------------------------------------------------------------------------------------------------------Net income $ 499 $ 430 $ 2,087 $ 1,556------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Earnings per share Basic $ 0.97 $ 0.80 $ 3.97 $ 2.82 Diluted $ 0.95 $ 0.78 $ 3.91 $ 2.77Weighted-average number of shares Basic 515.5 539.9 525.9 551.7 Diluted 523.6 550.8 534.3 562.2------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------These unaudited interim consolidated financial statements, expressed inCanadian dollars, and prepared in accordance with U.S. generally acceptedaccounting principles (U.S. GAAP), contain all adjustments (consisting ofnormal recurring accruals) necessary to present fairly Canadian NationalRailway Company's (the Company) financial position as at December 31, 2006and December 31, 2005, and its results of operations, changes inshareholders' equity and cash flows for the three months and years endedDecember 31, 2006 and 2005. These consolidated financial statements havebeen prepared using accounting policies consistent with those used inpreparing the Company's 2006 Annual Consolidated Financial Statements andshould be read in conjunction with such statements, notes thereto andManagement's Discussion and Analysis (MD&A).CANADIAN NATIONAL RAILWAY COMPANYCONSOLIDATED STATEMENT OF OPERATING INCOME (U.S. GAAP)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(In millions) Three months ended Year ended December 31 December 31 -------------------- --------------------- Variance Variance Fav Fav 2006 2005 (Unfav) 2006 2005 (Unfav)------------------------------------------------------------------------------------------------------------------------------------------------------ (Unaudited)RevenuesPetroleum and chemicals $ 301 $ 283 6% $1,173 $1,096 7%Metals and minerals 204 215 (5%) 885 837 6%Forest products 414 436 (5%) 1,745 1,738 -Coal 93 75 24% 375 331 13%Grain and fertilizers 352 310 14% 1,259 1,119 13%Intermodal 358 339 6% 1,420 1,270 12%Automotive 131 139 (6%) 514 514 -Other items 89 89 - 345 335 3%--------------------------------------- ---------------------------------------------------- ------------- 1,942 1,886 3% 7,716 7,240 7%Operating expensesLabor and fringe benefits 466 453 (3%) 1,800 1,841 2%Purchased services and material 222 224 1% 845 814 (4%)Depreciation and amortization 167 157 (6%) 650 627 (4%)Fuel 227 199 (14%) 890 725 (23%)Equipment rents 63 46 (37%) 198 192 (3%)Casualty and other 41 87 53% 303 417 27%--------------------------------------- ---------------------------------------------------- ------------- 1,186 1,166 (2%) 4,686 4,616 (2%)--------------------------------------- ---------------------------------------------------- -------------Operating income $ 756 $ 720 5% $3,030 $2,624 15%------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Operating ratio 61.1% 61.8% 0.7 60.7% 63.8% 3.1------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------CANADIAN NATIONAL RAILWAY COMPANYCONSOLIDATED BALANCE SHEET (U.S. GAAP)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(In millions) December 31 December 31 2006 2005------------------------------------------------------------------------------------------------------------------------------------------------------ (Unaudited)AssetsCurrent assets: Cash and cash equivalents $ 179 $ 62 Accounts receivable 692 623 Material and supplies 189 151 Deferred income taxes 84 65 Other 192 248------------------------------------------------------------------------------------------------------------------------------------------------------ 1,336 1,149Properties 21,053 20,078Intangible and other assets (1) 1,615 961------------------------------------------------------------------------------------------------------------------------------------------------------Total assets $ 24,004 $ 22,188------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Liabilities and shareholders' equityCurrent liabilities: Accounts payable and accrued charges $ 1,823 $ 1,478 Current portion of long-term debt 218 408 Other 73 72------------------------------------------------------------------------------------------------------------------------------------------------------ 2,114 1,958Deferred income taxes (1) 5,215 4,817Other liabilities and deferred credits (1) 1,465 1,487Long-term debt 5,386 4,677Shareholders' equity: Common shares 4,459 4,580 Accumulated other comprehensive loss (1) (44) (222) Retained earnings 5,409 4,891------------------------------------------------------------------------------------------------------------------------------------------------------ 9,824 9,249------------------------------------------------------------------------------------------------------------------------------------------------------Total liabilities and shareholders' equity $ 24,004 $ 22,188------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(1) On December 31, 2006, the Company adopted Statement of FinancialAccounting Standards (SFAS) No. 158, "Employers' Accounting for DefinedBenefit Pension and Other Postretirement Plans, an amendment of FASBStatements No. 87, 88, 106, and 132(R )," which requires the Company torecognize the over or underfunded position of its various benefit plans inits Consolidated Balance Sheet. As such, on December 31, 2006, the Companyincreased its pension asset by $599 million, to $1,275 million, anddecreased its pension and other post-retirement benefits liability by $7million, to $481 million. The Company will recognize changes in the fundedstatus in the year in which the changes occur, through other comprehensiveincome. The actuarial gains/losses and prior service costs/credits thatarise during the period but are not recognized as components of netperiodic benefit cost will be recognized as a component of Othercomprehensive loss, net of tax. These amounts recognized in Accumulatedother comprehensive loss will be adjusted as they are subsequentlyrecognized as components of net periodic benefit cost. Prior to December31, 2006, actuarial gains/losses and prior service costs/credits weredeferred in their recognition, and amortized into net periodic benefit costover the expected average remaining service life of the employee groupcovered by the plans. The adoption of SFAS No. 158 had no impact on yearsprior to 2006 as retrospective application was not allowed. This standardhad no effect on the 2006 computation of net periodic benefit cost forpensions and post-retirement benefits.These unaudited interim consolidated financial statements, expressed inCanadian dollars, and prepared in accordance with U.S. GAAP, containall adjustments (consisting of normal recurring accruals) necessary topresent fairly the Company's financial position as at December 31, 2006and December 31, 2005, and its results of operations, changes inshareholders' equity and cash flows for the three months and years endedDecember 31, 2006 and 2005. These consolidated financial statements havebeen prepared using accounting policies consistent with those used inpreparing the Company's 2006 Annual Consolidated Financial Statements andshould be read in conjunction with such statements, notes thereto andMD&A.CANADIAN NATIONAL RAILWAY COMPANYCONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(In millions) Three months ended Year ended December 31 December 31 ------------------ ----------------- 2006 2005 2006 2005------------------------------------------------------------------------------------------------------------------------------------------------------ (Unaudited)Common shares (1)Balance, beginning of period $ 4,476 $ 4,605 $ 4,580 $ 4,706 Stock options exercised and other 43 30 133 176 Share repurchase programs (2) (60) (55) (254) (302)------------------------------------------------------------------------------------------------------------------------------------------------------Balance, end of period $ 4,459 $ 4,580 $ 4,459 $ 4,580------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Accumulated other comprehensive lossBalance, beginning of period $ (520) $ (169) $ (222) $ (148)Other comprehensive income (loss):Unrealized foreign exchange gain (loss) on: Translation of the net investment in foreign operations 246 (43) 32 (233) Translation of U.S. dollar-denominated long-term debt designated as a hedge of the net investment in U.S. subsidiaries (196) 29 (33) 152Post-retirement and pension benefit plans adjustment: Minimum pension liability adjustment 1 4 1 4Derivative instruments: Decrease in unrealized holding gains on fuel derivative instruments - (70) (57) (35)------------------------------------------------------------------------------------------------------------------------------------------------------Other comprehensive income (loss) before income taxes 51 (80) (57) (112)Income tax recovery (expense) 11 27 (179) 38------------------------------------------------------------------------------------------------------------------------------------------------------Other comprehensive income (loss) 62 (53) (236) (74)Adjustment to reflect the funded status of benefit plans: (3) Net actuarial gain (net of income tax expense of ($200) for 2006) 434 - 434 - Prior service cost (net of income tax recovery of $14 for 2006) (31) - (31) - Reversal of minimum pension liability adjustment (net of income tax expense of ($6) for 2006) 11 - 11 -------------------------------------------------------------------------------------------------------------------------------------------------------Balance, end of period $ (44) $ (222) $ (44) $ (222)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Retained earningsBalance, beginning of period $ 5,306 $ 4,763 $ 4,891 $ 4,726 Net income 499 430 2,087 1,556 Share repurchase programs (2) (313) (235) (1,229) (1,116) Dividends (83) (67) (340) (275)------------------------------------------------------------------------------------------------------------------------------------------------------Balance, end of period $ 5,409 $ 4,891 $ 5,409 $ 4,891------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(1) For the three months and year ended December 31, 2006, the Company issued 1.7 million and 5.1 million common shares, respectively, as a result of stock options exercised. At December 31, 2006, the Company had 512.4 million common shares outstanding.(2) In 2006, the Company repurchased 29.5 million common shares under its share repurchase programs; 15.5 million common shares for $766 million (average price of $49.43 per share) under its new 28.0 million share repurchase program and 14.0 million common shares for $717 million (average price of $51.24 per share) under its previous 32.0 million share repurchase program which ended in the second quarter of 2006.(3) Pursuant to the adoption of SFAS No. 158.CANADIAN NATIONAL RAILWAY COMPANYCONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(In millions) Three months ended Year ended December 31 December 31 ------------------ ---------------- 2006 2005 2006 2005------------------------------------------------------------------------------------------------------------------------------------------------------ (Unaudited)Operating activitiesNet income $ 499 $ 430 $ 2,087 $ 1,556Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 167 157 653 630 Deferred income taxes 23 103 3 547 Other changes in: Accounts receivable 403 18 (17) 142 Material and supplies 18 25 (36) (25) Accounts payable and accrued charges 48 28 197 (156) Other net current assets and liabilities (34) (75) 58 8 Other (52) 8 5 3------------------------------------------------------------------------------------------------------------------------------------------------------Cash provided from operating activities 1,072 694 2,950 2,705------------------------------------------------------------------------------------------------------------------------------------------------------Investing activitiesProperty additions (472) (388) (1,298) (1,180)Acquisitions, net of cash acquired (26) - (84) -Other, net 14 15 33 105------------------------------------------------------------------------------------------------------------------------------------------------------Cash used by investing activities (484) (373) (1,349) (1,075)------------------------------------------------------------------------------------------------------------------------------------------------------Financing activitiesIssuance of long-term debt 183 987 3,308 2,728Reduction of long-term debt (234) (1,019) (3,089) (2,865)Issuance of common shares due to exercise of stock options and related excess tax benefits realized 42 11 120 115Repurchase of common shares (373) (290) (1,483) (1,418)Dividends paid (83) (67) (340) (275)------------------------------------------------------------------------------------------------------------------------------------------------------Cash used by financing activities (465) (378) (1,484) (1,715)------------------------------------------------------------------------------------------------------------------------------------------------------Net increase (decrease) in cash and cash equivalents 123 (57) 117 (85)Cash and cash equivalents, beginning of period 56 119 62 147------------------------------------------------------------------------------------------------------------------------------------------------------Cash and cash equivalents, end of period $ 179 $ 62 $ 179 $ 62------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Supplemental cash flow information Net cash receipts from customers and other $ 2,367 $ 1,830 $ 7,733 $ 7,375 Net cash payments for: Employee services, suppliers and other expenses (954) (921) (3,896) (3,872) Interest (89) (70) (316) (306) Workforce reductions (8) (15) (45) (87) Personal injury and other claims (47) (21) (107) (92) Pensions (66) (54) (112) (127) Income taxes (131) (55) (307) (186)------------------------------------------------------------------------------------------------------------------------------------------------------Cash provided from operating activities $ 1,072 $ 694 $ 2,950 $ 2,705------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Certain of the 2005 comparative figures have been reclassified in order tobe consistent with the 2006 presentation.CANADIAN NATIONAL RAILWAY COMPANYSELECTED RAILROAD STATISTICS (U.S. GAAP)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Three months ended Year ended December 31 December 31 ------------------ ----------------- 2006 2005 2006 2005------------------------------------------------------------------------------------------------------------------------------------------------------ (Unaudited)Statistical operating dataFreight revenues ($ millions) 1,853 1,797 7,371 6,905Gross ton miles (GTM) (millions) 88,407 87,828 352,972 342,894Revenue ton miles (RTM) (millions) 45,966 45,598 185,610 179,701Carloads (thousands) 1,146 1,208 4,824 4,841Route miles (includes Canada and the U.S.) 20,264 19,221 20,264 19,221Employees (end of period) 21,811 21,540 21,811 21,540Employees (average during period) 21,755 21,862 21,685 22,246------------------------------------------------------------------------------------------------------------------------------------------------------ProductivityOperating ratio (%) 61.1 61.8 60.7 63.8Freight revenue per RTM (cents) 4.03 3.94 3.97 3.84Freight revenue per carload ($) 1,617 1,488 1,528 1,426Operating expenses per GTM (cents) 1.34 1.33 1.33 1.35Labor and fringe benefits expense per GTM (cents) 0.53 0.52 0.51 0.54GTMs per average number of employees (thousands) 4,064 4,017 16,277 15,414Diesel fuel consumed (U.S. gallons in millions) 101 101 401 403Average fuel price ($/U.S. gallon) (1) 2.16 1.89 2.13 1.72GTMs per U.S. gallon of fuel consumed 875 870 880 851------------------------------------------------------------------------------------------------------------------------------------------------------Safety indicatorsInjury frequency rate per 200,000 person hours (2) 2.0 2.3 2.1 2.4Accident rate per million train miles (2) 2.0 2.8 2.2 1.8------------------------------------------------------------------------------------------------------------------------------------------------------Financial ratioDebt to total capitalization ratio (% at end of period) 36.3 35.5 36.3 35.5------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(1) Includes the impact of the Company's fuel hedging program until September 30, 2006.(2) As reported to the Federal Railroad Administration.Certain statistical data and related productivity measures are based onestimated data available at such time and are subject to change as morecomplete information becomes available.CANADIAN NATIONAL RAILWAY COMPANYSUPPLEMENTARY INFORMATION (U.S. GAAP)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Three months ended Year ended December 31 December 31 ---------------------- --------------------- Variance Variance Fav Fav 2006 2005 (Unfav) 2006 2005 (Unfav)------------------------------------------------------------------------------------------------------------------------------------------------------ (Unaudited)Revenue ton miles (millions)Petroleum and chemicals 7,930 7,949 - 31,868 31,235 2%Metals and minerals 4,026 4,245 (5%) 17,467 16,848 4%Forest products 10,049 10,581 (5%) 42,488 42,330 -Coal 3,209 3,003 7% 13,727 13,576 1%Grain and fertilizers 11,791 10,918 8% 44,096 40,393 9%Intermodal 8,237 8,094 2% 32,922 32,184 2%Automotive 724 808 (10%) 3,042 3,135 (3%)--------------------------------------- ------------------------------------------------------ --------------- 45,966 45,598 1% 185,610 179,701 3%Freight revenue / RTM (cents)Total freight revenue per RTM 4.03 3.94 2% 3.97 3.84 3%Commodity groups:Petroleum and chemicals 3.80 3.56 7% 3.68 3.51 5%Metals and minerals 5.07 5.06 - 5.07 4.97 2%Forest products 4.12 4.12 - 4.11 4.11 -Coal 2.90 2.50 16% 2.73 2.44 12%Grain and fertilizers 2.99 2.84 5% 2.86 2.77 3%Intermodal 4.35 4.19 4% 4.31 3.95 9%Automotive 18.09 17.20 5% 16.90 16.40 3%--------------------------------------- ------------------------------------------------------ ---------------Carloads (thousands)Petroleum and chemicals 145 146 (1%) 590 594 (1%)Metals and minerals 203 246 (17%) 981 994 (1%)Forest products 154 172 (10%) 667 712 (6%)Coal 94 101 (7%) 411 448 (8%)Grain and fertilizers 157 151 4% 594 566 5%Intermodal 332 322 3% 1,326 1,248 6%Automotive 61 70 (13%) 255 279 (9%)--------------------------------------- ------------------------------------------------------ --------------- 1,146 1,208 (5%) 4,824 4,841 -Freight revenue / carload (dollars)Total freight revenue per carload 1,617 1,488 9% 1,528 1,426 7%Commodity groups:Petroleum and chemicals 2,076 1,938 7% 1,988 1,845 8%Metals and minerals 1,005 874 15% 902 842 7%Forest products 2,688 2,535 6% 2,616 2,441 7%Coal 989 743 33% 912 739 23%Grain and fertilizers 2,242 2,053 9% 2,120 1,977 7%Intermodal 1,078 1,053 2% 1,071 1,018 5%Automotive 2,148 1,986 8% 2,016 1,842 9%------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Such statistical data and related productivity measures are based onestimated data available at such time and are subject to change as morecomplete information becomes available.CANADIAN NATIONAL RAILWAY COMPANYNON-GAAP MEASURES - unaudited------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Adjusted performance measuresDuring the three and twelve months ended December 31, 2006, the Companyreported adjusted net income of $472 million, or $0.90 per diluted shareand $1,810 million, or $3.40 per diluted share, respectively. Theseadjusted figures exclude the impact of a deferred income tax recovery of$27 million ($0.05 per diluted share) in the fourth quarter and $277million ($0.51 per diluted share) in the twelve-month period ended December31, 2006 that resulted from the enactment of lower federal and provincialcorporate tax rates in Canada and the resolution of matters pertaining toprior years' income taxes. Management believes that adjusted net income andadjusted earnings per share are useful measures of performance that canfacilitate period-to-period comparisons, as they exclude an item, such asthe deferred income tax recovery that resulted from the enactment of lowerfederal and provincial corporate tax rates in Canada and the resolution ofmatters pertaining to prior years' income taxes, that does not necessarilyarise as part of the normal day-to-day operations of the Company and coulddistort the analysis of trends in business performance. The exclusion ofsuch item in adjusted net income and adjusted earnings per share does not,however, imply that such item is necessarily non-recurring. These adjustedmeasures do not have any standardized meaning prescribed by GAAP and may,therefore, not be comparable to similar measures presented by othercompanies. The reader is advised to read all information provided in theCompany's 2006 Annual Consolidated Financial Statements, Notes thereto andManagement's Discussion and Analysis (MD&A). The following table provides areconciliation of net income and earnings per share, as reported for thethree and twelve months ended December 31, 2006, to the adjustedperformance measures presented herein.------------------------------------------------------------------------------------------------------------------------------------------------------ Three months ended Year ended December 31, 2006 December 31, 2006 ---------------------------- -----------------------------In millions, Deferred Deferred except per tax tax share data Reported recovery Adjusted Reported recovery Adjusted------------------------------------------------------------------------------------------------------------------------------------------------------Revenues $ 1,942 $ - $ 1,942 $ 7,716 $ - $ 7,716Operating expenses 1,186 - 1,186 4,686 - 4,686------------------------------------------------------------------------------------------------------------------------------------------------------Operating income 756 - 756 3,030 - 3,030------------------------------------------------------------------------------------------------------------------------------------------------------Interest expense (80) - (80) (312) - (312)Other income 27 - 27 11 - 11------------------------------------------------------------------------------------------------------------------------------------------------------Income before income taxes 703 - 703 2,729 - 2,729Income tax expense (204) (27) (231) (642) (277) (919)------------------------------------------------------------------------------------------------------------------------------------------------------Net income $ 499 $ (27) $ 472 $ 2,087 $ (277) $ 1,810------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Basic earnings per share $ 0.97 $ (0.05) $ 0.92 $ 3.97 $ (0.53) $ 3.44Diluted earnings per share $ 0.95 $ (0.05) $ 0.90 $ 3.91 $ (0.51) $ 3.40------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Free cash flowThe Company believes that free cash flow is a useful measure of performanceas it demonstrates the Company's ability to generate cash after the paymentof capital expenditures and dividends. Free cash flow does not have anystandardized meaning prescribed by GAAP and may, therefore, not becomparable to similar measures presented by other companies. The Companydefines free cash flow as cash provided from operating activities,excluding changes in the level of accounts receivable sold under thesecuritization program, less investing activities, and after the payment ofdividends, calculated as follows:------------------------------------------------------------------------------------------------------------------------------------------------------ Three months ended Year ended December 31 December 31 ------------------ ----------------In millions 2006 2005 2006 2005------------------------------------------------------------------------------------------------------------------------------------------------------Cash provided from operating activities $ 1,072 $ 694 $ 2,950 $ 2,705Less: Investing activities (484) (373) (1,349) (1,075)------------------------------------------------------------------------------------------------------------------------------------------------------Cash provided before financing activities 588 321 1,601 1,630------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Adjustments: Change in level of accounts receivable sold (1) (293) (11) 82 (54) Dividends paid (83) (67) (340) (275)------------------------------------------------------------------------------------------------------------------------------------------------------Free cash flow $ 212 $ 243 $ 1,343 $ 1,301------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(1) Changes in the level of accounts receivable sold under the Company's accounts receivable securitization program are considered a financing activity.FOR FURTHER INFORMATION PLEASE CONTACT: CN Mark Hallman (Media) System Director, Media Relations (905) 669-3384 CN Robert Noorigian (Investment Community) Vice-President, Investor Relations(514) 399-0052 www.cn.ca (C) Reuters 2007. 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