advertisement

---

To Canadian National Railway Co., it depends on how you interpret it. But the railroad's fourth-quarter and yearly financial results would appear to be mostly disappointing.


On Jan. 21, CN reported fourth-quarter net income of $22 million and operating income of $89 million, compared with $296 million and $521 million, respectively, in fourth-quarter 2001. Quarterly revenue increased 1 percent to $1.54 million and expenses rose 44 percent to $1.45 million.


But CN claims those are unadjusted figures, which don't take into account a $281 million charge resulting from a change in the railroad's estimated liability for U.S. personal injury and other claims, a $120 million workforce adjustment charge, or several other charges.


When adjusted, CN's fourth-quarter net income rises to $274 million, operating income increases to $490 million and operating expenses drop to $1.05 million.


Despite either set of figures, the railroad's quarterly operating ratio worsened 2.2 points to 68.3.


During 2002, CN earned $800 million in net income, $1.46 million in operating income and $6.11 million in revenue compared with $1.04 million, $1.68 million and $5.65 million, respectively, in 2001. The railroad's yearly operating expenses rose to $4.64 million compared with $3.97 million in 2001.


On an adjusted basis, CN's yearly operating income rose 5 percent to $1.87 million and operating expenses increased 10 percent to $4.24 million. The railroad's 2002 operating ratio worsened 0.9 points to 69.4.


"I would characterize it as a pretty good year," said CN President and Chief Executive Officer E. Hunter Harrison at a Jan. 21 press conference, adding that the figures don't necessarily represent an "apples to apples" comparison. "We laid out the facts as we're required to do, [and] we're telling people, 'You be the judge.'"


Harrison believes CN had an "outstanding year" in generating free cash flow ($513 million). The railroad's liquidity could come in handy if CN decides to pursue other railroads.


"We've always said that if properties are available at a reasonable price, we'd look at them," said Harrison, adding that the timing of such a transaction would dictate CN's interest.