Filed by Canadian National Railway Company
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Canadian National Railway Company
Commission File No. 333-94399
The following communications contain forward-looking statements within the
meaning of the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. References made in the following, in particular, statements
regarding the proposed combination of Canadian National and Burlington Northern
Santa Fe, are based on management's current expectations or beliefs and are
subject to a number of factors and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements. In
particular, the following factors, among others, could cause actual results to
differ materially from those described in the forward-looking statements:
inability to obtain, or meet conditions imposed for, court and governmental
approvals for the combination; failure of the Canadian National or Burlington
Northern Santa Fe stockholders to approve the merger; the risk that the Canadian
National or Burlington Northern Santa Fe businesses will not be coordinated
successfully; .
For a detailed discussion of these and other cautionary statements, please refer
to our filings with the Securities and Exchange Commission, especially the
sections titled "Cautionary Statement Concerning Forward-Looking Statements" and
"Risk Factors" of our Form F-4 filed on January 11, 2000.
* * * * * * * * * * *
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
Exhibit 99.1 Presentation prepared for meetings with financial
analysts titled "Financial Analysts' Meeting"
99.2 Presentation prepared for general purposes titled
"CN-BNSF Combination: A Different Kind of Railroad"
99.3 Press Release
HERE FOLLOWS A PRESENTATION PREPARED BY CANADIAN NATIONAL IN ASSOCIATION WITH
ITS PROPOSED COMBINATION WITH BURLINGTON NORTHERN SANTA FE:
Investors are urged to read the joint proxy statement/ circular/
prospectus related to the combination filed with the Securities
and Exchange Commission on Form F-4, together with any amendments
to it, because it contains important information. Investors can
obtain this and any other documents filed with the Securities and
Exchange Commission without charge at the internet web site of
the Securities and Exchange Commission (http://www.sec.gov). In
addition, any documents incorporated by Canadian National by
reference in the joint proxy statement/ circular/prospectus are
available without charge from Canadian National, as described on
p.3 of the joint proxy statement/ circular/ prospectus.
Financial Analysts'
Meeting
-------
<PAGE>
This presentation may contain forward-looking statements within the meaning of
the United States Private Securities Reform Act of 1995 and other applicable
legislation, regarding future events and the future performance of CN that
involve risks and uncertainties that could cause actual results to differ
materially. Such forward-looking statements may include, without limitation,
statements that the Company does not expect that claims, lawsuits, environmental
costs, commitments, contingent liabilities, labor negotiations or other matters
will have a material adverse effect on its consolidated financial condition,
results of operations or liquidity and other similar statements concerning
matters that are not historical facts, and projections or predictions as to the
Company's financial or operational results. Such forward-looking statements are
or will be based on information available at that time, are not guarantees of
future performance and involve known and unknown risks and uncertainties, and
other factors which may cause the outlook, the actual results or performance of
the Company or the rail industry to be materially different from any future
results or performance implied by such statements. Important factors that could
cause such differences include, but are not limited to, industry competition and
legislative and/or regulatory developments, changes in or compliance with
environmental laws and regulations, natural events such as severe weather,
floods and earthquakes, the effects of adverse general economic and business
conditions, changes in fuel prices, labor strikes, the impact of year 2000
systems problems, environmental investigations or proceedings and other types of
claims and litigation and other risks detailed from time to time in reports
filed by the Company with securities regulators in Canada and the United States.
Reference is made more specifically to "Management Discussion and Analysis" in
the Company's annual and quarterly reports filed with Canadian securities
regulators and in the Company's Form 40-F filed with the U.S. Securities and
Exchange Commission.
<PAGE>
Paul M. Tellier
President and Chief Executive Officer
<PAGE>
1999 FULL YEAR FINANCIAL RESULTS
- --------------------------------------------------------
[Graphic here depicting Canadian National locomotives]
o Operating income
- 15% increase
o Diluted EPS
- 20% increase ($3.71 vs. $3.09)
o Operating ratio improvement
- 3.1 points to 72.0%
o Free cash flow of $276M
<PAGE>
1999 ACCOMPLISHMENTS
- --------------------------------------------------------
o Industry leading performance
o Unqualified STB approval of CN/IC
o Flawless execution of integration
o CN/CP Fraser Canyon agreement
- directional running initiative
o Announced share buy-back
o 17% dividend increase
o CN/BNSF combination announced December 20, 1999
<PAGE>
CLAUDE MONGEAU
Senior Vice-President and Chief Financial Officer
<PAGE>
FOURTH QUARTER RESULTS
- --------------------------------------------------------
Pro-forma
(Cdn. $Millions except EPS data) 1999 1998
---- ----
Revenues 1,387 1,330 +4%
Expenses 980 974
----- -----
Operating income 407 356 +14%
Interest expense (74) (84)
Other income 8 25
----- -----
Income before income taxes 341 297
Income tax expense (128) (115)
----- -----
Net income 213 182 +17%
===== =====
Diluted EPS $1.03 $0.94 +10%
Shares (diluted in millions) 210.1 193.5
Operating ratio 70.7% 73.2%
References to pro-forma reflect the acquisition of IC at the beginning of 1998
and are presented for comparative purposes.
<PAGE>
FOURTH QUARTER REVENUES
- --------------------------------------------------------
(Cdn. $Millions)
Percent
change
Pro-forma Favorable/
1999 1998 [Unfavorable]
---- ---- -------------
Petroleum & chemicals 222 222 --
Metals & Minerals 98 97 1%
Forest products 243 245 (1%)
Coal 95 118 (19%)
Grain & fertilizers 316 278 14%
Intermodal 208 206 1%
Automotive 140 117 20%
Other items 65 47 38%
----- -----
Total 1,387 1,330 4%
References to pro-forma reflect the acquisition of IC at the beginning of 1998
and are presented for comparative purposes.
<PAGE>
FOURTH QUARTER EXPENSES
- --------------------------------------------------------
(Cdn. $Millions)
Percent
change
Pro-forma Favorable/
1999 1998 [Unfavorable]
---- ---- -------------
Labor & fringe benefits 366 398 8%
Purchased services 164 143 (15%)
Depreciation & amortization 118 126 6%
Equipment rents 80 79 (1%)
Fuel 97 71 (37%)
Material 55 52 (6%)
Operating taxes 39 43 9%
Casualty & other 61 62 2%
----- -----
Total 980 974 (1%)
References to pro-forma reflect the acquisition of IC at the beginning of 1998
and are presented for comparative purposes.
<PAGE>
FULL YEAR RESULTS*
- --------------------------------------------------------
(Cdn. $Millions) except EPS data)
Pro-forma
1999 1998
---- ----
Revenues 5,236 5,137 +2%
Expenses 3,769 3,856
----- -----
Operating income 1,467 1,281 +15%
Interest expense (314) (331)
Other income 55 23
----- -----
Income before income taxes 1,208 973
Income tax expense (462) (375)
----- -----
Net income 746 598 +25%
===== =====
Diluted EPS $3.71 $3.09 +20%
Shares (diluted in millions) 202.5 193.4
Operating ratio 72.0% 75.1%
* Excluding first-quarter 1999 and 1998 cumulative effect of changes in
accounting policy, and the third-quarter 1998 special charge.
References to pro-forma reflect the acquisition of IC at the beginning of 1998
and are presented for comparative purposes.
<PAGE>
CASH FLOW - 1999 FULL YEAR
- --------------------------------------------------------
(Cdn. $Millions)
Sources
Operating cash flow* 1,657
Uses
Changes in working capital and other** (144)
Payments for workforce reduction (219)
Capital expenditures (net) (936)
Net proceeds from disposals 36
Dividends (118) (1,381)
---- ------
Cash provided before financing activities 276
===
Cash used by financing activities (273)
===
Total indebtedness at end of period 4,553
Debt to total capitalization ratio at end of period 42.7%
* Net income excluding non-cash items.
** Excludes reduction in the sale of accounts receivable of $14 million.
<PAGE>
2000 FINANCIAL OUTLOOK
- --------------------------------------------------------
o Revenue
- 4% revenue growth forecast
- IC synergies drive market share gains
o Expenses
- cost containment driven by asset productivity push
- benefits of 1999 downsizing
- on target to achieve 70% operating ratio
o Cash flow and EPS
- capex budget at $1 billion
- significant free cash flow generation
-----------------------------------------------------------
Solid double-digit EPS growth
-----------------------------------------------------------
<PAGE>
SHARE REPURCHASE AND DIVIDEND INCREASE
- --------------------------------------------------------
o Share repurchase program:
- 13 million share authorization
- mirrors BNSF buy-back
- flexibility with respect to timing and price
o Dividend increase:
- 17% increase in cash dividend
- $0.70 per share (approx. US$0.48)
o Rationale:
- CN/BNSF combination on a stock-for-stock basis
- strong cash flow generation in 1999 and 2000
-----------------------------------------------------------
Enhancing shareholder value while
maintaining strong balance sheet
-----------------------------------------------------------
<PAGE>
E. HUNTER HARRISON
Executive Vice-President and Chief Operating Officer
<PAGE>
BREAKTHROUGH PRODUCTIVITY GAINS
- --------------------------------------------------------
Key Drivers 1999 v. 1998 % gain*
- ----------- --------------------
Locomotives 22
(GTM/hp)
Car Velocity 16
(Miles/Day)
Yard 16
(Car/YSH)
Network Density 13
(RTM/Route Mileage)
Labor 11
(RTM/FTE)
Train Load 9
(GTM/Train Mile)
Fuel Efficiency 7
(RTM/Gallon)
o New service plan and best practices
o Operating and capex benefits flowing over time
o Continued productivity going forward
* CN stand-alone only
<PAGE>
FLEET UTILIZATION
- --------------------------------------------------------
Locomotive Fleet Car Fleet
GTM's per available Hp Car miles per day
- ---------------------- -----------------
o Locomotive reduction of o Car reduction of 14,000
650 Jan 98 - Dec 99 Jan 98 - Dec 99
<PAGE>
SERVICE PLAN UPDATE
- --------------------------------------------------------
o Better reliability
- 81% (zero tolerance)
- 93% (within 24 hours)
- faster transit times - 24 hours on average
- bonus and gain sharing tied to 90% for year 2000
o Customer satisfaction
- survey satisfaction - approx 80%
- back to pre-service plan levels
- 2000 target of 85%
o CS/BNSF combination survey
- based on approx 325 responses from top customers
- 85%+ positive or neutral on combination
<PAGE>
CN/BNSF COMBINATION SHIPPER BENEFITS
- --------------------------------------------------------
[Map of North America visually depicting the following text bullet points:
o Paper and Newsprint from N. Quebec to U.S. West Coast and Southwest
o Single line service for vehicles from Ontario and Michigan to U.S.
Southwest, Pacific Northwest, West Coast and Mexico
o Auto parts Ontario and Michigan to North Central U.S., Midwest U.S. and
Mexico
o Lumber from B.C. to U.S. West Coast, North Central, Southwest
o RoadRailer in I-5 corridor
o New transcon alternative
o West for exports
o East for exports
<PAGE>
PAUL M. TELLIER
President and Chief Executive Officer
<PAGE>
CN/BNSF COMBINATION STRATEGIC RATIONALE
- --------------------------------------------------------
o North American Railways, Inc.
o NAFTA Fastest Growing Transportation Market
Double Digit Growth
o Improved Quality of Service
o Shippers Becoming North American in Scope -
Operations throughout North America
o Large Trucking Companies Already Operate on a North American
Basis
<PAGE>
A DIFFERENT KIND OF MERGER
- --------------------------------------------------------
o Service, service, service
- faster transit times, new gateways
- single-line access to four gateways into Mexico
- focus on gaining share from trucks
o Easy to achieve
- industry's most efficient railroads
- two best service records - no weak player
o Low risk
- end-to-end combination
- significant capacity at interchange points
- common operating systems
o Preserves each company's unique culture
- key members at both organizations remain
- local presence maintained
- not a slash and burn story
<PAGE>
KEY CN/BNSF IMPLEMENTATION INITIATIVES
- --------------------------------------------------------
o Implementation team
- leaders with proven track records
- committed to making it work
o Meetings
- 3 successful kick-off meetings to date
- scheduled meetings every month in Chicago
o Action items
- Information systems
o integrate IT and develop joint e-commerce initiatives
- Purchasing
o establish joint procurement system
- Operations
o adopt precision scheduling - common operating plan
o utilize total car and locomotive fleets
<PAGE>
SHAREHOLDER VALUE
- --------------------------------------------------------
EBIT Impact Earnings Per Share Accretion
- ----------- ----------------------------
(U.S. $M)
Year 1 ---> $150 - 200M 2001 ---> 2% - 3%
Year 2 ---> $350 - 400M 2002 ---> 10% - 12%
Year 3 ---> $500 - 600M 2003 ---> 12% - 15%
o Approximately Half from Revenue and Half from Efficiencies
<PAGE>
ROADMAP TO COMPLETION
- --------------------------------------------------------
- -----------------------------------------------------------------------------
Key Activities Timeframe
- -----------------------------------------------------------------------------
Execution and Announcement o December 20, 1999
- -----------------------------------------------------------------------------
STB Pre-Notification o December 20, 1999
- -----------------------------------------------------------------------------
Proxy filed with SEC o January 12, 2000
- -----------------------------------------------------------------------------
STB Public Hearings o March 8-9, 2000
- -----------------------------------------------------------------------------
STB Filing Application o Spring 2000
- -----------------------------------------------------------------------------
Shareholder Votes o Spring 2000
- -----------------------------------------------------------------------------
STB Approval Process o Prior mergers suggest up to
sixteen months from date of
announcement
- -----------------------------------------------------------------------------
Closing o Mid 2001
- -----------------------------------------------------------------------------
<PAGE>
SUMMARY
- --------------------------------------------------------
[Graphic of CN locomotive ommitted]
o Another solid quarter
o Over $275M of free cash flow in 1999
o Stock buy-back and dividend increase
o Ready for Q1 and 2000 challenges
o Company strategically positioned for long-term
<PAGE>
Graphic here
(2 trains)
HERE FOLLOWS A PRESENTATION PREPARED BY CANADIAN NATIONAL IN ASSOCIATION WITH
ITS PROPOSED COMBINATION WITH BURLINGTON NORTHERN SANTA FE:
Investors are urged to read the joint proxy statement/ circular/
prospectus related to the combination filed with the Securities
and Exchange Commission on Form F-4, together with any amendments
to it, because it contains important information. Investors can
obtain this and any other documents filed with the Securities and
Exchange Commission without charge at the internet web site of
the Securities and Exchange Commission (http://www.sec.gov). In
addition, any documents incorporated by Canadian National by
reference in the joint proxy statement/ circular/prospectus are
available without charge from Canadian National, as described on
p.3 of the joint proxy statement/ circular/ prospectus.
CN-BNSF Combination
-------------------------------------------------
A Different Kind of Railroad
-------------------------------------------------
<PAGE>
North American Railways, Inc.
- -------------------------------------------------------------------------------
[GRAPHICS OMITTED]
[Graphics depict:
Route Map of Canadian National and Burlington Northern Sante Fe showing large
cities served and eight key interchange points between the two rail networks
(Vancouver, Emerson Junction, Duluth/Superior, Chicago, St. Louis, Memphis,
Mobile and New Orleans).]
BNSF-CN Combined Statistics
- ---------------------------
Revenue: U.S.$12.5 billion
Employees: 67,000
Route Miles: 50,000
An end-to-end combination
- -------------------------------------------------------------------------------
<PAGE>
Deal Overview
- -------------------------------------------------------------------------------
Feature Description
- ------- -----------
The Business Combination o North American Railways, Inc. is formed by
the combination of BNSF and CN
o Both BNSF and CN will maintain their current
regional operating and marketing focus
o IT, Purchasing, and selected Marketing
functions will be coordinated
No New Debt o 100% equity
o Share exchange
Regulatory o Complies with CN Commercialization Act
o Subject to STB approval, expected 2001
<PAGE>
Benefits
- -------------------------------------------------------------------------------
[] An extensive single-line service network
[] New north-south single-line routes
[] Reduced transit times and better reliability
[] Unified information, enhanced tracking and tracing, simplified billing
and rating
[] New and greater efficiencies
[] Low integration risk
<PAGE>
Benefits: Northern & Eastern Shippers
- -------------------------------------------------------------------------------
[GRAPHICS OMITTED]
[Graphics depict:
Blank Map of North America upon which following bullet points illustrating new
north-south single line routes were superimposed.]
o B.C. and Western U.S. (I-5 corridor)
o Western Canada to U.S. Southwest/Mexico
o Eastern Canada to U.S. West and Mexico
o Access to Four Mexican Gateways: El Paso, Eagle Pass, Laredo and
Brownsville
New north-south single-line routes
- -------------------------------------------------------------------------------
<PAGE>
Benefits: Gulf Shippers
- -------------------------------------------------------------------------------
[GRAPHICS OMITTED]
[Graphics depict:
Map extracts of West Coast, Midwest (including Ontario) and Gulf Coast. Map
showed some of the largest cities in each region served by the combined rail
network, including Los Angeles, San Francisco and Vancouver on the West Coast;
Chicago, Detroit and Toronto in the Midwest; and Dallas, Houston and New Orleans
on the Gulf Coast.]
New single-line service for Gulf shippers to Midwest and West Coast
<PAGE>
Benefits: Midwest Shippers
- -------------------------------------------------------------------------------
[GRAPHICS OMITTED]
[Graphics depict:
Map extracts of West Coast, Midwest and Texas/Mexico. Map showed some of the
largest cities in each region and showed the four interchange points with
Mexico.]
o First single-line service from Michigan and S.W. Ontario to Mexico
and U.S. West
<PAGE>
Benefits: Product Types
- -------------------------------------------------------------------------------
Automotive o Single-line service between plants in Michigan and Southern
Ontario to U.S. Southwest, West Coast and Mexico
Chemicals o Connects Alberta, Gulf Coast and Sarnia production regions
o CN-IC Gulf producers gain single-line access to U.S. West
Coast
o BNSF Gulf producers gain single-line access to U.S. Midwest
and Canada
Intermodal o Single-line service between Eastern Canada, U.S. Midwest and
U.S. Southwest, West Coast
Gain o U.S. producers gain single-line access to the U.S. West
Coast
o Western Canadian producers gain single-line access to major
U.S. consumption markets
<PAGE>
High Quality Service
- -------------------------------------------------------------------------------
[] More direct and efficient routes will reduce transit time
[] Combined system will eliminate interchanges and by-pass congested areas
[] Service-intensive operating plan will guide both companies
[] Improved ease of doing business through unified information on ordering,
tracking, and billing
<PAGE>
Efficiencies
- -------------------------------------------------------------------------------
[] Reduced locomotive, car, and transportation costs by leveraging best
practices and increasing traffic
[] Reduced purchasing costs as companies leverage combined buying power and
rationalize supply chains
[] Economies of scale in selected G&A activities, IT, and some back office
functions
Shippers will benefit from a stronger and
more competitive carrier
<PAGE>
Low Risk
- -------------------------------------------------------------------------------
Key Factors
- -------------------------------------------------------------------------------
[] End-to-end combination
[] Same operating and computer systems
[] Best current service records
[] Best merger records
[] Strong management team
[] Unique structure preserves each company's customer focus and operations
<PAGE>
Organization Structure
- -------------------------------------------------------------------------------
Board
R. Krebs, Chairman
o 6 CN
o 6 BNSF
o 3 New
CEO
P. Tellier
CEO o Strategic direction
T. Hund o Operating philosophy
COO
H. Harrison
BNS President Shared Selected
M. Rose Services Marketing/Sales CN President
Activities
Consolidate Single point of
Few changes to duplicate customer contact-- Few changes to
Operations back office easier to do Operations
services business with
Limits integration risk and maintains customer focus
----------------------------------------------------
<PAGE>
A Different Combination
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
What North Amican Railways, Inc.
What North American Railways, Inc. is... is NOT...
- ---------------------------------------- -------------------------------------
<S> <C>
[] Two efficient, service- oriented [] Not absorbing a weak player
railroads
[] Pro-Service/Pro-Competition [] Not eliminating a parallel competitor
[] End-to-end combination [] Not splitting an existing railroad
[] Same systems platform [] Not an IT changeover
[] Preserving management, customer [] Not significantly restructuring
focus and culture operations or reducing key personnel
</TABLE>
HERE FOLLOWS A PRESS RELEASE ISSUED BY CANADIAN NATIONAL IN ASSOCIATION WITH
ITS PROPOSED COMBINATION WITH BURLINGTON NORTHERN SANTA FE:
Investors are urged to read the joint proxy statement/ circular/
prospectus related to the combination filed with the Securities
and Exchange Commission on Form F-4, together with any amendments
to it, because it contains important information. Investors can
obtain this and any other documents filed with the Securities and
Exchange Commission without charge at the internet web site of
the Securities and Exchange Commission (http://www.sec.gov). In
addition, any documents incorporated by Canadian National by
reference in the joint proxy statement/ circular/prospectus are
available without charge from Canadian National, as described on
p.3 of the joint proxy statement/ circular/ prospectus.
North America's Railroad FOR IMMEDIATE RELEASE
Stock symbols: TSE: CNR / NYSE: CNI
www.cn.ca
CN welcomes U.S. regulatory hearing March 8 on the structure of the North
American rail industry
MONTREAL, Jan. 24, 2000 -- Canadian National President and Chief Executive
Officer Paul M. Tellier today welcomed the decision of the United States Surface
Transportation Board (STB) to hold a public hearing on the subject of major
railroad consolidations and the present and future structure of the North
American rail industry.
"The STB hearing will permit a disciplined public evaluation of the concerns
expressed about the present and future structure of the North American rail
industry since the announcement of our combination with Burlington Northern
Santa Fe Corporation (BNSF) on Dec. 20, 1999," Tellier said.
"CN will be an active participant in the hearing and will respond to all the
questions the STB is addressing to participants." The hearing will be held in
Washington, D.C., at the offices of the STB.
Tellier added: "I am especially pleased that the STB has set March 8 as the
hearing date, because it will allow us to benefit from the views expressed at it
prior to the filing of our application for approval of the CN/BNSF combination.
1
<PAGE>
We will file our application on or shortly after March 20, the earliest possible
filing date."
The STB said that, in announcing the hearing, it does not intend any
"prejudgment" of CN/BNSF application, which the agency will review separate and
apart from the March 8 hearing. The agency said it wishes the hearing to act as
a forum for the discussion of broader matters that have been raised since the
CN/BNSF combination was announced.
The end-to-end combination of CN and BNSF will join two of the most efficient
and financially-strong railroads in North America, each with industry-leading
service plans and each with a proven record of implementing previous
consolidations without shipper disruption. Among its benefits, the CN/BNSF
combination is expected to:
o Create an extensive, efficient single-line network across Canada and
the central and western United States that will deliver faster, more
reliable service and better information to customers;
o Establish new single-line north-south traffic routes that will provide
more direct and efficient lanes that bypass congested areas, open new
markets to shippers and their customers, and move products efficiently
between Canada and the U.S.;
o Create truck-competitive service in key corridors that is expected to
give shippers viable alternatives to high trucking costs and reduce
truck traffic on highways;
o Be low risk and stand apart from certain recent rail consolidations.
The combination will not eliminate a parallel competitor, divide an
existing railroad or cut key personnel.
2
<PAGE>
Canadian National Railway Company 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 cities of Toronto, Buffalo, Chicago, Detroit, Memphis, St.
Louis, and Jackson, Miss., with connections to all points in North America.
This news release contains forward-looking statements. The Company cautions
that, by their nature, forward-looking statements involve risk and uncertainty
and that the Company's results could differ materially from those expressed or
implied in such statements. Reference should be made to CN's most recent Form
40-F filed with the United States Securities and Exchange Commission for a
summary of major risk factors.
-30-
Contacts:
Media Investment Community
Mark Hallman Robert Noorigian
System Director Vice President
Media Relations Investor Relations
(416) 217-6390 (514) 399-0052
3
