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CN reports Q3-2013 net income of C$705 million, or C$1.67 per diluted share

 CN reports Q3-2013 net income of C$705 million, or C$1.67 per diluted share

PR Newswire

MONTREAL, Oct. 22, 2013

Adjusted Q3-2013 net income was C$724 million, with adjusted diluted EPS
rising 13 per cent to C$1.72 ^(1)

Railway achieved record quarterly revenues and a 59.8 per cent operating ratio

MONTREAL, Oct. 22, 2013 /PRNewswire/ - CN (TSX: CNR) (NYSE: CNI) today
reported its financial and operating results for the third quarter and
nine-month period ended Sept. 30, 2013.

Third-quarter 2013 highlights

  *Third-quarter 2013 net income was C$705 million, or C$1.67 per diluted
    share, compared with net income of C$664 million, or C$1.52 per diluted
    share, for third-quarter 2012. The third-quarter 2013 results included a
    C$19 million (C$0.05 per diluted share) expense resulting from a one-time
    deferred income tax adjustment.
  *Excluding the income tax expense, Q3-2013 adjusted diluted earnings per
    share (EPS) increased 13 per cent to C$1.72 from Q3-2012 diluted EPS of
    C$1.52. ^(1)
  *Revenues for the latest quarter increased eight per cent to a quarterly
    record of C$2,698 million, driven by a four per cent increase in revenue
    ton-miles, and a three per cent increase in carloadings.
  *Operating income increased 10 per cent to C$1,084 million.
  *The operating ratio improved by 0.8 of a point to 59.8 per cent. ^
  *Free cash flow totalled C$778 million for the first nine months of 2013,
    compared with free cash flow of C$1,036 million in the comparable period
    of 2012. ^ (1)

Claude Mongeau, president and chief executive officer, said: "CN's agenda of
Operational and Service Excellence delivered outstanding financial results for
the quarter. All our key operating metrics improved, service levels remained
solid and we reached new levels of safety in our train operations.

"With continued focus on supply chain collaboration and solid execution, the
CN team is determined to grow its business safely and efficiently at a pace
faster than the overall economy and to meet its full-year 2013 financial
outlook." ^(2)

Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large portion of its
revenues and expenses is denominated in U.S. dollars. As such, the Company's
results are affected by exchange-rate fluctuations. On a constant currency
basis that excludes the impact of fluctuations in foreign currency exchange
rates, CN's third-quarter 2013 net income would have been lower by C$14
million, or C$0.03 per diluted share. ^(1)

Third-quarter 2013 revenues, traffic volumes and expenses
The eight per cent rise in third-quarter revenues was mainly attributable to
higher freight volumes due to strong energy markets, market share gains, as
well as growth in the North American economy; the positive translation impact
of the weaker Canadian dollar on U.S.-dollar-denominated revenues; freight
rate increases; and the impact of a higher fuel surcharge as a result of
year-over-year increases in applicable fuel prices and higher volumes.

Revenues increased for petroleum and chemicals (17 per cent), intermodal (13
per cent), metals and minerals (11 per cent), forest products (eight per
cent), and automotive (seven per cent). Revenues declined for grain and
fertilizers (three per cent) and coal (one per cent).

Carloads increased by three per cent while revenue ton-miles, measuring the
relative weight and distance of rail freight transported by CN, increased four
per cent over the same quarter in 2012.

Rail freight revenue per revenue ton-mile, a measurement of yield defined as
revenue earned on the movement of a ton of freight over one mile, increased
four per cent over the third quarter of 2012, driven by freight rate increases
and the positive translation impact of the weaker Canadian dollar on
U.S.-dollar-denominated revenues, partly offset by an increase in the average
length of haul.

Operating expenses increased seven per cent in the third quarter of 2013,
mainly due to the negative translation impact of the weaker Canadian dollar on
U.S.-dollar-denominated expenses, higher labor and fringe benefits expense,
higher depreciation and amortization, as well as increased purchased services
and material expense.

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

(2)See Forward-Looking Statements for a summary of the key assumptions
and risks regarding CN's 2013 outlook.

Forward-Looking Statements
Certain information included in this news release constitutes "forward-looking
statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and under Canadian securities laws. CN cautions
that, by their nature, these forward-looking statements involve risks,
uncertainties and assumptions. The Company cautions that its assumptions may
not materialize and that current economic conditions render such assumptions,
although reasonable at the time they were made, subject to greater
uncertainty. Such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other
factors which may cause the actual results or performance of the Company or
the rail industry to be materially different from the outlook or any future
results or performance implied by such statements. To the extent that CN has
provided guidance that are non-GAAP financial measures, the Company may not be
able to provide a reconciliation to the GAAP measures, due to unknown
variables and uncertainty related to future results. Key assumptions used in
determining forward-looking information are set forth below.

Current assumptions
CN maintains the 2013 financial outlook it issued on Jan. 22, 2013, as well as
its plan to invest approximately C$2 billion in capital programs in 2013,
which it revised upward from C$1.9 billion on April 22, 2013. Approximately
C$1.1 billion of the total expenditure will be targeted on track
infrastructure to maintain a safe and fluid railway network. In addition, the
Company will invest in projects to support a number of productivity and growth
initiatives.

CN made a number of economic and market assumptions in preparing its 2013
outlook. The Company is forecasting that North American industrial production
for the year will increase by about two per cent. CN also expects U.S. housing
starts to be approximately 950,000 units, and U.S. motor vehicles sales to be
approximately 15 million units. In addition, for the 2013/2014 crop year, CN
is now assuming Canadian grain production will be well above the five-year
average and that U.S. grain production will be above the five-year average.
With these assumptions, CN assumes carload growth of two to three per cent,
along with continued pricing improvement above inflation. CN assumes the
Canadian-U.S. exchange rate to be in the range of C$0.95-C$1.00 for 2013, and
that the price of crude oil (West Texas Intermediate) for the year to be in
the range of US$90-$100 per barrel.

Important risk factors that could affect the forward-looking statements
include, but are not limited to, the effects of general economic and business
conditions, industry competition, inflation, currency and interest rate
fluctuations, changes in fuel prices, legislative and/or regulatory
developments, compliance with environmental laws and regulations, actions by
regulators, various events which could disrupt operations, including natural
events such as severe weather, droughts, floods and earthquakes, labor
negotiations and disruptions, environmental claims, uncertainties of
investigations, proceedings or other types of claims and litigation, risks and
liabilities arising from derailments, 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 risk factors.

CN assumes no obligation to update or revise forward-looking statements to
reflect future events, changes in circumstances, or changes in beliefs, unless
required by applicable Canadian securities laws. In the event CN does update
any forward-looking statement, no inference should be made that CN will make
additional updates with respect to that statement, related matters, or any
other forward-looking statement.

CN (TSX: CNR) (NYSE: CNI) is a true backbone of the economy, transporting
approximately C$250 billion worth of goods annually for a wide range of
business sectors, ranging from resource products to manufactured products to
consumer goods, across a rail network spanning Canada and mid-America, from
the Atlantic and Pacific oceans to the Gulf of Mexico. CN - Canadian National
Railway Company, along with its operating railway subsidiaries -- serves the
ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and
Mobile, Ala., and the metropolitan areas of Toronto, 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) - unaudited
(In millions, except per share data)
                                                             
                                 Three months ended  Nine months ended
                                    September 30        September 30
                                    2013    2012    2013     2012
                                                                       
Revenues                            $ 2,698  $ 2,497  $ 7,830   $ 7,386
                                                             
Operating expenses                                             
  Labor and fringe benefits           521     476   1,588    1,489
  Purchased services and material     318     304     987      908
  Fuel                                390     369   1,197    1,124
  Depreciation and amortization       241     227     726      687
  Equipment rents                      68      64     204      185
  Casualty and other                   76      72     222      230
Total operating expenses             1,614   1,512   4,924    4,623
Operating income                     1,084     985   2,906    2,763
                                                             
Interest expense                      (89)    (84)   (266)    (256)
                                                              
Other income (Note 3)                    5      18      75      320
Income before income taxes           1,000     919   2,715    2,827
                                                             
Income tax expense (Note 7)          (295)   (255)   (738)    (757)
Net income                          $   705  $   664  $ 1,977   $ 2,070
                                                             
Earnings per share (Note 10)                                   
  Basic                            $  1.68  $  1.53  $  4.67  $  4.73
  Diluted                          $  1.67  $  1.52  $  4.66   $  4.71
                                                             
Weighted-average number of shares                              
  Basic                             419.6   433.9   423.1    437.3
  Diluted                           421.1   435.9   424.6    439.6
See accompanying notes to unaudited consolidated financial statements.

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (U.S. GAAP) - unaudited
(In millions)
                                                              
                                     Three months ended  Nine months ended
                                        September 30       September 30
                                           2013    2012      2013   2012
                                                                    
Net income                               $    705  $   664   $  1,977 $ 2,070
                                                                  
Other comprehensive income (loss)                                    
  Foreign exchange gain (loss) on:                                  
    Translation of the net investment                                
    in foreign operations                 (134)    (210)       221   (199)
    Translation of US                                                
     dollar-denominated long-term debt
     designated as a hedge of the net
    investment in U.S. subsidiaries         123     202      (197)     189
                                                                  
  Pension and other postretirement                      
   benefit plans (Note 6):                                            
    Amortization of net actuarial loss                               
     included in net periodic benefit
    cost                                     56      30        169      92
    Amortization of prior service cost                               
     included in net periodic benefit
    cost                                      1       1          4       5
                                                                  
Other comprehensive income before                          
income taxes                                  46      23        197     87
Income tax expense                          (32)    (37)      (20)   (51)
Other comprehensive income (loss) (Note                    
11)                                           14    (14)        177     36
Comprehensive income                     $    719  $   650   $  2,154 $ 2,106
See accompanying notes to unaudited                        
consolidated financial statements.                                    

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED BALANCE SHEET (U.S. GAAP) - unaudited
(In millions)
                                                                     
                                    September 30  December 31  September 30
                                           2013        2012         2012
                                                                     
Assets                                                                
                                                                     
Current assets:                                                       
     Cash and cash equivalents        $      182   $      155    $      175
     Restricted cash and cash                                 
      equivalents (Note 4)                   529          521           518
     Accounts receivable (Note 4)           868         831          845
     Material and supplies                  317         230          272
     Deferred and receivable income                           
      taxes                                   74           43            37
     Other                                   67          89           78
Total current assets                       2,037       1,869        1,925
                                                                     
Properties                                25,383      24,541       24,004
Intangible and other assets                  377         249          349
Total assets                           $   27,797   $   26,659    $   26,278
                                                                     
Liabilities and shareholders' equity                                  
                                                                     
Current liabilities:                                                  
     Accounts payable and other       $    1,499   $    1,626    $    1,631
     Current portion of long-term                             
      debt (Note 4)                        1,488          577           678
Total current liabilities                  2,987       2,203        2,309
                                                                     
Deferred income taxes                      5,884       5,555        5,603
Pension and other postretirement                               
benefits, net of current portion             589          784           553
Other liabilities and deferred                                 
credits                                      760          776           738
Long-term debt                             6,010       6,323        5,770
                                                                     
Shareholders' equity:                                                 
     Common shares                        4,036       4,108        4,120
     Accumulated other                                        
      comprehensive loss (Note 11)       (3,080)      (3,257)       (2,803)
     Retained earnings                   10,611      10,167        9,988
Total shareholders' equity                11,567      11,018       11,305
Total liabilities and shareholders'                            
equity                                 $   27,797    $   26,659     $   26,278
See accompanying notes to unaudited consolidated financial statements.

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP) -
unaudited
(In millions)
                                                                  
                                 Three months ended      Nine months ended
                                    September 30           September 30
                                    2013      2012      2013      2012
                                                                            
Common shares ^(1)                                                 
Balance, beginning of period     $   4,063  $   4,132  $   4,108  $   4,141
  Stock options exercised and
   other                                8        27        35       105
  Share repurchase programs
   (Note 4)                          (35)      (39)     (107)     (126)
Balance, end of period           $   4,036  $   4,120  $   4,036  $   4,120
                                                                  
Accumulated other comprehensive
loss                                                               
Balance, beginning of period     $ (3,094)  $ (2,789)  $ (3,257)  $ (2,839)
  Other comprehensive income
   (loss)                              14      (14)       177        36
Balance, end of period           $ (3,080)  $ (2,803)  $ (3,080)  $ (2,803)
                                                                  
Retained earnings                                                  
Balance, beginning of period     $  10,416  $   9,821  $  10,167  $   9,378
  Net income                         705       664     1,977     2,070
  Share repurchase programs
   (Note 4)                         (330)     (334)     (988)     (969)
  Dividends                        (180)     (163)     (545)     (491)
Balance, end of period           $  10,611  $   9,988  $  10,611  $   9,988
See accompanying notes to unaudited consolidated financial statements.

(1) During the three and nine months ended September 30, 2013, the Company
    issued 0.1 million and 0.7 million common shares, respectively, as a
    result of stock options exercised and repurchased 3.6 million and 11.1
    million common shares, respectively, under its current share repurchase
    program. At September 30, 2013, the Company had 418.0 million common
    shares outstanding.

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP) - unaudited
(In millions)
                                                            
                                 Three months ended      Nine months ended
                                    September 30           September 30
                                    2013      2012      2013      2012
                                                                           
Operating activities                                               
Net income                       $     705  $     664  $   1,977  $   2,070
Adjustments to reconcile net
income to net cash provided by
operating activities:                                              
       Depreciation and
        amortization                  241       227       726       687
       Deferred income taxes          13        59       169       331
       Gain on disposal of
        property (Note 3)               -         -      (69)     (281)
Changes in operating assets and
liabilities:                                                       
       Accounts receivable           (3)      (25)      (23)      (37)
       Material and supplies          11         3      (84)      (73)
       Accounts payable and
        other                          57        50     (146)       140
       Other current assets           17         5        28       (6)
Pensions and other, net                25        17     (128)     (495)
Net cash provided by operating
activities                          1,066     1,000     2,450     2,336
                                                                  
Investing activities                                               
Property additions                  (539)     (508)   (1,185)   (1,121)
Disposal of property (Note 3)           -         -        52       311
Change in restricted cash and
cash equivalents                     (32)      (46)       (8)      (19)
Other, net                            (8)         7      (10)         5
Net cash used in investing
activities                          (579)     (547)   (1,151)     (824)
                                                                  
Financing activities                                               
Issuance of debt (Note 4)           1,096       230     3,228     1,861
Repayment of debt                   (932)     (338)   (2,904)   (1,806)
Issuance of common shares due to
exercise of stock options and
related excess tax benefits
realized                                5        24        28        97
Repurchase of common shares
(Note 4)                            (383)     (373)   (1,095)   (1,095)
Dividends paid                      (180)     (163)     (545)     (491)
Net cash used in financing
activities                          (394)     (620)   (1,288)   (1,434)
Effect of foreign exchange
fluctuations on US
dollar-denominated cash and cash
equivalents                             2       (3)        16       (4)
Net increase (decrease) in cash
and cash equivalents                   95     (170)        27        74
Cash and cash equivalents,
beginning of period                    87       345       155       101
Cash and cash equivalents, end
of period                        $     182  $     175  $     182  $     175
                                                                  
Supplemental cash flow
information                                                        
Net cash receipts from customers
and other                        $   2,633  $   2,476  $   7,798  $   7,396
Net cash payments for:                                             
       Employee services,
        suppliers and other
        expenses                  (1,256)   (1,235)   (4,169)   (4,002)
       Interest                     (85)      (89)     (259)     (275)
       Personal injury and
        other claims                 (16)      (13)      (44)      (57)
       Pensions (Note 6)            (11)      (29)     (221)     (587)
       Income taxes                (199)     (110)     (655)     (139)
Net cash provided by operating
activities                       $   1,066  $   1,000  $   2,450  $   2,336
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  September 
30, 2013,  December  31, 2012  and  September 30,  2012,  and its  results  of 
operations, changes in shareholders' equity and  cash flows for the three  and 
nine months ended September 30, 2013 and 2012.

These unaudited Interim  Consolidated Financial Statements  and Notes  thereto 
have been prepared  using accounting  policies consistent with  those used  in 
preparing the Company's 2012  Annual Consolidated Financial Statements.  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  the  2012  Annual 
Consolidated Financial Statements and Notes thereto.

Note 2 - Accounting change

In February  2013,  the Financial  Accounting  Standards Board  (FASB)  issued 
Accounting Standards Update (ASU)  2013-02, Reporting of Amounts  Reclassified 
Out  of  Accumulated  Other  Comprehensive  Income.  ASU  2013-02  added   new 
disclosure  requirements  to  Accounting  Standards  Codification  (ASC)  220, 
Comprehensive  Income,  for  items  reclassified  out  of  accumulated   other 
comprehensive income (AOCI)  effective for reporting  periods beginning  after 
December 15, 2012.  It requires  entities to  disclose additional  information 
about amounts reclassified out of AOCI by component including changes in  AOCI 
balances and significant items reclassified out of AOCI by the respective line
items of net  income. The Company  has adopted ASU  2013-02 for the  reporting 
period beginning January 1, 2013 and the prescribed disclosures are  presented 
in Note 11 - Accumulated other comprehensive income (loss).

Note 3 - Disposal of property

2013 - Exchange of easements
On June 8, 2013, the  Company entered into an  agreement with another Class  I 
railroad to  exchange perpetual  railroad  operating easements  including  the 
track and roadway assets on specific rail lines (collectively the "exchange of
easements") without monetary consideration. The Company has accounted for  the 
exchange of easements  at fair  value pursuant  to FASB  ASC 845,  Nonmonetary 
Transactions. The transaction resulted in a  gain on exchange of easements  of 
$29 million ($18 million after-tax) that was recorded in Other income.

2013 - Disposal of Lakeshore West
On March 19,  2013, the Company  entered into an  agreement with Metrolinx  to 
sell a  segment  of  the  Oakville subdivision  in  Oakville  and  Burlington, 
Ontario, together  with the  rail fixtures  and certain  passenger  agreements 
(collectively the "Lakeshore West"), for  cash proceeds of $52 million  before 
transaction costs. Under  the agreement,  the Company  obtained the  perpetual 
right to operate freight  trains over the Lakeshore  West at its then  current 
level of operating activity, with the possibility of increasing its  operating 
activity for additional consideration. The  transaction resulted in a gain  on 
disposal of $40  million ($36 million  after-tax) that was  recorded in  Other 
income  under  the  full  accrual   method  of  accounting  for  real   estate 
transactions.

2012 - Disposal of Bala-Oakville
On March 23,  2012, the Company  entered into an  agreement with Metrolinx  to 
sell a segment  of the  Bala and  a segment  of the  Oakville subdivisions  in 
Toronto, Ontario,  together  with  the rail  fixtures  and  certain  passenger 
agreements (collectively  the  "Bala-Oakville"),  for cash  proceeds  of  $311 
million before transaction  costs. Under the  agreement, the Company  obtained 
the perpetual right to  operate freight trains over  the Bala-Oakville at  its 
then current level of operating  activity, with the possibility of  increasing 
its operating activity for additional consideration. The transaction  resulted 
in a  gain on  disposal of  $281  million ($252  million after-tax)  that  was 
recorded in Other income under the full accrual method of accounting for  real 
estate transactions.

Note 4 - Financing activities

Revolving credit facility
The Company has  an $800 million  revolving credit facility  agreement with  a 
consortium of  lenders.  The agreement,  which  contains customary  terms  and 
conditions, allows for an increase in the facility amount, up to a maximum  of 
$1.3 billion, as well as the option  to extend the term by an additional  year 
at each anniversary date,  subject to the consent  of individual lenders.  The 
Company exercised such option and  on March 22, 2013,  the expiry date of  the 
agreement was extended by one  year to May 5, 2018.  The Company plans to  use 
the credit  facility  for  working capital  and  general  corporate  purposes, 
including backstopping its commercial paper program. As at September 30, 2013,
the Company had no outstanding borrowings under its revolving credit  facility 
(nil as at December 31, 2012).

Commercial paper
The Company has a commercial paper  program, which is backed by its  revolving 
credit facility,  enabling  it to  issue  commercial  paper up  to  a  maximum 
aggregate principal amount of $800 million, or the US dollar equivalent. As at
September 30, 2013, the Company had total borrowings of $613 million, of which
$515  million  was  denominated  in  Canadian  dollars  and  $98  million  was 
denominated in  US dollars  (US$95 million)  presented in  Current portion  of 
long-term debt  on the  Consolidated Balance  Sheet (nil  as at  December  31, 
2012). The weighted-average interest rate on these borrowings was 0.98%.

Accounts receivable securitization program
On December  20,  2012,  the  Company entered  into  a  three-year  agreement, 
commencing on February 1, 2013, to sell an undivided co-ownership interest  in 
a revolving pool of accounts receivable  to unrelated trusts for maximum  cash 
proceeds of $450 million. The trusts  are multi-seller trusts and the  Company 
is not the primary beneficiary. Funding for the acquisition of these assets is
customarily through the issuance of asset-backed commercial paper notes by the
unrelated trusts.

The Company has retained the  responsibility for servicing, administering  and 
collecting the receivables sold. The average servicing period is approximately
one month. Subject  to customary  indemnifications, each  trust's recourse  is 
limited to the accounts receivable transferred.

The Company is subject to  customary reporting requirements for which  failure 
to perform  could result  in  termination of  the  program. In  addition,  the 
program is subject to customary credit rating requirements, which if not  met, 
could also result  in termination  of the  program. The  Company monitors  the 
reporting requirements and  is currently not  aware of any  trends, events  or 
conditions that could cause such termination.

The accounts  receivable  securitization  program provides  the  Company  with 
readily available short-term financing for general corporate use. In the event
the program is terminated before  its scheduled maturity, the Company  expects 
to meet  its  future  payment  obligations  through  its  various  sources  of 
financing  including  its  revolving  credit  facility  and  commercial  paper 
program, and/or access to capital markets.

The Company accounts for its accounts receivable securitization program  under 
ASC 860, Transfers and Servicing. Based  on the structure of the program,  the 
Company accounts  for the  proceeds as  a secured  borrowing. As  such, as  at 
September 30, 2013,  the Company  recorded $400 million  of proceeds  received 
under the accounts receivable securitization program in the Current portion of
long-term debt  on  the  Consolidated  Balance  Sheet  at  a  weighted-average 
interest rate of  1.16% which is  secured by  and limited to  $463 million  of 
accounts receivable.

Bilateral letter of credit facilities and Restricted cash and cash equivalents
The Company has  a series of  bilateral letter of  credit facility  agreements 
with various banks to  support its requirements to  post letters of credit  in 
the ordinary course of business. On March  22, 2013, the expiry date of  these 
agreements was extended by one year to April 28, 2016. Under these agreements,
the Company has the option from time to time to pledge collateral in the  form 
of cash or  cash equivalents, for  a minimum term  of one month,  equal to  at 
least the face  value of the  letters of  credit issued. As  at September  30, 
2013, the Company had letters of credit drawn of $559 million ($551 million as
at December 31,  2012) from  a total committed  amount of  $590 million  ($562 
million as at December  31, 2012) by  the various banks.  As at September  30, 
2013, cash and cash equivalents of  $529 million ($521 million as at  December 
31, 2012) were pledged as collateral and recorded as Restricted cash and  cash 
equivalents on the Consolidated Balance Sheet.

Share repurchase programs
On October 22,  2012, the Board  of Directors  of the Company  had approved  a 
share repurchase  program which  allowed  for the  repurchase  of up  to  $1.4 
billion in common shares,  not to exceed 18.0  million common shares,  between 
October 29, 2012 and October 28, 2013  pursuant to a normal course issuer  bid 
at prevailing market prices plus brokerage  fees, or such other prices as  may 
be permitted by the Toronto Stock Exchange. The Company repurchased a total of
14.7 million  common  shares for  $1.4  billion under  this  share  repurchase 
program.

The following table provides the activity under such share repurchase  program 
as well as the share repurchase programs of the prior year:

                                                             
                         Three months ended September     Nine months ended
                                     30                    September 30
In millions, except per
share data                      2013          2012      2013       2012
Number of common shares
repurchased ^(1)                 3.6           4.1      11.1       13.3
Weighted-average price
per share ^(2)             $   102.34      $   89.82   $  99.01    $  82.32
Amount of repurchase       $      365      $     373   $  1,095    $  1,095

(1) Includes common shares purchased in the first quarters of 2013 and 2012
    pursuant to private agreements between the Company and arm's length
    third-party sellers.
(2) Includes brokerage fees.

See Note 12 - Subsequent events for additional information on the Company's
new share repurchase program approved on October 22, 2013.

Note 5 - Stock plans

The Company has various stock-based incentive plans for eligible employees.  A 
description of the Company's major plans is provided in Note 10 - Stock  plans 
to the Company's 2012 Annual Consolidated Financial Statements. The  following 
table provides total  stock-based compensation  expense for  awards under  all 
plans, as well as the related tax benefit recognized in income, for the  three 
and nine months ended September 30, 2013 and 2012.

                                                                
                             Three months ended September   Nine months ended
                                                        30       September 30
In millions                            2013         2012     2013    2012
Cash settled awards                                                  
Restricted share unit plan
^(1)                              $       17     $      17   $    38  $    47
Voluntary Incentive Deferral
Plan (VIDP)                               4            4       17      14
                                        21           21       55      61
Stock option awards                       3            3        7       8
Total stock-based
compensation expense              $       24     $      24   $    62  $    69
Tax benefit recognized in
income                            $        7     $       7   $    15  $    16

(1) The nine months ended September 30, 2013 includes the reversal of
    approximately $20 million of stock-based compensation expense related to
    the forfeiture of restricted share units by the Company's former Chief
    Executive Officer and Chief Operating Officer.

Cash settled awards
Following approval by  the Board  of Directors  in January  2013, the  Company 
granted 0.4 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 are  generally scheduled for payout 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. In  addition, 
commencing at various  dates, for  senior and  executive management  employees 
("executive  employees"),  payout  is  conditional  on  compliance  with   the 
conditions of their benefit plans,  award or employment agreements,  including 
but not  limited  to  non-compete,  non-solicitation,  and  non-disclosure  of 
confidential information conditions. Current or former executive employees who
breach such conditions of their benefit plans, award or employment  agreements 
will forfeit the RSU  payout. Should the Company  reasonably determine that  a 
current or former executive employee may have violated the conditions of their
benefit  plans,  award  or  employment  agreement,  the  Company  may  at  its 
discretion change the manner of vesting of  the RSUs to suspend payout on  any 
RSUs pending resolution of such matter.

As at September  30, 2013,  0.1 million  RSUs remained  authorized for  future 
issuance under this plan.

In February 2013, the Company  entered into confidential agreements to  settle 
compensation amounts  subject to  non-compete  and non-solicitation  with  its 
former Chief Executive Officer (CEO) and  Chief Operating Officer (COO). As  a 
result, in  the quarter  ended March  31, 2013,  the stock-based  compensation 
liability was reduced by approximately $20 million.

The following table provides the 2013 activity for all cash settled awards:

                                        RSUs                    VIDP
In millions                       Nonvested  Vested      Nonvested  Vested
Outstanding at December 31, 2012        0.9     0.7 ^(1)          -     1.4
Granted (Payout)                        0.4   (0.5)              -   (0.3)
Forfeited/Settled                     (0.1)   (0.2) ^(1)          -       -
Outstanding at September 30, 2013       1.2       -              -     1.1

(1) The balance outstanding at December 31, 2012 included the units of the RSU
    payout otherwise due to the Company's former CEO that were in dispute that
    were settled in the first quarter of 2013.

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

In millions,
unless
otherwise                                                         VIDP
indicated                       RSUs ^(1)                        ^(2)        Total
                                                               
Year of
grant           2013     2012     2011   2010   2009                 
                                                               
Stock-based
compensation
expense
recognized
over
requisite
service
period                                                          
Nine months
ended
September
30, 2013
^(3)         $     12  $     22  $     17  $  (4)  $  (9)  $     17      $  55
Nine months
ended
September
30, 2012         N/A  $     10  $     18  $   19  $    -  $     14      $  61
                                                               
Liability
outstanding                                                     
September
30, 2013     $     12  $     46  $     63  $    -  $    -  $    125      $ 246
December 31,
2012             N/A  $     24  $     45  $   70  $   18  $    134      $ 291
                                                               
Fair value
per unit                                                        
September
30, 2013 ($) $  78.34  $  99.10  $ 103.94    N/A    N/A  $ 104.37       N/A
                                                               
Fair value
of awards
vested
during the
period                                                          
Nine months
ended
September
30, 2013     $      -  $      -  $      -  $    -    N/A  $      1      $   1
Nine months
ended
September
30, 2012         N/A  $      -  $      -  $    -    N/A  $      1      $   1
                                                               
Nonvested
awards at
September
30, 2013                                                        
Unrecognized
compensation
cost         $     17  $     17  $      4  $    -    N/A  $      1      $  39
Remaining
recognition
period
(years)          2.3      1.3      0.3    N/A    N/A      N/A ^(4)   N/A
                                                               
Assumptions
^(5)                                                            
Stock price
($)          $ 104.37  $ 104.37  $ 104.37    N/A    N/A  $ 104.37       N/A
Expected
stock price
volatility
^(6)             15%      14%      13%    N/A    N/A      N/A       N/A
Expected
term (years)
^(7)             2.3      1.3     0.3    N/A    N/A      N/A       N/A
Risk-free
interest
rate ^(8)      1.25%    1.09%    0.98%    N/A    N/A      N/A       N/A
Dividend
rate ($)
^(9)         $   1.72  $   1.72  $   1.72    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) Includes the reversal of stock-based compensation expense related to the
    forfeiture of restricted share units by the Company's former CEO and COO.
(4) The remaining recognition period has not been quantified as it relates
    solely to the 25% Company grant and the dividends earned thereon,
    representing a minimal number of units.
(5) Assumptions used to determine fair value are at September 30, 2013.
(6) Based on the historical volatility of the Company's stock over a period
    commensurate with the expected term of the award.
(7) Represents the remaining period of time that awards are expected to be
    outstanding.
(8) Based on the implied yield available on zero-coupon government issues with
    an equivalent term commensurate with the expected term of the awards.
(9) Based on the annualized dividend rate.

Stock option awards
Following approval by  the Board  of Directors  in January  2013, the  Company 
granted 0.5 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 
September 30, 2013, 10.1 million common shares remained authorized for  future 
issuances under  this  plan.  The  total  number  of  options  outstanding  at 
September 30, 2013 was 3.9 million.

The following table provides the activity of stock option awards during  2013, 
and for  options  outstanding  and  exercisable at  September  30,  2013,  the 
weighted-average exercise price and the weighted-average years to  expiration. 
The table also provides the  aggregate intrinsic value for in-the-money  stock 
options, which represents the  value that would have  been received by  option 
holders had  they  exercised  their  options on  September  30,  2013  at  the 
Company's closing stock price of $104.37 on the Toronto Stock Exchange.

                                                                
                       Options outstanding                              
                      Number                      Weighted-average   Aggregate
                          of   Weighted-average           years to   intrinsic
                    options    exercise price        expiration      value
                          In                                               In
                   millions                                    millions
Outstanding at
December 31, 2012
^(1)                     4.3       $     52.09                          
Granted                  0.5       $     94.94                          
Forfeited/Cancelled    (0.2)       $     70.03                          
Exercised              (0.7)       $     38.37                          
Outstanding at
September 30, 2013
^(1)                     3.9       $     60.46               5.9    $   172
Exercisable at
September 30, 2013
^(1)                     2.6       $     50.08               4.7    $   139

(1) Stock options with a US 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         2013   2012   2011   2010   2009   2008   Total
                                                           
Stock-based
compensation
expense
recognized
over
requisite
service
period ^(1)                                                 
Nine months
ended
September
30, 2013     $     4  $     1  $     1  $     1  $     -     N/A  $     7
Nine months
ended
September
30, 2012        N/A  $     3  $     2  $     1  $     2  $     -  $     8
                                                           
Fair value
per unit                                                    
At grant
date ($)     $ 17.04  $ 15.49  $ 15.66  $ 13.09  $ 12.60  $ 12.44     N/A
                                                           
Fair value
of awards
vested
during the
period                                                      
Nine months
ended
September
30, 2013     $     -  $     2  $     3  $     2  $     4     N/A  $    11
Nine months
ended
September
30, 2012        N/A  $     -  $     2  $     2  $     4  $     3  $    11
                                                           
Nonvested
awards at
September
30, 2013                                                    
Unrecognized
compensation
cost         $     4  $     3  $     1  $     -  $     -     N/A  $     8
Remaining
recognition
period
(years)         3.3     2.3     1.3     0.3       -     N/A     N/A
                                                           
Assumptions                                                 
Grant price
($)          $ 94.94  $ 76.70  $ 68.94  $ 54.76  $ 42.14  $ 48.51     N/A
Expected
stock price
volatility
^(2)            23%     26%     26%     28%     39%     27%     N/A
Expected
term (years)
^(3)            5.4     5.4     5.3     5.4     5.3     5.3     N/A
Risk-free
interest
rate ^(4)     1.41%   1.33%   2.53%   2.45%   1.97%   3.58%     N/A
Dividend
rate ($)
^(5)         $  1.72  $  1.50  $  1.30  $  1.08  $  1.01  $  0.92     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

The Company has various retirement benefit plans under which substantially all
of its employees are entitled to  benefits at retirement age, generally  based 
on compensation  and  length  of  service  and/or  contributions.  Senior  and 
executive  management  ("executive  employees")  subject  to  certain  minimum 
service and age requirements, are  also eligible for an additional  retirement 
benefit  under  their  Special   Retirement  Stipend  Agreements  (SRS),   the 
Supplemental Executive  Retirement Plan  (SERP)  or the  Defined  Contribution 
Supplemental Executive  Retirement Plan  (DC  SERP). Executive  employees  who 
breach the non-compete,  non-solicitation and  non-disclosure of  confidential 
information conditions of the SRS, SERP  or DC SERP plans or other  employment 
agreement will forfeit the  retirement benefit under  these plans. Should  the 
Company reasonably determine that a  current or former executive employee  may 
have violated the  conditions of their  SRS, SERP,  or DC SERP  plan or  other 
employment agreement, the Company  may at its  discretion withhold or  suspend 
payout of the retirement benefit pending resolution of such matter.

On February 4, 2013,  the Company's COO resigned  to join the Company's  major 
competitor in  Canada. As  a result,  compensation amounts  accumulated  under 
non-registered pension  plans  subject  to  non-compete  and  non-solicitation 
agreements were forfeited. The Company  will record an actuarial gain  related 
to the amounts forfeited upon the  completion of its next actuarial  valuation 
for accounting purposes, as at December 31, 2013.

For the  three  and  nine  months  ended September  30,  2013  and  2012,  the 
components of net periodic benefit cost for pensions and other  postretirement 
benefits were as follows:

(a) Components of net periodic benefit cost for pensions
                                                                  
                                                            Nine months ended
                      Three months ended September 30            September 30
In millions                   2013            2012      2013       2012
Service cost             $       39        $      37   $    117    $    109
Interest cost                  165             186       494        554
Settlement gain                  -               -       (1)          -
Expected return on                                   
plan assets                  (240)            (249)      (719)      (745)
Amortization of                                      
prior service cost               1                1          3          3
Amortization of net                                  
actuarial loss                  57               30        170         92
Net periodic benefit                                 
cost                     $       22         $       5    $     64    $     13
                                                                  
(b) Components of net periodic benefit cost for other postretirement benefits
                                                                  
                                                            Nine months ended
                      Three months ended September 30            September 30
In millions                   2013            2012      2013       2012
Service cost             $        1        $       1   $      2    $      3
Interest cost                    3               4         8         10
Amortization of                                      
prior service cost               -                -          1          2
Amortization of net                                  
actuarial gain                 (1)                -        (1)          -
Net periodic benefit                                 
cost                     $        3         $       5    $     10    $     15

Company contributions to its various pension plans are made in accordance with
the applicable legislation  in Canada  and the  United States  (U.S.) and  are 
determined by actuarial  valuations. Actuarial valuations  are required on  an 
annual basis both in Canada and the U.S. The actuarial valuations for  funding 
purposes for the Company's Canadian pension  plans, based on a valuation  date 
of December 31, 2012, were filed  in June 2013 and identified a  going-concern 
surplus of approximately $1.4 billion and a solvency deficit of  approximately 
$2.1  billion  calculated  using  the  three-year  average  of  the  Company's 
hypothetical wind-up ratio  in accordance with  the Pension Benefit  Standards 
Regulations,  1985.  Under  Canadian  legislation,  the  solvency  deficit  is 
required to be funded through special solvency payments, for which each annual
amount is equal to one fifth of the solvency deficit, and is re-established at
each valuation date.

Pension contributions made in the first nine  months of 2013 and 2012 of  $221 
million and $587 million, respectively, mainly represent contributions to  the 
Company's main  pension  plan,  the  CN Pension  Plan  and  include  voluntary 
contributions of  $100 million  and $450  million, respectively.  The  pension 
contributions also  include  contributions for  the  current service  cost  as 
determined under  the  Company's  current  actuarial  valuations  for  funding 
purposes. Voluntary contributions can be  treated as a prepayment against  the 
Company's required special solvency payments and as at September 30, 2013, the
Company had approximately $570 million of accumulated prepayments which remain
available to offset  future required  solvency deficit  payments. The  Company 
expects to make total contributions in 2013 of approximately $235 million  for 
all the Company's pension plans and  to apply approximately $100 million  from 
its accumulated prepayments  to satisfy  the remainder of  its estimated  2013 
required solvency deficit payment.

Additional information relating to the pension plans is provided in Note 11  - 
Pensions and  other  postretirement  benefits to  the  Company's  2012  Annual 
Consolidated Financial Statements.

Note 7 - Income taxes

The Company recorded income tax expense  of $295 million for the three  months 
ended September 30, 2013 and $738 million for the nine months ended  September 
30, 2013, compared  to $255 million  and $757 million,  respectively, for  the 
same periods  in 2012.  Included in  the 2013  figures was  a net  income  tax 
recovery of $7 million consisting of a third quarter $19 million and a  second 
quarter $5 million income tax expense from the enactment of higher  provincial 
corporate income tax rates; a second  quarter $15 million income tax  recovery 
from the recognition of U.S. state income tax losses; and a first quarter  $16 
million income tax recovery from a revision of the apportionment of U.S. state
income taxes. Included in  the 2012 figures was  a second quarter $28  million 
net income tax expense consisting of a $35 million income tax expense from the
enactment of  higher provincial  corporate income  tax rates  that was  partly 
offset by a  $7 million  income tax recovery  from the  recapitalization of  a 
foreign investment.

Note 8 - Major commitments and contingencies

A. Commitments
As at September  30, 2013,  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 $616 million ($735 million as at December 31, 2012).  The 
Company also has estimated remaining commitments of approximately $285 million
(US$275 million),  in  relation to  the  U.S. federal  government  legislative 
requirement to implement positive train control (PTC) by 2015. In addition, it
has estimated  remaining  commitments  of  approximately  $90  million  (US$85 
million), in relation to the acquisition of the principal lines of the  former 
Elgin,  Joliet  and  Eastern  Railway  Company,  for  railroad  infrastructure 
improvements, grade separation projects as well as commitments under a  series 
of agreements  with  individual  communities  and  a  comprehensive  voluntary 
mitigation  program   established  to   address  surrounding   municipalities' 
concerns. The Company also has agreements with fuel suppliers to purchase  all 
of its  estimated  2013 volume,  approximately  90% of  its  anticipated  2014 
volume, 65% of its anticipated 2015 volume, 60% of its anticipated 2016 volume
and 20% of its anticipated 2017 volume at market prices prevailing on the date
of the purchase.

B. Contingencies
In the normal  course of  business, the  Company becomes  involved in  various 
legal  actions  seeking  compensatory   and  occasionally  punitive   damages, 
including actions brought on behalf of various purported classes of  claimants 
and  claims   relating  to   employee  and   third-party  personal   injuries, 
occupational disease and property damage,  arising out of harm to  individuals 
or property allegedly  caused by,  but not  limited to,  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 a  future 
stream of payments  depending on  the nature and  severity of  the injury.  As 
such, the provision for employee injury claims is discounted. In the provinces
where the  Company is  self-insured, costs  related to  employee  work-related 
injuries are accounted  for based  on actuarially developed  estimates of  the 
ultimate cost associated  with such injuries,  including compensation,  health 
care and third-party administration costs. A comprehensive actuarial study  is 
generally performed  at  least on  a  triennial  basis. 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
Personal injury claims by the  Company's employees, including claims  alleging 
occupational disease and work-related injuries, are subject to the  provisions 
of the  Federal Employers'  Liability Act  (FELA). Employees  are  compensated 
under FELA for damages assessed based on  a finding of fault through the  U.S. 
jury system  or through  individual  settlements. As  such, the  provision  is 
undiscounted.  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,  including  asserted  and 
unasserted occupational disease claims, and  property damage claims, based  on 
actuarial estimates of their ultimate cost. A comprehensive actuarial study is
performed annually.

For employee work-related  injuries, including  asserted occupational  disease 
claims, and  third-party  claims,  including grade  crossing,  trespasser  and 
property  damage  claims,  the  actuarial  valuation  considers,  among  other 
factors, the Company's historical patterns of claims filings and payments. For
unasserted occupational  disease  claims,  the actuarial  study  includes  the 
projection of  the  Company's  experience  into  the  future  considering  the 
potentially exposed population. The Company  adjusts its liability based  upon 
management's assessment and  the results of  the study. 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 September  30, 2013,  the Company  had aggregate  reserves for  personal 
injury and other claims of $321 million, of which $52 million was recorded  as 
a current  liability ($314  million as  at  December 31,  2012, of  which  $82 
million was recorded as a current liability).

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  September  30, 2013,  or  with respect  to  future 
claims, cannot  be reasonably  determined.  When establishing  provisions  for 
contingent liabilities the Company considers,  where a probable loss  estimate 
cannot be made with reasonable certainty, a range of potential probable losses
for each such matter, and records the amount it considers the most  reasonable 
estimate within  the range.  However, when  no amount  within the  range is  a 
better estimate than  any other  amount, the minimum  amount in  the range  is 
accrued. For matters where a loss  is reasonably possible but not probable,  a 
range of potential losses cannot be estimated due to various factors which may
include the limited  availability of facts,  the lack of  demand for  specific 
damages and  the  fact that  proceedings  were at  an  early stage.  Based  on 
information currently  available,  the  Company  believes  that  the  eventual 
outcome of the actions  against the Company will  not, individually or in  the 
aggregate, have  a  material  adverse effect  on  the  Company's  consolidated 
financial position. However,  due to  the inherent inability  to predict  with 
certainty unforeseeable future  developments, there can  be no assurance  that 
the ultimate resolution  of these  actions 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  U.S. 
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  280 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 nature of anticipated response actions, taking into account
the available  clean-up techniques;  evolving regulatory  standards  governing 
environmental liability; and the number of potentially responsible parties and
their financial viability. As a result, liabilities are recorded based on  the 
results of  a  four-phase assessment  conducted  on a  site-by-site  basis.  A 
liability is initially recorded when environmental assessments occur, 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. The Company estimates the costs related
to a particular site using cost scenarios established by external  consultants 
based on the extent of contamination and expected costs for remedial  efforts. 
In the case of  multiple parties, the Company  accrues its allocable share  of 
liability taking into account the Company's alleged responsibility, the number
of potentially responsible parties and  their ability to pay their  respective 
share of  the liability.  Adjustments  to initial  estimates are  recorded  as 
additional information becomes available.

The Company's provision for specific  environmental sites is undiscounted  and 
includes costs for remediation and restoration of sites, as well as 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.  Recoveries 
of environmental remediation costs from  other parties are recorded as  assets 
when their receipt is deemed probable.

As at September 30, 2013, the Company had aggregate accruals for environmental
costs of  $124  million,  of which  $41  million  was recorded  as  a  current 
liability ($123 million  as at  December 31, 2012,  of which  $31 million  was 
recorded as a current liability). The Company anticipates that the majority of
the liability at September 30, 2013 will be paid out over the next five years.
However, some  costs may  be  paid out  over a  longer  period. 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,  the  discovery  of  new  facts,  future  changes  in  laws,  the 
possibility of releases of  hazardous materials into  the environment and  the 
Company's ongoing efforts to identify potential environmental liabilities that
may be associated  with its  properties may  result in  the identification  of 
additional environmental 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; and
(iv)  the determination of the Company's liability in proportion to other
      potentially  responsible parties and the ability to recover costs from
      any third parties with respect to particular sites.

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  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  position  or  liquidity. Costs  related  to  any  unknown 
existing or future contamination 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 guarantees  or 
indemnifications to third parties and others, which may extend beyond the term
of the  agreements. These  include, but  are not  limited to,  residual  value 
guarantees on operating leases,  standby letters of  credit, 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 2013 and 2021, 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. As at September 30, 2013, the maximum
exposure in  respect  of these  guarantees  was  $170 million.  There  are  no 
recourse provisions to recover any amounts from third parties.

(ii) Other guarantees
As at September 30, 2013, the Company, including certain of its  subsidiaries, 
had granted $559  million of  irrevocable standby  letters of  credit and  $36 
million  of  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 September 30, 2013, the maximum
potential liability under  these guarantee  instruments was  $595 million,  of 
which $525 million related to workers' compensation and other employee benefit
liabilities and  $70  million related  to  equipment under  leases  and  other 
liabilities. The  letters of  credit  were drawn  on the  Company's  bilateral 
letter of credit facilities.  The Company had not  recorded a liability as  at 
September 30, 2013 with respect to these guarantee instruments as they related
to the Company's future performance and the Company did not expect to make any
payments under  these guarantee  instruments. The  majority of  the  guarantee 
instruments mature at various dates between 2013 and 2015.

(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;
 (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;
  (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; and
 (l) acquisition 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  reasonably 
determined.

During the period, the Company entered into various indemnification  contracts 
with third parties for which the  maximum exposure for future payments  cannot 
be reasonably determined. 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 - Financial instruments

For financial assets  and liabilities measured  at fair value  on a  recurring 
basis, fair value is the price the  Company would receive to sell an asset  or 
pay  to  transfer  a  liability  in  an  orderly  transaction  with  a  market 
participant at the  measurement date.  In the  absence of  active markets  for 
identical  assets  or  liabilities,   such  measurements  involve   developing 
assumptions based on market observable data and, in the absence of such  data, 
internal information  that  is believed  to  be consistent  with  what  market 
participants would  use  in a  hypothetical  transaction that  occurs  at  the 
measurement  date.  Observable  inputs  reflect  market  data  obtained   from 
independent sources, while  unobservable inputs reflect  the Company's  market 
assumptions. Preference  is given  to observable  inputs. These  two types  of 
inputs create the following fair value hierarchy:

Level 1:  Quoted prices for identical instruments in active markets.
Level 2:   Quoted prices for similar instruments in active markets; quoted
          prices for identical or similar instruments in markets that are not
           active; and model-derived valuations whose inputs are observable or
           whose significant value drivers are observable.
Level 3:  Significant inputs to the valuation model are unobservable.

The Company uses the  following methods and assumptions  to estimate the  fair 
value of each class  of financial instruments for  which the carrying  amounts 
are included in the Consolidated Balance Sheet under the following captions:

(i) Cash and cash equivalents, Restricted cash and cash equivalents,  Accounts 
receivable, Other current assets, Accounts payable and other:
The carrying amounts approximate fair value  because of the short maturity  of 
these instruments.  Cash and  cash equivalents  and Restricted  cash and  cash 
equivalents include highly liquid investments  purchased three months or  less 
from maturity  and  are classified  as  Level 1.  Accounts  receivable,  Other 
current assets, and Accounts  payable and other are  classified as Level 2  as 
they may not be priced using quoted prices, but rather determined from  market 
observable information.

(ii) Intangible and other assets:
Included in Intangible and other assets  are equity investments for which  the 
carrying value approximates the fair value, with the exception of certain cost
investments for  which the  fair value  is estimated  based on  the  Company's 
proportionate share of the underlying net assets. Intangible and other  assets 
are classified  as  Level  3 as  their  fair  value is  based  on  significant 
unobservable inputs.

(iii) Debt:
The fair value of the Company's debt  is estimated based on the quoted  market 
prices for the same  or similar debt instruments,  as well as discounted  cash 
flows using  current  interest rates  for  debt with  similar  terms,  company 
rating, and remaining maturity. The Company's debt is classified as Level 2.

The following table presents the carrying amounts and estimated fair values of
the Company's financial instruments as at September 30, 2013 and December  31, 
2012 for  which the  carrying values  on the  Consolidated Balance  Sheet  are 
different from their fair values:

In millions           September 30, 2013  December 31, 2012
                     Carrying      Fair   Carrying    Fair
                       amount    value    amount     value
Financial assets                                  
      Investments     $    34  $   134   $    30  $   125
Financial liabilities                             
      Total debt      $ 7,498  $ 8,423   $ 6,900  $ 8,379

Note 10 - Earnings per share

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

                                                             
                        Three months ended September     Nine months ended
                                      30                    September 30
In millions, except per                                          
share data                      2013           2012       2013        2012
                                                                  
Net income                  $     705      $     664   $  1,977    $  2,070
                                                                  
Weighted-average shares                                          
outstanding                    419.6          433.9      423.1       437.3
Effect of stock options          1.5           2.0       1.5        2.3
Weighted-average diluted                                         
shares outstanding             421.1          435.9      424.6       439.6
                                                                  
Basic earnings per share    $    1.68      $    1.53   $   4.67    $   4.73
Diluted earnings per                                             
share                       $    1.67       $    1.52    $   4.66     $   4.71

Basic earnings per share are  calculated based on the weighted-average  number 
of common shares outstanding over each period. Diluted earnings per share  are 
calculated based on the weighted-average diluted shares outstanding using  the 
treasury stock  method, which  assumes  that any  proceeds received  from  the 
exercise of in-the-money stock options would be used to purchase common shares
at the average  market price for  the period. 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  nil 
for both the three and nine months  ended September 30, 2013, and nil and  0.1 
million, respectively, for the corresponding periods in 2012.

Note 11 - Accumulated other comprehensive income (loss)

The  following   tables   provide  the   components,   the  change   and   the 
reclassifications out of Accumulated other comprehensive income (loss) for the
three and nine months ended September 30, 2013:

                                        Pension
                                      and other    Foreign       Total              Tax          Total
                    Derivative   postretirement   currency      before         recovery         net of
In millions        instruments   benefit plans     items        tax      (expense)           tax
Beginning balance
at July 1, 2013        $     8     $   (3,174)   $ (544)  $ (3,710)        $   616     $ (3,094)
Other
comprehensive
income (loss)
before
reclassifications:                                                                  
    Foreign
    currency
    translation
   adjustments             -              -     (11)      (11)          (17)         (28)
Amounts
reclassified from
accumulated other
comprehensive
income (loss):                                                                      
    Amortization
    of net
  actuarial loss          -             56        -        56 ^(1)      (15) ^(2)       41
    Amortization
    of prior
   service cost            -              1        -         1 ^(1)         - ^(2)        1
Other
comprehensive
income (loss)               -             57     (11)        46          (32)           14
Ending balance at
September 30, 2013     $     8     $   (3,117)   $ (555)  $ (3,664)        $   584     $ (3,080)
                                                                                       
                                        Pension
                                      and other    Foreign       Total              Tax          Total
                    Derivative   postretirement   currency      before         recovery         net of
In millions        instruments   benefit plans     items        tax      (expense)           tax
Beginning balance
at January 1, 2013     $     8     $   (3,290)   $ (579)  $ (3,861)        $  604     $ (3,257)
Other
comprehensive
income (loss)
before
reclassifications:                                                                  
    Foreign
    currency
    translation
  adjustments             -              -       24        24            25           49
Amounts
reclassified from
accumulated other
comprehensive
income (loss):                                                                      
    Amortization
    of net
   actuarial loss          -            169        -       169 ^(1)      (44) ^(2)      125
    Amortization
    of prior
   service cost            -              4        -         4 ^(1)       (1) ^(2)        3
Other
comprehensive
income (loss)               -            173       24       197          (20)          177
Ending balance at
September 30, 2013     $     8     $   (3,117)   $ (555)  $ (3,664)        $   584     $ (3,080)

(1) Reclassified to Labor and fringe benefits on the Consolidated Statement of
    Income and included in components of net periodic benefit cost. See Note 6
    - Pensions and other postretirement benefits to the Company's unaudited
    Interim Consolidated Financial Statements.
(2) Included in Income tax expense on the Consolidated Statement of Income.

The  following   tables   provide  the   components,   the  change   and   the 
reclassifications out of Accumulated other comprehensive income (loss) for the
three and nine months ended September 30, 2012:

                                        Pension
                                      and other    Foreign       Total              Tax          Total
                    Derivative   postretirement   currency      before         recovery         net of
In millions        instruments   benefit plans     items        tax      (expense)           tax
Beginning balance
at July 1, 2012        $     8     $   (2,684)   $ (576)  $ (3,252)        $  463     $ (2,789)
Other
comprehensive
income (loss)
before
reclassifications:                                                                  
   Foreign
   currency
   translation
  adjustments              -              -      (8)       (8)          (28)         (36)
Amounts
reclassified from
accumulated other
comprehensive
income (loss):                                                                      
   Amortization of
   net actuarial
  loss                     -             30        -        30 ^(1)       (8) ^(2)      22
   Amortization of
   prior service
  cost                     -              1        -         1 ^(1)       (1) ^(2)        -
Other
comprehensive
income (loss)               -             31      (8)        23          (37)         (14)
Ending balance at
September 30, 2012     $     8     $   (2,653)   $ (584)  $ (3,229)        $  426     $ (2,803)
                                                                                  
                                        Pension
                                      and other    Foreign       Total              Tax          Total
                    Derivative   postretirement   currency      before         recovery         net of
In millions        instruments   benefit plans     items        tax      (expense)           tax
Beginning balance
at January 1, 2012     $     8     $   (2,750)   $ (574)  $ (3,316)        $  477     $ (2,839)
Other
comprehensive
income (loss)
before
reclassifications:                                                                  
   Foreign
   currency
   translation
  adjustments              -              -     (10)      (10)          (28)         (38)
Amounts
reclassified from
accumulated other
comprehensive
income (loss):                                                                      
   Amortization of
   net actuarial
  loss                     -             92        -        92 ^(1)      (20) ^(2)      72
   Amortization of
   prior service
  cost                     -              5        -         5 ^(1)       (3) ^(2)       2
Other
comprehensive
income (loss)               -             97     (10)        87          (51)          36
Ending balance at
September 30, 2012     $     8     $   (2,653)   $ (584)  $ (3,229)        $  426     $ (2,803)

(1) Reclassified to Labor and fringe benefits on the Consolidated Statement of
    Income and included in components of net periodic benefit cost. See Note 6
    - Pensions and other postretirement benefits to the Company's unaudited
    Interim Consolidated Financial Statements.
(2) Included in Income tax expense on the Consolidated Statement of Income.

Note 12 - Subsequent events

Common stock split
On October  22,  2013,  the Board  of  Directors  of the  Company  approved  a 
two-for-one common stock split which is to be effected in the form of a  stock 
dividend of one  additional common  share of  CN for  each share  outstanding, 
payable on November 29, 2013, to shareholders of record on November 15,  2013. 
At the effective date of the  stock split, all equity-based benefit plans  and 
the current share repurchase program will be adjusted to reflect the  issuance 
of additional shares.  All share and  per share data  for future periods  will 
also reflect the stock split.

Share repurchase program
On October 22,  2013, the Board  of Directors  of the Company  approved a  new 
share repurchase program which allows for the repurchase of up to 15.0 million
common shares before adjusting for the  stock split, between October 29,  2013 
and October 23,  2014 pursuant  to a normal  course issuer  bid at  prevailing 
market prices plus brokerage fees, or such other prices as may be permitted by
the Toronto Stock Exchange.

CANADIAN NATIONAL RAILWAY COMPANY
SELECTED RAILROAD STATISTICS (U.S. GAAP) - unaudited
                                                                        
                                       Three months ended  Nine months ended
                                          September 30       September 30
                                            2013     2012      2013     2012
                                                                            
Statistical operating data                                               
                                                                        
Rail freight revenues ($ millions)          2,427    2,237     7,093    6,658
Gross ton miles (GTM) (millions)          100,321   96,402   298,169  285,881
Revenue ton miles (RTM) (millions)         52,188   49,999   155,466  149,372
Carloads (thousands)                        1,333    1,298     3,880    3,789
Route miles (includes Canada and the                       
U.S.) ^(1)                                 20,000   20,000     20,000   20,000
Employees (end of period)                  23,664   23,610    23,664   23,610
Employees (average for the period)         23,756   23,573    23,706   23,444
                                                                        
Productivity                                                             
                                                                        
Operating ratio (%)                          59.8     60.6      62.9     62.6
Rail freight revenue per RTM (cents)         4.65     4.47      4.56     4.46
Rail freight revenue per carload ($)        1,821    1,723     1,828    1,757
Operating expenses per GTM (cents)           1.61     1.57      1.65     1.62
Labor and fringe benefits expense per                      
GTM (cents)                                  0.52     0.49       0.53     0.52
GTMs per average number of employees                       
(thousands)                                 4,223    4,090     12,578   12,194
Diesel fuel consumed (US gallons in                        
millions)                                    96.8     94.5      302.0    288.8
Average fuel price ($/US gallon)             3.52     3.40      3.52     3.45
GTMs per US gallon of fuel consumed         1,036    1,020       987      990
                                                                        
Safety indicators                                                        
                                                                        
Injury frequency rate per 200,000                          
person hours ^ (2)                           1.67     1.40       1.50     1.40
Accident rate per million train miles                      
^(2)                                         1.31     2.30       1.84     2.22
                                                                        
Financial ratio                                                          
                                                                        
Debt-to-total capitalization ratio (%                      
at end of period) ^(3)                       39.3     36.3       39.3     36.3

(1) Rounded to the nearest hundred miles.
(2) Based on Federal Railroad Administration (FRA) reporting criteria.
(3) Debt-to-total capitalization is calculated as total long-term debt plus
    current portion of long-term debt, divided by the sum of total debt plus
    total shareholders' equity.

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, as such  certain of the 2012  comparative data and  related 
productivity measures have been restated.

CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY INFORMATION (U.S. GAAP) - unaudited
                       
           Three months ended September 30     Nine months ended September 30
                                                                     
                                   % Change                           % Change
                                          at                                   at
                                    constant                             constant
                                %   currency                         %   currency
                           Change        Fav                    Change        Fav
                              Fav    (Unfav)                       Fav    (Unfav)
             2013   2012 (Unfav)       ^(1)      2013    2012 (Unfav)       ^(1)
                                                                               
Revenues                                                             
(millions
of dollars)                                                              
Petroleum                                                            
and
chemicals      485    416     17%        13%     1,420   1,213     17%        15%
Metals and                                                           
minerals       324    293     11%         7%       910     859      6%         4%
Forest                                                               
products       362    336      8%         5%     1,056   1,008      5%         3%
Coal           186    187    (1%)      (3%)      538     541    (1%)      (1%)
Grain and                                                            
fertilizers    357    368    (3%)       (5%)     1,141   1,131      1%          -
Intermodal     577    510     13%       12%    1,612   1,496      8%        7%
Automotive     136    127      7%        4%      416     410      1%         -
Total rail                                                           
freight
revenues     2,427  2,237      8%         6%     7,093   6,658      7%         5%
Other                                                                
revenues       271    260      4%         2%       737     728      1%          -
Total                                                                
revenues     2,698  2,497      8%         6%     7,830   7,386      6%         5%
                                                                     
Revenue ton                                                          
miles
(millions)                                                               
Petroleum                                                            
and
chemicals   11,033  9,461     17%        17%    32,428  27,295     19%        19%
Metals and                                                           
minerals     5,825  5,229     11%        11%    16,022  15,236      5%         5%
Forest                                                               
products     7,508  7,545       -          -    22,317  22,533    (1%)       (1%)
Coal         6,057  6,216    (3%)      (3%)   17,342  17,816    (3%)      (3%)
Grain and                                                            
fertilizers  9,105 10,394   (12%)      (12%)    30,556  32,591    (6%)       (6%)
Intermodal  11,986 10,492     14%       14%   34,722  31,782      9%        9%
Automotive     674    662      2%        2%    2,079   2,119    (2%)      (2%)
           52,188 49,999      4%        4%  155,466 149,372      4%        4%
Rail                                                                 
freight
revenue /
RTM (cents)                                                              
Total rail                                                           
freight
revenue per
RTM           4.65   4.47      4%         2%      4.56    4.46      2%         1%
Commodity                                                            
groups:                                                                  
Petroleum                                                            
and
chemicals     4.40   4.40       -       (3%)      4.38    4.44    (1%)       (3%)
Metals and                                                           
minerals      5.56   5.60    (1%)       (4%)      5.68    5.64      1%       (1%)
Forest                                                               
products      4.82   4.45      8%         5%      4.73    4.47      6%         4%
Coal          3.07   3.01      2%         -     3.10    3.04      2%        1%
Grain and                                                            
fertilizers   3.92   3.54     11%         8%      3.73    3.47      7%         7%
Intermodal    4.81   4.86    (1%)      (2%)     4.64    4.71    (1%)      (2%)
Automotive   20.18  19.18      5%        2%    20.01   19.35      3%        2%
                                                                     
Carloads                                                             
(thousands)                                                              
Petroleum                                                            
and
chemicals      152    152       -          -       452     444      2%         2%
Metals and                                                           
minerals       285    265      8%         8%       803     778      3%         3%
Forest                                                               
products       114    111      3%         3%       338     336      1%         1%
Coal           109    117    (7%)      (7%)      316     332    (5%)      (5%)
Grain and                                                            
fertilizers    126    144   (13%)      (13%)       401     426    (6%)       (6%)
Intermodal     493    455      8%        8%    1,402   1,305      7%        7%
Automotive      54     54       -         -      168     168       -         -
            1,333  1,298      3%        3%    3,880   3,789      2%        2%
Rail                                                                 
freight
revenue /
carload
(dollars)                                                                
Total rail                                                           
freight
revenue per
carload      1,821  1,723      6%         3%     1,828   1,757      4%         3%
Commodity                                                            
groups:                                                                  
Petroleum                                                            
and
chemicals    3,191  2,737     17%        13%     3,142   2,732     15%        13%
Metals and                                                           
minerals     1,137  1,106      3%         -     1,133   1,104      3%         1%
Forest                                                               
products     3,175  3,027      5%         2%     3,124   3,000      4%         3%
Coal         1,706  1,598      7%        5%    1,703   1,630      4%        3%
Grain and                                                            
fertilizers  2,833  2,556     11%         8%     2,845   2,655      7%         6%
Intermodal   1,170  1,121      4%        3%    1,150   1,146       -         -
Automotive   2,519  2,352      7%        4%    2,476   2,440      1%         -

(1) See supplementary schedule entitled Non-GAAP Measures for an explanation
    of this Non-GAAP measure.

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

For the three and nine months  ended September 30, 2013, the Company  reported 
adjusted net income  of $724 million,  or $1.72 per  diluted share and  $1,947 
million, or  $4.60  per  diluted share,  respectively.  The  adjusted  figures 
exclude a $19  million ($0.05  per diluted share)  income tax  expense in  the 
third quarter and a $5 million ($0.01 per diluted share) income tax expense in
the second quarter,  both resulting  from the enactment  of higher  provincial 
corporate income tax rates. The adjusted figures also exclude a second quarter
gain on exchange of perpetual railroad operating easements including the track
and roadway  assets on  specific  rail lines  (collectively the  "exchange  of 
easements") in the amount of $29 million, or $18 million after-tax ($0.04  per 
diluted share); and  a first  quarter gain  on disposal  of a  segment of  the 
Oakville subdivision, together  with the rail  fixtures and certain  passenger 
agreements (collectively the "Lakeshore West"), of $40 million, or $36 million
after-tax ($0.08 per diluted share).

For the three and nine months  ended September 30, 2012, the Company  reported 
adjusted net income  of $664 million,  or $1.52 per  diluted share and  $1,846 
million, or  $4.20  per  diluted share,  respectively.  The  adjusted  figures 
exclude a second  quarter net  income tax expense  of $28  million ($0.06  per 
diluted share) consisting of a $35  million income tax expense resulting  from 
the enactment of higher provincial corporate income tax rates that was  partly 
offset by a $7 million income tax recovery resulting from the recapitalization
of a foreign investment; and a first quarter gain on disposal of a segment  of 
the Bala and a  segment of the Oakville  subdivisions, together with the  rail 
fixtures and certain passenger agreements (collectively the  "Bala-Oakville"), 
of $281 million, or $252 million after-tax ($0.57 per diluted share).

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  2013  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 and nine months ended September  30, 2013 and 2012, to the  adjusted 
performance measures presented herein.

                                                                               
           Three months ended September 30,       Nine months ended September 30,
                        2013                                 2013
In                                              
millions,
except
per share
data       Reported  Adjustments  Adjusted    Reported  Adjustments  Adjusted
Revenues  $    2,698 $           - $    2,698  $    7,830 $           - $    7,830
Operating                                     
expenses      1,614            -     1,614       4,924            -     4,924
Operating                                     
income        1,084            -     1,084       2,906            -     2,906
Interest                                      
expense        (89)            -      (89)       (266)            -     (266)
Other                                         
income            5            -         5          75         (69)         6
Income                                        
before
income
taxes         1,000            -     1,000       2,715         (69)     2,646
Income                                        
tax
expense       (295)           19     (276)       (738)           39     (699)
Net                                           
income    $      705 $          19 $      724   $    1,977 $        (30) $    1,947
Operating                                     
ratio         59.8%                 59.8%       62.9%                 62.9%
Effective                                     
tax rate      29.5%                 27.6%       27.2%                 26.4%
Basic                                         
earnings
per share $     1.68 $        0.05 $     1.73   $     4.67 $     (0.06) $     4.61
Diluted                                       
earnings
per share $     1.67 $        0.05 $     1.72   $     4.66 $     (0.06) $     4.60

                                                                           
         Three months ended September 30, 2012   Nine months ended September 30, 2012
In         Reported                                 
millions,
except
per share
data                   Adjustments    Adjusted      Reported  Adjustment   Adjusted
Revenues  $    2,497  $           -   $    2,497    $    7,386 $          -  $    7,386
Operating                                       
expenses       1,512             -       1,512         4,623           -      4,623
Operating                                       
income           985             -         985         2,763           -      2,763
Interest                                        
expense         (84)             -        (84)         (256)           -      (256)
Other                                           
income            18             -          18           320       (281)         39
Income                                          
before
income
taxes            919             -         919         2,827       (281)      2,546
Income                                          
tax
expense        (255)             -       (255)         (757)          57      (700)
Net       $                                      
income           664  $           -   $      664     $    2,070 $      (224)  $    1,846
Operating                                       
ratio          60.6%                    60.6%         62.6%                 62.6%
Effective                                       
tax rate       27.7%                    27.7%         26.8%                 27.5%
Basic     $                                      
earnings
per share       1.53  $           -   $     1.53     $     4.73 $     (0.51)  $     4.22
Diluted   $                                      
earnings
per share       1.52  $           -   $     1.52     $     4.71 $     (0.51)  $     4.20

Constant currency

Although CN  conducts  its  business  and reports  its  earnings  in  Canadian 
dollars, a  large  portion of  revenues  and  expenses is  denominated  in  US 
dollars.  As  such,  the  Company's  results  are  affected  by  exchange-rate 
fluctuations.

Financial results at "constant  currency" allow results  to be viewed  without 
the impact  of  fluctuations  in  foreign  currency  exchange  rates,  thereby 
facilitating  period-to-period  comparisons  in  the  analysis  of  trends  in 
business performance. Measures  at constant currency  are considered  non-GAAP 
measures and do not have any standardized meaning prescribed by GAAP and  may, 
therefore, not be comparable to similar measures presented by other companies.
Financial results at constant currency are obtained by translating the current
period results denominated in US dollars at the foreign exchange rates of  the 
comparable period of the prior year.  The average foreign exchange rates  were 
$1.04 and $1.02 per US$1.00, respectively, for the three and nine months ended
September 30, 2013,  and $0.99 and  $1.00 per US$1.00,  respectively, for  the 
corresponding periods in 2012.

On a  constant currency  basis, the  Company's 2013  third quarter  and  first 
nine-month net  income would  have been  lower by  $14 million,  or $0.03  per 
diluted share and $18 million, or  $0.04 per diluted share, respectively.  The 
following table presents a  reconciliation of 2013 net  income as reported  to 
net income on a constant currency basis:

                                                                         
                                     Three months ended  Nine months ended
In millions                            September 30, 2013  September 30, 2013
Net income, as reported                      $        705        $      1,977
Add back:                                                                
    Positive impact due to the                                   
    weakening Canadian dollar included
   in net income                                    (12)                (15)
Add:                                                                     
         Decrease due to the weakening                           
         Canadian dollar on additional
        year-over-year US$ net income                (2)                 (3)
Impact of foreign exchange using                     (14)
constant currency rates                                                (18)
Net income, on a constant currency
basis ^                                      $        691        $      1,959

Free cash flow

The Company generated $341 million and $778 million of free cash flow for  the 
three and nine months ended September 30, 2013, respectively, compared to $333
million and $1,036 million  for the same periods  in 2012, respectively.  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  the 
sum of net cash provided by operating activities, adjusted for changes in cash
and cash equivalents  resulting from  foreign exchange  fluctuations; and  net 
cash used in investing activities, adjusted for changes in restricted cash and
cash equivalents, if any,  the impact of major  acquisitions, if any; and  the 
payment of dividends, calculated as follows:

                                                                          
                              Three months ended          Nine months ended
                                  September 30                    September 30
In millions                      2013       2012        2013       2012
                                                                     
Net cash provided by          $  1,066     $  1,000    $    2,450     $
operating activities                                                  2,336
Net cash used in investing      (579)       (547)      (1,151)     
activities                                                            (824)
Net cash provided before          487         453        1,299     
financing activities                                                  1,512
                                                                  
Adjustments:                                                       
   Dividends paid              (180)      (163)       (545)      (491)
   Change in restricted                                        
    cash and cash
    equivalents                     32           46             8           19
  Effect of foreign                                           
    exchange fluctuations on
    US dollar-denominated
    cash and cash
    equivalents                      2          (3)            16          (4)
Free cash flow                $    341    $    333   $      778    $  1,036



SOURCE CN

Contact:

Contacts:
Media
Mark Hallman
Director
Communications and Public Affairs
(905) 669-3384

Investment Community
Janet Drysdale
Vice-President
Investor Relations
(514) 399-0052
 
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