Canadian National Railway Company

Welcome to the CN First Quarter 2021 Financial and Operating Results Conference Call. I would now like to turn the meeting over to Paul Butcher, the Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher.

Well, thank you, Christina. Good afternoon, everyone, and thank you for joining us for CN's First Quarter 2021 Financial Results Conference Call. I would like to remind you about the comments already made regarding forward-looking statements. With me today is JJ Rouet, our President and Chief Executive Officer, Ghislaine Houlle, our Executive Vice President and Chief Financial Officer, Rob Riley, our Executive Vice President and Chief Operating Officer, and Sean Finn, our Executive Vice President, Corporate Services, and Chief Legal Officer. I do want to remind you to please limit yourselves to one question so that everyone has the opportunity to participate in the Q&A. The IR team will be available after the call for any follow-up questions. It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Mr. J.J. Rouet.

Well, thank you, Paul, and good afternoon to everyone. I hope you all had a safe, healthy, and constructive start to 2021. Here at CN, we're off to a good, strong running start. The underlying performance of CN has been strong, and this is thanks to our dedicated colleagues. Our railroad is delivered despite severe winter operating conditions, unprecedented demand in a number of markets like pork and grain, and ongoing challenges in the pandemic. As you can see from slide five, CN is on track to become the premier railway of the 21st century. We are focused on our role as an engine of the North American economic growth and prosperity, as well as a supply chain and environmental leader. We pioneered and were the first to implement precision schedule railroading across our network, and we are a clear industry leader in ESG. Our strong balance sheet is a testament to our operational excellence, and we continue to prudently invest in the business and our strategy as we grow and expand our reach. CN has a longstanding successful track record of strategic and accredited acquisition throughout North America, which has resulted in successful integration of our current rail network. In line with our existing strategy, CN made a superior proposal to acquire the KCS. This is the right next step for both CN and KCS toward becoming the premier railway of the 21st century. Turning to slide six, we are confident that together with KCS experience and very talented team, we will be able to continue that success in a combination of CN and KCS to the benefit of both companies. Specifically, This offer will deliver superior value to KCS shareholders. CN's proposal represents a 21% premium to the CP proposal and more than double the amount of cash per share, resulting in not just greater value, but also greater certainty of the value for KCS shareholders. The combination will also significantly enhance customers' choice and competition. In particular, it would create a new express route that connects the U.S., Mexico, and Canada with end-to-end seamless single-owner, single-operator service. It would connect vibrant ports from all three coasts to more interland market in cities. It would connect CN and KCS buyers and sellers to more destinations. It will also preserve access to all existing interchange options to enhance route choice and ensure robust competition. We are also firmly committed to maintaining open gateway to competitors' network. We believe this combination will enable better solution to our customers, speed of movement of goods from country to country, coast to coast, enhance competition, create jobs up and down the railroad, and prevent millions of tons of greenhouse gas from entering the atmosphere by converting truck traffic to rail supply chain. As an update on where our proposal currently stands, On April 21st, we submitted a pre-filing notification to the STB of our intent to file an application seeking authority to combine with KCS should the KCS Board of Directors accept our superior proposal. We are proposing to use an identical voting trust structure that CP has proposed, and we are confident that the STB will not subject our proposal to any different standard in approving the voting trust than those that would be applicable to CP. We believe that both voting trusts are equally likely to be approved. If our voting trust is approved and a combination with KCS is consummated, KCS shareholders will receive the value of their consideration being offered when the transaction closes in trust, which we anticipate could be as soon as the second half of 2021. We are fully committed to this transaction and confident in our ability to achieve all necessary regulatory approval to close into our voting trust and then ultimately receive approval to combine with KCS. On page 7, I would like to provide a brief update on our strong progress as we have made in only one week since announcing our proposed combination. We were very pleased to learn on Saturday that the Board of KCS determined that CN's offer is reasonably expected to lead to a company-superior proposal and we were granted permission to conduct our confirmatory due diligence. We look forward to working toward finalizing a definitive agreement merger to combine our two great railroads. I connected with Pat, the CEO of KCS, over the weekend and reiterated CN's strong enthusiasm, readiness, and most importantly, our deep commitment to begin collaboration with the KCS team toward a successful combination. Secondly, we filed earlier today an application with the STB for the approval of our voting trust and named Dave Starling as the trustee. Finally, a great importance of note, in less than a week of making a proposal to combine with KCS, we have received an overwhelming amount of support from more than 500 freight customers, port ecosystem partners, supplier, government officials, and other stakeholders. They have voiced their support for a combined CN-KCS, which will help them compete in their market and better serve their needs by offering greater choice and greater efficiencies. We have also spoken to our shareholders and many of you as well and appreciate your strong support in this combination. I myself, on behalf of the entire CN team, we are fully committed to this transaction and we're very confident in our ability to achieve all the necessary regular approval to close into a voting trust and then ultimately receive approval to combine with KCS. Together, we will create the premier North American railway for the 21st century. Moving on page 8. I am very proud of the CN underlying performance in Q1. This quarter, we realized solid results, and we continue to work on our yield of our new business mix. During the quarter, we continue to deliver industry-leading volume growth, with RTM up 5%, while revenue were flat versus last year, mainly due to adverse fuel lag and exchange rate. Our yield strategy is working. Our same-store pricing was 4.2% in Q1. Our network is fluid, and we recovered very well from the polar vortex of February. Our efforts are reflected in our ability to capitalize on consumer-driven trends and growth of our internal business, which was up 19% for the quarter, with CN significantly outpacing the rest of the industry, as well as our strong financial performance and gain in safety, train length, car velocity, labor productivity, fuel efficiencies, and other key measure of operational performance. We are confident in our business and committed to our long-term strategy. With that, I will turn it to Rob.