Canadian National Railway pany(CNI) - 2024 Q4 - Annual Report

Internal Control and Audit - The Company assessed the effectiveness of its internal control over financial reporting as of December 31, 2024, and determined it was effective[2]. - KPMG LLP issued an unqualified audit opinion on the Company's 2024 consolidated financial statements and internal control over financial reporting[3]. - The Company maintained effective internal control over financial reporting as of December 31, 2024, based on established criteria[17]. - The audit included evaluating the design and operating effectiveness of internal controls related to the Company's capital additions process[15]. - The internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting[21]. - The Company has been audited by KPMG LLP since 1992, ensuring continuity and expertise in the audit process[16]. Financial Performance - Revenues for 2024 reached $17,046 million, a slight increase of 1.3$16,828 million in 2023[26]. - Operating income decreased to $6,247 million in 2024 from$6,597 million in 2023, reflecting a decline of 5.3%[26]. - Net income for 2024 was $4,448 million, down 20.9$5,625 million in 2023[26]. - Basic earnings per share decreased to $7.02 in 2024 from$8.55 in 2023, a decline of 17.9%[26]. - Total operating expenses increased to $10,799 million in 2024, up from$10,231 million in 2023, representing a rise of 5.6%[26]. - Labor and fringe benefits rose to $3,422 million in 2024, compared to$3,150 million in 2023, an increase of 8.6%[26]. - Interest expense increased to $891 million in 2024 from$722 million in 2023, a rise of 23.4%[26]. - Other income (loss) was $42 million in 2024, down from$134 million in 2023[26]. - Income tax expense increased to $1,404 million in 2024 from$863 million in 2023, an increase of 62.5%[26]. - Comprehensive income for 2024 increased to $5,707 million, compared to$5,315 million in 2023, reflecting a rise of 7.4%[27]. Assets and Liabilities - Total assets as of December 31, 2024, reached $57,067 million, an increase of 8.5$52,666 million in 2023[29]. - Current liabilities decreased to $3,976 million in 2024, down 21$5,035 million in 2023[29]. - Long-term debt increased to $19,728 million in 2024, up 22$16,133 million in 2023[29]. - Shareholders' equity rose to $21,051 million in 2024, an increase of 4.6$20,117 million in 2023[29]. - The pension asset increased to $4,541 million in 2024, up from$3,140 million in 2023[29]. Cash Flow and Investments - Net cash provided by operating activities was $6,699 million, slightly down from$6,965 million in 2023[33]. - Total cash, cash equivalents, and restricted cash at the end of 2024 was $401 million, down from$924 million in 2023[33]. - Cash used in investing activities increased to $3,607 million in 2024 from$3,468 million in 2023[33]. - Issuance of debt rose to $3,483 million in 2024, compared to$2,554 million in 2023[33]. - Repurchase of common shares decreased to $2,600 million in 2024 from$4,551 million in 2023[33]. - Dividends paid increased to $2,138 million in 2024, compared to$2,071 million in 2023[33]. Taxation - The Company operates in various tax jurisdictions, requiring significant judgments and estimates regarding its tax positions[10]. - The audit procedures involved assessing the Company's interpretation of relevant tax regulations and evaluating the reasonability of its tax positions[12]. - The effective income tax expense for 2024 was C$1,404 million, compared to C$863 million in 2023, influenced by provincial and foreign income taxes[122]. - The company had net deferred income taxes of $(10,185) million as of December 31, 2024, an increase from$(9,384) million in 2023[125]. - The total amount of gross unrecognized tax benefits was $41 million as of December 31, 2024, down from$46 million in 2023[128]. Capital Expenditures - Capital additions, net of finance leases, amounted to $3,549 million for the year ended December 31, 2024, including$1,564 million for track and railway infrastructure maintenance[13]. - The Company capitalizes all costs necessary to make purchased assets ready for intended use, including direct material, labor, and contracted services[62]. - The service life of rail assets is extended through rail grinding, which is capitalized as it allows for additional gross tons to be carried over the rail[63]. - Expenditures related to shoulder ballast undercutting are capitalized as they represent the addition of a new asset, replacing deteriorated ballast[64]. - The Company uses approximately 40 different depreciable asset classes, with depreciation rates based on estimated service lives[67]. Debt and Financing - The Company has a total debt of $20,894 million as of December 31, 2024, which includes finance lease liabilities of$7 million[170]. - The Company extended the maturity date of its committed bilateral letter of credit facilities to April 28, 2027, with outstanding letters of credit totaling $329 million[167]. - The Company issued a total of$1,242 million in notes in May 2024, including $700 million 4.60$550 million 5.10% Notes due in 2054[158]. - The Company had total commercial paper borrowings of $721 million as of December 31, 2024, compared to$1,801 million in 2023, reflecting a decrease of 60%[160]. Pension and Investment Strategy - The Company expects total cash contributions of approximately $80 million for all other pension plans in 2025, with no contributions anticipated for the CN Pension Plan due to its fully funded status[180]. - The actual asset allocation for 2024 shows a 30$18,435 million, a rise from $17,533 million in 2023[187]. - The funded status of the Company's pension plans is significantly influenced by overall capital market returns and interest rate levels[185]. - The fair value of total derivatives included in investments for 2024 was$8,359 million, with an unrealized gain of $86 million and an unrealized loss of$183 million, compared to $7,569 million,$504 million gain, and $257 million loss in 2023[198].