Operator: Welcome to CN First Quarter 2020 Financial Results Conference Call.I would now like to turn the meeting over to Paul Butcher, Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher.

Paul Butcher: Well, thank you, Eric. Good afternoon, everyone.

And thank you for joining us for CN's first quarter 2020 earnings call. I would like to remind you about the comments already made regarding forward-looking statements. With me today is JJ Ruest, our President and Chief Executive Officer; Ghislain Houle, our Executive Vice President and Chief Financial Officer; Rob Reilly, our Executive Vice President and Chief Operating Officer; Keith Reardon, our Senior Vice President, Consumer Products Supply Chain; and James Cairns, our Senior Vice President, Rail Centric Supply Chain.Once again, I do want to remind you to please limit yourself to one question so that everyone has the opportunity to participate in the Q&A session. 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. JJ Ruest.

JJ Ruest: Thank you, Paul. And good afternoon, everyone and welcome to first quarter earnings call. In keeping with our commitment to safety, I hope you and your families are staying safe, practicing social distancing and helping to reduce the spread of Covid-19. We at CN have been diligent in providing a safe environment for all of our employees and I'm happy to report that rail road is safe and CN never slow down.As we look back to the quarter, my first message is that despite the unusual challenge we were faced with, the men and women of CN produced solid financial results. I also believe it is important to look ahead.

My second message is that the resiliency of CN which we demonstrated last quarter was serviced well to this challenging time and positioned us for the recovery. Our investors know we manage the business to deliver long-term performance and we continue to build for 2021 and beyond. We will balance the need to manage through the short term with the focus on long-term performance of the business. The network is currently in full operation and very fluid.We have the capacity to move goods and enable the eventual recovery of the economy. We also continue to build on our technology big ideas such as automating track inspection, automating train inspection.

Fully enabling a connected and paperless train crews and increasing the automation of trains. Rob will walk you through the strength of operation and highlight some specific progress we continue to make in technology and safety.Our financial strength will also service well in the near to long term. We have a very robust balance sheet and a proven track record of dealing with any type of business disruption. Ghislain will give more color on our financial strength, our cost, our free cash as well as a balance sheet. Our 2020 CapEx will further enhance capacity in the strategic and maintain to Rupert growth corridor, as well as the infrastructure required for our growth in and around the Port of Vancouver.

Keith and James will speak as to how we are building businesses even in this tough marketplace.ESG is strength for CN. Our carbon footprint continues to decrease and our fuel costs continue to improve. In these unusual time, we are beefing up our cyber security, as well as pushing further on a broad range of key ECS aspect related to gender, human capital and environmental strategies.So in summary, a good quarter despite a month long of illegal rail blockade, a proven resilience that will help us delivers in the near term. And we are ready to support the recovery and deliver a long-term shareholders value. On that I will pass it on to Rob who’ll talk to you about the operation.

Rob Reilly: All right. Thank you JJ. Team delivered impressive results in Q1 with car velocity improving 5%, train velocity improving by 7% and dwell was reduced by 4%. Even better if we look at the month of March after the illegal blockades have been lifted, car and train velocity improved 10% year-over-year, while dwell was reduced by 7%. As you know, by increasing car and train velocity while reducing dwell, it allows us to use less locomotives and cars on our network to move the same amount of GTMS.

In addition, we had a very solid performance on other fronts as well.In safety, accident and injury rates decreased 36% and 3% respectively. In productivity and sustainability, fuel efficiency improved 6% to an all-time Q1 record for CN, while avoiding over 100,000 tons of CO2 emissions. The disciplined execution of the CN team and how we utilize our locomotives on a daily basis led to a $20 million savings in fuel efficiency year-over-year. We remain focused on maintaining our industry leadership and progressing on our long-term carbon efficiency target. And we expect to be able to deliver a low single-digit year-over-year fuel efficiency for the balance of the year.

What is most impressive is that we were able to achieve all of this, while we faced multiple challenges including 30-plus illegal blockades across our network in February and the subsequent recovery of backlog traffic in March.Needless to say, I'm very proud of the entire CN team. As JJ mentioned, we are also well-positioned to continue to operate safely and efficiently throughout the impact of the pandemic. Our priorities have been and continued to be to protect our employees, ensure the continuity of our railroad as an essential service and right size our resources to the decreasing demand. 500 locomotives are now laid up reducing fuel, maintenance and labor costs. Our active online inventory of railcars has been reduced by 16%.

Over 2,500 employees have been furloughed and nearly 700 weekly train starts have been removed leading to 23% less active trains on our network.We've also curtailed switching activities at multiple locations with reduced car volumes and discontinued work at a couple more locomotive shops allowing us to further right-size our transportation and mechanical workforces. While we are aggressively right-sizing our resources to fit the demand, we do so with a purpose and a plan. We've laid up our least reliable locomotives first and ensure that they are stored in good working condition, so that when the time comes we can get them back into service pulling freight quickly. We store our cars and locomotives at locations where they will be needed and with our furloughed employees, we've established regular and frequent communications so that they are aware of our business demands.In addition with fewer trains on our network, we're using this time to further strengthen our railroad by providing more productive time to our engineering gangs to maintain our infrastructure. This will allow us to more quickly ramp up two volumes when demands increase.

Finally, we continue to progress on our technology initiatives. The FRA has now approved our test program to perform automated track inspections between Chicago and New Orleans. By operating these cars in regular train service, this multi-phase approach will ultimately lead to less on track inspection time for track infrastructure and more consistent and regular track evaluations.This will create capacity, improved safety and reliability and save costs. And we're already seeing the positive impacts to our railroad with a 90% reduction in track defects found as we've inspected 12 times more track miles than last year with better inspection quality and lower costs.In closing, thanks goes out to all of our central employees and the vital role we play in moving critical supplies to keep the North American supply chain open and fluid. With that I'll turn it over to James.

James Cairns: Thank you, Rob. In Q1, we demonstrated our ability to bounce back in times of adversity. It's what helped us in the months ahead and leave us well positioned for the recovery. Let me walk you through a few specific market segments highlighting our Q1 performance. In Q1, we set a record for domestic potash with revenue growth in the range of 20% compared to the prior winter.

We also produced all-time records for Canadian grain and coal in March. Despite some difficult conditions in Q1, we handled the majority of Canadian grain rail shipments with market share of 51% for the quarter and almost 52% in March.Looking broadly at energy related carloads, crude by rail was a significant growth driver, up 45% year-over-year for the quarter with nearly a third of that volume being heavy, non-dangerous, undiluted crude. We also saw sequential growth in frac sand from Q4, 2019 to Q1, 2020 of over 40%. Turning to propane, volumes were flat for the quarter in spite of the negative impact of the rail blockades, the CTA mandated train speed restriction and a general lack of propane supply. Importantly, our market share of Western Canadian propane kept on growing from the low 70s to almost 80% in the quarter.

We saw more of the available propane move to export markets via the new CN Prince Rupert supply chain; it connects Canadian production with more profitable and ratable long-term demand in Asia.As we look at the second quarter, we know it will be tough. We know crude, frac sand and jet fuels are in decline. Western Canada select the Canadian crude benchmark needs to be in the $25 to $30 range before curtailed production could come back online. In Q2, we expect to move the majority of our crude volume will be heavy, undiluted crude. This heavy crude which is similar to diluent recovery unit spec product will be less impacted than dilbit crude in Q2 and will continue to move but at a reduced run rate.

This speaks to the diversity and resiliency of our crude franchise.Aluminum, steel, plastics and some chemicals will continue to be impacted by the temporary auto production shut down. Once production resumes we will be ready to fill those supply chains back up. On the positive and in spite of the current environment, we could see more record volumes of Canadian coal and grain in Q2 just like we saw in Q1. We will continue to see growth in propane as AltaGas ramps up volume through 2020. Our unique geographic franchise will continue to underpin our medium and longer-term growth and serves as an unmatched strategic competitive advantage.

We exclusively provide physical service to the port of Prince Rupert, as well as the North Shore of Vancouver. Late this year or early next, Pembina is expected to commission their export propane facility at Watson Island at the port of Prince Rupert, creating a second wave of West Coast export propane carloads.Vancouver grain and export nameplate capacity is expected to increase by almost 50% with all new facilities exclusively CN served. In addition, we expect to see another six high throughput loop track country elevators come online exclusively served by CN by the end of 2021, adding in the range of 10% more car spots to see the CN network.Tech business is on track to start April 2021 and if marketing conditions remain favorable, we could see Coalspur continued to ramp up production, which will position us to move record coal volumes in 2021. Finally speaking on behalf of Keith and myself, CN's pricing strategy for carload and intermodal is consistent. We will continue to maintain our price discipline, pricing ahead of railway cost inflation as we keep a close eye on the recovery curve, so that we ramp up capacity and price smartly to allocate capacity through the recovery phase.I will now turn it over to Keith to walk you through our consumer markets.

Keith?

Keith Reardon: Thank you, James and good afternoon, everyone. Let me begin by saying we produced strong results in the first quarter and have kept essential products moving. We also showed we could be agile and resourceful and quickly develop supply chain alternatives to connect Montreal and Toronto to keep some of our customers business moving despite the blockades.Let me highlight a few points for each segment in Q1. On domestic intermodal, we continue to develop and refine our product offering to convert business from truck to rail using our CNTL domestic retail service and our wholesale partners services. The acquisitions of TransX and H&R and the development of our Cargo Cool business segments have given us the ability to increase our market presence in foods and other goods requiring temperature protective services.For international intermodal, the entire overseas shipping industry was impacted with volumes weakened from the supply side and now from the demand factors.

We saw 37 blank sailings for the quarter. Finally automotive, the industry came to a halt in March following the temporary closures of the North American assembly plant, an issue for the entire rail industry. Our import business in eastern passage and in Vancouver continued to move volume but at a lesser pace.Now looking ahead. In domestic intermodal, we remain focused on moving essential goods and continue to see good opportunities in the refrigerated segment. For example, we renewed and expanded our relationship with Maritime Ontario, one of Canada's leading transportation and logistics services providers.

Several additional strategic growth initiatives continue to show results including the EMP trans-border volume that increased 15% over Q1, 2019.Moving over to the International intermodal business, through close collaboration with our supply chain partners, we are mitigating the potential congestion at inland terminals as warehouses and distribution centers become full. This enables us to prepare for the bounce-back in imports. We will see some volume gains in early May related to the business transition of the shipping lines at ONE back to CN. We continue to focus and drive forward midterm, strategic and structural opportunities at our international intermodal gateways through close collaboration with our terminal partners, such as the proposed expansion plan at both Vancouver and Prince Rupert with GCT and DP World and working with PSA and Halifax.The CSX CN container services from the ports of New York, New Jersey and Philadelphia continue to grow and create a new balanced gateway into Canada from those ports. Lastly automotive, wherein Q1 we renewed and extended our agreement with FCA to handle over 80% of their Canadian destined traffic for another five years.

With the first North American assembly plants only set to reopen in a few weeks, Q2 volumes will be weak. We continue to focus on our long-term strategy of increasing the number of automotive storefronts and leveraging our great franchise of finished vehicle manufacturing plants on or close to our network. We continue to develop new business in our Vancouver auto port facility. We are also on target for a late fall opening of our new automotive compound in New Richmond serving the Minneapolis St. Paul market.In closing, the strategies and structural advantages that we have built over the years give us resiliency during these challenging times.

And ensure we are well positioned for the recovery and ready to deliver on our growth opportunities.I will now turn it over Ghislain for his commentary of financial.

Ghislain Houle: Thanks Keith. Starting on page 11 of the presentation, I will summarize the key financial highlights of our first quarter performance. Operating income came in at slightly above $1.2 billion, up $135 million or 13% versus last year. Excluding a one-time charge and depreciation and amortization related to the replacement of our positive train control back office system in 2019, operating income was up 4%.Our operating ratio came in at 65.7%, 380 basis point lower than last year.

Excluding this one-time charge in 2019, the operating ratio improved by 150 basis points. During the entire month of February over 30 illegal blockades popped up on the network that impacted revenues and limited our ability to reduce costs accordingly which resulted in a February OR in the mid-70s. I'm extremely proud on how the team recovered and please to report the OR in March was in the high 50s despite the start of the pandemic.Net income was slightly above a $1 billion and reported diluted earnings per share were a $1.42, up 31% versus last year. Excluding the impact on income tax of the US economic stimulus package through the CARES Act this quarter and the expense related to the replacement of the PTC back office system in 2019, our adjusted diluted EPS was up 4% versus last year. There is no material impact of foreign currency in the quarter.Turning to expenses on page 12, our operating expenses were down 5% at $2.3 billion versus last year.

I will now cover some of the key highlights. Overall, the quarter demonstrated our ability to control costs quickly, which along with our strong balance sheet will serve us well in the coming months, while positioning us for the recovery. Labor and fringe benefit expenses were 7% lower than last year. Headcount at the end of the first quarter was down 3,100, a 12% decrease year-over-year. Q1 also benefited from low incentive compensation as a result of the impact of the illegal blockade and the endemic.Purchased services and material expense was 4% higher than last year.

This was mostly the result of higher trucking and transload expenses due to the inclusion of TransX, partly offset by lower material cost and contracted services. Finally equipment rent decreased by 8% versus last year mostly due to lower locomotive and railcar lease cars.Now moving to cash on page 13. We generated strong free cash flow up close to $600 million through the end of March, double the amount from last year. Let me now address our 2020 financial outlook including our strategic and proved approach to financial management and capital allocation. The pandemic is having an unprecedented and extraordinary impact on the global economy.

In North America and in Canada in particular, these impacts are being compounded by the drop in oil prices. The economic outlook and therefore overall demand for transportation services is highly correlated to the duration of containment measures and the impacts on businesses and consumers, which at this point remain uncertain. As a result, CN like many companies is withdrawing its 2020 financial guidance.In fact, even the Bank of Canada took the unusual step of halting its economic forecast in its most recent financial update to the House of Commons. We are continuing to closely monitor demand in each of our business segments and are moving swiftly to ensure our resources are well aligned. The rail sector and CN specifically has a proven track record of resiliency in periods of economic weakness.

At CN, we have always taken a strategic approach to the balance sheet. We have a strong investment grade credit rating, top-tier amongst all companies and the best in the rail industry. This has once again served as well. In recent weeks, we had continued access to low-cost financing including the commercial paper market and we are in a strong position in terms of overall liquidity.We are slightly reducing our 2020 capital expenditure program to $2.9 billion reflecting reduced, near-term demand while protecting the recovery and our CN specific growth opportunities starting in 2021. While it is clear that no one can predict the ultimate impact of the current, global economic environment, based on what we know today, the company is still working to generate a minimum of approximately $2.5 billion of free cash flow.

We paused share repurchases at the end of March during our blackout period. We will continue to pause and we'll reassess the repurchase of shares on an ongoing basis. We are committed to maintaining our previously announced dividend increase of 7% in 2020. On this note, back to you JJ.

JJ Ruest: Thank you, Ghislain.

And I think you get an example of the team provided an overview of a strong and resilient first quarter results. Our operations are fluid and we're managing very well to the current pandemic and supporting our customers and a broad economy. We remain very bullish on our structural advantage and our strategic growth coming in 2021. So operator, in order to maintain the flow of question easy and since we're not all located in the same place, I will direct the question and also I will ask each analyst to refrain themselves to one question only for the sake of fairness. So I'm going to turn it back to you Eric for the question period.

Operator: [Operator Instructions]The first question is from Cherilyn Radbourne with TD Securities. Please go ahead. CherilynRadbourne: [Tech Difficulty]
PaulButcher: Cherilyn, we are having an issues we're having an issue with your line. So --
JJRuest: Yes. We cannot make what your question was, Cherilyn?
CherilynRadbourne: Can you hear me now? Okay.

So if we think about how supply chains might be reconfigured as a result of this pandemic, what are your thoughts on how that might shake out between reshoring to North America versus diversification away from China to other low-cost countries in Asia? And how might those shifts impact your business?
JJRuest: Yes. So maybe, Cherilyn, I can start a bit and then after that I will hand it off to Keith. So I think this so-called nearshoring has been happening partly before the pandemic. It was related to the high labor costs in China and some of that manufacturing moving to other countries like Vietnam and that's one reason why for example we're so working hard on the East Coast strategy because over time Vietnam, Singapore and the countries around through to India will become a more important trade factor for us. I think though regarding, I think frankly some of this is emotional.

Some of it is overblown; some of it is real. So if you're buying masks, of course, we're going to be making those masks in anything medical in North America all that stuff that currently comes to us by our air freight. We will know that because CN is big buyer of mass right now.And I'm not too sure it's moving the needle when it comes to container, but the world is changing. It will never be quite the same. Keith, you want to add to some of that.

KeithReardon: Sure. JJ. And, Cherilyn, as you know, we've been keeping close tabs on this for the last several years as these manufacturing capabilities are moving around Asia either for lower costs or to get closer to the vertical integration of the supply chain and other, in other countries. So it will continue to happen. There will be some nearshoring but I think for the most part we're still going to see quite a bit of production in Asia, maybe some moving to Mexico, but I don't think there's going to be any drastic changes.

Operator: The next question is from Ken Hoexter with Bank of America. Please go ahead. KenHoexter: Hey, good afternoon. So really sounds like a really solid rebound especially into March given especially with the start of the pandemic, but Ghislain, can you maybe just talk a bit about your $2.5 billion free cash flow reiteration? Maybe talk about some of the assumptions you've got in there especially given your slight drop for CapEx. I presume you're just maintaining for future growth, but maybe just talk about some of the assumptions and OR built into that assumption.

Thanks. JJRuest: Ghislain, you want to provide color. GhislainHoule: Yes. Thanks, Ken. Listen, as a lot of companies today, we're running a lot of scenarios.

The visibility that we have is quite limited hence why we removed or suspended our guidance. If you look, I mean, I won't give you a specific number, but I'll tell you this. If you look at April volumes month to date in terms of our TMS, we're down roughly about 15%. So what we looked at is worse than that and that would apply until the balance of year to the full balance of year. So worse to the full balance of year that's what we've assumed and we feel comfortable that we still would deliver around $2.5 billion.

So that's how -- that's what we took.

Operator: The next question is from Fadi Chamoun with BMO Capital Markets. Please go ahead. FadiChamoun: Hi, everyone. Thanks for taking my question.

I want to circle back on the $2.5 billion just kind of bridging where you were last year at about $2 billion. You have CapEx down maybe in the order of $1.5 billion. The implied is maybe you're--you've done about $600 million from kind of operation. Are there other kind of moving part and the cash flow that we should think about and understand the profitability outlook here that you're potentially talking about?
JJRuest: You want to add some further color, Ghislain. Again you mentioned minimum.

GhislainHoule: Yes. So again that's the point. No, Fadi. I think what's important is this is a minimum. So you can define it; you can define it otherwise to say this is a worst case scenario.

So obviously, we've run scenarios that are better but we wanted to offer to investors the floor and you've got the pieces. There's nothing hidden in the nice back pocket. So this is what we believe as a minimum we will deliver. JJRuest: Yes. We felt that since when we are not providing guidance now the time where cash is king that we would give you some color on the cash.

Operator: The next question is from Chris Wetherbee with Citi. Please go ahead. ChrisWetherbee: Good afternoon, guys. Maybe if you could touch a bit on how you're managing the resources kind of in the shorter term relative to the volume declines that you're seeing. Maybe if you could touch on the headcount and ,JJ, I think you had mentioned before that almost everything is on the table sort of ex-interest expense and probably depreciation and maybe pension, but can you talk about sort of the flexibility of the line items to a degree here in 2Q as you're responding to this drop-off in RTM?
JJRuest: Yes.

I will start just on the headcount and then Rob will add some of the stuff he's doing week to week really if not twice a week. But on a headcount, as we speak here like this week we're 3,800 less people than last year. So we're 14% down of which 2,500 are furlough that we will call back in time and 1,300 are people that we don't have on the payroll this year that we had last year. So with headcount, it's obviously headcount rolling stock is one of the place we start. Rob, you want to add some other figures and stats.

RobReilly: Yes. Sure. So as we continue to adjust to the volumes here, I mentioned we had over 2,500 people furloughed. We haven't quite seen the bottom yet. So we'll continue to right-size our operation in terms of train starts, which will naturally pull people out and also allow us to lay up locomotives as well.

We've also used this opportunity as I said to further strengthen our railroad in terms of having the additional time available out there on the track, where even though Ghislain talked about reducing our capital spend, we're going to use that in terms of increased productivity and still get the units on the ground. So we're doing a lot of things here in terms of reacting to the volumes. And we have as of today; we have 14,000 cars in storage. We see a few more going to the storage over the next few weeks. So we'll continue to right-size as we go along.

JJRuest: And the team is being asked to really drive hard and fuel productivity. We're a leader in that space and we're going to make sure we remain a leader in Q2. And as Rob mentioned, even though our CapEx is down a bit, we actually going to do as much as work as in the past maybe more because you really get longer work block and Rob and his team in engineering is being tasked to be sure that they get more done with the same amount of dollars.

Operator: The next question is from Benoit Poirier with Desjardins Capital Markets. Please go ahead.

BenoitPoirier: Good afternoon, everyone. So you mentioned, color about the pricing environment kind of inflation plus but I was wondering if you could provide more color about how the yield should evolve given the mix and fluctuation in FX and fuel. Thank you. JJRuest: So maybe James can provide the pricing color in general and Ghislain would be in better shape to talk to you about the ever long question of mix. So James just start.

JamesCairns: Yes. In general, Benoit, on pricing we maintain that price discipline in good times and in bad times. That's something that our customers come to expect from us. In order to offer the product that our customers need to compete and win in their end markets, we have to have a disciplined approach to pricing. I think where we have to be prepared for is when we see that recovery to make sure that we have some pricing leverage or pricing opportunity in front of us as capacity may start to get scarce as we get well deep into the recovery there.

Ghislain?
GhislainHoule: Yes. I think, Benoit, as you see the, you were asking about profitability and about FX. As you know, FX is about $0.71 as we speak. So that's a shock absorber. Again remind you the rule of thumb every $0.01 of the depreciation in the Canadian adds about $0.05 of EPS.

So that's number one and number two, from an expense standpoint when you look at it outside of depreciation that's pretty much fixed and equipment rents where when we return some cars and we did return about 2,000 Centerbeams, little over 2,000 Centerbeams since last year. The leases have to expire, so you've got a little bit of timing there. But otherwise most of the other expenses are essentially variable. So again very important and as we get this business coming and the business declining then we're adjusting that variable expenses whether it be labor, processing services, casualty and other you could assume and debate that we will get less accident cost because you have less volume on your network. So you can expect the profitability and you can expect the OR because I think that's leading to your question to come back in line to what you're used to see.I think we made the point in first quarter that unfortunately the illegal blockade really had an important impact on us .And again as I said our OR was in the mid 70s but I think Rob and the team and all of us are back on track and stay tuned but you will see -- you will see numbers that there you're used to see.

JJRuest: That's right. And just for those of you may not be following the Canadian Exchange so closely, we started a quarter almost around $0.75 now we're around $0.70. GhislainHoule: Yes. JJRuest: So obviously it has an impact on the mix that you're talking about, Benoit.

Operator: The next question is from Ravi Shankar with Morgan Stanley.

Please go ahead. RaviShankar: Thanks. Good evening, everyone. JJ, maybe question for you as you say on the call, I think, the structural outlook is still pretty good and you guys expect a good rebound here in 2021. Can you share the thought process behind pulling the three-year guidance in that case? I mean do you expect more of an L-shape recovery than a V-shape or what is the long-term outlook looks like?
JJRuest: Yes.

So they could be many type of recovery out there. V shape, U-shape or a long slow line. So I think the financial markets might be a V-shape because people will go on expectation. From freight point of view this is where it really has to be is. When will we go back to our natural economy; when all of us can get out of our house, going shopping, buy furnitures; go to restaurants, start to do some travel.

When will our factories are start to run flat out again et cetera, et cetera and that we don't really have a view because that really reside with each governor, each premier of each province and what you've seen lately is the beginning of silver lining of potential returns. The province of Saskatchewan is talking about reopening their economy step by step.New Brunswick, these two provinces are small population so they're more about the carload in the world of natural resource like potash mine. And then they probably what will take more time is comment made in Michigan, Illinois, Ontario, Quebec where you have large population and where the issue is bigger in a bigger city. So at this point that's why we don't feel comfortable to provide guidance on stuff like even the Bank of Canada has taken out their forecast at this point. So we need to know more to go back to providing you specific guidance.

RaviShankar: So just to clarify, are you saying that you need to know more about how deep the decline is going to be to set the trajectory for the rebound or are you saying that there could be as some changes in the fundamental outlook at some of these end markets as well?
JJRuest: Ghislain, maybe you want to add something?
GhislainHoule: Yes. I think, Ravi, I think that we still don't; we still feel that the worst is not behind us. So until we see and we're comfortable that the worst is behind us, I think, we'll have better visibility of the recovery and that this is why we felt, we didn't feel comfortable to continue to guide either on 2020 or to continue to keep our longer-term three-year guidance that we provided at the last Analyst Day. I think that we want to see, we want to get better visibility on how deep that thing will go. Everybody thinks that May maybe the worst month and Q2 will be the worst quarter and then maybe in Q3 people think that it will be less worse.

And then there might be a little bit of an uptick in Q4. But at this point, it's all guessing work because again these times are unprecedented. So I would say to you stay tuned and as the world recovers from this pandemic then we'll get better visibility and we'll be able to provide and we'll see and the recovery will have better visibility on the recovery but we need to know how deep that thing is and the worst needs to be behind those first and foremost. JJRuest: Yes. It definitely feels, definitely feel like that we're close to the bottom.

That the month of May might be as bad as you get. How fast a recovery after that? That's where the science, we don't have the science to do that but think in terms of the long-term network and structural advantage that we have. And also look and our confidence in investing capital this year between Edmonton and Rupert because we believe in Fast Trans Pacific trade for bulk and container as well as the fact we're also investing growth capital around Vancouver because again same thing we have a long-term faith into the bulk and container trade business around the Port of Vancouver. So just these two things tells you that we're very confident about the long-term future, but in the short term we're not too sure what the economy has in store for us.

Operator: The next question is from Steve Hansen with Raymond James.

Please go ahead. SteveHansen: Hey, guys. Just maybe a quick one on the near-term outlook. Again relating to the magnitude and duration of these headwinds. I think it was mentioned earlier that you had 37 blank sailings on a quarter.

I'm just curious that in discussions with your line customers if you got a sense for how many you'll see in 2Q and 3Q. JJRuest: Maybe, Keith, could give you a sense and we had some good discussion with some of our partners about Q2 and Q3, so how do you see the world from -- in that space. Keith?
KeithReardon: Sure. Thanks for your question. It's in the first quarter we saw a little bit, as I mentioned 37 blanks.

At this point in time, we're not seeing that many blanks for the second quarter for us. That doesn't mean that there are not that many blanks that are going to happen, but after talking to our customers that's what we're seeing is going to be impacting us for the West Coast. We do see a few East Coast blanks but I also want to caution you it's not necessarily the number of blanks, it's how much those blanks are affecting, how much discharge is on that vessel? We got caught up in that a little bit too where we were seeing all these blanks. And we saw bigger discharges with the vessels that were coming. So it's not an exact science just because you count up how many blanks are going there.

So we've been cautious about that. I don't think that we'll see as many for the second quarter, but then again we were seeing blanks happen throughout all the months and they won't make a decision until maybe the week before they actually call the blanks. So we'll see how that plays out. JJRuest: And if there's the view of some who are very involved on the ocean side and the container side, that they may or may not be a so-called summer peak, back-to-school peak type thing because it will depend whether or not when are kids going back to school and how much of what's already in the warehouse really needs to be replenished on us. But at the same time, our partners in the West Coast DP world of reiterate as of a few days ago.

They're still going further with the expansion at center. They're going ahead with that as planned on the same prime time timetable and they also going ahead with the expansion at Rupert again with the same timetable because they like us view that there is a future between beyond 2020.

Operator: The next question is from Brian Ossenbeck with JPMorgan. Please go ahead. BrianOssenbeck: Hey.

Good afternoon. Thank you, JJ. So I want to come back to your comment on fuel efficiency at CN. There's clearly some more competition from your peers talking about this area more as well. Big focal point for CN, what else do you expect to need to implement to get to the goals of your targeting for this year and beyond? And how much of that is volume dependent? And curious if you can maybe tie some financial implications to that longer-term reduction in the missions, what does that mean for efficiency overall? Thank you.

JJRuest: Yes before I pass it on to, Rob, we did notice through that other railroad that documents fuel efficiencies as well as a reduction of carbon emission. And I think it bodes well and also says there is a something here for the rail industry to focus on. Rob, you're the leader of the industry right now. So you want to talk about how you're going to keep that?
RobReilly: Yes. Thanks JJ and as JJ just said when CN sets a record it is an industry record.

We are the best in north America, have been for a while and will continue to be and really a lot of that has to do with the discipline day-in and day-out of how we use our locomotives and maximizing the tonnage to horsepower, throttle limiting, idling locomotives. Beyond that we use technology working with a vendor and trying to get that technology to where our manual processes are part of that technology. When you look at long term, we're targeting 29% reduction in emissions by 2030 versus 2015. And we will do everything we can to do that which is part of our daily process. And we talk on conference calls in the morning.

We talk about our fuel efficiency every day whether there's an opportunity to improve that's part of the discussions that go on every day. So pretty solid process. I think as technology continues to evolve, we will only get better here as we go forward. JJRuest: That's right. It's not because the economy is weak that we've lost our focus on the ESG.

Operator: The next question is from Walter Spracklin with RBC Capital Markets. Please go ahead. WalterSpracklin: Good afternoon, JJ. Thanks very much for taking my question. And so I'm trying to get a handle on what the world will be like post Covid-19.

And JJ and Keith as well you both indicated that you didn't think nearshoring would be a major change from what was happening before. So I guess my question is if it is a major change, so if it is significant and significantly more than you expect, is it fair to say that the Canadian gateway will be significantly disadvantaged in that environment? And if it's not a significant, if nearshoring is not a significant change, what is your best guess as to what would be?
JJRuest: Yes. So maybe I can start and then I'll pass it on to Keith. But Canada is a trading nation. I mean as a nation here we've always been a major trading nation with the US.

MCA. We just got, we signed the CTA with Europe which eventually will produce some result and a trade with Asia. So we will always be a trade nation, ports will always be quite key to us. It is important to invest and support and that's why we're going ahead with Hutchison port with the terminal Quebec City, so that we have a world-class supply chain on the East Coast as well as the West Coast. And as I mentioned DP World which is also owned partly by the case is also going ahead with the expansion in Rupert and in San Term.

So there's no really pull back on these major capital investment. I think may be more relevant is the world economy was slow down so therefore world, the trade will slow down and but if it's not coming from China, it might coming from other parts of Asia, it might be coming from Mexico and Keith's got a great domestic intimal product to move stuff around North America. But just one thing that might be actually one of the fallout and the new world order under coronavirus, the pandemic is that as we think of people coming back to work here in a headquarter, we have 15, 16 floor about 2,000 people are in this building usually.I don't think in that the future there'll be as many people working from offices. There'll be more people working from home. So as we think about people can return to work in a few weeks, few months between now and this fall, we know we're going to be looking at maybe 20% of them working from home as a start.

And then I think some of this -- some of the real estate aspect and how you see people commuting back and forth will be one of the new world as it relate to the pandemic. But, Keith, you want to go back to how you see what the comments you get on trans-pacific trade. KeithReardon: So, Walter, the nearshoring opportunities or what the focus is now, a lot of that is essential goods right. The medical side, if you look at what we bring through our gateways and whether it's in the Canada or into the US, a lot of it's automotive, it's electronics. It is white goods.

It's garments and I don't see those types of things being near shored and if they're not as strategic they're not as security sensitive. So that's why we feel the way that we do. It's the types of products that are moving. JJRuest: There's not as emotional as mask and medical supply. KeithReardon: And we're set up very well for that having three coasts, three gateways to come in.

And so they have opportunities even if they wanted to bring it into the US. I mean we service mobile in New Orleans as well so. JJRuest: Yes. But we keep our mind open. We're still in the marketplace and I will definitely watch all these things as to where these different balls are lay down.

Operator: The next question is from Scott Group with Wolfe Research. Please go ahead. ScottGroup: Hey. Thanks. Good afternoon, guys.

So I just want to follow up on a couple of things that they came up. So the comment about May being the worst of it, any sense on which segments you think get worse from here in the near term and then I get Ghislain's point about the OR and March, but I guess for you JJ, is this, do you think there's a refocus at CN about closing the OR gap relative to peers. GhislainHoule: So maybe I'll start with OR gap. We, obviously, the operating ratio of CN in the first quarter are not to our liking. We would have liked to have the freedom to run a railroad the way we wanted to run it.

If you go back in January we lost the main line to Vancouver I think was five days, Rob. We basically had that half a month and came down overall main line. It was helped try to get it back and then in February we had a month of something cloud and moving around the country especially in east. So we're not satisfied with the operating ratio of the first quarter and we really want to -- try to work on that for the second quarter. Regarding, I don't know if you want to start make comments, Keith, about where the different movement in the book of business.

Right now automotives are probably the biggest challenge we have. It's 85% down because customers are not producing. KeithReardon: Yes. I mean I'd say it's even greater than that down by almost 90 and so those are the things that are impacting us. We are -- we were thinking that some of the plants we're going to be opening up in on May 4 due to a lot of social distancing and other issues from some of the states that look like that might get pushed out a week or so.

We're not exactly sure. So we could be affected for at least half a month longer on the automotive side, that's really the most difficult spot we have. And then as more and more people are out of work for longer term, that discretionary income that they may have to go buy things for the kids or get ready for school and who knows when school is going to start back up. Those types of things are not being purchased today, it's really the essential goods, the things that are going across the grocery store shelves and medical supplies and the like. JJRuest: So, Scott.

We -- I don't know if it helps you, but if there is a supplement I'll allow you to do it because we didn't quite hear the beginning of your question. So -- . ScottGroup: The beginning was you talked about May being the bottom. I was just wondering which segments; I get autos down the most. Now I'm guessing which segments you thought of the most sort of incremental room to fall if in the near term?
JJRuest: From here automotive is as low as I guess.

Energy might get a little worse even though crude and price as we speak there's not that much left but it might -- it will go a little further. So energy, not much left in automotive and US coal might get worse from here. Okay, thank you.

Operator: Thank you. The next question is from Konark Gupta with Scotiabank.

Please go ahead. KonarkGupta: Good afternoon, everyone. Just wondering if you can help us understand the decrementals margins that are for every dollar of revenue decline because of the volume declines. What kind of impact do you anticipate on your operating income with the cost initiatives you have taken here? I understand there are multiple scenarios, but any help would be appreciated. Thanks.

JJRuest: So I think Ghislain will help you without giving you quality guidance on OR. GhislainHoule: Yes, I don't think I'll give you any numbers related to this. And I know this question has been asked by -- to all the other -- all of our peers. All I can tell you, Konark, is that if you look at what's variable versus what's fixed, again as I said before, most of all of out expense categories are variable except depreciation. And again if you remember, we do have a depreciation headwind this year due to the high CapEx that we had in the last two years and I would tell you that we said in January, depreciation was a headwind of about $100 million -- over $100 million I would say.The other thing that we have that's fixed, mostly fixed for Canadian railroads including us, is pension.

And again we said, and pension expense is really determined on where the discount rate finishes in December of the prior year. So -- and that's mostly, I mean, that's simplifying it, but that's mostly the case. And we've said in January, the pension was going to be a headwind of about $70 million. But everything else, I mean if you look at labor, fuel, equipment brands, there's a bit of timing, turning the cars and CNO is variable. So I think what you have to do you get the volumes every week and you have to look at what we're doing in terms of what Rob said in terms of having people being furloughed.

And you can do the math and put in your model and you can make your calculation. But that's the way I'll answer it is, outside of pensions for Canada and depreciation most of everything else is variable and we're pushing hard and JJ is pushing the team hard, pushing us hard every -- and we have these discussions every week even twice a week, make sure that we right-size our people. Our -- not only our people, but our assets in light of this quickly reducing demand that's in front of us.

Operator: Thank you. The next question is from David Vernon with Bernstein.

Please go ahead. DavidVernon: Hi. Good afternoon. Hey guys. Thanks a lot for taking the time.

James, I was wondering if you might be able to help us kind of think about the -- what volume in crude would sustain through the next couple of quarters here. You mentioned that there was some heavier stuff that you guys are going to continue to run? And then within that category with the RPU kind of ending last year or this year at $4,500 bucks or so, should we be seeing a headwind on that as that -- those 1,000 carloads of the lighter crude come out?
JJRuest: Very good question David. James you want to handle that?
JamesCairns: Yes, sure. Let's talk about heavy crude in the CN franchise. We started moving a heavy unconventional barrel way back in about 2012 and that's been our moves consistent barrel in good times and bad times.

If you look at where we were in Q1, we moved about 50,000 barrels a day of a heavy undiluted non dangerous crude. Now this would be the same spec as would come out of a diluent recovery unit already doing that today and about the same volume as you would expect from a full build-out of a diluent recovery unit. So we're not going to maintain the same run rate we had in Q1 through Q2 with heavy undiluted. But the heavy undiluted barrel will continue to move speaking to that resiliency of that type of barrel and the diversity of our crude franchise.We expect moving into Q2 that the majority of crude we continue to move is going to be the heavy undiluted barrel. It just simply does not make sense to move the dilbit barrel in today's climate, particularly given that the dilbit barrel as a pipeline spec barrel and the pipeline to have more than ample capacity to handle that barrel.The undiluted barrel moves to different markets and these different markets will have some demand moving forward through Q2.

So not a scenario where we see this ever going to zero on CN. DavidVernon: So this is at 50,000 barrels a day, I think last -- in the last slide deck you were doing about 170,000 some-odd in Q2, Q3, is that right?
JamesCairns: We did on average of 200,000 barrels a day in Q1. About 50,000 barrels a day of that was a heavy undiluted conventional barrel.

Operator: Thank you. The next question is from Jason Seidl with Cowen.

Please go ahead. JasonSeidl: Thank you. Good afternoon, gentlemen. I wanted to ask a little bit about domestic intermodal. Obviously, there is probably going to be increased competition on the truck side.

Wondering where you see that shaking out as we move throughout the year and businesses started to come back. And also wondering if there has been an update from the Canadian government on putting in ELDs if that is still planned for 2021?
JJRuest: So, Keith, fuel is cheaper, but the drivers are in the same supply as they were. KeithReardon: Yes. And our services stellar right now. I mean that's the true enabler of getting domestic businesses being able to be more truck like and getting it from point A to point B, as well as going through our terminals and making sure that we're efficiently handling the trucker.

All of those key service metrics we focus on daily. So that's enabling us to gain share on the trucks. As JJ said the fuel is coming down, but it's coming down for us as well. And so that gap between our fuel surcharge and their fuel surcharge is actually about the same.So the second question on the ELDs. I don't believe that anything is changed from what was proposed and written about, so nothing has changed there.

It's still 2021. JJRuest: Jason, we view domestic [intermodal], as an area of growth for CN. There are a lot of places where truck still has a dominant share around North America. Just don't think of Canada. Think of North America and it's a market where the railroads especially CN is very focused on finding new growth in the years to come.

And that's the reason why we bought TransX and H&R. Thank you.

Operator: Thank you. The next question is from Jon Chappell with Evercore ISI. Please go ahead.

JonChappell: Thank you. Good afternoon. Keith and James, a question for you. You have a great slide in the appendix on growth opportunities and I understand that your capital envelope is just changing a little bit during the disrupted period. But just wondering any conversations with customers and whether it'd be PSA, I'm sorry partners PSA and Halifax or the propane terminal or even setting that or maybe this is changing their views on time and capital budgets, where maybe some of these projects get pushed to the right?
JJRuest: So maybe, James, you talk -- you want to talk about Pembina and AltaGas in some of their capital expansion as Rupert.

And then after that Keith will complete with a discussion on PSA in Halifax. So James?
JamesCairns: So the print Rupert supply chain continues to be the most profitable export opportunity for propane producers. If they export the product through Prince Rupert, they have the opportunity for a better net back. AltaGas is moving forward with an expand -- not an expansion, but an increased production out of their facility and Pembina is still full steam ahead as we understand, thinking about Q4 possibly Q1 of next year. As we look at these new projects that are coming online.

You think about the long-term structural advantage that Prince Rupert lays in front of us, and customers see that and customer see, listen, there's a real opportunity here for me to take advantage of that Prince Rupert gateway to get my goods to a better net back market. So far so good as far as folks continue to invest and support the expansion of their business on CN. JJRuest: On PSA Keith. KeithReardon: Yes, no. On PSA, I mean, James is referring to Prince Rupert and the Halifax any of the terminals that we're working with the folks who are either building one or expanding one.

On the east, it's the Prince Rupert model of the east. So we are very much engaged with PSA. In fact, we're talking to them weekly about our plans. It's not only operational discussions but a marketing effort that's joint and we are putting together some very unique round trip economic scenarios for our steamship line customers. They come through Halifax to make it even more enticing for them to come in.

JJRuest: Yes. When you look at partners like PSC, AltaGas, Pembina, these are very aggressive companies and they like CN believe that there is an economy beyond this short-term pandemic. Thank you for your question.

Operator: Thank you. The final question will be from Tom Wadewitz with UBS.

Please go ahead. TomWadewitz: Yes, good afternoon, JJ. Thanks for fitting me in here at the end. I guess I want to refer to Slide 7; you've got quite a bit. So either for you or Rob, you've got quite a bit in terms of idled switching yards here.

So pretty nimble response on that network. Well done in the responsiveness. Should we think of a component of those yards, idle switching yards or in a reduced activity or mechanical activity facility is a portion of that structural or is that all kind of a quick cyclical response where when the volume comes back those facilities would also all come back online?
JJRuest: So, Rob. Yes. Rob has been tasked with at least idling and then we'll see the future.

Idling some of the smaller yard, which are used to be fed by carload business which right now is a little weak? Rob?
RobReilly: Yes. Thanks for recognizing the nimbleness there, Tom. The team really is, when you think about where we're at five weeks ago and chasing grain after the backlogs and we delivered an all-time record for Canadian grain. Chasing coal, we delivered an all-time record in March for Canadian coal. Team really did a good job in terms of bouncing back after these blockades of February.

So to answer your question, when we look at this, some of it will be structural possibly on the locomotive side. On the yard switching side some of this is intermediate switching that allows us to keep cars moving to destination. So we'll look at that and try and make what we can permanent. But a lot of it will depend on when and where this traffic volume comes back. So to answer your question, some of them will be structural.

I think some of it will come back as volumes come back. Thanks for the question, Tom.End of Q&

A
Operator: Thank you. The question-and-answer session has now ended. I would like to -- now I'd like to turn the meeting over to Mr. Jean-Jacques Ruest.

JJRuest: Okay. Just maybe some very short wrap up comments. Thank you for your time to be with us today. As you could see the network is running very fluid, very solid, we are very well prepared to go to the pandemic here in the weeks and months to come. Our employees are safe as job one at CN and that's why we got the supply of everything and anything that we might need to keep them safe.

We're already starting to work on the sort of the slow back to work for those who are currently working in offices, and we'll see how fast that goes in the weeks and months to come. And we're focused on beyond the pandemic, beyond the law or maybe the low point of the month of May and we are confident about the future, and I don't know if this will be a V-shape, U-shape or what kind of shape of recovery there will be, when that comes we will be ready to get back to running a solid railroad and do trade with kind of US and with the rest of the world. So on that note, thanks for joining us and see you back in July. Thank you, operator.

Operator: Thank you.

The conference is now ended. Please disconnect your line at this time. Thank you for your participation.