Executives: Paul A. N. Butcher - Vice President-Investor Relations Luc Jobin - President, Chief Executive Officer & Director Michael A. Cory - Chief Operating Officer & Executive Vice President Jean-Jacques Ruest - Chief Marketing Officer & Executive Vice President Ghislain Houle - Chief Financial Officer & Executive Vice

President
Analysts: Fadi Chamoun - BMO Capital Markets (Canada) Eric Morgan - Barclays Capital, Inc. Walter Spracklin - RBC Dominion Securities, Inc.

Ravi Shanker - Morgan Stanley & Co. LLC Cherilyn Radbourne - TD Securities, Inc. Scott H. Group - Wolfe Research LLC Turan Quettawala - Scotia Capital, Inc. (Broker) Thomas Wadewitz - UBS Securities LLC Brian P.

Ossenbeck - JPMorgan Securities LLC Jason H. Seidl - Cowen & Co. LLC Chris Wetherbee - Citigroup Global Markets, Inc. (Broker) Steve Hansen - Raymond James Ltd. (Broker) Allison M.

Landry - Credit Suisse Securities (USA) LLC (Broker) Justin Long - Stephens, Inc. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC Kenneth Scott Hoexter - Bank of America Merrill Lynch Bascome Majors - Susquehanna Financial Group

LLLP
Operator: Welcome to the CN Second Quarter 2016 Financial Results Conference Call.

I'll turn the meeting over to Paul Butcher, Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher. Paul A. N.

Butcher - Vice President-

Investor Relations: Thank you, John. Good afternoon, everyone, and thank you for joining us. I would like to remind you of the comments already made regarding forward-looking statements. With me today is Luc Jobin, our President and Chief Executive Officer; Mike Cory, our Executive Vice President and Chief Operating Officer; JJ Ruest, our Executive Vice President and Chief Marketing Officer and Ghislain Houle, our Executive Vice President and Chief Financial Officer. In order to be fair for all participants, I would ask you to please limit yourselves to one question.

I 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. Luc Jobin. Luc Jobin - President, Chief Executive Officer & Director: Thanks very much, Paul, and I would like to welcome all of you to CN's second quarter call. Before I get into the detailed results, let me first express my deepest appreciation to Claude Mongeau, our former CEO.

Claude's career at CN has been nothing short of exceptional as he has spent the last 22 years working with the likes of Paul Tellier, Michael Sabia and Hunter Harrison to mold this company and help CN achieve great success over the years. As CN's CEO for the last six plus years, he also has been instrumental in helping us raise our game by evolving our strategic agenda to one of operational and service excellence while positioning CN as a true supply chain enabler. That agenda still resonates today with our customers and helps us gain traction in the marketplace even in difficult economic circumstances. So rest assured we will continue with this strategic trust moving forward. I also would like to give our appreciation to Jim Vena who has led the operating team over the last three plus years and who has retired after a long and distinguished career at CN spanning 39 years.

To both of our former colleagues, we also thank them for the part they played in the results we present today and we wish them good health in the tomorrows. So I'm pleased to be joined today by a strong leadership team. Starting with my colleague and our outstanding Chief Marketing Officer, JJ, and some new members who are joining us for the first time. I'd like to take a minute to formally introduce them. At CN our bench is deep and we work hard at grooming talented people throughout the organization to flourish.

So Mike Cory takes the helm of the operations group as our Chief Operating Officer. Mike has 35 years of experience at CN and he's worked in every region in just about every aspect of transportation. He's a true innovator, a motivator and a team player. Next is Ghislain Houle. He steps into the CFO role after close to 20 years at CN.

During this time he covered every key senior function in finance. And on top of that he's a certified train conductor and engineer. Ghis has a keen understanding of the railway and he holds the same financial philosophy as his predecessor. He has worked closely with me over the last seven years and has all my confidence. Last but not least, Paul Butcher takes the lead as our Head of Investor Relations and most of you know Paul from the last seven years in Investor Relations but few realize that he has over 20 years of experience at CN including in marketing and finance.

Okay so now let's – I'd like to talk a little bit more about the second quarter results. We continue to see a difficult economic environment in the second quarter affecting several sectors of our business and continuing to put downward pressure on volumes and revenues. Given that context we focused on aligning our resources with the reduced freight demand while ensuring that we don't compromise safety and we protect service. I'm happy to report that we have continued to make solid progress in all of these dimensions, which demonstrate that we're effectively gaining productivity and managing costs, but not at the expense of our strategic agenda and our future prospects. This translate into a record second quarter operating ratio of 54.5%, which by all means is an outstanding result.

At CN, we don't make a lot of noise and lofty promises, but we deliver. I'm extremely proud of the team as it is very difficult to achieve this level of results and do so in a sustainable way. This allowed us to deliver an adjusted diluted EPS of CAD 1.11, down only 3% versus last year, while dealing with a decline in carloads of 12%. We also generated strong free cash flow of over CAD 1.2 billion year-to-date, slightly ahead of last year. Allow me to turn it over to the team now to give you a little bit more color on these results, starting with you, Mike.

Michael A. Cory - Chief Operating Officer & Executive

Vice President: Thank you, Luc. I'd like to echo your comments about Jim and Claude, and from the operations team, we just want to thank them for their leadership and their efforts through all these years. And a personal note to Jim, I've worked with Jim for 25 years and I just want to express my gratitude and thanks for everything he did in terms of making this railroad what it is. So with that, I'd like to thank the women and the men of CN operations who once again delivered an outstanding performance in the quarter.

Their efforts and execution of our operational and service excellence model accomplished these results. So if you want to take a look at page six, I'll go over the Q2 operating highlights. Our platform of operational and service excellence with a broad-based view on cost management and swift execution is clearly delivering results. You can see the significant improvements in all of our key operating metrics. One key indicator of productivity is trainload.

And we delivered outstanding performance in this area, especially when the lower volumes are accounted for. We're consciously balancing trainload with car velocity and yard dwell, and we aren't enamored with any one metric. Our guiding principles don't waver with changing conditions. The key is to understand when to give a little in one metric to gain overall, and our operating team's leadership teaches and supports these iterative exercises to ensure the overall plan of the system is continuously moving. This balancing act is something that we focus on intensely and it's driven by the operating leaders of the team and it enables us to tightly manage costs while providing superior service to our customers and supply chain partners.

This is what gets us to that extra carload every time. To give an example of a balanced approach to delivering operational and service excellence, I'm going to share with you how we move our Western Canadian grain and how, in light of the expected record crop, we're in a great position to move it all very productively. Our goal is always to minimize train starts and move cars as fast as we can. Those are basic fundamental rules we live by. For us, it's really an iterative exercise that takes place every day.

By managing this way, we create capacity and resiliency over our network with fewer trains in the grids increasing the speed of those cars on the trains. This provides reliable end-to-end service. Our grain supply chain partners count on us to provide them reliability and speed in order that equipment is available for the next shipment. However, they count on us to deliver the right grain at the right time to minimize their handling of the grain at their port elevators. So it's not just a one-sided view we have on how fast we can get the cars to them, it's more about how the supply chain functions as one, especially during the busy periods like we're coming up to.

In this case, we need to take into account what our partners need in order to turn the cars quickly at the port as it has a positive effect on the overall velocity of the equipment. We've been incrementally increasing the size of our grain trains, in line with our capital investment in new locomotives. As a result of these purchases, we've seen our grain trains go from 110 cars to 150 cars to 175 cars, primarily based on maximizing the use of horsepower on the new DP units. We can do this as our network is built to meet and pass trains that are 12,000 feet and longer, and our grades in all locations are in line with allowing us to do this safely and reliably. With our new AC locomotives, we're able to increase the amount of tonnage pulled with the same set of locomotives.

As a result, we now run grain trains through the West Coast ports at 210 cars. This keeps the origin train sets intact which allows for faster turnaround at the port. So not only are we maximizing the use of our network and our assets, we're increasing the overall velocity of the entire supply chain, and that creates productivity and better customer service as we do it. So our game plan is very broad-based though, so let's move on to the next slides. Our operating team's role is to maintain CN's position as a leader in efficiency, and we have the best team of railroaders in place to accomplish that.

But I feel what stands out when you look at our accomplishments is the level of engagement of our leadership group. Our belief is in developing leaders who understand our agenda requires engagement and team work. There is no magic bullet. And make no mistake, this is a commitment we all make in order for the team to achieve our goals. That's why we're successful.

Our continued growth as a learning organization allows us to improve our bench strength as we move forward in this journey. Safety forms the basis from which all operational accomplishments are made. So far this year our safety performance has been amongst the best in our history and both accident ratios and costs have improved significantly. We will always have work to do on the safety front. However, this improvement comes by taking a fully comprehensive approach to safety, one that leverages people and technology with investment.

We place a great deal of emphasis on improving process controls and developing predictive data analytics. We know this will deliver further productivity gains. Our greatest strength is our people, and we continue to invest in their development and safety engagement through programs such as Looking Out for Each Other, we embed a stronger safety culture through employees engaging more directly with their co-workers. As they perform each task, they ensure each member of the crew is aligned directly to the goal in a safe and productive manner. This cohesive approach creates an environment of quality that will yield payback for years to come.

Cost management is always near the top of our minds, we are focusing on what we can control, what we do best. Assets are precious and we strive to have one less than we need, so innovation and creativity compels us to deliver for our customers in the most efficient way possible. We achieve these goals by empowering our people to make decisions, but they also understand they're accountable for the outcome. As leaders, we provide the support and opportunity to motivate the entire team. We have a number of customer service metrics that we're very proud of, and a key one is our car fulfillment order.

This past quarter we met 98% to 99% of the unconstrained weekly demand for customer cars. I spoke earlier relative to the grain crop and how we were prepared to move it productively and reliably. Our capital investment program has positioned us to succeed. Across the network we continue to invest for the long range view and that's supports our agenda of safety, service and productivity. The result of our multi-year program are evidence.

Our long-term approach is to strengthen the core network and remove capacity constraints through pinpointed investments. This is evidenced in our safety performance, service offering and operating metrics. Our capital envelope for 2016 is basically in line with last year despite the lower volume environment. As a result, we've been able to spend those capital dollars in a far more efficient way. We've increased our work block lengths which has reduced unit cost due to less productive time.

For example, we recently completed a work program in our busy Edson subdivision that runs from Edmonton to Jasper, our gateway to our West Coast ports. By providing longer work periods to the engineering gang, unit costs were cut by more than half with less unproductive time needed for moving in and removing equipment during start-up and shutdown As a result we were able to complete two years' worth of work in one. So overall, these investments in hardening the infrastructure of our rail network and in the technologies that make our inspection practices more efficient and productive, will provide a runaway for future betterment in safety, service and productivity. Bottom line the network's in great shape, we're in a position to productively support our customers going forward. We are certainly looking forward to moving record amounts of grain and to support the diverse marketplaces JJ and the sales and marketing team have created.

So with that, over to you JJ
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Thank you, Mike, and congratulations to the operation team for another very clean low operating ratio of 54.5%. And (12:33) also to recognize the sort of (12:36) track record of both Claude Mongeau and Jim Vena, whose leadership produced over the past 20 years the fourth largest market cap on the Toronto Stock Exchange at more than CAD 60 billion and having maintained for all these years the very best operating ratio of the rail industry just pure result. And of course I want to congratulate all my four colleagues for their recent promotion. Okay. Now back to business.

The second quarter revenue was down 9% from last year, broadly broken down as follows. We had tough environment which reduced our volume by roughly 10%, the carloads and RTM were down at 12% and 11% respectively. The bulk business was in steep decline, namely, Canadian grain, U.S. coal, sulphur, crude and frac sand were also quite down. The Port of Vancouver had a disappointing quarter on intermodal where available terminal rail capacity was negatively impacted by the construction expansion of Deltaport.

On the positive side, we benefited from U.S. housing start, and also it feels like volume have reached bottom in Q2 for many segments including some of the major culprits like crude by rail, frac sand, grain and iron ore. Same store price, excluding grain and legacy contract was up 2.8%. If you look at it all in, same store price was up 2.2%. The fuel surcharge application lowered our revenue by 3%, but it was fully offset by the weaker Canadian dollar.

I will now go to the result and outlook for selected segment starting with lumber and panel, which revenue grew by 12% versus last year. Our lumber shipment to U.S. increased by 17%, while export carloads to Asia declined by 32%. Lumber and panel will stay strong Consumer purchase of finished vehicle look to be at a peak level. Our automotive revenue was down 4% in Q2.

We are very focused on our fluidity and cost control. This attention to service detail has enabled CN to gain some further market ground for future quarter. Our crude by rail volume dropped 55% versus last year to 10,000 carloads. We feel the volume since mid-second quarter have reached bottom, and will stay in that range for the short term. Frac sand was down 40% in volume to 11,000 carloads.

Our frac sand business is now oriented to natural gas drilling, and it is also believed that we have reached bottom. Domestic intermodal revenue was up 4%, driven by gain from our unique CNTL door-to-door retail service. Excluding the de-marketing of the Triple Crown product, our overall volume would have been up 3%. International intermodal revenue was down 3%. Rupert has resumed its strength of sequential growth during the month of June, and our Deltaport terminal in Vancouver capacity will not support growth during the next two-quarter construction expansion.

But in the meantime, we are trucking to our domestic yard to help out during that challenging phase. On the other hand, while we were in Asia last week, CN's unique supply chain model continued to make targeted inroads for 2017. On the East Coast, Halifax was strong. Volume was growing about 35%. The growth of Halifax will now slow down in the upcoming quarters.

And on the Gulf Coast – we do serve all three coasts – we've handled the first container of the Panama Canal service expansion with our partners APMT and the Port of Mobile. Our grain operation is running very smoothly. The Canadian grain volume was down 17% in the second quarter on very weak export demand. We expect a big and early crop this year in Canada. Although quarter to date, wheat and canola are still moving very slowly versus last year.

We expect the crop to be in the range of 70 million metric tons to 72 million metric tons, with more upside than downside potential, and likely to be one of the largest Canadian crop on record. CN long-term future in the Canadian Prairies with the Canadian grain look bright. We are attracting our share of the new country elevators construction with these next-generation loop track for longer train. U.S. grain volume was also down 8% in the second quarter.

U.S. export were hurt by the too strong U.S. dollar. The coming U.S. crop also look good and promising.

Beans are now currently moving well, and the corn is opening up because the Brazilian market – Brazilian harvest is looking to be increasingly worse. U.S. grain has the potential to outperform last quarter – of the third quarter of last year. Potash producers are poised to increase their export now that the oil pricing seems to have settled down. Coal volume continues to decline.

The secular downward trend is expected to continue. Coal only represent 3.3% of CN's book of business, already the lowest exporter of any Class 1 in North America. The Minnesota iron ore mine, UTac, will reopen in late third quarter, replacing Cliffs Empire Mine, which is expected to close at the end of this year. Our team is also improving our finished steel carload market position. The pricing environments remain impacted by the excess capacity in all transportation mode, but still broadly favorable to the rail industry.

We expect to produce pricing above rail inflation. And keep in mind rail cost inflation remain low. The fuel surcharge application will remain a revenue headwind in our year-over-year comparable. In Q3 of last year, the highway diesel applicable tariff was at $2.85 on average. In closing, our short-term volume will remain below last year.

But our July gross ton mile is sequentially neutral from prior months, and we will eventually resume our sequential growth direction. In this environment, it is helpful to think of CN key strength. We have a diversified market portfolio that benefit from an array of economic drivers, an array wide choice of customers. We're connecting the North American consumer in service-sensitive industries to the world via our 3-post network (18:39) pivoting around our Chicago EJ&E Advantage. And pricing will remain above inflation.

We will have the industry very best operating ratio. And we have a consistent track record that speaks volume. We'll pass it on to Ghislain. Ghislain Houle - Chief Financial Officer & Executive

Vice President: Thank you, JJ. I also want to thank Claude and Jim for all their contribution and their friendship.

So let me walk you through the financial highlights of our solid second quarter performance. Revenues were down 9% at slightly over CAD 2.8 billion dollars. Fuel lag on a year-over-year basis represented a revenue headwind of CAD 10 million, or CAD 0.01 of EPS. Operating income was down 5% versus last year, or just under CAD 1.3 billion. Our operating ratio came in at 54.5%, an all-time record for second quarter representing an improvement of 190 basis point over last year.

Net income stood at CAD 858 million, down 3% versus last year with reported diluted earnings per share of CAD 1.10. Adjusted EPS declined 3% to CAD 1.11 from year earlier adjusted EPS of CAD 1.15 excluding the impact of deferred income tax expense from the enactment of a higher provincial income tax rate in both years. The impact of foreign currency was CAD 23 million favorable on net income or CAD 0.03 of EPS in the quarter. Turning to expenses. We continue to make significant progress in the quarter in terms of safety, productivity and cost management while maintaining our superior service.

In a lower volume environment, we continue to right size our resources which drove operating expenses down 12% versus last year at just over CAD 1.5 billion. Expressed on a constant currency basis, this is a 15% improvement. At this point I will refer to the variances on a constant currency basis. Labor and fringe benefit expenses were CAD 469 million, 15% lower than last year. This was mostly the result of a decrease in overall wage cost by 13% as wage inflation was more than offset by lower over time and a reduction of nearly 11% in average head count for the quarter versus 2015.

Lower pension expense of CAD 49 million also contributed to reduced labor cost partly offset by higher incentive compensation of CAD 28 million. We now expect the pension tailwind of approximately CAD 180 million this year versus CAD 150 million previously. This is mainly from improved demographic data from our most recent actuarial valuation. Purchased services and material expenses were CAD 377 million, 15% lower than last year. Our solid safety performance contributed to lower accident cost by CAD 21 million of the overall favorable variance.

Also lower volumes and our cost management initiatives helped reduce repairs and maintenance by CAD 16 million, trucking and transload activities by CAD 7 million and crew accommodation by CAD 8 million. Fuel expense came in at CAD 243 million or 29% lower than last year. Price was favorable by CAD 49 million and lower volumes accounted for an additional CAD 28 million reduction while fuel productivity came in at almost 2.5%. Depreciation stood at CAD 296 million, 2% higher than last year. This was a function of asset addition partly offset by the favorable impact of depreciation studies.

Casualty and other cost were CAD 72 million which was CAD 23 million lower than last year mainly attributable to lower accident-related costs. Turning to cash, we generated free cash flow of CAD 1.169 billion through the end of June. This was CAD 118 million higher than in 2015 and mostly as a result of higher cash from operating activities. Capital expenditures at CAD 1.139 billion were essentially flat with last year. Finally, our 2016 financial outlook.

The macroeconomic environment continues to be sluggish and we do expect volumes to remain challenged in the second half of the year. We expect shipments of commodities related to oil and gas development such as crude oil, frac sand and drilling pipe at or near bottom but still below last year and we also expect slightly weaker international intermodal volumes. On a positive note, we see continued strength in lumber and panels and automotive while the Canadian grain crop looks to be strong. We estimate that this will continue to translate into a decline in our annual carload volume now in the mid-single digit range versus 2015 while pricing will stay ahead of inflation. We continue to assume that the Canadian to U.S.

dollar exchange rate will be in the range of $0.75 to $0.80 and that fuel prices using WTI will remain in the range of $35 to $45 per barrel. These factors still make it a challenging environment for us including tougher cost management comparables in the second half on a year-over-year basis. However, we are reiterating our guidance of aiming to deliver 2016 adjusted diluted EPS in line with last year's adjusted diluted EPS of CAD 4.44. With respect to capital investments, we continue to reinvest in our business to support the safety, superior service, and efficiency of our network. As Mike mentioned, we have maintained our capital investment program, and we have been deploying this capital in a very efficient manner.

Furthermore, we continue to deliver sustainable value for our shareholders and reward them with consistent dividend and share buyback returns. CN's annual dividend was increased by 20% earlier this year while we gradually move towards a 35% dividend payout ratio. In addition, our current share buyback program is approximately CAD 2 billion. So despite a challenging environment in 2016, we are focused and committed to managing the business in a manner that protects earnings while continuing to position ourselves for long-term competitiveness. On this note, back to you, Luc.

Luc Jobin - President, Chief Executive Officer & Director: Thanks very much, Ghis. So to wrap it up, I guess for us at CN, the journey continues. The great transformation which started back in 1995 when Paul Tellier, then CEO, led the privatization of the company, along with Michael Sabia and Claude Mongeau. That journey lives today. And as we stand, the team is set, our game plan is clear, and we will continue to leverage our great franchise.

As well, with through supply chain collaboration we'll deliver value to our customer. CN's culture of safety and innovation, meshed with our continuous improvement efforts, allow us to drive results in today's reality while investing for the future. So we'll now be happy to turn the call back over to you, John, and to take questions.

Operator: Thank you, sir. Our first question is from Fadi Chamoun from BMO.

Please go ahead. Fadi Chamoun - BMO Capital Markets (Canada): Good afternoon. Luc Jobin - President, Chief Executive Officer & Director: Afternoon. Fadi Chamoun - BMO Capital Markets (Canada): So a quick question on the decremental margin and how should we think about the incremental margin when volumes start to recover. I mean historically we would think about sort of a classic rail recession that when your volumes are down, we see the operating ratio and the margin compress.

And then ultimately we see the positive operating leverage on the other end of it. But you have done an excellent job, I guess, through this downturn in volume in terms of minimizing the decremental margin. Is this then a function of the type of freight that has come down? And how should we think about the incremental margin sort of on the other end of this volume story?
Luc Jobin - President, Chief Executive Officer & Director: Fadi it's Luc. Listen, that's always a bit of a tricky equation to project. I mean of course it depends on what the recovery looks like.

If we're continue to see a slow growth environment, then that may encourage some of the factors to remain somewhat contained. So, as an example, if the price of oil starts to climb back up and we see a very sudden and amplified recovery, then that could change the condition. So in a nutshell, it would all depend in terms of where and how progressive the economy moves, because obviously, we can have incremental margins that are quite attractive if you're looking at just slow, steady growth. If it starts to leap, then we have to get back into getting more train starts and calling back crews and all of that. So in a nutshell, we're going to have to play it out.

I don't have a crystal ball, so it's pretty tough to call at this point. And we'll have to see what the contour of the recovery might look like. Fadi Chamoun - BMO Capital Markets (Canada): Okay. Just sort of a follow-up. So if we were to see the volume recovery being led by some of the consumer.

And it looks like you have some nice pieces of that intermodal business that could begin to work going into next year. So if it's intermodal and sort of merchandise industrial kind of carloads that leads us into the recovery say into 2017, is it reasonable that we should sort of expect that incremental margin we saw in the prior cycle? Or is there anything different about what we've seen this time because you're running at a mid 50%-ish sort of operating ratio right now, and so the question is, this sort of the cost curve came down permanently at this point?
Luc Jobin - President, Chief Executive Officer & Director: Fadi, I mean, the two factors just to talk a little bit about or generally. One is as you know the impact of the lower fuel prices has contributed to some of the reduction, so that's a factor which we don't control and if and when that starts to climb back up it will have an impact on everybody's OR. The second comment is really with respect to the way we think about operating ratio. For us it's all about growing the business, growing the franchise and in profitable way over time.

So we are not focused single handedly on the operating ratio. We are always looking to drive the business, drive the top line in a way that's sensible for the long-term. And so again it depends what the competitive conditions are like and what the mix of the recovery entails. So again we're pragmatic. So we look at the business that's out there and we make decisions for the longer haul which is to say that we wouldn't turn away from business that might be slightly higher, if it makes sense.

We look at more factors than just the OR in driving our future successes. So not exactly the quantitative number that you're looking for but directionally I think it gives you a sense for how we think about it and then we look at how the game moves on and we make the right decisions, at least for us for this franchise. Thanks very much, Fadi. Fadi Chamoun - BMO Capital Markets (Canada): Thank you.

Operator: Thank you.

The next question is from Brandon Oglenski from Barclays. Please go ahead. Eric Morgan - Barclays Capital, Inc.: Good afternoon. This is Eric Morgan on for Brandon. Thanks for taking my question and congrats to everyone on the team.

Luc Jobin - President, Chief Executive Officer & Director: Thanks, Eric. Eric Morgan - Barclays Capital, Inc.: I just wanted to ask a quick one on the outlook. You kept your guidance unchanged but it sounds like you're now expecting some incremental tailwinds from pension and depreciation assuming that depreciation benefits carry forward. I guess is the delta there just kind of incrementally softer demand in a tougher environment or would you say your outlook is potentially conservative with the new tailwind?
Ghislain Houle - Chief Financial Officer & Executive

Vice President: Yeah. Eric, this is Ghislain.

Listen, I think our outlook is our best foot forward. As you know, the markets are pretty volatile. The visibility that we have on some of the markets out there and commodities is not all that clear. And you know when we look at it, I wouldn't say that our outlook is conservative. I would say that this is our best foot forward and this is the best outlook that we've put out there.

Luc Jobin - President, Chief Executive Officer & Director: Eric, I think just to add a little bit to what Ghislain said, keep in mind that we will be facing some fuel surcharge significant headwind in the second quarter. So, there's puts and takes in terms of where and how the cost pressures will be. We do expect slightly easier comps versus last year's second half. But on the cost side, we really were pushing hard last year so it'll be a little bit tougher on top of the elements that Ghislain outlined. So all in all, as we typically do, we try to put the guidance in a reasonable place, and as far as we can call it right now, that is where that's where we are.

Thanks very much, Eric. Eric Morgan - Barclays Capital, Inc.: Thank you.

Operator: Thank you the next question is from Walter Spracklin for RBC. Please go ahead. Walter Spracklin - RBC Dominion Securities, Inc.: Thanks very much.

Good morning or good afternoon, everyone. Luc Jobin - President, Chief Executive Officer & Director: Good afternoon. Walter Spracklin - RBC Dominion Securities, Inc.: I guess my question comes back to Fadi's question on incremental margin but perhaps on the labor front. And, Mike, perhaps for you here as you look at the volume guidance that or the volume levels that you're guiding toward, your staffing level right now, I mean, it's down substantially down to this trough around 22,000 at the end of the period. Are you looking at re-staffing up from this point forward to the end of the year given the upward shift in volume? And after that, would you really be staffing on a one for one in terms of percentage increase of staffing with volume as you go from there or should we be looking at it a little differently?
Michael A.

Cory - Chief Operating Officer & Executive

Vice President: I think you're – I wouldn't say a one to one, Walter. I think as volume comes, we put it in the mix and we take a look at first of all what we can extract from obviously minimizing train starts and/or any operational activity we have to do. So we're going to see a requirement. I wouldn't say it's going to be a big requirement. We have a requirement for the grain haul that's going to take place.

We plan for that every year. And we have winter coming, so we're going to do something, but they'll all be in line with what we spoke about in how we do achieve our operating ratio, and it's more than just the volume that comes. We look for innovation, opportunity, and at the end of the day, we look to make sure we maintain the service level that our customers need. Walter Spracklin - RBC Dominion Securities, Inc.: But a degree of upward staffing from this level to the end of the year is what you're expecting?
Michael A. Cory - Chief Operating Officer & Executive

Vice President: I would say so, Walter.

Yes. Walter Spracklin - RBC Dominion Securities, Inc.: Okay. Great. Michael A. Cory - Chief Operating Officer & Executive

Vice President: Keep in mind, Walter, we do face winter, so we typically like to staff up a little bit because the demands are much higher.

Ghislain Houle - Chief Financial Officer & Executive

Vice President: Especially compared to last winter, which wasn't that tough. Walter Spracklin - RBC Dominion Securities, Inc.: Okay. Luc Jobin - President, Chief Executive Officer & Director: Thank you, Walter. Walter Spracklin - RBC Dominion Securities, Inc.: Thank you.

Operator: Thank you.

The next question is from Ravi Shanker from Morgan Stanley. Please go ahead. Ravi Shanker - Morgan Stanley & Co. LLC: Thanks. Good evening, everyone.

Luc, congratulations to you and the rest of the team on the new responsibilities. Just wanted to get a sense of what your top three priorities might be, and if there's any changes versus your kind of previous direction or any new focus areas?
Luc Jobin - President, Chief Executive Officer & Director: Yeah, thanks, Ravi. I mean, the – as I mentioned earlier, I mean, the strategy is not changing, so we're staying true to the course we set out under Claude's leadership. So we continue to focus on, again, striking a balance between operational and service excellence. Our focus on safety is relentless, so that's – those things are pretty well set.

What we don't always have is the luxury of calling what the market's going to be like. And clearly, the recent times have been more challenging, and we do expect that we're going to probably see some moderate growth, moderate to sluggish growth going forward. So we're taking a slightly more defensive posture. So issues of cost management, productivity, are being played up and have been played up over the last 12 months to 18 months. Other than that, we'll continue to leverage innovation.

I think that's a big part of what differentiates CN, a lot of teamwork going on. We're also looking at where and how we can leverage technology in a constructive way, whether that's on safety, whether that's actually looking at things like big data and leveraging that in terms of getting better outcomes in terms of safety, in terms of mechanical maintenance and engineering, maintenance projects. So I think, again, same general broad themes, but clearly with the current environment, we have to push every lever that we have and see how we can outperform the rest of the group. Ravi Shanker - Morgan Stanley & Co. LLC: Great.

I had a follow-up question on pricing. Your core pricing sequentially decelerated. Is that a function primarily of truck competition or are you seeing some intra-rail competition showing up there as well?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Hi, Ravi, it's JJ. We see all of the above. You know, competing with barge, with trucks, with other railroads in Canada and the U.S.

And fundamentally what's key is to be above inflation. So when you look at rail inflation today, where it's been, if you take the RCF and adjust it, as published by the AR, that gives you a benchmark. We want to be above that. So inflation today is not that strong, and the competition from all mode is real. Most mode have capacity, so it's a combination of all these factors.

We calculate it very precisely. We do same store price on all book of business, business that's been with us, worked under contract for five year, six years and business that's been with us only for five weeks, six weeks. So it is 2.2 in total, and 2.8 if you strip out the Canadian grain cap as set by us, work by the Canadian government, as well as our legacy contract from when we bought some railroad and we had some line for line (38:44) contract. Ravi Shanker - Morgan Stanley & Co. LLC: Great.

Thank you. Luc Jobin - President, Chief Executive Officer & Director: Thank you, Ravi.

Operator: Thank you. The next question is from Cherilyn Radbourne from TD Securities. Please go ahead.

Cherilyn Radbourne - TD Securities, Inc.: Thanks very much, and good afternoon. I wanted to ask you about Canadian grain. It sounds like you're ready to handle a very large crop. I just wonder if you could comment on the readiness of the other participants in the supply chain, and just what implications you think that another very large crop might have on the regulatory environment as it relates to volume minimums and the extended interswitching radius, et cetera. Luc Jobin - President, Chief Executive Officer & Director: Yeah, I think – Cherilyn, this is Luc speaking.

We are well prepared to address the challenges. Now, again, a lot of what we've said over the last several years, especially since we had the last big crop, was that there are a number of factors which lead to the success of the entire supply chain. So we're an important player. But there are – it's critical that the elevators in the country as well as the grain terminals at Tidewater work hand in hand with us. So having 24/7 operation, that's critical.

Making sure that we're in sync and we're understanding where the bottlenecks may come up, that's critical. I hate to say that, but winter does occur, and it does create challenges for all of us in the supply chain. So what we're trying to do is to reach out to our customers and all of the supply chain partners, to try to, adjust as much as we can our operating plans to maximize the throughput. So that's what Mike and his team as well as JJ and his group are trying to achieve. And it takes really – it takes everybody at the table, as opposed to pointing fingers to actually open up and share what the operating plans are and to do certain things.

I think we're trying as well to get folks to perform certain activities so that they can better withstand winter and they can better achieve higher throughputs. So Mike, I don't know if you want to add... Michael A. Cory - Chief Operating Officer & Executive

Vice President: Just to echo – Cherilyn it's Mike here. Just to echo Luc's comments, we've been working extremely close with both the operating team and JJ's team in not just reaching out to the customers but sitting down and having a strong process plan in terms of everything from communication to how we're going to actually set up our switching plans at the port, how we're going to deliver to the country.

We've got a good mix in how we're going to go about it in terms of sets and our scheduled grain plan, so we're not only excited, but we see with the grain customers, that what the supply chain's coming tighter together all the time. So we're looking forward to it. Cherilyn Radbourne - TD Securities, Inc.: Great. Thank you. That's my one.

Luc Jobin - President, Chief Executive Officer & Director: Thank you, Cherilyn. Michael A. Cory - Chief Operating Officer & Executive

Vice President: Thank you, Cherilyn. Ghislain Houle - Chief Financial Officer & Executive

Vice President: Thank you.

Operator: Thank you.

The next question is from Scott Group from Wolfe Research. Please go ahead. Scott H. Group - Wolfe

Research LLC: Hey. Thanks.

Afternoon, guys. So JJ, I think you made a comment that you've made some inroads into the volumes for 2017 in China. I presume you're talking about some of the international intermodal contracts coming up. I was wondering if you can give any more color about what you mean. Are you saying that you've started to re-sign some of the contracts? Or just making progress to that point?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: So we always re-sign some contracts, Scott, and we did sign another contract in the last few weeks.

And we also signed another contract that will start with us in January 2017. Scott H. Group - Wolfe

Research LLC: So would you expect your international intermodal share to be a net gain in 2017?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: That would likely be the case. Scott H. Group - Wolfe

Research LLC: Sorry, I missed that, JJ.

Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: That would likely be the case. Scott H. Group - Wolfe

Research LLC: Okay. Great. And then – can I just clarify just two quick things.

What was the depreciation benefit in the quarter? I don't know if I got the number. And then, JJ, can you just share your third quarter and fourth quarter volume expectations to get to down mid single?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Without getting into quarterly numbers, sequentially the second quarter was our bottom in terms of volume. And in July, we're not sinking anymore. We're flat and slightly kind of going up slowly. And between now and year end, hopefully from month to month, quarter to quarter, we're going to improve sequentially but year-over-year, we're going to be down versus last year.

And I don't know exactly at what point the sequential improvement will actually lap. All in the guidance is basically reflective of that. Scott H. Group - Wolfe

Research LLC: Okay. Ghislain Houle - Chief Financial Officer & Executive

Vice President: And, Scott, on the depreciation, the benefit that came from depreciation – this is Ghislain – from the benefit that came from depreciation studies in the quarter was CAD 10 million.

Scott H. Group - Wolfe

Research LLC: Okay. Great. Thank you, guys. Appreciate it.

Operator: Thank you. The next question is from Turan Quettawala from Scotiabank. Please go ahead. Turan Quettawala - Scotia Capital, Inc. (Broker): Yes.

Good evening, everyone, and congratulations all around on the promotion as well as on the good quarter here. I guess my question's on CapEx. A few of the rails have now suggested that CapEx should trend down here a little bit over the next few years. I know you are working with some specific projects. But can you give us a sense, maybe, of how CapEx will trend here over the next few years?
Ghislain Houle - Chief Financial Officer & Executive

Vice President: Yeah, I mean we're – this is Ghislain.

So we're always looking at CapEx, obviously. As you know, this year we're keeping our CapEx at the CAD 2.750 billion. We're taking the opportunity to invest in our rail and in what we call our basic infrastructure. And Mike mentioned the fact that if volumes are down, the fact that volumes are down a bit, then it allows us to deploy that capital much more productive, mostly related and driven by better work blocks for our gang. This year, as you know, we have about CAD 300 million to CAD 400 million slated for new locomotives, the 90 new GE locomotives that we will receive which obviously we are not going to have any CapEx on this next year.

So, stay tuned we will look at this, and again on our investments we're always looking for good projects. So if we've got good projects that bring a good return to the company, then obviously we will look at them closely and we will put CapEx to those. But stay tuned, just to let you know the CAD 300 million to CAD 400 million of locomotives are not going to be required next year, and we'll see where we're going to be next year on the CapEx front. Luc Jobin - President, Chief Executive Officer & Director: Thanks, Turan. Turan Quettawala - Scotia Capital, Inc.

(Broker): Thank you.

Operator: Thank you. The next question is from Tom Wadewitz from UBS. Please go ahead. Thomas Wadewitz - UBS

Securities LLC: Yeah.

Good afternoon, Luc, Mike, Ghislain. Congratulations on the new positions and the promotions. The – let's see, wanted to ask you a little bit more on the intermodal. I know you've commented that some – where I might have missed this, where do you think the inventories are? Have they kind of started to come back, maybe retail inventories, and then I guess on the comment JJ that you mentioned about some share gain. Is that in Canada? Or is that the U.S.

business? Or how might we think about that? So some thoughts on intermodal. Thank you. Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Thank you, Tom. It's JJ speaking. So, on the retail inventory it might also help on the manufacturing sector, I think we look at the same stats as you're looking – same statistics as you're looking, they're not really improving a whole lot.

There's still a lot of product out there in terms of the supply chain of either retailer or manufacturing sector. As it relate to some of the gain we gave for 2017 I'm not going to get into the detail of where the product is going at this point. We'll talk about that sometime early next year. It's on the West Coast. Thomas Wadewitz - UBS

Securities LLC: Okay.

So do you think intermodal kind of improves, like gets less worse through the year as you look third quarter and fourth quarter? Or how would you look at – kind of how intermodal fits into your broader guidance comment?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: We have a bit of a special situation at CN with we're a major player at the Deltaport in Vancouver. And in construction, the construction is going ahead. We don't have the same capacity that we had last year at the same time to pull product out of Deltaport, we are working with the terminal operator in our supply chain mindset to truck every day containers from their port to our domestic yard to supplement the lost capacity during the construction phase. So you've got to keep that in mind. Rupert should grow.

Montreal is flat. Halifax a good story, and Mobile is a new story so it can only go up. But – the fact Deltaport is going through construction is creating some challenge for us over the next six months. But broadly, you would think the market would slowly improve. But it's not going to be gang-busters for anybody on the West Coast.

Thomas Wadewitz - UBS

Securities LLC: Okay. Thank you. Luc Jobin - President, Chief Executive Officer & Director: Thank you, Tom.

Operator: Thank you. The next question is from Brian Ossenbeck from JPMorgan.

Please go ahead. Brian P. Ossenbeck - JPMorgan

Securities LLC: Hi. Good afternoon. Thanks for taking the call.

So, JJ, you mentioned 2Q is probably going to be the bottom for crude by rail. I was looking at the spreads it's moving back now close to $10 a barrel. Is that sufficient to move Western Canada to the Gulf Coast? And how do you see pipeline versus rail capacity when you look out into 2017? Do you think that growth can start to pick up again around that time?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Regarding the crude by rail today, the volume is still weak, so maybe the spread is widening, but we're not getting the phone call about moving the train. So that's so far it doesn't mean anything. Everything we move, is from Western Canada.

We don't really move anything from the back end, whether Saskatchewan back end or the U.S. And for 2017, frankly it's too early. Right now you know crude by rail is not the horse you want to ride very hard. If the demand is there, the demand is there. I was looking at my stats during the second quarter and third quarter.

We're getting our fair share of what's available to Canadian railroad, and slightly more. So it's a question of how big will the market be. But this is not something that our guidance for example, is depending on. Brian P. Ossenbeck - JPMorgan

Securities LLC: Okay.

And if you can just give us a quick update on the competitive dynamics that you mentioned last quarter, specifically in some of the energy markets?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: So I think what we said last quarter needs to be said but we're not going to say anymore. And regarding crude by rail the biggest competition we have is the pipeline. Pipeline is really is the king. That's who dominate the marketplace and that's the reason why our carload is down to the level it is right now. Luc Jobin - President, Chief Executive Officer & Director: All right.

Thanks, Brian. Brian P. Ossenbeck - JPMorgan

Securities LLC: Okay. Thank you.

Operator: Thank you.

The next question is from Jason Seidl from Cowen. Please go ahead. Jason H. Seidl - Cowen & Co. LLC: Thank you, operator.

Mike, JJ, Ghislain, how are you guys today?
Michael A. Cory - Chief Operating Officer & Executive

Vice President: Very good. Thank you. Ghislain Houle - Chief Financial Officer & Executive

Vice President: Very good. Thank you, Jason.

Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Very good. Thank you. Jason H. Seidl - Cowen & Co. LLC: Just quick question going back on the crude side.

I saw today that there was a new ruling taking out the DOT 111 cars a couple of months early. I know there's under probably 30,000 of these cars out there. What's that going to do to at least third quarter? Are you guys going to be able to shift some of those around or how many are running on CN's network at the time?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: None of them are moving crude at CN network at this time and we don't need that fleet there. The fleet of crude right now and for North America is long. We've got cars parked and it's very good cars (50:41).

They're all being parked. So this is good news for society and I think it's good news for the railroad, from a safety point.... Jason H. Seidl - Cowen & Co. LLC: Fantastic.

In terms of when you mentioned that obviously there's a little more competitive environment across the board for the rails and for all forms of transport here it seems like that's across North America. What have you seen in terms of trucking competition towards the end of the quarter and here into July? Has that lessened a bit? Because we're getting some sense from some of the people that have reported on the truck load side that capacity is starting to tighten back up a little bit again. Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: I think for the average, such a short period of time I'm not able to see whether or not the last four weeks there have been a bit of a shift so I wouldn't be able to really give you a sense whether there was any turning point in the last month, necessarily. Luc Jobin - President, Chief Executive Officer & Director: Okay. Thanks...

Jason H. Seidl - Cowen & Co. LLC: Okay. That's all I had, gentlemen. Thank you.

Luc Jobin - President, Chief Executive Officer & Director: Thanks, Jason.

Operator: Thank you. The next question is from Chris Wetherbee from Citi. Please go ahead. Chris Wetherbee - Citigroup Global Markets, Inc.

(Broker): Hey, great. Thanks. Good afternoon. Wanted to ask a question just coming back to CapEx for a moment. So, Luc, I think you had mentioned that you're looking forward to kind of a moderate to sluggish growth environment and just thinking about sort of capital intensity maybe beyond 2017 but a little bit further than that.

You think about the locomotives maybe coming out next year. But bigger picture, should we be thinking about CapEx as a percent of revenue kind of easing down from the levels we've been at? And just kind of given the sense of with the volume outlook and with the resource that you now have, how do you think about it a little longer term?
Luc Jobin - President, Chief Executive Officer & Director: I think, Chris, longer term it's – we would expect to see capital coming down. We do have obviously a very large and substantial project which is the implementation of Positive Train Control in the U.S. which will for probably the next couple of years be significant. But I figure it's going to run for the next couple of years about at the level where it is currently this year.

And so less mode of power requirement and then it's really going to be dependent upon what happens in terms of the business. We do have a good car supply, so it's this is not an area that we're going to be again very stressed on. But we're also looking at the future and as was pointed out by Ghislain, we do look at opportunities and as I talked a little bit about the application of technology within our space, the leveraging of big data, those kinds of things are part of our future. And so if we may continue to invest a little bit more in that area, it's obviously not of the same magnitude but we do see opportunities out there and we've been known over the last several years not necessarily to be following everybody just because that's the way the story goes. So clearly we'll be at a lower level in terms of percentage or revenue but we constantly look for opportunities to deploy the capital smartly in order to gain a long term advantage and so that's kind of how we think about it longer term.

Chris Wetherbee - Citigroup Global Markets, Inc. (Broker): Just one quick follow-up to that, when you think about sort of the capacity you have, I know this is a very difficult question to answer but I'm going to ask it anyway. When you think about what type of volume you can take with sort of the horse power, the locomotive fleet that you have now, the car fleet that you have now, any sense, rough sense of maybe how we can think about the incremental volumes the network can handle?
Michael A. Cory - Chief Operating Officer & Executive

Vice President: It's all about – this is Mike here. It's all about speed, and the size of train.

And so it's kind of hard in terms of – and I think Luc mentioned earlier having a crystal ball as to what the volumes are. But to answer your question, yes, there is more capacity out there. At what rate does that capacity get swallowed up? I mean, it's relative to the amount of volume that comes. So it's a little difficult at this time, but there is capacity. Luc Jobin - President, Chief Executive Officer & Director: Let's just say that we're not worried about that as being a constraint for quite some time.

And again, if we sense that things are really picking up, we've been known to, have a pretty good eye for anticipating and deploying the capital five minutes before midnight, as opposed to five after midnight. So, we keep at it – we obviously are always mindful of that, and – but in the short to mid-term, that's not going to be a problem. Michael A. Cory - Chief Operating Officer & Executive

Vice President: And just to add one more thing, Luc. We've simulated our entire network by corridor in terms of the capacity that it has by train starts.

So it's not difficult to add volume as we see it coming. We have a pretty solid process on how we call P3X and how we determine what we're going to need for assets and where the volume's coming from. So we'll be ready when the time comes. Chris Wetherbee - Citigroup Global Markets, Inc. (Broker): Great.

Thanks for the time, guys. Appreciate it. Luc Jobin - President, Chief Executive Officer & Director: Thanks, Chris. Michael A. Cory - Chief Operating Officer & Executive

Vice President: Thank you.

Operator: Thank you. The next question is from Steve Hansen from Raymond James. Please go ahead. Steve Hansen - Raymond James Ltd. (Broker): Hey, guys.

Just a quick one for me on frac sand. I think you suggested in your commentary that it's now bottomed out as well. I'm just curious here whether you think the visibility or recovery in frac sand carloads is any better than it is in crude, given that, I think, if I'm not mistaken, the fracking intensity has pretty much maintained an upward trajectory through the downturn, and we're also starting to see some early evidence that the rig count is on the rise, at least in some basins. So just trying to get a broader context whether you think the recovery in sand is going to come before crude, and if so, to what magnitude?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Yeah. There is an increase in rig count.

Some of it is in crude, some of it is in natural gas. As natural gas price goes up, people will drill and they will find gas, and they will put the gas in the network and the price of gas will start to come down, which is back to whether or not gas will be displaced by coal, which mean that gas would have to be expensive. So I think in the case of CN, as I said in my comments, we're very exposed to gas, gas drilling, that's where we – that's our story in both Western Canada and as well as interchanging in Chicago with the Eastern Railroad. And in that market, we are facing some competition from local sand. People are using more sand than they used to.

But they also, in the area of cost saving they are using some cheaper sand, which tends to be trucked locally from local sand pits. So that's kind of the environment that we're in. Sand seems to have reached its bottom. I would be cautious to how fast things climb back up from where we are here. In the case of crude, you're back to really a bigger competitor.

I'm not talking in that case, the local, the sand pits, we're talking the pipeline industry and how much capacity they have, and back to the spread and crude prices come back down with the Canadian dollars. So I think this is kind of an old card at this point for the crude. Steve Hansen - Raymond James Ltd. (Broker): Okay. Very helpful.

Thanks. Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Thank you. Luc Jobin - President, Chief Executive Officer & Director: Thanks, Steve.

Operator: Thank you. The next question is from Allison Landry from Credit Suisse.

Please go ahead. Allison M. Landry - Credit Suisse Securities (USA) LLC (Broker): Thanks. So, you talked about carloads for the full year down in the mid-single digits. Is that the right way to think about RTMs for the full year or should we be looking for something a little better than that? Just in the last few weeks as the spread between RTMs and carloads look like it's widened a bit.

So, any color on your expectations for mix in the second half would be helpful. Thanks. Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Okay, Allison, it's JJ. So at CN, one of the issues that drives that spread between RTM and carload is whether or not UTac will restart in late August, because that's a lot of carload and have very little RTM. The story about crude, that was a lot of carload, but driving long RTM.

Because when we go with crude, typically we go all the way to the East Coast or the Gulf of Mexico. So you're going to see some noise in our result coming up because of restart of the iron ore mine. And some of our – the Canadian grain should be long haul. You're talking Saskatchewan, Manitoba, to typically Vancouver. But I think right now, they might be – your best bet would be to track our RTM.

If you want to have a sense of our volume you'd have a better sense of our volume performance by tracking RTM than tracking our carloads. Allison M. Landry - Credit Suisse Securities (USA) LLC (Broker): Okay. Thank you. Luc Jobin - President, Chief Executive Officer & Director: Thank you, Allison.

Operator: Thank you. The next question is from Justin Long from Stephens, Inc. Please go ahead. Justin Long - Stephens, Inc.: Thanks, and good afternoon. I was wondering if you could provide an update on how many of your current contracts are one-year deals versus multi-year deals.

And I was just curious if that mix has been changing at all in this environment? Are you making a push for longer-term deals to secure more revenue visibility?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: It's JJ, Justin. No, not really. First of all, we don't provide too specific detail to our commercial strategy in that regard, but we have tariff, we have one-year contract, we have three-year contract, we have some longer-term contract, and it's really about the situation itself. And also when we talk about contract, we talk basically yield, yield that lead to operating ratio. Operating ratio means you also get paid fairly for your work, not just cutting costs.

And when the business is more attractive, then we're more inclined. When the business is less attractive, then we're less inclined to lock in for a period of time. Justin Long - Stephens, Inc.: Okay. Great. Thank you.

Luc Jobin - President, Chief Executive Officer & Director: Thanks, Justin. Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Thank you.

Operator: Thank you. The next question is from David Vernon from Bernstein. Please go ahead.

J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Hey, guys, and thanks for taking the question. JJ, I just wanted to talk a little bit about international intermodal and how you get comfortable that the volumes through Rupert are in fact stabilizing? We're just hearing a lot from various steamship lines that they're changing a lot of their vessel strings, whether it's through the Suez or the Panama, and I'm sort of getting a sense that those guys are still trying to figure out how they're going to adapt their networks to some of the larger vessel sizes.

I'm just wondering if there's some risk that Rupert might lose some share in the medium-term, not necessarily next week, but over the next couple years. Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: So when you look at Rupert – this is – Vernon it's JJ speaking again – the expansion, we don't have it yet. The expansion is really coming on stream in July, roughly July 2017. So as much as we work hard right now to get some business, we wouldn't be able to serve it. We can't take another vessel call.

All of the alliance in the world are changing, and the new alliance will come in place July – May 1 of next year. So as you do that, either good things or bad things happen. You could work it for your favor or it could work against you, and obviously in our case of CN, we are trying hard to bring all of the alliance into Rupert, which Rupert could accommodate when it has a second berth in the expansion by July. So our game plan is for Rupert to benefit from all of this turmoil, and also our game plan is for cases where we don't control the marketplace, cases people want to go over to Panama Canal that's why we developed the Mobile, the Mobile Port mostly right now with COSCO and Maersk, but this alliance will change next year. New players actually will come in that are interested to use Mobile to mid-America.

And if you come via Suez Canal, to the point you mentioned, the Suez can also take some big ship. Some customers want to be served now from the East Coast. We're going to be – we're operating in Halifax; very much in play, and it's already a big player. We use Halifax as a gateway. That would work very well with through – for the U.S.

Midwest at CMA. And CMA is probably – they got alliance with the Chinese, and that also might have some potential for next year. So all that to say that the – all these flows are in turmoil, but we are the railroad that serves three coasts, right? People want to go East Coast we're going to operate in Halifax to the Midwest. You want to go Gulf Coast via Panama Canal we're going to get you Mobile to the Midwest. You want to stay in the West Coast, we'll get you to Midwest with the West Coast.

J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: But nothing sort of this long term has the steamship lines sort of tied in after they go through this alliance reshuffle through Rupert, or is it just more flexible than that and it's just unknown at this stage?
Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Well with Rupert expanding and the alliance reshuffling, our game plan as we're fairly hopeful our game plan will work. There will be more alliance and more ship to Rupert next year.

J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Great, thanks a lot for the time. Congratulations to everybody and good luck with your new appointments.

Thanks. Luc Jobin - President, Chief Executive Officer & Director: Thanks, David. Jean-Jacques Ruest - Chief Marketing Officer & Executive

Vice President: Thank you.

Operator: Thank you. The next question is from Ken Hoexter from Bank of America Merrill Lynch.

Please go ahead. Kenneth Scott Hoexter - Bank of America

Merrill Lynch: Great. Good afternoon. Luc, Ghislain, Mike and Paul, congrats on your new roles, and JJ, good afternoon. Mike, can you just – you talked a bit about the productivity expansion or detraction before.

Can you talk – are you at peak on train lengths or how much can you improve from here? And anything on the labor contracts you're still working with? Just want to understand your potential for continued expansion on the margins. Michael A. Cory - Chief Operating Officer & Executive

Vice President: Sure, Ken. I'm not going to really give you a specific number on how big trains can get or how many less we need. But there's always room.

Just our approach every day in – and we do it every day

from 5:00 in the morning on, we're looking at every opportunity we can to increase both length and both the train weight. With our capital purchase of new locomotives, it just makes it all the easier. I hope my team's listening to this, because really, that's what we go after. In terms of contract negotiations, we're – our conductors' contract is up. We're in conciliation with them right now.

We're meeting weekly to make sure that we move the process along. We're comfortable that we're – our conversations are going well. And we'll see how it turns out. Luc Jobin - President, Chief Executive Officer & Director: Okay. Thanks very much, Ken.

Kenneth Scott Hoexter - Bank of America

Merrill Lynch: Great. Thank you
Michael A. Cory - Chief Operating Officer & Executive

Vice President: Thank you.

Operator: The next question is from Bascome Majors from Susquehanna. Please go ahead.

Bascome Majors - Susquehanna Financial

Group LLLP: Yeah. Thanks for taking my questions here. Just a housekeeping item. On the expense studies that you did on the pension and the D&A, was that something that was brought on kind of off-cycle by the reduction in volumes and head count or is this part of just a normal kind of update that you guys do periodically in the quarter?
Ghislain Houle - Chief Financial Officer & Executive

Vice President: Bascome, this is Ghislain. The pension was – is part of our actuarial valuation that we have to do every year which we file with the regulator at the end of June.

So this was just a betterment coming from the average service life of our employees to be a tad longer than what we had before and basically that gave us the CAD 16 million of pension credit or pension income in the quarter. Bascome Majors - Susquehanna Financial

Group LLLP: Okay. And on the D&A study, was that something that you guys did?
Ghislain Houle - Chief Financial Officer & Executive

Vice President: Well we always – we do, Bascome, these studies on a regular basis. And we tackle different classes of assets and sometimes they turn out to be negative. Sometimes they turn out to be positive, and the ones that I referred to happen to be positive in the tune of CAD 10 million in the quarter.

But we do these on a regular basis obviously and we have some other scheduled for the end of this year and then next year. Bascome Majors - Susquehanna Financial

Group LLLP: Thank you for the time. Ghislain Houle - Chief Financial Officer & Executive

Vice President: Thank you. Luc Jobin - President, Chief Executive Officer & Director: All right. Thanks very much.

And this will bring our call to a close. I would like to thank everybody for joining us today. I'll just reiterate that we're very pleased with our second quarter results. I think they demonstrate again the strength of our franchise and the strength of our operating model as well as the power of the team. So we look forward to sharing with you our third quarter results and that call will be scheduled sometime in October.

And in the meantime, just we encourage everybody to be safe out there. So thank you very much. And, John, I will turn it back to you to close the call.

Operator: Thank you, sir. The conference has now ended.

Please disconnect your line at this time and we thank you for your participation.