April 20, 2018 - 8:00 AM EDT
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Kansas City Southern Reports Record First Quarter Results

KANSAS CITY, Mo.

First Quarter 2018 Results

  • Record first quarter revenues of $639 million, an increase of 5% from prior year on 1% volume growth
  • Record first quarter operating income of $219 million, 4% higher than a year ago
  • Operating ratio of 65.8%, compared with 65.4% in first quarter 2017
  • Record first quarter diluted earnings per share of $1.40, an increase of 1% over first quarter 2017; record first quarter adjusted diluted earnings per share of $1.30, an increase of 11% over first quarter 2017

Kansas City Southern (KCS) (NYSE:KSU) reported record first quarter 2018 revenues of $639 million, an increase of 5% from first quarter 2017. Overall, carload volumes increased 1% compared to the prior year.

First quarter 2018 revenues increased in four commodity groups, led by a 17% increase in Automotive, a 10% increase in Chemicals and Petroleum and a 9% increase in Intermodal. Revenue from Industrial and Consumer was also positive with an increase of 4% compared to the first quarter of 2017. These increases were partially offset by declines in Energy and Agriculture and Minerals of 11% and 2%, respectively, compared to the first quarter of 2017.

Operating expenses in the first quarter were $420 million, 5% higher than 2017. Operating income was a first quarter record at $219 million, an increase of 4% from the first quarter 2017. KCS reported a first quarter operating ratio of 65.8%, a 0.4 point deterioration over first quarter 2017.

Reported net income in the first quarter of 2018 was $145 million, or $1.40 per diluted share, compared with $147 million, or $1.38 per diluted share, in the first quarter of 2017. Excluding the impacts of foreign exchange, adjusted diluted earnings per share was a first quarter record of $1.30, compared to $1.17 in first quarter 2017.

“Despite congestion across the North American rail network, KCS grew volumes in all commodity groups except Energy and Agriculture and Minerals during the first quarter 2018,” stated Kansas City Southern’s President and Chief Executive Officer Patrick J. Ottensmeyer. “Furthermore, we maintain our outlook for mid-single digit volume growth for full year 2018.”

GAAP Reconciliations

($ in millions, except per share amounts)

 
Reconciliation of Diluted Earnings per Share to        
Adjusted Diluted Earnings per Share Three Months Ended March 31, 2018

Income Before
Income Taxes

   

Income Tax
Expense

Net Income    

Diluted Earnings
per Share

As reported $ 221.7 $ 76.8 $ 144.9 $ 1.40
Adjustments for:
Foreign exchange gain (27.8 ) (8.3 ) (19.5 ) (0.19 )
Foreign exchange component of income taxes   (8.9 ) 8.9   0.09  
Adjusted $ 193.9   $ 59.6   134.3

Less: Noncontrolling interest and preferred stock dividends

(0.5 )

Adjusted net income available to common stockholders - see (a) below

$ 133.8   $ 1.30  
 
Three Months Ended March 31, 2017

Income Before
Income Taxes

Income Tax
Expense

Net Income

Diluted Earnings
per Share

As reported $ 237.9 $ 91.0 $ 146.9 $ 1.38
Adjustments for:
Foreign exchange gain (46.8 ) (14.1 ) (32.7 ) (0.31 )
Foreign exchange component of income taxes   (10.3 ) 10.3   0.10  
Adjusted $ 191.1   $ 66.6   124.5

Less: Noncontrolling interest and preferred stock dividends

(0.4 )

Adjusted net income available to common stockholders - see (a) below

$ 124.1   $ 1.17  
(a)   The Company believes adjusted diluted earnings per share is meaningful as it allows investors to evaluate the Company’s performance for different periods on a more comparable basis by excluding the impact of changes in foreign currency exchange rates. The income tax expense impacts related to these adjustments are calculated at the applicable statutory tax rate.
 
 

Headquartered in Kansas City, Mo., Kansas City Southern (KCS) (NYSE: KSU) is a transportation holding company that has railroad investments in the U.S., Mexico and Panama. Its primary U.S. holding is The Kansas City Southern Railway Company, serving the central and south central U.S. Its international holdings include Kansas City Southern de Mexico, S.A. de C.V., serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal. KCS' North American rail holdings and strategic alliances are primary components of a railway network, linking the commercial and industrial centers of the U.S., Mexico and Canada. More information about KCS can be found at www.kcsouthern.com.

This news release contains “forward-looking statements” within the meaning of the securities laws concerning potential future events involving KCS and its subsidiaries, which could materially differ from the events that actually occur. Words such as “projects,” “estimates,” “forecasts,” “believes,” “intends,” “expects,” “anticipates,” and similar expressions are intended to identify many of these forward-looking statements. Such forward-looking statements are based upon information currently available to management and management’s perception thereof as of the date hereof. Differences that actually occur could be caused by a number of external factors over which management has little or no control, including: competition and consolidation within the transportation industry; the business environment in industries that produce and use items shipped by rail; loss of the rail concession of KCS’ subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination of, or failure to renew, agreements with customers, other railroads and third parties; access to capital; disruptions to KCS’ technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents on KCS’ rail network or at KCS’ facilities or customer facilities involving the release of hazardous materials, including toxic inhalation hazards; fluctuation in prices or availability of key materials, in particular diesel fuel; dependency on certain key suppliers of core rail equipment; changes in securities and capital markets; unavailability of qualified personnel; labor difficulties, including strikes and work stoppages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic, political and social conditions; the level of trade between the United States and Asia or Mexico; fluctuations in the peso-dollar exchange rate; increased demand and traffic congestion; the outcome of claims and litigation involving KCS or its subsidiaries; and other factors affecting the operation of the business. More detailed information about factors that could affect future events may be found in filings by KCS with the Securities and Exchange Commission, including KCS’ Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 1-4717) and subsequent reports. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. KCS is not obligated to update any forward-looking statements to reflect future events or developments.

 
Kansas City Southern and Subsidiaries
Consolidated Statements of Income
(In millions, except share and per share amounts)
(Unaudited)
        Three Months Ended
March 31,
2018     2017
Revenues $ 638.6   $ 609.5  
Operating expenses:
Compensation and benefits 121.6 117.4
Purchased services 47.1 48.8
Fuel 81.3 75.4
Mexican fuel excise tax credit (9.2 ) (11.7 )
Equipment costs 32.2 31.2
Depreciation and amortization 83.3 79.3
Materials and other 63.6   58.4  
Total operating expenses 419.9   398.8  
Operating income 218.7 210.7
Equity in net earnings of affiliates 1.0 4.0
Interest expense (25.5 ) (24.7 )
Foreign exchange gain 27.8 46.8
Other income (expense), net (0.3 ) 1.1  
Income before income taxes 221.7 237.9
Income tax expense 76.8   91.0  
Net income 144.9 146.9
Less: Net income attributable to noncontrolling interest 0.4   0.3  
Net income attributable to Kansas City Southern and subsidiaries 144.5 146.6
Preferred stock dividends 0.1   0.1  
Net income available to common stockholders $ 144.4   $ 146.5  
 
Earnings per share:
Basic earnings per share $ 1.41   $ 1.38  
Diluted earnings per share $ 1.40   $ 1.38  
 
Average shares outstanding (in thousands):
Basic 102,574 106,111
Potentially dilutive common shares 402   215  
Diluted 102,976   106,326  
 
 
Kansas City Southern and Subsidiaries
Revenue & Carload/Units by Commodity - First Quarter 2018 and 2017
                   
Revenues Carloads and Units Revenue per
(in millions) (in thousands) Carload/Unit
Year to Date % Year to Date % Year to Date %
2018 2017 Change 2018 2017 Change 2018 2017 Change
 
Chemical & Petroleum
Chemicals $ 57.7 $ 54.6 6 % 26.7 27.5 (3 %) $ 2,161 $ 1,985 9 %
Petroleum 49.0 38.8 26 % 24.0 21.0 14 % 2,042 1,848 10 %
Plastics 33.0   33.1     17.4   18.2   (4 %) 1,897   1,819   4 %
Total 139.7   126.5   10 % 68.1   66.7   2 % 2,051   1,897   8 %
 
Industrial & Consumer Products
Forest Products 65.3 63.5 3 % 29.6 29.6 2,206 2,145 3 %
Metals & Scrap 53.8 54.3 (1 %) 29.7 30.4 (2 %) 1,811 1,786 1 %
Other 27.2   22.3   22 % 22.7   20.8   9 % 1,198   1,072   12 %
Total 146.3   140.1   4 % 82.0   80.8   1 % 1,784   1,734   3 %
 
Agriculture & Minerals
Grain 65.2 66.2 (2 %) 33.5 35.7 (6 %) 1,946 1,854 5 %
Food Products 36.2 38.3 (5 %) 14.9 16.3 (9 %) 2,430 2,350 3 %
Ores & Minerals 4.9 4.3 14 % 5.3 4.8 10 % 925 896 3 %
Stone, Clay & Glass 7.1   7.5   (5 %) 3.2   3.3   (3 %) 2,219   2,273   (2 %)
Total 113.4   116.3   (2 %) 56.9   60.1   (5 %) 1,993   1,935   3 %
 
Energy
Utility Coal 29.3 42.8 (32 %) 30.0 44.5 (33 %) 977 962 2 %
Coal & Petroleum Coke 10.2 11.0 (7 %) 13.4 16.3 (18 %) 761 675 13 %
Frac Sand 11.1 10.7 4 % 7.1 7.2 (1 %) 1,563 1,486 5 %
Crude Oil 10.7   4.5   138 % 7.0   3.7   89 % 1,529   1,216   26 %
Total 61.3   69.0   (11 %) 57.5   71.7   (20 %) 1,066   962   11 %
 
Intermodal 90.9   83.5   9 % 243.0   224.0   8 % 374   373    
 
Automotive 59.8   51.3   17 % 39.8   37.6   6 % 1,503   1,364   10 %
 
TOTAL FOR COMMODITY GROUPS 611.4 586.7 4 % 547.3   540.9   1 % $ 1,117   $ 1,085   3 %
 
Other Revenue 27.2   22.8   19 %
 
TOTAL $ 638.6   $ 609.5   5 %

Kansas City Southern
Ashley Thorne, 816-983-1530
[email protected]


Source: Business Wire (April 20, 2018 - 8:00 AM EDT)

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