Kansas City Southern Reports Record First Quarter Revenues, Carloads, Operating Income, Operating Ratio and Earnings per Share

Date : 04/21/2017 @ 8:00AM
Source : Business Wire
Stock : Kansas City Southern (KSU)
Quote : 108.57  1.01 (0.94%) @ 2:28PM
Kansas City Southern share price Chart

Kansas City Southern Reports Record First Quarter Revenues, Carloads, Operating Income, Operating Ratio and Earnings per Share

Kansas City Southern (NYSE:KSU)
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6 Months : From Feb 2017 to Aug 2017

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First Quarter 2017 Results

  • Record first quarter revenues of $610 million, an increase of 8% over first quarter 2016 on a 6% increase in carloads
  • Operating income of $211 million, a first quarter record and 12% higher than prior year
  • Record first quarter operating ratio of 65.4%, a 1.2 point improvement over first quarter 2016
  • Diluted earnings per share of $1.38, an increase of 39% over first quarter 2016. Adjusted diluted earnings per share of $1.17, an increase of 14% over first quarter 2016. Both diluted and adjusted diluted earnings per share were first quarter records.

Kansas City Southern (KCS) (NYSE:KSU) reported first quarter 2017 revenues of $610 million, an increase of 8% over first quarter 2016. Overall carload volumes were 541 thousand, 6% higher compared to first quarter 2016. Excluding the estimated impact of Mexican peso depreciation, revenue increased by 11% compared to the first quarter of 2016.

First quarter 2017 revenues increased in four commodity groups, led by a 64% increase in Energy and a 25% increase in Automotive. Revenues from Chemical & Petroleum and Agriculture & Minerals were also positive with increases of 8% and 6%, respectively, compared to the first quarter of 2016. These increases were partially offset by declines in Intermodal and Industrial & Consumer of 2% and 1%, respectively, compared to the first quarter of 2016.

Operating expenses in the first quarter were $399 million, 6% higher than 2016. Excluding the estimated impact of Mexican peso depreciation, operating expenses increased 9% compared to the first quarter of 2016.

Operating income for the first quarter of 2017 was $211 million, an increase of 12% from the first quarter 2016. KCS reported a first quarter operating ratio of 65.4%, a 1.2 point improvement over first quarter 2016. Reported net income in the first quarter of 2017 totaled $147 million, or $1.38 per diluted share, compared with $108 million, or $0.99 per diluted share, in the first quarter of 2016. Excluding the impacts of foreign exchange rate fluctuations, adjusted diluted earnings per share for first quarter 2017 was $1.17, compared to $1.03 in first quarter 2016.

“Kansas City Southern is pleased with the return of year-over-year revenue and volume growth in first quarter 2017,” stated Kansas City Southern’s President and Chief Executive Officer Patrick J. Ottensmeyer. “We all remain focused on operational improvements and longer-term growth drivers and are excited to see some of these opportunities, such as refined products movements, materialize in 2017.”

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, 2017

Income BeforeIncome Taxes

   

Income TaxExpense

    Net Income    

DilutedEarningsper 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       Three Months Ended March 31, 2016

Income BeforeIncome Taxes

Income TaxExpense

Net Income

DilutedEarningsper Share

As reported $ 164.9 $ 56.8 $ 108.1 $ 0.99 Adjustments for: Foreign exchange loss 3.5 1.0 2.5 0.03 Foreign exchange component of income taxes —   (1.1 ) 1.1   0.01   Adjusted $ 168.4   $ 56.7   111.7

Less: Noncontrolling interest and preferred stock dividends

(0.4 )

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

$ 111.3   $ 1.03       GAAP Reconciliations (continued)

($ in millions)

 

Revenue Change Excluding Estimated Foreign Exchange Impact

                         

Change %

Reported revenues for the three months ended March 31, 2017 $ 609.5 Reported revenues for the three months ended March 31, 2016 562.7 Revenue change 46.8 8 %   Estimated foreign exchange impact 14.6

Revenue change excluding foreign exchange impact - see (b) below     

$ 61.4 11 %  

Operating Expense Change Excluding Estimated Foreign Exchange Impact

             

Change %

Reported operating expenses for the three months ended March 31, 2017 $ 398.8 Reported operating expenses for the three months ended March 31, 2016 374.8 Operating expense change 24.0 6 %   Estimated foreign exchange impact 11.4

Operating expense change excluding foreign exchange impact - see (b) below

$ 35.4 9 %   (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.   (b) The Company believes revenue and operating expense changes excluding foreign exchange impact are meaningful measures as they allow investors to evaluate the Company's performance for different periods on a more comparable basis by excluding the impact of fluctuations in foreign currency exchange rates by holding these rates constant between the reporting periods.  

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 KCSR, 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 NAFTA Railway system, linking the commercial and industrial centers of the U.S., Mexico and Canada.

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; availability 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, 2016 (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, 2017     2016 Revenues $ 609.5   $ 562.7   Operating expenses: Compensation and benefits 117.4 110.1 Purchased services 48.8 50.9 Fuel 75.4 56.8 Mexican fuel excise tax credit (11.7 ) — Equipment costs 31.2 26.7 Depreciation and amortization 79.3 74.3 Materials and other 58.4   56.0   Total operating expenses 398.8   374.8   Operating income 210.7 187.9 Equity in net earnings of affiliates 4.0 3.9 Interest expense (24.7 ) (23.6 ) Foreign exchange gain (loss) 46.8 (3.5 ) Other income, net 1.1   0.2   Income before income taxes 237.9 164.9 Income tax expense 91.0   56.8   Net income 146.9 108.1 Less: Net income attributable to noncontrolling interest 0.3   0.3   Net income attributable to Kansas City Southern and subsidiaries 146.6 107.8 Preferred stock dividends 0.1   0.1   Net income available to common stockholders $ 146.5   $ 107.7     Earnings per share: Basic earnings per share $ 1.38   $ 1.00   Diluted earnings per share $ 1.38   $ 0.99     Average shares outstanding (in thousands): Basic 106,111 108,057 Potentially dilutive common shares 215   218   Diluted 106,326   108,275       Kansas City Southern and Subsidiaries Revenue & Carload/Units by Commodity - First Quarter 2017 and 2016       Revenues     Carloads and Units     Revenue per   (in millions) (in thousands) Carload/Unit First Quarter % First Quarter % First Quarter % 2017   2016 Change 2017   2016 Change 2017   2016 Change Chemical & Petroleum Chemicals $ 54.6 $ 50.3 9 % 27.5 26.4 4 % $ 1,985 $ 1,905 4 % Petroleum 38.8 35.0 11 % 21.0 20.1 4 % 1,848 1,741 6 % Plastics 33.1   32.0   3 % 18.2   17.8   2 % 1,819   1,798   1 % Total 126.5   117.3   8 % 66.7   64.3   4 % 1,897   1,824   4 %   Industrial & Consumer Products Forest Products 63.5 64.8 (2 %) 29.6 30.5 (3 %) 2,145 2,125 1 % Metals & Scrap 54.3 54.3 — 30.4 32.7 (7 %) 1,786 1,661 8 % Other 22.3   22.3   —   20.8   18.7   11 % 1,072   1,193   (10 %) Total 140.1   141.4   (1 %) 80.8   81.9   (1 %) 1,734   1,726   —     Agriculture & Minerals Grain 66.2 63.2 5 % 35.7 35.2 1 % 1,854 1,795 3 % Food Products 38.3 34.9 10 % 16.3 15.7 4 % 2,350 2,223 6 % Ores & Minerals 4.3 4.6 (7 %) 4.8 4.8 — 896 958 (6 %) Stone, Clay & Glass 7.5   7.3   3 % 3.3   3.2   3 % 2,273   2,281   —   Total 116.3   110.0   6 % 60.1   58.9   2 % 1,935   1,868   4 %   Energy Utility Coal 42.8 22.8 88 % 44.5 31.8 40 % 962 717 34 % Coal & Petroleum Coke 11.0 8.2 34 % 16.3 14.1 16 % 675 582 16 % Frac Sand 10.7 5.1 110 % 7.2 4.5 60 % 1,486 1,133 31 % Crude Oil 4.5   5.9   (24 %) 3.7   4.8   (23 %) 1,216   1,229   (1 %) Total 69.0   42.0   64 % 71.7   55.2   30 % 962   761   26 %   Intermodal 83.5   85.1   (2 %) 224.0   225.2   (1 %) 373   378   (1 %)   Automotive 51.3   41.0   25 % 37.6   27.2   38 % 1,364   1,507   (9 %)   TOTAL FOR COMMODITY GROUPS 586.7 536.8 9 % 540.9   512.7   6 % $ 1,085   $ 1,047   4 %   Other Revenue 22.8   25.9   (12 %)   TOTAL $ 609.5   $ 562.7   8 %

Kansas City SouthernAshley Thorne, 816-983-1530athorne@kcsouthern.com

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