UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 
 
FORM 8-K
 
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): April 21, 2015
 
 
 
 
KANSAS CITY SOUTHERN
(Exact name of registrant as specified in its charter)
 
 
 
 
DELAWARE
1-4717
44-0663509
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
file number)
Identification Number)

427 West 12th Street, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:
(816) 983 - 1303

Not Applicable
(Former name or former address if changed since last report)
 
 
 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 







Item 2.02 Results of Operations and Financial Condition.
Kansas City Southern (the “Company”, “KCS”) is furnishing under Item 2.02 of this Current Report on Form 8-K, the information included as Exhibit 99.1 to this report. Exhibit 99.1 is the Company’s press release, dated April 21, 2015, announcing the Company’s first quarter earnings and operating results. Included in Exhibit 99.1 are schedules regarding certain financial information discussed during the Company’s first quarter 2015 analyst presentation and conference call.
The information included in this Item 2.02, and Exhibit 99.1 to this Current Report on Form 8-K, shall not be deemed “filed” for the purposes of or otherwise subject to the liabilities under Section 18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). Unless expressly incorporated into a filing of KCS under the Securities Act of 1933, or the Exchange Act made after the date hereof, the information contained in this Item 2.02 and Exhibit 99.1 hereto shall not be incorporated by reference into any filing of KCS, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
(d)
Press Release dated April 21, 2015 issued by Kansas City Southern entitled “Kansas City Southern Reports First Quarter Results”.





2




SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Kansas City Southern
Date: April 21, 2015
By:
/s/ Mary K. Stadler
 
Name: Mary K. Stadler
 
Title: Senior Vice President & Chief Accounting Officer
 
(Principal Accounting Officer)




3




Exhibit Index
Exhibit No
 
Description
99.1
 
Press Release dated April 21, 2015 issued by Kansas City Southern entitled “Kansas City Southern Reports First Quarter Results”.








Exhibit 99.1
    
Media Contact: William H. Galligan                  Phone: 816/983-1551
bgalligan@kcsouthern.com
    
Kansas City Southern Reports First Quarter Results

First Quarter 2015 Results

Revenue of $603 million, a decrease of 1% compared to first quarter 2014.
Operating income of $178 million. Excluding lease termination costs, adjusted operating income of $188 million, 1% lower than a year ago.
Operating ratio of 70.5%, compared with 73.7% in first quarter 2014. Excluding lease termination costs, adjusted operating ratio of 68.9%, a 0.2 point increase compared to first quarter 2014.
Diluted earnings per share of $0.91. Adjusted diluted earnings per share of $1.03 for first quarter 2015, a 2% decrease compared to first quarter 2014.

Kansas City, Mo., April 21, 2015. Kansas City Southern (KCS) (NYSE:KSU) reported first quarter 2015 revenues of $603 million. Overall, carload volumes were 1% higher than in first quarter 2014.

Compared to 2014, first quarter revenue included a 9% increase in Chemicals & Petroleum and an 8% increase in Intermodal. Automotive was also strong, with revenues growing by 4% in the first quarter of 2015 despite headwinds from the weaker peso. Energy revenue declined 15% largely due to reduced utility coal shipments as a result of lower natural gas prices. Industrial & Consumer revenue declined 2% primarily due to lower metals shipments. Agriculture & Minerals revenue declined by 7% compared to the prior year, primarily due to a decline in grain shipments when compared to the strong first quarter of 2014. Also, excluding the impacts of lower U.S. fuel prices and the depreciating peso, revenue growth would have been approximately 4% compared to the first quarter of 2014.

After adjusting for lease termination costs, operating expenses in the first quarter were $415 million, 1% lower than 2014, primarily due to lower U.S. fuel prices and the depreciating peso. Adjusted operating income for the first quarter of 2015 was $188 million compared with $190 million a year ago. KCS reported a first quarter 2015 adjusted operating ratio of 68.9%, a 0.2 point increase compared to first quarter 2014.

Reported net income in the first quarter of 2015 totaled $101 million, or $0.91 per diluted share, compared with $94 million, or $0.85 per diluted share, in the first quarter of 2014. Excluding lease termination costs, debt retirement costs and the impacts of foreign exchange rate fluctuations, adjusted diluted earnings per share for first quarter 2015 was $1.03 compared to $1.05 in 2014.
  
“Lower-than-expected carloadings in a few commodity groups, particularly utility coal, coupled with a weak peso and the impact of low U.S. fuel prices on fuel surcharge revenues, combined to exert pressure on first quarter consolidated revenues” stated Chief Executive Officer David L. Starling. “We believe our ability to scale operating expenses and capital where necessary, provide KCS with the opportunity to improve earnings as 2015 progresses. In addition, we remain fully committed to managing our railroad in a manner designed to allow our Company and its stockholders to benefit from the abundant growth opportunities that should emerge in the years ahead.”












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, 2015
 
Income Before Income Taxes
 
Income Tax Expense
 
Net Income
 
Diluted Earnings per Share
As reported
$
151.6

 
$
50.4

 
$
101.2

 
$
0.91

Adjustments for:
 
 
 
 
 
 
 
Lease termination costs
9.6

 
2.9

 
6.7

 
0.06

Foreign exchange loss
11.6

 
3.5

 
8.1

 
0.07

Foreign exchange component of income taxes

 
1.6

 
(1.6
)
 
(0.01
)
Adjusted
$
172.8

 
$
58.4

 
114.4

 
 
Less: Noncontrolling interest and preferred

 

 
 
 
 
   stock dividends
 
 
 
 
(0.5
)
 
 
Adjusted net income available to common
 
 
 
 
 
 
 
stockholders - see (a) below
 
 
 
 
$
113.9

 
$
1.03



 
Three Months Ended March 31, 2014
 
Income Before Income Taxes
 
Income Tax Expense
 
Net Income
 
Diluted Earnings per Share
As reported
$
143.0

 
$
49.0

 
$
94.0

 
$
0.85

Adjustments for:
 
 
 
 
 
 
 
Lease termination costs
29.9

 
10.1

 
19.8

 
0.18

Debt retirement costs
6.6

 
2.2

 
4.4

 
0.04

Foreign exchange gain
(3.1
)
 
(0.9
)
 
(2.2
)
 
(0.02
)
Foreign exchange component of income taxes

 
(0.2
)
 
0.2

 

Adjusted
$
176.4

 
$
60.2

 
116.2

 
 
Less: Noncontrolling interest and preferred

 

 
 
 
 
   stock dividends
 
 
 
 
(0.4
)
 
 
Adjusted net income available to common
 
 
 
 
 
 
 
stockholders - see (a) below
 
 
 
 
$
115.8

 
$
1.05







GAAP Reconciliations (continued)
($ in millions)

Reconciliation of Operating Expenses to Adjusted
 
Three Months Ended
 
Operating Expenses
 
March 31,
 
 
 
2015
 
2014
 
Operating expenses as reported
 
$
424.9

 
$
447.4

 
Adjustment for lease termination costs
 
(9.6
)
 
(29.9
)
 
Adjusted operating expenses - see (b) below
 
$
415.3

 
$
417.5

 
 
 
 
 
 
 
Operating income as reported
 
$
178.2

 
$
160.0

 
Adjusted operating income - see (b) below
 
187.8

 
189.9

 
 
 
 
 
 
 
Operating ratio (c) as reported
 
70.5
%
 
73.7
%
 
Adjusted operating ratio - see (b) and (c) below
 
68.9
%
 
68.7
%
 


Revenue Change Adjusted for Estimated Foreign Exchange
 
 
 
 
 
   and U.S. Fuel Price Impacts
 
 
 
 
 
 
 
 
 
Revenue Change %
 
Reported revenues for the three months ended March 31, 2015
 
$
603.1

 
 
 
Reported revenues for the three months ended March 31, 2014
 
607.4

 
 
 
Revenue change
 
(4.3
)
 
(1
%)
 
 
 
 
 
 
 
Estimated adjustment for foreign exchange
 
13.2

 
 
 
Estimated adjustment for U.S. fuel price
 
15.4

 
 
 
Revenue change excluding foreign exchange and U.S. fuel price impacts - see (d) below
$
24.3

 
4
%
 


(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 and items that are not directly related to the ongoing operations of the Company.
(b)
The Company believes adjusted operating expenses, operating income and operating ratio are meaningful as they allow investors to evaluate the Company's performance for different periods on a more comparable basis by excluding items that are not directly related to the ongoing operations of the Company.
(c)
Operating ratio is calculated by dividing operating expenses by revenues; or in the case of adjusted operating ratio, adjusted operating expenses divided by revenues.
(d)
The Company believes the revenue change excluding foreign exchange and U.S. fuel price impacts is a meaningful measure as it allows investors to evaluate the Company's performance for different periods on a more comparable basis by excluding the impacts of fluctuations in foreign currency exchange rates and U.S. fuel price by holding these rates constant between the reporting periods.












Headquartered in Kansas City, Mo., Kansas City Southern 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 México, 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.  Kansas City Southern's 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; interest rates; 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; credit risk of customers and counterparties and their failure to meet their financial obligations; 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; insufficiency of insurance to cover lost revenue, profits or other damages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic conditions; political and economic conditions in Mexico and the level of trade between the United States and Mexico; 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, 2014 (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,
 
2015
 
2014
Revenues
$
603.1

 
$
607.4

Operating expenses:
 
 
 
Compensation and benefits
117.6

 
110.6

Purchased services
58.1

 
55.2

Fuel
81.0

 
103.9

Equipment costs
29.1

 
31.7

Depreciation and amortization
68.5

 
61.9

Materials and other
61.0

 
54.2

Lease termination costs
9.6

 
29.9

Total operating expenses
424.9

 
447.4

Operating income
178.2

 
160.0

Equity in net earnings of unconsolidated affiliates
4.4

 
5.7

Interest expense
(18.6
)
 
(18.7
)
Debt retirement costs

 
(6.6
)
Foreign exchange gain (loss)
(11.6
)
 
3.1

Other expense, net
(0.8
)
 
(0.5
)
Income before income taxes
151.6

 
143.0

Income tax expense
50.4

 
49.0

Net income
101.2

 
94.0

Less: Net income attributable to noncontrolling interest
0.4

 
0.3

Net income attributable to Kansas City Southern and subsidiaries
100.8

 
93.7

Preferred stock dividends
0.1

 
0.1

Net income available to common stockholders
$
100.7

 
$
93.6

 
 
 
 
Earnings per share:
 
 
 
Basic earnings per share
$
0.91

 
$
0.85

Diluted earnings per share
$
0.91

 
$
0.85

 
 
 
 
Average shares outstanding (in thousands):
 
 
 
Basic
110,309

 
110,086

Potentially dilutive common shares
218

 
317

Diluted
110,527

 
110,403

 
 
 
 






Kansas City Southern and Subsidiaries
Revenue & Carload/Units by Commodity - First Quarter 2015 and 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Revenues
 
 
 
 Carloads and Units
 
 
 
 Revenue per
 
 
 
(in millions)
 
 
 
(in thousands)
 
 
 
Carload/Unit
 
 
 
First Quarter
 
%
 
First Quarter
 
%
 
First Quarter
 
%
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chemical & Petroleum
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chemicals
$
53.0

 
$
49.9

 
6
%
 
29.2

 
26.6

 
10
%
 
$
1,815

 
$
1,876

 
(3
%)
Petroleum
33.0

 
28.8

 
15
%
 
17.4

 
16.4

 
6
%
 
1,897

 
1,756

 
8
%
Plastics
28.8

 
26.5

 
9
%
 
15.6

 
14.8

 
5
%
 
1,846

 
1,791

 
3
%
Total
114.8

 
105.2

 
9
%
 
62.2

 
57.8

 
8
%
 
1,846

 
1,820

 
1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Industrial & Consumer Products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forest Products
68.5

 
65.4

 
5
%
 
32.4

 
31.4

 
3
%
 
2,114

 
2,083

 
1
%
Metals & Scrap
60.5

 
65.9

 
(8
%)
 
31.3

 
34.0

 
(8
%)
 
1,933

 
1,938

 

Other
17.0

 
17.8

 
(4
%)
 
17.4

 
18.2

 
(4
%)
 
977

 
978

 

Total
146.0

 
149.1

 
(2
%)
 
81.1

 
83.6

 
(3
%)
 
1,800

 
1,783

 
1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture & Minerals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grain
54.7

 
66.1

 
(17
%)
 
30.8

 
35.3

 
(13
%)
 
1,776

 
1,873

 
(5
%)
Food Products
37.0

 
35.2

 
5
%
 
16.2

 
14.9

 
9
%
 
2,284

 
2,362

 
(3
%)
Ores & Minerals
7.0

 
5.1

 
37
%
 
6.8

 
5.2

 
31
%
 
1,029

 
981

 
5
%
Stone, Clay & Glass
6.9

 
7.0

 
(1
%)
 
3.0

 
3.3

 
(9
%)
 
2,300

 
2,121

 
8
%
Total
105.6

 
113.4

 
(7
%)
 
56.8

 
58.7

 
(3
%)
 
1,859

 
1,932

 
(4
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Energy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Utility Coal
36.1

 
48.8

 
(26
%)
 
40.9

 
48.0

 
(15
%)
 
883

 
1,017

 
(13
%)
Coal & Petroleum Coke
9.8

 
9.8

 

 
13.6

 
14.1

 
(4
%)
 
721

 
695

 
4
%
Frac Sand
14.5

 
16.4

 
(12
%)
 
7.7

 
8.2

 
(6
%)
 
1,883

 
2,000

 
(6
%)
Crude Oil
6.2

 
3.2

 
94
%
 
3.6

 
2.0

 
80
%
 
1,722

 
1,600

 
8
%
Total
66.6

 
78.2

 
(15
%)
 
65.8

 
72.3

 
(9
%)
 
1,012

 
1,082

 
(6
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intermodal
95.0

 
88.0

 
8
%
 
243.3

 
234.2

 
4
%
 
390

 
376

 
4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
54.4

 
52.4

 
4
%
 
31.0

 
28.7

 
8
%
 
1,755

 
1,826

 
(4
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL FOR COMMODITY GROUPS
582.4

 
586.3

 
(1
%)
 
540.2

 
535.3

 
1
%
 
$
1,078

 
$
1,095

 
(2
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Revenue
20.7

 
21.1

 
(2
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL
$
603.1

 
$
607.4

 
(1
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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