Second Quarter 2015
Results
- Revenue of $586 million, a decrease of
10% compared to second quarter 2014.
- Operating income of $187 million.
Excluding lease termination costs in 2014, adjusted operating
income was 13% lower than a year ago.
- Operating ratio of 68.1%, compared with
68.3% in second quarter 2014. Excluding lease termination costs in
2014, adjusted operating ratio increased 1.1 points compared to
second quarter 2014.
- Diluted earnings per share of $1.01.
Adjusted diluted earnings per share of $1.03 for second quarter
2015, a 15% decrease compared to second quarter 2014.
Kansas City Southern (KCS) (NYSE:KSU) reported second quarter
2015 revenues of $586 million, a decrease of 10% compared to second
quarter 2014. Overall, carload volumes were 6% lower than in second
quarter 2014. Excluding the estimated impacts of lower U.S. fuel
prices and peso depreciation, revenue declined 2% compared to the
second quarter of 2014.
Second quarter revenue declined in all commodity groups except
Chemicals & Petroleum, which grew 1%. Energy revenue declined
46% driven by lower volumes in utility coal due to lower natural
gas prices and in frac sand volumes as a result of the significant
decline in U.S. drilling operations.
Operating expenses in the second quarter were $399 million, 8%
lower than 2014 when excluding lease termination costs in 2014.
Excluding the estimated impacts of lower U.S. fuel prices and peso
depreciation, operating expenses declined 1% compared to the second
quarter of 2014, when excluding lease termination costs in
2014.
Operating income for the second quarter of 2015 was $187 million
compared with $214 million a year ago, when excluding lease
termination costs in 2014. KCS reported a second quarter 2015
adjusted operating ratio of 68.1%, a 1.1 point increase compared to
second quarter 2014.
Reported net income in the second quarter of 2015 totaled $112
million, or $1.01 per diluted share, compared with $130 million, or
$1.18 per diluted share, in the second quarter of 2014. Excluding
the impacts of foreign exchange rate fluctuations and lease
termination costs, adjusted diluted earnings per share for second
quarter 2015 was $1.03 compared to $1.21 in 2014.
“KCS continued to scale its operations in both the U.S. and
Mexico and has made strides in improving its network fluidity,”
stated KCS’ Chief Executive Officer David L. Starling. “Our actions
contributed to the Company attaining a solid second quarter
operating ratio despite volume challenges, particularly in its
Energy commodity group. We expect our system performance and
operating metrics to continue to improve throughout the remainder
of the year.
“As evidenced in the weekly industry carload data, there are
still uncertainties in many of the primary markets served by rail.
However, KCS’ average daily volumes increased each month throughout
the second quarter and the initial results from the first few weeks
of July suggest the positive trend may be continuing.”
GAAP Reconciliations($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings
per Share to Adjusted Diluted Earnings per Share
Three Months Ended June 30, 2015
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarnings perShare
As reported $ 162.4 $ 50.2 $ 112.2 $ 1.01 Adjustments for: Foreign
exchange loss 10.5 3.2 7.3 0.07 Foreign exchange component of
income taxes — 5.4 (5.4 ) (0.05 ) Adjusted $ 172.9
$ 58.8 114.1 Less: Noncontrolling interest (0.4 )
Adjusted net income available to common stockholders - see (a)
below $ 113.7 $ 1.03
Three Months Ended June 30, 2014
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarnings perShare
As reported $ 196.3 $ 66.1 $ 130.2 $ 1.18 Adjustments for: Lease
termination costs 8.4 2.9 5.5 0.05 Foreign exchange gain (5.3 )
(1.6 ) (3.7 ) (0.04 ) Foreign exchange component of income taxes —
(2.1 ) 2.1 0.02 Adjusted $ 199.4 $ 65.3
134.1 Less: Noncontrolling interest (0.4 ) Adjusted net
income available to common stockholders - see (a) below $ 133.7
$ 1.21
Reconciliation of Operating Expenses to Adjusted Three
Months Ended Operating Expenses June 30,
2015 2014 Operating expenses as
reported $ 399.0 $ 443.9 Adjustment for lease termination costs —
(8.4 ) Adjusted operating expenses - see (b) below $ 399.0
$ 435.5 Operating income as reported $ 186.8 $
205.8 Adjusted operating income - see (b) below 186.8 214.2
Operating ratio (c) as reported 68.1 % 68.3 % Adjusted operating
ratio - see (b) and (c) below 68.1 % 67.0 %
Revenue Change Excluding Estimated
Foreign Exchange and U.S. Fuel Price Impacts Change
% Reported revenues for the three months ended June 30, 2015 $
585.8 Reported revenues for the three months ended June 30, 2014
649.7 Revenue change (63.9 ) (10 %) Estimated foreign
exchange impact
18.4
Estimated U.S. fuel price impact
30.1 Revenue change excluding foreign exchange and
U.S. fuel price impacts - see (d) below $
(15.4
) (2 %)
Adjusted Operating Expense Change
Excluding Estimated Foreign Exchange and U.S. Fuel Price
Impacts Change % Adjusted operating expenses for the
three months ended June 30, 2015 $ 399.0 Adjusted operating
expenses for the three months ended June 30, 2014 435.5
Adjusted operating expense change (36.5 ) (8 %) Estimated
foreign exchange impact 17.9 Estimated U.S. fuel price impact 14.7
Adjusted operating expense change
excluding foreign exchange and U.S. fuel priceimpacts - see (d)
below
$ (3.9 ) (1 %) (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 revenue and adjusted operating expense
changes excluding foreign exchange and U.S. fuel price impacts are
meaningful measures as they allow 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 Six Months Ended June 30, June 30,
2015 2014 2015 2014 Revenues $ 585.8
$ 649.7 $ 1,188.9 $ 1,257.1 Operating
expenses: Compensation and benefits 108.0 115.5 225.6 226.1
Purchased services 57.0 63.8 115.1 119.0 Fuel 77.5 107.7 158.5
211.6 Equipment costs 29.9 29.5 59.0 61.2 Depreciation and
amortization 70.8 63.9 139.3 125.8 Materials and other 55.8 55.1
116.8 109.3 Lease termination costs — 8.4 9.6
38.3 Total operating expenses 399.0 443.9
823.9 891.3 Operating income 186.8 205.8 365.0 365.8
Equity in net earnings of unconsolidated affiliates 5.0 5.9 9.4
11.6 Interest expense (17.7 ) (17.9 ) (36.3 ) (36.6 ) Debt
retirement costs — — — (6.6 ) Foreign exchange gain (loss) (10.5 )
5.3 (22.1 ) 8.4 Other expense, net (1.2 ) (2.8 ) (2.0 ) (3.3 )
Income before income taxes 162.4 196.3 314.0 339.3 Income tax
expense 50.2 66.1 100.6 115.1 Net
income 112.2 130.2 213.4 224.2 Less: Net income attributable to
noncontrolling interest 0.4 0.4 0.8 0.7
Net income attributable to Kansas City Southern and subsidiaries
111.8 129.8 212.6 223.5 Preferred stock dividends — —
0.1 0.1 Net income available to common stockholders $
111.8 $ 129.8 $ 212.5 $ 223.4
Earnings per share: Basic earnings per share $ 1.01 $ 1.18
$ 1.93 $ 2.03 Diluted earnings per share $
1.01 $ 1.18 $ 1.92 $ 2.02
Average shares outstanding (in thousands): Basic 110,334 110,160
110,322 110,121 Potentially dilutive common shares 181 237
200 277 Diluted 110,515 110,397
110,522 110,398
Kansas
City Southern and Subsidiaries Revenue &
Carload/Units by Commodity - Second Quarter 2015 and
2014
Revenues Carloads and
Units Revenue per (in millions) (in thousands)
Carload/Unit Second Quarter % Second Quarter % Second
Quarter % 2015 2014 Change 2015 2014 Change 2015 2014 Change
Chemical & Petroleum Chemicals $ 53.8 $ 55.2 (3 %) 28.6 30.3 (6
%) $ 1,881 $ 1,822 3 % Petroleum 32.8 31.6 4 % 17.9 17.7 1 % 1,832
1,785 3 % Plastics 29.4 28.3 4 % 16.3 16.2
1 % 1,804 1,747 3 % Total 116.0 115.1
1 % 62.8 64.2 (2 %) 1,847 1,793
3 % Industrial & Consumer Products Forest Products 67.5
67.5 — 32.5 32.1 1 % 2,077 2,103 (1 %) Metals & Scrap 57.5 69.1
(17 %) 31.3 37.0 (15 %) 1,837 1,868 (2 %) Other 19.6 19.6
— 19.0 20.2 (6 %) 1,032 970
6 %
Total
144.6 156.2 (7 %) 82.8 89.3 (7 %) 1,746
1,749 — Agriculture & Minerals
Grain 59.0 66.5 (11 %) 34.6 35.5 (3 %) 1,705 1,873 (9 %) Food
Products 32.3 34.8 (7 %) 14.6 15.0 (3 %) 2,212 2,320 (5 %) Ores
& Minerals 6.5 6.2 5 % 6.8 6.6 3 % 956 939 2 % Stone, Clay
& Glass 6.7 7.4 (9 %) 2.9 3.2 (9 %)
2,310 2,313 — Total 104.5 114.9
(9 %) 58.9 60.3 (2 %) 1,774 1,905 (7 %)
Energy Utility Coal 17.6 48.8 (64 %) 26.4 46.1 (43 %) 667
1,059 (37 %) Coal & Petroleum Coke 10.5 9.9 6 % 15.1 15.1 — 695
656 6 % Frac Sand 8.7 17.5 (50 %) 5.6 8.8 (36 %) 1,554 1,989 (22 %)
Crude Oil 7.4 5.2 42 % 4.8 3.5 37 %
1,542 1,486 4 % Total 44.2 81.4 (46 %)
51.9 73.5 (29 %) 852 1,107 (23 %)
Intermodal 97.9 98.7 (1 %) 250.0 254.5
(2 %) 392 388 1 % Automotive 55.0
59.6 (8 %) 30.8 31.8 (3 %) 1,786
1,874 (5 %)
TOTAL FOR COMMODITY GROUPS 562.2
625.9 (10 %) 537.2 573.6 (6 %) $ 1,047 $ 1,091
(4 %) Other Revenue 23.6 23.8 (1 %)
TOTAL $ 585.8 $ 649.7 (10 %)
Kansas City Southern and
Subsidiaries Revenue & Carload/Units by
Commodity - Year to Date June 30, 2015 and 2014
Revenues
Carloads and Units Revenue per (in millions) (in
thousands)
Carload/Unit Year to Date % Year to Date % Year
to Date % 2015 2014 Change 2015 2014 Change 2015 2014 Change
Chemical & Petroleum Chemicals $ 106.8 $ 105.1 2 % 57.8 56.9 2
% $ 1,848 $ 1,847 — Petroleum 65.8 60.4 9 % 35.3 34.1 4 % 1,864
1,771 5 % Plastics 58.2 54.8 6 % 31.9 31.0 3 % 1,824
1,768 3 % Total 230.8 220.3 5 % 125.0 122.0
2 % 1,846 1,806 2 % Industrial &
Consumer Products Forest Products 136.0 132.9 2 % 64.9 63.5 2 %
2,096 2,093 — Metals & Scrap 118.0 135.0 (13 %) 62.6 71.0 (12
%) 1,885 1,901 (1 %) Other 36.6 37.4 (2 %) 36.4 38.4
(5 %) 1,005 974 3 % Total 290.6 305.3 (5 %)
163.9 172.9 (5 %) 1,773 1,766 —
Agriculture & Minerals Grain 113.7 132.6 (14 %) 65.4 70.8 (8 %)
1,739 1,873 (7 %) Food Products 69.3 70.0 (1 %) 30.8 29.9 3 % 2,250
2,341 (4 %) Ores & Minerals 13.5 11.3 19 % 13.6 11.8 15 % 993
958 4 % Stone, Clay & Glass 13.6 14.4 (6 %) 5.9 6.5
(9 %) 2,305 2,215 4 % Total 210.1 228.3
(8 %) 115.7 119.0 (3 %) 1,816 1,918 (5 %)
Energy Utility Coal 53.7 97.6 (45 %) 67.3 94.1 (28 %) 798
1,037 (23 %) Coal & Petroleum Coke 20.3 19.7 3 % 28.7 29.2 (2
%) 707 675 5 % Frac Sand 23.2 33.9 (32 %) 13.3 17.0 (22 %) 1,744
1,994 (13 %) Crude Oil 13.6 8.4 62 % 8.4 5.5 53 %
1,619 1,527 6 % Total 110.8 159.6 (31 %) 117.7
145.8 (19 %) 941 1,095 (14 %)
Intermodal 192.9 186.7 3 % 493.3 488.7 1 % 391
382 2 % Automotive 109.4 112.0 (2 %) 61.8 60.5
2 % 1,770 1,851 (4 %)
TOTAL FOR
COMMODITY GROUPS 1,144.6 1,212.2 (6 %) 1,077.4 1,108.9
(3 %) $ 1,062 $ 1,093 (3 %) Other Revenue 44.3
44.9 (1 %)
TOTAL $ 1,188.9 $ 1,257.1 (5
%)
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150717005093/en/
Kansas City SouthernWilliam H.
Galligan, 816-983-1551bgalligan@kcsouthern.com
Kansas City Southern (NYSE:KSU)
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