Fourth Quarter 2015
Results
- Revenue of $598 million, a decrease of
7% from fourth quarter 2014.
- Operating income of $219 million, 2%
higher than a year ago.
- Operating ratio of 63.4%, compared with
66.7% in fourth quarter 2014.
- Diluted earnings per share of $1.28.
Adjusted diluted earnings per share of $1.23 for fourth quarter
2015, a 3% decrease compared to fourth quarter 2014.
Kansas City Southern (KCS) (NYSE:KSU) reported fourth quarter
2015 revenues of $598 million. Overall, carload volumes were 2%
lower than in fourth quarter 2014. Excluding the estimated impacts
of Mexican peso depreciation and lower U.S. fuel prices, revenue
was flat compared to the fourth quarter of 2014.
Operating expenses in the fourth quarter were $379 million, 12%
lower than 2014. Excluding the estimated impacts of Mexican peso
depreciation and lower U.S. fuel prices, operating expenses
decreased 3% compared to the fourth quarter of 2014.
Operating income for the fourth quarter of 2015 was $219 million
compared with $214 million a year ago, a 2% increase. KCS reported
a fourth quarter 2015 operating ratio of 63.4%, a 3.3 point
improvement from fourth quarter 2014. Reported net income in the
fourth quarter of 2015 totaled $140 million, or $1.28 per diluted
share, compared with $142 million, or $1.28 per diluted share, in
the fourth quarter of 2014. Excluding debt retirement and exchange
costs, and the impacts of foreign exchange rate fluctuations,
adjusted diluted earnings per share for fourth quarter 2015 was
$1.23 compared to $1.27 in 2014.
For the full year of 2015, revenue was $2.4 billion, down 6%
from 2014. Carloads for 2015 were 2.2 million, a decrease of 3%
from the prior year. After adjusting for lease termination costs,
full-year operating income was $813 million. Full-year 2015
adjusted operating income decreased 4% from the prior year’s
adjusted operating income. The Company’s 2015 adjusted operating
ratio was 66.4% compared with the adjusted operating ratio of 67.1%
in 2014, a 0.7 point improvement.
Reported net income in 2015 totaled $485 million, or $4.40 per
diluted share, compared with $504 million, or $4.55 per diluted
share, in 2014. Excluding lease termination, debt retirement and
exchange costs, and the impacts of foreign exchange rate
fluctuations, adjusted diluted earnings per share for 2015 was
$4.49 compared to $4.82 in 2014.
“KCS’ ability to react to a rapidly changing market and
operational conditions was clearly evidenced during the fourth
quarter in which not only did the Company have to contend with an
unsettled economy but also with a hurricane in Mexico and floods in
a key section of its U.S. rail network,” stated Chief Executive
Officer David L. Starling. “Despite these challenges, KCS attained
a fourth quarter 2015 operating ratio of 63.4%, a 3.3 point
improvement from the prior year. System velocity and system dwell
metrics also improved, returning KCS to the top tier of Class I
railroads in these categories.
“Though our industry still must contend with economic
uncertainty in 2016, the progress we have made during 2015 gives us
confidence that KCS is positioned to maximize its near-term and
longer-term business opportunities.”
GAAP Reconciliations($ in millions,
except per share amounts)
Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per Share Three Months Ended
December 31, 2015
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarnings perShare
As reported $ 186.7 $ 46.7 $ 140.0 $ 1.28 Adjustments for: Debt
retirement and exchange costs 7.6 2.7 4.9 0.05 Foreign exchange
loss 4.5 1.4 3.1 0.03 Foreign exchange component of income taxes —
13.9 (13.9 ) (0.13 ) Adjusted $ 198.8 $ 64.7
134.1 Less: Noncontrolling interest (0.7 ) Adjusted net
income available to common stockholders - see (a) below $ 133.4
$ 1.23
Three Months Ended
December 31, 2014
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarnings perShare
As reported $ 170.2 $ 28.5 $ 141.7 $ 1.28 Adjustments for: Foreign
exchange loss 31.4 9.4 22.0 0.20 Foreign exchange component of
income taxes — 22.9 (22.9 ) (0.21 ) Adjusted $ 201.6
$ 60.8 140.8 Less: Noncontrolling interest (0.7 )
Adjusted net income available to common stockholders - see (a)
below $ 140.1 $ 1.27
GAAP Reconciliations (continued)($
in millions, except per share amounts)
Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per Share (continued) Twelve
Months Ended December 31, 2015
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarnings perShare
As reported $ 672.6 $ 187.3 $ 485.3 $ 4.40 Adjustments for: Lease
termination costs 9.6 2.9 6.7 0.06 Debt retirement and exchange
costs 7.6 2.7 4.9 0.04 Foreign exchange loss 56.6 17.0 39.6 0.36
Foreign exchange component of income taxes — 40.5
(40.5 ) (0.37 ) Adjusted $ 746.4 $ 250.4 496.0 Less:
Noncontrolling interest and preferred stock dividends (2.0 )
Adjusted net income available to common stockholders - see (a)
below $ 494.0 $ 4.49
Twelve Months Ended December 31, 2014
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarnings perShare
As reported $ 713.1 $ 208.8 $ 504.3 $ 4.55 Adjustments for: Lease
termination costs 38.3 13.0 25.3 0.23 Debt retirement and exchange
costs 6.6 2.2 4.4 0.04 Foreign exchange loss 35.5 10.6 24.9 0.22
Foreign exchange component of income taxes — 24.2
(24.2 ) (0.22 ) Adjusted $ 793.5 $ 258.8 534.7 Less:
Noncontrolling interest and preferred stock dividends (1.9 )
Adjusted net income available to common stockholders - see (a)
below $ 532.8 $ 4.82
GAAP Reconciliations (continued)($
in millions)
Reconciliation of Operating Expenses to Adjusted
Twelve Months Ended Operating Expenses December
31, 2015 2014 Operating expenses as
reported $ 1,615.0 $ 1,768.0 Adjustment for lease termination costs
(9.6 ) (38.3 ) Adjusted operating expenses - see (b) below $
1,605.4 $ 1,729.7 Operating income as reported
$ 803.8 $ 809.1 Adjusted operating income - see (b) below 813.4
847.4 Operating ratio (c) as reported 66.8 % 68.6 % Adjusted
operating ratio - see (b) and (c) below 66.4 % 67.1 %
Revenue Change Excluding Estimated Foreign Exchange
and U.S. Fuel Price Impacts Change % Reported
revenues for the three months ended December 31, 2015 $ 598.0
Reported revenues for the three months ended December 31, 2014
642.5 Revenue change (44.5 ) (7 %) Estimated foreign
exchange impact 20.2 Estimated U.S. fuel price impact 27.2
Revenue change excluding foreign exchange and U.S. fuel price
impacts - see (d) below $ 2.9 —
Operating Expense Change Excluding Estimated Foreign
Exchange and U.S. Fuel Price Impacts Change %
Reported operating expenses for the three months ended December 31,
2015 $ 379.1 Reported operating expenses for the three months ended
December 31, 2014 428.6 Operating expense change (49.5 ) (12
%) Estimated foreign exchange impact 20.4 Estimated U.S.
fuel price impact 15.2 Operating expense change excluding
foreign exchange and U.S. fuel price impacts - see (d) below $
(13.9 ) (3 %) (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 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 (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; 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 Twelve Months Ended
December 31, December 31, 2015 2014
2015 2014 Revenues $ 598.0 $ 642.5 $
2,418.8 $ 2,577.1 Operating expenses: Compensation
and benefits 103.9 123.2 442.2 474.5 Purchased services 50.9 62.0
223.0 245.2 Fuel 69.9 95.1 306.9 415.9 Equipment costs 29.2 29.6
119.4 119.2 Depreciation and amortization 73.9 67.3 284.6 258.1
Materials and other 51.3 51.4 229.3 216.8 Lease termination costs —
— 9.6 38.3 Total operating expenses
379.1 428.6 1,615.0 1,768.0 Operating
income 218.9 213.9 803.8 809.1 Equity in net earnings of
unconsolidated affiliates 3.9 4.5 18.3 21.1 Interest expense (23.7
) (18.3 ) (81.9 ) (72.8 ) Debt retirement and exchange costs (7.6 )
— (7.6 ) (6.6 ) Foreign exchange loss (4.5 ) (31.4 ) (56.6 ) (35.5
) Other income (expense), net (0.3 ) 1.5 (3.4 ) (2.2 )
Income before income taxes 186.7 170.2 672.6 713.1 Income tax
expense 46.7 28.5 187.3 208.8 Net
income 140.0 141.7 485.3 504.3 Less: Net income attributable to
noncontrolling interest 0.7 0.7 1.8 1.7
Net income attributable to Kansas City Southern and subsidiaries
139.3 141.0 483.5 502.6 Preferred stock dividends — —
0.2 0.2 Net income available to common stockholders $
139.3 $ 141.0 $ 483.3 $ 502.4
Earnings per share: Basic earnings per share $ 1.28 $ 1.28
$ 4.41 $ 4.56 Diluted earnings per share $
1.28 $ 1.28 $ 4.40 $ 4.55
Average shares outstanding (in thousands): Basic 108,521 110,227
109,709 110,163
Potentially dilutive common shares
216 266 206 270 Diluted 108,737
110,493 109,915 110,433
Kansas City Southern and Subsidiaries
Revenue & Carload/Units by Commodity - Fourth Quarter
2015 and 2014
Revenues Carloads and
Units Revenue per (in millions) (in thousands)
Carload/Unit Fourth Quarter % Fourth Quarter % Fourth
Quarter % 2015 2014 Change 2015 2014 Change 2015 2014 Change
Chemical & Petroleum Chemicals $ 52.9 $ 53.3 (1 %) 28.0 28.3 (1
%) $ 1,889 $ 1,883 — Petroleum 35.3 32.4 9 % 20.4 17.0 20 % 1,730
1,906 (9 %) Plastics 32.2 29.6 9 % 18.1 16.3
11 % 1,779 1,816 (2 %) Total 120.4
115.3 4 % 66.5 61.6 8 % 1,811 1,872
(3 %) Industrial & Consumer Products Forest
Products 64.2 67.4 (5 %) 29.8 32.4 (8 %) 2,154 2,080 4 % Metals
& Scrap 45.5 65.4 (30 %) 25.3 33.9 (25 %) 1,798 1,929 (7 %)
Other 19.9 18.3 9 % 17.3 17.6 (2 %)
1,150 1,040 11 % Total 129.6 151.1 (14
%) 72.4 83.9 (14 %) 1,790 1,801 (1 %)
Agriculture & Minerals Grain 56.7 65.7 (14 %) 31.7 34.7
(9 %) 1,789 1,893 (5 %) Food Products 37.5 35.9 4 % 17.6 15.9 11 %
2,131 2,258 (6 %) Ores & Minerals 7.0 5.5 27 % 8.0 5.7 40 % 875
965 (9 %) Stone, Clay & Glass 7.4 6.6 12 % 3.2
2.9 10 % 2,313 2,276 2 %
Total
108.6 113.7 (4 %) 60.5 59.2 2 % 1,795
1,921 (7 %) Energy Utility Coal 44.2 42.7 4 %
52.9 44.2 20 % 836 966 (13 %) Coal & Petroleum Coke 9.4 10.9
(14 %) 16.2 15.4 5 % 580 708 (18 %) Frac Sand 5.9 15.4 (62 %) 4.1
7.8 (47 %) 1,439 1,974 (27 %) Crude Oil 8.3 7.5 11 %
6.1 4.2 45 % 1,361 1,786 (24 %) Total
67.8 76.5 (11 %) 79.3 71.6 11 % 855
1,068 (20 %) Intermodal 93.4 102.4
(9 %) 244.3 261.0 (6 %) 382 392
(3 %) Automotive 54.7 60.6 (10 %) 32.8
32.5 1 % 1,668 1,865 (11 %)
TOTAL
FOR COMMODITY GROUPS 574.5 619.6 (7 %) 555.8 569.8
(2 %) $ 1,034 $ 1,087 (5 %) Other
Revenue 23.5 22.9 3 %
TOTAL $ 598.0
$ 642.5 (7 %)
Kansas City
Southern and Subsidiaries Revenue &
Carload/Units by Commodity - Years Ended December 31, 2015 and
2014
Revenues Carloads and Units
Revenue per (in millions) (in thousands)
Carload/Unit
Years Ended % Years Ended % Years Ended % 2015 2014 Change 2015
2014 Change 2015 2014 Change Chemical & Petroleum
Chemicals $ 215.6 $ 214.3 1 % 115.8 115.2 1 % $ 1,862 $ 1,860 —
Petroleum 136.9 124.5 10 % 76.3 68.2 12 % 1,794 1,826 (2 %)
Plastics 121.7 114.2 7 % 67.6 63.5 6 %
1,800 1,798 —
Total
474.2 453.0 5 % 259.7 246.9 5 % 1,826
1,835 — Industrial & Consumer
Products Forest Products 269.7 271.5 (1 %) 127.1 129.6 (2 %) 2,122
2,095 1 % Metals & Scrap 221.9 272.3 (19 %) 120.7 141.4 (15 %)
1,838 1,926 (5 %) Other 78.8 79.5 (1 %) 72.7
76.4 (5 %) 1,084 1,041 4 % Total 570.4
623.3 (8 %) 320.5 347.4 (8 %) 1,780
1,794 (1 %) Agriculture & Minerals Grain 231.0
258.2 (11 %) 132.9 137.7 (3 %) 1,738 1,875 (7 %) Food Products
142.7 137.6 4 % 64.7 60.0 8 % 2,206 2,293 (4 %) Ores & Minerals
27.2 23.0 18 % 28.9 24.0 20 % 941 958 (2 %) Stone, Clay & Glass
28.4 27.8 2 % 12.3 12.2 1 % 2,309
2,279 1 % Total 429.3 446.6 (4 %) 238.8
233.9 2 % 1,798 1,909 (6 %)
Energy Utility Coal 140.6 199.1 (29 %) 173.7 192.5 (10 %) 809 1,034
(22 %) Coal & Petroleum Coke 39.6 40.9 (3 %) 61.2 60.3 1 % 647
678 (5 %) Frac Sand 38.4 63.7 (40 %) 23.1 32.3 (28 %) 1,662 1,972
(16 %) Crude Oil 33.7 23.1 46 % 22.8 14.1
62 % 1,478 1,638 (10 %)
Total
252.3 326.8 (23 %) 280.8 299.2 (6 %)
899 1,092 (18 %) Intermodal 381.5 395.8
(4 %) 990.3 1,019.6 (3 %) 385 388
(1 %) Automotive 218.7 238.4 (8 %)
126.5 127.1 — 1,729 1,876 (8 %)
TOTAL FOR COMMODITY GROUPS 2,326.4 2,483.9 (6 %)
2,216.6 2,274.1 (3 %) $ 1,050 $ 1,092
(4 %) Other Revenue 92.4 93.2 (1 %)
TOTAL $ 2,418.8 $ 2,577.1 (6 %)
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160122005129/en/
KCSWilliam H. Galligan,
816-983-1551bgalligan@kcsouthern.com
Kansas City Southern (NYSE:KSU)
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