First Quarter 2016
Results
- Revenue of $563 million, a decrease of
7% from first quarter 2015.
- Operating income of $188 million, 5%
higher than a year ago. Excluding lease termination costs in 2015,
operating income was flat compared to first quarter 2015.
- Operating ratio of 66.6%, compared with
70.5% in first quarter 2015. Excluding lease termination costs in
2015, adjusted operating ratio decreased 2.3 points compared to
first quarter 2015.
- Diluted earnings per share of $0.99.
Adjusted diluted earnings per share of $1.03 for first quarter
2016, which was flat compared to first quarter 2015.
Kansas City Southern (KCS) (NYSE:KSU) reported first quarter
2016 revenues of $563 million. Overall, carload volumes were 5%
lower than in first quarter 2015. Excluding the estimated impacts
of Mexican peso depreciation and lower U.S. fuel prices, revenue
declined 1% compared to the first quarter of 2015.
Operating expenses in the first quarter were $375 million, 12%
lower than 2015. Excluding the estimated impacts of Mexican peso
depreciation and lower U.S. fuel prices, adjusted operating
expenses decreased 3% compared to the first quarter of 2015.
Operating income for the first quarter of 2016 was $188 million,
which was flat compared to first quarter 2015 when excluding 2015
lease termination costs. KCS reported a first quarter 2016
operating ratio of 66.6%, a 2.3 point improvement from first
quarter 2015, when excluding 2015 lease termination costs. Reported
net income in the first quarter of 2016 totaled $108 million, or
$0.99 per diluted share, compared with $101 million, or $0.91 per
diluted share, in the first quarter of 2015. Excluding the impacts
of foreign exchange rate fluctuations and 2015 lease termination
costs, adjusted diluted earnings per share for first quarter 2016
was $1.03 which was flat compared to 2015.
“Despite flooding that shut down key portions of our U.S. rail
network for over three weeks, KCS delivered solid earnings and
operating results,” stated KCS Chief Executive Officer David L.
Starling. “That we overcame this very significant challenge while
simultaneously scaling costs across the network clearly
demonstrates KCS’ ability to react quickly to rapid and unexpected
changes to its operating environment.”
GAAP Reconciliations($ in millions,
except per share amounts)
Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per Share Three Months Ended
March 31, 2016
IncomeBeforeIncomeTaxes
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
Three Months Ended March 31, 2015
IncomeBeforeIncomeTaxes
Income TaxExpense
Net Income
DilutedEarningsper 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
GAAP Reconciliations (continued)($
in millions)
Reconciliation of Operating Expenses to
Adjusted Three Months Ended Operating Expenses
March 31, 2016 2015 Operating expenses as
reported $ 374.8 $ 424.9 Adjustment for lease termination costs
— (9.6 ) Adjusted operating expenses - see (b)
below $ 374.8 $ 415.3 Operating income as
reported $ 187.9 $ 178.2 Adjusted operating income - see (b) below
187.9 187.8 Operating ratio (c) as reported 66.6 % 70.5 %
Adjusted operating ratio - see (b) and (c) below 66.6 % 68.9 %
Revenue Change Excluding Estimated Foreign
Exchange and U.S. Fuel Price Impacts
Change % Reported revenues for the three months ended
March 31, 2016 $ 562.7 Reported revenues for the three months ended
March 31, 2015 603.1 Revenue change (40.4 ) (7
%) Estimated foreign exchange impact 20.1 Estimated U.S.
fuel price impact 17.2 Revenue change excluding
foreign exchange and U.S. fuel price impacts - see (d) below $ (3.1
) (1 %)
Adjusted Operating Expense Change
Excluding Estimated Foreign Exchange and U.S. Fuel Price
Impacts
Change
%
Adjusted operating expenses for the three months ended March 31,
2016 $ 374.8 Adjusted operating expenses for the three months ended
March 31, 2015 415.3 Adjusted operating expense
change
(40.5
)
(10
%)
Estimated foreign exchange impact 17.6 Estimated U.S. fuel
price impact 9.4 Adjusted operating expense change
excluding foreign exchange and U.S. fuel price impacts - see (d)
below
$
(13.5
)
(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 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 (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; 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, 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, 2015 (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, 2016
2015 Revenues $ 562.7 $ 603.1 Operating
expenses: Compensation and benefits 110.1 117.6 Purchased services
50.9 58.1 Fuel 56.8 81.0 Equipment costs 26.7 29.1 Depreciation and
amortization 74.3 68.5 Materials and other 56.0 61.0 Lease
termination costs — 9.6 Total operating expenses
374.8 424.9 Operating income 187.9 178.2 Equity in
net earnings of affiliates 3.9 4.4 Interest expense (23.6 ) (18.6 )
Foreign exchange loss (3.5 ) (11.6 ) Other income (expense), net
0.2 (0.8 ) Income before income taxes 164.9 151.6 Income tax
expense 56.8 50.4 Net income 108.1 101.2 Less: Net
income attributable to noncontrolling interest 0.3 0.4
Net income attributable to Kansas City Southern and
subsidiaries 107.8 100.8 Preferred stock dividends 0.1 0.1
Net income available to common stockholders $ 107.7 $
100.7 Earnings per share: Basic earnings per share $
1.00 $ 0.91 Diluted earnings per share $ 0.99
$ 0.91 Average shares outstanding (in thousands):
Basic 108,057 110,309 Potentially dilutive common shares 218
218 Diluted 108,275 110,527
Kansas City Southern and Subsidiaries
Revenue & Carload/Units by Commodity - First Quarter
2016 and 2015
Revenues Carloads and Units
Revenue per (in millions) (in thousands)
Carload/Unit
First Quarter % First Quarter % First Quarter % 2016 2015 Change
2016 2015 Change 2016 2015 Change Chemical & Petroleum
Chemicals $ 50.3 $ 53.0 (5 %) 26.4 29.2 (10 %) $ 1,905 $ 1,815 5 %
Petroleum 35.0 33.0 6 % 20.1 17.4 16 % 1,741 1,897 (8 %) Plastics
32.0 28.8 11 % 17.8 15.6 14 % 1,798
1,846 (3 %) Total 117.3 114.8 2 % 64.3
62.2 3 % 1,824 1,846 (1 %)
Industrial & Consumer Products Forest Products 64.8 68.5 (5 %)
30.5 32.4 (6 %) 2,125 2,114 1 % Metals & Scrap 54.3 60.5 (10 %)
32.7 31.3 4 % 1,661 1,933 (14 %) Other 22.3 17.0 31 %
18.7 17.4 7 % 1,193 977 22 % Total
141.4 146.0 (3 %) 81.9 81.1 1 % 1,726
1,800 (4 %) Agriculture & Minerals Grain
63.2 54.7 16 % 35.2 30.8 14 % 1,795 1,776 1 % Food Products 34.9
37.0 (6 %) 15.7 16.2 (3 %) 2,223 2,284 (3 %) Ores & Minerals
4.6 7.0 (34 %) 4.8 6.8 (29 %) 958 1,029 (7 %) Stone, Clay &
Glass 7.3 6.9 6 % 3.2 3.0 7 % 2,281
2,300 (1 %) Total 110.0 105.6 4 % 58.9
56.8 4 % 1,868 1,859 —
Energy Utility Coal 22.8 36.1 (37 %) 31.8 40.9 (22 %) 717 883 (19
%) Coal & Petroleum Coke 8.2 9.8 (16 %) 14.1 13.6 4 % 582 721
(19 %) Frac Sand 5.1 14.5 (65 %) 4.5 7.7 (42 %) 1,133 1,883 (40 %)
Crude Oil 5.9 6.2 (5 %) 4.8 3.6 33 %
1,229 1,722 (29 %) Total 42.0 66.6 (37
%) 55.2 65.8 (16 %) 761 1,012 (25 %)
Intermodal 85.1 95.0 (10 %) 225.2 243.3
(7 %) 378 390 (3 %) Automotive 41.0
54.4 (25 %) 27.2 31.0 (12 %) 1,507
1,755 (14 %)
TOTAL FOR COMMODITY GROUPS
536.8 582.4 (8 %) 512.7 540.2 (5 %) $ 1,047 $
1,078 (3 %) Other Revenue 25.9 20.7 25
%
TOTAL $ 562.7 $ 603.1 (7 %)
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160419005492/en/
Kansas City SouthernWilliam H. Galligan,
816-983-1551bgalligan@kcsouthern.com
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