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 %
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version on businesswire.com: http://www.businesswire.com/news/home/20170421005124/en/
Kansas City SouthernAshley Thorne,
816-983-1530athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
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