Kansas City Southern (KCS) (NYSE:KSU) reported strong fourth
quarter and full year 2020 results, despite significant operating
and economic challenges.
Fourth Quarter 2020
Fourth quarter revenues were $693.4 million, a decrease of 5%
primarily due to lower volumes related to a service interruption at
Lazaro Cardenas due to teachers' protests, lower fuel surcharge and
fluctuations in foreign currency.
Fourth quarter operating expenses were $431.1 million. Operating
income was $262.3 million and the reported operating ratio was
62.2%. Fourth quarter net income was $166.3 million, or $1.80 per
diluted share. Adjusted fourth quarter operating income, operating
ratio, net income and diluted earnings per share were as
follows:
(in millions, except operating ratio and
diluted earnings per share)
Three Months Ended December
31, 2020
Operating Income
Operating Ratio
Net Income
Diluted Earnings per Share
GAAP Operating Results
$
262.3
62.2
%
$
166.3
$
1.80
Write-off of software development
costs
13.6
(2.0
)%
10.0
0.11
Other Adjustments, Net
—
—
(1.6
)
(0.02
)
Adjusted Operating Results (non-GAAP)
$
275.9
60.2
%
$
174.7
$
1.89
See following pages for reconciliations to
GAAP
"Despite several significant challenges in the fourth quarter,
including continued impacts from the pandemic, weather events and
an extended outage from illegal protests on segments of our network
in Mexico, KCS delivered strong fourth quarter results," stated
president and chief executive officer, Patrick J. Ottensmeyer.
"Thanks to the hard work and dedication of our employees, we are
overcoming the adversity that we faced in the fourth quarter and
throughout 2020, and we heighten our focus on Precision Scheduled
Railroading (PSR)-driven service improvements to realize the
significant growth opportunities that we see going forward."
Full Year 2020
Full year 2020 revenues were $2.6 billion, a decrease of 8% on a
6% decline in carloads. Operating income was $1.0 billion and the
reported operating ratio was 61.9%. Full year 2020 net income was
$619.1 million, or $6.54 per diluted share.
During 2020, the KCS network experienced a rapid decline in
volumes followed by an unprecedented volume rebound, forcing the
Company to quickly adjust its service model to match customer
demand while optimizing its cost structure. These actions resulted
in significant improvements to train length and fuel efficiency,
improving 12% and 5%, respectively. PSR initiatives also
contributed directly to operating expense savings of $96 million in
2020, and are projected to deliver incremental savings of $50
million in 2021.
"As we turn our focus to 2021, our primary objective will be the
implementation of PSR Phase 3, which combines improved operational
performance with an intense focus on customer service and revenue
growth,” stated Ottensmeyer. "Phase 3 of PSR will help us
capitalize on the unique growth opportunities available across our
franchise.
"These growth opportunities, combined with an intense focus on
excellent execution, give us confidence to reinstate a multi-year
outlook, which has improved from the guidance provided a year ago.
We look forward to delivering another year of strong returns to
shareholders.”
KCS Outlook:
Along with earnings results, KCS has issued the following
financial outlook*:
Financial Metric
Current Outlook
Revenue Growth
Double-digit growth in 2021
Operating Ratio
~57.5% in 2021 Between 55% - 56%
in 2022
Earnings per Share
$9.00 or better in 2021 Between
$10.50 - $11.00 in 2022
Capital Expenditures
~17% of revenue in 2021 &
2022
Free Cash Flow
~$700M in 2021 & 2022
*Assumes constant currency and fuel
price
Statement Regarding Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with
U.S. GAAP, the accompanying fourth quarter and full year 2020
earnings release contains non-GAAP financial measures. KCS
management believes that certain non-GAAP financial measures used
to review and in certain cases manage the Company's business fall
within the meaning of Regulation G (Disclosure of non-GAAP
financial measures) and may provide its users of the financial
information with additional meaningful comparison when reviewing
the Company's results. KCS management uses non-GAAP information in
its planning and forecasting processes and to further analyze its
own financial trends and operational performance, as well as making
financial comparisons to prior periods presented on a similar
basis. Management believes investors and users of the Company's
financial information should consider all of the above factors when
evaluating KCS's results.
These non-GAAP measures should be viewed as a supplement and not
considered a substitute for GAAP measures. Some of KCS's non-GAAP
measures may differ from similar measures used by other companies,
even if similar terms are used to identify such measures.
GAAP Reconciliations
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per
Share to Adjusted
Diluted Earnings per Share
Three Months Ended December
31, 2020
Income Before Income Taxes
Income Tax Expense
Net Income
Diluted Earnings per Share
As reported
$
235.9
$
69.6
$
166.3
$
1.80
Adjustments for:
Write-off of software development
costs
13.6
3.6
10.0
0.11
Foreign exchange gain
(14.4
)
(4.3
)
(10.1
)
(0.11
)
Foreign exchange component of income
taxes
—
(8.5
)
8.5
0.09
Adjusted
$
235.1
$
60.4
174.7
Less: Noncontrolling interest and
preferred stock dividends
(0.6
)
Adjusted net income available to common
stockholders - see (a) below
$
174.1
$
1.89
Three Months Ended December
31, 2019
Income Before Income Taxes
Income Tax Expense
Net Income
Diluted Earnings per Share
As reported
$
207.5
$
79.6
$
127.9
$
1.30
Adjustments for:
Restructuring charges
38.3
10.1
28.2
0.29
Debt retirement costs
0.5
0.1
0.4
—
Foreign exchange gain
(7.6
)
(2.3
)
(5.3
)
(0.05
)
Foreign exchange component of income
taxes
—
(27.9
)
27.9
0.28
Adjusted
$
238.7
$
59.6
179.1
Less: Noncontrolling interest and
preferred stock dividends
(0.7
)
Adjusted net income available to common
stockholders - see (a) below
$
178.4
$
1.82
GAAP Reconciliations
(continued)
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per
Share to Adjusted
Diluted Earnings per Share
Year Ended December 31,
2020
Income Before Income Taxes
Income Tax Expense
Net Income
Diluted Earnings per Share
As reported
$
823.2
$
204.1
$
619.1
$
6.54
Adjustments for:
Write-off of software development
costs
13.6
3.6
10.0
0.11
Restructuring charges
17.0
4.5
12.5
0.13
Foreign exchange loss
29.6
8.9
20.7
0.22
Foreign exchange component of income
taxes
—
3.4
(3.4
)
(0.04
)
Adjusted
$
883.4
$
224.5
658.9
Less: Noncontrolling interest and
preferred stock dividends
(2.3
)
Adjusted net income available to common
stockholders - see (a) below
$
656.6
$
6.96
Year Ended December 31,
2019
Income Before Income Taxes
Income Tax Expense
Net Income
Diluted Earnings per Share
As reported
$
788.4
$
247.6
$
540.8
$
5.40
Adjustments for:
Restructuring charges
168.8
43.6
125.2
1.25
Debt retirement costs
1.1
0.3
0.8
0.01
Foreign exchange gain
(17.1
)
(5.1
)
(12.0
)
(0.12
)
Foreign exchange component of income
taxes
—
(35.9
)
35.9
0.36
Adjusted
$
941.2
$
250.5
690.7
Less: Noncontrolling interest and
preferred stock dividends
(2.1
)
Adjusted net income available to common
stockholders - see (a) below
$
688.6
$
6.90
GAAP Reconciliations
(continued)
($ in millions)
Reconciliation of Operating Expenses to
Adjusted
Three Months Ended
Years Ended
Operating Expenses
December 31,
December 31,
2020
2019
2020
2019
Operating expenses as reported
$
431.1
$
493.5
$
1,629.6
$
1,979.7
Adjustment for write-off of software
development costs
(13.6
)
—
(13.6
)
—
Adjustment for restructuring charges
—
(38.3
)
(17.0
)
(168.8
)
Adjusted operating expenses - see (b)
below
$
417.5
$
455.2
$
1,599.0
$
1,810.9
Operating income as reported
$
262.3
$
236.0
$
1,003.0
$
886.3
Adjusted operating income - see (b)
below
275.9
274.3
1,033.6
1,055.1
Operating ratio (c) as reported
62.2
%
67.6
%
61.9
%
69.1
%
Adjusted operating ratio - see (b) and (c)
below
60.2
%
62.4
%
60.7
%
63.2
%
(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 adjusting for the impact of changes in foreign
currency exchange rates, and items that are not directly related to
the ongoing operations of the Company. The income tax expense
impacts related to these adjustments are calculated at the
applicable statutory tax rate.
(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 adjusting for 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.
Investor Conference Call and Webcast
KCS will also hold its fourth quarter 2020 earnings conference
call on Friday, January 22, 2021 at 8:45 a.m. eastern time.
Shareholders and other interested parties are invited to
participate via live webcast or telephone. To participate in the
live webcast and to view accompanying presentation materials,
please log into investors.kcsouthern.com immediately prior to the
presentation. To join the teleconference, please call (844)
308-6428 from the U.S., or (412) 317-5409 from all other
countries.
A replay of the presentation will be available by calling (877)
344-7529 from the U.S., (855) 669-9658 from Canada or (412)
317-0088 from all other countries and entering conference ID
10150484. The webcast replay and presentation materials will be
archived on the company’s website.
About Kansas City Southern
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 The Kansas City Southern Railway Company, 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 with other North American rail partners are
primary components of a unique railway system, linking the
commercial and industrial centers of the U.S., Mexico and Canada.
More information about KCS can be found at www.kcsouthern.com.
Forward-Looking Information
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934, as amended and
the Private Securities Litigation Reform Act of 1995. In addition,
management may make forward-looking statements orally or in other
writing, including, but not limited to, in press releases,
quarterly earnings calls, executive presentations, in the annual
report to stockholders and in other filings with the Securities and
Exchange Commission. Readers can usually identify these
forward-looking statements by the use of such words as "may,"
"will," "should," "likely," "plans," "projects," "expects,"
"anticipates," "believes" or similar words. These statements
involve a number of risks and uncertainties. Actual results could
materially differ from those anticipated by such forward-looking
statements as a result of a number of factors or combination of
factors including, but not limited: public health threats or
outbreaks of communicable diseases, such as the ongoing COVID-19
pandemic and its impact on KCS’s business, suppliers, consumers,
customers, employees and supply chains; rail accidents or other
incidents or accidents on KCS’s rail network or at KCS’s facilities
or customer facilities involving the release of hazardous
materials, including toxic inhalation hazards; legislative and
regulatory developments and disputes, including environmental
regulations; loss of the rail concession of Kansas City Southern’s
subsidiary, Kansas City Southern de México, S.A. de C.V.; domestic
and international economic, political and social conditions;
disruptions to the Company’s technology infrastructure, including
its computer systems; increased demand and traffic congestion; the
level of trade between the United States and Asia or Mexico;
fluctuations in the peso-dollar exchange rate; natural events such
as severe weather, hurricanes and floods; the outcome of claims and
litigation involving the Company or its subsidiaries; competition
and consolidation within the transportation industry; the business
environment in industries that produce and use items shipped by
rail; the termination of, or failure to renew, agreements with
customers, other railroads and third parties; fluctuation in prices
or availability of key materials, in particular diesel fuel; access
to capital; climate change and the market and regulatory responses
to climate change; dependency on certain key suppliers of core rail
equipment; changes in securities and capital markets;
unavailability of qualified personnel; labor difficulties,
including strikes and work stoppages; acts of terrorism or risk of
terrorist activities, war or other acts of violence; and other
factors affecting the operation of the business; and other risks
identified in this news release, in KCS's Annual Report on Form
10-K for the year ended December 31, 2019, and in other reports
filed by KCS with the Securities and Exchange Commission.
Forward-looking statements reflect the information only as of
the date on which they are made. KCS does not undertake any
obligation to update any forward-looking statements to reflect
future events, developments, or other information.
Kansas City Southern and
Subsidiaries
Consolidated Statements of
Income
(In millions, except share and
per share amounts)
(Unaudited)
Three Months Ended
Years Ended
December 31,
December 31,
2020
2019
2020
2019
Revenues
$
693.4
$
729.5
$
2,632.6
$
2,866.0
Operating expenses:
Compensation and benefits
121.9
137.1
476.5
529.1
Purchased services
52.9
56.3
198.1
219.2
Fuel
54.6
82.6
219.8
340.4
Equipment costs
21.9
26.8
85.8
108.6
Depreciation and amortization
90.0
88.0
357.9
350.7
Materials and other
76.2
64.4
260.9
262.9
Write-off of software development
costs
13.6
—
13.6
—
Restructuring charges
—
38.3
17.0
168.8
Total operating expenses
431.1
493.5
1,629.6
1,979.7
Operating income
262.3
236.0
1,003.0
886.3
Equity in net earnings (losses) of
affiliates
(1.3
)
(2.6
)
(1.4
)
1.0
Interest expense
(39.1
)
(31.8
)
(150.9
)
(115.9
)
Debt retirement costs
—
(0.5
)
—
(1.1
)
Foreign exchange gain (loss)
14.4
7.6
(29.6
)
17.1
Other income (expense), net
(0.4
)
(1.2
)
2.1
1.0
Income before income taxes
235.9
207.5
823.2
788.4
Income tax expense
69.6
79.6
204.1
247.6
Net income
166.3
127.9
619.1
540.8
Less: Net income attributable to
noncontrolling interest
0.6
0.7
2.1
1.9
Net income attributable to Kansas City
Southern and subsidiaries
165.7
127.2
617.0
538.9
Preferred stock dividends
—
—
0.2
0.2
Net income available to common
stockholders
$
165.7
$
127.2
$
616.8
$
538.7
Earnings per share:
Basic earnings per share
$
1.81
$
1.31
$
6.57
$
5.42
Diluted earnings per share
$
1.80
$
1.30
$
6.54
$
5.40
Average shares outstanding (in
thousands):
Basic
91,311
97,467
93,826
99,316
Effect of dilution
525
513
489
431
Diluted
91,836
97,980
94,315
99,747
Kansas City Southern and
Subsidiaries
Revenue & Carload/Units by
Commodity - Fourth Quarter 2020 and 2019
Revenues
Carloads and Units
Revenue per
(in millions)
(in thousands)
Carload/Unit
Fourth Quarter
%
Fourth Quarter
%
Fourth Quarter
%
2020
2019
Change
2020
2019
Change
2020
2019
Change
Chemical & Petroleum
Chemicals
$
61.9
$
59.3
4
%
24.4
23.0
6
%
$
2,537
$
2,578
(2
%)
Petroleum
113.5
88.4
28
%
54.9
41.8
31
%
2,067
2,115
(2
%)
Plastics
39.4
38.4
3
%
19.4
18.9
3
%
2,031
2,032
—
Total
214.8
186.1
15
%
98.7
83.7
18
%
2,176
2,223
(2
%)
Industrial & Consumer Products
Forest Products
61.5
67.5
(9
%)
25.7
27.9
(8
%)
2,393
2,419
(1
%)
Metals & Scrap
44.2
56.4
(22
%)
26.7
28.7
(7
%)
1,655
1,965
(16
%)
Other
26.0
30.5
(15
%)
23.0
23.8
(3
%)
1,130
1,282
(12
%)
Total
131.7
154.4
(15
%)
75.4
80.4
(6
%)
1,747
1,920
(9
%)
Agriculture & Minerals
Grain
83.1
74.2
12
%
41.0
36.8
11
%
2,027
2,016
1
%
Food Products
34.7
39.0
(11
%)
14.4
15.6
(8
%)
2,410
2,500
(4
%)
Ores & Minerals
5.2
6.0
(13
%)
7.4
7.8
(5
%)
703
769
(9
%)
Stone, Clay & Glass
8.2
8.1
1
%
3.4
3.3
3
%
2,412
2,455
(2
%)
Total
131.2
127.3
3
%
66.2
63.5
4
%
1,982
2,005
(1
%)
Energy
Utility Coal
29.9
31.8
(6
%)
34.6
36.7
(6
%)
864
866
—
Coal & Petroleum Coke
10.5
11.3
(7
%)
13.5
14.5
(7
%)
778
779
—
Frac Sand
3.5
5.3
(34
%)
2.7
3.9
(31
%)
1,296
1,359
(5
%)
Crude Oil
8.7
14.3
(39
%)
6.0
9.4
(36
%)
1,450
1,521
(5
%)
Total
52.6
62.7
(16
%)
56.8
64.5
(12
%)
926
972
(5
%)
Intermodal
77.8
97.2
(20
%)
235.2
254.1
(7
%)
331
383
(14
%)
Automotive
54.7
62.3
(12
%)
34.8
36.4
(4
%)
1,572
1,712
(8
%)
TOTAL FOR COMMODITY GROUPS
662.8
690.0
(4
%)
567.1
582.6
(3
%)
$
1,169
$
1,184
(1
%)
Other Revenue
30.6
39.5
(23
%)
TOTAL
$
693.4
$
729.5
(5
%)
Kansas City Southern and
Subsidiaries
Revenue & Carload/Units by
Commodity - Years Ended December 31, 2020 and 2019
Revenues
Carloads and Units
Revenue per
(in millions)
(in thousands)
Carload/Unit
Years Ended
%
Years Ended
%
Years Ended
%
2020
2019
Change
2020
2019
Change
2020
2019
Change
Chemical & Petroleum
Chemicals
$
236.7
$
246.9
(4
%)
94.5
99.6
(5
%)
$
2,505
$
2,479
1
%
Petroleum
375.0
341.8
10
%
186.6
163.4
14
%
2,010
2,092
(4
%)
Plastics
152.1
148.5
2
%
75.6
74.4
2
%
2,012
1,996
1
%
Total
763.8
737.2
4
%
356.7
337.4
6
%
2,141
2,185
(2
%)
Industrial & Consumer Products
Forest Products
247.8
261.4
(5
%)
102.6
109.2
(6
%)
2,415
2,394
1
%
Metals & Scrap
188.4
232.9
(19
%)
107.1
120.3
(11
%)
1,759
1,936
(9
%)
Other
101.5
116.1
(13
%)
90.8
91.4
(1
%)
1,118
1,270
(12
%)
Total
537.7
610.4
(12
%)
300.5
320.9
(6
%)
1,789
1,902
(6
%)
Agriculture & Minerals
Grain
299.6
298.4
—
147.2
146.1
1
%
2,035
2,042
—
Food Products
154.6
149.4
3
%
61.4
60.5
1
%
2,518
2,469
2
%
Ores & Minerals
21.8
25.0
(13
%)
29.8
32.8
(9
%)
732
762
(4
%)
Stone, Clay & Glass
29.4
33.5
(12
%)
12.6
13.9
(9
%)
2,333
2,410
(3
%)
Total
505.4
506.3
—
251.0
253.3
(1
%)
2,014
1,999
1
%
Energy
Utility Coal
105.6
126.9
(17
%)
122.3
139.2
(12
%)
863
912
(5
%)
Coal & Petroleum Coke
41.8
43.2
(3
%)
56.5
57.6
(2
%)
740
750
(1
%)
Frac Sand
11.3
27.4
(59
%)
9.3
19.6
(53
%)
1,215
1,398
(13
%)
Crude Oil
36.3
48.7
(25
%)
21.9
28.3
(23
%)
1,658
1,721
(4
%)
Total
195.0
246.2
(21
%)
210.0
244.7
(14
%)
929
1,006
(8
%)
Intermodal
319.1
370.2
(14
%)
924.5
979.8
(6
%)
345
378
(9
%)
Automotive
172.7
255.6
(32
%)
110.7
154.9
(29
%)
1,560
1,650
(5
%)
TOTAL FOR COMMODITY GROUPS
2,493.7
2,725.9
(9
%)
2,153.4
2,291.0
(6
%)
$
1,158
$
1,190
(3
%)
Other Revenue
138.9
140.1
(1
%)
TOTAL
$
2,632.6
$
2,866.0
(8
%)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210122005047/en/
KCS: Ashley Thorne, 816-983-1530,
athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
Historical Stock Chart
From Mar 2024 to Apr 2024
Kansas City Southern (NYSE:KSU)
Historical Stock Chart
From Apr 2023 to Apr 2024