Second Quarter 2018
Results
- Record revenues of $682 million, an
increase of 4% from prior year on 1% volume growth
- Record operating income of $246
million, 3% higher than prior year
- Operating ratio of 64.0%, compared to
63.5% in second quarter 2017
- Diluted earnings per share of $1.45, an
increase of 14% from prior year; record adjusted diluted earnings
per share of $1.54, 16% higher than a year ago
Kansas City Southern (KCS) (NYSE:KSU) reported record revenues
of $682 million, an increase of 4% from second quarter 2017.
Overall, carload volumes increased 1% compared to prior year.
Revenues for the second quarter of 2018 increased in five
commodity groups, led by a 17% increase in Automotive and a 14%
increase in Chemicals and Petroleum. Intermodal and Industrial and
Consumer both grew by 3%, and Agriculture and Minerals grew by 1%.
These increases were partially offset by a 20% decline in Energy,
driven primarily by a reduction in utility coal volume due to a
Texas utility closure in January 2018.
Operating expenses in the second quarter of 2018 were $437
million, 5% higher than 2017. Operating income was a record $246
million, 3% higher than a year ago. KCS reported a second quarter
operating ratio of 64.0%, 0.5 points higher than second quarter
2017.
Reported net income in the second quarter of 2018 was $149
million, or $1.45 per diluted share, compared with $135 million, or
$1.27 per diluted share in the second quarter of 2017. Adjusted
diluted earnings per share was a record $1.54, 16% higher than a
year ago, excluding the impacts of foreign exchange, debt
retirement costs and adjustments to 2017 provisional income tax
benefit for the Tax Cuts and Jobs Act.
“Supported by the strength and diversity of our franchise, KCS
achieved record quarterly financial results,” stated Kansas City
Southern’s President and Chief Executive Officer Patrick J.
Ottensmeyer. “We persevered through volume headwinds from utility
coal and a challenging FX environment impacting Mexico
international intermodal business, to deliver topline growth from
five of six business units, record franchise cross-border revenue
and record adjusted diluted earnings per share.
“As we move into the second half of 2018 and 2019, we expect
volume growth to accelerate, benefiting from a strong economy,
network capacity investments and commercial opportunities that are
unique to the KCS franchise.”
GAAP Reconciliations
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per Share Three Months Ended
June 30, 2018
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 196.1 $ 47.4 $ 148.7 $ 1.45 Adjustments for: Foreign
exchange loss 21.0 6.3 14.7 0.14 Debt retirement costs 2.2 0.7 1.5
0.02 Tax Cuts and Jobs Act — 4.3 (4.3 ) (0.04 ) Foreign exchange
component of income taxes — 2.4 (2.4 ) (0.03 )
Adjusted $ 219.3 $ 61.1 158.2 Less: Noncontrolling
interest (0.5 ) Adjusted net income available to common
stockholders - see (a) below $ 157.7 $ 1.54
Three Months Ended June 30, 2017
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 231.3 $ 96.6 $ 134.7 $ 1.27 Adjustments for: Foreign
exchange gain (14.2 ) (4.3 ) (9.9 ) (0.09 ) Foreign exchange
component of income taxes — (16.6 ) 16.6 0.15
Adjusted $ 217.1 $ 75.7 141.4 Less: Noncontrolling
interest (0.3 ) Adjusted net income available to common
stockholders - see (a) below $ 141.1 $ 1.33 (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 impact of adjustments to 2017 provisional income tax benefit
for the Tax Cuts and Jobs Act, 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.
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 are primary components of a railway network,
linking the commercial and industrial centers of the U.S., Mexico
and Canada. More information about KCS can be found at
www.kcsouthern.com
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;
unavailability 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, 2017 (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, 2018 2017 2018
2017 Revenues $ 682.4 $ 656.4 $ 1,321.0
$ 1,265.9 Operating expenses: Compensation and benefits
122.3 125.2 243.9 242.6 Purchased services 49.5 51.4 96.6 100.2
Fuel 85.5 78.9 166.8 154.3 Mexican fuel excise tax credit (8.0 )
(12.8 ) (17.2 ) (24.5 ) Equipment costs 30.7 31.2 62.9 62.4
Depreciation and amortization 86.3 80.4 169.6 159.7 Materials and
other 70.3 62.8 133.9 121.2 Total
operating expenses 436.6 417.1 856.5 815.9
Operating income 245.8 239.3 464.5 450.0 Equity in net
earnings of affiliates 1.0 2.9 2.0 6.9 Interest expense (28.0 )
(25.0 ) (53.5 ) (49.7 ) Debt retirement costs (2.2 ) — (2.2 ) —
Foreign exchange gain (loss) (21.0 ) 14.2 6.8 61.0 Other income
(expense), net 0.5 (0.1 ) 0.2 1.0 Income
before income taxes 196.1 231.3 417.8 469.2 Income tax expense 47.4
96.6 124.2 187.6 Net income 148.7 134.7
293.6 281.6 Less: Net income attributable to noncontrolling
interest 0.5 0.3 0.9 0.6 Net income
attributable to Kansas City Southern and subsidiaries 148.2 134.4
292.7 281.0 Preferred stock dividends — — 0.1
0.1 Net income available to common stockholders $ 148.2
$ 134.4 $ 292.6 $ 280.9 Earnings
per share: Basic earnings per share $ 1.45 $ 1.27 $
2.86 $ 2.66 Diluted earnings per share $ 1.45
$ 1.27 $ 2.85 $ 2.65 Average shares
outstanding (in thousands): Basic 102,092 105,473 102,332 105,792
Potentially dilutive common shares 400 285 401
250 Diluted 102,492 105,758 102,733
106,042
Kansas City Southern and
Subsidiaries Revenue & Carload/Units by Commodity -
Second Quarter 2018 and 2017
Revenues Carloads and
Units Revenue per (in millions) (in thousands)
Carload/Unit Second Quarter % Second Quarter % Second
Quarter % 2018 2017 Change 2018 2017 Change 2018 2017 Change
Chemical & Petroleum Chemicals $ 60.4 $ 56.0 8 % 26.1 27.8 (6
%) $ 2,314 $ 2,014 15 % Petroleum 57.8 50.8 14 % 28.1 25.5 10 %
2,057 1,992 3 % Plastics 39.6 32.0 24 % 19.4
18.2 7 % 2,041 1,758 16 % Total 157.8
138.8 14 % 73.6 71.5 3 % 2,144 1,941
10 % Industrial & Consumer Products Forest
Products 69.2 62.2 11 % 31.0 29.3 6 % 2,232 2,123 5 % Metals &
Scrap 54.0 57.3 (6 %) 30.3 30.5 (1 %) 1,782 1,879 (5 %) Other 29.5
29.1 1 % 23.7 22.9 3 % 1,245
1,271 (2 %) Total 152.7 148.6 3 % 85.0
82.7 3 % 1,796 1,797 —
Agriculture & Minerals Grain 75.4 73.1 3 % 37.7 37.6 — 2,000
1,944 3 % Food Products 36.3 38.1 (5 %) 14.8 15.7 (6 %) 2,453 2,427
1 % Ores & Minerals 5.8 4.8 21 % 6.6 5.6 18 % 879 857 3 %
Stone, Clay & Glass 7.6 7.4 3 % 3.5 3.4
3 % 2,171 2,176 — Total 125.1
123.4 1 % 62.6 62.3 — 1,998
1,981 1 % Energy Utility Coal 23.9 39.0 (39 %) 27.0
38.4 (30 %) 885 1,016 (13 %) Coal & Petroleum Coke 11.2 10.3 9
% 16.3 16.1 1 % 687 640 7 % Frac Sand 10.5 14.0 (25 %) 7.0 8.7 (20
%) 1,500 1,609 (7 %) Crude Oil 10.9 7.2 51 % 7.0
6.4 9 % 1,557 1,125 38 % Total 56.5
70.5 (20 %) 57.3 69.6 (18 %) 986
1,013 (3 %) Intermodal 93.7 90.6 3 %
251.2 243.1 3 % 373 373 —
Automotive 67.3 57.5 17 % 42.5 37.9 12
% 1,584 1,517 4 %
TOTAL FOR COMMODITY
GROUPS 653.1 629.4 4 % 572.2 567.1 1 % $ 1,141
$ 1,110 3 % Other Revenue 29.3 27.0
9 %
TOTAL $ 682.4 $ 656.4 4 %
Kansas City Southern and Subsidiaries
Revenue & Carload/Units by Commodity - Year to Date June 30,
2018 and 2017
Revenues Carloads and Units Revenue
per (in millions) (in thousands)
Carload/Unit Year to
Date % Year to Date % Year to Date % 2018 2017 Change 2018 2017
Change 2018 2017 Change Chemical & Petroleum Chemicals $
118.1 $ 110.6 7 % 52.8 55.3 (5 %) $ 2,237 $ 2,000 12 % Petroleum
106.8 89.6 19 % 52.1 46.5 12 % 2,050 1,927 6 % Plastics 72.6
65.1 12 % 36.8 36.4 1 % 1,973 1,788
10 % Total 297.5 265.3 12 % 141.7 138.2
3 % 2,100 1,920 9 % Industrial &
Consumer Products Forest Products 134.5 125.7 7 % 60.6 58.9 3 %
2,219 2,134 4 % Metals & Scrap 107.8 111.6 (3 %) 60.0 60.9 (1
%) 1,797 1,833 (2 %) Other 56.7 51.4 10 % 46.4
43.7 6 % 1,222 1,176 4 % Total 299.0
288.7 4 % 167.0 163.5 2 % 1,790 1,766
1 % Agriculture & Minerals Grain 140.6 139.3 1 %
71.2 73.3 (3 %) 1,975 1,900 4 % Food Products 72.5 76.4 (5 %) 29.7
32.0 (7 %) 2,441 2,388 2 % Ores & Minerals 10.7 9.1 18 % 11.9
10.4 14 % 899 875 3 % Stone, Clay & Glass 14.7 14.9
(1 %) 6.7 6.7 — 2,194 2,224
(1 %) Total 238.5 239.7 (1 %) 119.5
122.4 (2 %) 1,996 1,958 2 % Energy
Utility Coal 53.2 81.8 (35 %) 57.0 82.9 (31 %) 933 987 (5 %) Coal
& Petroleum Coke 21.4 21.3 — 29.7 32.4 (8 %) 721 657 10 % Frac
Sand 21.6 24.7 (13 %) 14.1 15.9 (11 %) 1,532 1,553 (1 %) Crude Oil
21.6 11.7 85 % 14.0 10.1 39 % 1,543
1,158 33 %
Total
117.8 139.5 (16 %) 114.8 141.3 (19 %)
1,026 987 4 % Intermodal 184.6 174.1
6 % 494.2 467.1 6 % 374 373 —
Automotive 127.1 108.8 17 % 82.3
75.5 9 % 1,544 1,441 7 %
TOTAL FOR
COMMODITY GROUPS 1,264.5 1,216.1 4 % 1,119.5 1,108.0
1 % $ 1,130 $ 1,098 3 % Other Revenue
56.5 49.8 13 %
TOTAL $ 1,321.0 $
1,265.9 4 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180720005037/en/
Kansas City SouthernAshley Thorne,
816-983-1530athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
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