Second Quarter 2019
Results
- Record revenues of $714 million, an increase of 5% from prior
year on flat volumes
- Operating income of $208 million. Record adjusted operating
income of $259 million, excluding restructuring charges related to
Precision Scheduled Railroading (“PSR”) initiatives
- Reported operating ratio of 70.9%. Adjusted operating ratio of
63.7%, compared to 64.0% in the prior year
- Reported diluted earnings per share of $1.28. Record adjusted
diluted earnings per share of $1.64, 6% higher than a year ago
Kansas City Southern (KCS) (NYSE:KSU) reported record revenues
of $714 million, an increase of 5% from second quarter 2018.
Overall, carload volumes were flat compared to prior year.
Revenue growth for the second quarter of 2019 was led by a 19%
increase in Chemicals and Petroleum due to growth in shipments
related to Mexico energy reform, and a 5% increase in Automotive.
These increases were partially offset by revenue declines in the
remaining four commodity groups. Energy revenues declined by 5%, as
increased Utility Coal shipments were more than offset by declines
in Frac Sand and Crude Oil. Industrial & Consumer Products and
Agriculture & Minerals revenues each declined by 2%, and
Intermodal revenues declined by 1%.
In the second quarter of 2019, reported operating expenses were
$506 million. Excluding restructuring charges related to PSR
initiatives, adjusted operating expenses were $455 million, 4%
higher than 2018. Adjusted operating income was $259 million, 5%
higher than a year ago. KCS reported an adjusted second quarter
operating ratio of 63.7%, a 0.3 point improvement over second
quarter 2018.
Reported net income in the second quarter of 2019 was $129
million, or $1.28 per diluted share, compared with $148 million, or
$1.45 per diluted share in the second quarter of 2018. As presented
in the following reconciliations, adjusted diluted earnings per
share was $1.64, 6% higher than a year ago.
“The Company is handling the same volume as last year with fewer
assets, fewer crewstarts and considerably less network congestion,
driving an improvement in customer service, operating metrics and
cost profile,” stated Kansas City Southern’s President and Chief
Executive Officer Patrick J. Ottensmeyer. “This improvement in cost
profile helped us absorb a 130 basis point headwind to our adjusted
operating ratio from the loss of the Mexican Fuel Excise Tax
credit, while still improving profitability versus prior year.
“I am extremely pleased with the commitment, enthusiasm and
cross-functional teamwork that my Kansas City Southern colleagues
have demonstrated in the early stages of executing Precision
Scheduled Railroading principles. Together we are building a more
consistent, reliable and resilient network that is positioned to
deliver excellent customer service and strong operating leverage as
volume and revenue growth improves.”
GAAP Reconciliations
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per
Share to
Adjusted Diluted Earnings per
Share
Three Months Ended June 30,
2019
Income Before Income Taxes
Income Tax Expense
Net Income
Diluted Earnings per Share
As reported
$
188.2
$
59.1
$
129.1
$
1.28
Adjustments for:
Restructuring charges
51.0
13.2
37.8
0.38
Foreign exchange gain
(8.3
)
(2.5
)
(5.8
)
(0.06
)
Foreign exchange component of income
taxes
—
(4.0
)
4.0
0.04
Adjusted
$
230.9
$
65.8
165.1
Less: Noncontrolling interest and
preferred stock dividends
(0.4
)
Adjusted net income available to common
stockholders - see (a) below
$
164.7
$
1.64
Three Months Ended June 30,
2018
Income Before Income Taxes
Income Tax Expense
Net Income
Diluted Earnings per Share
As reported
$
196.1
$
47.4
$
148.7
$
1.45
Adjustments for:
Debt retirement costs
2.2
0.7
1.5
0.02
Tax Cuts and Jobs Act
—
4.3
(4.3
)
(0.04
)
Foreign exchange loss
21.0
6.3
14.7
0.14
Foreign exchange component of income
taxes
—
2.4
(2.4
)
(0.03
)
Adjusted
$
219.3
$
61.1
$
158.2
Less: Noncontrolling interest and
preferred stock dividends
(0.5
)
Adjusted net income available to common
stockholders - see (a) below
$
157.7
$
1.54
GAAP Reconciliations
(continued)
($ in millions)
Reconciliation of Operating Expenses to
Adjusted
Three Months Ended
Six Months Ended
Operating Expenses
June 30,
June 30,
2019
2018
2019
2018
Operating expenses as reported
$
506.0
$
436.6
$
1,020.5
$
856.5
Adjustment for restructuring charges
(51.0
)
—
(118.5
)
—
Adjusted operating expenses - see (b)
below
$
455.0
$
436.6
$
902.0
$
856.5
Operating income as reported
$
208.0
$
245.8
$
368.3
$
464.5
Adjusted operating income - see (b)
below
259.0
245.8
486.8
464.5
Operating ratio (c) as reported
70.9
%
64.0
%
73.5
%
64.8
%
Adjusted operating ratio - see (b) and (c)
below
63.7
%
64.0
%
64.9
%
64.8
%
(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, 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.
(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.
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 México, 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.
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, 2018 (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,
2019
2018
2019
2018
Revenues
$
714.0
$
682.4
$
1,388.8
$
1,321.0
Operating expenses:
Compensation and benefits
128.3
122.3
257.2
243.9
Purchased services
56.7
49.5
109.5
96.6
Fuel
87.7
85.5
170.7
166.8
Mexican fuel excise tax credit
—
(8.0
)
—
(17.2
)
Equipment costs
26.3
30.7
56.7
62.9
Depreciation and amortization
87.7
86.3
176.2
169.6
Materials and other
68.3
70.3
131.7
133.9
Restructuring charges
51.0
—
118.5
—
Total operating expenses
506.0
436.6
1,020.5
856.5
Operating income
208.0
245.8
368.3
464.5
Equity in net earnings (losses) of
affiliates
(0.2
)
1.0
1.5
2.0
Interest expense
(28.0
)
(28.0
)
(56.2
)
(53.5
)
Debt retirement costs
—
(2.2
)
(0.6
)
(2.2
)
Foreign exchange gain (loss)
8.3
(21.0
)
12.9
6.8
Other income, net
0.1
0.5
0.2
0.2
Income before income taxes
188.2
196.1
326.1
417.8
Income tax expense
59.1
47.4
93.8
124.2
Net income
129.1
148.7
232.3
293.6
Less: Net income attributable to
noncontrolling interest
0.4
0.5
0.8
0.9
Net income attributable to Kansas City
Southern and subsidiaries
128.7
148.2
231.5
292.7
Preferred stock dividends
—
—
0.1
0.1
Net income available to common
stockholders
$
128.7
$
148.2
$
231.4
$
292.6
Earnings per share:
Basic earnings per share
$
1.29
$
1.45
$
2.31
$
2.86
Diluted earnings per share
$
1.28
$
1.45
$
2.30
$
2.85
Average shares outstanding (in
thousands):
Basic
100,028
102,092
100,264
102,332
Potentially dilutive common shares
394
400
405
401
Diluted
100,422
102,492
100,669
102,733
Kansas City Southern and
Subsidiaries
Revenue & Carload/Units by
Commodity - Second Quarter 2019 and 2018
Revenues
Carloads and Units
Revenue per
(in millions)
(in thousands)
Carload/Unit
Second Quarter
%
Second Quarter
%
Second Quarter
%
2019
2018
Change
2019
2018
Change
2019
2018
Change
Chemical & Petroleum
Chemicals
$
61.6
$
60.4
2
%
25.4
26.1
(3
%)
$
2,425
$
2,314
5
%
Petroleum
90.0
57.8
56
%
42.9
28.1
53
%
2,098
2,057
2
%
Plastics
36.7
39.6
(7
%)
18.6
19.4
(4
%)
1,973
2,041
(3
%)
Total
188.3
157.8
19
%
86.9
73.6
18
%
2,167
2,144
1
%
Industrial & Consumer Products
Forest Products
63.2
69.2
(9
%)
26.8
31.0
(14
%)
2,358
2,232
6
%
Metals & Scrap
59.9
54.0
11
%
30.4
30.3
—
1,970
1,782
11
%
Other
27.2
29.5
(8
%)
22.0
23.7
(7
%)
1,236
1,245
(1
%)
Total
150.3
152.7
(2
%)
79.2
85.0
(7
%)
1,898
1,796
6
%
Agriculture & Minerals
Grain
73.2
75.4
(3
%)
35.9
37.7
(5
%)
2,039
2,000
2
%
Food Products
34.7
36.3
(4
%)
14.2
14.8
(4
%)
2,444
2,453
—
Ores & Minerals
5.8
5.8
—
8.0
6.6
21
%
725
879
(18
%)
Stone, Clay & Glass
8.7
7.6
14
%
3.7
3.5
6
%
2,351
2,171
8
%
Total
122.4
125.1
(2
%)
61.8
62.6
(1
%)
1,981
1,998
(1
%)
Energy
Utility Coal
27.5
23.9
15
%
30.4
27.0
13
%
905
885
2
%
Coal & Petroleum Coke
10.1
11.2
(10
%)
14.4
16.3
(12
%)
701
687
2
%
Frac Sand
6.7
10.5
(36
%)
4.7
7.0
(33
%)
1,426
1,500
(5
%)
Crude Oil
9.6
10.9
(12
%)
5.2
7.0
(26
%)
1,846
1,557
19
%
Total
53.9
56.5
(5
%)
54.7
57.3
(5
%)
985
986
—
Intermodal
92.6
93.7
(1
%)
244.6
251.2
(3
%)
379
373
2
%
Automotive
70.9
67.3
5
%
42.7
42.5
—
1,660
1,584
5
%
TOTAL FOR COMMODITY GROUPS
678.4
653.1
4
%
569.9
572.2
—
$
1,190
$
1,141
4
%
Other Revenue
35.6
29.3
22
%
TOTAL
$
714.0
$
682.4
5
%
Kansas City Southern and
Subsidiaries
Revenue & Carload/Units by
Commodity - Year to Date June 30, 2019 and 2018
Revenues
Carloads and Units
Revenue per
(in millions)
(in thousands)
Carload/Unit
Year to Date
%
Year to Date
%
Year to Date
%
2019
2018
Change
2019
2018
Change
2019
2018
Change
Chemical & Petroleum
Chemicals
$
122.1
$
118.1
3
%
50.9
52.8
(4
%)
$
2,399
$
2,237
7
%
Petroleum
164.3
106.8
54
%
79.4
52.1
52
%
2,069
2,050
1
%
Plastics
70.5
72.6
(3
%)
36.0
36.8
(2
%)
1,958
1,973
(1
%)
Total
356.9
297.5
20
%
166.3
141.7
17
%
2,146
2,100
2
%
Industrial & Consumer Products
Forest Products
129.6
134.5
(4
%)
54.7
60.6
(10
%)
2,369
2,219
7
%
Metals & Scrap
116.9
107.8
8
%
61.1
60.0
2
%
1,913
1,797
6
%
Other
53.6
56.7
(5
%)
43.3
46.4
(7
%)
1,238
1,222
1
%
Total
300.1
299.0
—
159.1
167.0
(5
%)
1,886
1,790
5
%
Agriculture & Minerals
Grain
145.9
140.6
4
%
71.4
71.2
—
2,043
1,975
3
%
Food Products
70.4
72.5
(3
%)
29.2
29.7
(2
%)
2,411
2,441
(1
%)
Ores & Minerals
12.3
10.7
15
%
16.1
11.9
35
%
764
899
(15
%)
Stone, Clay & Glass
16.7
14.7
14
%
7.1
6.7
6
%
2,352
2,194
7
%
Total
245.3
238.5
3
%
123.8
119.5
4
%
1,981
1,996
(1
%)
Energy
Utility Coal
60.0
53.2
13
%
63.9
57.0
12
%
939
933
1
%
Coal & Petroleum Coke
20.6
21.4
(4
%)
29.5
29.7
(1
%)
698
721
(3
%)
Frac Sand
14.7
21.6
(32
%)
10.4
14.1
(26
%)
1,413
1,532
(8
%)
Crude Oil
23.2
21.6
7
%
11.7
14.0
(16
%)
1,983
1,543
29
%
Total
118.5
117.8
1
%
115.5
114.8
1
%
1,026
1,026
—
Intermodal
172.5
184.6
(7
%)
465.5
494.2
(6
%)
371
374
(1
%)
Automotive
128.5
127.1
1
%
79.3
82.3
(4
%)
1,620
1,544
5
%
TOTAL FOR COMMODITY GROUPS
1,321.8
1,264.5
5
%
1,109.5
1,119.5
(1
%)
$
1,191
$
1,130
5
%
Other Revenue
67.0
56.5
19
%
TOTAL
$
1,388.8
$
1,321.0
5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190719005059/en/
KCS: Ashley Thorne 816-983-1530
athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
Historical Stock Chart
From Jun 2024 to Jul 2024
Kansas City Southern (NYSE:KSU)
Historical Stock Chart
From Jul 2023 to Jul 2024