Fourth Quarter 2016
Results
- Revenue of $599 million, unchanged from
prior year
- Carload volumes of 555 thousand,
unchanged from prior year
- Operating income of $211 million, a
decrease of 4% from fourth quarter 2015
- Operating ratio of 64.8%, compared with
63.4% in fourth quarter 2015
- Diluted earnings per share of $1.21, a
decrease of 5% compared to fourth quarter 2015. Adjusted diluted
earnings per share of $1.12, a decrease of 9% compared to fourth
quarter 2015
Kansas City Southern (KCS) (NYSE:KSU) reported fourth quarter
2016 revenues of $599 million, unchanged from fourth quarter 2015.
Overall, carload volumes were unchanged compared to the prior year.
Excluding the estimated impact of Mexican peso depreciation,
revenues would have increased by 3% compared to the fourth quarter
of 2015.
Operating expenses in the fourth quarter were $388 million, an
increase of 2% from 2015. Excluding the estimated impact of Mexican
peso depreciation, operating expenses increased 7% compared to the
fourth quarter of 2015.
Operating income for the fourth quarter of 2016 was $211
million, a decrease of 4% from the fourth quarter 2015. KCS
reported a fourth quarter operating ratio of 64.8%, a 1.4 point
increase from fourth quarter 2015. Reported net income in the
fourth quarter of 2016 totaled $130 million, or $1.21 per diluted
share, compared with $140 million, or $1.28 per diluted share, in
the fourth quarter of 2015. Excluding the impacts of foreign
exchange fluctuations and 2015 debt retirement and exchange costs,
adjusted diluted earnings per share for fourth quarter 2016 was
$1.12, compared to $1.23 in fourth quarter 2015.
For the full year of 2016, revenue was $2.3 billion, down 3%
from 2015. Carloads for 2016 were 2.17 million, a decrease of 2%
from the prior year. Full year 2016 operating income was $819
million, an increase of 2% from the prior year. The Company’s 2016
operating ratio was 64.9%, a 1.9 point improvement from the prior
year’s reported operating ratio and a 1.5 point improvement from
the prior year’s adjusted operating ratio.
Reported net income in 2016 totaled $480 million or $4.43 per
diluted share, compared with $485 million, or $4.40 per diluted
share, in 2015. Excluding the impacts of foreign exchange
fluctuations and 2015 lease termination and debt retirement and
exchange costs, adjusted diluted earnings per share for 2016 was
$4.48 compared to $4.49 in 2015.
“KCS’ ability to react swiftly and efficiently was proven
throughout 2016, as our network faced challenging operational
interruptions throughout the year. In addition, volatility in key
commodities such as energy, consumer, and intermodal markets
created uncertainty during 2016. Despite these conditions, KCS’
achieved a full-year operating ratio of 64.9%, a 1.5 point
improvement versus 2015 adjusted,” stated Kansas City Southern’s
President and Chief Executive Officer Patrick J. Ottensmeyer.
“Looking ahead to 2017, the Company is aware of both economic
and political uncertainty. However, we continue to emphasize our
commitment to growth and we are well positioned to take full
advantage of the significant new business opportunities that lie
ahead of us.”
GAAP Reconciliations
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per
Share to Adjusted Diluted Earnings per Share
Three Months Ended December 31, 2016
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 165.7 $ 35.4 $ 130.3 $ 1.21 Adjustments for: Foreign
exchange loss 24.7 7.4 17.3 0.16 Foreign exchange component of
income taxes — 26.8 (26.8 ) (0.25 ) Adjusted $
190.4 $ 69.6 120.8 Less: Noncontrolling interest (0.7 )
Adjusted net income available to common
stockholders - see (a) below
$ 120.1 $ 1.12
Three Months Ended December 31, 2015
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 186.7 $ 46.7 $ 140.0 $ 1.28 Adjustments for: Debt
retirement and exchange costs 7.6 2.7 4.9 0.05 Foreign exchange
loss 4.5 1.4 3.1 0.03 Foreign exchange component of income taxes —
13.9 (13.9 ) (0.13 ) Adjusted $ 198.8 $ 64.7
134.1 Less: Noncontrolling interest (0.7 )
Adjusted net income available to common
stockholders - see (a) below
$ 133.4 $ 1.23
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, 2016
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 662.7 $ 182.8 $479.9 $ 4.43 Adjustments for: Foreign
exchange loss 72.0 21.6 50.4 0.47 Foreign exchange component of
income taxes — 45.0
(45.0
)
(0.42 ) Adjusted $ 734.7 $ 249.4 485.3
Less: Noncontrolling interest and
preferred stock dividends
(2.0 )
Adjusted net income available to common
stockholders - see (a) below
$483.3 $ 4.48
Year Ended December
31, 2015
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 672.6 $ 187.3 $485.3 $ 4.40 Adjustments for: Lease
termination costs 9.6 2.9 6.7 0.06 Debt retirement and exchange
costs 7.6 2.7 4.9 0.04 Foreign exchange loss 56.6 17.0 39.6 0.36
Foreign exchange component of income taxes — 40.5
(40.5
)
(0.37 ) Adjusted $ 746.4 $ 250.4 496.0
Less: Noncontrolling interest and
preferred stock dividends
(2.0 )
Adjusted net income available to common
stockholders - see (a) below
$494.0 $ 4.49
GAAP Reconciliations
(continued)
($ in millions)
Reconciliation of Operating Expenses to
Adjusted Operating Expenses
Years Ended
December 31, 2016 2015 Operating expenses as
reported $1,515.7 $ 1,615.0 Adjustment for lease termination costs
— (9.6 )
Adjusted operating expenses - see (b)
below
$1,515.7 $ 1,605.4 Operating income as
reported $818.5 $ 803.8 Adjusted operating income - see (b) below
818.5 813.4 Operating ratio (c) as reported 64.9 % 66.8 %
Adjusted operating ratio - see (b) and (c) below 64.9 % 66.4 %
Revenue Change Excluding Estimated
Foreign Exchange Impact
Change %
Reported revenues for the three months ended December 31, 2016
$598.5 Reported revenues for the three months ended December 31,
2015 598.0 Revenue change 0.5 —
Estimated foreign exchange impact 16.9
Revenue change excluding foreign exchange
impact - see (d) below
$ 17.4 3 %
Operating Expense Change Excluding
Estimated Foreign Exchange Impact
Change
%
Reported operating expenses for the three months ended December 31,
2016 $387.6 Reported operating expenses for the three months ended
December 31, 2015 379.1 Operating expense change
8.5
2
%
Estimated foreign exchange impact 16.3
Operating expense change excluding foreign
exchange impact - see (d) below
$24.8
7
%
(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 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 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 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 Years
Ended December 31, December 31, 2016
2015 2016 2015
Revenues $ 598.5 $ 598.0 $ 2,334.2 $ 2,418.8
Operating expenses: Compensation and benefits 115.4 103.9
462.4 442.2 Purchased services 49.4 50.9 208.5 223.0 Fuel 67.8 69.9
253.8 306.9 Mexican fuel excise tax credit (13.2 ) — (62.8 ) —
Equipment costs 34.1 29.2 120.0 119.4 Depreciation and amortization
78.1 73.9 305.0 284.6 Materials and other 56.0 51.3 228.8 229.3
Lease termination costs — — — 9.6 Total
operating expenses 387.6 379.1 1,515.7 1,615.0
Operating income 210.9 218.9 818.5 803.8 Equity in net
earnings of affiliates 4.2 3.9 14.6 18.3 Interest expense (24.5 )
(23.7 ) (97.7 ) (81.9 ) Debt retirement and exchange costs — (7.6 )
— (7.6 ) Foreign exchange loss (24.7 ) (4.5 ) (72.0 ) (56.6 ) Other
expense, net (0.2 ) (0.3 ) (0.7 ) (3.4 ) Income before income taxes
165.7 186.7 662.7 672.6 Income tax expense 35.4 46.7
182.8 187.3 Net income 130.3 140.0 479.9 485.3 Less:
Net income attributable to noncontrolling interest 0.7 0.7
1.8 1.8 Net income attributable to Kansas City
Southern and subsidiaries 129.6 139.3 478.1 483.5 Preferred stock
dividends — — 0.2 0.2 Net income
available to common stockholders $ 129.6 $ 139.3 $
477.9 $ 483.3 Earnings per share: Basic
earnings per share $ 1.21 $ 1.28 $ 4.44 $ 4.41
Diluted earnings per share $ 1.21 $ 1.28 $
4.43 $ 4.40 Average shares outstanding (in
thousands): Basic 106,845 108,521 107,560 109,709 Potentially
dilutive common shares 206 216 201 206
Diluted 107,051 108,737 107,761 109,915
Kansas City
Southern and Subsidiaries
Revenue &
Carload/Units by Commodity - Fourth Quarter 2016 and
2015
Revenues
Carloads and Units Revenue per
(in millions) (in thousands)
Carload/Unit Fourth
Quarter % Fourth Quarter % Fourth Quarter % 2016 2015 Change
2016 2015 Change 2016 2015 Change Chemical
& Petroleum Chemicals $ 50.1 $ 52.9 (5 %) 26.4 28.0 (6 %) $
1,898 $ 1,889 — Petroleum 31.4 35.3 (11 %) 17.6 20.4 (14 %) 1,784
1,730 3 % Plastics 29.9 32.2 (7 %) 16.7 18.1
(8 %) 1,790 1,779 1 % Total 111.4 120.4
(7 %) 60.7 66.5 (9 %) 1,835 1,811
1 % Industrial & Consumer Products Forest
Products 60.6 64.2 (6 %) 28.9 29.8 (3 %) 2,097 2,154 (3 %) Metals
& Scrap 51.2 45.5 13 % 28.3 25.3 12 % 1,809 1,798 1 % Other
24.2 19.9 22 % 19.4 17.3 12 % 1,247
1,150 8 % Total 136.0 129.6 5 % 76.6
72.4 6 % 1,775 1,790 (1 %)
Agriculture & Minerals Grain 69.7 56.7 23 % 38.8 31.7 22 %
1,796 1,789 — Food Products 40.2 37.5 7 % 18.1 17.6 3 % 2,221 2,131
4 % Ores & Minerals 5.4 7.0 (23 %) 6.5 8.0 (19 %) 831 875 (5 %)
Stone, Clay & Glass 7.2 7.4 (3 %) 3.4 3.2
6 % 2,118 2,313 (8 %) Total 122.5 108.6
13 % 66.8 60.5 10 % 1,834 1,795
2 % Energy Utility Coal 40.1 44.2 (9 %) 46.9 52.9 (11 %) 855
836 2 % Coal & Petroleum Coke 10.0 9.4 6 % 15.5 16.2 (4 %) 645
580 11 % Frac Sand 7.9 5.9 34 % 6.0 4.1 46 % 1,317 1,439 (8 %)
Crude Oil 2.7 8.3 (67 %) 3.0 6.1 (51 %)
900 1,361 (34 %) Total 60.7 67.8 (10 %)
71.4 79.3 (10 %) 850 855 (1 %)
Intermodal 92.5 93.4 (1 %) 240.8 244.3
(1 %) 384 382 1 % Automotive 52.9 54.7
(3 %) 38.9 32.8 19 % 1,360 1,668
(18 %)
TOTAL FOR COMMODITY GROUPS 576.0 574.5 — 555.2
555.8 — $ 1,037 $ 1,034 —
Other Revenue 22.5 23.5 (4 %)
TOTAL $ 598.5 $ 598.0 —
Kansas City
Southern and Subsidiaries
Revenue &
Carload/Units by Commodity - Years Ended December 31, 2016 and
2015
Revenues
Carloads and Units Revenue per
(in millions) (in thousands)
Carload/Unit Years Ended
% Years Ended % Years Ended % 2016 2015 Change 2016
2015 Change 2016 2015 Change Chemical & Petroleum
Chemicals $ 204.7 $ 215.6 (5 %) 107.8 115.8 (7 %) $ 1,899 $ 1,862 2
% Petroleum 142.5 136.9 4 % 79.7 76.3 4 % 1,788 1,794 — Plastics
128.2 121.7 5 % 71.0 67.6 5 % 1,806
1,800 — Total 475.4 474.2 —
258.5 259.7 — 1,839 1,826
1 % Industrial & Consumer Products Forest Products 250.2
269.7 (7 %) 117.8 127.1 (7 %) 2,124 2,122 — Metals & Scrap
211.2 221.9 (5 %) 122.6 120.7 2 % 1,723 1,838 (6 %) Other 92.6
78.8 18 % 76.6 72.7 5 % 1,209
1,084 12 % Total 554.0 570.4 (3 %) 317.0
320.5 (1 %) 1,748 1,780 (2 %)
Agriculture & Minerals Grain 262.9 231.0 14 % 147.6 132.9 11 %
1,781 1,738 2 % Food Products 149.8 142.7 5 % 68.1 64.7 5 % 2,200
2,206 — Ores & Minerals 19.6 27.2 (28 %) 22.7 28.9 (21 %) 863
941 (8 %) Stone, Clay & Glass 28.7 28.4 1 % 13.0
12.3 6 % 2,208 2,309 (4 %)
Total
461.0 429.3 7 % 251.4 238.8 5 % 1,834
1,798 2 % Energy Utility Coal 125.8 140.6 (11
%) 157.8 173.7 (9 %) 797 809 (1 %) Coal & Petroleum Coke 37.9
39.6 (4 %) 62.1 61.2 1 % 610 647 (6 %) Frac Sand 24.8 38.4 (35 %)
19.6 23.1 (15 %) 1,265 1,662 (24 %) Crude Oil 14.2 33.7
(58 %) 14.4 22.8 (37 %) 986 1,478
(33 %) Total 202.7 252.3 (20 %) 253.9
280.8 (10 %) 798 899 (11 %) Intermodal
357.6 381.5 (6 %) 952.8 990.3 (4 %) 375
385 (3 %) Automotive 189.9 218.7
(13 %) 133.3 126.5 5 % 1,425 1,729 (18
%)
TOTAL FOR COMMODITY GROUPS 2,240.6 2,326.4 (4 %)
2,166.9 2,216.6 (2 %) $ 1,034 $ 1,050
(2 %) Other Revenue 93.6 92.4 1 %
TOTAL $ 2,334.2 $ 2,418.8 (3 %)
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170120005094/en/
Kansas City SouthernWilliam H. Galligan,
816-983-1551bgalligan@kcsouthern.com
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