Third Quarter 2017
Results
- Third quarter revenues of $657 million,
an increase of 9% from third quarter 2016 on a 3% increase in
carloads
- Record third quarter operating income
of $234 million, representing a 17% increase from third quarter
2016
- Operating ratio of 64.4%, a third
quarter record and an improvement of 2.5 points from third quarter
2016
- Third quarter diluted earnings per
share of $1.23, an increase of 10% compared to third quarter 2016.
Adjusted diluted earnings per share of $1.35, a third quarter
record and an increase of 21% compared to third quarter 2016
Kansas City Southern (KCS) (NYSE:KSU) reported third quarter
2017 revenues of $657 million, representing an overall increase of
9% with year over year growth from all six business units. Carload
volumes increased 3% compared to third quarter 2016.
Operating expenses in the third quarter were $423 million, 4%
higher than 2016. Operating income was a third quarter record at
$234 million, an increase of 17% from the third quarter 2016.
KCS reported a record third quarter operating ratio of 64.4%, a
2.5 point improvement over third quarter 2016. Reported net income
in the third quarter of 2017 totaled $130 million, or $1.23 per
diluted share, compared with $121 million, or $1.12 per diluted
share, in the third quarter of 2016. Excluding the impacts of
foreign exchange rate fluctuations, adjusted diluted earnings per
share for third quarter 2017 was $1.35 compared to $1.12 in third
quarter 2016, representing a third quarter record.
“KCS’ third quarter financial results were strong, even with the
impact of Hurricane Harvey on KCS’ U.S. Gulf Coast and cross-border
traffic in August and September,” stated President and Chief
Executive Officer Patrick J. Ottensmeyer. “Despite the
severity of the storm and widespread flooding, we recovered quickly
from the extended service outage, delivering record third quarter
operating income, operating ratio and adjusted earnings per
share.
“Our recovery was a testament to KCS’ operations personnel, who
worked tirelessly during and after the storm to restore our
network. We also want to thank our rail partners for their
cooperation, as we worked together during this period to minimize
the impact of the outage on our customers.”
GAAP Reconciliations
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per Share Three
Months Ended September 30, 2017
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 211.9 $ 82.0 $ 129.9 $ 1.23 Adjustments for: Foreign
exchange gain (0.8 ) (0.2 ) (0.6 ) — Foreign exchange component of
income taxes — (12.9 ) 12.9 0.12 Adjusted $
211.1 $ 68.9 142.2
Less: Noncontrolling interest and
preferred stock dividends
(0.7 )
Adjusted net income available to common
stockholders - see (a) below
$ 141.5 $ 1.35
Three Months Ended
September 30, 2016
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 158.3 $ 37.3 $ 121.0 $ 1.12 Adjustments for: Foreign
exchange loss 19.8 5.9 13.9 0.13 Foreign exchange component of
income taxes — 14.1 (14.1 ) (0.13 ) Adjusted $ 178.1
$ 57.3 120.8
Less: Noncontrolling interest and
preferred stock dividends
(0.5 )
Adjusted net income available to common
stockholders - see (a) below
$ 120.3 $ 1.12 (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.
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;
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
Nine Months Ended September 30, September
30, 2017 2016 2017
2016 Revenues $ 656.6 $ 604.5 $ 1,922.5
$ 1,735.7 Operating expenses: Compensation and
benefits 129.0 127.9 371.6 347.0 Purchased services 46.3 54.5 146.5
159.1 Fuel 80.1 67.6 234.4 186.0 Mexican fuel excise tax credit
(11.1 ) (15.6 ) (35.6 ) (49.6 ) Equipment costs 30.9 32.0 93.3 85.9
Depreciation and amortization 81.9 76.9 241.6 226.9 Materials and
other 65.7 61.4 186.9 172.8 Total
operating expenses 422.8 404.7 1,238.7 1,128.1
Operating income 233.8 199.8 683.8 607.6 Equity in net
earnings of affiliates 2.8 3.5 9.7 10.4 Interest expense (25.2 )
(25.2 ) (74.9 ) (73.2 ) Foreign exchange gain (loss) 0.8 (19.8 )
61.8 (47.3 ) Other income (expense), net (0.3 ) — 0.7
(0.5 ) Income before income taxes 211.9 158.3 681.1 497.0 Income
tax expense 82.0 37.3 269.6 147.4 Net
income 129.9 121.0 411.5 349.6 Less: Net income attributable to
noncontrolling interest 0.6 0.4 1.2 1.1
Net income attributable to Kansas City Southern and subsidiaries
129.3 120.6 410.3 348.5 Preferred stock dividends 0.1 0.1
0.2 0.2 Net income available to common
stockholders $ 129.2 $ 120.5 $ 410.1 $ 348.3
Earnings per share: Basic earnings per share $ 1.24
$ 1.12 $ 3.89 $ 3.23 Diluted earnings
per share $ 1.23 $ 1.12 $ 3.88 $ 3.23
Average shares outstanding (in thousands): Basic 104,324
107,621 105,297 107,800 Potentially dilutive common shares 354
191 285 199 Diluted 104,678
107,812 105,582 107,999
Kansas City
Southern and Subsidiaries Revenue & Carload/Units by
Commodity - Third Quarter 2017 and 2016
Revenues
Carloads and Units Revenue per (in millions) (in
thousands)
Carload/Unit Third Quarter % Third Quarter %
Third Quarter % 2017 2016 Change 2017 2016 Change 2017 2016 Change
Chemical & Petroleum Chemicals $ 57.0 $ 53.7 6 % 26.4
27.8 (5 %) $ 2,159 $ 1,932 12 % Petroleum 47.6 35.8 33 % 23.4 19.3
21 % 2,034 1,855 10 % Plastics 32.3 34.8 (7 %) 17.8
18.7 (5 %) 1,815 1,861 (2 %) Total
136.9 124.3 10 % 67.6 65.8 3 % 2,025
1,889 7 % Industrial & Consumer Products
Forest Products 64.3 64.4 — 29.5 29.7 (1 %) 2,180 2,168 1 % Metals
& Scrap 58.9 53.5 10 % 30.1 30.8 (2 %) 1,957 1,737 13 % Other
29.3 22.6 30 % 22.7 18.7 21 % 1,291
1,209 7 % Total 152.5 140.5 9 % 82.3
79.2 4 % 1,853 1,774 4 %
Agriculture & Minerals Grain 68.6 64.8 6 % 36.4 36.1 1 % 1,885
1,795 5 % Food Products 34.7 36.4 (5 %) 14.9 16.5 (10 %) 2,329
2,206 6 % Ores & Minerals 5.8 4.9 18 % 6.7 5.9 14 % 866 831 4 %
Stone, Clay & Glass 6.9 7.3 (5 %) 3.2 3.2
— 2,156 2,281 (5 %) Total 116.0
113.4 2 % 61.2 61.7 (1 %) 1,895 1,838
3 % Energy Utility Coal 46.0 43.6 6 % 49.6 52.9 (6 %)
927 824 13 % Coal & Petroleum Coke 9.4 10.7 (12 %) 13.9 17.3
(20 %) 676 618 9 % Frac Sand 13.8 6.0 130 % 8.6 4.6 87 % 1,605
1,304 23 % Crude Oil 5.3 2.5 112 % 4.6 3.1
48 % 1,152 806 43 % Total 74.5 62.8
19 % 76.7 77.9 (2 %) 971 806 20
% Intermodal 92.3 88.6 4 % 249.5 240.6
4 % 370 368 1 % Automotive 61.4
51.4 19 % 39.1 36.5 7 % 1,570 1,408
12 %
TOTAL FOR COMMODITY GROUPS 633.6 581.0 9
% 576.4 561.7 3 % $ 1,099 $ 1,034 6 %
Other Revenue 23.0 23.5 (2 %)
TOTAL $ 656.6 $ 604.5 9 %
Kansas
City Southern and Subsidiaries Revenue & Carload/Units
by Commodity - Year to Date September 30, 2017 and 2016
Revenues Carloads and Units Revenue per (in
millions) (in thousands)
Carload/Unit Year to Date % Year to
Date % Year to Date % 2017 2016 Change 2017 2016 Change 2017 2016
Change Chemical & Petroleum Chemicals $ 167.6 $ 154.6 8
% 81.7 81.4 — $ 2,051 $ 1,899 8 % Petroleum 137.2 111.1 23 % 69.9
62.1 13 % 1,963 1,789 10 % Plastics 97.4 98.3 (1 %)
54.2 54.3 — 1,797 1,810 (1 %)
Total 402.2 364.0 10 % 205.8 197.8 4 %
1,954 1,840 6 % Industrial & Consumer
Products Forest Products 190.0 189.6 — 88.4 88.9 (1 %) 2,149 2,133
1 % Metals & Scrap 170.5 160.0 7 % 91.0 94.3 (3 %) 1,874 1,697
10 % Other 80.7 68.4 18 % 66.4 57.2 16
% 1,215 1,196 2 % Total 441.2 418.0 6 %
245.8 240.4 2 % 1,795 1,739 3 %
Agriculture & Minerals Grain 207.9 193.2 8 % 109.7 108.8 1 %
1,895 1,776 7 % Food Products 111.1 109.6 1 % 46.9 50.0 (6 %) 2,369
2,192 8 % Ores & Minerals 14.9 14.2 5 % 17.1 16.2 6 % 871 877
(1 %) Stone, Clay & Glass 21.8 21.5 1 % 9.9
9.6 3 % 2,202 2,240 (2 %) Total 355.7
338.5 5 % 183.6 184.6 (1 %) 1,937
1,834 6 % Energy Utility Coal 127.8 85.7 49 %
132.5 110.9 19 % 965 773 25 % Coal & Petroleum Coke 30.7 27.9
10 % 46.3 46.6 (1 %) 663 599 11 % Frac Sand 38.5 16.9 128 % 24.5
13.6 80 % 1,571 1,243 26 % Crude Oil 17.0 11.5 48 %
14.7 11.4 29 % 1,156 1,009 15 % Total
214.0 142.0 51 % 218.0 182.5 19 % 982
778 26 % Intermodal 266.4 265.1
— 716.6 712.0 1 % 372 372 —
Automotive 170.2 137.0 24 % 114.6
94.4 21 % 1,485 1,451 2 %
TOTAL FOR COMMODITY GROUPS
1,849.7 1,664.6 11 % 1,684.4 1,611.7 5 % $ 1,098
$ 1,033 6 % Other Revenue 72.8 71.1
2 %
TOTAL $ 1,922.5 $ 1,735.7 11
%
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version on businesswire.com: http://www.businesswire.com/news/home/20171020005146/en/
Kansas City SouthernAshley Thorne,
816-983-1530athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
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