Fourth Quarter 2017
Results
- Record fourth quarter revenues of $660
million, an increase of 10% from prior year on 5% volume
growth
- Record fourth quarter operating income
of $238 million, 13% higher than a year ago
- Operating ratio of 64.0%, compared with
64.8% in fourth quarter 2016
- Diluted earnings per share of $5.33, an
increase of 340% over fourth quarter 2016. Diluted earnings per
share includes benefits from changes in the U.S. tax law
- All-time record adjusted diluted
earnings per share of $1.38, an increase of 23% over fourth quarter
2016
Kansas City Southern (KCS) (NYSE:KSU) reported record fourth
quarter 2017 revenues of $660 million, an increase of 10% from
fourth quarter 2016. Overall, carload volumes increased 5% compared
to the prior year, serving as a fourth quarter record.
Operating expenses in the fourth quarter were $423 million, 9%
higher than 2016. Operating income was a fourth quarter record at
$238 million, an increase of 13% from the fourth quarter 2016. KCS
reported a fourth quarter operating ratio of 64.0%, a 0.8 point
improvement over fourth quarter 2016.
Reported net income in the fourth quarter of 2017 was $552
million, or $5.33 per diluted share, compared with $130 million, or
$1.21 per diluted share, in the fourth quarter of 2016. Excluding
the impacts of foreign exchange fluctuations and changes in the
U.S. tax law, adjusted diluted earnings per share for fourth
quarter 2017 was an all-time record of $1.38, compared to $1.12 in
fourth quarter 2016.
For the full year of 2017, KCS achieved record revenues,
operating income, operating ratio and adjusted diluted earnings per
share. Revenue was $2.6 billion, up 11% from 2016, on 5% carload
growth. Full year 2017 operating income was $922 million, an
increase of 13% from the prior year. The Company’s 2017 operating
ratio was 64.3%, a 0.6 point improvement from the prior year
reported operating ratio.
Reported net income in 2017 was $964 million or $9.16 per
diluted share, compared with $480 million, or $4.43 per diluted
share, in 2016. Excluding the impacts of foreign exchange
fluctuations and changes in the U.S. tax law, adjusted diluted
earnings per share for 2017 was $5.25 compared to $4.48 in
2016.
“Kansas City Southern achieved record financial results with
revenue growth in all six commodity groups in 2017,” stated
President and Chief Executive Officer Patrick J. Ottensmeyer.
“Despite the impact of Hurricane Harvey in the third quarter,
strong topline performance, led by our Energy, Automotive and
Chemical & Petroleum business units, contributed to record
full-year adjusted diluted earnings per share of $5.25, an increase
of 17% over 2016.
“Looking ahead to 2018, we believe KCS is positioned to maintain
its growth momentum driven by unique franchise opportunities, a
strengthening economy and a focus on cost control. We expect to
continue leveraging the investments made in our network to grow our
business, ensure good customer service and maximize shareholder
returns.”
GAAP Reconciliations($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per Share Three Months
Ended December 31, 2017
IncomeBeforeIncome Taxes
Income TaxExpense(Benefit)
Net Income
DilutedEarningsper Share
As reported $ 193.2 $ (359.2 ) $ 552.4 $ 5.33 Adjustments for:
Foreign exchange loss 20.1 6.1 14.0 0.14 Foreign exchange component
of income taxes — 8.2 (8.2 ) (0.08 ) Change in tax law —
414.4 (414.4 ) (4.01 ) Adjusted $ 213.3 $ 69.5
143.8 Less: Noncontrolling interest (0.7 )
Adjusted net income available to common
stockholders - see (a) below
$ 143.1 $ 1.38
Three Months
Ended December 31, 2016
IncomeBeforeIncome 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
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, 2017
IncomeBeforeIncome Taxes
Income TaxExpense(Benefit)
Net Income
DilutedEarningsper Share
As reported $ 874.3 $ (89.6 ) $ 963.9 $ 9.16 Adjustments for:
Foreign exchange gain (41.7 ) (12.5 ) (29.2 ) (0.28 ) Foreign
exchange component of income taxes — (31.6 ) 31.6 0.30 Change in
tax law — 413.0 (413.0 ) (3.93 ) Adjusted $ 832.6
$ 279.3 553.3
Less: Noncontrolling interest and
preferred stock dividends
(2.1 )
Adjusted net income available to common
stockholders - see (a) below
$ 551.2 $ 5.25
Year
Ended December 31, 2016
IncomeBeforeIncome 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 (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 the impacts of the
changes in tax law due to the enactment of the Tax Cuts and Jobs
Act of 2017. 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
Years Ended December 31, December 31,
2017 2016 2017
2016 Revenues $ 660.4 $ 598.5 $ 2,582.9
$ 2,334.2 Operating expenses: Compensation and benefits
122.2 115.4 493.8 462.4 Purchased services 47.2 49.4 193.7 208.5
Fuel 81.7 67.8 316.1 253.8 Mexican fuel excise tax credit (8.5 )
(13.2 ) (44.1 ) (62.8 ) Equipment costs 35.9 34.1 129.2 120.0
Depreciation and amortization 79.3 78.1 320.9 305.0 Materials and
other 64.8 56.0 251.7 228.8 Total
operating expenses 422.6 387.6 1,661.3 1,515.7
Operating income 237.8 210.9 921.6 818.5 Equity in net
earnings of affiliates 1.8 4.2 11.5 14.6 Interest expense (25.3 )
(24.5 ) (100.2 ) (97.7 ) Foreign exchange gain (loss) (20.1 ) (24.7
) 41.7 (72.0 ) Other expense, net (1.0 ) (0.2 ) (0.3 ) (0.7 )
Income before income taxes 193.2 165.7 874.3 662.7 Income tax
expense (benefit) (359.2 ) 35.4 (89.6 ) 182.8 Net
income 552.4 130.3 963.9 479.9 Less: Net income attributable to
noncontrolling interest 0.7 0.7 1.9 1.8
Net income attributable to Kansas City Southern and subsidiaries
551.7 129.6 962.0 478.1 Preferred stock dividends — —
0.2 0.2 Net income available to common stockholders $
551.7 $ 129.6 $ 961.8 $ 477.9
Earnings per share: Basic earnings per share $ 5.35 $ 1.21
$ 9.18 $ 4.44 Diluted earnings per share $
5.33 $ 1.21 $ 9.16 $ 4.43
Average shares outstanding (in thousands): Basic 103,038 106,845
104,728 107,560 Potentially dilutive common shares 393 206
312 201 Diluted 103,431 107,051
105,040 107,761
Kansas City Southern
and Subsidiaries Revenue & Carload/Units by Commodity -
Fourth Quarter 2017 and 2016
Revenues Carloads and Units
Revenue per (in millions) (in
thousands)
Carload/Unit Fourth Quarter % Fourth Quarter %
Fourth Quarter % 2017 2016 Change 2017 2016 Change
2017 2016 Change Chemical & Petroleum Chemicals $ 57.5 $
50.1 15 % 26.2 26.4 (1 %) $ 2,195 $ 1,898 16 % Petroleum 48.8 31.4
55 % 24.7 17.6 40 % 1,976 1,784 11 % Plastics 31.4 29.9
5 % 16.8 16.7 1 % 1,869 1,790 4
% Total 137.7 111.4 24 % 67.7 60.7 12 %
2,034 1,835 11 % Industrial & Consumer
Products Forest Products 65.8 60.6 9 % 30.5 28.9 6 % 2,157 2,097 3
% Metals & Scrap 52.8 51.2 3 % 29.1 28.3 3 % 1,814 1,809 —
Other 28.5 24.2 18 % 24.5 19.4 26 %
1,163 1,247 (7 %) Total 147.1 136.0 8 %
84.1 76.6 10 % 1,749 1,775 (1 %)
Agriculture & Minerals Grain 70.2 69.7 1 % 36.3 38.8 (6 %)
1,934 1,796 8 % Food Products 40.0 40.2 — 15.7 18.1 (13 %) 2,548
2,221 15 % Ores & Minerals 5.0 5.4 (7 %) 5.6 6.5 (14 %) 893 831
7 % Stone, Clay & Glass 6.5 7.2 (10 %) 3.1
3.4 (9 %) 2,097 2,118 (1 %) Total 121.7
122.5 (1 %) 60.7 66.8 (9 %) 2,005 1,834
9 % Energy Utility Coal 38.5 40.1 (4 %) 43.2 46.9 (8
%) 891 855 4 % Coal & Petroleum Coke 10.1 10.0 1 % 16.1 15.5 4
% 627 645 (3 %) Frac Sand 13.3 7.9 68 % 8.2 6.0 37 % 1,622 1,317 23
% Crude Oil 7.9 2.7 193 % 6.2 3.0 107 %
1,274 900 42 % Total 69.8 60.7 15 %
73.7 71.4 3 % 947 850 11 %
Intermodal 97.4 92.5 5 % 258.5 240.8 7
% 377 384 (2 %) Automotive 60.6 52.9
15 % 40.9 38.9 5 % 1,482 1,360 9
%
TOTAL FOR COMMODITY GROUPS 634.3 576.0 10 % 585.6
555.2 5 % $ 1,083 $ 1,037 4 %
Other Revenue 26.1 22.5 16 %
TOTAL $ 660.4
$ 598.5 10 %
Kansas City Southern
and Subsidiaries Revenue & Carload/Units by Commodity -
Years Ended December 31, 2017 and 2016
Revenues Carloads and Units
Revenue per (in millions) (in
thousands)
Carload/Unit Years Ended % Years Ended % Years
Ended % 2017 2016 Change 2017 2016 Change 2017
2016 Change Chemical & Petroleum Chemicals $ 225.1 $ 204.7 10 %
107.9 107.8 — $ 2,086 $ 1,899 10 % Petroleum 186.0 142.5 31 % 94.6
79.7 19 % 1,966 1,788 10 % Plastics 128.8 128.2 —
71.0 71.0 — 1,814 1,806 —
Total 539.9 475.4 14 % 273.5 258.5
6 % 1,974 1,839 7 % Industrial &
Consumer Products Forest Products 255.8 250.2 2 % 118.9 117.8 1 %
2,151 2,124 1 % Metals & Scrap 223.3 211.2 6 % 120.1 122.6 (2
%) 1,859 1,723 8 % Other 109.2 92.6 18 % 90.9
76.6 19 % 1,201 1,209 (1 %) Total 588.3
554.0 6 % 329.9 317.0 4 % 1,783 1,748
2 % Agriculture & Minerals Grain 278.1 262.9 6 %
146.0 147.6 (1 %) 1,905 1,781 7 % Food Products 151.1 149.8 1 %
62.6 68.1 (8 %) 2,414 2,200 10 % Ores & Minerals 19.9 19.6 2 %
22.7 22.7 — 877 863 2 % Stone, Clay & Glass 28.3 28.7
(1 %) 13.0 13.0 — 2,177 2,208
(1 %) Total 477.4 461.0 4 % 244.3 251.4
(3 %) 1,954 1,834 7 % Energy Utility
Coal 166.3 125.8 32 % 175.7 157.8 11 % 946 797 19 % Coal &
Petroleum Coke 40.8 37.9 8 % 62.4 62.1 — 654 610 7 % Frac Sand 51.8
24.8 109 % 32.7 19.6 67 % 1,584 1,265 25 % Crude Oil 24.9
14.2 75 % 20.9 14.4 45 % 1,191 986
21 % Total 283.8 202.7 40 % 291.7 253.9
15 % 973 798 22 % Intermodal 363.8
357.6 2 % 975.1 952.8 2 % 373
375 (1 %) Automotive 230.8 189.9 22 %
155.5 133.3 17 % 1,484 1,425 4 %
TOTAL FOR COMMODITY GROUPS 2,484.0 2,240.6 11 % 2,270.0
2,166.9 5 % $ 1,094 $ 1,034 6 %
Other Revenue 98.9 93.6 6 %
TOTAL $ 2,582.9
$ 2,334.2 11 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180119005129/en/
Kansas City SouthernAshley Thorne,
816-983-1530athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
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