Kansas City Southern (KCS) (NYSE:KSU) reported revenues of
$749.5 million, an increase of 37% from second quarter 2020.
Overall, carload volumes were up 31% compared to prior year.
Second Quarter 2021
Second quarter revenues were $749.5 million, an increase of 37%
primarily resulting from higher volumes, higher fuel surcharge, and
the strengthening of the Mexican peso against the U.S. dollar.
Second quarter operating expenses were $1,181.2 million,
including a $700 million termination fee paid to Canadian Pacific.
The $700 million reimbursement from Canadian National will be
recognized upon KCS shareholder vote on the merger with Canadian
National. Operating loss was $431.7 million and the reported
operating ratio was 157.6%. Second quarter net loss was $378.0
million, or $4.17 per diluted share. Adjusted second quarter
operating income, operating ratio, net income, and diluted earnings
per share were as follows:
(in millions, except operating ratio and
diluted earnings per share)
Three Months Ended June 30,
2021
Operating Income (Loss)
Operating Ratio
Net Income (Loss)
Diluted Earnings (Loss) per
Share
GAAP Operating Results
$
(431.7
)
157.6
%
$
(378.0
)
$
(4.17
)
Merger Costs
720.8
(96.2
)%
569.4
6.26
Other Adjustments, Net
—
—
(2.6
)
(0.03
)
Adjusted Operating Results (non-GAAP)
$
289.1
61.4
%
$
188.8
$
2.06
See following pages for reconciliations to
GAAP
"KCS delivered strong second quarter volume growth, as our
franchise benefited from unique growth drivers and the economy
recovered from the COVID-19 downturn,” stated president and chief
executive officer, Patrick J. Ottensmeyer. “Although we are pleased
with the strong volume growth, we fell short of our own
expectations for customer service.
“Our operating team is focused on implementing structural and
sustainable changes that will improve operational performance and
the resiliency of our network. To that end, we have deployed
additional assets and crews in support of our service recovery,
setting the Company up to continue delivering robust volume growth
while improving customer service in the second half of 2021.
“During the second quarter, KCS also announced a pro-competitive
merger with Canadian National, which will deliver more choices to
customers through the creation of new, single line service options
between the U.S., Canada and Mexico. This combination represents an
exciting opportunity for KCS and CN stakeholders, and we look
forward to delivering a safer, faster, cleaner and stronger
railroad. For more information on the transaction and its benefits,
visit ConnectedContinent.”
Statement Regarding Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with
U.S. GAAP, the accompanying second quarter 2021 earnings release
contains non-GAAP financial measures. KCS management believes that
certain non-GAAP financial measures used to review and in certain
cases manage the Company's business fall within the meaning of
Regulation G (Disclosure of non-GAAP financial measures) and may
provide its users of the financial information with additional
meaningful comparison when reviewing the Company's results. KCS
management uses non-GAAP information in its planning and
forecasting processes and to further analyze its own financial
trends and operational performance, as well as making financial
comparisons to prior periods presented on a similar basis.
Management believes investors and users of the Company's financial
information should consider all of the above factors when
evaluating KCS's results.
These non-GAAP measures should be viewed as a supplement and not
considered a substitute for GAAP measures. Some of KCS's non-GAAP
measures may differ from similar measures used by other companies,
even if similar terms are used to identify such measures.
GAAP Reconciliations
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings
(Loss) per Share to
Adjusted Diluted Earnings per
Share
Three Months Ended June 30,
2021
Income (Loss) Before Income
Taxes
Income Tax Expense (Benefit)
Net Income (Loss)
Diluted Earnings (Loss) per
Share
As reported
$
(459.6
)
$
(81.6
)
$
(378.0
)
$
(4.17
)
Adjustments for:
Merger costs
720.8
151.4
569.4
6.26
Foreign exchange gain
(6.8
)
(2.0
)
(4.8
)
(0.05
)
Foreign exchange component of income
taxes
—
(2.2
)
2.2
0.02
Adjusted
$
254.4
$
65.6
188.8
Less: Noncontrolling interest and
preferred stock dividends
(0.6
)
Adjusted net income available to common
stockholders - see (a) below
$
188.2
$
2.06
GAAP Reconciliations
(continued)
($ in millions, except per share
amounts)
Three Months Ended June 30,
2020
Income Before Income Taxes
Income Tax Expense
Net Income
Diluted Earnings per Share
As reported
$
151.1
$
40.8
$
110.3
$
1.16
Adjustments for:
Restructuring charges
10.5
2.8
7.7
0.08
Foreign exchange gain
(7.8
)
(2.3
)
(5.5
)
(0.06
)
Foreign exchange component of income
taxes
—
2.8
(2.8
)
(0.03
)
Adjusted
$
153.8
$
44.1
109.7
Less: Noncontrolling interest and
preferred stock dividends
(0.6
)
Adjusted net income available to common
stockholders - see (a) below
$
109.1
$
1.15
Reconciliation of Operating Expenses to
Adjusted
Three Months Ended
Six Months Ended
Operating Expenses
June 30,
June 30,
2021
2020
2021
2020
Operating expenses as reported
$
1,181.2
$
367.5
$
1,634.2
$
810.4
Adjustment for merger costs
(720.8
)
—
(740.1
)
—
Adjustment for restructuring charges
—
(10.5
)
—
(16.5
)
Adjusted operating expenses - see (b)
below
$
460.4
$
357.0
$
894.1
$
793.9
Operating income (loss) as reported
$
(431.7
)
$
180.4
$
(178.7
)
$
469.2
Adjusted operating income - see (b)
below
289.1
190.9
561.4
485.7
Operating ratio (c) as reported
157.6
%
67.1
%
112.3
%
63.3
%
Adjusted operating ratio - see (b) and (c)
below
61.4
%
65.2
%
61.4
%
62.0
%
(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, 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.
Investor Conference Call and Webcast
KCS will also hold its second quarter 2021 earnings conference
call on Friday, July 16, 2021 at 8:45 a.m. eastern time.
Shareholders and other interested parties are invited to
participate via live webcast or telephone. To participate in the
live webcast and to view accompanying presentation materials,
please log into investors.kcsouthern.com immediately prior to the
presentation. To join the teleconference, please call (844)
308-6428 from the U.S., or (412) 317-5409 from all other
countries.
A replay of the presentation will be available by calling (877)
344-7529 from the U.S., (855) 669-9658 from Canada or (412)
317-0088 from all other countries and entering conference ID
10152592. The webcast replay and presentation materials will be
archived on the company’s website.
About Kansas City Southern
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 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
Forward-Looking Information
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934, as amended and
the Private Securities Litigation Reform Act of 1995. In addition,
management may make forward-looking statements orally or in other
writing, including, but not limited to, in press releases,
quarterly earnings calls, executive presentations, in the annual
report to stockholders and in other filings with the Securities and
Exchange Commission. Readers can usually identify these
forward-looking statements by the use of such words as "may,"
"will," "should," "likely," "plans," "projects," "expects,"
"anticipates," "believes" or similar words. These statements
involve a number of risks and uncertainties. Actual results could
materially differ from those anticipated by such forward-looking
statements as a result of a number of factors or combination of
factors including, but not limited: the merger with Canadian
National Railway Company ("CN") is subject to various closing
conditions and there can be no assurances as to whether and when it
may be completed; failure to complete the Company’s merger with CN
could negatively impact the Company’s stock price and future
business and financial results; Company’s stockholders cannot be
sure of the value of the merger consideration they will receive
from CN in the merger; lawsuits may be filed against the Company
and/or CN challenging the transactions contemplated by the merger
between, among others, the Company and CN; the shares of CN common
stock to be received by the Company’s stockholders upon completion
of the merger will have different rights from shares of the
Company’s common stock; after completion of the merger, CN may fail
to realize the projected benefits and cost savings of the merger;
public health threats or outbreaks of communicable diseases, such
as the ongoing COVID-19 pandemic and its impact on KCS’s business,
suppliers, consumers, customers, employees and supply chains; rail
accidents or other incidents or accidents on KCS’s rail network or
at KCS’s facilities or customer facilities involving the release of
hazardous materials, including toxic inhalation hazards;
legislative and regulatory developments and disputes, including
environmental regulations; loss of the rail concession of Kansas
City Southern’s subsidiary, Kansas City Southern de México, S.A. de
C.V.; domestic and international economic, political and social
conditions; disruptions to the Company’s technology infrastructure,
including its computer systems; increased demand and traffic
congestion; the level of trade between the United States and Asia
or Mexico; fluctuations in the peso-dollar exchange rate; natural
events such as severe weather, hurricanes and floods; the outcome
of claims and litigation involving the Company or its subsidiaries;
competition and consolidation within the transportation industry;
the business environment in industries that produce and use items
shipped by rail; the termination of, or failure to renew,
agreements with customers, other railroads and third parties;
fluctuation in prices or availability of key materials, in
particular diesel fuel; access to capital; climate change and the
market and regulatory responses to climate change; 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 other acts of
violence; and other factors affecting the operation of the
business; and other risks identified in this news release, in KCS's
Annual Report on Form 10-K for the year ended December 31, 2020,
and in other reports filed by KCS with the Securities and Exchange
Commission.
Forward-looking statements reflect the information only as of
the date on which they are made. KCS does not undertake any
obligation to update any forward-looking statements to reflect
future events, developments, or other information.
Kansas City Southern and
Subsidiaries
Consolidated Statements of
Operations
(In millions, except share and
per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Revenues
$
749.5
$
547.9
$
1,455.5
$
1,279.6
Operating expenses:
Compensation and benefits
128.4
103.8
257.9
237.2
Purchased services
55.8
44.6
109.6
97.9
Fuel
79.0
39.5
149.9
114.4
Equipment costs
24.1
18.1
45.2
40.0
Depreciation and amortization
91.2
89.3
183.2
178.7
Materials and other
81.9
61.7
148.3
125.7
Merger costs
720.8
—
740.1
—
Restructuring charges
—
10.5
—
16.5
Total operating expenses
1,181.2
367.5
1,634.2
810.4
Operating income (loss)
(431.7
)
180.4
(178.7
)
469.2
Equity in net earnings of affiliates
3.4
0.2
9.4
1.2
Interest expense
(39.1
)
(38.1
)
(78.1
)
(72.3
)
Foreign exchange gain (loss)
6.8
7.8
(0.5
)
(51.7
)
Other income, net
1.0
0.8
0.2
2.2
Income (loss) before income taxes
(459.6
)
151.1
(247.7
)
348.6
Income tax expense (benefit)
(81.6
)
40.8
(23.1
)
86.0
Net income (loss)
(378.0
)
110.3
(224.6
)
262.6
Less: Net income attributable to
noncontrolling interest
0.5
0.6
0.9
1.1
Net income (loss) attributable to Kansas
City Southern and subsidiaries
(378.5
)
109.7
(225.5
)
261.5
Preferred stock dividends
0.1
—
0.1
0.1
Net income (loss) available to common
stockholders
$
(378.6
)
$
109.7
$
(225.6
)
$
261.4
Earnings (loss) per share:
Basic earnings (loss) per share
$
(4.17
)
$
1.16
$
(2.48
)
$
2.75
Diluted earnings (loss) per share
$
(4.17
)
$
1.16
$
(2.48
)
$
2.74
Average shares outstanding (in
thousands):
Basic
90,767
94,476
90,762
95,070
Effect of dilution
—
417
—
464
Diluted
90,767
94,893
90,762
95,534
Kansas City Southern and
Subsidiaries
Revenue & Carload/Units by
Commodity - Second Quarter 2021 and 2020
Revenues
Carloads and Units
Revenue per
(in millions)
(in thousands)
Carload/Unit
Second Quarter
%
Second Quarter
%
Second Quarter
%
2021
2020
Change
2021
2020
Change
2021
2020
Change
Chemical & Petroleum
Chemicals
$
64.8
$
52.2
24
%
24.5
21.2
16
%
$
2,645
$
2,462
7
%
Petroleum
132.9
70.6
88
%
60.9
36.7
66
%
2,182
1,924
13
%
Plastics
34.8
35.7
(3
%)
18.0
17.7
2
%
1,933
2,017
(4
%)
Total
232.5
158.5
47
%
103.4
75.6
37
%
2,249
2,097
7
%
Industrial & Consumer Products
Forest Products
62.6
57.8
8
%
24.8
24.2
2
%
2,524
2,388
6
%
Metals & Scrap
51.0
40.4
26
%
28.1
22.6
24
%
1,815
1,788
2
%
Other
31.0
22.4
38
%
21.5
21.2
1
%
1,442
1,057
36
%
Total
144.6
120.6
20
%
74.4
68.0
9
%
1,944
1,774
10
%
Agriculture & Minerals
Grain
88.9
64.1
39
%
40.7
33.0
23
%
2,184
1,942
12
%
Food Products
36.6
39.0
(6
%)
13.8
15.2
(9
%)
2,652
2,566
3
%
Ores & Minerals
6.1
5.3
15
%
7.8
7.0
11
%
782
757
3
%
Stone, Clay & Glass
8.3
6.0
38
%
3.6
2.5
44
%
2,306
2,400
(4
%)
Total
139.9
114.4
22
%
65.9
57.7
14
%
2,123
1,983
7
%
Energy
Utility Coal
31.2
23.2
34
%
38.7
25.6
51
%
806
906
(11
%)
Coal & Petroleum Coke
12.0
9.5
26
%
14.6
14.5
1
%
822
655
25
%
Frac Sand
4.2
1.7
147
%
3.1
1.5
107
%
1,355
1,133
20
%
Crude Oil
7.1
4.9
45
%
6.7
2.5
168
%
1,060
1,960
(46
%)
Total
54.5
39.3
39
%
63.1
44.1
43
%
864
891
(3
%)
Intermodal
91.1
63.5
43
%
250.3
191.0
31
%
364
332
10
%
Automotive
49.4
15.6
217
%
27.7
11.6
139
%
1,783
1,345
33
%
TOTAL FOR COMMODITY GROUPS
712.0
511.9
39
%
584.8
448.0
31
%
$
1,218
$
1,143
7
%
Other Revenue
37.5
36.0
4
%
TOTAL
$
749.5
$
547.9
37
%
Kansas City Southern and
Subsidiaries
Revenue & Carload/Units by
Commodity - Year to Date June 30, 2021 and 2020
Revenues
Carloads and Units
Revenue per
(in millions)
(in thousands)
Carload/Unit
Year to Date
%
Year to Date
%
Year to Date
%
2021
2020
Change
2021
2020
Change
2021
2020
Change
Chemical & Petroleum
Chemicals
$
125.4
$
114.7
9
%
49.4
45.8
8
%
$
2,538
$
2,504
1
%
Petroleum
268.1
166.4
61
%
120.1
83.2
44
%
2,232
2,000
12
%
Plastics
70.3
76.0
(8
%)
35.5
37.5
(5
%)
1,980
2,027
(2
%)
Total
463.8
357.1
30
%
205.0
166.5
23
%
2,262
2,145
5
%
Industrial & Consumer Products
Forest Products
120.3
126.7
(5
%)
48.3
51.6
(6
%)
2,491
2,455
1
%
Metals & Scrap
97.3
102.7
(5
%)
54.6
54.8
—
1,782
1,874
(5
%)
Other
61.0
50.2
22
%
43.8
45.0
(3
%)
1,393
1,116
25
%
Total
278.6
279.6
—
146.7
151.4
(3
%)
1,899
1,847
3
%
Agriculture & Minerals
Grain
163.6
141.9
15
%
76.4
68.4
12
%
2,141
2,075
3
%
Food Products
73.6
81.7
(10
%)
28.5
31.7
(10
%)
2,582
2,577
—
Ores & Minerals
11.3
11.1
2
%
15.0
14.7
2
%
753
755
—
Stone, Clay & Glass
15.8
14.2
11
%
6.7
6.0
12
%
2,358
2,367
—
Total
264.3
248.9
6
%
126.6
120.8
5
%
2,088
2,060
1
%
Energy
Utility Coal
62.9
46.8
34
%
76.6
54.8
40
%
821
854
(4
%)
Coal & Petroleum Coke
22.4
21.1
6
%
27.1
29.5
(8
%)
827
715
16
%
Frac Sand
7.6
5.5
38
%
6.0
4.6
30
%
1,267
1,196
6
%
Crude Oil
19.1
22.2
(14
%)
15.0
12.8
17
%
1,273
1,734
(27
%)
Total
112.0
95.6
17
%
124.7
101.7
23
%
898
940
(4
%)
Intermodal
172.4
152.2
13
%
483.1
424.6
14
%
357
358
—
Automotive
93.5
69.5
35
%
54.1
43.8
24
%
1,728
1,587
9
%
TOTAL FOR COMMODITY GROUPS
1,384.6
1,202.9
15
%
1,140.2
1,008.8
13
%
$
1,214
$
1,192
2
%
Other Revenue
70.9
76.7
(8
%)
TOTAL
$
1,455.5
$
1,279.6
14
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210716005038/en/
KCS: Ashley Thorne, 816-983-1530, athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
Historical Stock Chart
From Sep 2024 to Oct 2024
Kansas City Southern (NYSE:KSU)
Historical Stock Chart
From Oct 2023 to Oct 2024