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Press release from Business Wire

Kansas City Southern Reports Record Revenues and Carloads, Driven by Strong Cross-Border Revenue Growth

<p> <span class='bwuline'><b>Third Quarter 2013 Results</b></span> </p> <ul> <li class='bwlistitemmargb'> Revenues of $622 million, an increase of 8% over third quarter 2012 on a 3% increase in carloads. </li> <li class='bwlistitemmargb'> Operating income of $200 million, 11% higher than operating income in third quarter 2012. </li> <li class='bwlistitemmargb'> Operating ratio of 67.8%, a 0.9 point improvement over the operating ratio in third quarter 2012. </li> <li class='bwlistitemmargb'> Diluted earnings per share of $1.07 compared with diluted earnings per share of $0.82 in third quarter 2012. Adjusted diluted earnings per share of $1.10 for third quarter 2013 increased 16% over adjusted diluted earnings per share of $0.95 in the third quarter 2012. </li> </ul>

Friday, October 18, 2013

Kansas City Southern Reports Record Revenues and Carloads, Driven by Strong Cross-Border Revenue Growth

08:00 EDT Friday, October 18, 2013

KANSAS CITY, Mo. (Business Wire) -- Kansas City Southern (KCS) (NYSE:KSU) reported record third quarter 2013 revenues of $622 million. Overall, carload volumes were 3% higher than in third quarter 2012.

Third quarter revenue growth compared to 2012 was led by a 17% increase in Intermodal. Revenues from Industrial & Consumer, Agriculture & Minerals and Automotive grew by 7%. Revenues from Energy and Chemicals & Petroleum grew by 6% and 3%, respectively, over 2012.

Operating expenses for the third quarter were $421 million, 6% higher than the corresponding 2012 period. Operating income for the third quarter of 2013 was $200 million, 11% higher than 2012 operating income. KCS reported a third quarter 2013 operating ratio of 67.8%, a 0.9 point improvement over the 2012 operating ratio.

Reported net income in the third quarter of 2013 totaled $119 million, or $1.07 per diluted share, compared with $91 million, or $0.82 per diluted share, in the third quarter of 2012. Excluding the impacts of debt retirement costs and foreign exchange rate fluctuations, adjusted diluted earnings per share for third quarter 2013 was $1.10 compared with $0.95 a year ago.

“Kansas City Southern achieved record revenues and carloads as a result of solid, sustainable growth opportunities and strong execution by our team,” stated President and Chief Executive Officer David L. Starling. “This performance demonstrates KCS' ability to absorb the impacts of a challenging economic environment while consistently delivering strong top-line and bottom-line results.

“The fact that KCS delivered revenue growth in all of its business units speaks to the strength and diversity of this franchise. In addition to the many exciting growth opportunities that we see on the horizon from Intermodal, Auto and Energy, KCS' core carload franchise continues to deliver solid revenue performance and contribution to our overall growth in earnings. Particularly exciting is the fact that our cross-border revenue grew by 16% in the quarter. In addition to continued strength in cross-border intermodal, cross-border revenue also benefited from strength in steel shipments and an early rebound in export grain.

“Looking ahead, we expect a strong end to the year benefited by growth in export grain shipments. We also look forward to long-term improvement in our operating ratio as we move forward with our plan to increase the percentage of equipment we own versus lease.”

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, 2013

Income
Before
Income
Taxes

 

Income
Tax
Expense

Net
Income

 

Diluted
Earnings
per Share

As reported $ 182.3 $ 63.3 $ 119.0 $ 1.07
Adjustments for:
Debt retirement costs 2.4 0.8 1.6 0.02
Foreign exchange loss 1.4 0.4 1.0 0.01
Foreign exchange component of income taxes   (0.4 )

0.4

   
Adjusted $ 186.1   $ 64.1   122.0
Less: Noncontrolling interest (i) (ii) 0.6  

Adjusted net income attributable to Kansas City Southern and subsidiaries - see (a) below

$ 121.4   $ 1.10  
Adjusted effective income tax rate - see (a) below 34.4 %
(ii)/(i)
 
 
Three Months Ended September 30, 2012

Income
Before
Income
Taxes

Income
Tax
Expense

Net
Income

Diluted
Earnings
per Share

As reported $ 164.6 $ 73.9 $ 90.7 $ 0.82
Adjustments for:
Foreign exchange gain (3.7 ) (1.1 ) (2.6 ) (0.02 )
Foreign exchange component of income taxes   (17.6 ) 17.6   0.15  
Adjusted $ 160.9   $ 55.2   105.7
Less: Noncontrolling interest (i) (ii) 0.6  

Adjusted net income attributable to Kansas City Southern and subsidiaries - see (a) below

$ 105.1   $ 0.95  
Adjusted effective income tax rate - see (a) below 34.3 %
(ii)/(i)
 
(a)   The Company believes adjusted diluted earnings per share and the related adjusted effective income tax rate are meaningful as these measures allow 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.
 

Headquartered in Kansas City, MO, Kansas City Southern 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. Kansas City Southern's 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 of this news release. 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; interest rates; 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; credit risk of customers and counterparties and their failure to meet their financial obligations; 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; loss of key 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 conditions; political and economic conditions in Mexico and the level of trade between the United States and Mexico; 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, 2012 (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 in this news release to reflect future events or developments.

       

Kansas City Southern

Consolidated Statements of Income

(In millions, except share and per share amounts)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Revenues $ 621.6   $ 577.4   $ 1,753.7   $ 1,670.2  
Operating expenses:
Compensation and benefits 111.4 108.4 328.4 323.5
Purchased services 57.2 54.6 160.4 169.3
Fuel 102.7 89.5 286.6 264.7
Equipment costs 39.5 42.9 120.0 124.3
Depreciation and amortization 57.2 49.8 165.0 146.9
Materials and other 53.3 51.5 150.8 142.2
Elimination of deferred statutory profit sharing liability, net       (43.0 )
Total operating expenses 421.3   396.7   1,211.2   1,127.9  
Operating income 200.3 180.7 542.5 542.3
Equity in net earnings of unconsolidated affiliates 4.8 4.4 13.8 15.1
Interest expense (18.3 ) (24.1 ) (61.2 ) (76.6 )
Debt retirement costs (2.4 ) (113.8 ) (18.0 )
Foreign exchange gain (loss) (1.4 ) 3.7 (10.1 ) 4.1
Other expense, net (0.7 ) (0.1 ) (0.5 ) (0.8 )
Income before income taxes 182.3 164.6 370.7 466.1
Income tax expense 63.3   73.9   131.8   179.2  
Net income 119.0 90.7 238.9 286.9
Less: Net income attributable to noncontrolling interest 0.6   0.6   1.3   1.4  
Net income attributable to Kansas City Southern and subsidiaries 118.4 90.1 237.6 285.5
Preferred stock dividends 0.1   0.1   0.2   0.2  
Net income available to common stockholders $ 118.3   $ 90.0   $ 237.4   $ 285.3  
 
Earnings per share:
Basic earnings per share $ 1.08   $ 0.82   $ 2.16   $ 2.60  
Diluted earnings per share $ 1.07   $ 0.82   $ 2.15   $ 2.59  
 
Average shares outstanding (in thousands):
Basic 110,003 109,739 109,956 109,684
Potentially dilutive common shares 370   388   361   377  
Diluted 110,373   110,127   110,317   110,061  
 
 

Kansas City Southern

Revenue & Carloads/Units by Commodity - Third Quarter 2013 and 2012

                 
Revenues Carloads and Units Revenue per
(in millions) (in thousands) Carload/Unit
Third Quarter % Third Quarter % Third Quarter %
2013 2012 Change 2013 2012 Change 2013 2012 Change
 
Chemical & Petroleum
Chemicals $ 54.1 $ 51.4 5 % 29.5 28.1 5 % $ 1,834 $ 1,829
Petroleum 27.2 27.9 (3 %) 16.5 18.7 (12 %) 1,648 1,492 10 %
Plastics 28.2   27.1   4 % 16.2   16.0   1 % 1,741   1,694   3 %
Total 109.5   106.4   3 % 62.2   62.8   (1 %) 1,760   1,694   4 %
 
Industrial & Consumer Products
Forest Products 64.5 63.5 2 % 32.1 32.0 2,009 1,984 1 %
Metals & Scrap 63.6 54.8 16 % 33.7 31.8 6 % 1,887 1,723 10 %
Other 19.9   19.7   1 % 20.0   21.7   (8 %) 995   908   10 %
Total 148.0   138.0   7 % 85.8   85.5     1,725   1,614   7 %
 
Agriculture & Minerals
Grain 49.4 44.6 11 % 27.5 26.4 4 % 1,796 1,689 6 %
Food Products 34.2 34.4 (1 %) 15.5 15.4 1 % 2,206 2,234 (1 %)
Ores & Minerals 6.6 5.4 22 % 6.8 5.3 28 % 971 1,019 (5 %)
Stone, Clay & Glass 6.9   6.3   10 % 3.3   3.1   6 % 2,091   2,032   3 %
Total 97.1   90.7   7 % 53.1   50.2   6 % 1,829   1,807   1 %
 
Energy
Utility Coal 61.2 62.5 (2 %) 57.5 61.0 (6 %) 1,064 1,025 4 %
Coal & Petroleum Coke 11.7 8.4 39 % 15.6 11.9 31 % 750 706 6 %
Frac Sand 16.3 13.4 22 % 7.9 6.9 14 % 2,063 1,942 6 %
Crude Oil 5.4   5.0   8 % 3.0   2.7   11 % 1,800   1,852   (3 %)
Total 94.6   89.3   6 % 84.0   82.5   2 % 1,126   1,082   4 %
 
Intermodal 95.8   82.0   17 % 256.8   243.3   6 % 373   337   11 %
 
Automotive 51.4   48.2   7 % 28.0   28.1     1,836   1,715   7 %
 
TOTAL FOR COMMODITY GROUPS 596.4 554.6 8 % 569.9   552.4   3 % $ 1,046   $ 1,004   4 %
 
Other Revenue 25.2   22.8   11 %
 
TOTAL $ 621.6   $ 577.4   8 %
 
 

Kansas City Southern

Revenue & Carload/Units by Commodity - Year to Date September 30, 2013 and 2012

                 
Revenues Carloads and Units Revenue per
(in millions) (in thousands) Carload/Unit
Year to Date % Year to Date % Year to Date %
2013 2012 Change 2013 2012 Change 2013 2012 Change
 
Chemical & Petroleum
Chemicals $ 156.7 $ 149.5 5 % 85.3 84.2 1 % $ 1,837 $ 1,776 3 %
Petroleum 83.8 79.2 6 % 51.3 52.8 (3 %) 1,634 1,500 9 %
Plastics 80.4   77.6   4 % 47.5   48.2   (1 %) 1,693   1,610   5 %
Total 320.9   306.3   5 % 184.1   185.2   (1 %) 1,743   1,654   5 %
 
Industrial & Consumer Products
Forest Products 194.5 189.9 2 % 95.3 97.4 (2 %) 2,041 1,950 5 %
Metals & Scrap 182.4 168.6 8 % 99.3 95.5 4 % 1,837 1,765 4 %
Other 57.4   55.3   4 % 60.1   61.3   (2 %) 955   902   6 %
Total 434.3   413.8   5 % 254.7   254.2     1,705   1,628   5 %
 
Agriculture & Minerals
Grain 130.6 167.2 (22 %) 78.8 95.5 (17 %) 1,657 1,751 (5 %)
Food Products 97.2 105.0 (7 %) 43.5 46.5 (6 %) 2,234 2,258 (1 %)
Ores & Minerals 17.2 16.6 4 % 17.4 16.2 7 % 989 1,025 (4 %)
Stone, Clay & Glass 19.8   19.8     9.7   9.9   (2 %) 2,041   2,000   2 %
Total 264.8   308.6   (14 %) 149.4   168.1   (11 %) 1,772   1,836   (3 %)
 
Energy
Utility Coal 160.7 156.9 2 % 153.0 160.1 (4 %) 1,050 980 7 %
Coal & Petroleum Coke 31.2 24.5 27 % 44.2 33.3 33 % 706 736 (4 %)
Frac Sand 44.6 37.7 18 % 21.5 19.7 9 % 2,074 1,914 8 %
Crude Oil 19.7   9.1   116 % 10.6   5.2   104 % 1,858   1,750   6 %
Total 256.2   228.2   12 % 229.3   218.3   5 % 1,117   1,045   7 %
 
Intermodal 262.2   226.5   16 % 722.7   679.4   6 % 363   333   9 %
 
Automotive 148.0   125.3   18 % 81.0   75.2   8 % 1,827   1,666   10 %
 
TOTAL FOR COMMODITY GROUPS 1,686.4 1,608.7 5 % 1,621.2   1,580.4   3 % $ 1,040   $ 1,018   2 %
 
Other Revenue 67.3   61.5   9 %
 
TOTAL $ 1,753.7   $ 1,670.2   5 %
 

Kansas City Southern
William H. Galligan, 816-983-1551
bgalligan@kcsouthern.com

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