Second Quarter 2017
Results
- Record second quarter revenues of $656
million, an increase of 15% from second quarter 2016 on a 6%
increase in carloads
- All-time record quarterly operating
income of $239 million, an increase of 9% from second quarter
2016
- Operating ratio of 63.5%, compared with
61.3% in second quarter 2016
- Record second quarter diluted earnings
per share of $1.27, an increase of 14% compared to second quarter
2016. Adjusted diluted earnings per share of $1.33, an increase of
9% compared to second quarter 2016.
Kansas City Southern (KCS) (NYSE:KSU) reported record second
quarter 2017 revenues of $656 million, an increase of 15% from
second quarter 2016. Overall, carload volumes increased 6% compared
to second quarter 2016.
Operating expenses in the second quarter were $417 million, 20%
higher than 2016. In the second quarter of 2016, KCS determined it
could utilize a Mexican fuel excise tax credit, and recognized a
year-to-date benefit, including $17 million for the first quarter
of 2016.
Operating income for the second quarter of 2017 was $239
million, an increase of 9% from the second quarter 2016 and an
all-time quarterly record. KCS reported a second quarter operating
ratio of 63.5%, a 2.2 point increase from second quarter 2016.
Reported net income in the second quarter of 2017 totaled $135
million, or $1.27 per diluted share, compared with $121 million, or
$1.11 per diluted share, in the second quarter of 2016. Excluding
the impacts of foreign exchange rate fluctuations, adjusted diluted
earnings per share for second quarter 2017 was $1.33, compared to
$1.22 in second quarter 2016.
“We are pleased to report record second quarter revenues and
earnings per share, as well as an all-time record quarterly
operating income,” stated Kansas City Southern’s President and
Chief Executive Officer Patrick J. Ottensmeyer. “All three
milestones highlight the overall strength of our second quarter
2017 results.
“Carloads were up in four out of six commodity groups, driving
strong second quarter revenue growth of 15%. Our revenue
performance featured strength in Energy, Automotive and Chemicals
& Petroleum, as higher commodity prices, Mexican automotive
production and the emergence of Mexican energy reform supported
growth.
“Looking forward, the investments that we have made in our
network and our ability to improve operational performance in a
strong demand environment position our Company for continued
growth.”
GAAP Reconciliations
($ in millions, except per share
amounts)
Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per
Share Three Months Ended June 30, 2017
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 231.3 $ 96.6 $ 134.7 $ 1.27 Adjustments for: Foreign
exchange gain (14.2 ) (4.3 ) (9.9 ) (0.09 ) Foreign exchange
component of income taxes — (16.6 ) 16.6 0.15
Adjusted $ 217.1 $ 75.7 141.4 Less: Noncontrolling
interest (0.3 )
Adjusted net income available to common
stockholders - see (a) below
$ 141.1 $ 1.33
Three Months Ended
June 30, 2016
Income BeforeIncome Taxes
Income TaxExpense
Net Income
DilutedEarningsper Share
As reported $ 173.8 $ 53.3 $ 120.5 $ 1.11 Adjustments for: Foreign
exchange loss 24.0 7.2 16.8 0.16 Foreign exchange component of
income taxes — 5.3 (5.3 ) (0.05 ) Adjusted $ 197.8
$ 65.8 132.0 Less: Noncontrolling interest (0.4 )
Adjusted net income available to common
stockholders - see (a) below
$ 131.6 $ 1.22 (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
Six Months Ended June 30, June
30, 2017 2016 2017
2016 Revenues $ 656.4 $ 568.5 $ 1,265.9
$ 1,131.2 Operating expenses: Compensation and
benefits 125.2 109.0 242.6 219.1 Purchased services 51.4 53.7 100.2
104.6 Fuel 78.9 61.6 154.3 118.4 Mexican fuel excise tax credit
(12.8 ) (34.0 ) (24.5 ) (34.0 ) Equipment costs 31.2 27.2 62.4 53.9
Depreciation and amortization 80.4 75.7 159.7 150.0 Materials and
other 62.8 55.4 121.2 111.4 Total
operating expenses 417.1 348.6 815.9 723.4
Operating income 239.3 219.9 450.0 407.8 Equity in net
earnings of affiliates 2.9 3.0 6.9 6.9 Interest expense (25.0 )
(24.4 ) (49.7 ) (48.0 ) Foreign exchange gain (loss) 14.2 (24.0 )
61.0 (27.5 ) Other income (expense), net (0.1 ) (0.7 ) 1.0
(0.5 ) Income before income taxes 231.3 173.8 469.2 338.7 Income
tax expense 96.6 53.3 187.6 110.1 Net
income 134.7 120.5 281.6 228.6 Less: Net income attributable to
noncontrolling interest 0.3 0.4 0.6 0.7
Net income attributable to Kansas City Southern and subsidiaries
134.4 120.1 281.0 227.9 Preferred stock dividends — —
0.1 0.1 Net income available to common stockholders $
134.4 $ 120.1 $ 280.9 $ 227.8
Earnings per share: Basic earnings per share $ 1.27 $ 1.12
$ 2.66 $ 2.11 Diluted earnings per share $
1.27 $ 1.11 $ 2.65 $ 2.11
Average shares outstanding (in thousands): Basic 105,473 107,720
105,792 107,891 Potentially dilutive common shares 285 187
250 203 Diluted 105,758 107,907
106,042 108,094
Kansas City Southern
and Subsidiaries Revenue & Carload/Units by Commodity -
Second Quarter 2017 and 2016
Revenues Carloads and Units
Revenue per (in millions) (in thousands)
Carload/Unit Second Quarter % Second Quarter % Second
Quarter % 2017 2016 Change 2017 2016 Change 2017
2016 Change Chemical & Petroleum Chemicals $ 56.0
$ 50.6 11 % 27.8 27.2 2 % $ 2,014 $ 1,860 8 % Petroleum 50.8 40.3
26 % 25.5 22.7 12 % 1,992 1,775 12 % Plastics 32.0 31.5
2 % 18.2 17.8 2 % 1,758 1,770 (1
%) Total 138.8 122.4 13 % 71.5 67.7 6 %
1,941 1,808 7 % Industrial & Consumer
Products Forest Products 62.2 60.4 3 % 29.3 28.7 2 % 2,123 2,105 1
% Metals & Scrap 57.3 52.2 10 % 30.5 30.8 (1 %) 1,879 1,695 11
% Other 29.1 23.5 24 % 22.9 19.8 16 %
1,271 1,187 7 % Total 148.6 136.1 9 %
82.7 79.3 4 % 1,797 1,716 5 %
Agriculture & Minerals Grain 73.1 65.2 12 % 37.6 37.5 — 1,944
1,739 12 % Food Products 38.1 38.3 (1 %) 15.7 17.8 (12 %) 2,427
2,152 13 % Ores & Minerals 4.8 4.7 2 % 5.6 5.5 2 % 857 855 —
Stone, Clay & Glass 7.4 6.9 7 % 3.4 3.2
6 % 2,176 2,156 1 % Total 123.4 115.1
7 % 62.3 64.0 (3 %) 1,981 1,798
10 % Energy Utility Coal 39.0 19.3 102 % 38.4 26.2 47 %
1,016 737 38 % Coal & Petroleum Coke 10.3 9.0 14 % 16.1 15.2 6
% 640 592 8 % Frac Sand 14.0 5.8 141 % 8.7 4.5 93 % 1,609 1,289 25
% Crude Oil 7.2 3.1 132 % 6.4 3.5 83 %
1,125 886 27 % Total 70.5 37.2 90 %
69.6 49.4 41 % 1,013 753 35 %
Intermodal 90.6 91.4 (1 %) 243.1 246.2
(1 %) 373 371 1 % Automotive 57.5 44.6
29 % 37.9 30.7 23 % 1,517 1,453
4 %
TOTAL FOR COMMODITY GROUPS 629.4 546.8 15 % 567.1
537.3 6 % $ 1,110 $ 1,018 9 %
Other Revenue 27.0 21.7 24 %
TOTAL $
656.4 $ 568.5 15 %
Kansas City
Southern and Subsidiaries Revenue & Carload/Units by
Commodity - Year to Date June 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 $
110.6 $ 100.9 10 % 55.3 53.6 3 % $ 2,000 $ 1,882 6 % Petroleum 89.6
75.3 19 % 46.5 42.8 9 % 1,927 1,759 10 % Plastics 65.1 63.5
3 % 36.4 35.6 2 % 1,788 1,784 —
Total 265.3 239.7 11 % 138.2 132.0
5 % 1,920 1,816 6 % Industrial &
Consumer Products Forest Products 125.7 125.2 — 58.9 59.2 (1 %)
2,134 2,115 1 % Metals & Scrap 111.6 106.5 5 % 60.9 63.5 (4 %)
1,833 1,677 9 % Other 51.4 45.8 12 % 43.7 38.5
14 % 1,176 1,190 (1 %) Total 288.7
277.5 4 % 163.5 161.2 1 % 1,766 1,721
3 % Agriculture & Minerals Grain 139.3 128.4 8 %
73.3 72.7 1 % 1,900 1,766 8 % Food Products 76.4 73.2 4 % 32.0 33.5
(4 %) 2,388 2,185 9 % Ores & Minerals 9.1 9.3 (2 %) 10.4 10.3 1
% 875 903 (3 %) Stone, Clay & Glass 14.9 14.2 5 %
6.7 6.4 5 % 2,224 2,219 — Total
239.7 225.1 6 % 122.4 122.9 —
1,958 1,832 7 % Energy Utility Coal 81.8 42.1
94 % 82.9 58.0 43 % 987 726 36 % Coal & Petroleum Coke 21.3
17.2 24 % 32.4 29.3 11 % 657 587 12 % Frac Sand 24.7 10.9 127 %
15.9 9.0 77 % 1,553 1,211 28 % Crude Oil 11.7 9.0 30
% 10.1 8.3 22 % 1,158 1,084 7 % Total
139.5 79.2 76 % 141.3 104.6 35 % 987
757 30 % Intermodal 174.1 176.5
(1 %) 467.1 471.4 (1 %) 373 374 —
Automotive 108.8 85.6 27 % 75.5
57.9 30 % 1,441 1,478 (3 %)
TOTAL FOR COMMODITY GROUPS
1,216.1 1,083.6 12 % 1,108.0 1,050.0 6 % $ 1,098
$ 1,032 6 % Other Revenue 49.8 47.6
5 %
TOTAL $ 1,265.9 $ 1,131.2 12
%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170721005094/en/
Kansas City SouthernAshley Thorne,
816-983-1530athorne@kcsouthern.com
Kansas City Southern (NYSE:KSU)
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