Kansas City Southern's CEO Discusses Q2 2012 Results - Earnings Call Transcript

If you’ll turn to the next page, second quarter results, I’m going to let Pat and Mike get into the nuts and bolts; but I would like to say we are certainly enjoying reporting the 62.6 second quarter operating ratio, but we understand the comparative adjusted second quarter operating ratio of 70.5, representing a 1.2 point improvement over last year, is the important number. Our second quarter adjusted diluted EPS was $0.85 compared to last year’s adjusted diluted EPS of $0.71.

If you turn to Page 7, finally despite some of the volumes and foreign exchange challenges in the quarter, KCS remains mostly on target in terms of its 2012 guidance. Year-to-date volume growth of 6% is solidly within the mid-single digit range we laid out in January. Pricing also continues to be mid-single digit. Our year-to-date revenue increase of 7% is tracking somewhat below our low double-digit projection. I will point out, however, that the combined effect of lower than anticipated coal volumes and a weaker peso amounted to a 4% negative impact on our first half revenues.

Finally, our year-to-date adjusted operating ratio is 1.9 points improved over the adjusted operating ratio for the first half of 2011, which among other things speaks to the Company’s ever-improving operating efficiencies and the overall profitability of its commodity areas. I’ll come back at the end of the meeting with a few comments on how we see the remainder of 2012 playing out and how that could transcend into 2013 and beyond; but now, let me turn it over to Dave Ebbrecht.

David Ebbrecht

Thanks, Dave. Turning to Slide 9, I want to start out by emphasizing the importance of our safety efforts at KCS and the value it has provided for the Company. We’re very proud of the recognition of our best-in-class safety award of May. Not having injuries, not having accidents and not having derailments is not only great for our employees and the public, but it also adds value to the bottom line. Our injury claims are down 43%, total liabilities down nearly 60%, and our total casualty expense is down 60% compared with the same period in 2008 when we had higher headcounts and higher train activity. Recognizing that the cost of failure in our business can be expensive, we continue to improve our standards in the future and ensure safety is at the forefront of every decision.

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