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TheStreet Open House

Kansas City Southern Reports Record Fourth Quarter And Full-Year 2012 Revenues, Carloads And Operating Income

Stocks in this article: KSU

“It is to the credit of the entire KCS team that the Company successfully navigated its way through a host of challenging economic and climatic issues to make 2012 one of the best years in its 125-year history,” stated David L. Starling, KCS president and chief executive officer.

“Despite the impact on our coal franchise of an unseasonably warm winter and low natural gas prices, the effect on our grain carloadings of one of the most severe droughts in U.S. history and finally, the dampening effect on overall economic activity late in the year due to fiscal cliff concerns, KCS achieved record carloadings and revenues in 2012. This success is due in large part to the balanced and diverse mix of commodities that KCS transports and the ability of employees at every level of the company to react quickly and effectively to opportunities in the transportation marketplace.

“KCS reported a fourth quarter 2012 operating ratio of 69.5% compared to 71.6% in the fourth quarter of 2011. For the full year, KCS’ adjusted operating ratio was 69.9%, a 2.2 point improvement to the full year 2011 adjusted operating ratio of 72.1%.

“In addition, KCS met the top-line guidance targets for full-year 2012 of mid-single digit growth in volume, revenues and pricing that were outlined in July. With a host of new facilities that KCS will serve coming on-line in the second half of 2013 and in 2014, coupled with expanded business opportunities throughout all commodity groups, we believe in the Company’s ability to generate strong revenue growth over both the short and longer term.

“Management remains focused on closely monitoring every aspect of KCS’ ongoing operations while also overseeing the expansion of system capacity in order to stay ahead of the sustained growth we anticipate. We are committed to this in order to ensure good service for our customers and to maximize returns to our shareholders.”

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,

  2012   2011  
Diluted earnings per share $ 0.83 $ 0.87
Adjustment for debt retirement costs 0.01 0.14
Adjustment for foreign exchange loss 0.01 0.01
Adjustment for foreign exchange component of

income taxes

  0.07   (0.25 )
Adjusted diluted earnings per share - see (a) below $ 0.92 $ 0.77  
       
Reconciliation of Operating Expenses to Adjusted

Operating Expenses

Twelve Months Ended

December 31,

  2012         2011  
Operating expenses as reported $ 1,522.7 $ 1,486.7
Adjustment for elimination of net deferred liability 43.0 -
Adjustment for gain on insurance recoveries   -     25.6  
Adjusted operating expenses - see (b) below $ 1,565.7   $ 1,512.3  
 
Operating income as reported $ 715.9 $ 611.6
Adjusted operating income - see (b) below 672.9 586.0
 
Operating ratio (c) as reported 68.0 % 70.9 %
Adjusted operating ratio - see (b) and (c) below 69.9 % 72.1 %
 
(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 items that are not directly related to the ongoing operations of the Company.
(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 excluding 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.
 

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.

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