Media Contact: William H. Galligan Phone: 816/983-1551 bgalligan@kcsouthern.com
Kansas City Southern Reports Record Fourth Quarter and Full-Year 2013 Revenues, Carloads and Operating Income
Fourth Quarter 2013 Results
Revenue of $616 million, an increase of 8% over fourth quarter 2012. Operating income of $196 million, 13% higher than a year ago. Operating ratio of 68.1%, compared with 69.5% in fourth quarter 2012.
Reported and adjusted diluted earnings per share for fourth quarter 2013 was $1.03, a 12% increase over fourth quarter 2012 adjusted diluted earnings per share.
Kansas City, MO., January 24, 2014. Kansas City Southern (KCS) (NYSE:KSU) reported record fourth quarter 2013 revenues of $616 million. Overall, carload volumes were 2% higher than in fourth quarter 2012.
Compared to 2012, fourth quarter revenue growth was led by a 30% increase in Agriculture & Minerals and an 18% increase in Intermodal. Automotive and Industrial & Consumer Products were also strong, both with revenues growing by 9% in the fourth quarter of 2013. Chemical & Petroleum revenue grew 2% and Energy revenue declined by 17% compared to the prior year, primarily due to a decline in utility coal shipments.
Operating income for the fourth quarter of 2013 was $196 million compared with $174 million a year ago, a 13% increase. KCS reported a fourth quarter 2013 operating ratio of 68.1%, a 1.4 point improvement from fourth quarter 2012. Operating expenses in the fourth quarter were $420 million compared with $395 million in the corresponding 2012 period, a 6% increase.
Reported net income in the fourth quarter of 2013 totaled $114 million, or $1.03 per diluted share, compared with $93 million, or
$0.83 per diluted share, in the fourth quarter of 2012. Excluding debt retirement costs and the impacts of foreign exchange rate fluctuations, adjusted diluted earnings per share for fourth quarter 2013 was $1.03 compared to $0.92 in 2012.
For the full year of 2013, revenue was a record $2.4 billion, up 6% over 2012. Carloads for 2013 were 2.2 million, an increase of 2%
over the prior year.
Full-year operating income was $739 million. Excluding one-time benefits from the elimination of a net deferred liability in 2012, full- year 2013 operating income increased 10% over prior year's adjusted operating income. The Company's 2013 operating ratio was
68.8% compared with the adjusted operating ratio of 69.9% in 2012, a 1.1 point improvement.
"The year 2013 proved to be another very good year for Kansas City Southern," stated President and Chief Executive Officer David L. Starling. "While some shifts in market conditions impacted volumes in our Agriculture & Minerals and Energy commodity groups,
2013 marks the fourth consecutive year KCS has recorded a double-digit percentage increase in its adjusted diluted earnings per share.
"KCS met its stated target of mid-single digit year-over-year revenue growth, coming in 6% higher than 2012. Also, KCS achieved a record operating ratio, improving by 1.1 points over the prior year's adjusted operating ratio. For 2013, the Company reported adjusted diluted earnings per share of $3.98, a 12% improvement over prior year.
"Five years ago, KCS management established a primary corporate objective of attaining investment grade status. In 2013, after several years of delivering strong operating and financial results, the Company achieved this distinction. Given that long-term debt rates were near all-time lows during the year, the Company immediately capitalized on its upgraded rating and executed a major debt restructuring, which resulted in KCS extending its weighted-average maturity, reducing its weighted-average coupon and
creating the lowest-cost debt portfolio in the industry. This restructuring benefitted us significantly in 2013 by lowering our interest expense by $20 million over 2012, and by strengthening our balance sheet. Moreover, KCS is a stronger company going forward given its expanded financial flexibility.
"We expect to maintain our excellent growth momentum in 2014 and beyond. As 2014 evolves, investors can expect to see positive developments in a wide-range of commodity groups, including intermodal, automotive, steel and chemical & petroleum products. Particularly exciting is that growth in these areas, as well as the increase of crude oil traffic originating in Canada and terminating at various Gulf locations, should continue to ramp up over the next five years. And, while longer term, when the positive impact of Mexican energy reform is considered, KCS appears well-positioned for growth over the next decade."
GAAP Reconciliations
($ in millions, except per share amounts)
Reconciliation of Diluted Earnings per Share to Adjusted Diluted
Earnings per Share Three Months Ended December 31, 2013
Income Before
Income Taxes
Income Tax
Expense Net Income
Diluted Earnings per Share
As reported $ 180.9 $ 66.5 $ 114.4 $ 1.03
Adjustments for:
Debt retirement costs 5.4 1.6 3.8 0.03
Foreign exchange gain (4.9) (1.4) (3.5) (0.03) Foreign exchange component of income taxes - 0.4 (0.4) -
Adjusted $ 181.4 $ 67.1 114.3
Less: Noncontrolling interest (i) (ii) 0.6
Adjusted net income attributable to Kansas City
Southern and subsidiaries - see (a) below $ 113.7 $ 1.03
Adjusted effective income tax rate - see (a) below 37.0% (ii)/(i)
Three Months Ended December 31, 2012
Income Before
Income Taxes
Income Tax
Expense Net Income
Diluted Earnings per Share
As reported $ 150.3 $ 57.8 $ 92.5 $ 0.83
Adjustments for:
Debt retirement costs 2.1 0.8 1.3 0.01
Foreign exchange loss 1.4 0.4 1.0 0.01
Foreign exchange component of income taxes - (7.3) 7.3 0.07
Adjusted $ 153.8 $ 51.7 102.1
Less: Noncontrolling interest (i) (ii) 0.7
Adjusted net income attributable to Kansas City
Southern and subsidiaries - see (a) below $ 101.4 $ 0.92
Adjusted effective income tax rate - see (a) below 33.6% (ii)/(i)
Reconciliation of Diluted Earnings per Share to Adjusted Diluted
Earnings per Share (continued) Twelve Months Ended December 31, 2013
Income Before
Income Taxes
Income Tax
Expense Net Income
Diluted Earnings per Share
As reported $ 551.6 $ 198.3 $ 353.3 $ 3.18
Adjustments for:
Debt retirement costs 119.2 35.9 83.3 0.76
Foreign exchange loss 5.2 1.6 3.6 0.03
Foreign exchange component of income taxes - (1.3) 1.3 0.01
Adjusted $ 676.0 $ 234.5 441.5
Less: Noncontrolling interest (i) (ii) 1.9
Adjusted net income attributable to Kansas City
Southern and subsidiaries - see (a) below $ 439.6 $ 3.98
Adjusted effective income tax rate - see (a) below 34.7% (ii)/(i)
Twelve Months Ended December 31, 2012
Income Before
Income Taxes
Income Tax
Expense Net Income
Diluted Earnings per Share
As reported $ 616.4 $ 237.0 $ 379.4 $ 3.43
Adjustments for:
Debt retirement costs 20.1 7.6 12.5 0.11
Elimination of net deferred statutory profit sharing liability (43.0) (12.9) (30.1) (0.27) Foreign exchange gain (2.7) (0.8) (1.9) (0.02) Foreign exchange component of income taxes - (33.9) 33.9 0.31
Adjusted $ 590.8 $ 197.0 393.8
Less: Noncontrolling interest (i) (ii) 2.1
Adjusted net income attributable to Kansas City
Southern and subsidiaries - see (a) below $ 391.7 $ 3.56
Adjusted effective income tax rate - see (a) below 33.3% (ii)/(i)
Reconciliation of Operating Expenses to Adjusted
Operating Expenses
Twelve Months Ended
December 31,
2013 2012
Operating expenses as reported Adjustment for elimination of net deferred statutory profit sharing liability | $ 1,630.7 - | $ 1,522.7 43.0 | |
Adjusted operating expenses - see (b) below | $ 1,630.7 | $ 1,565.7 | |
Operating income as reported | $ 738.6 | $ 715.9 | |
Adjusted operating income - see (b) below | 738.6 | 672.9 | |
Operating ratio (c) as reported | 68.8% | 68.0% | |
Adjusted operating ratio - see (b) and (c) below | 68.8% | 69.9% |
(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.
(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.
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
(In millions, except share and per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
Revenues $ 615.6 | $ 568.4 | $ 2,369.3 | $ 2,238.6 |
Operating expenses:
Purchased services | 57.2 | 50.5 | 217.6 | 219.8 | |||
Equipment costs | 40.5 | 42.8 | 160.5 | 167.1 | |||
Materials and other | 47.3 | 47.7 | 198.1 | 189.9 | |||
Total operating expenses | 419.5 | 394.8 | 1,630.7 | 1,522.7 | |||
Equity in net earnings of unconsolidated affiliates | 5.0 | 4.2 | 18.8 | 19.3 | |||
Debt retirement costs | (5.4) | (2.1) | (119.2) | (20.1) | |||
Other expense, net | (0.3) | (0.2) | (0.8) | (1.0) | |||
Income tax expense | 66.5 | 57.8 | 198.3 | 237.0 | |||
Less: Net income attributable to noncontrolling interest | 0.6 | 0.7 | 1.9 | 2.1 | |||
Preferred stock dividends | - | - | 0.2 | 0.2 | |||
Earnings per share: | |||||||
Diluted earnings per share | $ 1.03 | $ 0.83 | $ 3.18 | $ 3.43 | |||
Basic |
(in millions) (in thousands) Carload/Unit
Fourth Quarter % Fourth Quarter % Fourth Quarter %
2013 2012 Change 2013 2012 Change 2013 2012 Change
Chemical & Petroleum |
Chemicals $ 51.5 $ 50.7 2% 27.8 27.7 - $ 1,853 $ 1,830 1%
Petroleum 27.1 | 26.6 | 2% | 16.0 | 17.9 | (11%) | 1,694 | 1,486 | 14% |
Plastics 27.2 26.7 2% 15.5 16.0 (3%) 1,755 1,669 5%
Total | 105.8 | 104.0 | 2% | 59.3 | 61.6 | (4%) | 1,784 | 1,688 | 6% |
Industrial & Consumer Products
Forest Products 64.1 | 64.0 | - | 30.7 | 31.7 | (3%) | 2,088 | 2,019 | 3% |
Metals & Scrap 66.8 56.2 19% 33.7 31.2 8% 1,982 1,801 10%
Other 18.6 | 17.1 | 9% | 18.7 | 19.0 | (2%) | 995 | 900 | 11% |
Total 149.5 137.3 9% 83.1 81.9 1% 1,799 1,676 7%
Agriculture & Minerals |
Grain 70.2 45.9 53% 37.5 27.3 37% 1,872 1,681 11%
Food Products 36.7 | 35.0 | 5% | 16.4 | 15.3 | 7% | 2,238 | 2,288 | (2%) |
Ores & Minerals 5.5 5.0 10% 5.7 5.2 10% 965 962 -
Stone, Clay & Glass 6.7 | 6.0 | 12% | 3.0 | 3.0 | - | 2,233 | 2,000 | 12% |
Total 119.1 91.9 30% 62.6 50.8 23% 1,903 1,809 5%
Energy |
Utility Coal 41.0 54.1 (24%) 41.9 51.5 (19%) 979 1,050 (7%)
Coal & Petroleum Coke 10.1 | 10.1 | - | 14.4 | 13.2 | 9% | 701 | 765 | (8%) |
Frac Sand 14.2 13.1 8% 6.9 5.9 17% 2,058 2,220 (7%)
Crude Oil 5.1 | 7.3 | (30%) | 3.2 | 3.5 | (9%) | 1,594 | 2,086 | (24%) |
Total 70.4 84.6 (17%) 66.4 74.1 (10%) 1,060 1,142 (7%)
Intermodal 94.4 80.0
234.8
341 14%
Automotive 53.5 49.1 9% 29.3 28.5 3% 1,826 1,723 6%
TOTAL FOR COMMODITY GROUPS 592.7 | 546.9 | 8% | 543.6 | 531.7 | 2% | $ 1,090 | $ 1,029 | 6% |
Other Revenue 22.9 21.5 7%
TOTAL | $ 615.6 | $ 568.4 | 8% |
(in millions) (in thousands) Carload/Unit
Years Ended % Years Ended % Years Ended %
2013 2012 Change 2013 2012 Change 2013 2012 Change
Chemical & Petroleum |
Chemicals $ 208.2 $ 200.2 4% 113.1 111.9 1% $ 1,841 $ 1,789 3%
Petroleum 110.9 | 105.8 | 5% | 67.3 | 70.7 | (5%) | 1,648 | 1,496 | 10% |
Plastics 107.6 104.3 3% 63.0 64.2 (2%) 1,708 1,625 5%
Total | 426.7 | 410.3 | 4% | 243.4 | 246.8 | (1%) | 1,753 | 1,662 | 5% |
Industrial & Consumer Products
Forest Products 258.6 | 253.9 | 2% | 126.0 | 129.1 | (2%) | 2,052 | 1,967 | 4% |
Metals & Scrap 249.2 224.8 11% 133.0 126.7 5% 1,874 1,774 6%
Other 76.0 | 72.4 | 5% | 78.8 | 80.3 | (2%) | 964 | 902 | 7% |
Total 583.8 551.1 6% 337.8 336.1 1% 1,728 1,640 5%
Agriculture & Minerals |
Grain 200.8 213.1 (6%) 116.3 122.8 (5%) 1,727 1,735 -
Food Products 133.9 | 140.0 | (4%) | 59.9 | 61.8 | (3%) | 2,235 | 2,265 | (1%) |
Ores & Minerals 22.7 21.6 5% 23.1 21.4 8% 983 1,009 (3%)
Stone, Clay & Glass 26.5 | 25.8 | 3% | 12.7 | 12.9 | (2%) | 2,087 | 2,000 | 4% |
Total 383.9 400.5 (4%) 212.0 218.9 (3%) 1,811 1,830 (1%)
Energy |
Utility Coal 201.7 211.0 (4%) 194.9 211.6 (8%) 1,035 997 4%
Coal & Petroleum Coke 41.3 | 34.6 | 19% | 58.6 | 46.5 | 26% | 705 | 744 | (5%) |
Frac Sand 58.8 50.8 16% 28.4 25.6 11% 2,070 1,984 4%
Crude Oil 24.8 | 16.4 | 51% | 13.8 | 8.7 | 59% | 1,797 | 1,885 | (5%) |
Total 326.6 312.8 4% 295.7 292.4 1% 1,104 1,070 3%
Intermodal 356.6 306.5
914.2
335 10%
Automotive 201.5 174.4 16% 110.3 103.7 6% 1,827 1,682 9%
TOTAL FOR COMMODITY GROUPS 2,279.1 | 2,155.6 | 6% | 2,164.8 | 2,112.1 | 2% | $ 1,053 | $ 1,021 | 3% |
Other Revenue 90.2 83.0 9%
TOTAL | $ 2,369.3 | $ 2,238.6 | 6% |
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