Kansas City Southern (KCS) (NYSE:KSU) recorded first quarter 2008 revenues of $450.6 million, a 9.6% increase over first quarter 2007. The revenue growth was attributable to a continued strong pricing environment and carload/unit growth in some of the company’s business segments.
For the first quarter, KCS revenues were led by automotive, which had revenue growth of 19.4%, and agriculture and minerals, which experienced revenue increases of 16.0% quarter over quarter. In addition, in the first quarter, revenues in chemical and petroleum products increased 14.7%, intermodal grew 9.1%, coal revenues were up 4.2% and forest products and metals improved 1.4%.
First quarter operating expenses were $367.2 million, an increase of 8.4% over last year. Fuel expenses increased 24.6% over the prior year, although this was partially offset by fuel surcharge revenue.
Operating income for the first quarter of 2007 was $83.4 million compared with $72.4 million last year, a 15.2% improvement. The first quarter 2007 operating ratio was 81.5%, a 0.9 point improvement from first quarter 2007.
Net income available to common shareholders in the first quarter totaled $32.9 million, or $0.39 per diluted share, compared with $17.0 million and $0.21, respectively, in first quarter 2007.
Comments from the Chairman
“We are encouraged by the year-over-year improvement in KCS’ operating ratio especially in the face of significantly higher fuel expenses and weather conditions which provided operating challenges throughout much of the first quarter,” stated Michael Haverty, KCS chairman and chief executive officer. “Increased revenues and solid improvement in key operating metrics were the drivers of our results.
“Tighter operating discipline contributed to our stronger operating performance, which was evidenced by improved trends in train velocity and terminal dwell time in the first quarter. Changes made in the second half of 2007 have taken hold and moved KCS ahead in those key measurements. In addition, the integration of approximately 180 new locomotives into our network fleet has resulted in significant improvement in locomotive availability over the past few months. We have thirty more locomotives which will arrive in the second quarter. This will complete delivery of all 210 units of our three year fleet renewal program, and will result in KCS having a significantly younger fleet than just a few years ago.
“The combination of new business opportunities, strong pricing environment, and continuous operating improvements positions us well for the remainder of the year. Going forward, KCS has the momentum needed to attain its 2008 operating and financial targets even within what is projected to be a difficult economic environment.”
Headquartered in Kansas City, Mo., KCS is a transportation holding company that has railroad investments in the U.S., Mexico and Panama. Its primary U.S. holding includes KCSR, serving the central and south central U.S. Its international holdings include Kansas City Southern de Mexico, serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50% 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 NAFTA Railway system, linking the commercial and industrial centers of the U.S., Canada and Mexico.
This press release includes statements concerning potential future events involving the Company, which could materially differ from the events that actually occur. The differences could be caused by a number of factors including those factors identified in the "Risk Factors" and the "Cautionary Information" sections of the Company's Form 10-K for the year ended December 31, 2007, filed by the Company with the Securities and Exchange Commission (SEC) (Commission file no. 1-4717). The Company will not update any forward-looking statements in this press release to reflect future events or developments.
Kansas City Southern | ||||||
Income Statement | ||||||
| (In millions, except share and per share amounts) | ||||||
| (Unaudited) | ||||||
| Three Months | ||||||
| Ended March 31, | ||||||
| 2008 | 2007 | |||||
| Revenues | $ 450.6 | $ 411.3 | ||||
| Operating expenses: | ||||||
| Compensation and benefits | 106.1 | 99.9 | ||||
| Purchased services | 44.9 | 46.7 | ||||
| Fuel | 77.9 | 62.5 | ||||
| Equipment costs | 45.8 | 44.9 | ||||
| Depreciation and amortization | 40.7 | 38.1 | ||||
| Casualties and insurance | 19.0 | 19.4 | ||||
| Materials and other costs | 32.8 | 27.4 | ||||
| Total operating expenses | 367.2 | 338.9 | ||||
| Operating income | 83.4 | 72.4 | ||||
| Equity in net earnings of unconsolidated affiliates | 4.1 | 1.1 | ||||
| Interest expense | (39.5 | ) | (39.4 | ) | ||
| Foreign exchange gain (loss) | 2.5 | (3.1 | ) | |||
| Other income | 3.0 | 0.6 | ||||
| Income before income taxes and minority interest | 53.5 | 31.6 | ||||
| Income tax expense | 15.7 | 9.3 | ||||
| Income before minority interest | 37.8 | 22.3 | ||||
| Minority interest | 0.1 | 0.1 | ||||
| Net income | 37.7 | 22.2 | ||||
| Preferred stock dividends | 4.8 | 5.2 | ||||
| Net income available to common shareholders | $ 32.9 | $ 17.0 | ||||
| Earnings per share: | ||||||
| Basic earnings per share | $ 0.43 | $ 0.22 | ||||
| Diluted earnings per share | $ 0.39 | $ 0.21 | ||||
| Average shares outstanding (in thousands): | ||||||
| Basic | 76,253 | 75,611 | ||||
| Potential dilutive common shares | 21,231 | 14,724 | ||||
| Diluted | 97,484 | 90,335 | ||||
Kansas City Southern | ||||||||||||||
Revenue & Carloadings By Commodity – First Quarter 2008 | ||||||||||||||
| (Dollars in Millions) | ||||||||||||||
| Carloadings | Revenue | |||||||||||||
| First Quarter | % | First Quarter | % | |||||||||||
| 2008 | 2007 | Change | 2008 | 2007 | Change | |||||||||
| Coal | ||||||||||||||
| 59,120 | 62,299 | (5.1 | %) | Unit Coal | $ 37.0 | $ 35.6 | 3.9 | % | ||||||
| 13,651 | 12,844 | 6.3 | % | Other Coal | 10.0 | 9.5 | 5.3 | % | ||||||
| 72,771 | 75,143 | (3.2 | %) | Total | 47.0 | 45.1 | 4.2 | % | ||||||
| Forest Products & Metals | ||||||||||||||
| 27,743 | 30,272 | (8.4 | %) | Pulp/Paper | 41.2 | 40.1 | 2.7 | % | ||||||
| 4,781 | 2,881 | 65.9 | % | Scrap Paper | 5.8 | 3.7 | 56.8 | % | ||||||
| 5,528 | 5,043 | 9.6 | % | Pulpwood/Logs/Chips | 5.2 | 4.2 | 23.8 | % | ||||||
| 4,661 | 6,454 | (27.8 | %) | Lumber/Plywood | 7.5 | 8.9 | (15.7 | %) | ||||||
| 27,284 | 29,231 | (6.7 | %) | Metal/Scrap | 39.7 | 36.7 | 8.2 | % | ||||||
| 24,781 | 28,174 | (12.0 | %) | Military/Other Carloads | 24.5 | 28.6 | (14.3 | %) | ||||||
| 94,778 | 102,055 | (7.1 | %) | Total | 123.9 | 122.2 | 1.4 | % | ||||||
| Chemical & Petroleum Products | ||||||||||||||
| 4,021 | 3,430 | 17.2 | % | Agri Chemicals | 5.4 | 4.2 | 28.6 | % | ||||||
| 26,273 | 22,771 | 15.4 | % | Other Chemicals | 36.9 | 29.8 | 23.8 | % | ||||||
| 16,489 | 17,904 | (7.9 | %) | Petroleum | 24.1 | 23.3 | 3.4 | % | ||||||
| 14,862 | 10,479 | 41.8 | % | Plastics | 20.3 | 18.3 | 10.9 | % | ||||||
| 61,645 | 54,584 | 12.9 | % | Total | 86.7 | 75.6 | 14.7 | % | ||||||
| Agriculture and Minerals | ||||||||||||||
| 40,379 | 39,156 | 3.1 | % | Grain | 66.3 | 52.0 | 27.5 | % | ||||||
| 14,546 | 16,031 | (9.3 | %) | Food Products | 23.4 | 25.0 | (6.4 | %) | ||||||
| 12,523 | 14,208 | (11.9 | %) | Ores and Minerals | 12.7 | 11.8 | 7.6 | % | ||||||
| 4,352 | 3,475 | 25.2 | % | Stone, Clay & Glass | 6.4 | 5.0 | 28.0 | % | ||||||
| 71,800 | 72,870 | (1.5 | %) | Total | 108.8 | 93.8 | 16.0 | % | ||||||
| Intermodal & Automotive | ||||||||||||||
| 124,067 | 129,305 | (4.1 | %) | Intermodal | 35.8 | 32.8 | 9.1 | % | ||||||
| 27,212 | 22,839 | 19.1 | % | Automotive | 28.3 | 23.7 | 19.4 | % | ||||||
| 151,279 | 152,144 | (0.6 | %) | Total | 64.1 | 56.5 | 13.5 | % | ||||||
| 452,273 | 456,796 | (1.0 | %) | TOTAL FOR BUSINESS UNITS | 430.5 | 393.2 | 9.5 | % | ||||||
| Other Revenue | 20.1 | 18.1 | 11.0 | % | ||||||||||
| 452,273 | 456,796 | (1.0 | %) | TOTAL | $ 450.6 | $ 411.3 | 9.6 | % | ||||||
Contacts:
William H. Galligan, 816-983-1551
bgalligan@kcsouthern.com
