(Source: Kansas City Southern press release (PDF), July 18, 2014)
KANSAS CITY, Mo. — Kansas City Southern (KCS) reported second quarter 2014 revenues of $650 million. Overall, carload volumes were 7% higher than in second quarter 2013.
Highlights:
• Record revenues of $650 million, an increase of 12% over second quarter 2013 on a 7% increase in carloads.
• Operating income of $206 million. Excluding lease termination costs, adjusted operating income of $214 million, 20% higher than a year ago.
• Operating ratio of 68.3%. Excluding lease termination costs, adjusted operating ratio of 67.0%, a 2.0 point improvement over second quarter 2013.
• Diluted earnings per share of $1.18. Adjusted diluted earnings per share of $1.21 for second quarter 2014, a 26% increase over second quarter 2013.
Second quarter revenue growth compared to 2013 was led by a 33% increase in Agriculture and Minerals and a 25% increase in Automotive. Intermodal and Industrial & Consumer Products were also strong, growing by 14% and 10%, respectively. Chemical & Petroleum revenue grew by 6%, and Energy revenue declined by 5%, primarily due to a decline in utility coal shipments.
After adjusting for lease termination costs, operating expenses in the second quarter were $436 million, 9% higher than 2013 operating expenses. Adjusted operating income for the second quarter of 2014 was $214 million compared with $179 million a year ago, a 20% increase. KCS achieved a second quarter 2014 adjusted operating ratio of 67.0%, a 2.0 point improvement from second quarter 2013.
Reported net income in the second quarter of 2014 totaled $130 million, or $1.18 per diluted share, compared with $15 million, or $0.14 per diluted share, in the second quarter of 2013. Excluding the impacts of lease termination costs, foreign exchange rate fluctuations and debt retirement costs, adjusted diluted earnings per share for second quarter 2014 was $1.21, compared with $0.96 in the second quarter of 2013, a 26% increase.
“During the second quarter of 2014, KCS experienced strong revenue growth from the shipment of grain and automotive,” stated Kansas City Southern’s President and Chief Executive Officer David L. Starling. “KCS’ core carload franchise continues to show strength in line with the general economy, while the energy commodity group declined due to reduced shipments of utility coal.
“We are optimistic about our business in the second half of the year, but we again remind investors that grain growth rates will decline from the first half of 2014, reflecting the improved grain shipments in the second half of 2013. Therefore, we maintain our 2014 goals outlined to investors in January. Looking ahead, KCS’ long-term growth story remains very much intact with the recent announcements of additional automotive plants in Mexico and the growth of our energy franchise with the announcement of the crude oil terminal in Port Arthur, Texas. Energy and automotive, along with cross-border intermodal, Lázaro Cárdenas expansion and a host of other system-wide opportunities, position KCS very well for business growth over the next several years.”
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.