(Source: Kansas City Southern press release (PDF), July 17, 2012)
KANSAS CITY, Mo. —Kansas City Southern (KCS) reported second quarter 2012 revenues of $545 million, an increase of 2% over second quarter 2011 on a 4% increase in carloads.
Second quarter 2012 highlights:
• Record second quarter revenues of $545 million.
• Operating income of $204 million. Adjusted operating income of $161 million, also a record for the second quarter.
• Operating ratio of 62.6%. Adjusted operating ratio of 70.5%, a 1.2 point improvement over second quarter 2011 and a
0.7 point sequential improvement over first quarter 2012.
• Diluted earnings per share of $1.09 compared with diluted earnings per share of $0.64 in second quarter 2011.
• Adjusted diluted earnings per share of $0.85 for second quarter 2012 compared with adjusted diluted earnings per
share of $0.71, a 20% improvement over second quarter 2011.
Second quarter revenue growth compared to 2011 was led by a 23% increase in Intermodal and a 15% increase in Automotive revenues. Revenue from Industrial and Consumer Products was also strong, growing 10% over 2011. Revenues from Chemical & Petroleum and Agriculture & Minerals each declined by 7% in the second quarter. Energy revenue declined by 12% compared to 2011, primarily caused by a 24% decrease in utility coal revenue.
Operating income for the second quarter of 2012 was $204 million compared with $152 million a year ago. Adjusting for a one-time benefit from the elimination of a net deferred liability resulting from an organizational restructuring, operating income was $161 million, 6% higher than second quarter 2011. KCS reported an adjusted second quarter 2012 operating ratio of 70.5%, a 1.2 point improvement from second quarter 2011. Operating expenses in the second quarter were $341 million compared with $383 million in the corresponding 2011 period. Adjusted operating expenses in the second quarter were $384 million, comparatively flat with the same period in 2011.
Reported net income in the second quarter of 2012 totaled $120 million, or $1.09 per diluted share, compared with $71 million, or $0.64 per diluted share, in the second quarter of 2011. Excluding debt retirement costs and the one-time benefit from the elimination of a net deferred liability, adjusted diluted earnings per share for second quarter 2012 was $0.85, compared with adjusted diluted earnings per share of $0.71 in second quarter 2011.
“While lower than anticipated coal traffic clearly had an impact on second quarter results, KCS still reported a 4% increase in carloads, and excluding utility coal, our volumes rose 7% compared to second quarter 2011,” stated KCS president and chief executive officer David L. Starling. “We also ended the quarter on a strong note by achieving the highest average daily carloads in KCS’ history during the month of June.
“Despite economic uncertainties that might affect the overall business environment, a number of second quarter achievements provide powerful evidence that KCS’ growth story remains very much intact. Cross border intermodal volumes increased 106% over the prior year. This increase is significant as it is in a business segment that has some of the longest lengths of haul on our network.
It also is an area in which KCS, taking advantage of secular changes in transportation, has the opportunity to experience record growth over an extended period of time. Carloads out of Lázaro Cárdenas grew by 20%. With Lázaro Cárdenas being the fastest growing container port in North America, and with a second port concession now being added, these opportunities will benefit the Company for many years.
“Automotive carloads increased 18% in the second quarter. It is anticipated that finished automotive production in Mexico will grow by more than 30% between now and 2015. KCS is well-positioned to benefit from this growth. In addition, the ripple effect from finished auto production on other commodity groups such as plastics, steel, glass and intermodal bodes well for KCS’ overall
business mix over the long-term.
“These growth opportunities are combined with a steady focus on cost controls and a continual refinement of our overall cost structure. In the second quarter, KCS continued to effectively scale operational expenses to volume changes. As a result, despite a significant decline in utility coal shipments, KCS again achieved strong incremental margins in the second quarter.
“While we appreciate the importance of adjusting spending in response to periodic fluctuations in the business environment, KCS is first and foremost a growth company with excellent business expansion opportunities over a wide variety of commodity areas. We will continue to make the investments necessary to facilitate that growth in the future.”