(Kansas City Southern issued the following on July 31.)
KANSAS CITY, Mo. — Kansas City Southern (KCS) (NYSE:KSU) reported record second quarter revenues of $486.2 million, a 13.8% increase over second quarter 2007. The revenue growth was attributable to a continued strong pricing environment, significant growth in certain business units and an increase in fuel surcharges.
Second Quarter Highlights:
• Revenues of $486.2 million, a 13.8% increase over 2007 with all business units experiencing increases.
• Operating income of $104.6 million compared with $83.1 million in 2007, a 25.9% increase.
• Operating ratio of 78.5%, a 2-point improvement over the prior year period.
• Diluted EPS of $0.56 compared with $0.30 in 2007, an 86.7% increase.
For the second quarter, KCS revenue growth was led by the chemical and petroleum sector which had revenue growth of 19.9% driven by new business primarily in plastic products. Carloads in this sector were 13.2% higher than in the prior year period. Agriculture and minerals experienced revenue increases of 18.4% quarter-over-quarter. In addition, in the second quarter, revenues in industrial and consumer products, which includes forest products, metals and scrap and other commodities, increased 12.4%. Intermodal revenue grew 20.3%, automotive revenues increased 10.3% and coal revenue improved 5.7%.
Second quarter operating expenses were $381.6 million, an increase of 10.9% over the prior year period, primarily driven by a 38.8% increase in fuel expense. Excluding the impact of fuel expense, operating expenses were up 4.3%.
Operating income for the second quarter of 2008 was $104.6 million compared with $83.1 million last year, a 25.9% improvement. The second quarter 2008 operating ratio was 78.5%, a 2.0 point improvement compared with second quarter 2007.
Net income available to common shareholders in the second quarter totaled $50.5 million, or $0.56 per diluted share, compared with $25.3 million, and $0.30 per diluted share, respectively, in second quarter 2007.
Comments from the Chairman
“All the positive revenue and operational trends that highlighted KCS’ first quarter performance were even more pronounced over the prior three months resulting in a strong second quarter,” stated Chairman and Chief Executive Officer Michael R. Haverty. “Record revenues, a 26% increase in operating income, and productivity measured by increased velocity, higher locomotive availability and lower terminal dwell times contributed to strong performance and were important factors resulting in a two point improvement in the operating ratio to 78.5%.
“Also notable is that KCS recorded volume growth despite a U.S. economy that has provided a downward pressure on traffic related to building materials, appliances and automobiles. Volume pressure in those areas was more than compensated for by double digit volume gains in chemicals, metals and scrap, and a 44% increase in container volumes out of Lázaro Cárdenas.
“KCS’ diversified revenue portfolio and unique cross-border network characterized by a well-balanced mix of established customers and new business opportunities are central to the Company’s belief that we will be the fastest growing railroad in North America over the foreseeable future.”
Headquartered in Kansas City, Missouri, 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 Mexico, 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.