(Kansas City Southern issued the following on February 3, 2009.)
KANSAS CITY, Mo. — Kansas City, MO. Kansas City Southern (KCS) (NYSE:KSU) reported fourth quarter 2008 revenues of $423.8 million, a 7.9% decrease over the corresponding 2007 period. The revenue decline was primarily the result of volume decreases in the quarter resulting from weakening economies in the U.S. and Mexico which was illustrated by the most significant downturn in the more economically sensitive commodities.
Full-Year 2008 highlights:
* Record annual revenues of $1.85 billion, a 6.3% increase
* Record operating income of $390.2 million, a 7.7% increase
* Operating ratio of 78.9%, compares favorably with 79.2% in 2007
* Record diluted EPS of $1.86, an 18.5% improvement
Highlights From Fourth Quarter 2008 Results:
* Revenues of $423.8 million, a 7.9% decrease from prior year
* Operating income of $91.2 million, a 16.1% decrease
* Operating ratio of 78.5%, compared with 76.4% in 2007
* Diluted EPS of $0.40, compared with $0.56 in 2007
Operating expenses for the fourth quarter 2008 were $332.6 million, a decrease of 5.4% quarter over quarter. Fuel expense for the quarter was down 13.7% as the price of fuel dropped during the quarter. Compensation and benefits were also down 14.3% due to lower incentive compensation expense as well as operations being scaled back due to volume declines. Operating income for the fourth quarter was $91.2 million compared with $108.7 million last year, a 16.1% decrease. The fourth quarter 2008 operating ratio was 78.5% compared with 76.4% a year ago.
Net income available to common shareholders in the fourth quarter totaled $36.4 million, or $0.40 per diluted share, compared with $49.9 million, or $0.56 per diluted share in fourth quarter 2007, a 28.6% decrease in diluted earnings per share. During the fourth quarter, the company recorded a $21.7 million pre-tax foreign exchange loss as a result of the strengthening U.S. dollar against the Mexican peso. Also included in the fourth quarter is a $2.7 million income tax benefit resulting from economic conditions in Mexico.
Revenues for full year 2008 were $1.85 billion, a 6.3% increase over 2007. Revenues were led by agriculture & minerals, up 12.7%, spurred by a combination of long haul traffic from the upper Midwest to Mexico and strong pricing. Chemical & petroleum experienced a revenue increase of 8.6% for the year on strong pricing and substantial volume gains through three quarters. Coal revenues were up 5.5% and industrial & consumer revenues were up 1.5% both on strong pricing. Intermodal & automotive had mixed results with intermodal revenues up 12.2% year over year while automotive was down 4.8%.
For the year, operating expenses increased 5.9% as fuel expense was up nearly 20%. The operating ratio for the year was 78.9%, a slight improvement over the 79.2% recorded in 2007. Earnings per diluted share were $1.86, an 18.5% improvement over the prior year in spite of recording the foreign exchange loss for the fourth quarter.
Comments from the Chairman
“KCS reported record revenues, operating income, and diluted earnings per share for full year 2008 despite depressed fourth quarter revenues resulting from the most severe economic conditions in recent history,” stated KCS Chairman and Chief Executive Officer Michael R. Haverty. “As soon as traffic volumes began to fall in the wake of two September hurricanes, KCS management reshaped its transportation service plan and took out costs throughout the entire company. As a result, despite volumes that weakened throughout the quarter, KCS achieved a fourth quarter operating ratio of 78.5%. For the full-year 2008, KCS’ operating ratio was 78.9%, a 0.3 point improvement over 2007, and despite declining in the fourth quarter, 2008 annual revenues increased 6.3%.
“Because of the unsettled states of the U.S. and global economies, it would not be constructive to attempt to provide 2009 volume or revenue guidance at this time. However, through maintaining stringent control of operating and capital expenditures, KCS management is committed to operating the company in a manner which will allow it to be free cash flow positive in 2009.
“Looking beyond the present economic challenges, KCS remains a growth company. All the ingredients for the company’s long-term success are still in place. We have the management and employees, infrastructure and business opportunities in both the U.S. and Mexico to deliver exceptional value to all our stakeholders.”
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 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.