(Source: Kansas City Southern press release (PDF), July 17, 2020)
KANSAS CITY, Mo. — Kansas City Southern (KCS) reported revenues of $547.9 million, a decrease of 23% from second quarter 2019. Overall, carload volumes were down 21% compared to prior year.
Second Quarter 2020
Second quarter revenues were $547.9 million, a decrease of 23% primarily as a result of an overall decline in demand due to COVID-19.
Second quarter operating expenses were $367.5 million, including $10.5 million of restructuring charges primarily related to the voluntary separation program implemented in the quarter. Operating income was $180.4 million and the reported operating ratio was 67.1%; on an adjusted basis, operating ratio was 65.2%. Second quarter net income was $110.3 million, or $1.16 per diluted share.
Due to the general economic uncertainty created by the global COVID-19 pandemic, KCS is not providing guidance on revenue, volume, operating ratio or earnings per share. Previously provided 2020 capital expenditure guidance remains $425.0 million or below. Guidance for 2021 and 2022 capital expenditures remains at ~17% of revenue. The Company is on track to deliver $500.0 million or more of free cash flow in 2020. See the following pages for a reconciliation of historical free cash flow.
“Kansas City Southern demonstrated excellent execution during an extremely challenging quarter,” stated President and Chief Executive Officer, Patrick J. Ottensmeyer. “Our network experienced a rapid decline in volumes followed by an unprecedented rebound, forcing us to quickly adjust our service model to match customer demand while optimizing our cost structure.
“I would like to thank the men and women of Kansas City Southern who work tirelessly under challenging circumstances to deliver essential freight transportation and keep the U.S. and Mexican economies running. Their efforts have allowed KCS to continue providing consistent and reliable service to our customers.
“Precision Scheduled Railroading is producing sustainable improvements to customer service and operations, and has been a key contributor to the Company’s strong cost performance this quarter. Although visibility into second half volumes and revenue remains limited, the Company is focused on retaining the efficiencies gained during the second quarter, and reiterates its outlook to deliver at least $500 million free cash flow in 2020. We are confident in our operational execution, and believe KCS will emerge from these challenging times even better positioned to deliver superior growth and shareholder returns.”