EX-99.1 2 c19585exv99w1.htm PRESS RELEASE exv99w1
 

(LETTERHEAD)
         
Date:
  October 25, 2007    
 
        
Media Contact:
  William H. Galligan   Phone: 816/983-1551
 
  bgalligan@kcsouthern.com    
Strong Operating Income Growth, Operating Ratio Improvement Highlight
Kansas City Southern’s Third Quarter 2007 Earnings
Third Quarter Highlights
  •   Revenues of $444.1 million, a 6.8% increase over 2006
 
  •   Record operating income of $98.2 million, a 27% increase
 
  •   Operating ratio of 77.9%, a 3.5 point improvement
 
  •   Diluted earnings per share of $0.48, a 50% increase
Kansas City, MO, October 25 2007. Kansas City Southern (KCS) (NYSE:KSU) recorded third quarter 2007 revenues of $444.1 million, a 6.8% increase over third quarter 2006. Revenue gains were primarily attributable to volume growth in select commodity areas and a continued favorable pricing environment.
For the third quarter, revenues for the Automotive group increased 21.8% on volume growth of 16.6%. Coal revenues remained strong, increasing 16.9% for the quarter with volumes growing by 4.8%. Chemical & Petroleum products revenues experienced 12.7% growth with volume increasing by 5.3%. Agriculture & Minerals revenues increased by 7.0% while posting a 2.2% decrease in volumes. Despite the impact of a depressed U.S. new home building market on building materials, Paper & Forest Products posted a revenue gain of 1.0%, though overall volumes were 12.1% lower. Intermodal revenues, including haulage, were flat quarter-over-quarter, with volumes 6.5% lower. Excluding the loss of certain haulage business, intermodal revenues increased by 12.5% and

 

 

volumes grew by 17.6%. Overall volumes fell by 2.8%, however excluding the haulage traffic, volumes would have been 3.0% higher than last year.
Third quarter 2007 operating expenses totaled $345.9 million, increasing 2.2% from 2006. Operating income grew 27.0% from $77.3 million to $98.2 million. The third quarter operating ratio improved to 77.9% from 81.4% for the same prior year period, a 3.5 point improvement.
Net income available to common shareholders in the third quarter 2007 increased by 58% to $41.8 million, or $0.48 per diluted share, compared with $26.4 million, or $0.32 per diluted share in the third quarter 2006.
Comments from the Chairman
KCS Chairman and Chief Executive Officer Michael R. Haverty said, “Within the context of a slower than expected economy, we are encouraged by the overall improvement in KCS’s operating performance. The Company posted solid, double-digit revenue growth in three of its commodity groups, and only haulage revenues declined as a result of the loss of certain business over the Meridian Speedway.
“While operating expenses were in-line with our expectations, KCS management remains committed to taking additional costs out of our network. Having attained an operating ratio of 77.9% for the quarter and the Company is focused on achieving the revenue growth and expense controls necessary to meet our target of an operating ratio below 80% for the year.
“Construction of Phase I of the Port of Lazaro Cardenas is complete, which brings the capacity to over 500,000 TEUs. Even prior to the expansion, third quarter revenue growth from Lazaro Cardenas was approximately 23%. The opening of Phase I will offer KCS customers new service options and will result in increased intermodal and carload traffic out of the port to both inter-Mexico and cross-border destinations.

 

 

“Finally, at the end of the quarter, KCS and its former Mexican partner, Grupo TMM, S.A. (TMM) entered into an agreement that resolved all remaining claims and disputes over liabilities established in 2005 as part of the acquisition of Grupo TFM, now Kansas City Southern de Mexico (KCSM). The settlement was favorable for KCS and its shareholders as it finalizes KCS’ relationship with TMM and eliminates any future payouts to TMM and potential dilution of KCS shares.”
Headquartered in Kansas City, Mo., KCS is a transportation holding company that has railroad investments in the U.S., Mexico and Panama. Its primary U.S. holding includes 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. KCS’ 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., Canada and Mexico.
This press release includes statements concerning potential future events involving the Company, which could materially differ from the events that actually occur. The differences could be caused by a number of factors including those factors identified in the “Risk Factors” and the “Cautionary Information” sections of the Company’s Form 10-K for the year ended December 31, 2006, filed by the Company with the Securities and Exchange Commission (SEC) (Commission file no. 1-4717). The Company will not update any forward-looking statements in this press release to reflect future events or developments
# # #

 

 

Kansas City Southern
Income Statement
(In millions, except share and per share amounts)
(Unaudited)
                                 
    Three Months     Nine Months  
    Ended September 30,     Ended September 30,  
    2007     2006     2007     2006  
Revenues
   $ 444.1     $ 415.7     $ 1,282.5     $ 1,217.3  
 
                                
Operating expenses:
                                
  Compensation and benefits
     104.7       96.5       303.1       289.1  
  Purchased services
     47.9       56.6       137.7       163.9  
  Fuel
     66.6       66.4       194.8       187.8  
  Equipment costs
     43.7       46.1       137.1       130.1  
  Depreciation and amortization
     38.9       37.7       117.8       112.9  
  Casualties and insurance
     15.9       12.0       52.8       40.1  
  Materials and other costs
     28.2       23.1       85.5       77.3  
 
                        
 
                                
Total operating expenses
     345.9       338.4       1,028.8       1,001.2  
 
                        
 
                                
  Operating income
     98.2       77.3       253.7       216.1  
 
                                
Equity in net earnings of unconsolidated affiliates
     3.3       3.2       7.2       5.7  
Interest expense
     (37.3 )     (42.3 )     (118.3 )     (123.5 )
Debt retirement costs
     —       —       (6.9 )     (2.2 )
Foreign exchange gain (loss)
     (1.9 )     4.5       (1.6 )     (6.7 )
Other income
     2.0       3.5       5.9       9.3  
 
                        
 
                                
  Income before income taxes and minority interest
     64.3       46.2       140.0       98.7  
Income tax expense
     17.5       14.7       40.6       30.2  
 
                        
 
                                
  Income before minority interest
     46.8       31.5       99.4       68.5  
Minority interest
     0.1       0.2       0.3       0.2  
 
                        
 
                                
  Net income
     46.7       31.3       99.1       68.3  
Preferred stock dividends
     4.9       4.9       15.0       14.6  
 
                        
 
                                
  Net income available to common shareholders
   $ 41.8     $ 26.4     $ 84.1     $ 53.7  
 
                        
 
                                
Earnings per share:
                                
  Basic earnings per share
   $ 0.55     $ 0.35     $ 1.11     $ 0.72  
 
                        
 
                                
  Diluted earnings per share
   $ 0.48     $ 0.32     $ 1.00     $ 0.67  
 
                        
 
                                
Average shares outstanding (in thousands):
                                
  Basic
     75,935       75,178       75,797       74,490  
  Potential dilutive common shares
     21,716       16,411       14,781       16,431  
 
                        
  Diluted
     97,651       91,589       90,578       90,921  
 
                        

 

 

Kansas City Southern
Revenue & Carloadings By Commodity – Third Quarter 2007
(Dollars in Millions)
                                             
Carloadings                 Revenue        
Third Quarter     %         Third Quarter     %  
2007   2006 (a)     Change         2007     2006 (a)     Change  
 
                   Coal                        
65,951
     62,370       5.7 %   Unit Coal   $ 39.6     $ 33.7       17.5 %
13,808
     13,708       0.7 %   Other Coal     11.0       9.6       14.6 %
 
                                      
79,759
     76,078       4.8 %   Total     50.6       43.3       16.9 %
 
                                      
 
                                            
 
                   Paper & Forest Products                        
30,431
     34,776       (12.5 %)   Pulp/Paper     42.9       44.7       (4.0 %)
4,946
     1,808       173.6 %   Scrap Paper     6.0       1.8       233.3 %
4,821
     4,374       10.2 %   Pulpwood/Logs/Chips     4.3       2.9       48.3 %
6,534
     7,638       (14.5 %)   Lumber/Plywood     9.5       9.8       (3.1 %)
21,640
     30,275       (28.5 %)   Metal/Scrap     30.5       34.9       (12.6 %)
26,626
     29,145       (8.6 %)   Military/Other Carloads     30.7       28.6       7.3 %
 
                                      
94,998
     108,016       (12.1 %)   Total     123.9       122.7       1.0 %
 
                                      
 
                                            
 
                   Chemical & Petroleum Products                        
3,471
     3,267       6.2 %   Agri Chemicals     4.5       3.9       15.4 %
27,145
     22,749       19.3 %   Other Chemicals     37.1       27.7       33.9 %
15,856
     17,929       (11.6 %)   Petroleum     21.6       24.4       (11.5 %)
11,716
     11,329       3.4 %   Plastics     20.3       18.1       12.2 %
 
                                      
58,188
     55,274       5.3 %   Total     83.5       74.1       12.7 %
 
                                      
 
                                            
 
                   Agriculture and Minerals                        
39,970
     40,711       (1.8 %)   Grain     59.4       54.0       10.0 %
15,944
     17,331       (8.0 %)   Food Products     25.1       26.0       (3.5 %)
14,271
     13,827       3.2 %   Ores and Minerals     12.8       11.1       15.3 %
3,969
     3,950       0.5 %   Stone, Clay & Glass     5.8       5.3       9.4 %
 
                                      
74,154
     75,819       (2.2 %)   Total     103.1       96.4       7.0 %
 
                                      
 
                                            
 
                   Intermodal & Automotive                        
27,997
     24,010       16.6 %   Automotive     29.0       23.8       21.8 %
134,869
     144,172       (6.5 %)   Intermodal     37.4       37.4       0.0 %
 
                                      
162,866
     168,182       (3.2 %)   Total     66.4       61.2       8.5 %
 
                                      
 
                                            
469,965
     483,369       (2.8 %)   TOTAL FOR BUSINESS UNITS     427.5       397.7       7.5 %
 
                   Other KCSR Revenue     16.6       18.0       (7.8 %)
 
                                      
 
                                            
469,965
     483,369       (2.8 %)   TOTAL   $ 444.1     $ 415.7       6.8 %
 
                                      
 
(a)   Certain amounts have been reclassified to reflect changes in the business groups and to conform to the current year presentation.

 

 

Kansas City Southern
Revenue & Carloadings By Commodity – Year to Date September 30, 2007
(Dollars in Millions)
                                             
Carloadings                 Revenue        
Year to Date     %         Year to Date     %  
2007   2006 (a)     Change         2007     2006 (a)     Change  
 
                   Coal                        
192,971
     183,986       4.9 %   Unit Coal   $ 112.1     $ 98.0       14.4 %
39,536
     39,151       1.0 %   Other Coal     29.1       26.3       10.6 %
 
                                      
232,507
     223,137       4.2 %   Total     141.2       124.3       13.6 %
 
                                      
 
                                            
 
                   Paper & Forest Products                        
91,437
     101,246       (9.7 %)   Pulp/Paper     125.5       121.4       3.4 %
13,775
     5,825       136.5 %   Scrap Paper     16.5       5.6       194.6 %
13,371
     14,226       (6.0 %)   Pulpwood/Logs/Chips     11.1       9.4       18.1 %
20,096
     24,483       (17.9 %)   Lumber/Plywood     27.6       31.0       (11.0 %)
74,879
     99,890       (25.0 %)   Metal/Scrap     98.4       109.0       (9.7 %)
83,526
     89,212       (6.4 %)   Military/Other Carloads     91.6       90.5       1.2 %
 
                                      
297,084
     334,882       (11.3 %)   Total     370.7       366.9       1.0 %
 
                                      
 
                                            
 
                   Chemical & Petroleum Products                        
10,462
     11,168       (6.3 %)   Agri Chemicals     12.9       12.1       6.6 %
76,875
     67,087       14.6 %   Other Chemicals     103.0       81.4       26.5 %
49,005
     53,851       (9.0 %)   Petroleum     63.7       69.9       (8.9 %)
33,459
     33,522       (0.2 %)   Plastics     57.8       52.4       10.3 %
 
                                      
169,801
     165,628       2.5 %   Total     237.4       215.8       10.0 %
 
                                      
 
                                            
 
                   Agriculture and Minerals                        
121,722
     121,287       0.4 %   Grain     168.6       152.8       10.3 %
47,708
     50,747       (6.0 %)   Food Products     74.6       75.2       (0.8 %)
41,376
     42,038       (1.6 %)   Ores and Minerals     35.8       33.6       6.5 %
11,921
     12,304       (3.1 %)   Stone, Clay & Glass     17.3       16.2       6.8 %
 
                                      
222,727
     226,376       (1.6 %)   Total     296.3       277.8       6.7 %
 
                                      
 
                                            
 
                   Intermodal & Automotive                        
79,451
     76,212       4.2 %   Automotive     81.8       74.4       9.9 %
385,334
     400,159       (3.7 %)   Intermodal     103.7       100.1       3.6 %
 
                                      
464,785
     476,371       (2.4 %)   Total     185.5       174.5       6.3 %
 
                                      
 
                                            
1,386,904
     1,426,394       (2.8 %)   TOTAL FOR BUSINESS UNITS     1,231.1       1,159.3       6.2 %
 
                   Other KCSR Revenue     51.4       58.0       (11.4 %)
 
                                      
 
                                            
1,386,904
     1,426,394       (2.8 %)   TOTAL   $ 1,282.5     $ 1,217.3       5.4 %
 
                                      
 
(a)   Certain amounts have been reclassified to reflect changes in the business groups and to conform to the current year presentation.