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Kansas City Southern reports record quarterly revenues and operating ratio of 68.7% in 3Q 2012

(Source: Kansas City Southern press release, October 19, 2012)

KANSAS CITY, Mo. — Kansas City Southern (KCS) reported record third quarter 2012 revenues of $577 million, an increase of 6% over third quarter 2011 on a 7% increase in carloads.

Third quarter 2012 highlights:

• Record quarterly revenues of $577 million, a 6% increase over 2011.
• Operating income of $181 million. Adjusting for the third quarter 2011 gain on hurricane-related insurance recoveries, operating income increased by 16% compared to 2011.
• Operating ratio of 68.7%, a 2.6 point improvement compared to the 2011 adjusted operating ratio.
• Diluted earnings per share of $0.82 compared to 2011 adjusted diluted earnings per share of $0.78.

Third quarter revenue growth compared to 2011 was led by a 31% increase in Automotive and a 25% increase in Intermodal revenues. Revenue from Energy was also strong, growing 8% over 2011. Revenues from Chemical & Petroleum and Industrial & Consumer grew by 4% and 1%, respectively, in the third quarter. Agriculture & Minerals revenue declined by 10% compared to 2011.

Operating income for the third quarter of 2012 was $181 million compared with $182 million a year ago. Adjusting for the third quarter 2011 gain on insurance recoveries related to Hurricane Alex, operating income increased by 16% over the prior year. KCS reported a third quarter 2012 operating ratio of 68.7%, a 2.6 point improvement over the 2011 adjusted operating ratio and an all time record.

Operating expenses in the third quarter were $397 million compared with $363 million in the corresponding 2011 period. Adjusting for the third quarter 2011 gain on insurance recoveries, operating expense increased by 2% over the prior year.

Reported net income in the third quarter of 2012 totaled $91 million, or $0.82 per diluted share, compared with $100 million, or $0.91 per diluted share, in the third quarter of 2011. Adjusting for the third quarter 2011 gain on insurance recoveries and debt retirement costs, earnings per diluted share increased by 5% over third quarter 2011.

“The combination of solid top line growth and disciplined operating performance resulted in KCS delivering a third quarter operating ratio of 68.7%, the best in the Company’s history,” stated David L. Starling, KCS president and chief executive officer.

“Revenues were primarily driven by KCS’ five fastest growing categories – automotive, cross-border intermodal, container traffic through Lázaro Cárdenas, crude oil and frac sand. Collectively, these five categories, which represent approximately 18% of total KCS freight revenues for the third quarter, grew by 46% when compared to the third quarter 2011, and we believe that there is significant long term growth potential in each of these areas.

“On the expense side, what stands out is that while KCS experienced 7% volume growth, year-over-year operating expenses increased only 2% after adjusting for the hurricane-related insurance recoveries in 2011. KCS has firm control over all aspects of its operations and in the third quarter this resulted in industry-leading employee productivity, a 2.6 point improvement in its adjusted operating ratio and excellent incremental margins.

“Given a persistently sluggish U.S. economy and the impact of this summer’s drought on the nation’s grain harvest, KCS’ solid third quarter operating results speak to the strength of our franchise. More importantly, over the long term we believe that KCS can produce strong and sustained financial and operating results. When we look out to a host of new and expanded business opportunities coming on-line during the second half of 2013 and beyond, there is good reason for investors to be enthusiastic about KCS’ continued long-term growth trajectory.”

Friday, October 26, 2012

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