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KCS reports fourth quarter and full-year 2018 results

(Source: Kansas City Southern press release (PDF), January 18, 2019)

KANSAS CITY, Mo. — Kansas City Southern (KCS) reported record fourth quarter 2018 revenues of $694 million, an increase of 5% from fourth quarter 2017 while carload volumes remained flat compared to prior year.

Fourth quarter 2018 highlights:

• Record fourth quarter revenues of $694 million, an increase of 5% from fourth quarter 2017
• Reported operating income of $256 million. Record fourth quarter adjusted operating income of $248 million, excluding a gain on insurance recoveries related to hurricane damage
• Reported operating ratio of 63.1%, compared to 64.0% in fourth quarter 2017. Adjusted operating ratio of 64.3%
• Reported diluted earnings per share of $1.59. Record fourth quarter adjusted diluted earnings per share of$1.56, 13% higher than a year ago

Reported operating expenses in the fourth quarter of 2018 were $438 million. Excluding a gain on insurance recoveries related to damage and service interruptions from Hurricane Harvey in 2017, adjusted operating expenses were $446 million, 6% higher than 2017. Adjusted operating income was $248 million, 4% higher than a year ago. KCS reported an adjusted fourth quarter operating ratio of 64.3%, 30 basis points higher than prior year.

Reported net income in the fourth quarter of 2018 was $162 million, or $1.59 per diluted share. As presented in the following reconciliations, adjusted diluted earnings per share was a fourth quarter record $1.56, 13% higher than a year ago.

For the full year of 2018, KCS achieved record revenues, adjusted operating income and adjusted diluted earnings per share. Revenue was $2.7 billion, up 5% from 2017, on 2% carload growth. Full year 2018 operating income was $986 million. Excluding a gain on insurance recoveries, adjusted operating income was $968 million, a 5% increase over prior year. The Company’s 2018 adjusted operating ratio was 64.3%, unchanged from 2017.

Reported net income in 2018 was $629 million, or $6.13 per diluted share. As presented in the following reconciliations, adjusted diluted earnings per share was a record $5.97, 14% higher than a year ago.

“While we delivered record revenues, adjusted operating income and adjusted earnings per share, 2018 did not meet our own expectations for financial or operational performance” stated President and Chief Executive Officer Patrick J. Ottensmeyer. “In addition, we did not meet the expectations of our customers or shareowners, particularly in the areas of customer service and growth.

“KCS has entered 2019 with a renewed and heightened focus on operational excellence. Throughout the year, we will implement principles of the Precision Scheduled Railroading (PSR) methodology that are most applicable to our network. We expect this focus on operational excellence and PSR principles to help drive improvement in asset utilization, cost and capital efficiency and customer satisfaction.

“As we look forward, our confidence in topline growth and operational improvement is strong, supporting our outlook for an operating ratio of 60% to 61% by the year 2021.”

Friday, January 18, 2019

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