Kansas City Southern's Q4 earnings jump nearly 58% year-over-year to US$55.6M as revenues increase 18% to US$479M, largely on a 12% spike in carloadings
KANSAS CITY, Missouri
January 27, 2011
Fourth Quarter 2010 Results
* Revenues of $479 million, an increase of 18% over fourth quarter 2009 on a 12% increase in carloadings
* Operating income of $135 million, an increase of 47% over fourth quarter 2009
* Operating ratio of 71.8%, a 5.5 point improvement from fourth quarter 2009
* Adjusted diluted earnings per share of $0.62, excluding a $0.12 loss for debt retirement costs in the quarter, an 82% increase over the prior year’s results
Kansas City Southern (KCS) (NYSE:KSU - News) reported fourth quarter 2010 revenues of $479 million reflecting continued improvement in economic conditions in the markets served. Sequentially, revenues recovered from third quarter 2010 which were negatively impacted by service disruptions caused by Hurricane Alex.
Revenue growth was experienced across all commodity groups. Automotive revenues were up 41% over fourth quarter 2009 as a combination of strong pricing and new cross border vehicle routings benefitted the commodity group. Coal revenues increased 31% from a year ago on improved contract pricing which took effect at the beginning of 2010. Intermodal revenues were up 28% on a strong volume increase of 24%. Other period-over-period revenue improvements were 23% for Industrial & Consumer Products, 11% for Chemical & Petroleum, and 8% for Agriculture & Minerals.
Reported operating income for the fourth quarter was $135 million representing a 47% increase from a year ago. The Company reported a fourth quarter 2010 operating ratio of 71.8% compared with 77.3% in fourth quarter of 2009. Operating expenses in the fourth quarter increased 9% from a year ago on a revenue increase of 18%.
The Company has produced positive free cash flow of $174 million year to date, including $48 million in the fourth quarter.
Reported net income available to common stockholders in the fourth quarter totaled $52 million, or $0.50 per diluted share, compared to $32 million, or $0.34 per diluted share in fourth quarter 2009. Excluding debt retirement costs related to refinancing activity in the fourth quarter 2010, adjusted diluted earnings per share was $0.62, an 82% increase over the fourth quarter 2009.
For the full year 2010, revenues were $1,815 million, up 23% over 2009 in spite of lost revenue from Hurricane Alex in the third quarter of 2010. Carloads for 2010 were up 15% over 2009 as the general economy improved and KCS continues to execute on its plan. Operating income increased 82% over the prior year and the Company’s 2010 operating ratio was 73.2%, an 8.8 point improvement from 2009. Diluted earnings per share for full year 2010 were $1.67 compared to $0.60 for 2009. Excluding debt retirement costs, adjusted diluted earnings per share were $2.11 and $0.64 for 2010 and 2009, respectively.
“A solid fourth quarter capped off a year in which KCS’s 2010 linehaul revenues exceeded 2008 levels,” stated executive chairman Michael R. Haverty. “The speed with which we recovered was truly impressive and speaks to the resiliency and vitality of the markets KCS serves and to the quality of our management who has been instrumental in the Company attaining record levels of operating efficiency and profitability. We believe that KCS will continue to deliver attractive volume and revenue growth as well as sustaining a high level of operating performance in 2011.”
David L. Starling, president and chief executive officer, stated, “KCS’s fourth quarter operating ratio of 71.8% improved 5.5 points from a year ago and marked the lowest quarterly operating ratio in the Company’s history. Our business strategy is targeted toward continuous improvement of our system operations and, given a stable economy, we expect KCS to improve its annual operating ratio in future years.
“Overall, we ended the year having made good progress in maximizing operational efficiency, improving our track and facilities infrastructure and strengthening our balance sheet and capital structure. KCS is well-positioned for continued improvement in these key areas again in 2011.”
CHANGE IN ACCOUNTING PRINCIPLE
Certain prior year amounts have been adjusted for the retrospective change in accounting principle for rail grinding costs.
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.
IndustryIntel Editor's Note: In an omitted table, the company reported Q4 net income of $55.6 million. For the same quarter a year ago, the company reported net income of $35.2 million.
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