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Kansas City Southern Reports Record Fourth Quarter and Full-Year 2018 Results

January 18, 2019

KANSAS CITY, Mo.--(BUSINESS WIRE)--Jan 18, 2019--Kansas City Southern (KCS) (NYSE:KSU) 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.

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.”

Headquartered in Kansas City, Mo., Kansas City Southern (KCS) (NYSE: KSU) 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. KCS’ North American rail holdings and strategic alliances with other North American rail partners are primary components of a unique railway system, linking the commercial and industrial centers of the U.S., Mexico and Canada. More information about KCS can be found at www.kcsouthern.com.

This news release contains “forward-looking statements” within the meaning of the securities laws concerning potential future events involving KCS and its subsidiaries, which could materially differ from the events that actually occur. Words such as “projects,” “estimates,” “forecasts,” “believes,” “intends,” “expects,” “anticipates,” and similar expressions are intended to identify many of these forward-looking statements. Such forward-looking statements are based upon information currently available to management and management’s perception thereof as of the date hereof. Differences that actually occur could be caused by a number of external factors over which management has little or no control, including: competition and consolidation within the transportation industry; the business environment in industries that produce and use items shipped by rail; loss of the rail concession of KCS’ subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination of, or failure to renew, agreements with customers, other railroads and third parties; access to capital; disruptions to KCS’ technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents on KCS’ rail network or at KCS’ facilities or customer facilities involving the release of hazardous materials, including toxic inhalation hazards; fluctuation in prices or availability of key materials, in particular diesel fuel; dependency on certain key suppliers of core rail equipment; changes in securities and capital markets; unavailability of qualified personnel; labor difficulties, including strikes and work stoppages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic, political and social conditions; the level of trade between the United States and Asia or Mexico; fluctuations in the peso-dollar exchange rate; increased demand and traffic congestion; the outcome of claims and litigation involving KCS or its subsidiaries; and other factors affecting the operation of the business. More detailed information about factors that could affect future events may be found in filings by KCS with the Securities and Exchange Commission, including KCS’ Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 1-4717) and subsequent reports. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. KCS is not obligated to update any forward-looking statements to reflect future events or developments.

View source version on businesswire.com:https://www.businesswire.com/news/home/20190118005072/en/

CONTACT: KCS

Ashley Thorne, 816-983-1530

athorne@kcsouthern.com

KEYWORD: UNITED STATES NORTH AMERICA MISSOURI

INDUSTRY KEYWORD: TRANSPORT AIR MARITIME RAIL TRUCKING OTHER TRANSPORT

SOURCE: Kansas City Southern

Copyright Business Wire 2019.

PUB: 01/18/2019 08:00 AM/DISC: 01/18/2019 08:01 AM

http://www.businesswire.com/news/home/20190118005072/en