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Rail News: Kansas City Southern

KCS sets several revenue and volume records


On Jan. 8, Kansas City Southern marked its 125th anniversary. Fifteen days later, the Class I marked something else: the stellar financial results it recorded in the fourth quarter and for all of 2011. In the quarter, KCS set revenue and volume records, and in the full year, the railroad surpassed $2 billion in revenue and exceeded 2 million carloads for the first time.

Fourth-quarter revenue jumped 30 percent to a record $530 million, volume rose 7 percent to a record 521,800 units, operating income climbed 11 percent to $150 million, net income soared 73 percent to $96 million, reported diluted earnings per share ballooned 74 percent to 87 cents and the operating ratio improved 0.2 points to 71.6 compared with fourth-quarter 2010 results.

Although traffic declined in three of the Class I’s six business groups, strong automotive, intermodal and coal demand drove the revenue and carload gains, KCS senior executives said yesterday during their earnings webcast and teleconference. Automotive revenue jumped 30 percent to $30 million and volume climbed 22 percent to 23,600 units; intermodal revenue jumped 29 percent to $69.9 million and volume rose 18 percent to 220,300 units; and coal revenue increased 20 percent to $75 million and volume rose 8 percent to 76,800 units. In addition, the three business groups that struggled in the fourth quarter already have registered rebounds early in the first quarter, KCS execs said yesterday during their earnings webcast and teleconference.

The quarterly results were especially gratifying considering that two years ago, the railroad was trying to come out of “the worst economic environment since the Depression,” said KCS President and Chief Executive Officer David Starling.

Meanwhile, fourth-quarter operating expenses rose 10.5 percent to $379.9 million primarily because fuel costs jumped 24 percent to $88.5 million and compensation and benefits costs climbed 12 percent to $109.7 million. During the quarter, fuel prices increased 17 percent and headcount inched up 0.5 percent to 6,124.

For the full year, revenue rose 16 percent to a record $2.1 billion, carloads increased 8 percent to a record 2 million units, operating income shot up 26 percent to $612 million, diluted earnings per share nearly doubled to $3 and the reported operating ratio improved 2.3 points to 70.9 compared with 2010 results. KCS has shaved its operating ratio by 10 points in the past five years and the next goal will be to attain a ratio that begins with a six, said Starling.

"It may not be in 2012, but it's certainly doable in the future," he said. “We believe that in 2012, KCS will continue on a growth trend similar to that of the past year with mid-single-digit increases in volumes and pricing."

Jeff Stagl

Contact Progressive Railroading editorial staff.

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