Kansas City Southern Reports Record Fourth Quarter and Full-Year 2012 Revenues, Carloads and Operating Income

  Kansas City Southern Reports Record Fourth Quarter and Full-Year 2012
  Revenues, Carloads and Operating Income

Fourth Quarter 2012 Results

  *Revenue of $568 million, an increase of 7% over fourth quarter 2011.
  *Operating income of $174 million, 15% higher than a year ago.
  *Operating ratio of 69.5%, compared with 71.6% in fourth quarter 2011.
  *Diluted earnings per share for fourth quarter 2012 was $0.83. Adjusted
    diluted earnings per share was $0.92 for fourth quarter 2012.

Business Wire

KANSAS CITY, Mo. -- January 22, 2013

Kansas City Southern (KCS) (NYSE:KSU) reported record fourth quarter 2012
revenues of $568 million. Fourth quarter carloads of 532 thousand, also a
record, increased 2% over fourth quarter 2011.

Compared to 2011, fourth quarter revenue growth was led by a 33% increase in
Automotive revenue and 14% increases in Chemical & Petroleum and Intermodal
revenue. Industrial & Consumer Products was also strong with revenues growing
by 11% in the fourth quarter of 2012. Energy and Agriculture & Minerals
revenues declined by 1% and 11%, respectively.

Operating income for the fourth quarter of 2012 was $174 million compared with
$150 million a year ago, a 15% increase. KCS reported a fourth quarter 2012
operating ratio of 69.5%, a 2.1 point improvement from fourth quarter 2011.
Operating expenses in the fourth quarter were $395 million compared with $380
million in the corresponding 2011 period, a 4% increase.

Reported net income in the fourth quarter of 2012 totaled $92 million, or
$0.83 per diluted share, compared with $96 million, or $0.87 per diluted
share, in the fourth quarter of 2011. Excluding debt retirement costs and the
impacts of foreign exchange rate fluctuations, adjusted diluted earnings per
share for fourth quarter 2012 was $0.92 compared to $0.77 in 2011.

For the full year of 2012, revenue was a record $2.2 billion, up 7% over 2011.
Carloads for 2012 were 2.1 million, an increase of 5% over the prior year.

Full-year operating income was $716 million, a 17% increase over the prior
year, and the Company’s 2012 operating ratio was 68.0% compared with 70.9% in
2011. Excluding one-time benefits from the elimination of a net deferred
liability in 2012 and insurance recoveries in 2011, full-year 2012 adjusted
operating income was $673 million, an increase of 15% over prior year’s
adjusted operating income. The 2012 full-year adjusted operating ratio was
69.9%, a 2.2 point improvement over the prior year’s adjusted operating ratio.

“It is to the credit of the entire KCS team that the Company successfully
navigated its way through a host of challenging economic and climatic issues
to make 2012 one of the best years in its 125-year history,” stated David L.
Starling, KCS president and chief executive officer.

“Despite the impact on our coal franchise of an unseasonably warm winter and
low natural gas prices, the effect on our grain carloadings of one of the most
severe droughts in U.S. history and finally, the dampening effect on overall
economic activity late in the year due to fiscal cliff concerns, KCS achieved
record carloadings and revenues in 2012. This success is due in large part to
the balanced and diverse mix of commodities that KCS transports and the
ability of employees at every level of the company to react quickly and
effectively to opportunities in the transportation marketplace.

“KCS reported a fourth quarter 2012 operating ratio of 69.5% compared to 71.6%
in the fourth quarter of 2011. For the full year, KCS’ adjusted operating
ratio was 69.9%, a 2.2 point improvement to the full year 2011 adjusted
operating ratio of 72.1%.

“In addition, KCS met the top-line guidance targets for full-year 2012 of
mid-single digit growth in volume, revenues and pricing that were outlined in
July. With a host of new facilities that KCS will serve coming on-line in the
second half of 2013 and in 2014, coupled with expanded business opportunities
throughout all commodity groups, we believe in the Company’s ability to
generate strong revenue growth over both the short and longer term.

“Management remains focused on closely monitoring every aspect of KCS’ ongoing
operations while also overseeing the expansion of system capacity in order to
stay ahead of the sustained growth we anticipate. We are committed to this in
order to ensure good service for our customers and to maximize returns to our
shareholders.”

GAAP RECONCILIATIONS
                                                              
($ in millions, except per share amounts)
                                                                     
Reconciliation of Diluted Earnings per Share to           Three Months Ended

Adjusted Diluted Earnings per Share                     December 31,
                                                           2012      2011  
Diluted earnings per share                                $ 0.83     $ 0.87
Adjustment for debt retirement costs                        0.01       0.14
Adjustment for foreign exchange loss                        0.01       0.01
Adjustment for foreign exchange component of
                                                           0.07      (0.25 )
income taxes
Adjusted diluted earnings per share - see (a)             $ 0.92     $ 0.77  
below

                                              
Reconciliation of Operating Expenses to            Twelve Months Ended
Adjusted
                                                   December 31,
Operating Expenses
                                                    2012        2011    
Operating expenses as reported                     $ 1,522.7       $ 1,486.7
Adjustment for elimination of net deferred           43.0            -
liability
Adjustment for gain on insurance                    -             25.6    
recoveries
Adjusted operating expenses - see (b)              $ 1,565.7      $ 1,512.3 
below
                                                                   
Operating income as reported                       $ 715.9         $ 611.6
Adjusted operating income - see (b) below            672.9           586.0
                                                                   
Operating ratio (c) as reported                      68.0    %       70.9    %
Adjusted operating ratio - see (b) and (c)           69.9    %       72.1    %
below
                                                                             

      The Company believes adjusted diluted earnings per share is meaningful
      as it allows investors to evaluate the Company’s performance for
(a)  different periods on a more comparable basis by excluding the impact of
      changes in foreign currency exchange rates and items that are not
      directly related to the ongoing operations of the Company.
      The Company believes adjusted operating expenses, operating income and
      operating ratio are meaningful as they allow investors to evaluate the
(b)   Company’s performance for different periods on a more comparable basis
      by excluding items that are not directly related to the ongoing
      operations of the Company.
      Operating ratio is calculated by dividing operating expenses by
(c)   revenues; or in the case of adjusted operating ratio, adjusted operating
      expenses divided by revenues.
      

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 México, 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.

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. The words “projects,” “estimates,” “forecasts,” “believes,” “intends,”
“expects,” “anticipates,” and similar expressions are intended to identify
forward-looking statements. Such forward-looking statements are based upon
information currently available to management and management’s perception
thereof as of the date of this news release. 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 consume rail freight; revocation of the rail concession of KCS’s
subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination, or
failure to renew, agreements with customers, other railroads and third
parties; interest rates; access to capital; disruptions to KCS’s technology
infrastructure, including its computer systems; natural events such as severe
weather, hurricanes and floods; market and regulatory responses to climate
change; credit risk of customers and counterparties and their failure to meet
their financial obligations; legislative and regulatory developments and
disputes; rail accidents or other incidents or accidents along KCS’s rail
network, 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; loss of key personnel; labor difficulties, including strikes
and work stoppages; insufficiency of insurance to cover lost revenue, profits
or other damages; acts of terrorism or risk of terrorist activities; war or
risk of war; domestic and international economic conditions; political and
economic conditions in Mexico and the level of trade between the United States
and Mexico; the outcome of claims and litigation involving KCS or its
subsidiaries; and other factors affecting the operation of the business. More
detailed information about these factors may be found in filings by KCS with
the Securities and Exchange Commission, including KCS’s Annual Report on Form
10-K for the year ended December 31, 2011 (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 in this news release to
reflect future events or developments.

                                                             
Kansas City Southern
Consolidated Statements of Income
(In millions, except share and per share amounts)
(Unaudited)
                             Three Months Ended      Twelve Months Ended
                             December 31,            December 31,
                             2012        2011        2012          2011
Revenues                     $ 568.4    $ 530.3    $ 2,238.6    $ 2,098.3 
Operating expenses:
Compensation and             107.0       109.7       430.5         423.8
benefits
Purchased services           50.5        51.3        219.8         204.8
Fuel                         94.9        88.5        359.6         346.5
Equipment costs              42.8        42.8        167.1         172.0
Depreciation and             51.9        47.1        198.8         186.2
amortization
Materials and other          47.7        40.5        189.9         179.0
Elimination of deferred
statutory profit sharing     —           —           (43.0     )   —
liability, net
Gain on insurance
recoveries related to        —          —          —            (25.6     )
hurricane damage
Total operating expenses     394.8      379.9      1,522.7      1,486.7   
Operating income             173.6       150.4       715.9         611.6
Equity in net earnings
of unconsolidated            4.2         4.6         19.3          18.2
affiliates
Interest expense             (23.8   )   (31.4   )   (100.4    )   (129.1    )
Debt retirement costs        (2.1    )   (24.5   )   (20.1     )   (38.7     )
Foreign exchange gain        (1.4    )   (2.3    )   2.7           (9.2      )
(loss)
Other income (expense),      (0.2    )   (0.1    )   (1.0      )   2.2       
net
Income before income         150.3       96.7        616.4         455.0
taxes
Income tax expense           57.8       0.7        237.0        123.1     
Net income                   92.5        96.0        379.4         331.9
Less: Net income
attributable to              0.7        0.3        2.1          1.6       
noncontrolling interest
Net income attributable
to Kansas City Southern      91.8        95.7        377.3         330.3
and subsidiaries
Preferred stock              —          0.1        0.2          1.6       
dividends
Net income available to      $ 91.8     $ 95.6     $ 377.1      $ 328.7   
common stockholders
                                                                   
Earnings per share:
Basic earnings per share     $ 0.84     $ 0.87     $ 3.44       $ 3.04    
Diluted earnings per         $ 0.83     $ 0.87     $ 3.43       $ 3.00    
share
                                                                   
Average shares
outstanding (in
thousands):
Basic                        109,793     109,566     109,712       108,208
Potentially dilutive         344        346        368          1,622     
common shares
Diluted                      110,137    109,912    110,080      109,830   
                                                                   
Cash dividends declared      $ 0.195    $ —        $ 0.780      $ —       
per common share
                                                                             

                                                                                                          
Kansas City Southern
Revenue & Carloads/Units by Commodity - Fourth Quarter 2012 and 2011
                                                                                           
                Revenues                         Carloads and                 Revenue per
                                                 Units
                (in millions)                    (in thousands)               Carload/Unit
                Fourth Quarter          %        Fourth Quarter     %        Fourth Quarter          %
                2012        2011        Change   2012      2011      Change   2012        2011        Change
                                                                                                      
Chemical &
Petroleum
Chemicals       $ 50.7      $ 44.1      15  %    27.7      26.3      5   %    $ 1,830     $ 1,677     9   %
Petroleum       26.6        23.6        13  %    17.9      16.6      8   %    1,486       1,422       5   %
Plastics        26.7       23.9       12  %    16.0     15.8     1   %    1,669      1,513      10  %
Total           104.0      91.6       14  %    61.6     58.7     5   %    1,688      1,560      8   %
                                                                                                      
Industrial
& Consumer
Products
Forest          64.0        59.0        8   %    31.7      32.0      (1  %)   2,019       1,844       9   %
Products
Metals &        56.2        46.2        22  %    31.2      26.7      17  %    1,801       1,730       4   %
Scrap
Other           17.1       18.1       (6  %)   19.0     18.4     3   %    900        984        (9  %)
Total           137.3      123.3      11  %    81.9     77.1     6   %    1,676      1,599      5   %
                                                                                                      
Agriculture
& Minerals
Grain           45.9        54.0        (15 %)   27.3      33.3      (18 %)   1,681       1,622       4   %
Food            35.0        36.7        (5  %)   15.3      16.8      (9  %)   2,288       2,185       5   %
Products
Ores &          5.0         5.7         (12 %)   5.2       5.7       (9  %)   962         1,000       (4  %)
Minerals
Stone, Clay     6.0        6.6        (9  %)   3.0      3.1      (3  %)   2,000      2,129      (6  %)
& Glass
Total           91.9       103.0      (11 %)   50.8     58.9     (14 %)   1,809      1,749      3   %
                                                                                                      
Energy (i)
Utility         54.1        66.9        (19 %)   51.5      66.7      (23 %)   1,050       1,003       5   %
Coal
Coal &
Petroleum       10.1        8.1         25  %    13.2      10.1      31  %    765         802         (5  %)
Coke
Frac Sand       13.1        9.7         35  %    5.9       5.7       4   %    2,220       1,702       30  %
Crude Oil       7.3        0.8        813 %    3.5      0.7      400 %    2,086      1,143      83  %
Total           84.6       85.5       (1  %)   74.1     83.2     (11 %)   1,142      1,028      11  %
                                                                                                      
Intermodal      80.0       69.9       14  %    234.8    220.3    7   %    341        317        8   %
                                                                                                      
Automotive      49.1       37.0       33  %    28.5     23.6     21  %    1,723      1,568      10  %
                                                                                                      
TOTAL FOR
COMMODITY       546.9       510.3       7   %    531.7    521.8    2   %    $ 1,029    $ 978      5   %
GROUPS
                                                                                                      
Other           21.5       20.0       8   %
Revenue
                                                                                                      
TOTAL           $ 568.4    $ 530.3    7   %

(i) Effective January 1, 2012, the Company established the Energy commodity
group, which includes the previous Coal commodity group and certain amounts
previously included within the Agriculture & Minerals and Chemicals &
Petroleum commodity groups. Prior period amounts have been reclassified to
conform to the current year presentation.

                                                                                                                  
Kansas City Southern
Revenue & Carload/Units by Commodity - Years Ended December 31, 2012 and 2011
                                                                                                   
                Revenues                             Carloads and Units               Revenue per
                (in millions)                        (in thousands)                   Carload/Unit
                Years Ended                 %        Years Ended            %        Years Ended             %
                2012          2011          Change   2012        2011        Change   2012        2011        Change
                                                                                                              
Chemical &
Petroleum
Chemicals       $ 200.2       $ 192.0       4   %    111.9       115.5       (3  %)   $ 1,789     $ 1,662     8   %
Petroleum       105.8         106.8         (1  %)   70.7        72.1        (2  %)   1,496       1,481       1   %
Plastics        104.3        97.5         7   %    64.2       64.5       —       1,625      1,512      7   %
Total           410.3        396.3        4   %    246.8      252.1      (2  %)   1,662      1,572      6   %
                                                                                                              
Industrial
& Consumer
Products
Forest          253.9         233.0         9   %    129.1       128.8       —        1,967       1,809       9   %
Products
Metals &        224.8         195.3         15  %    126.7       117.1       8   %    1,774       1,668       6   %
Scrap
Other           72.4         75.3         (4  %)   80.3       80.7       —       902        933        (3  %)
Total           551.1        503.6        9   %    336.1      326.6      3   %    1,640      1,542      6   %
                                                                                                              
Agriculture
& Minerals
Grain           213.1         212.1         —        122.8       128.3       (4  %)   1,735       1,653       5   %
Food            140.0         150.3         (7  %)   61.8        69.8        (11 %)   2,265       2,153       5   %
Products
Ores &          21.6          27.5          (21 %)   21.4        27.1        (21 %)   1,009       1,015       (1  %)
Minerals
Stone, Clay     25.8         25.7         —       12.9       13.4       (4  %)   2,000      1,918      4   %
& Glass
Total           400.5        415.6        (4  %)   218.9      238.6      (8  %)   1,830      1,742      5   %
                                                                                                              
Energy (i)
Utility         211.0         245.5         (14 %)   211.6       245.8       (14 %)   997         999         —
Coal
Coal &
Petroleum       34.6          36.5          (5  %)   46.5        42.3        10  %    744         863         (14 %)
Coke
Frac Sand       50.8          31.8          60  %    25.6        21.3        20  %    1,984       1,493       33  %
Crude Oil       16.4         3.6          356 %    8.7        2.6        235 %    1,885      1,385      36  %
Total           312.8        317.4        (1  %)   292.4      312.0      (6  %)   1,070      1,017      5   %
                                                                                                              
Intermodal      306.5        251.8        22  %    914.2      798.8      14  %    335        315        6   %
                                                                                                              
Automotive      174.4        139.2        25  %    103.7      85.6       21  %    1,682      1,626      3   %
                                                                                                              
TOTAL FOR
COMMODITY       2,155.6       2,023.9       7   %    2,112.1    2,013.7    5   %    $ 1,021    $ 1,005    2   %
GROUPS
                                                                                                              
Other           83.0         74.4         12  %
Revenue
                                                                                                              
TOTAL           $ 2,238.6    $ 2,098.3    7   %

(i) Effective January 1, 2012, the Company established the Energy commodity
group, which includes the previous Coal commodity group and certain amounts
previously included within the Agriculture & Minerals and Chemicals &
Petroleum commodity groups. Prior period amounts have been reclassified to
conform to the current year presentation.

Contact:

Kansas City Southern
William H. Galligan, 816-983-1551
bgalligan@kcsouthern.com
 
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