Kansas City Southern (KSU, Financial) filed Quarterly Report for the period ended 2012-03-31.
Kansas City Sou has a market cap of $7.85 billion; its shares were traded at around $74.83 with a P/E ratio of 24.3 and P/S ratio of 3.7. The dividend yield of Kansas City Sou stocks is 1.1%. Kansas City Sou had an annual average earning growth of 13.1% over the past 10 years.
Concession Duty. Under Kansas City Southern de México, S.A. de C.V. s (“KCSM”) 50-year railroad concession from the Mexican government (the “Concession”), the Mexican government has the right to receive a payment from KCSM equivalent to 0.5% of KCSM s gross revenue during the first 15 years of the Concession period and, beginning on June 24, 2012, 1.25% of KCSM s gross revenue for the remaining years of the Concession period. For the three months ended March 31, 2012, the concession duty expense, which is recorded within operating expenses, was $1.3 million, compared to $1.1 million for the same period in 2011.
The Company reported quarterly earnings of $0.68 per diluted share on consolidated net income of $75.0 million for the three months ended March 31, 2012, compared to quarterly earnings of $0.58 per diluted share on consolidated net income of $64.0 million for the same period in 2011.
Operating expenses increased 8% compared to the same period in 2011, primarily due to higher volumes, increases in fuel prices and compensation and benefit expense, partially offset by the effect of fluctuations in the value of the Mexican peso against the value of the U.S. dollar for operating expenses denominated in Mexican pesos. Operating expenses as a percentage of revenues declined to 71.2% for the three months ended March 31, 2012, as compared to 73.8% for the same period in 2011.
Materials and other. Materials and other expense increased $5.3 million for the three months ended March 31, 2012, compared to the same period in 2011 primarily due to a settlement of a legal dispute recorded in the first quarter of 2012 and increases in employee expenses and property tax expense. The Company expects materials and other expense to increase by approximately $4.0 million for the year ending December 31, 2012 due to an increase in the concession duty rate. KCSM currently pays concession duty expense of 0.5% of gross revenues, and beginning on June 24, 2012, KCSM will pay 1.25% of gross revenues for the remaining years of the Concession.
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Kansas City Sou has a market cap of $7.85 billion; its shares were traded at around $74.83 with a P/E ratio of 24.3 and P/S ratio of 3.7. The dividend yield of Kansas City Sou stocks is 1.1%. Kansas City Sou had an annual average earning growth of 13.1% over the past 10 years.
Highlight of Business Operations:
Interest Rate Swaps. On March 5, 2012, the Company entered into four amortizing interest rate swaps with an aggregate notional amount of $320.0 million, which have been designated as cash flow hedges. The interest rate swaps effectively convert interest payments on a portion of outstanding term loans of The Kansas City Southern Railway Company (“KCSR”), a wholly-owned subsidiary of KCS, from variable rates to fixed rates. The swaps are highly effective and as a result there will be minimal earnings impact associated with ineffectiveness of these hedges. As of March 31, 2012, the hedging instruments have an aggregate notional amount of $316.8 million at a fixed rate of 0.4942%. Settlements are indexed to the one-month London Interbank Offered Rate (“LIBOR”) and will occur monthly beginning March 30, 2012 through March 31, 2014.Concession Duty. Under Kansas City Southern de México, S.A. de C.V. s (“KCSM”) 50-year railroad concession from the Mexican government (the “Concession”), the Mexican government has the right to receive a payment from KCSM equivalent to 0.5% of KCSM s gross revenue during the first 15 years of the Concession period and, beginning on June 24, 2012, 1.25% of KCSM s gross revenue for the remaining years of the Concession period. For the three months ended March 31, 2012, the concession duty expense, which is recorded within operating expenses, was $1.3 million, compared to $1.1 million for the same period in 2011.
The Company reported quarterly earnings of $0.68 per diluted share on consolidated net income of $75.0 million for the three months ended March 31, 2012, compared to quarterly earnings of $0.58 per diluted share on consolidated net income of $64.0 million for the same period in 2011.
Operating expenses increased 8% compared to the same period in 2011, primarily due to higher volumes, increases in fuel prices and compensation and benefit expense, partially offset by the effect of fluctuations in the value of the Mexican peso against the value of the U.S. dollar for operating expenses denominated in Mexican pesos. Operating expenses as a percentage of revenues declined to 71.2% for the three months ended March 31, 2012, as compared to 73.8% for the same period in 2011.
Materials and other. Materials and other expense increased $5.3 million for the three months ended March 31, 2012, compared to the same period in 2011 primarily due to a settlement of a legal dispute recorded in the first quarter of 2012 and increases in employee expenses and property tax expense. The Company expects materials and other expense to increase by approximately $4.0 million for the year ending December 31, 2012 due to an increase in the concession duty rate. KCSM currently pays concession duty expense of 0.5% of gross revenues, and beginning on June 24, 2012, KCSM will pay 1.25% of gross revenues for the remaining years of the Concession.
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