Kansas City Southern (NYSE:KSU) Q4 2015 Earnings Conference Call - Preliminary Transcript

Jan 22, 2016 • 08:45 am ET

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Kansas City Southern (NYSE:KSU) Q4 2015 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Greetings and welcome to the Kansas City Southern Fourth Quarter 2015 Earnings Release Conference Call. At this time all participants are in listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dave Starling. Please go ahead, sir.

Executive
Dave Starling

Good morning and welcome to Kansas City Southern's fourth quarter 2015 earnings conference call. Presenting with me this morning are President Pat Ottensmeyer; Chief Transportation Officer, Jeff Songer; Chief Marketing Officer, Brian Hancock; Chief Financial Officer, Mike Upchurch; and on the phone from Mexico will be Jose Zozaya, our President and Executive Representative for the answering session of the call.

Turning for our fourth quarter, the combination of a challenging economy and the dual impact of a weak peso and lower than normal fuel surcharge revenues resulted in revenues declining 7% from fourth quarter 2014. The combination of foreign exchange and lower us fuel prices had significant effect on our consolidated revenue. Excluding those factors, KCS's revenue for the fourth quarter of 2014 were approximately flat with the prior year.

The company responded very well to the difficult macro conditions, which is illustrated by our posting of 63.3 operating ratio for the quarter, an improvement of 3.4 points compared to fourth quarter 2014. Prime contributors to KCS's strong operating ratio, or steadily improving system velocity and system level metrics, which have essentially returned to our 2013 levels. Making our performance even more impressive is the fact that we had to contend with the hurricane that hit Mexico in late October, and devastating floods in southern Missouri in late December.

In both cases, we had worked around washouts and weather related service delays. Despite the challenges, we operated at high level of efficiency, and recorded service metrics that put KCS in the top tier amongst class ones. Macroeconomic forces served to constrain levels of business growth in certain commodity segments, which appears to be the case moving into 2016. We do not have a crystal ball to help project how the industrial economy will perform over the next six to 12 months. For that reason, we are unable to project definite growth and revenue numbers for the near future.

As Jeff will discuss some of the areas in which we believe KCS can show measurable productivity improvements in 2016, as well as cover some of the capital projects necessary to handle the business growth opportunities that Brian Hancock and his team will be bringing online in the second half of 2016 and into '17 and beyond. With an alternate over to Pat.

Executive
Pat Ottensmeyer

Thanks, Dave. And good morning, everyone. I will begin my comments on Slide 7. Before I get into the data on this slide, let me just pick up on Dave's opening comments by saying that we are not going to talk a lot this morning about the factors which affected our performance, that -- and our outlook, that we do not control