Kansas City Southern (NYSE:KSU) Q2 2016 Earnings Conference Call - Preliminary Transcript

Jul 19, 2016 • 08:45 am ET


Kansas City Southern (NYSE:KSU) Q2 2016 Earnings Conference Call - Preliminary Transcript


Loading Event

Loading Transcript

Patrick J. Ottensmeyer

was 61.3, adjusting how the first quarter impact would have resulted in an operating ratio that was in approximately 300 basis points higher than we reported. But still more than 350 basis points improvement from last year.

We expect this benefits continue through 2016. Looking beyond 2016 the ongoing impact of this excise tax credit coupled with the longer term impact of Mexican energy market deregulation is difficult to quantify because it will be influenced by many factors, most importantly, the market price of diesel fuel and the level of Mexican excise tax. Again, Mike will have much more detailed explanation in a few minutes and we will be happy to entertain questions on this point at the end of the presentation.

With that, I will turn the presentation over to Jeff Songer.

Jeffrey M. Songer

Thank you Pat and good morning. Beginning with Slide 7 velocity for the quarter of 28.4 miles per hour was a 7.6% improvement over prior year draw for the quarter of 21.8 hours was a 7.2% improvement over prior year. Solid operating performance in the quarter despite continued weather related interruptions, which I will discuss enabled improvements in our key operating metrics. And we have stabilised our operation well over the past three quarters.

Moving to the operations overview on Slide 8, we continue to aggressively manage resources. Currently 7% of the US T&E workforces in furlough status and 15% of our locomotives across the system are in storage. Providing an update on other costs initiatives our fuel management programmes have provided approximately $3 million in reduced costs here today to improve fuel efficiency. As presented in the first quarter of fuel optimization programme as well underway. Approximately one third complete with a plane installation for 2016 where we are installing on approximately 20% of the US road fleet.

Expanding upon this initiative in the second half of the year, we will begin similar work in Mexico related to fuel optimization technology. We plan to deploy this technology across the similar number of our Mexico road sleep through 2017. Automatic engine start stop for ATSS [Phonetic] technology is another area of focus and our fuel management efforts. While we employ this technology today, future work in this area, including expanding huge in our locomotives, upgrading to newer technologies, and tightening up the work rules related to engine start stop procedures will aid in our fuel efficiency management.

With respect to labour management reproves are another key metric we have been focused on. In the second quarter we achieved a 49% reduction in recruits. And here today we have reduced overall US and Mexico recruits by 42%. Our capital project highlights for the quarter focused on our expansion of families policy, in support of the announcements you've seen regarding the new BMW, and for automotive clients, as well as the WCC and walk through fluids terminal.

We're currently in the design phase for further capacity expansions in the family's policy area, including multiple new support tracks that are