Kansas City Southern (NYSE:KSU) Q3 2020 Earnings Conference Call - Final Transcript

Oct 16, 2020 • 08:45 am ET

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Kansas City Southern (NYSE:KSU) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the Kansas City Southern Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded.

It is now my pleasure to introduce you to Ashley Thorne, Vice President, Investor Relations for Kansas City Southern.

Executive
Ashley Thorne

Thank you, Joe. Good morning, and thank you for joining Kansas City Southern third quarter 2020 earnings call. Before we begin, I want to remind you that this presentation contains forward-looking statements within the meaning of the Securities Exchange Act as amended. Actual results could materially differ from those anticipated by such forward-looking statements as a result of a number of factors or combination of factors, including but not limited to the risks identified in our Annual Report on Form 10-K for the year ended December 31, 2019, and in other reports filed by us with the Securities and Exchange Commission, including our quarterly report for the quarter ended September 30, 2020.

Forward-looking statements reflect the information only as of the date on which they are made. KCS does not undertake any obligation to update any forward-looking statements to reflect future events, developments or other information.

And with that, it is now my pleasure to introduce Kansas City Southern's President and CEO, Pat Ottensmeyer.

Executive
Patrick J. Ottensmeyer

Thank you, Ashley and good morning everyone. I will just skip over Slide 4, the presenters and participants on the call are the same as in prior quarter. So let's go directly to Slide 5 with a quick recap of the third quarter and a bit of a preview of what we see in the period ahead.

As you saw in the press release, our third quarter results, revenues were 12% lower than the previous year on volume reduction of 4%. Third quarter operating ratio of 58.8%, was an all-time best for Kansas City Southern, a 190 basis point improvement over the prior year on an adjusted basis.

Third quarter earnings per share of $2.01, 11% above prior year on an adjusted basis, primarily foreign exchange which Mike will talk about later. $1.96 which was 1% above 2019. The headline story for this quarter is clearly operating ratio, and more specifically our ability to hold the PSR driven efficiency improvements and cost savings generated over the prior year and a half, as our volumes and revenues experienced a truly unprecedented roller coaster ride, with the steep decline in the second quarter and then the very sharp recovery in growth during the third quarter.

The fact that we were able to hold these operating efficiency and cost improvements and produce a meaningful reduction in operating ratio versus last year and a 640 basis point reduction in operating ratio from the second quarter of this year is solid validation of the substantial and sustainable improvements to the way we run our network that have resulted from our PSR transformation. Fahmy and Mike Upchurch will get into more detail about those improvements in a few minutes.

Looking ahead, we are reinstating and slightly improving our outlook for