Kansas City Southern Reports Record Third Quarter Results

Third Quarter 2019 Results

• Record revenues of $747.7 million, an increase of 7% from prior year on flat volumes
• Operating income of $282.0 million. Record adjusted operating income of $294.0 million up 15% over prior year, excluding restructuring charges related to Precision Scheduled Railroading ("PSR") initiatives and a gain on insurance recoveries related to hurricane damage a year ago
• Reported operating ratio of 62.3%. Adjusted operating ratio of 60.7%, compared to 63.4% in the prior year
• Reported diluted earnings per share of $1.81. Record adjusted diluted earnings per share of $1.94, 24% higher than a year ago

Kansas City Southern (KCS) KSU reported record revenues of $747.7 million, an increase of 7% from third quarter 2018. Overall, carload volumes were flat compared to prior year.

Revenue growth for the third quarter of 2019 was led by a 21% increase in Chemicals and Petroleum due primarily to increased refined fuel products and liquid petroleum gas shipments to Mexico. Agriculture and Minerals revenues grew 15%, driven primarily by improved cycle times. Industrial and Consumer Products and Intermodal revenues also increased by 2% and 1%, respectively. These increases were partially offset by revenue declines in the remaining two commodity groups. Energy revenues declined by 11%, as increased Utility Coal shipments were more than offset by declines in Frac Sand and Crude Oil; Automotive revenues declined by 2%.

In the third quarter of 2019, reported operating expenses were $465.7 million. Excluding restructuring charges related to PSR initiatives and a gain on insurance recoveries related to hurricane damage a year ago, adjusted operating expenses were $453.7 million, 2% higher than 2018. Adjusted operating income was $294.0 million, 15% higher than a year ago. KCS reported an adjusted third quarter operating ratio of 60.7%, a 2.70 point improvement over third quarter 2018.

Reported net income in the third quarter of 2019 was $180.6 million, or $1.81 per diluted share, compared with $174.0 million, or $1.70 per diluted share in the third quarter of 2018. As presented in the following reconciliations, adjusted diluted earnings per share was $1.94, 24% higher than a year ago.

"Kansas City Southern posted all-time record financial results in the third quarter 2019, including adjusted operating income growth of 15% and an adjusted operating ratio of 60.7%" stated President and Chief Executive Officer Patrick J. Ottensmeyer. "These results are a testament to our employees' hard work, and dedication to improving operational performance and customer service.

"We are very pleased with our progress towards implementing PSR principles. Notwithstanding this exceptional performance, we expect to continue optimizing our cost profile while delivering superior customer service and shareholder value."

Headquartered in Kansas City, Mo., Kansas City Southern (KCS) KSU 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 Mexico, 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. KCS' North American rail holdings and strategic alliances with other North American rail partners are primary components of a unique railway system, linking the commercial and industrial centers of the U.S., Mexico and Canada. More information about KCS can be found at www.kcsouthern.com.

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. Words such as "projects," "estimates," "forecasts," "believes," "intends," "expects," "anticipates," and similar expressions are intended to identify many of these forward-looking statements. Such forward-looking statements are based upon information currently available to management and management's perception thereof as of the date hereof. 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 use items shipped by rail; loss of the rail concession of KCS' subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination of, or failure to renew, agreements with customers, other railroads and third parties; access to capital; disruptions to KCS' technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents on KCS' rail network or at KCS' 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; unavailability of qualified personnel; labor difficulties, including strikes and work stoppages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic, political and social conditions; the level of trade between the United States and Asia or Mexico; fluctuations in the peso-dollar exchange rate; increased demand and traffic congestion; the outcome of claims and litigation involving KCS or its subsidiaries; and other factors affecting the operation of the business. More detailed information about factors that could affect future events may be found in filings by KCS with the Securities and Exchange Commission, including KCS' Annual Report on Form 10-K for the year ended December 31, 2018 (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 to reflect future events or developments.

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