

Kansas City Southern Consolidated Financial Report (unaudited) First Quarter 2023 | ||
| KANSAS CITY SOUTHERN | ||


| Income Information ................................................................................................................................................................ | |||||
| Balance Sheet Information .................................................................................................................................................... | |||||
| Cash Flow Information .......................................................................................................................................................... | |||||
| Revenue Statistics by Commodity - Quarterly .................................................................................................................... | |||||
| Productivity Statistics ........................................................................................................................................................... | |||||
| Capital Expenditures ............................................................................................................................................................. | |||||
| Free Cash Flow........................................................................................................................................................................ | |||||
| Debt Summary......................................................................................................................................................................... | |||||
| Non-GAAP Financial Information (Regulation G) ............................................................................................................... | |||||

| Three Months Ended | ||||||||||||||
| March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Revenues | $ | 877.3 | $ | 778.2 | ||||||||||
| Operating expenses: | ||||||||||||||
Compensation and benefits | 155.9 | 133.0 | ||||||||||||
Purchased services | 67.9 | 51.3 | ||||||||||||
Fuel | 110.2 | 97.1 | ||||||||||||
Equipment costs | 28.6 | 18.6 | ||||||||||||
Depreciation and amortization | 100.5 | 96.2 | ||||||||||||
Materials and other | 103.3 | 78.1 | ||||||||||||
Merger costs | 9.3 | 12.8 | ||||||||||||
| Total operating expenses | 575.7 | 487.1 | ||||||||||||
| Operating income | 301.6 | 291.1 | ||||||||||||
| Equity in net earnings of affiliates | 2.3 | 8.8 | ||||||||||||
| Interest expense | (39.0) | (38.9) | ||||||||||||
| Foreign exchange loss | (18.5) | (1.4) | ||||||||||||
| Other income, net | 0.5 | 0.9 | ||||||||||||
| Income before income taxes | 246.9 | 260.5 | ||||||||||||
| Income tax expense | 65.0 | 72.5 | ||||||||||||
| Net income | 181.9 | 188.0 | ||||||||||||
| Less: Net income attributable to noncontrolling interest | 0.2 | 0.6 | ||||||||||||
| Net income attributable to Kansas City Southern and subsidiaries | $ | 181.7 | $ | 187.4 | ||||||||||

March 31, 2023 | December 31, 2022 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 166.0 | $ | 207.6 | ||||||||||
Accounts receivable, net | 482.0 | 543.6 | ||||||||||||
Materials and supplies | 175.8 | 174.2 | ||||||||||||
Other current assets | 107.4 | 138.8 | ||||||||||||
Total current assets | 931.2 | 1,064.2 | ||||||||||||
| Operating lease right-of-use assets | 97.8 | 100.9 | ||||||||||||
| Investments | 68.2 | 55.8 | ||||||||||||
| Property and equipment (including concession assets), net | 9,410.9 | 9,362.4 | ||||||||||||
| Other assets | 83.0 | 94.1 | ||||||||||||
Total assets | $ | 10,591.1 | $ | 10,677.4 | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
Long-term debt due within one year | $ | 654.7 | $ | 655.0 | ||||||||||
Accounts payable and accrued liabilities | 595.5 | 635.7 | ||||||||||||
Total current liabilities | 1,250.2 | 1,290.7 | ||||||||||||
| Long-term operating lease liabilities | 68.4 | 71.5 | ||||||||||||
| Long-term debt | 3,122.9 | 3,124.6 | ||||||||||||
| Deferred income taxes | 1,243.3 | 1,237.1 | ||||||||||||
| Other noncurrent liabilities and deferred credits | 153.2 | 158.7 | ||||||||||||
Total liabilities | 5,838.0 | 5,882.6 | ||||||||||||
| Stockholder's equity | — | — | ||||||||||||
| Additional paid-in capital | 860.6 | 860.6 | ||||||||||||
| Retained earnings | 3,583.3 | 3,626.6 | ||||||||||||
| Accumulated other comprehensive loss | (22.0) | (23.4) | ||||||||||||
Total stockholder's equity | 4,421.9 | 4,463.8 | ||||||||||||
| Noncontrolling interest | 331.2 | 331.0 | ||||||||||||
Total equity | 4,753.1 | 4,794.8 | ||||||||||||
Total liabilities and equity | $ | 10,591.1 | $ | 10,677.4 | ||||||||||

| Three Months Ended | ||||||||||||||
| March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Operating activities: | ||||||||||||||
Net income | $ | 181.9 | $ | 188.0 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization | 100.5 | 96.2 | ||||||||||||
Deferred income taxes | 6.1 | 16.0 | ||||||||||||
Equity in net earnings of affiliates | (2.3) | (8.8) | ||||||||||||
Loss on foreign currency derivative instruments | 26.7 | 8.1 | ||||||||||||
Foreign exchange gain | (8.1) | (6.7) | ||||||||||||
| Merger costs, net | 9.3 | 12.8 | ||||||||||||
Distributions from affiliates | 0.1 | — | ||||||||||||
Settlement of foreign currency derivative instruments | (49.7) | (2.2) | ||||||||||||
Cash payments for merger costs | (24.8) | (27.5) | ||||||||||||
Changes in working capital items: | ||||||||||||||
Accounts receivable | 65.3 | (130.6) | ||||||||||||
Materials and supplies | (1.9) | (13.7) | ||||||||||||
Other current assets | 30.2 | 31.8 | ||||||||||||
Accounts payable and accrued liabilities | 1.8 | (9.3) | ||||||||||||
Other, net | 6.7 | (4.9) | ||||||||||||
Net cash provided by operating activities | 341.8 | 149.2 | ||||||||||||
| Investing activities: | ||||||||||||||
Capital expenditures | (151.9) | (95.7) | ||||||||||||
Property investments in MSLLC | (2.4) | (16.4) | ||||||||||||
Investments in and advances to affiliates | (2.7) | (5.3) | ||||||||||||
Proceeds from disposal of property | 1.7 | 1.7 | ||||||||||||
Other, net | (1.1) | (0.1) | ||||||||||||
Net cash used for investing activities | (156.4) | (115.8) | ||||||||||||
| Financing activities: | ||||||||||||||
Repayment of long-term debt | (2.8) | (2.5) | ||||||||||||
Dividends paid | (225.0) | (265.0) | ||||||||||||
Net cash used for financing activities | (227.8) | (267.5) | ||||||||||||
| Effect of exchange rate changes on cash | 0.8 | (0.6) | ||||||||||||
| Cash and cash equivalents: | ||||||||||||||
Net decrease during each period | (41.6) | (234.7) | ||||||||||||
At beginning of year | 207.6 | 339.3 | ||||||||||||
At end of period | $ | 166.0 | $ | 104.6 | ||||||||||

| Revenues | Carloads and Units | Revenue per | ||||||||||||||||||||||||||||||||||||
| (in millions) | (in thousands) | Carload/Unit | ||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Chemical & Petroleum | ||||||||||||||||||||||||||||||||||||||
Chemicals | $ | 71.1 | $ | 69.9 | 24.6 | 26.1 | $ | 2,890 | $ | 2,678 | ||||||||||||||||||||||||||||
Petroleum | 89.5 | 79.0 | 41.7 | 36.6 | 2,146 | 2,158 | ||||||||||||||||||||||||||||||||
Plastics | 46.3 | 38.5 | 17.4 | 17.7 | 2,661 | 2,175 | ||||||||||||||||||||||||||||||||
Total | 206.9 | 187.4 | 83.7 | 80.4 | 2,472 | 2,331 | ||||||||||||||||||||||||||||||||
| Industrial & Consumer Products | ||||||||||||||||||||||||||||||||||||||
Forest Products | 77.1 | 69.1 | 25.4 | 25.6 | 3,035 | 2,699 | ||||||||||||||||||||||||||||||||
Metals & Scrap | 79.8 | 56.5 | 38.1 | 33.0 | 2,094 | 1,712 | ||||||||||||||||||||||||||||||||
Other | 39.0 | 35.1 | 22.2 | 19.7 | 1,757 | 1,782 | ||||||||||||||||||||||||||||||||
Total | 195.9 | 160.7 | 85.7 | 78.3 | 2,286 | 2,052 | ||||||||||||||||||||||||||||||||
| Agriculture & Minerals | ||||||||||||||||||||||||||||||||||||||
Grain | 116.9 | 105.7 | 48.3 | 45.3 | 2,420 | 2,333 | ||||||||||||||||||||||||||||||||
Food Products | 43.0 | 40.2 | 15.1 | 15.0 | 2,848 | 2,680 | ||||||||||||||||||||||||||||||||
Ores & Minerals | 8.4 | 8.3 | 8.9 | 9.0 | 944 | 922 | ||||||||||||||||||||||||||||||||
Stone, Clay & Glass | 9.6 | 9.2 | 3.3 | 3.7 | 2,909 | 2,486 | ||||||||||||||||||||||||||||||||
Total | 177.9 | 163.4 | 75.6 | 73.0 | 2,353 | 2,238 | ||||||||||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||||||||||||||
Utility Coal | 39.3 | 40.2 | 38.2 | 39.8 | 1,029 | 1,010 | ||||||||||||||||||||||||||||||||
Coal & Petroleum Coke | 11.9 | 12.4 | 12.7 | 14.3 | 937 | 867 | ||||||||||||||||||||||||||||||||
Frac Sand | 3.5 | 4.9 | 2.3 | 3.2 | 1,522 | 1,531 | ||||||||||||||||||||||||||||||||
Crude Oil | 19.0 | 14.1 | 11.0 | 9.9 | 1,727 | 1,424 | ||||||||||||||||||||||||||||||||
Total | 73.7 | 71.6 | 64.2 | 67.2 | 1,148 | 1,065 | ||||||||||||||||||||||||||||||||
| Intermodal | 109.4 | 95.9 | 242.7 | 245.3 | 451 | 391 | ||||||||||||||||||||||||||||||||
| Automotive | 68.0 | 54.3 | 32.6 | 31.0 | 2,086 | 1,752 | ||||||||||||||||||||||||||||||||
| Total for Commodity Groups | 831.8 | 733.3 | 584.5 | 575.2 | $ | 1,423 | $ | 1,275 | ||||||||||||||||||||||||||||||
| Other Revenue | 45.5 | 44.9 | ||||||||||||||||||||||||||||||||||||
Total | $ | 877.3 | $ | 778.2 | ||||||||||||||||||||||||||||||||||

| Three Months Ended | ||||||||||||||
| March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
Gross Ton Miles (GTM) (in millions) (i) | 26,636 | 25,922 | ||||||||||||
| Average Employees - Total | 7,067 | 6,943 | ||||||||||||
| Average Employees - Union | 5,213 | 5,139 | ||||||||||||
| GTM's per Average Employee (in millions) | 3.77 | 3.73 | ||||||||||||
| Operating Ratio | 65.6% | 62.6% | ||||||||||||
| Adjusted Operating Ratio* | 64.6% | 60.9% | ||||||||||||
Gross Velocity (miles per hour) (ii) | 12.3 | 15.6 | ||||||||||||
Average Terminal Dwell Times (hours) (iii) | 26.1 | 19.7 | ||||||||||||
Train Length (feet) (iv) | 6,590 | 6,467 | ||||||||||||
| Locomotive Fuel Statistics | ||||||||||||||
| Locomotive fuel consumed in gallons (in millions) | 32.9 | 32.2 | ||||||||||||
| Average fuel cost per gallon | $3.35 | $3.01 | ||||||||||||
Fuel efficiency (gallons per 1,000 GTM's) (v) | 1.23 | 1.24 | ||||||||||||
| Revenue Ton Miles (in Millions) | ||||||||||||||
| Chemical & Petroleum | 2,792 | 2,639 | ||||||||||||
| Industrial & Consumer Products | 2,431 | 2,132 | ||||||||||||
| Agriculture & Minerals | 4,853 | 4,816 | ||||||||||||
| Energy | 2,376 | 2,511 | ||||||||||||
| Intermodal | 1,185 | 996 | ||||||||||||
| Automotive | 427 | 437 | ||||||||||||
| Total | 14,064 | 13,531 | ||||||||||||
| (i) Excludes Locomotive Gross Ton Miles | ||||||||||||||
| (ii) Gross velocity is the average train speed between origin and destination in miles per hour calculated as the sum of the miles traveled divided by the sum of total transit hours. Transit hours are measured as the difference between a train’s origin departure and destination arrival date and times broken down by segment across the train route (includes all time spent including crew changes, terminal dwell, delays, and incidents). | ||||||||||||||
| (iii) Terminal dwell is the average amount of time in hours between car arrival to and departure from the yard (excludes cars that move through a terminal on a run-through train, stored, bad ordered, and maintenance-of-way cars). Calculated by dividing the total number of hours cars spent in terminals by the total count of car dwell events. | ||||||||||||||
| (iv) Train length is the average length of a train across its reporting stations, including the origin and intermediate stations. Length of a train is the sum of car and locomotive lengths measured in feet. | ||||||||||||||
| (v) Fuel efficiency is calculated by taking locomotive fuel consumed in gallons divided by thousand gross ton miles (“GTM’s”) net of detours with no associated fuel gallons. GTM’s are the movement of one ton of train weight over one mile calculated by multiplying total train weight by distance the train moved. GTM’s exclude locomotive gross ton miles. | ||||||||||||||
* All reconciliations to GAAP can be found on page 10. | ||||||||||||||

| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Roadway capital program | $ | 74.0 | $ | 60.0 | |||||||
| Locomotives and freight cars | 9.3 | 10.3 | |||||||||
| Capacity | 48.5 | 14.6 | |||||||||
| Information technology | 7.6 | 12.1 | |||||||||
| Positive train control | 0.4 | 1.3 | |||||||||
| Other | 1.9 | 0.4 | |||||||||
Total capital expenditures (accrual basis) | 141.7 | 98.7 | |||||||||
Change in capital accruals | 10.2 | (3.0) | |||||||||
Total cash capital expenditures | $ | 151.9 | $ | 95.7 | |||||||
| Track Renewal | |||||||||||
| Track miles of rail installed | 7 | 12 | |||||||||
| Cross ties installed (thousands) | 192 | 122 | |||||||||
| Three Months Ended | |||||||||||||||||
| March 31, | |||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| Net cash provided by operating activities | $ | 341.8 | $ | 149.2 | |||||||||||||
| Net cash used for investing activities | (156.4) | (115.8) | |||||||||||||||
| Free cash flow | $ | 185.4 | $ | 33.4 | |||||||||||||

| Long-Term Debt | |||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Expiration Date | Interest Rate | March 31, 2023 | December 31, 2022 | ||||||||||||||||||||
| KCS Revolver | 3/8/2024 | Floating | $ — | $ — | |||||||||||||||||||
| Total Bank Facilities | — | — | |||||||||||||||||||||
| KCS 3.00% Senior Notes | 5/15/2023 | 3.000 | % | 439.1 | 439.1 | ||||||||||||||||||
| KCS 3.85% Senior Notes | 11/15/2023 | 3.850 | % | 199.2 | 199.2 | ||||||||||||||||||
| KCS 3.125% Senior Notes | 6/1/2026 | 3.125 | % | 250.0 | 250.0 | ||||||||||||||||||
| KCS 2.875% Senior Notes | 11/15/2029 | 2.875 | % | 425.0 | 425.0 | ||||||||||||||||||
| KCS 4.30% Senior Notes | 5/15/2043 | 4.300 | % | 448.7 | 448.7 | ||||||||||||||||||
| KCS 4.95% Senior Notes | 8/15/2045 | 4.950 | % | 499.2 | 499.2 | ||||||||||||||||||
| KCS 4.70% Senior Notes | 5/1/2048 | 4.700 | % | 500.0 | 500.0 | ||||||||||||||||||
| KCS 3.50% Senior Notes | 5/1/2050 | 3.500 | % | 550.0 | 550.0 | ||||||||||||||||||
| KCS 4.20% Senior Notes | 11/15/2069 | 4.200 | % | 425.0 | 425.0 | ||||||||||||||||||
| KCSM 3.00% Senior Notes | 5/15/2023 | 3.000 | % | 5.6 | 5.6 | ||||||||||||||||||
| KCSR Senior Notes | Various | Various | 2.7 | 2.7 | |||||||||||||||||||
| Total Unsecured Senior Notes | 3,744.5 | 3,744.5 | |||||||||||||||||||||
| Tex Mex RRIF Loan | 7/13/2030 | 4.290 | % | 21.1 | 21.7 | ||||||||||||||||||
| KCSR RRIF Loan | 2/24/2037 | 2.960 | % | 35.4 | 36.0 | ||||||||||||||||||
| Finance Leases | Various | Various | 17.0 | 18.7 | |||||||||||||||||||
| Other | Various | Various | 0.2 | 0.2 | |||||||||||||||||||
| Discount and Debt Issuance Costs | (40.6) | (41.5) | |||||||||||||||||||||
| Total Long-Term Debt | $ | 3,777.6 | $ | 3,779.6 | |||||||||||||||||||
| Short-Term Borrowings | |||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Expiration Date | Weighted- Average Interest Rate | March 31, 2023 | December 31, 2022 | ||||||||||||||||||||
| KCS Commercial Paper | 3/8/2024 | — | $ — | $ — | |||||||||||||||||||
| Total Short-Term Borrowings | $ — | $ — | |||||||||||||||||||||

| Reconciliation of Operating Expenses to Adjusted | Three Months Ended | |||||||||||||
| Operating Expenses: | March 31, | |||||||||||||
| 2023 | 2022 | |||||||||||||
| Operating expenses as reported | $ | 575.7 | $ | 487.1 | ||||||||||
| Adjustment for merger costs | (9.3) | (12.8) | ||||||||||||
| Adjusted operating expenses - see (a) below | $ | 566.4 | $ | 474.3 | ||||||||||
| Operating income as reported | $ | 301.6 | $ | 291.1 | ||||||||||
| Adjusted operating income - see (a) below | 310.9 | 303.9 | ||||||||||||
| Operating ratio (b) as reported | 65.6% | 62.6% | ||||||||||||
| Adjusted operating ratio - see (a) and (b) below | 64.6% | 60.9% | ||||||||||||