Kansas City Southern Fourth Quarter 2012 Earnings Presentation January 22, 2013 January 23, 2013 – Slides 39 and 40 added to Appendix Safe Harbor Statement This presentation 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. The words “projects,” “estimates,” “forecasts,” “believes,” “intends,” “expects,” “anticipates,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are based upon information currently available to management and management’s perception thereof as of the date of this presentation. 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 consume rail freight; revocation of the rail concession of KCS’s subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination, or failure to renew, agreements with customers, other railroads and third parties; interest rates; access to capital; disruptions to KCS’s technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; credit risk of customers and counterparties and their failure to meet their financial obligations; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents along KCS’s rail network, 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; loss of key personnel; labor difficulties, including strikes and work stoppages; insufficiency of insurance to cover lost revenue, profits or other damages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic conditions; political and economic conditions in Mexico and the level of trade between the United States and Mexico; the outcome of claims and litigation involving KCS or its subsidiaries; and other factors affecting the operation of the business. More detailed information about these factors may be found in filings by KCS with the Securities and Exchange Commission, including KCS’s Annual Report on Form 10-K for the year ended December 31, 2011 (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 in this presentation to reflect future events or developments. All reconciliations to GAAP can be found on the KCS website, kcsouthern.com/investors. 2 1
Dave Starling 3 Today’s Presenters Dave Starling President & CEO Dave Ebbrecht EVP & COO Pat Ottensmeyer EVP Sales & Marketing Mike Upchurch EVP & CFO 4 2
KCS Overview • Strong performance despite coal and grain challenges • Record full-year adjusted operating ratio* of 69.9% • Stock price appreciation of 23% in 2012 5 * All reconciliations to GAAP can be found on the KCS website in the Investors section. Fourth Quarter Results Q4 2012 Q4 2011 Variance Carloads/Units (in thousands) 531.7 521.8 2% Reported Revenues (in millions) $568.4 $530.3 7% Reported Operating Ratio 69.5% 71.6% 2.1 points Reported Diluted Earnings per $0.83 $0.87 (5%) Share Adjusted Diluted Earnings per $0.92 $0.77 19% Share * 6 * All reconciliations to GAAP can be found on the KCS website in the Investors section. 3
Full Year 2012 Results FY 2012 FY 2011 Variance Carloads/Units (in thousands) 2,112.1 2,013.7 5% Reported Revenues (in millions) $2,238.6 $2,098.3 7% Reported Operating Ratio 68.0% 70.9% 2.9 points Adjusted Operating Ratio* 69.9% 72.1% 2.2 points Reported Diluted Earnings per $3.43 $3.00 14% Share Adjusted Diluted Earnings per $3.56 $2.90 23% Share * 7 * All reconciliations to GAAP can be found on the KCS website in the Investors section. Update for Full Year 2012 2012 Guidance Final 2012 Results • Mid-single digit volume growth • 2012 volume growth of 5% • Mid-single digit pricing • 2012 core pricing in mid-single digit range • Mid-single digit revenue growth • 2012 revenue growth of 7% (depending on F/X impact) • Continued operating ratio • YTD adjusted operating ratio* improvement on a year-to-year improved 2.2 points compared to 2011 basis 8 * All reconciliations to GAAP can be found on the KCS website in the Investors section. 4
2013 Guidance • Mid-single digit volume growth • Mid-single digit core pricing • High-single digit revenue growth (depending on F/X impact) • Continued operating ratio improvement • Total capex – 21% of revenue 9 Dave Ebbrecht 10 5
KCS ‘Ops’ Leverage Continues to Expand 510 (D) Linehaul Revenue Ops Costs 460 Linear (Linehaul Revenue) Linear (Ops Costs) 410 Q412 ‘Ops’ Leverage of 360 $278M – Ops Costs up 21% over past 4 yrs Millions $ against Linehaul 310 Revenue growth of 53% Q109 ‘Ops’ 260 Leverage of $147M 210 160 110 Operations costs contain transportation, mechanical, engineering, equipment costs, and other operations 60 11 (D) See definitions in the appendix to this presentation. All reconciliations to GAAP can be found on the KCS website in the Investors section. Operations – Industry Leading Productivity 6,600 95 90 87 90 86 85 85 83 82 85 79 80 Carloads per Employee 78 6,400 80 77 73 Headcount 75 72 72 71 70 69 68 70 6,200 65 60 61 60 55 6,000 50 Headcount Carloads per Employee 12 * Q3 2010 carloads per employee adjusted for Hurricane Alex. 6
KCS 2013 Capital Investments Providing Capacity for Growth • Capacity enhancements: – Double track and additional/longer sidings - $47m – New origin/destination facilities - $27m – Intermodal terminal expansion - $29m – CTC and increased main line speeds - $20m AAR Train Velocity – Rolling stock - $45m 30 • Delivering measurable results on investments: 29 28 MPH 27 26 25 13 Operations Performance – Strong Operating Metrics Sustained in Q4 (D) Dwell Velocity 75 (D) Car Efficiency (D) Slow Order Miles 65 55 Miles 45 35 25 15 14 * Q3 2010 adjusted for Hurricane Alex. (D) See definitions in the appendix to this presentation. 7
Pat Ottensmeyer 15 Fourth Quarter Revenue Summary Q4 2012 vs. Q4 2011 Q4 2012 Q4 2011 Variance Reported Revenues (in $568.4 $530.3 7% millions) Carloads (in thousands) 531.7 521.8 2% 16 8
Multiple Contributors to Revenue Growth in the Fourth Quarter +$5 $ in millions +$22 +$8 +$3 $568 $530 Q4 12 Q4 08 17 Fourth Quarter Energy Business Unit Change Components $ in millions +$3 ($13 ) +$2 +$7 $85 $86 Q4 12 Q4 08 18 9
(D) Revenue Increases 2% Cross Border Q4 2012 vs. Q4 2011 Excluding Agriculture & Minerals Business Unit, Cross Border (D) RevenueIncreases 22% in Q4 2012 vs. Q4 2011 (D) 19 (D) See definitions in the appendix to this presentation. Cross Border Intermodal Revenue Growth Increases 70% (D) Intermodal Cross Border (D) Intermodal Cross Border Revenues Volumes ($ in thousands) +74% +70% 13,974 $12,290 8,041 $7,233 Q4 11 Q4 12 Q4 11 Q4 12 20 (D) See definitions in the appendix to this presentation. 10
Lázaro Cárdenas Revenue Growth Increases 12% Lázaro Cárdenas Revenues Lázaro Cárdenas Volumes ($ in thousands) $21,386 54,600 57,198 $19,079 (5%) +12% Q4 11 Q4 12 Q4 11 Q4 12 21 Lázaro Cárdenas Development Plans • APM Terminals signed second container concession contract in August 2012 and will invest $900m in the project • In October 2012, SSA Marine won a concession to develop, operate and maintain a Specialized Auto Terminal capable of handling up to 750,000 autos annually • Hutchinson Port Holdings plans to have five new vessel cranes installed in Q2 2013 22 Source: APM Terminals Press Release dated November 12, 2012; sct.gob.mx 11
Market Outlook – Linehaul Revenue Assumes constant F/X FY 2013 Chemical & Petroleum Industrial & Consumer Agriculture & Minerals Energy Intermodal Automotive 23 + Single digit revenue growth expected during period. ++ Double digit revenue growth expected during period. Strategic Growth Areas up 39% in Q4 2012 Q4 2012 vs. Q4 2011 100.0% 900.0% Collectively these 5 growth markets grew YoY Revenue Growth - Automotive, Frac Sand, Cross-Border 90.0% 800.0% 39% YoY and represent 19% of total KCS Crude Oil +780% Freight Revenue in Q4 2012 80.0% 700.0% YoY Revenue Growth - Crude Oil Cross-Border Intermodal & Lázaro Cárdenas 70.0% +70% Intermodal 600.0% 60.0% 500.0% 50.0% 400.0% 40.0% Frac Sand +35% +33% Automotive 300.0% 30.0% 200.0% 20.0% Lázaro Cárdenas +12% 100.0% 10.0% 0.0% 0.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% % of Freight Revenue 24 12
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