Update: On May 18, 2012, management presented at the Bank of America Merrill Lynch Global Transportation Conference. The materials presented at that conference update some of the information contained in these slides. Please review the updated presentation materials, which can be found by clicking on the following link: Bank of America Merrill Lynch Global Transportation Conference Presentation 5.18.12 Kansas City Southern First Quarter 2012 Earnings Presentation April 24, 2012
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 t o 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 Quarterly Reports on Form 10-Q. 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
Dave Starling 3
Today’s Presenters Dave Starling President & CEO Dave Ebbrecht EVP Operations Pat Ottensmeyer EVP Sales & Marketing Mike Upchurch EVP & CFO 4
KCS Overview • All-time record quarterly revenues, record first quarter carloads and operating income • Continued strengthening of capital structure and balance sheet • Announcement of cash dividend to common stockholders 5
Record First Quarter Results Q1 2012 Q1 2011 Variance Carloads/Units (in thousands) 508.1 474.1 7% Reported Revenues (in millions) $547.5 $488.6 12% Reported Operating Ratio 71.2% 73.8% 2.6 points Reported Diluted Earnings per $0.68 $0.58 17% Share Adjusted Diluted Earnings per $0.75 $0.58 29% Share * * All reconciliations to GAAP can be found on the KCS website in the Investors section. 6
No Change to 2012 Guidance Despite Coal Headwind Original 2012 Guidance Update • Mid-single digit volume growth • Q1 volume growth of 7% • Mid-single digit pricing • Core pricing and revenue per unit in mid- single digit range • Q1 revenue growth of 12% • Low-double digit revenue growth (depending on fx impact) • Continued operating ratio improvement • Operating ratio improved 2.6 points over Q1 on a year-to-year basis 2011 7
Dave Ebbrecht 8
Investing in Growth Capacity 600 2,800,000 KCS Road Locomotive Projections Carload Projections - Consensus Growth Rates KCS has developed 3-5 year Road Locomotives - End of Period plans that drive timely 550 20 investment in the following 2,400,000 20 areas: 20 500 • Infrastructure 30 2,000,000 • Human Resources 30 450 • Rolling Stock 400 1,600,000 2011 2012 2013 2014 2015 Locomotive Purchases 2011 - 2015 (D) Road Locomotives Carload Projections with Consensus Growth Rates Linear (Carload Projections with Consensus Growth Rates) (D) See definitions in the appendix to this presentation. 9
KCS “Ops” Leverage Continues to Expand 540 (D) Linehaul Revenue 490 Ops Costs 440 Linear (Linehaul Revenue) 390 Q112 “Ops” Leverage of $276M – Ops Costs up 15% over past 3 yrs against Linehaul Revenue 340 growth of 49% $ in millions Q109 “Ops” 290 Leverage of $147M 240 190 140 Operations costs contain transportation, mechanical, engineering, 90 equipment costs, and other operations 40 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 (D) See definitions in the appendix to this presentation. 10 All reconciliations to GAAP can be found on the KCS website in the Investors section.
Operations – Industry Leading Productivity Seasonal Decline in Carloads Drives Q4 to Q1 Dip 6,600 90 85 83 85 85 82 80 79 Carloads per Employee 78 80 77 6,400 73 75 Headcount 72 72 71 70 68 69 70 65 60 61 6,200 6,124 60 6,089 6,080 55 6,000 50 Headcount Carloads per Employee 11 * Q3 2010 carloads per employee adjusted for Hurricane Alex.
Operations Performance 35 550,000 30 550,000 (D) Velocity Dwell 25 30 500,000 500,000 System Velocity System Dwell 20 Carloads Carloads 25 450,000 15 450,000 10 20 400,000 400,000 5 15 350,000 0 350,000 Avg System Velocity Carloads Avg System Dwell Carloads Strong Operating Metrics Sustained in Q1 as KCS Experienced Record Volumes (D) Car Efficiency (D) Slow Order Miles 75 55,000 Avg Cars On-Line per Day 520,000 65 50,000 55 470,000 Carloads Miles 45 45,000 420,000 35 40,000 370,000 25 15 35,000 320,000 Cars On-line Carloads * Q3 2010 adjusted for Hurricane Alex. (D) See definitions in the appendix 12 to this presentation.
KCS Operations – Q1 2012 Highlights • Network remained fluid with record volumes • Productivity and efficiency improvements in fuel, velocity, and capacity • PTC is on-track with deployment schedule • Best-in-class safety recognition - 6 th straight Harriman awarded 13
Pat Ottensmeyer 14
First Quarter Revenues Increased 12% Q1 2012 Q1 2011 Variance Reported Revenues (in millions) $547.5 $488.6 12% Carloads (in thousands) 508.1 474.1 7% Average Revenue per Unit $1,041 $992 5% 15
Multiple Contributors to Revenue Growth $ in millions +$18 +$17 ($6) +$14 $548 +$16 $489 Q4 08 16
New Energy Business Unit Minor Business Units as a Percentage of Q1 2012 Energy Revenue Utility Coal 11% • New Energy business unit 2% Coal/Pet Coke replaces Coal 16% 71% Crude Oil • Historic low natural gas prices drive Utility Coal decline Frac Sand Q1 2012 Energy Revenue - $71m • Strength in Frac Sand offsets Q1 2011 to Q1 2012 – Revenue Change Coal decreases $ in millions • New business opportunities +$1 ($6) +$5 progressing $72 $71 ($1) Q1 2012 17
First Quarter Commodity Group Results Q1 2012 vs. Q1 2011 Q1 2012 Q1 2011 Variance Reported Revenues (in $547.5 $488.6 12% millions) 26% Carloads (in thousands) 508.1 474.1 7% 21% Average RPU $1,041 $992 5% 18% 17% 14% 14% 13% 11% Carloads 8% RPU 6% 6% 5% 5% 4% Revenue 3% -1% -2% -6% Chemical & Industrial & Agriculture & Energy Intermodal Automotive Petroleum Consumer Minerals 18
Cross Border (D) Revenue Increases 28% Q1 2012 vs. Q1 2011 $140 30% 25% Revenue (in millions) $120 % of Revenue 20% $100 15% 10% $80 5% $60 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 09 09 09 09 10 10 10 10 11 11 11 11 12 (D) Cross Border Revenue Hurricane Adjustment % Total Revenue (D) See definitions in the appendix to this presentation. 19
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