KSU Kansas City Southern

Management Discussion

• Revenues include both revenue for transportation services and fuel surcharges. For the three months ended September 30, 2019, revenues increased 7% and carloads/unit remained flat, compared to the same period in 2018. For the nine months ended September 30, 2019, revenues increased 6% and carload/unit volumes decreased 1%, compared to the same period in 2018. Revenues increased primarily due to growth in refined fuel products and liquid petroleum gas shipments to Mexico, favorable impact of improved operations in northern Mexico, and improved cycle times for agriculture and mineral shipments.
• For the three and nine months ended September 30, 2019, revenue per carload/unit increased by 7% and 6%, respectively, compared to the same periods in 2018, due to mix, higher fuel surcharge, and positive pricing impacts. These increases were partially offset by the weakening of the Mexican peso against the U.S. dollar for revenue transactions denominated in Mexican pesos. The average exchange rate of Mexican pesos per U.S. dollar was Ps.19.4, for the three months ended September 30, 2019, compared to Ps.19.0 for the same period in 2018, which resulted in a decrease to revenues of approximately $2.0 million. The average exchange rate of Mexican pesos per U.S. dollar was Ps.19.3 for the nine months ended September 30, 2019, compared to Ps.19.0 for the same period in 2018, which resulted in a decrease to revenues of approximately $5.0 million.
• KCS’s fuel surcharges are a mechanism to adjust revenue based upon changes in fuel prices above fuel price thresholds set in KCS’s tariffs or contracts. Fuel surcharge revenue is calculated using a fuel price from a prior time period that can be up to 60 days