November 10, 2020
Kansas City, Mo., November 10, 2020 – Kansas City Southern (KCS) (NYSE: KSU) announced that its Board of Directors approved updates to its capital allocation policy. Under this updated policy, the Company intends to continue deploying available cash in the following manner:
• Approximately 40-50% to capital projects and strategic investments; and
• Approximately 50-60% to share repurchases and dividends.
In addition, from time to time, the Company also plans to prudently use additional debt to support the revised policy and intends to increase its Debt-to-EBITDA ratio to the mid-2x range, consistent with its current ratings of BBB from Standard & Poor’s and Fitch Ratings and Baa2 from Moody’s.
In connection with this updated policy, the Board also approved the following actions:
• An increase in the quarterly dividend on KCS’s common stock from $0.40 to $0.44 per share. The board declared a common stock dividend for this increased amount payable on January 20, 2021, to stockholders of record at the close of business on December 31, 2020. In April 2021, KCS will implement a quarterly dividend approach that targets a low 20% range payout; and
• A new $3.0 billion share repurchase program, expiring December 31, 2023. This new program replaces the $2.0 billion stock repurchase program announced in 2019 under which the Company has purchased approximately $1.4 billion of Company stock, including the $500 million accelerated share repurchase agreement that was announced alongside our third quarter 2020 earnings.
“Kansas City Southern’s revenue growth, margin improvement and cash flow generation this year have been remarkable given the economic and operational challenges we have faced,” stated President and Chief Executive Officer, Patrick J. Ottensmeyer. “Our plan to prudently increase the amount of capital returned to shareholders demonstrates management’s and our Board’s confidence in our strong growth prospects, ability to continue delivering on our long-range plan and the long-term operational efficiencies and lower capital spend intensity created by our Precision Scheduled Railroading implementation.”
“We believe today’s announcement continues to balance our objectives of delivering meaningful capital returns while investing in future growth opportunities and maintaining a desirable credit profile.”
The Company’s Board also declared a regular dividend of $0.25 per share on the outstanding KCS 4% Non-Cumulative Preferred stock. This dividend is payable on January 19, 2021, to stockholders of record at the close of business on December 31, 2020.
Headquartered in Kansas City, Mo., Kansas City Southern (KCS) (NYSE: 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 Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. In addition, management may make forward-looking statements orally or in other writing, including, but not limited to, in press releases, quarterly earnings calls, executive presentations, in the annual report to stockholders and in other filings with the Securities and Exchange Commission. Readers can usually identify these forward-looking statements by the use of such words as "may," "will," "should," "likely," "plans," "projects," "expects," "anticipates," "believes" or similar words. These statements involve a number of risks and uncertainties. Actual results could materially differ from those anticipated by such forward-looking statements as a result of a number of factors or combination of factors including, but not limited: public health threats or outbreaks of communicable diseases, such as the ongoing COVID-19 pandemic and its impact on KCS’s business, suppliers, consumers, customers, employees and supply chains; rail accidents or other incidents or accidents on KCS’s rail network or at KCS’s facilities or customer facilities involving the release of hazardous materials, including toxic inhalation hazards; legislative and regulatory developments and disputes, including environmental regulations; loss of the rail concession of Kansas City Southern’s subsidiary, Kansas City Southern de México, S.A. de C.V.; domestic and international economic, political and social conditions; disruptions to the Company’s technology infrastructure, including its computer systems; increased demand and traffic congestion; the level of trade between the United States and Asia or Mexico; fluctuations in the peso-dollar exchange rate; natural events such as severe weather, hurricanes and floods; the outcome of claims and litigation involving the Company or its subsidiaries; competition and consolidation within the transportation industry; the business environment in industries that produce and use items shipped by rail; the termination of, or failure to renew, agreements with customers, other railroads and third parties; fluctuation in prices or availability of key materials, in particular diesel fuel; access to capital; climate change and the market and regulatory responses to climate change; 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 other acts of violence; and other factors affecting the operation of the business; and other risks identified in this news release, in KCS's Annual Report on Form 10-K for the year ended December 31, 2019, and in other reports filed by KCS with the Securities and Exchange Commission.
Forward-looking statements reflect the information only as of the date on which they are made. KCS does not undertake any obligation to update any forward-looking statements to reflect future events, developments, or other information.
Contact: Ashley Thorne, 816-983-1530