CALGARY, AB, July 30, 2024 /CNW/ - Canadian Pacific Kansas City (TSX:CP) (NYSE:CP) (CPKC) today announced its second-quarter results, including revenues of $3.6 billion, diluted earnings per share (EPS) of $0.97 and core adjusted combined diluted EPS1, 2 of $1.05. "Our excellent second quarter results showcase how the advantages of this unrivaled North American network are being realized," said Keith Creel, CPKC President and Chief Executive Officer. "These results are a direct reflection of the dedication and hard work of our railroaders, whose commitment to safety, service and efficiency remains the cornerstone of our achievements. We delivered robust revenue growth driven by synergies, along with strong operating and safety performance." Second-quarter 2024 results1 Reported operating ratio (OR) decreased by 550 basis points to 64.8 percent from 70.3 percent in Q2 2023 Core adjusted combined OR2 decreased 280 basis points to 61.8 percent from 64.6 percent in Q2 2023 Reported diluted EPS decreased to $0.97 from $1.42 in Q2 2023 Core adjusted combined diluted EPS2 increased 27 percent to $1.05 from $0.83 in Q2 2023 Volumes, as measured in Revenue Ton-Miles3 (RTMs), increased six percent on a combined basis Federal Railroad Administration (FRA)-reportable train accident frequency decreased to 0.77 from 0.80 in Q2 2023 on a combined basis4 FRA-reportable personal injury frequency decreased to 0.81 from 1.31 in Q2 2023 on a combined basis4 "Looking ahead, we are confident in our strategy and our team's ability to continue this momentum. We are well on track to deliver on our guidance for the year, leveraging our strong operational foundation to deliver sustainable growth and value for our stakeholders," Creel added. "Together, we are moving forward with a clear vision of success for all stakeholders and an industry leading team in place to execute it." 1 The results of Kansas City Southern (KCS) are included on a consolidated basis from April 14, 2023, the date we acquired control. From December 14, 2021 to April 13, 2023, we recorded our interest in KCS under the equity method of accounting. 2 These measures have no standardized meanings prescribed by accounting principles generally accepted in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies. For information regarding non-GAAP measures including reconciliations, see attached supplementary schedule of Non-GAAP Measures. 3 These operating statistics represent combined operating information to illustrate the estimated effects of the acquisition for the second quarter ended June 30, 2023, as if the acquisition closed on January 1, 2022. For the three months ended June 30, 2024, KCS was consolidated. 4 FRA statistics for Q2 2023 reflect Canadian Pacific (CP) and KCS results on a combined basis. The second-quarter 2023 FRA-reportable train accident frequency and FRA-reportable personal injury frequency on a combined basis were previously reported as 0.79 and 1.25 respectively. These restatements reflect new information available within a specified period as stipulated by the FRA but that exceeds CPKC's financial reporting timeline. Conference Call DetailsCPKC will discuss its results with the financial community in a conference call beginning at 4:30 p.m. ET (2:30 p.m. MT) on July 30, 2024. Conference Call AccessCanada and U.S.: 800-225-9448 International: 203-518-9708*Conference ID: CPKCQ224Callers should dial in 10 minutes prior to the call. WebcastWe encourage you to access the webcast and presentation material in the Investors section of CPKC's website at investor.cpkcr.com. A replay of the second-quarter conference call will be available by phone through August 6, 2024, at 800-839-5629 (Canada/U.S.) or 402-220-2556 (International).  Forward looking informationThis news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws in both the U.S. and Canada. Forward-looking information includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions and statements about possible future events, conditions, and results of operations or performance. Forward-looking information may contain statements with words or headings such as "financial expectations", "key assumptions", "anticipate", "believe", "expect", "plan", "will", "outlook", "guidance", "should" or similar words suggesting future outcomes. This news release contains forward-looking information relating, but not limited, to statements concerning our ability to deliver on our financial guidance for 2024, the success of our business, the realization of anticipated benefits and synergies of the CP-KCS combination, and the opportunities arising therefrom, our operations, priorities and plans, business prospects and demand for our services and growth opportunities. The forward-looking information that may be in this news release is based on current expectations, estimates, projections and assumptions, having regard to CPKC's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: changes in business strategies, North American and global economic growth and conditions; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; labour disruptions; the satisfaction by third parties of their obligations to CPKC; and carbon markets, evolving sustainability strategies, and scientific or technological developments. Although CPKC believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CPKC's forward-looking information involves inherent risks and uncertainties that could cause actual results to differ materially from the forward looking information, including, but not limited to, the following factors: changes in business strategies and strategic opportunities; general Canadian, U.S., Mexican and global social, economic, political, credit and business conditions; risks associated with agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures, including competition from other rail carriers, trucking companies and maritime shippers in Canada, the U.S. and Mexico; North American and global economic growth and conditions; industry capacity; shifts in market demand; changes in commodity prices and commodity demand; uncertainty surrounding timing and volumes of commodities being shipped via CPKC; inflation; geopolitical instability; changes in laws, regulations and government policies, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; changes in fuel prices; disruption in fuel supplies; uncertainties of investigations, proceedings or other types of claims and litigation; compliance with environmental regulations; labour disputes; changes in labour costs and labour difficulties; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; sufficiency of budgeted capital expenditures in carrying out business plans; services and infrastructure; the satisfaction by third parties of their obligations; currency and interest rate fluctuations; exchange rates; effects of changes in market conditions and discount rates on the financial position of pension plans and investments; trade restrictions or other changes to international trade arrangements; the effects of current and future multinational trade agreements on the level of trade among Canada, the U.S. and Mexico; climate change and the market and regulatory responses to climate change; anticipated in-service dates; success of hedging activities; operational performance and reliability; customer, regulatory and other stakeholder approvals and support; regulatory and legislative decisions and actions; the adverse impact of any termination or revocation by the Mexican government of Kansas City Southern de México, S.A. de C.V.'s Concession; public opinion; various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches and earthquakes, and cybersecurity attacks, as well as security threats and governmental response to them, and technological changes; acts of terrorism, war or other acts of violence or crime or risk of such activities; insurance coverage limitations; material adverse changes in economic and industry conditions, including the availability of short and long-term financing; the demand environment for logistics requirements and energy prices, restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions, and disruptions to global supply chains; the realization of anticipated benefits and synergies of the CP-KCS transaction and the timing thereof; the satisfaction of the conditions imposed by the U.S. Surface Transportation Board in its March 15, 2023 final decision; the success of integration plans for KCS; other disruptions arising from the CP-KCS integration; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital markets on favourable terms or at all; cost of debt and equity capital; improvement in data collection and measuring systems; industry-driven changes to methodologies; and the ability of the management of CPKC to execute key priorities, including those in connection with the CP-KCS transaction. The foregoing list of factors is not exhaustive. These and other factors are detailed from time to time in reports filed by CPKC with securities regulators in Canada and the United States. Reference should be made to "Item 1A – Risk Factors" and "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements" in CPKC's annual and interim reports on Form 10-K and 10-Q. Any forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CPKC undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise. About CPKCWith its global headquarters in Calgary, Alta., Canada, CPKC is the first and only single-line transnational railway linking Canada, the United States and México, with unrivaled access to major ports from Vancouver to Atlantic Canada to the Gulf of México to Lázaro Cárdenas, México. Stretching approximately 20,000 route miles and employing 20,000 railroaders, CPKC provides North American customers unparalleled rail service and network reach to key markets across the continent. CPKC is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpkcr.com to learn more about the rail advantages of CPKC. CP-IR FINANCIAL STATEMENTS INTERIM CONSOLIDATED STATEMENTS OF INCOME(unaudited) For the three months ended June 30 For the six months ended June 30 (in millions of Canadian dollars, except share and per share data) 2024 2023 2024 2023 Revenues (Note 3) Freight $           3,534 $          3,101 $           6,961 $          5,318 Non-freight 69 73 162 122 Total revenues 3,603 3,174 7,123 5,440 Operating expenses Compensation and benefits (Note 8) 612 659 1,302 1,097 Fuel 466 397 924 723 Materials (Note 8) 97 98 191 170 Equipment rents 82 80 164 110 Depreciation and amortization (Note 8) 473 410 940 635 Purchased services and other (Note 8) 606 586 1,186 932 Total operating expenses 2,336 2,230 4,707 3,667 Operating income 1,267 944 2,416 1,773 Less: Equity earnings of Kansas City Southern (Note 8, 9) — (26) — (230) Other (income) expense (Note 8, 10) (40) 21 (42) 23 Other components of net periodic benefit recovery (Note 12) (88) (83) (176) (169) Net interest expense (Note 8) 200 204 406 358 Remeasurement loss of Kansas City Southern (Note 8) — 7,175 — 7,175 Income (loss) before income tax expense (recovery) 1,195 (6,347) 2,228 (5,384) Less: Current income tax expense (Note 4) 274 281 516 419 Deferred income tax expense (recovery) (Note 4, 8) 18 (7,953) 35 (7,928) Income tax expense (recovery) (Note 4) 292 (7,672) 551 (7,509) Net income $              903 $          1,325 $           1,677 $          2,125 Less: Net (loss) income attributable to non-controlling interest (Note 8) (2) 1 (3) 1 Net income attributable to controlling shareholders $              905 $          1,324 $           1,680 $          2,124 Earnings per share (Note 5) Basic earnings per share $             0.97 $            1.42 $             1.80 $            2.28 Diluted earnings per share $             0.97 $            1.42 $             1.80 $            2.28 Weighted-average number of shares (millions) (Note 5) Basic 932.8 931.2 932.6 930.9 Diluted 934.6 933.8 934.5 933.6 Dividends declared per share $             0.19 $            0.19 $             0.38 $            0.38 See Notes to Interim Consolidated Financial Statements. INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(unaudited) For the three months ended June 30 For the six months ended June 30 (in millions of Canadian dollars) 2024 2023 2024 2023 Net income $            903 $        1,325 $        1,677 $        2,125 Net gain (loss) in foreign currency translation adjustments, net of hedging activities 301 (611) 1,000 (638) Change in derivatives designated as cash flow hedges 3 1 4 3 Change in pension and post-retirement defined benefit plans 11 (3) 23 5 Other comprehensive (loss) income from equity investees (2) 4 (2) 7 Other comprehensive income (loss) before income taxes 313 (609) 1,025 (623) Income tax (expense) recovery — (17) 6 (20) Other comprehensive income (loss) (Note 6) 313 (626) 1,031 (643) Comprehensive income $        1,216 $            699 $        2,708 $        1,482 Comprehensive income (loss) attributable to non-controlling interest 9 (7) 31 (7) Comprehensive income attributable to controlling shareholders $        1,207 $            706 $        2,677 $        1,489 See Notes to Interim Consolidated Financial Statements. INTERIM CONSOLIDATED BALANCE SHEETS AS AT(unaudited) June 30 December 31 (in millions of Canadian dollars) 2024 2023 Assets Current assets Cash and cash equivalents $                    557 $                    464 Accounts receivable, net (Note 7) 1,893 1,887 Materials and supplies 421 400 Other current assets 334 251 3,205 3,002 Investments 559 533 Properties 53,470 51,744 Goodwill (Note 8) 18,411 17,729 Intangible assets 3,035 2,974 Pension asset 3,516 3,338 Other assets 596 582 Total assets $               82,792 $               79,902 Liabilities and equity Current liabilities Accounts payable and accrued liabilities $                 2,611 $                 2,567 Long-term debt maturing within one year (Note 10, 11) 3,668 3,143 6,279 5,710 Pension and other benefit liabilities 582 581 Other long-term liabilities 812 797 Long-term debt (Note 10, 11) 18,956 19,351 Deferred income taxes 11,340 11,052 Total liabilities 37,969 37,491 Shareholders' equity Share capital 25,655 25,602 Additional paid-in capital 93 88 Accumulated other comprehensive income (loss) (Note 6) 379 (618) Retained earnings 17,745 16,420 43,872 41,492 Non-controlling interest 951 919 Total equity 44,823 42,411 Total liabilities and equity $               82,792 $               79,902 See Contingencies (Note 14). See Notes to Interim Consolidated Financial Statements. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited) For the three months ended June 30 For the six months ended June 30 (in millions of Canadian dollars) 2024 2023 2024 2023 Operating activities Net income $             903 $          1,325 $          1,677 $          2,125 Reconciliation of net income to cash provided by operating activities: Depreciation and amortization 473 410 940 635 Deferred income tax expense (recovery) (Note 4) 18 (7,953) 35 (7,928) Pension recovery and funding (Note 12) (75) (78) (151) (155) Equity earnings of Kansas City Southern (Note 8, 9) — (26) — (230) Remeasurement loss of Kansas City Southern (Note 8) — 7,175 — 7,175 Dividend from Kansas City Southern (Note 9) — — — 300 Settlement of foreign currency forward contracts (Note 11) — — (65) — Other operating activities, net (69) 28 (68) (19) Changes in non-cash working capital balances related to operations 28 11 (75) (129) Net cash provided by operating activities 1,278 892 2,293 1,774 Investing activities Additions to properties (808) (628) (1,335) (1,034) Additions to Meridian Speedway properties (16) (8) (20) (8) Proceeds from sale of properties and other assets 9 12 10 16 Cash acquired on control of Kansas City Southern (Note 8) — 298 — 298 Investment in government securities — (267) — (267) Other investing activities, net 33 (24) 21 (24) Net cash used in investing activities (782) (617) (1,324) (1,019) Financing activities Dividends paid (178) (176) (355) (353) Issuance of Common Shares 20 19 42 37 Repayment of long-term debt, excluding commercial paper (Note 10) (149) (610) (220) (1,096) Net (repayment) issuance of commercial paper (Note 10) (157) 550 (362) 550 Acquisition-related financing fees — (15) — (15) Other financing activities, net — (1) — (1) Net cash used in financing activities (464) (233) (895) (878) Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents 6 (7) 19 (3) Cash position Net increase (decrease) in cash and cash equivalents 38 35 93 (126) Cash and cash equivalents at beginning of period 519 290 464 451 Cash and cash equivalents at end of period $             557 $             325 $             557 $             325 Supplemental cash flow information Income taxes paid $             309 $             259 $             551 $             443 Interest paid $             161 $             271 $             406 $             418 See Notes to Interim Consolidated Financial Statements. INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited) For the three months ended June 30 (in millions of Canadian dollars except per share data) Common shares (in millions) Share capital Additional paid-in capital Accumulated other comprehensive Income (loss) Retained earnings Total shareholders' equity Non-controlling interest Total equity Balance as at April 1, 2024 932.6 $ 25,629 $            95 $                    77 $   17,018 $          42,819 $          942 $ 43,761 Net income (loss) — — — — 905 905 (2) 903 Contribution from non-controlling interest — — — — — — — — Other comprehensive income (Note 6) — — — 302 — 302 11 313 Dividends declared ($0.19 per share) — — — — (178) (178) (178) Effect of stock-based compensation expense — — 3 — — 3 — 3 Shares issued under stock option plan 0.5 26 (5) — — 21 — 21 Balance as at June 30, 2024 933.1 $ 25,655 $            93 $                  379 $   17,745 $          43,872 $          951 $ 44,823 Balance as at April 1, 2023 930.9 $ 25,538 $            84 $                    74 $   13,824 $          39,520 $             — $ 39,520 Net income — — — — 1,324 1,324 1 1,325 Other comprehensive loss (Note 6) — — — (618) — (618) (8) (626) Dividends declared ($0.19 per share) — — — — (176) (176) — (176) Effect of stock-based compensation expense — — 9 — — 9 — 9 Shares issued under stock option plan 0.5 25 (5) — — 20 — 20 Non-controlling interest in connection with business acquisition — — — — — — 932 932 Balance as at June 30, 2023 931.4 $ 25,563 $            88 $                (544) $   14,972 $          40,079 $          925 $ 41,004   For the six months ended June 30 (in millions of Canadian dollars except per share data) Common shares (in millions) Share capital Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total shareholders' equity Non-controlling interest Total equity Balance at January 1, 2024 932.1 $ 25,602 $           88 $                 (618) $  16,420 $          41,492 $          919 $ 42,411 Net income (loss) — — — — 1,680 1,680 (3) 1,677 Contribution from non-controlling interest — — — — — — 1 1 Other comprehensive income (Note 6) — — — 997 — 997 34 1,031 Dividends declared ($0.38 per share) — — — (355) (355) — (355) Effect of stock-based compensation expense — — 16 — — 16 — 16 Shares issued under stock option plan 1.0 53 (11) — — 42 — 42 Balance as at June 30, 2024 933.1 $ 25,655 $           93 $                   379 $  17,745 $          43,872 $          951 $ 44,823 Balance as at January 1, 2023 930.5 $ 25,516 $           78 $                     91 $  13,201 $          38,886 $             — $ 38,886 Net income — — — — 2,124 2,124 1 2,125 Other comprehensive loss      (Note 6) — — — (635) — (635) (8) (643) Dividends declared ($0.38 per share) — — — — (353) (353) — (353) Effect of stock-based compensation expense — — 19 — — 19 — 19 Shares issued under stock option plan 0.9 47 (9) — — 38 — 38 Non-controlling interest in connection with business acquisition — — — — — — 932 932 Balance as at June 30, 2023 931.4 $ 25,563 $           88 $                 (544) $  14,972 $          40,079 $          925 $ 41,004 See Notes to Interim Consolidated Financial Statements. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2024 (unaudited) 1    Description of business and basis of presentation Canadian Pacific Kansas City Limited ("CPKC" or the "Company") owns and operates a transcontinental freight railway spanning Canada, the United States ("U.S."), and Mexico. CPKC provides rail and intermodal transportation services over a network of approximately 20,000 miles, serving principal business centres across Canada, the U.S., and Mexico. The Company transports bulk commodities, merchandise, and intermodal freight. CPKC's Common Shares trade on the Toronto Stock Exchange and New York Stock Exchange under the symbol "CP". On April 14, 2023, Canadian Pacific Railway Limited ("CPRL") assumed control of Kansas City Southern ("KCS") and changed its name to Canadian Pacific Kansas City Limited. These unaudited interim consolidated financial statements as at and for the three and six months ended June 30, 2024 ("Interim Consolidated Financial Statements") include KCS as a consolidated subsidiary from April 14, 2023. For the period beginning on January 1, 2023 and ending on April 13, 2023, the Company's 100% interest in KCS was accounted for and reported as an equity-method investment (see Notes 8 and 9). These Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). They do not include all of the information required for a complete set of annual financial statements prepared in accordance with GAAP and should be read in conjunction with the Company's audited consolidated financial statements as at and for the year ended December 31, 2023 ("last annual financial statements"). Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and results of operations since the last annual financial statements. These Interim Consolidated Financial Statements have been prepared using the same significant accounting policies used in the last annual financial statements, except for the adoption of new standards (see Note 2). Amounts are stated in Canadian dollars unless otherwise noted. The Company's operations and income for interim periods can be affected by seasonal fluctuations such as changes in customer demand and weather conditions, and may not be indicative of annual results. 2    Accounting changes Recently adopted accounting standards The accounting standards that have become effective during the three and six months ended June 30, 2024 did not have a material impact on the Interim Consolidated Financial Statements. Accounting standards not yet adopted Recently issued accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations when they are adopted. 3    Revenues  The following table presents disaggregated information about the Company's revenues from contracts with customers by major source: For the three months ended June 30 For the six months ended June 30 (in millions of Canadian dollars) 2024 2023 2024 2023 Grain $             665 $             537 $          1,395 $          1,052 Coal 236 219 445 374 Potash 180 144 317 276 Fertilizers and sulphur 103 89 207 185 Forest products 203 187 405 290 Energy, chemicals and plastics 695 575 1,397 941 Metals, minerals and consumer products 464 440 904 673 Automotive 358 257 623 382 Intermodal 630 653 1,268 1,145 Total freight revenues 3,534 3,101 6,961 5,318 Non-freight excluding leasing revenues 43 39 106 66 Revenues from contracts with customers 3,577 3,140 7,067 5,384 Leasing revenues 26 34 56 56 Total revenues $          3,603 $          3,174 $          7,123 $          5,440 4    Income taxes During the three months ended June 30, 2024, legislation was enacted to decrease the Arkansas state corporate income tax rate. As a result of this change, the Company recorded a deferred tax recovery of $3 million related to the revaluation of deferred income tax balances. The effective tax rates including discrete items for the three and six months ended June 30, 2024 were 24.40% and 24.72%, respectively, compared to 120.88% and 139.47%, respectively, for the same periods of 2023. For the three months ended June 30, 2024, the effective tax rate was 25.00%, excluding the discrete items of amortization of business acquisition fair value adjustments of $88 million, acquisition-related costs incurred by CPKC of $28 million, and a deferred tax recovery of $3 million on the Arkansas state corporate income tax rate change. For the three months ended June 30, 2023, the effective tax rate was 25.18%, excluding the discrete items of the derecognition of the deferred income tax liability on the outside basis difference of the investment in KCS of $7,832 million upon acquiring control of KCS, remeasurement loss of KCS of $7,175 million, acquisition-related costs incurred by CPKC of $119 million, amortization of business acquisition fair value adjustments of $75 million, revaluation of deferred income tax balances on unitary state apportionment changes of $51 million, and the equity earnings of KCS of $26 million. For the six months ended June 30, 2024, the effective tax rate was 25.00%, excluding the discrete items of amortization of business acquisition fair value adjustments of $174 million, acquisition-related costs incurred by CPKC of $54 million, adjustments to provisions and settlements of Mexican taxes of $10 million recognized in "Compensation and benefits", and a deferred tax recovery of $3 million on the Arkansas state corporate income tax rate change. For the six months ended June 30, 2023, the effective tax rate was 24.88%, excluding the discrete items of the derecognition of the deferred income tax liability on the outside basis difference of the investment in KCS of $7,832 million upon acquiring control of KCS, remeasurement loss of KCS of $7,175 million, the equity earnings of KCS of $230 million, acquisition-related costs incurred by CPKC of $134 million, amortization of business acquisition fair value adjustments of $75 million, revaluation of deferred income tax balances on unitary state apportionment changes of $51 million, and an outside basis deferred tax recovery of $23 million arising from the difference between the carrying amount of CPKC's investment in KCS for financial reporting and the underlying tax basis of this investment. See Note 8 for information regarding the KCS acquisition and Note 9 for information regarding the investment in KCS.