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Rail News Home Kansas City Southern

10/28/2008



Rail News: Kansas City Southern

KCS overcomes storms' financial drag to set revenue, income records


Not even the brunt of two Gulf Coast hurricanes could throw water at Kansas City Southern’s financial results in the third quarter.

The Class I’s revenue increased 10.7 percent to a record $491.5 million, operating income rose 13 percent to a record $111 million, net income jumped 17 percent to $48.9 million (or 52 cents per diluted share) and operating ratio improved 0.5 points to 77.4 compared with third-quarter 2007 results.

Carloadings fell 0.9 percent to 465,658 units primarily because the hurricanes disrupted service and temporarily knocked 15 Gulf Coast refineries and chemical facilities out of commission in September, KCS said. The railroad estimates the storms’ financial impact at more than one full point on the operating ratio, or about 7 cents per diluted share.

“Just prior to the hurricanes, KCS volumes were up 1.5 percent in the third quarter compared to last year, indicative of the company’s growing business opportunities,” said KCS Chairman and Chief Executive Officer Mike Haverty in a prepared statement. “Unfortunately … KCS’ U.S.-Mexico cross-border traffic was totally shut down for eight days as a result of Union Pacific’s track in southeastern Texas, over which KCS operates, being out of service.”

Revenue growth was driven by coal, which registered a 13.2 percent gain in revenue and 0.7 percent increase in volume year over year. Intermodal revenue jumped 15.8 percent, agriculture and minerals revenue rose 12.3 percent, industrial and consumer products revenue increased 11.8 percent, and chemical and petroleum products revenue inched up 0.5 percent. Revenue in automotive — a key component of Kansas City Southern de México S.A. de C.V.’s commodity mix — dropped 13.4 percent because of the soft economy and decreased demand for new vehicles, KCS said.

Meanwhile, third-quarter expenses rose 10 percent year over year to $380.5 million primarily because fuel costs soared 35 percent to $90.1 million. Excluding fuel’s impact, operating expenses increased 4 percent.


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