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RAIL EMPLOYMENT



Rail News Home Kansas City Southern

2/3/2009



Rail News: Kansas City Southern

KCS' traffic and revenue tumble, operating ratio climbs


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A sharp economic downturn in both the United States and Mexico was too much for Kansas City Southern to overcome in the fourth quarter. Today, the Class I reported that quarterly carloadings tumbled 8.4 percent to 441,641 units and revenue dipped 7.9 percent to $423.8 million compared with fourth-quarter 2007 totals.

In addition, operating income fell 16.1 percent to $91.2 million, earnings declined 29 percent to 40 cents per diluted share and KCS’ operating ratio increased 2.1 points to 78.5. Analysts had forecasted earnings of 32 cents per share on revenue of $437.7 million, according to Thomson Reuters.

On the positive side, operating expenses decreased 5.4 percent year over year to $332.6 million primarily because fuel costs dropped 13.7 percent and compensation/benefits costs declined 14.3 percent.

Depressed quarterly revenue resulted from the “most severe economic conditions in recent history,” said KCS Chairman and Chief Executive Officer Mike Haverty in a prepared statement. “[But] as soon as traffic volumes began to fall in the wake of two September hurricanes, KCS management reshaped its transportation service plan and took out costs throughout the entire company.”

For the full year, revenue increased 6.3 percent to a record $1.85 billion, operating income rose 7.7 percent to a record $390.2 million, earnings jumped 18.5 percent to an all-time-high $1.86 per diluted share and the operating ratio dropped 0.3 points to 78.9 compared with 2007 levels.

A 12.7 percent gain in agriculture & minerals revenue, spurred by a combination of long-haul traffic from the upper Midwest to Mexico and strong pricing, led the annual revenue increase, KCS said. Chemical and petroleum revenue rose 8.6 percent, coal revenue increased 5.5 percent, and industrial and consumer revenue inched up 1.5 percent. Intermodal revenue jumped 12.2 percent, but automotive revenue dropped 4.8 percent.

Annual operating expenses increased 5.9 percent to $1.5 billion as fuel costs shot up nearly 20 percent to $324.8 million vs. 2007 costs.

Despite the sluggish end to 2008 and weakened economy, KCS “remains a growth company,” said Haverty. “All the ingredients for the company’s long-term success are still in place.”

Meanwhile, KCS announced yesterday it named James Fisk vice president and chief mechanical officer for U.S. subsidiary The Kansas City Southern Railway Co. (KCSR). He will report to KCSR Executive VP and Chief Operating Officer Scott Arvidson.

Fisk returns to KCS after serving as VP of continuous improvement for Electro-Motive Diesel Inc. since 2005. Prior to joining EMD, he was VP and CMO for KCS for two years. Fisk also previously served as president and COO for National Railway Equipment Co., and EVP for Wisconsin Central Ltd., where he was responsible for the United States, Europe and Australia.


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