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Rail News: Kansas City Southern

Quarterly results show signs of a 'modest recovery,' KCS' Haverty says

The last Class I to report third-quarter earnings posted similar results to the six other large roads — as in significantly less revenue and income, but drastically reduced expenses. Today, Kansas City Southern reported net income of $25.8 million, or 27 cents per diluted share, compared with $48.9 million, or 52 cents per diluted share, in third-quarter 2008.

Operating income declined 24 percent to $84.4 million and revenue tumbled 21 percent to $386.1 million. All commodity groups registered revenue declines on a year-over-year basis. But each group “recorded higher revenues on a sequential basis from the second quarter, reflecting a gradually improving business environment,” KCS officials said in a prepared statement. Third-quarter revenue rose 13 percent and carloads increased 12 percent vs. second-quarter figures.

Results show the railroad is “beginning to experience a gradually improving business environment” and “provide reasons to believe that at least we are seeing some signs of a modest recovery,” said KCS Chairman Mike Haverty.

Although the Class I’s operating ratio inched up 0.4 points to 78.1, the ratio bested the second-quarter mark of 87.3 by a wide margin.

Total operating costs fell 21 percent to $301.7 million compared with third-quarter 2008’s total as fuel costs plunged 45 percent to $49.7 million, compensation and benefit costs dropped 10 percent to $83.4 million, purchased service costs tumbled 29 percent to $36.4 million and equipment costs decreased 6 percent to $41.8 million.

“As encouraging as KCS’ third-quarter results are, management recognizes there is much work yet to be done to get the company’s revenues and earnings back to pre-recession levels,” said Haverty. “The company’s mix of new and expanded business opportunities, coupled with a continued commitment to efficient operations and cost controls, provides KCS with the resources to build upon the operational and financial leverage achieved in the third quarter.”

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More News from 10/29/2009