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Rail News: Kansas City Southern

KCS' third-quarter results reflect benefits of TFM acquisition, detriments from hurricanes

For the first time as the sole owner of The Kansas City Southern Railway Co., Texas Mexican Railway Co. and TFM S.A. de C.V., Kansas City Southern reported quarterly financial results. Primarily because of the TFM and Tex-Mex acquisitions, KCS’ third-quarter consolidated revenue reached a record $384.6 million and consolidated earnings totaled $110.5 million compared with third-quarter 2004’s $8.9 million.

However, quarterly consolidated operating expenses more than doubled to $386.5 million because of costs associated with the acquisitions and increased claim reserves. In addition, Hurricane Emily reduced Mexican operating income by $1.8 million, and hurricanes Katrina and Rita reduced U.S. operating income by $7.8 million and Mexican income by $2.4 million.

“U.S. rail operations had strong momentum going into the third quarter that would have generated significantly different results absent the impact of the hurricanes,” said KCS Chairman, President and Chief Executive Officer Mike Haverty in a prepared statement. “ The cost impacts were primarily the result of clean up, interruption of service, repositioning of equipment away from the path of the two September storms and the storage of that equipment while waiting for embargoes to be lifted.”

During 2005’s first nine months, KCS earned record consolidated revenue of $963.9 million compared with $499 million during the same 2004 period. Operating income dropped to $14.5 million compared with last year’s $56.1 million.

“We continue to be encouraged by the wealth of opportunities for both business growth and cost savings that full ownership of TFM provides us, while recognizing that it will take some time for management to implement the many changes required to maximize the value of the combined systems,” said Haverty.

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More News from 11/2/2005