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Rail News: Kansas City Southern

KCS registers revenue gains because of acquisitions, reports income losses because of hurricanes


Yesterday, Kansas City Southern became the seventh Class I to report a financial record in the fourth quarter. The railroad registered all-time-high consolidated revenue of $388.2 million, which more than doubled fourth-quarter 2004 revenue of $174.6 million primarily because KCS last year became the sole owner of Kansas City Southern de México (KCSM) and The Texas Mexican Railway Co.

However, KCS reported a net loss of $4.1 million compared with a fourth-quarter 2004 net loss of $1.4 million. The Class I’s quarterly operating income fell $12.8 million because of infrastructure damage and lost revenue associated with hurricanes Katrina and Rita.

“Katrina resulted in the rerouting of Class I connecting traffic away from the Gulf region, which caused congestion along parts of the KCSR system, as well as disrupting locomotive and freight-car positioning and availability,” said KCS Chairman, President and Chief Executive Officer Mike Haverty in a prepared statement. “The total impact to fourth-quarter U.S. revenues of the hurricanes was approximately $9.8 million, and the total revenue impact for the final four months of 2005 was approximately $14 million.”

In addition, KCS’ consolidated fourth-quarter operating expenses of $341.6 million more than doubled costs totaling $147.2 million during the same 2004 period because of acquisition expenses and higher fuel costs.

For the full year, KCS’ consolidated revenue totaling $1.35 billion doubled 2004’s $639.5 million and set a record. Net income ballooned to $84.9 million compared with 2004’s $15.7 million. However, operating income of $61 million dropped 27 percent and total operating expenses of $1.3 billion increased more than 130 percent compared with 2004.

“Certainly, 2005 presented challenges as we began to integrate the Tex-Mex, KCSM and KCSR systems into a seamless KCS network stretching from the heartland of the U.S. to the heartland of Mexico and the Pacific coast,” said Haverty. “The good news is that most of these issues have either been resolved or will be resolved during the first quarter of 2006.”

Contact Progressive Railroading editorial staff.

More News from 2/3/2006