Kansas City Southern (KSU) 8-K Strong Revenues and Improved Operations Highlight Kansas City Southern’s Second Quarter Earnings

EXHIBIT 99.1

Date:	August 2, 2006
Media Contact:	William H. Galligan	816/983-1551
	William.h.galligan@kcsr.com

Strong Revenues and Improved Operations
Highlight Kansas City Southern’s Second Quarter Earnings

Second Quarter Highlights

• EPS improved to $0.26 with an improved consolidated operating ratio of 81.2%. The second quarter operating ratio reflects a 3.0 point improvement compared with the first quarter 2006.

• Revenues increased 8.4% to $413.1 million compared with second quarter 2005. Operating expenses decreased slightly compared with the prior year, exclusive of one-time charges a year ago.

• Continued focus on improving yields on low margin business and a strong pricing environment contributed to ongoing improvements in revenue per car.

• Operating income was $77.5 million compared with an $8.3 million loss in the prior year. Operating income for second quarter 2005 was $43.1 million, exclusive of the one-time charges.

Second Quarter 2005

Kansas City, MO. Kansas City Southern (KCS or Company) (NYSE:KSU) today reported consolidated revenues of $413.1 million for second quarter 2006 compared with $381.1 million in 2005. The 8.4% increase in revenue was primarily driven by pricing, increased fuel surcharges, consistent with increases in the cost of fuel, and volume increases in coal and chemical and petroleum products.

Operating expenses of $335.6 million were $53.8 million, or 13.8%, lower compared with the prior year’s second quarter total. Second quarter 2005 operating expenses included a non-cash,

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pre-tax charge of $35.6 million related to the accounting for deferred profit sharing in Mexico, and $15.8 million of charges related to the acquisition of TFM, S.A. de C.V. (now Kansas City Southern de Mexico, or KCSM).

Second quarter 2006 operating income was $77.5 million, which compares favorably with $43.1 million the prior year, excluding the second quarter 2005 one-time charges. In addition to higher revenues, the improvement in operating income was driven by operating expense reductions including casualties ($7.4 million), purchased services ($5.6 million) and equipment ($0.6 million).

Net income available to common shareholders for the second quarter 2006 was $19.2 million, or $0.26 per share, compared with a net loss of $27.3 million, or $(0.33) per share the previous year. Net income for second quarter 2005, exclusive of one-time charges, was $1.0 million, or $0.01 per share.

Comments from the Chairman

“Stronger second quarter earnings and improved operations demonstrate the continued progress KCS is making toward integrating its U.S. and Mexican rail operations,” stated Chairman and Chief Executive Officer Michael R. Haverty. “We expect our financial performance to continue to improve throughout the second half of 2006 for a number of reasons.

• Further improvement in the coordination of the combined rail system, bolstered by the expanded utilization of MCS, the Company’s transportation software, which was installed successfully at KCSM in July of this year.

• Strong revenue growth reflecting continued focus on yield management and the value-recognition of KCS’ long haul freight transportation services.

• Strengthened executive management team highlighted by this year’s additions of Jose Zozaya, KCSM’s president and executive representative; Patrick Ottensmeyer, executive

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	vice president and chief financial officer; and Daniel Avramovich, executive vice president and chief marketing officer.
•	Ongoing integration of shared services for U.S. and Mexico operations providing additional cost saving opportunities for the consolidated system.

“During the second quarter, KCS marked the 10^th anniversary of the start-up of the Mexican rail franchise and the first full year of our control of KCSM. We are proud of what has been accomplished to date and our expectations for future growth far exceed the internal projections we made a decade ago.”

Headquartered in Kansas City, Mo., KCS is a transportation holding company that has railroad investments in the U.S., Mexico and Panama. Its primary U.S. holding includes KCSR, serving the central and south central U.S. Its international holdings include Kansas City Southern de Mexico, serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal. KCS’ North American rail holdings and strategic alliances are primary components of a NAFTA Railway system, linking the commercial and industrial centers of the U.S., Canada and Mexico.

This press release includes statements concerning potential future events involving the Company, which could materially differ from the events that actually occur. The differences could be caused by a number of factors including those factors identified in the “Risk Factors” and the “Cautionary Information” sections of the Company’s Form 10-K for the year ended December 31, 2005, filed by the Company with the Securities and Exchange Commission (SEC) (Commission file no. 1-4717). The Company will not update any forward-looking statements in this press release to reflect future events or developments.

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KANSAS CITY SOUTHERN
INCOME STATEMENT
(Dollars in millions except per share data)
(Unaudited)

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2006			2005			2006			2005
Revenues	$	413.1		$	381.1		$	801.5		$	579.3
Operating expenses
Compensation and benefits		93.0			93.4			187.0			154.7
Fuel		63.1			56.5			121.4			83.0
Purchased services		52.4			56.6			107.3			76.4
Equipment costs		39.3			41.5			84.0			58.6
Depreciation and amortization		36.8			40.4			75.2			54.7
Casualties and insurance		15.5			22.0			28.1			34.7
KCSM employees’ statutory profit sharing		4.6			38.7			5.6			38.7
Other		30.9			40.3			54.1			62.0
Total operating expenses		335.6			389.4			662.7			562.8
Operating income (loss)		77.5			(8.3	)		138.8			16.5
Equity in net earnings (loss) of unconsolidated affiliates
Grupo TFM, S.A. de C.V.		—			—			—			(1.0	)
Other		2.0			1.5			2.5			0.4
Interest expense		(40.6	)		(38.7	)		(81.2	)		(51.0	)
Debt retirement costs		(2.2	)		(3.9	)		(2.2	)		(3.9	)
Exchange gain (loss)		(7.0	)		4.3			(11.2	)		4.3
Other income and expense		2.9			3.8			5.8			7.1
Income before income taxes and minority interest		32.6			(41.3	)		52.5			(27.6	)
Income tax provision		8.5			1.6			15.5			7.2
Income before minority interest		24.1			(42.9	)		37.0			(34.8	)
Minority interest		—			(17.8	)		—			(17.8	)
Net income		24.1			(25.1	)		37.0			(17.0	)
Preferred stock dividends		4.9			2.2			9.8			4.4
Net income (loss) available to common shareholders	$	19.2		$	(27.3	)	$	27.2		$	(21.4	)
Per Share Data
Earnings (loss) per common share — basic	$	0.26		$	(0.33	)	$	0.37		$	(0.29	)
Earnings (loss) per share — diluted	$	0.24		$	(0.33	)	$	0.36		$	(0.29	)
Weighted average Common shares outstanding (in thousands)
Basic		74,464			81,707			73,661			72,604
Potential dilutive Common shares		18,088						16,355
Diluted		92,552			81,707			90,016			72,604

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Kansas City Southern
Carloadings By Commodity – Second Quarter 2006
(Dollars in Thousands)

Carloadings								Revenue
Second Quarter				%				Second Quarter				%
2006		2005		Change				2006		2005		Change
							Coal
	60,631		51,032		18.8	%	Unit Coal	$	32,337.4	$	26,651.0		21.3	%
	1,109		746		48.7	%	Other Coal		755.1		348.0		117.0	%
	61,740		51,778		19.2	%	Total		33,092.5		26,999.0		22.6	%
							Paper & Forest Products
	32,396		34,140		-5.1	%	Pulp/Paper		38,354.6		33,492.5		14.5	%
	6,597		7,800		-15.4	%	Scrap Paper		6,677.3		7,321.5		-8.8	%
	5,597		8,384		-33.2	%	Pulpwood/Logs/Chips		3,827.5		5,478.0		-30.1	%
	7,663		8,726		-12.2	%	Lumber/Plywood		10,048.1		10,063.0		-0.1	%
	29,544		30,715		-3.8	%	Metal/Scrap		31,979.7		27,690.2		15.5	%
	15,278		19,046		-19.8	%	Military/Other Carloads		21,014.9		17,802.8		18.0	%
	97,075		108,811		-10.8	%	Total		111,902.1		101,848.0		9.9	%
							Chemical & Petroleum Products
	3,674		3,350		9.7	%	Agri Chemicals		4,329.7		3,054.0		41.8	%
	27,486		26,353		4.3	%	Petroleum		27,734.7		21,554.0		28.7	%
	12,335		11,872		3.9	%	Plastics		19,290.4		17,651.0		9.3	%
	23,670		24,751		-4.4	%	Other		30,801.1		26,457.2		16.4	%
	67,165		66,326		1.3	%	Total		82,155.9		68,716.2		19.6	%
							Agriculture & Minerals
	38,353		38,386		-0.1	%	Grain		49,194.5		44,004.4		11.8	%
	21,166		22,894		-7.5	%	Food Products		29,447.5		28,488.0		3.4	%
	14,300		16,469		-13.2	%	Ores and Minerals		11,823.0		11,415.0		3.6	%
	19,414		21,174		-8.3	%	Stone, Clay & Glass		16,141.6		15,730.0		2.6	%
	93,233		98,923		-5.8	%	Total		106,606.6		99,637.4		7.0	%
							Intermodal & Automotive
	25,052		33,346		-24.9	%	Automotive		24,655.7		33,796.4		-27.0	%
	135,143		143,648		-5.9	%	Intermodal		32,906.8		34,010.2		-3.2	%
	160,195		176,994		-9.5	%	Total		57,562.5		67,806.6		-15.1	%
	479,408		502,832		-4.7	%	TOTAL FOR BUSINESS UNITS		391,319.6		365,007.2		7.2	%
	—		—				Other revenue		21,818.1		16,142.3		35.2	%
	479,408		502,832		-4.7	%	TOTAL	$	413,137.7	$	381,149.5		8.4	%

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Kansas City Southern
Carloadings By Commodity – Year to Date June 30, 2006
(Dollars in Thousands)
(2005 Proforma for comparison purposes)

Carloadings								Revenue
Year to Date				%				Year to Date				%
2006		2005		Change				2006		2005		Change
							Coal
	121,616		110,747		9.8	%	Unit Coal	$	64,349.4	$	57,045.0		12.8	%
	2,218		1,465		51.4	%	Other Coal		1,638.1		666.0		146.0	%
	123,834		112,212		10.4	%	Total		65,987.5		57,711.0		14.3	%
							Paper & Forest Products
	66,151		67,457		-1.9	%	Pulp/Paper		75,424.8		65,453.8		15.2	%
	13,142		15,336		-14.3	%	Scrap Paper		13,394.1		14,184.8		-5.6	%
	11,556		17,838		-35.2	%	Pulpwood/Logs/Chips		7,803.1		11,663.4		-33.1	%
	15,295		17,040		-10.2	%	Lumber/Plywood		19,842.1		19,552.0		1.5	%
	60,815		62,879		-3.3	%	Metal/Scrap		64,933.7		57,169.6		13.6	%
	30,826		32,642		-5.6	%	Military/Other Carloads		42,006.2		30,003.5		40.0	%
	197,785		213,192		-7.2	%	Total		223,404.0		198,027.1		12.8	%
							Chemical & Petroleum Products
	6,994		5,991		16.7	%	Agri Chemicals		7,672.0		5,395.0		42.2	%
	52,683		53,845		-2.2	%	Petroleum		51,516.2		44,434.0		15.9	%
	23,934		23,811		0.5	%	Plastics		36,974.2		35,487.0		4.2	%
	46,802		49,189		-4.9	%	Other		59,185.6		54,753.4		8.1	%
	130,413		132,836		-1.8	%	Total		155,348.0		140,069.4		10.9	%
							Agriculture & Minerals
	73,360		78,515		-6.6	%	Grain		90,589.9		88,131.8		2.8	%
	42,236		44,439		-5.0	%	Food Products		58,079.2		54,314.0		6.9	%
	29,839		32,776		-9.0	%	Ores and Minerals		24,429.3		23,117.0		5.7	%
	37,369		40,444		-7.6	%	Stone, Clay & Glass		30,423.8		29,928.0		1.7	%
	182,804		196,174		-6.8	%	Total		203,522.2		195,490.8		4.1	%
							Intermodal & Automotive
	52,202		62,187		-16.1	%	Automotive		50,499.1		62,499.9		-19.2	%
	255,987		272,082		-5.9	%	Intermodal		62,310.9		64,256.3		-3.0	%
	308,189		334,269		-7.8	%	Total		112,810.0		126,756.2		-11.0	%
	943,025		988,683		-4.6	%	TOTAL FOR BUSINESS UNITS		761,071.7		718,054.5		6.0	%
	—		—				Other revenue		40,479.0		30,677.7		31.9	%
	943,025		988,683		-4.6	%	TOTAL	$	801,550.7	$	748,732.2		7.1	%

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