Kansas City Southern 8K Revenue Growth, Cost Containment Highlight Kansas City Southern’s Third Quarter Earnings | KSU 2 Nov 06

Exhibit 99.1


Date:	October 31, 2006

Media Contact:	William H. Galligan	816/983-1551
	William.h.galligan@kcsr.com

Revenue Growth, Cost Containment
Highlight Kansas City Southern’s Third Quarter Earnings

Third Quarter Highlights

	§		EPS improved to $0.32 per diluted share as compared with an adjusted prior year’s diluted $0.02 per share, which excludes an adjustment to casualty reserves and a one-time VAT settlement.

	§		Revenues increased 8.1% to $415.7 million, as volumes increased 1.9%.

	§		Revenue per carload increased 6.3%.

	§		Operating expenses decreased 3.0% from prior year, excluding an adjustment to 2005 operating expenses.

	§		Operating ratio of 81.4%.

Third Quarter 2006

Kansas City, Mo. Kansas City Southern (KCS or Company) (NYSE:KSU) today reported consolidated revenues of $415.7 million, an increase of $31.1 million, or 8.1%, compared with $384.6 million in 2005. The revenue growth was driven by a 1.9% increase in volumes, and a continued recognition of the value of our freight services. All business units, except Automotive, recorded strong quarter-over-quarter gains led by Intermodal (24.8%), Paper & Forest Products (10.3%) and Agricultural and Minerals (10.0%).

Based on an actuarial study, the Company recorded an increase to its personal injury claims reserve of $37.8 million in 2005. KCS also recorded a one-time, non-cash gain of approximately $131.9 million as a result of a VAT settlement with the Mexican Government, which resulted in KCS attaining 100% ownership of KCSM in 2005. This non-cash gain was the key factor in the Company reporting a net income of $110.5 million, or $1.14 per diluted share in the third quarter 2005. These items had a related tax effect of $14.5 million.

Operating expenses for the third quarter of 2006 were $338.4 million, a 3.0% reduction from third quarter 2005 expenses of $348.7 million. A 31.4% reduction in casualties and insurance, excluding the prior year adjustment related to personal injury claims, was a large driver of the substantial reduction in operating costs. Fuel expense in the third quarter 2006 increased 11.4%.

Operating income for third quarter 2006 was $77.3 million compared with $35.9 million, exclusive of the claims reserve adjustment in third quarter 2005. Net income available to common shareholders for the third quarter 2006 was $26.4 million, or $0.32 per diluted share, compared with $1.9 million, or $0.02 per diluted share, in third quarter 2005, exclusive of the aforementioned non-recurring items.

Comments from the Chairman

“Volume growth improving overall operations and our continued progress in containing costs, were major contributors to KCS having a positive third quarter,” stated chairman and chief executive officer, Michael R. Haverty.

“After four quarter-over-quarter volume comparisons showing an absence of unit growth, KCS recorded increased volumes in the third quarter of 2006 compared with the previous year, even after accounting for the hurricanes that hit our rail system in 2005. This suggests that the majority of our business rationalization is behind us and much of our lower margin business has been replaced with more profitable traffic.

“U.S. operations improved significantly in the quarter, which is a product of better locomotive utilization, the positive impact of our capacity-enhancing projects, and a sharp focus on operational efficiencies.

“KCS has made substantial progress in strengthening its financial position during the first nine months of 2006, and we fully expect to maintain our positive momentum during the remainder of the year.”

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


	Three Months
	Ended September 30,						Variance
	2006			2005			Dollar			Percent
Revenues	$	415.7		$	384.6		$	31.1			8.1	%

Operating expenses
Compensation and benefits		97.1			94.0			3.1			3.3	%
Fuel		66.4			59.6			6.8			11.4	%
Purchased services		56.6			57.0			(0.4	)		(0.7	%)
Equipment costs		46.1			46.6			(0.5	)		(1.1	%)
Depreciation and amortization		37.7			40.5			(2.8	)		(6.9	%)
Casualties and insurance		12.0			55.3			(43.3	)		(78.3	%)
KCSM employees’ statutory profit sharing		(0.6	)		2.2			(2.8	)		(127.3	%)
Other		23.1			31.3			(8.2	)		(26.2	%)


Total operating expenses		338.4			386.5			(48.1	)		(12.4	%)


Operating income (loss)		77.3			(1.9	)		79.2			4168.4	%

Equity in net earnings of unconsolidated affiliates:
Other		3.2			1.3			1.9			146.2	%
Interest expense		(42.3	)		(39.5	)		(2.8	)		(7.1	%)
Exchange gain (loss)		4.5			(1.5	)		6.0			400.0	%
VAT/Put settlement gain, net		—			131.9			(131.9	)		(100.0	%)
Other income		3.5			2.6			0.9			34.6	%


Income before income taxes and minority interest		46.2			92.9			(46.7	)		(50.3	%)
Income tax provision (benefit)		14.7			(19.8	)		34.5			174.2	%


Net income before minority interest		31.5			112.7			(81.2	)		(72.0	%)
Minority interest		0.2			—			0.2			—	%


Net income		31.3			112.7			(81.4	)		(72.2	%)
Preferred stock dividends		4.9			2.2			2.7			122.7	%


Net income available to common shareholders	$	26.4		$	110.5			(84.1	)		(76.1	%)


Per Share Data
Earnings per common share — basic	$	0.35		$	1.35			(1.00	)		(74.0	%)


Earnings per share — diluted	$	0.32		$	1.14			(0.82	)		(71.9	%)


Weighted average Common shares outstanding (in thousands)
Basic		75,178			81,795			(6,617	)		(8.1	%)
Potential dilutive Common shares		16,411			17,703			(1,292	)		(7.3	%)

Diluted		91,589			99,498			(7,909	)		(7.9	%)

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


	Nine Months
	Ended September 30,						Variance
	2006			2005			Dollar			Percent
Revenues	$	1,217.3		$	963.9		$	253.4			26.3	%

Operating expenses
Compensation and benefits		284.1			248.7			35.4			14.2	%
Fuel		187.8			142.6			45.2			31.7	%
Purchased services		163.9			133.3			30.6			23.0	%
Equipment costs		130.1			105.2			24.9			23.7	%
Depreciation and amortization		112.9			95.3			17.6			18.5	%
Casualties and insurance		40.1			90.0			(49.9	)		(55.4	%)
KCSM employees’ statutory profit sharing		5.0			41.0			(36.0	)		(87.8	%)
Other		77.3			93.3			(16.0	)		(17.1	%)


Total operating expenses		1,001.2			949.4			51.8			5.5	%


Operating income		216.1			14.5			201.6			1390.3	%

Equity in net earnings (loss) of unconsolidated affiliates:
Grupo TFM, S.A. de C.V.		—			(1.0	)		1.0			100.0	%
Other		5.7			1.7			4.0			235.3	%
Interest expense		(123.5	)		(90.5	)		(33.0	)		(36.5	%)
Debt retirement costs		(2.2	)		(3.9	)		1.7			43.6	%
Exchange gain (loss)		(6.7	)		2.8			(9.5	)		(339.3	%)
VAT/Put settlement gain, net		—			131.9			(131.9	)		(100.0	%)
Other income		9.3			9.7			(0.4	)		(4.1	%)


Income before income taxes and minority interest		98.7			65.2			33.5			51.4	%
Income tax provision (benefit)		30.2			(12.7	)		42.9			337.8	%


Net income before minority interest		68.5			77.9			(9.4	)		(12.1	%)
Minority interest		0.2			(17.8	)		18.0			101.1	%


Net income		68.3			95.7			(27.4	)		(28.6	%)
Preferred stock dividends		14.6			6.6			8.0			121.2	%


Net income available to common shareholders	$	53.7		$	89.1			(35.4	)		(39.7	%)


Per Share Data
Earnings per common share — basic	$	0.72		$	1.18			(0.46	)		(38.8	%)


Earnings per share — diluted	$	0.67		$	1.05			(0.38	)		(36.2	%)


Weighted average Common shares outstanding (in thousands)
Basic		74,490			75,664			(1,174	)		(1.6	%)
Potential dilutive Common shares		16,431			16,432			(1	)		0.0	%

Diluted		90,921			92,096			(1,175	)		(1.3	%)

Kansas City Southern
Revenue & Carloadings By Commodity — Third Quarter 2006
(Dollars in Thousands)


*Carloadings*								*Revenue*
Third Quarter				%				Third Quarter				%
2006		2005		Change				2006		2005		Change
							Coal
	62,370		60,131		3.7	%	Unit Coal	$	33,623.8	$	32,472.1		3.5	%
	1,219		987		23.5	%	Other Coal		849.4		518.5		63.8	%

	63,589		61,118		4.0	%	Total		34,473.2		32,990.6		4.5	%


							Paper & Forest Products
	34,402		34,499		(0.3	%)	Pulp/Paper		43,575.0		37,368.9		16.6	%
	5,646		7,437		(24.1	%)	Scrap Paper		6,022.5		7,313.9		(17.7	%)
	5,053		7,253		(30.3	%)	Pulpwood/Logs/Chips		3,579.4		4,621.2		(22.5	%)
	6,928		7,766		(10.8	%)	Lumber/Plywood		8,918.0		9,709.0		(8.1	%)
	26,542		25,770		3.0	%	Metal/Scrap		31,070.0		26,779.1		16.0	%
	16,130		15,665		3.0	%	Military/Other Carloads		20,172.1		16,936.6		19.1	%

	94,701		98,390		(3.7	%)	Total		113,337.0		102,728.7		10.3	%


							Chemical & Petroleum Products
	3,146		2,810		12.0	%	Agri Chemicals		3,674.5		2,848.8		29.0	%
	29,037		22,637		6.2	%	Other Chemicals		30,401.7		27,080.8		12.3	%
	26,787		25,708		4.2	%	Petroleum		27,397.1		23,298.6		17.6	%
	12,959		12,053		3.3	%	Plastics		17,275.0		19,385.2		(10.9	%)

	66,424		63,208		5.1	%	Total		78,748.3		72,613.4		8.4	%


							Agriculture and Minerals
	39,746		35,081		13.3	%	Grain		54,857.7		43,548.2		26.0	%
	19,058		21,882		(12.9	%)	Food Products		28,352.8		29,599.8		(4.2	%)
	13,527		15,335		(11.8	%)	Ores and Minerals		11,151.8		11,255.2		(0.9	%)
	18,142		19,822		(8.5	%)	Stone, Clay & Glass		15,542.7		15,489.1		0.3	%

	90,473		92,120		(1.8	%)	Total		109,905.0		99,892.3		10.0	%


							Intermodal & Automotive
	24,010		29,039		(17.3	%)	Automotive		23,832.8		29,164.5		(18.3	%)
	144,172		130,695		10.3	%	Intermodal		37,452.6		29,998.2		24.8	%

	168,182		159,734		5.3	%	Total		61,285.4		59,162.7		3.6	%


	483,369		474,570		1.9	%	TOTAL FOR BUSINESS UNITS		397,748.9		367,387.7		8.3	%
	—		—				Other KCSR Revenue		17,984.6		17,177.2		4.7	%


	483,369		474,570		1.9	%	TOTAL	$	415,733.5	$	384,564.9		8.1	%

Kansas City Southern
Revenue & Carloadings By Commodity — Year to Date September 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
	183,986		170,878		7.7	%	Unit Coal	$	97,973.2	$	89,517.0		9.4	%
	3,437		2,452		40.2	%	Other Coal		2,487.5		1,183.5		110.2	%

	187,423		173,330		8.1	%	Total		100,460.7		90,700.5		10.8	%


							Paper & Forest Products
	100,553		101,956		(1.4	%)	Pulp/Paper		118,999.8		102,823.3		15.7	%
	18,788		22,773		(17.5	%)	Scrap Paper		19,416.6		21,497.7		(9.7	%)
	16,609		25,091		(33.8	%)	Pulpwood/Logs/Chips		11,382.5		16,284.4		(30.1	%)
	22,223		24,806		(10.4	%)	Lumber/Plywood		28,760.1		29,261.7		(1.7	%)
	87,357		88,649		(1.5	%)	Metal/Scrap		96,003.7		83,947.9		14.4	%
	46,956		48,307		(2.8	%)	Military/Other Carloads		62,178.3		46,939.9		32.5	%

	292,486		311,582		(6.1	%)	Total		336,741.0		300,754.9		12.0	%


							Chemical & Petroleum Products
	10,140		8,801		15.2	%	Agri Chemicals		11,346.5		8,244.8		37.6	%
	70,839		71,826		(1.4	%)	Other Chemicals		89,587.3		81,832.7		9.5	%
	79,470		79,553		(0.1	%)	Petroleum		78,913.3		67,732.3		16.5	%
	36,388		35,869		1.5	%	Plastics		54,249.2		54,873.1		(1.1	%)

	196,837		196,044		0.4	%	Total		234,096.3		212,682.9		10.1	%


							Agriculture and Minerals
	113,106		113,596		(0.4	%)	Grain		145,447.6		131,680.1		10.5	%
	61,294		66,321		(7.6	%)	Food Products		86,432.0		83,913.9		3.0	%
	43,366		48,111		(9.9	%)	Ores and Minerals		35,581.1		34,371.8		3.5	%
	55,511		60,266		(7.9	%)	Stone, Clay & Glass		45,966.5		45,417.6		1.2	%

	273,277		288,294		(5.2	%)	Total		313,427.2		295,383.4		6.1	%


							Intermodal & Automotive
	76,212		91,226		(16.5	%)	Automotive		74,331.9		91,664.4		(18.9	%)
	400,159		402,777		(0.6	%)	Intermodal		99,763.5		94,253.9		5.8	%

	476,371		494,003		(3.6	%)	Total		174,095.4		185,918.3		(6.4	%)


	1,426,394		1,463,253		(2.5	%)	TOTAL FOR BUSINESS UNITS		1,158,820.6		1,085,440.0		6.8	%
	—		—		0.0	%	Other KCSR Revenue		58,464.6		48,556.9		20.4	%


	1,426,394		1,463,253		(2.5	%)	TOTAL	$	1,217,285.2	$	1,133,996.9		7.3	%

Kansas City Southern (KSU) 8-KRevenue Growth, Cost Containment Highlight Kansas City Southern’s Third Quarter Earnings