Kansas City Southern (KSU) 8-K KCS First Quarter 2008 Revenues, Operating Income and Operating Ratio Improve; EPS up 86% over Prior Year

Date:	April 24, 2008
Media Contact:	William H. Galligan	Phone: 816/983-1551
	bgalligan@kcsouthern.com

KCS First Quarter 2008 Revenues, Operating Income and Operating
Ratio Improve; EPS up 86% over Prior Year

First Quarter Highlights

• Revenues of $450.6 million, nearly a 10 % increase over 2007 with all commodity groups experiencing gains

• Operating income of $83.4 million compared with $72.4 million in 2007, a 15% increase.

• Operating ratio of 81.5%, nearly 1 point better than last year.

• Diluted EPS of $0.39 compared with $0.21 in 2007, an 86% increase.

Kansas City, MO. Kansas City Southern (KCS) (NYSE:KSU) recorded first quarter 2008 revenues of $450.6 million, a 9.6% increase over first quarter 2007. The revenue growth was attributable to a continued strong pricing environment and carload/unit growth in some of the company’s business segments.

For the first quarter, KCS revenues were led by automotive, which had revenue growth of 19.4%, and agriculture and minerals, which experienced revenue increases of 16.0% quarter over quarter. In addition, in the first quarter, revenues in chemical and petroleum products increased 14.7 %, intermodal grew 9.1%, coal revenues were up 4.2% and forest products and metals improved 1.4%.

First quarter operating expenses were $367.2 million, an increase of 8.4% over last year. Fuel expenses increased 24.6% over the prior year, although this was partially offset by fuel surcharge revenue.

Operating income for the first quarter of 2007 was $83.4 million compared with $72.4 million last year, a 15.2% improvement. The first quarter 2007 operating ratio was 81.5%, a 0.9 point improvement from first quarter 2007.

Net income available to common shareholders in the first quarter totaled $32.9 million, or $0.39 per diluted share, compared with $17.0 million, and $0.21, respectively, in first quarter 2007.

Comments from the Chairman

“We are encouraged by the year-over-year improvement in KCS’ operating ratio especially in the face of significantly higher fuel expenses and weather conditions which provided operating challenges throughout much of the first quarter,” stated Michael Haverty, KCS chairman and chief executive officer. “Increased revenues and solid improvement in key operating metrics were the drivers of our results.

“Tighter operating discipline contributed to our stronger operating performance, which was evidenced by improved trends in train velocity and terminal dwell time in the first quarter. Changes made in the second half of 2007 have taken hold and moved KCS ahead in those key measurements. In addition, the integration of approximately 180 new locomotives into our network fleet has resulted in significant improvement in locomotive availability over the past few months. We have thirty more locomotives which will arrive in the second quarter. This will complete delivery of all 210 units of our three year fleet renewal program, and will result in KCS having a significantly younger fleet than just a few years ago.

“The combination of new business opportunities, strong pricing environment, and continuous operating improvements positions us well for the remainder of the year. Going forward, KCS has the momentum needed to attain its 2008 operating and financial targets even within what is projected to be a difficult economic environment.”

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, 2007, 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.

Kansas City Southern
Income Statement
(In millions, except share and per share amounts)
(Unaudited)

	Three Months
	Ended March 31,
	2008			2007
Revenues	$	450.6		$	411.3
Operating expenses:
Compensation and benefits		106.1			99.9
Purchased services		44.9			46.7
Fuel		77.9			62.5
Equipment costs		45.8			44.9
Depreciation and amortization		40.7			38.1
Casualties and insurance		19.0			19.4
Materials and other costs		32.8			27.4
Total operating expenses		367.2			338.9
Operating income		83.4			72.4
Equity in net earnings of unconsolidated affiliates		4.1			1.1
Interest expense		(39.5	)		(39.4	)
Foreign exchange gain (loss)		2.5			(3.1	)
Other income		3.0			0.6
Income before income taxes and minority interest		53.5			31.6
Income tax expense		15.7			9.3
Income before minority interest		37.8			22.3
Minority interest		0.1			0.1
Net income		37.7			22.2
Preferred stock dividends		4.8			5.2
Net income available to common shareholders	$	32.9		$	17.0
Earnings per share:
Basic earnings per share	$	0.43		$	0.22
Diluted earnings per share	$	0.39		$	0.21
Average shares outstanding (in thousands):
Basic		76,253			75,611
Potential dilutive common shares		21,231			14,724
Diluted		97,484			90,335

Kansas City Southern
Revenue & Carloadings By Commodity – First Quarter 2008
(Dollars in Millions)

Carloadings							Revenue
First Quarter				%			First Quarter				%
2008		2007		Change			2008		2007		Change
						Coal
	59,120		62,299	(5.1	%)	Unit Coal	$	37.0	$	35.6	3.9	%
	13,651		12,844	6.3	%	Other Coal		10.0		9.5	5.3	%
	72,771		75,143	(3.2	%)	Total		47.0		45.1	4.2	%
						Forest Products & Metals
	27,743		30,272	(8.4	%)	Pulp/Paper		41.2		40.1	2.7	%
	4,781		2,881	65.9	%	Scrap Paper		5.8		3.7	56.8	%
	5,528		5,043	9.6	%	Pulpwood/Logs/Chips		5.2		4.2	23.8	%
	4,661		6,454	(27.8	%)	Lumber/Plywood		7.5		8.9	(15.7	%)
	27,284		29,231	(6.7	%)	Metal/Scrap		39.7		36.7	8.2	%
	24,781		28,174	(12.0	%)	Military/Other Carloads		24.5		28.6	(14.3	%)
	94,778		102,055	(7.1	%)	Total		123.9		122.2	1.4	%
						Chemical & Petroleum Products
	4,021		3,430	17.2	%	Agri Chemicals		5.4		4.2	28.6	%
	26,273		22,771	15.4	%	Other Chemicals		36.9		29.8	23.8	%
	16,489		17,904	(7.9	%)	Petroleum		24.1		23.3	3.4	%
	14,862		10,479	41.8	%	Plastics		20.3		18.3	10.9	%
	61,645		54,584	12.9	%	Total		86.7		75.6	14.7	%
						Agriculture and Minerals
	40,379		39,156	3.1	%	Grain		66.3		52.0	27.5	%
	14,546		16,031	(9.3	%)	Food Products		23.4		25.0	(6.4	%)
	12,523		14,208	(11.9	%)	Ores and Minerals		12.7		11.8	7.6	%
	4,352		3,475	25.2	%	Stone, Clay & Glass		6.4		5.0	28.0	%
	71,800		72,870	(1.5	%)	Total		108.8		93.8	16.0	%
						Intermodal & Automotive
	124,067		129,305	(4.1	%)	Intermodal		35.8		32.8	9.1	%
	27,212		22,839	19.1	%	Automotive		28.3		23.7	19.4	%
	151,279		152,144	(0.6	%)	Total		64.1		56.5	13.5	%
	452,273		456,796	(1.0	%)	TOTAL FOR BUSINESS UNITS		430.5		393.2	9.5	%
						Other Revenue		20.1		18.1	11.0	%
	452,273		456,796	(1.0	%)	TOTAL	$	450.6	$	411.3	9.6	%