Today, KCS reported revenue of $346 million, down 23 percent compared with first-quarter 2008. The Class I’s traffic volume declined 15 percent primarily because of the weak U.S., Mexican and global economies, reduced fuel surcharge revenues and a weakened Mexican peso. Revenue dropped in four of five business lines, with only coal recording volume and revenue gains.
KCS recorded a net loss of $7.5 million compared with net income of $32.9 million in first-quarter 2008. The railroad reported a negative impact of $5.9 million from debt retirement costs and $5.1 million in a foreign exchange loss associated with the weakened peso.
In addition, operating income fell from $83.4 million in first-quarter 2008 to $48.5 million and KCS’ operating ratio increased 4.5 points to 86.
“Four factors — foreign exchange losses, debt retirement costs, the impact of preferred stock dividends and higher depreciation resulting from significant recent capital investment — had an adverse effect on earnings per share for the quarter,” said KCS Chairman and Chief Executive Officer Mike Haverty in a prepared statement. “However, these factors neither diminish our positioning for a strong rebound nor affect the long term strength of our franchise.”
The good news for KCS is that operating costs diminished significantly in the quarter. Totaling $297.5 million, operating expenses declined 19 percent year over year. Fuel costs dropped 44 percent; casualties and insurance costs fell 32.8 percent; compensation/benefit costs decreased 23.4 percent; purchased service costs declined 13.1 percent; and equipment costs dropped 11.9 percent.
“Operating costs, excluding depreciation, were down 23 percent, yet operating performance metrics and customer service achieved all-time highs,” said Haverty.