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Original Source: FD (FAIR DISCLOSURE) WIRE
. Michael Haverty, Kansas City Southern, Chairman, President & CEO
. Art Shoener, Kansas City Southern, President & CEO, KCSR & Tex
Mex Railway & EVP & COO . Ron Russ, Kansas City Southern, EVP & CFO
4Q04 revenues were up 17.6%. KSU recorded seven consecutive quarters of revenue growth at the topline. EBITDA was up $14.9m, 4Q03 to 4Q04, and up $33.3m YoverY. In 2005, the Co. is going to take 2004's great records and where it started is the starting point to take it up another notch. Q&A Focus: Fuel, TFM, and Tex Mex.
A. Key Data From Call 1. EBITDA was up $14.9m, 4Q03 to 4Q04, and up $33.3m YoverY. 2. Consolidated CapEx for 2004 = $117.2m.
S1. 4Q04 Performance (M.H.) 1. 4Q04 Highlights: 1. Revenue growth was very strong in the qtr., as it has been for the entire industry.
2. Costs, with the exception of fuel, were pretty much under
control. 1. Looking at the type of growth that KSU had and the type of increases it had in expenses, they were really very miniscule. 2. Of that 18% growth in revenue, about 4% of that is as a result of the fuel surcharge that KSU had implemented.
3. Therefore, KSU has been able to cover these fuel cost increases.
3. TFM: 1. Still believes that TFM has great growth opportunities,
still believes it is the fastest growing growth opportunity in North America. 2. Had another aberration again in 4Q04 where the Co. actually reduced tax rate in Mexico, which is a good thing.
3. Tax rates go from 33% to 30% this year and then gradually
down 29%, 28%, and 27%, which is actually a good news announcement.
4. Unfortunately, under the accounting rules, KSU had to take a charge for that as a non-cash charge. 5. Encouraged by the revenue growth. 6. Also did implement a fuel charge in late 2004.
7. The Co. would have liked to seen that a little bit earlier,
because with fuel prices being up, not just in the US, but throughout North America, that would have been something that maybe KSU could have put in earlier, but market conditions kept that from happening.
8. Believes that there are some other opportunities on some upcoming contracts where KSU might be able to also increase the yield. 1. Certainly intends to take advantage of that going forward.
9. Looking at the TFM volumes to support the growth opportunity in Mexico, total carloadings for the qtr. were up 14%, chemicals and agriculture up 11%, industrial metals and minerals up 8%, and intermodal and automotive up 20%. 1. Believes that there is certainly a great opportunity in Mexico. 4. Consolidated EPS: 1. Comparing apples-to-apples: 1. Taking out the one-time charge of 4Q03 at $21.1m, then one has to take out the impact of the tax reduction on TFM this year. 1. Comparing apples-to-apples, this year would be $0.12 vs. $0.09 a year ago. 2. Following that same logic of taking out those aberrations, in 2003, the EPS would be $0.31 per share and would be 39% for 2004. 5. Core Domestic Earnings Trend: 1. US: 1. Looking at the performance of the KSU domestic operations on a pro forma ongoing basis here, one can see the kind of progress that has been made QtoQ, beginning in 1Q03 through 4Q04. 2. KSU is very pleased with the progress that it is making in
the US. 6. Consolidated Revenues: 1. QtoQ 2003-2004, up 17.6%. 2. For the full year, up 10%. 3. Trends: 1. 2Q04 up over 1Q04 by 4.1%, and then up 3Q04 over 2Q04 by 6%, and then 4Q04 over 3Q04 by 7%. 2. So the trend certainly is up on the revenue side and the Co. does not see that changing in the immediate future. 3. Believes that that's going to continue for a while.
4. The Co. is moving ahead with its planned implementation of putting TFM under KSU. 1. Reached an amended acquisition agreement called a AAA between KSU and TMM on Dec. 15. 2. Virtually, all of the reviews, Surface Transportation Board in the US, Foreign Investment Commission and Competition Commission in Mexico, plus recently Hart-Scott-Rodino have all been pretty much signed off on. 3. KSU got the SEC comments to its filing last Friday. 1. Is dealing with those. 2. Will respond to the SEC next week. 3. Hopes to get out a proxy …