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Revenue Growth, Operating Ratio Improvement and Record Operating Income Highlight Kansas City Southern's Fourth Quarter and Full-Year 2007 Earnings

Kansas City Southern (KCS) (NYSE:KSU) reported record fourth quarter 2007 revenues of $460.3 million, a 4.0% increase over the corresponding 2006 period. Revenue growth was primarily the result of a continued strong pricing environment as well as volume growth in some key commodity segments.

For the quarter, new business was a significant contributor to a 12.0% revenue increase in chemical & petroleum. Led by increased volumes in Mexico, intermodal revenues grew by 11.6%. Also reflecting a strengthening Mexican base, automotive revenues grew by 6.2%. Coal revenues improved by 2.4% over fourth quarter 2006. Agriculture & minerals and forest products & metals both increased in the fourth quarter by 0.8%. Overall, volumes fell by 2.5%; however, excluding the loss of certain haulage traffic volumes would have been 4.9% higher than the fourth quarter 2006.

Operating expenses for the fourth quarter 2007 were $351.6 million, a decrease of 0.7%. Increased fuel, casualties and insurance and materials and other expenses were partially offset by reductions in compensation and benefits, purchased services and equipment costs. The improvement in compensation and benefits expense includes, among other things, certain non-cash credits related to profit sharing expense in Mexico driven by various tax initiatives taken in response to new tax legislation enacted in the fourth quarter. Tax expense in the fourth quarter was driven higher by the recent tax legislation in Mexico increasing the effective rate for the quarter to 32.6% due to a non-recurring, non-cash adjustment of previously recognized net operating losses.

Operating income for the fourth quarter was a record $108.7 million compared with $88.2 million last year, a 23.2% increase. The fourth quarter 2007 operating ratio was 76.4% compared with 80.1% a year ago.

Net income available to common shareholders in the fourth quarter totaled $49.9 million, or $0.56 per diluted share, compared with $35.7 million, or $0.41 per diluted share in fourth quarter 2006, a 36.6% increase.

Comments from the Chairman

While KCS 2007 revenue growth of 5% fell short of our projections going into the year, given the weakness in the U.S. economy, we were generally pleased by the year-over-year increase, and by the new business opportunities that developed during the year. Chemicals, intermodal and automotive were particularly strong in the fourth quarter and should remain so in 2008.

We were also encouraged by meeting our target of achieving an operating ratio below 80% for the full year, coming in at 79.2%, which compares favorably with 81.7% in 2006. KCS is committed to continuous improvement in this area and will translate business growth, increased productivity and more efficient operations into further significant improvement in the operating ratio in 2008.

While the uncertain economy will provide a challenge, KCS is confident that new business coming on-line both in the U.S. and Mexico, and continued strong pricing, will allow for volume growth in most commodity areas and revenue growth across-the-board.

KCS has pledged to be the fastest growing railroad in North America. We believe that the company is positioned to make measurable strides toward attaining that goal in the year ahead.

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, 2006, 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 Twelve Months
Ended December 31, Ended December 31,
2007 2006 2007 2006
Revenues $ 460.3 $ 442.4 $ 1,742.8 $ 1,659.7
Operating expenses:
Compensation and benefits 91.0 104.5 394.1 393.6
Purchased services 47.0 51.3 184.7 204.7
Fuel 76.0 65.8 270.8 253.6
Equipment costs 45.3 49.6 182.4 179.7
Depreciation and amortization 42.4 42.1 160.2 155.0
Casualties and insurance 18.2 13.3 71.0 53.4
Materials and other 31.7 27.6 117.2 115.4
Total operating expenses 351.6 354.2 1,380.4 1,355.4
Operating income 108.7 88.2 362.4 304.3
Equity in net earnings of unconsolidated affiliates 4.2 1.6 11.4 7.3
Interest expense (38.4 ) (43.7 ) (156.7 ) (167.2 )
Debt retirement costs (2.6 ) (6.9 ) (4.8 )
Foreign exchange gain (loss) 0.7 3.0 (0.9 ) (3.7 )
Other income 6.1 9.4 12.0 18.7
Income before income taxes and minority interest 81.3 55.9 221.3 154.6
Income tax expense 26.5 15.2 67.1 45.4
Income before minority interest 54.8 40.7 154.2 109.2
Minority interest 0.1 0.1 0.4 0.3
Net income 54.7 40.6 153.8 108.9
Preferred stock dividends 4.8 4.9 19.8 19.5
Net income available to common shareholders $ 49.9 $ 35.7 $ 134.0 $ 89.4
Earnings per share:
Basic earnings per share $ 0.66 $ 0.48 $ 1.77 $ 1.20
Diluted earnings per share $ 0.56 $ 0.41 $ 1.57 $ 1.08
Average shares outstanding (in thousands):
Basic 75,948 75,230 75,832 74,593
Potential dilutive common shares 21,785 24,718 21,784 17,793
Diluted 97,733 99,948 97,616 92,386

Kansas City Southern

Revenue & Carloadings By Commodity Fourth Quarter 2007

(Dollars in Millions)

CarloadingsRevenue
Fourth Quarter

%

Fourth Quarter %
2007 2006 (a) Change 2007 2006 (a) Change
Coal
66,395 67,445 (1.6%) Unit Coal $ 40.0 $ 39.8 0.5%
15,271 14,459 5.6% Other Coal 11.8 10.8 9.3%
81,666 81,904 (0.3%) Total 51.8 50.6 2.4%
Forest Products and Metals
27,742 32,364 (14.3%) Pulp/Paper 40.0 43.1 (7.2%)
4,749 1,610 195.0% Scrap Paper 5.6 1.6 250.0%
5,968 5,154 15.8%

Pulpwood/ Logs/Chips

5.6 4.6 21.7%
5,521 6,656 (17.1%) Lumber/Plywood 8.6 8.7 (1.1%)
26,879 31,204 (13.9%) Metal/Scrap 42.3 39.8 6.3%
25,859 30,555 (15.4%) Military/Other Carloads 28.3 31.6 (10.4%)
96,718 107,543 (10.1%) Total 130.4 129.4 0.8%
Chemical & Petroleum Products
3,690 3,266 13.0% Agri Chemicals 5.0 4.0 25.0%
26,611 21,795 22.1% Other Chemicals 37.4 28.4 31.7%
16,229 16,715 (2.9%) Petroleum 23.1 23.4 (1.3%)
11,923 10,186 17.1% Plastics 17.5 18.3 (4.4%)
58,453 51,962 12.5% Total 83.0 74.1 12.0%
Agriculture and Minerals
43,413 47,567 (8.7%) Grain 67.2 69.2 (2.9%)
14,151 13,898 1.8% Food Products 22.0 21.1 4.3%
13,233 13,285 (0.4%) Ores and Minerals 12.2 11.7 4.3%
4,377 3,156 38.7% Stone, Clay & Glass 6.0 4.6 30.4%
75,174 77,906 (3.5%) Total 107.4 106.6 0.8%
Intermodal & Automotive
141,036 147,484 (4.4%) Intermodal 39.4 35.3 11.6%
28,951 27,524 5.2% Automotive 29.1 27.4 6.2%
169,987 175,008 (2.9%) Total 68.5 62.7 9.3%
481,998 494,323 (2.5%) TOTAL FOR BUSINESS UNITS 441.1 423.4 4.2%
Other KCSR Revenue 19.2 19.0 1.1%
481,998 494,323 (2.5%) TOTAL $ 460.3 $ 442.4 4.0%
(a) Certain amounts have been reclassified to reflect changes in the business groups and to conform to the current year presentation.

Kansas City Southern

Revenue & Carloadings By Commodity Year to Date December 31, 2007

(Dollars in Millions)
CarloadingsRevenue
Year to Date % Year to Date %
2007 2006 (a) Change 2007 2006 (a) Change
Coal
259,366 251,431 3.2% Unit Coal $ 152.1 $ 137.8 10.4%
54,807 53,610 2.2% Other Coal 40.9 37.1 10.2%
314,173 305,041 3.0% Total 193.0 174.9 10.3%
Forest Products and Metals
119,179 133,610 (10.8%) Pulp/Paper 165.5 164.5 0.6%
18,524 7,435 149.1% Scrap Paper 22.1 7.2 206.9%
19,339 19,380 (0.2%)

Pulpwood/ Logs/Chips

16.7 14.0 19.3%
25,617 31,139 (17.7%) Lumber/Plywood 36.2 39.7 (8.8%)
101,758 131,094 (22.4%) Metal/Scrap 140.7 148.8 (5.4%)
109,385 119,767 (8.7%) Military/Other Carloads 119.9 122.1 (1.8%)
393,802 442,425 (11.0%) Total 501.1 496.3 1.0%
Chemical & Petroleum Products
14,152 14,434 (2.0%) Agri Chemicals 17.9 16.1 11.2%
103,486 88,882 16.4% Other Chemicals 140.4 109.8 27.9%
65,234 70,566 (7.6%) Petroleum 86.8 93.3 (7.0%)
45,382 43,708 3.8% Plastics 75.3 70.7 6.5%
228,254 217,590 4.9% Total 320.4 289.9 10.5%
Agriculture and Minerals
165,135 168,854 (2.2%) Grain 235.8 222.0 6.2%
61,859 64,645 (4.3%) Food Products 96.6 96.3 0.3%
54,609 55,323 (1.3%) Ores and Minerals 48.0 45.3 6.0%
16,298 15,460 5.4% Stone, Clay & Glass 23.3 20.8 12.0%
297,901 304,282 (2.1%) Total 403.7 384.4 5.0%
Intermodal & Automotive
526,370 547,643 (3.9%) Intermodal 143.1 135.4 5.7%
108,402 103,736 4.5% Automotive 110.9 101.8 8.9%
634,772 651,379 (2.5%) Total 254.0 237.2 7.1%
1,868,902 1,920,717 (2.7%) TOTAL FOR BUSINESS UNITS 1,672.2 1,582.7 5.7%
Other KCSR Revenue 70.6 77.0 (8.3%)
1,868,902 1,920,717 (2.7%) TOTAL $ 1,742.8 $ 1,659.7 5.0%
(a) Certain amounts have been reclassified to reflect changes in the business groups and to conform to the current year presentation.

Contacts:

Kansas City Southern
William H. Galligan , 816-983-1551
william.h.galligan@kcsr.com

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