Balance Sheet

On August 31, 2010, KSU announced the establishment of a $100 million revolving credit facility for Kansas City Southern de Mexico, S.A. de C.V. (KCSM).  This credit facility will improve liquidity and financial flexibility at KCSM. In addition, KCSM has called for redemption of the remaining $63.7 million of its 9.375% Senior Notes due 2012.  Year to date debt reduction, including the redemption of the KCSM notes, will total approximately $337 million, in line with the previously announced debt reduction plan.

Cash Flow

In 3Q10, cash flow from operations was $139.6 million versus $108.8 million in 2Q10 and Free cash flow was $56.6 million versus $42.4 million in 2Q10.

Share Repurchase/ Dividend

During 3Q10, KSU repurchased the remaining $63.7 million of its 9 3/8% notes due 2012 bringing the total amount of debt reduction in 2010 to $332 million. Including its revolver availability, KCS ended the quarter with liquidity of $289 million, the highest level in more than 10 years.

On October 13, 2010, KSU’s Board of Directors paid a regular quarterly cash dividend of $12.8125 per share on the outstanding KCS 5.125% Cumulative Convertible Perpetual Preferred stock, series D, to preferred stockholders of record at the close of business on November 1, 2010.

On October 5, 2010, KSU’s Board of Directors paid a dividend of $0.25 per share on the outstanding KCS 4% non-cumulative preferred stock, to preferred stockholders of record at the close of business as of September 13, 2010.
 

Capital Intensive:  The Company’s business requires substantial ongoing expenditures for additions and improvements to roadway, structures and technology, acquisitions, and maintenance and repair of equipment and the rail system.

Exchange Rates:  Downturns in the United States economy or in trade between the United States and Asia or Mexico and fluctuations in the peso-dollar exchange rates will likely have an adverse effect on KSU’s business and on the results of operations.

Credit Risk and Rising Costs:  Kansas is exposed to the credit risk of its customers and counterparties that will likely affect its business. Additionally, the recent downturn in the credit markets has increased the cost of borrowing.