Kansas City Southern projects strong cash flow, more debt repayment

By Jennifer Lanning Drey

Savannah, Ga., Jan. 27 - Kansas City Southern expects to generate strong free cash flow going forward, which will be used to repay high-cost debt and invest in growth opportunities, Michael Upchurch, the company's chief financial officer, said during its fourth-quarter earnings conference call held Thursday.

Kansas City Southern reported free cash flow of $174 million in 2010, compared with negative $65 million in 2009. Upchurch said the improvement was primarily the result of strong cash generated from operations.

The company has lowered its debt balances by about $850 million since the end of 2009, he said.

At Dec. 31, Kansas City Southern had $310 million of liquidity, which included $85 million in cash and $225 million in unused lines of credit.

The $310 million of liquidity was up from $203 million of liquidity at the end of 2009.

During Thursday's call, Upchurch also noted that during the fourth quarter, Kansas City Southern accessed the markets with a new $185 million 10-year issue for Kansas City Southern de Mexico SA de CV, representing the lowest Kansas City Southern de Mexico coupon rate for public market debt and the company's longest maturity.

Kansas City Southern de Mexico priced the senior notes at par on Dec. 14 to yield 6 5/8%, Prospect News previously reported.

For the fourth quarter, Kansas City Southern posted revenues of $479 million, representing an 18% improvement over revenues in the fourth quarter of 2009. The company said the increase reflected continued improvement in economic conditions in the markets its serves.

Revenue growth was experienced across all commodity groups.

Based in Kansas City, Mo., Kansas City Southern provides rail transportation services.

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