[Starts Abruptly]. Turning it over to the speakers, I would like to read the Safe Harbor. Presentation includes statements concerning potential future events involving the Company which could materially differ from events that actually occur. The differences could be caused by a number of factors including those identified in the Risk Factor section of the Company's Form 10-K for the year ended December 31, 2006, filed by the Company with the SEC. The Company will not update any forward-looking statements in this presentation to reflect future events or developments. All reconciliations to GAAP can be found on the KCS website, www.kcsouthern.com/investors. And now, I would like to turn it over to the KCS Chairman and Chief Executive Officer, Michael Haverty.

Thank you very much, Bill, and I would like to welcome all of you to the Fourth Quarter and Year End 2007 Earnings Presentation. Got a pretty good crowd here today in New York, when you consider the work competing against the New York giants parade out here, I think we got a pretty good turnout. Joining me today in presenting our fourth quarter and year end earnings will be Art Shoener, our President and COO; Dan Avramovich, Executive VP of Sales and Marketing; and Pat Ottensmeyer, Executive VP and CFO. Also with us today are Dave Starling, who is the President of the Panama Canal Railway Company. And if any of you have any questions, Dave, during or after this meeting, feel free to visit with him. Also we have Michael Borrows, our Chief Accounting Officer, Kansas City Southern; Bill Galligan, the Head of our Investor Relations; and Ginger Adamiak, who is the Director of Investor Relations. We will start out here. We will start out with the highlights of our presentation here, and we will talk first of all about the operating ratio and the record operating income revenues and the EPS. We had a good operating ratio for the quarter, and we exceeded the 80% that we had projected for the year. Operating income and revenues and even EPS would also be a record, other than the year that we had the VAT settlement, as we had a little better EPS at that time that was a one-time type event, when you take that out, this is the best year that we also had from an EPS standpoint. Let me just kind of, before I go forward here, talk a little bit about the year-end review kind of how we did during the year. At the beginning…

Thanks Mike. Just another view of the operating ratio here for the last quarter for the last three years, you can continue just another way of looking at the improvements we've made over the last three years. And also over the last three years, the total year now, I might add Dave Starling is here with us and we are very pleased with the 79.2, but we are not nearly as good as Dave's 57 that he finished the year. So, we envy you Dave; we'll keep trying. Let's take a look at revenue growth, it was up 4% quarter-over-quarter led by chemical and automotive volumes, particularly in Mexico; firm pricing in forest products and metals. Revenue growth for the year, as Mike has already talked about, up plus 5%, again chemicals and automotive pricing across the board; Dan will talk more about that when he is up here. Let's look at the bar chart on our expenses for the quarter. Carbon benefits, a very big improvement that was led by a Mexican profit sharing benefit; which Pat is going to talk in detail with you about. And overhead credits as well as managing our comp expenses. Fuel was up, due to fuel price, primarily. Consumption is improving. The new locomotives are starting to show up, and we're using those, so we are going to see more and more fuel consumption improvements, but fuel price jumped dramatically up almost 2.5 gallon here in the US. Purchase services and equipment, both are down, that's primarily because of turning locomotives back and reduced freight car expense. One that we are not real proud of, but we'll continue to work real hard at is the casualty side and that was because we've had fewer derailments, but we had some big ones throughout the…

As both Mike and Art had indicated we achieved record revenues in the quarter of $460 million or about 4% over 2006. We look at the details by market segment, we'll see that both chemicals and intermodal grew in double-digits, both 12%; Automotive grew little over 6% in a down sector, actually if you look at our third quarter we had a really robust growth in the third quarter. So, it did slow down somewhat into the fourth quarter. Coal grew 2% but we lapped a rebasing in 2006 where we had a rebasing of a major contract for utility, ex that increase that we got from the fuel surcharge in the fourth quarter last year our overall revenues would have been up about 10%. As both Mike and Art had indicated previously, we did get impacted in the Ag side from a volume perspective as customers weren't centered on reducing their inventories in the fourth quarter. We are actually seeing a lot of that volume come back in the first part of January, but clearly it was about 4% to 5% in the quarter that we experienced in the Ag side. If you look at the mix of our revenue per unit, our overall peer pricing grew 8%, again fairly consistent with what we saw last quarter, which was up 9%. We did have a fairly major reduction from a mix perspective, about a little over 1.5, due to lower higher revenue per unit movements of both forest products and the Ag side of the equation. As you will see shortly, there was a fairly dramatic movement between... within each one of the business units as well. Overall volume, albeit down... on a pure sense down 2.5% in the quarter, we take out the haulage that we lost actually…

Thank you, Dan, and good morning everyone. Just giving a little more of an expanded view of the income statement for the quarter. As you already know, revenues were up 4% over the last year, operating expense is down 0.7% due to good expense control and performance in a number of areas including comp and benefits which... as Art mentioned... was driven was, at least, partially by changes in the tax law and deferred comp expenses; I will talk about in more detail later. We had a small currency profit for the quarter, down from the previous year. Equity earnings were up significantly, and just as a reminder the three main contributors to equity earnings are Southern Capital, which is a leasing company, Panama Canal Railway which was the main driver for the increase year-over-year and Ferroviaria de México which is a terminal operator in Mexico City. Interest expense was down about a little over $5 million for the quarter, and that has to do with the full quarter impact of some of the successful refinancings that we have completed recently, particularly in Mexico. In context expense was up noticeably, and again that's driven by the changes in the tax law in Mexico which I will talk in more detail. Net income up 35%, and as you saw, the operating ratio show a significant improvement year-over-year. Earnings per share for the quarter up $0.56, up 37% from last year, for the full year $1.57 up 45%. Another look at earnings per share, in sort of sequential time line, obviously, you see good improvement quarter-over-quarter. One thing I will point out here, if you look at the box at the bottom of this page you will see we had about 2 million fewer shares in the fourth quarter of this year…

Thank you, Pat. What I would like to do is conclude here with kind of a 2008 outlook. We expect the revenue growth for the year to be in the high single-digits. We expect continued operating ratio improvement. We said in the five year plan projection that every year we would look at between one and two percentage points improvement on the operating ratio and we did little better this year than we had anticipated. Going forward in 2008, we think that there should be an improvement of a point plus on the operating ratio. Cash capital expenditures will be approximately $500 million, if you also add in the Meridian speedway capital plus some leases that the rating agencies look at as capital; we are going to be around $700 million this year which is about 3% above what it was in 2007. And both of these years are big years for us, but we have said that we expect to see a lot of new business and have a lot of great business opportunities with not only the new automobile assembly plants but many other opportunities as well. So, we do not intend to skimp on the capital. We think that capital going into infrastructure and equipment to be able to handle this business is the right management decision to make at this time. And we will continue to spend the capital that we have planned. We will focus on execution, and we are committed to the achievement of the five year plan that we presented in the first quarter of last year, and as I said earlier we think we will be on target for that plan this year. Let me close by making a few comments about the Panama Canal Railway Company. We introduced Dave Starling here…

Would you please identify yourself?

Hi, Mike, it's Rick Paterson from UBS. Question on the locomotives, can you talk about exactly when they'll be fully implemented and what that is expected to do in terms of the loss in dwell and the potential magnitude of improvements there and then how it runs through the income statement?

Well Rick on the locomotives, we'll get another 60 in the second quarter. And early third quarter we will finish that. For the last 60, we've got 150. As we said, we retired and/or turned back a little over 200 plus. Part of our implementation of that locomotive, we've been using those locomotives in the last quarter of '07 to pay-off a bunch of horsepower hours that we owed people, now we are have worked all of them down and/or paid them off. In fact, we actually have some people owing us, but our plans going forward with the new locomotives and the fuel efficiency; there is a cornerstone around making sure we use the locomotives and use them in the service they are needed and really pay the benefits. And we've developed a plan, sort of, modeled after South West Airlines. We look at how quick they turn their airplanes; we want to do the same thing. We want to sort of run the transits alike, particularly, for the merchandise and intermodel network, and we sort of nicknamed it the 737 plan. Basically, two ACs put together, will basically handle just about everything except for the some other bulk trains that we shove over the hills in various places. But with quick turnaround in sort of a commonality, we are going to get away from having to do what we call a lot of slicing and dicing of locomotives and terminals. Basic concept will be able to move quickly through the terminals and turn quickly at the endpoints. We think all of these things, plus the reliability of good locomotives will decrease our hours of service tie ups, allow us to increase the velocity on the railroads. We have been in the 23, 24 range here last year, part…

Okay other question.

Hey it's Chris Wetherbee from Merrill Lynch. Just a question on the casualty and benefits line... I missed it, I apologize, if you guys covered this before. What was the cause for the bump in the quarter, specifically, I think you mentioned the year, but I was curious about the quarter change?

Chris we had, I think, a couple of things, couple of things, we had a couple of derailments on the North South line, broken rail. That's why we are going to lay about 50 miles of rail on the north south this year, and we have increased our testing, coupled with an accumulation moving across from another accounts, some vandalism that we had in Mexico to our cars. That was an other account that was probably the bigger drivers of that.

Okay, and then just jumping back to the locals for a second. I don't know if you mentioned. I know you said that you took out about 220 in the year, you retired 220 old locomotives. What do you think is the total target for the full replacement program... you have 210 total coming in over the year and some change period, what would be your target foreseeing it now.

Somewhere between 325 and 350. So, I think we are also examining our four-axle fleet. When I've got this floor, I will just give a pitch for it... we're taking a look at some innovation in the four-axle fleet too that might even give us some more benefits, but we are not ready to talk about that yet, but we believe the new ACs, and the utilization plans, and the reliability are going to enable us to get rid of just about all of our old ST 40s [ph], we've got much of the super sevens in Mexico. We are going to retire and/or sale. And we will have probably one of the youngest road fleets in the country. We will grow from about 22 to 23 years old, down to about 9 years old.

Okay, yes, that was my next question, so thank you for answering that. And then just finally, on the coal situation, Dan, I think you mentioned there was a coal contract that went away. I think... did you say it was a one year impact, or was that, that just is going away, is there an expectation to bring it back. And then just following on that, does that impact kind of what you guys have said in the past about the opportunity for coal through Lázaro and just kind of where that stands now?

Yes the, it's an one year impact, so it is a one year contract, actually the customer went out in anticipation that we would be actually into routing, all right, and it didn't work out that way. So, they saw the error in their way, all right, so that's why it's limited to a one year deal, which will be good for us, bad in 2008, but good as we approach 2009. And the piece I mentioned on Lázaro was really more of a one-time opportunity. We had fairly small volume, $3 million to $4 million of volume for CFE, but here again they make sourcing decisions every year, so they are not tied into long term pieces, but we are working with them on potential opportunities to source coal from other locations for them.

Randy Cousins, BMO Capital Markets, I wondered if you guys can talk about productivity. I noticed that headcount was basically up a little, and your GTMs were kind of flattish. Your goals for, in terms of sort of labor productivity for 2008 and how should we model up our headcount, in terms of thinking about KSU and the total organization.

Randy, you are right, our headcount has been flat, we took a couple of hundred out here in '06 and we have flattened out right now. I think with some of the growth areas getting our people in the right place, we have got some negotiations in Mexico that may, but we are not really privy to say, but when we come out of that we hope we can get a little more efficient in some of our headcount down there as well as we will continue to squeeze up some things. We have changed some of our operations around in the US, we think the Rosenberg Victoria thing, while, if you would think immediately, you would see some productivity activity, and we will because we will save about 8 to 10 hours on that route and look at crew opportunities, but we think we will fill it right back in with new business coming out of Mexico. So, I think, the productivity would be to handle more business with the same people and take them out where we can as we make some of these capital improvements.

Okay, Dan, you've got a number of lines that are now pulling into Lázaro. Have any of them committed to move product into the United States yet? And when would you start to expect seeing volume going into the US using Lázaro as a staging point?

In regards to, liner companies are actually looking to go across border. Of the five we have, two have actually voiced some interest, okay, in fact in one case we are actually doing some test movements as we speak grounding it in Laredo and bringing it into Texas. Texas actually is a huge opportunity for us. I mean, if you look at the flow of traffic coming into Asia through LA Long Beach and then destined to Texas, it probably represents close to 40% of the South East traffic, goes to kind of our sweet spot. So, I think a lot of the liner companies are looking at as we open up Rosenberg in end of April, first part of May, in getting some traction that that will further our kind of our position going into both Texas as well as the South East, and actually going into the lower Ohio Valley as well.

Okay, one more question here.

Scott Nichols, Gilford Securities. Mike, could tell us what the status is currently of the legislation in Washington that would give the industry a 25% investment tax credit on capital spending?

Scott, that's still in discussion stages at this point in time, and even though there is going to be a presidential, kind of, stimulus package, I am not sure that that will make it this year. It's not necessarily on the priority list, at least, that's our understanding. It is for us, but from a government standpoint, so I think that perhaps it probably would not happen this year, but hopefully maybe next year we might see that. Okay, and one last, Tony.

Okay, Tony Hatches [ph]. Two quick ones for Dan. Can you give us an update on business on Meridian, and with the CP, do you have any deal. Have you guys talked to [Technical Difficulty] CP, [indiscernible] have you kind of explore doing any more business, [indiscernible] high operation of that number back in the ocean line [ph].

Let me take the second question, and then I will let Dan answer the first one about business on the Meridian speedway. We have had a great relationship with the railroad when it was CPE, when it became the IMRL, then when it became IC&E, and we still have a great relationship with them. And in fact we have haulage agreements that allow us to price grain out of Northern Iowa and Southern Minnesota into our territory. And we expect to be able to protect those contracts, and we have a good relationship with DM&E and with CP, so we think there should be opportunities there. Dan, Meridian.

In regards to Meridian speedway, actually we're... we picked up some traffic from one of the largest domestic intermodal players, truckload domestic intermodal players going from Dallas into Charlotte and Jacksonville. So that was a big win for us this year, actually started April, May of this year, and in regards to kind of other international business, obviously, a lot of that is driven by NS, albeit that we are getting back close to about 30% to 40% of the volume that we lost as a result of the BSR haulage changeover.

And we have built a lot of capacity into the line, really in the last year and a half. And the centralized traffic control will be finished here this quarter, Art says, and. So, we certainly can handle additional business on that line, there is plenty of capacity. This is the final question here.

Thank you David Link, [ph] Stockholder. I was curious as to what you thought the long term impact should be on the Panama Canal Railroad intermodal traffic with the enlargement of the locks and the capacity improvements that are projected for the canal itself?

Okay I am going to let Dave Starling, our President of Panama Canal Railway Company answer that question, and we certainly have considered that going forward. Dave, here, why don't you.

Justify my trip. A lot of the volume that we have today, and lot of the growth that you see are actually not post-Panamac ships, these are vessels that like Maersk, for instance, they had a trade shipment center in Kingston, and it was actually their own terminal. So about a year ago they chose to take the AC-2 deployment and pull it back into Balboa, and then they could save 104 transits, 330,000 each, and a vessel. So, that was about $52 million in savings. If you take the rail cost and the port cost, it's about $30 million. So you've got about $22 million savings for one carrier one deployment. They are now doing the same thing they recently have done with the AC-1. So, as you can see this model is not built around the construction of the canal, it's really built around the savings for the carriers, so.

Okay. I might follow up on that, when we invested in Panama we never considered that the railroad was ever going to be a competitor with the Panama Canal. And what we did is we figured there was a niche business there, particularly traffic going up and down the coast that we could reposition from one side to the other and we could do pretty well off of that. And with the rates that keep going up and up and up on the canal passage there, more people, in fact, are taking a look at this, in some cases, as Dave said, they can actually save a ship maybe by using the railroad. So, clearly the canal is going to be much more efficient when they add the third set of locks. But again I think we are going to be a in a great position. We are going to handle a lot of business. And I never thought that I would see the rates go up and up and up on the canal to where our rail rates are actually not all that far off of being competitive. But again, we still don't consider the canal as a competitor. Okay, with that I am going to close the meeting. And I want to thank everybody for being here in New York, and also thank everybody for joining us on the telephone. Thank you very much.