Greetings, and welcome to the Kansas City Southern's Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode and a brief question-and-answer session will follow the formal presentation. (operator instructions). As reminder this conference is being recorded. This 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 factors identified in the risk factors section of the company's Form 10-K for the year ended December 31, 2007, filed 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. And it is now my pleasure to introduce your host, Mr. Michael Haverty, Chairman and CEO for Kansas City Southern. Mr. Haverty, you may now begin.

Thank you very much, and I want to welcome everyone to the fourth quarter 2008 year-end earnings presentation. Here from the Kansas City, joining me as presenters today are Dave Starling, President and Chief Operating Officer of the company; Pat Ottensmeyer, EVP Sales and Marketing; and Mike Upchurch EVP and CFO. Also joining us on the telephone today from Mexico City is our President and Chief Executive... our Chief Executive Representative from Mexico, Jose Zozaya; and in the office here in Kansas City, we also have Scott Arvidson, who is the EVP and CIO and the EVP and COO of US operations, as well as Michael Borrows, our Chief Accounting Officer, Will Galligan and Ginger Adamiak, Investor Relations. If you'll turn to slide number four, which if you are following on the website is entitled Financial Results, has 4Q '08-'07, fiscal year '08-'07. Bottom line is that we had what I consider a good year, but certainly a not-so-good final four months of the year including the fourth quarter. For the year EPS was up 18.5%, but down 28.6% for the fourth quarter, and much of the fourth quarter was due to a foreign exchange... rate exchange from the Mexican peso. I think it's appropriate that I comment about the fiscal year 6.3% increase on revenues, because at the last analyst meeting there's a comment that I believe that we were going to finish with double-digit growth on our revenues. And at that time we were at 11.4% ahead for three quarters. We had just experienced the hurricanes of September. We had a lot of belief that in October some of those chemical plants paper, lumber plants that we saw that had shut down in Louisiana and Texas in September, were going to come back in the fourth quarter. And…

Thank you, Mike and good morning. I'd like to start off with the operating ratio. As Mike stated, we were really doing well until September and as the volume started to drop, our operating team very quickly has started to scale and bring our costs down. And we're not totally disappointed in our 78.5 operating ratio. We think, given the economic challenges we've had in fourth quarter, that that's a very acceptable operating ratio. And the main driver was the economy and it's impact on our volumes and revenues, and all in all under the circumstances we felt like we did a good job coming under 79%, which allowed us to achieve some year-over-year improvement. We go to page nine; obviously, the fourth quarter broke the trend and we just averaged over the last three years. There's a reflection of recession, as our fourth quarter operating expenses did improve and we hit new highs in operating performance, as you will see in the coming graphs. Going to slide ten; if you follow the weekly AR data, you know that KCS now ranks among the elite railroads in terms of average train speed and terminal dwell times. These charts just cover the last nine months and that those of you who have followed us for years know, if you go further back our recent performance is even more notable. These efficiency improvements have allowed us to reduce total rolling stock while growing volume. Our rolling stock is down 11% from 2006 to 2008 and 5% from 2007 to 2008. We'll go to slide 11; our focus on execution. Before looking at the next charts, I'd like to show you the truly impressive operating improvements and like to explain what we are trying to get at here. First, as Mike stated on…

Thanks Dave. I will start my comments on slide 16, just with some highlights about the quarter and the year from a revenue perspective. As you've seen, our quarterly revenue declined by 7.9% to 423.8, primarily due to the rapid volume reductions in the fourth quarter, specifically November and December. If you recall, Mike's slide earlier in the presentation, you can see that the dramatic drop off that we and most of the railroads experienced at the end of the year. I don't want to lose sight of the fact and the second point here that the full year revenue increased by 6.3% to a record $1.852 billion. So we had a very strong year in spite of the fact the business just fell off at the end, particularly in Ag and minerals and chemicals and intermodals, were the growth leaders. Mike mentioned core pricing environment continues to be strong in spite of the economy. So a couple of data points here that I'll get into more detail later on in my comments. So look at same linehaul move revenue; looking at moves year-over-year for the same costumers, the same commodities and the same O-D pairs and we saw a 5.6% increase in that metric year-over-year. And then, we also look at our linehaul rate per mile which I'll talk more about later and that is linehaul revenue, so it excludes fuel divided by total loaded car miles and year-over-year we saw an increase of 10.7% in that metric. So again we're seeing good discipline and good pricing increases year-over-year. Revenue per unit was negatively impacted by mix and foreign exchange and again, I'll give you more detail on that but just as an example, some of the areas that held up the best were lower-rated businesses in our portfolio.…

Thank you, Pat. Let me walk you through our detailed financial results starting on page 33. First, 2008 full year revenues increased 6.3% to $1.852 billion. That revenue was generated through RPU increases of 9.3%, while volume declined 2.6%, largely as a result of the declining traffic in the last four months of the year. RPU without the impact of fuel recovery programs, increased a strong 5.4% for the year. Operating expenses increased 5.9%, primarily due to the 20% in fuel costs. Without fuel, operating expenses increased 2.5% and I will provide a little bit more color in the coming pages. Operating income increased 7.7%, despite the negative impact of high fuel costs. We recorded a $21 million currency loss for the year as a result of strengthening U.S. dollar against the peso. Equity and earnings increased nearly 60% year-over-year as the result of more than doubling of income from PCRC and strong increases in income from our tunnel operation in Mexico. Interest expense declined 19 million year-over-year due to lower interest rates, higher capitalized interest from construction activities that increased year-over-year, and the reversal of interest accrual resulting from a favorable tax settlement that we reported earlier in the year. Other income declined year-over-year largely due to fewer property sales in 2008 versus 2007 and also lower interest income and a change in the valuation of short-term investments. Income tax expense declined slightly, driven by a lower effective rate due largely from tax benefits of foreign currency losses in Mexico. And on the next slide, I'll talk a little bit more in detail about our affective tax-rate reconciliation on a year-over-year basis. So in total, for fiscal 2008, net income increased to solid 20%. Moving to page 34. For the full year 2008 our effective tax-rate was 25.9%, lower…

Okay. Thank you, Mike. If you will turn to slide 42, the Panama Canal Railway, I'll just make some brief comments about our equity investment there. You've seen that we finished the year about 350,000 units we've been projecting around 360 to drop off a little bit at the end. But in spite of that we had a 56 % increase over the previous year, and the operating ratio was in the mid-50s. And as we go forward, certainly Panama Canal which has slowed down somewhat in its expansion and our railroad are both feeling the impact of global recession. So we're not going to give projections for 2009, but even if we ended up flat through the mid-50s, our operating ratio is still in a very good case, so it's for us. Final slide, page 43 summary and outlook. I am not going to give any guidance. Try to kind of do that in October with the best information we have of what was happening where we're heading and the bottom kind of settle up. That is giving I think a pretty good summary of market outlook. We just don't quite know what is going to happen. There are some positive things that we see, but who knows when the economy is really going to turnaround. The one thing as Mike has emphasized and also Dave that we are going to do is manage our of company this year to positive free cash flow. And that means disciplined cost controlled both in capital and operating expenses, and we expect those to be significantly below what we've spent in 2007 and 2008, when we were really building capacity. We are comfortable that we have plenty of capacity in our railroad even if business should comeback, its not like we're going…

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. (operator instructions). Thank you. Our first question Chris Wetherbee of Merrill Lynch & Company.

Great. Thanks very much, guys. I wonder if I can touch on yield first. Pat, I think, you mentioned that the FX impact in the quarter was... FX and yield together was down about one-sixth. Does that imply that the FX is kind of north of 7% headwind in the quarter, just want to kind of understand that a bit better?

Chris, the 1.6 was price and mix. The exchange rate was actually about 1% decrease. But that is I think we said it before that. 70% of our Mexican revenues are... contract revenues are denominated in dollars and the other 30% is denominated in pesos. So, what this reflects the exchange rate impact on the water fall chart is the reduction in U.S. dollar revenues that occurred because of the devaluation of the peso on that portion of the revenue that is peso-denominated. This is the different than the foreign exchange rate that Mike Upchurch just talked about, which is more of an asset-based asset-driven variable. So, this is the revenue impact of the exchange rate devaluation.

Okay. And is that net for expenses, I guess you've said in the past that your expense, exposure was close to the 45% down in Mexico as far as what's in pesos relative to U.S. dollars, is that right?

Yeah, Chris, this is Mike Upchurch. That's about right. It's in the low 40s. And so, as we looked at the fourth quarter and looked at our peso denominated revenues and expenses and considering kind of a 75% OR there, we looked at that and it's almost a net loss in terms of the revenues and expenses within pesos.

Okay, that's fair. And then just staying on yield for a second, Pat on the auto side. I kind of missed a bit of what you said there. It looks like the yield was particularly difficult there and it looked like your actually fuel pricing was a bit weaker there too. So, I if you could just kind of grow into that. I know you had a bunch of plans that were offline in the quarter but just from a pricing perspective. Are you getting push back there?

No, we didn't have any repricings in the quarter as our decline in revenue per unit is really mostly driven by the losses in longer haul business that we had from one large manufacturer in Mexico. So again, it was a mix shift away from longer haul higher rated revenues.

Okay. And I guess just on the volume side, just kind of the general outlook. I know guys aren't providing top line guidance. But I guess as far as the improvement that you've seen and I know what you can see in the next couple of weeks, is it that plan that have been kind of front load or on holiday over the course of the New Year time frame. Are those coming back online, or what's the business activity that's driving a bit of the firming in the volumes?

Are you talking about overall or just...

Overall, yeah. That's right.

It's plans that are coming back online. I think it's a function also, if you go back to the chart that Mike started the presentation with, I think is a very powerful chart, and I'm sure the same for almost everybody. That is just a function of how bad things got in December. We saw things that, plans and activity to shutdown like they've never shutdown before. And so, the good news is and the point of that chart is to say that some of that is coming back from those levels. We're still clearly below last year. So, we're not sitting here saying that the recession is over, and we're back to good times. It's just that there is some signs of life. We've seen some paper plants coming back online; auto plants, we think they are going to come back over the next few weeks. So, there is a pulse out there.

Okay. And then just one ...

I don't know if you can say it, it certainly gives you the impression that we think it's going to be a quick rebound or recovery; it's alive, that's about it.

Okay, that's fair enough, and just one more question, on the yield side again, Pat again I think you mentioned 21% still open for repricing in 2009, 21% of your business. If you just let us know how much of that in Mexico, and if you are feeling any weakness based on that FX impact obviously, with the combination of increased pricing and devaluing currency, it seems like a pretty big number that some of your customers may have to deal with coming up?

Yes, it's pretty well balanced. There is some Mexico contracts in there, but we're well into the Mexican repricing cycle and we've... it's growing reasonably well. The inflation rate in Mexico last year which is usually what we used to peg pricing changes was over 6%. But we've got some of our large customers and industries that are really affected by the downturn that were trying to work with to help find a way to offset the environment that we're in that... so obviously no one is excited about pricing increases, but we are able to hang in there and so far it's looking like we are going to get pretty close to inflation in terms of our increases in Mexico.

Okay, great. Thank you very much for the time. I appreciate it.

Thank you. Our next question is coming from Edward Wolfe of Wolfe Research.

Thanks. Good afternoon. I just wanted to make sure that I am looking at this the way you're looking at in the quarter. If you take the $22 million currency loss and the $21 million tax gain below the line, tax rate in line let's call 31% the 30 to 32 that you gave us. I get about $0.41 ongoing earnings if I do those three things. Is that kind of how you're thinking about this quarter in going forward?

Ed the 21... you referenced the $21 million tax gain?

Well if I normalize the tax rate to 31%, that gives me tax as you would have paid at $18 million. 0.7 that you got again?

Our pre-tax income was 36.5, right? So, we're using kind of an effective rate of 30%, would have been income tax expense of about 11.

Right. But again what I'm doing is I am taking the currency below line. $22 million to $217 million. Changed my pre-tax to 58 and then I'm normalizing a tax rate of 31, which gives me $18 million in taxes that I m taking below the line. That 18 away pass the 2.7 that you got as the benefit and when I do all the math, I get around $0.41 that are 31% tax rate. And by doing these things that you think is incorrect or what do you think?

No I think on a go forward basis that's exactly where we will try to guide you in terms of your effective tax rate.

But that you did already in terms of currency going forward do you view these kind of large swings, that are non-cash; is that an appropriate way that you look at internally?

It is. I can tell you it's pretty difficult for us to predict what's going to happen with this currency. I don't think anybody would have predicted the decline we saw in fourth quarter. It's similar to trying to predict fuel prices the way we are seeing the fluctuation $4 down to a $1.50 during the course of the year. So for our planning purposes, we have kind of assumed really a stable currency. I realize that the exchange rate right now is a bit higher than it was at the end of the year and would like to see how that plays out. But assuming kind of consistent currency rates I think our guidance is 30 to 32% is right inline.

One of the volume charts that I think Mike Haverty showed. You talked about volumes coming back a bit in January, but every January seasonally they come back. You then said in the Q&A that you're seeing a couple of plans to reopen and so forth. Hence year-over-year if you take the seasonality out of it, what's your sense then that volumes right now are tracking give or take in the US and in Mexico?

Tracking from, compared to last year.

Past year-over-year?

Lower.

I mean that are we lower 8% still or is it much worse than that? Where are we?

Sorry, could you repeat that?

I am just looking at your.

Hello?

Can you hear me?

Yeah.

I m looking at the chart five where you showed this big decline in December and then this big uptick in January and I'm looking at the beginning of the chart that shows the same thing a year ago in January. And I'm just assuming seasonally after you come off of the break back. So I m trying to understand year-over-year, getting your sense that plans are reopening right now, taking seasonality out of it, how should we think about volumes? Currently as you see it, I know you can read the future in the economy is terrible, so kind of where are we relative to November and December year-over-year right now?

Year-over-year, we're still down at this point. But and again the point of this slide ... I see your point on week one. Last year we had another phenomenon that affected volumes around year-end which goes back to this ISU tax that Mike mentioned. And I don't know if you remember this from last year but we had grain shipments with probably the biggest impact where this new tax was rolled out and it became effective in January 1st of 2008. And the heavy impact of delaying a lot of shipments for inventory purposes in Mexico that really popped up in January as Mexico introduced this new tax law, Mexican tax law. People are able to take a credit for investment including inventory investment. So that had a kind of a big impact and provided some static around the end of last year. It was really an inventory management issue as opposed to a seasonal issue or any kind of a cyclical issue. But the point is, the chart five, I think is to show that things are improving from the dismal levels at the end of last year. But the fact is we're still running lower year-over-year, a little bit closer in the U.S. if you just look at the AER carloads statistics. Our U.S. business is actually hanging in there a little bit better than Mexico. Mexico is driven by fuel, autos and cement which we expect to be down for the foreseeable future.

Visibility. There is a slide where you showed that basically 81% has been repriced by tariff or contract for 09. Can you give us a sense on both of those sides, the tariff side and the contract side? What have you seen kind of as the average increase those have come up both sides of the house?

Well again, I gave a very recent example of a long-term contract that we renewed in a range that was with the high end of the 5 to 6% range that we've been talking about. So I'd say, generally, we still are seeing pricing increases on contract renewals in that mid-single digit range call it 4 to 5%.

I am sorry, single digits 4 or 5 was, what's that?

Contract renewals.

And what are you seeing on the tariff side?

About the same.

And is there a big difference between Mexico and the U.S.? Is Mexico still higher?

Overall, I'd say no, maybe there is maybe a little bit inflation rate in Mexico is a little bit higher, but I would say not materially different.

It I were to just changing gears now at your expense line items? Comp was down about 13.5%?

Looking at quarter-over-quarter?

Yeah, I am looking at fourth quarter of 08 or the fourth quarter of 07 salary and benefits?

Right. Yeah, we talked about that being somewhere related to reductions in headcount as volume ramped down and a reduction in incentive and stock-based compensation on a year-over-year basis.

Was there some reversals of accrued comp here?

Yeah, minor. About $1million in the fourth quarter from balances that we had at the end of Q3.

Talk a little about Mexican fuel prices and the direction year-over-year, where we are right now and where you see that going because this credits are definitely than fuel.

Yeah, I think we continue to see increases on a year-over-year basis in fuel down in Mexico. However, the impact of the currency has actually caused our prices to be relatively stable. For 2007, our fuel prices was $1.72 in Mexico when converted to the U.S. dollars; and in 2008, $1.84. So obviously, there was a higher increase in fuel in Mexico percentage wise from a peso standpoint. But, we saw the favorable impact of the currency bring that down from U.S. dollar standpoint. There is some momentum in Mexico right now, to put a cap on fuel prices. We have already done that for the citizens buying the gas. And there is some real optimism here that they may implement that as well on diesel prices for businesses.

How do we think about, I understand that makes sense for the cost side. How do we think about the surcharge side and the lagging benefit that you might or not be getting in Mexico relative to the U.S.?

Well, we had a favorable impact in the fourth quarter, when you look year-over-year. And certainly, going into 2009, it's going to be a little bit difficult for us to predict given what the government may end up doing with fuel prices.

But in fourth quarter, you had a benefit of if you look at where your costs went up in fuel year-over-year versus where your surcharge went up?

Correct

And I'm guessing that benefit wasn't as close to as large that that was in the U.S. though?

It was not as large, but it was certainly a benefit, noticeable benefit.

Just on and then I'll let some other. Can you give just an update on the RRIF loan status for Victoria Rosenberg?

Yeah, obviously with change in administration, we're unclear exactly what all the impacts are going to be. We have had continuing conversations with the government about our RRIF loan. I think that that program will still at the end of the day be a viable option for us to try to fund capital expenditure programs. There maybe different mechanisms in place to access that funding with Victoria Rosenberg, as we've previously indicated. We chose to move forward with that project prior to the environmental reviews. And, whether that at the end of day with the new administration will still allow us to go in and replace the potential bridge financing with the RRIF loan, it is certainly something we're going to work with the administration on. But, they were looking at a variety of different programs, whether it'd be RRIF loans, which they have tended to indicate they would favorably inclined to continue methodically (ph) for Victoria Rosenberg or future capital projects, but also a lot of discussion around investment tax credits and accelerated depreciation. So we just have to wait and see what happens with the stimulus plan.

When does Victoria Rosenberg project end?

Well, I'm sorry, when did that end?

What I'm saying is, if you're done with financing Victoria Rosenberg, which you're going to be at some point this year. Is it too late at that point to seek the RRIF or can the RRIF cover what you already laid out?

No, we would actually be able to still file our application. And I think as we previously discussed, timing is the big question and it would likely take nine to 12 months to get through that approval process.

Okay. Thanks for all the time. I appreciate it.

Sure.

Thank you. Our next question is coming from Randy Cousins of BMO Capital Markets.

Good afternoon. Just a couple of housekeeping; you mentioned that you cut the CapEx back. I wondered if you guys could actually tell us for the dollar CapEx you are budgeting for, for 2009 and are you planning to use any lease financing at all?

The last one is easy. We're not planning on any kind of significant lease financing that's typically been associated with equipment and you'll see a pretty sizable reduction in our plan on year-over-year basis.

Randy I would just tell you, we're trying to retain from flexibility and our capital program. But if you look at the slide on page 38, 2008 CapEx was 577. I kind of indicated the 35to 40% reduction. So you might look at something in the 350 to 375 range.

Okay, and just on the cash flow, you've taken your receivable, down to $167 million from 243. Can you sustain them at that level or do you see some... is that kind of more of the year-end phenomenon?

No. It's absolutely not a year-end phenomenon and I would tell you, really the accounting department took the leadership role in this initiative. They worked very, very closely with the marketing organizations to identify, how we can really reduce payments terms and accelerate cash generation. Clearly we're dealing with difficult economic environment right now. But we have internal goals that we will continue to improve that. It may be not be at the cliff of reducing 12 days the way we did in 2008. But I can tell you, we absolutely believe we can continue to reduce that. If you look at some of our competitors while we have caught up significantly with most of them, there are a couple that are still significantly better than we are and that have might be a multiyear effort to try to get contract terms and conditions changed to mirror what, a couple of other railroads may have in place today. But we continue to believe we can move this down and we will see improvement in 2009.

And again with reference with cost benefit, I think you might just the add that the million dollars was kind of like the prior accrual. I think you also talked about the stock-based compensation. So if we look to that 78 and we're just sort of thinking about some sort of normalized number excluding the sort of the variance items that came through in the fourth quarter, what would have been the fourth quarter run rate?

Run rate for stock base compensation?

Just compensation in benefit overall. Like you took out... looks like there was a stock-based reversal. I'm assuming there was a bonus accrual in the fourth quarter which didn't take place because of the reduced results. And then there was a reversal for prior quarters, right? Yeah. What just I am coming at is what would be the sort of run rate that we should use for the comp and benefits if we use fourth quarter as the benchmark?

Yeah, Randy. I did mentioned a roughly a million dollar reversal to give a little bit more guidance on a year-over-year basis in the fourth quarter. I mean we did see a sizeable reduction in incentive and stock-based compensation. It was to the tune of about $8 million and that represents a combination of a couple of factors. One, corporate shares under our stock program of individuals to who have left the company, but also in annual reduction in the percentage of payout on our stock-based program. Now going forward if you are familiar with our stock-based program, the war becomes more difficult in the third and final year which is 2009. So I wouldn't necessarily you know think about significant increases in the stock-based comp. There may be some ability for us to make that up, but again it's largely going to dependant on the recovery in the economy and whether we can get back to some of our numbers that we established three years ago relative to that plan.

And then on casualty and insurance, you mentioned the favorable actuarial results. What was that worth and given the positive momentum that you've built up in terms of safety performance, do you structure that as cost item that will be coming down in 2009.

Yes we do see that as an item that will come down in 2009. Quarter-over-quarter, we look at that as a $5 million improvement

Okay. And then my last question is for Pat; just with reference to the intermodal; you talked about this as an area for opportunity. There seems to be a lot of moving parts there and I wondered, if you could give us some sense, Pat, just in terms of sort of how you are sensing the mix? What that's going to do to RPU in the intermodal category?

Well, obviously the wildcard is still the economy, but it gets I think about the intermodal business, we expect Lazaro to grow. You should remember the chart in the presentation. We had a big surge in growth activity in the last four months of the year, if the traffic through the port continues at that level, we should still see very solid 30-40% growth through port. So that's going to drive our growth. That should be good RPU at least as good as our overall portfolio. We are going to see growth over the Meridian speedway on our haulage trains. The RPU there is lower and then the other big thing we've got going on is the opening of the Victoria-Rosenburg line, the opening of the Rosenburg Terminal and the intense focus on cross border traffic from Houston into Mexico and really offering a service in that lane and the RPU ought to be again very good.

So in general, would you have a positive effect on RPU if everything just continues to play the way you're looking at it right now?

I think that's a fair statement. The other moving piece there that's had big impact is the automotive-related business which is just been dead for the last several months. So, if the auto plant start producing and we get some that parts business moving, it shows up in our intermodal numbers we could get... that could help us well.

And you've been working really hard to drive up the length of haul. What's happening with the length of haul in that intermodal business?

It's been staying about flat. So we haven't really seen the kind of improvements that we want because of the economy in the fourth quarter that I think the real opportunity for us is when we open that Rosenberg Terminal and that Victoria Rosenberg line be able to serve Houston to Central Mexico.

Okay, great. Thank you.

Okay.

Thank you. Our next question coming from Jason Seidl of Dahlman Rose & Co. Mr. Seidl. You may now ask your question. We will go to our last question coming from David Feinberg of the Goldman Sachs Group.

Good morning or good afternoon. First question is about a quarter ago when you were talking about refinancing, you were discussing the possibility to repay trading cash. I am assuming this point that's off the table?

No, that's not off the table.

And what would determine the timing or the amount of any of those issues in terms of repay trading cash from Mexico to the U.S.?

We've completed that initial tranche in the first quarter.

How much was that?

About $65 million.

Thank you. And then, Pat, you were quoting what I felt Houston statistic is really the same linehaul and the linehaul move the increases in the fourth quarter. Can you give us similar more statistics for the other quarters looking 2008 for 1Q, 2Q, 3Q?

I don't have those in front of me. I think though if we look it year-over-year, the order of magnitude will decrease somewhat the high double or high single digits, low double-digits.

Okay. And then as we look at your book of business, in the 2010, the 50% of your contract that you'll touch of the ... excuse me, the 50% of the 36% of the roughly 18% that you are going to touch in 2010. When do you start talking to customers about those 2010 contracts. Is it the back half of year, did you start now?

It will really heat up in the back half for the year. And a lot of that is in Mexico. A lot of the contracts that we have in Mexico are one year renewable annually and they are typically in the first few months of the year. So, a big chunk of that 56% relates to our Mexican business.

And, is it safe to assume based on some of your earlier comments, you tend to peg those to a trailing Mexican inflation rate?

That has typically been the pattern.

And then my last question is a follow-up to your comments on intermodal and the potential for cross motor traffic moving from Central Mexico into Houston. Are those... is there hope there that it will be international moves. In other words, using Lazaro as an alternative to some of the other West Coast ports or is that ... are those products coming from industry within Mexico into the U.S.?

It's primarily the latter. It's the truckload market from the industrial part of Mexico across border. We have been talking about across the international opportunity at Lazaro for some time now. So it's really going to be both that the opportunity that I mentioned with the opening of Rosenberg Terminal is going to be truck inversion market that moves across in the Lazaro gateway. It's a big market and dominated by truck and we think the new service and the improved service that we'll have from Rosenberg into the heart of Mexico is going to make it possible for us to get a much bigger share of that.

And then the last question specifically on that international intermodal move from Lazaro into the U.S. Have shippers pushed out any plans or thoughts given the weakness in U.S. volumes in terms of some of the data points we've picked up is that, some of the bottlenecks within international shipping lanes have eased up such that they not as aggressively looking for alternative ports in alternative lands, has that been the case?

I'd say that's been the case as far as people looking for alternatives. What we're seeing though is people who aren't calling in LA Long Beach, who are interested in using Lazaro as gateway to get into the Southern and Southeastern U.S. So, it's not shift in calling patterns. It's really an example would be the South American carriers, who seldom seem to call on Los Angeles. They are interested in using Lazaro as the gateway into the Southern U.S.

Alright. Thank you very much.

Okay.

Thank you. Ladies and gentlemen, we are out of time for further questions today. I would like to hand the floor back over to management for any closing comments.

Okay, thank you very much and I want to thank all of you for joining us today. And I hope times gets better here and news is a little better as we go forward. But we are committed to sticking with our plan, keeping our cost under control, remaining positive cash flow and we've been through these times before and we will survive this time. So, thank you very much again for joining us.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.