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Kansas City Southern achieved “very solid first-quarter performance” with its financial statement despite severe winter storms in February and escalating fuel prices, senior executives said during an earnings conference held this morning.

Revenue climbed 12 percent to $488.6 million, volume rose 7 percent to 474,100 units, diluted earnings per share skyrocketed 70.6 percent to 58 cents, operating income jumped 18 percent to $128 million and the operating ratio improved 1.4 points to a first-quarter record 73.8 compared with first-quarter 2010 results.

In late 2010, KCS announced 2011 projections of low double-digit revenue growth, mid-single-digit volume growth, mid-single-digit rate increases and annual operating ratio improvement of 100 to 150 basis points. First-quarter results show the Class I is on track with internal expectations, said President and Chief Executive Officer David Starling.

“We are trending toward our guidance, and a bit better,” he said.

KCS increased revenue in every business segment except agriculture and minerals. Revenue growth was driven by legacy or same-store contracts (defined as the same customer, same freight and same routing) as well as new business, said Executive Chairman Mike Haverty.

The automotive segment led revenue gains, ballooning 43 percent year over year to $31.1 million as volume rose 13 percent to 20,100 units. Volume was strong in Mexico, especially in Lázaro Cárdenas, said Executive Vice President of Sales and Marketing Patrick Ottensmeyer.

“We haven’t seen a dramatic drop in the supply chain because of the events in Japan and floods,” he said, adding that Mexican automotive business isn’t heavily tied to Japan.

Intermodal revenue climbed 27 percent to $54.2 million as volume increased 17 percent to 175,900 units. KCS noted strong demand in most segments, especially in Lázaro Cárdenas, where volume jumped 44 percent as intermodal capacity continues to increase, such as through a major port expansion project, said Ottensmeyer. Cross-border intermodal traffic ballooned by 70 percent.

Chemical and petroleum revenue rose 8 percent to $96.9 million as volume inched up 1 percent to 63,000 units; industrial and consumer products revenue jumped 19 percent to $118.5 million as volume increased 12 percent to 82,100 units; and coal revenue rose 9 percent to $64.6 million even though volume fell 5 percent to 68,700 units. Agriculture and minerals revenue tumbled 1 percent to $105.1 million as volume declined 4 percent to 64,300 units.

In terms of operating expenses, total first-quarter costs increased 10 percent year over year to $360.8 million. Compensation and benefits expenses rose 11 percent to $100.4 million — even though headcount remained flat at 6,080 — and fuel expenses soared 31 percent to $79.5 million, said EVP and Chief Financial Officer Mike Upchurch. Excluding the effects of high fuel costs, operating expenses would have increased only 5 percent and the operating ratio would have improved by an additional one point, he said.

First-quarter results are not affecting KCS’ plan to accelerate capital spending this year, as the railroad announced in late 2010. The Class I will use funds projected for early 2012 to help pay for accelerated locomotive purchases and buyouts of leased assets and facilities, including an intermodal terminal, said Upchurch.

KCS plans to become an owner instead of lessor of strategic assets to take advantage of a 100 percent depreciation tax benefit available now, said Starling.

“We weren’t in position to do this in the past, but we’re in position to do this now,” he said.

If the economy holds out, KCS expects to meet its growth goals for 2011, said Starling.

“The pipeline of new business opportunities remains full,” he said.

— Jeff Stagl