Securities and Exchange Commission
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003 and 2002
Commission File Number: 333-91478
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
The Kansas City Southern Railway Company Union 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Kansas City Southern
427 West 12th Street
Kansas City, Missouri 64105-1804
CONTENTS
FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm
Statements of Net Assets Available for Benefits as of December 31,
2003 and 2002
Statements of Changes in Net Assets Available for Benefits for the
years ended December 31, 2003 and 2002
Notes to Financial Statements
EXHIBIT:
Exhibit 23 - Consent of KPMG LLP
THE KANSAS CITY SOUTHERN RAILWAY
COMPANY UNION 401(K) PLAN
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm Thereon)
THE KANSAS CITY SOUTHERN RAILWAY
COMPANY UNION 401(K) PLAN
TABLE OF CONTENTS
PAGE
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available for Benefits as of
December 31, 2003 and 2002 2
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2003 and 2002 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULE*
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
as of December 31, 2003 8
* Other schedules required by 29 CFR 2520.103-8 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are
not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Participants and Plan Administrator of
The Kansas City Southern Railway Company Union 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Kansas City Southern Railway Company Union 401(k) Plan (the Plan) as of
December 31, 2003 and 2002, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002, and the changes in net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated, in all material respects, in relation to the basic financial statements
taken as a whole.
/s/ KPMG LLP
Kansas City, Missouri
May 15, 2004
THE KANSAS CITY SOUTHERN RAILWAY
COMPANY UNION 401(K) PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
--------------- -----------
Assets:
Cash and temporary investments $ 2,201 2,611
Investments, at fair value:
Common stock of Kansas City Southern 8,620 9,756
Common collective trust 53,586 39,798
Mutual funds 467,247 351,625
--------------- -----------
Total investments 529,453 401,179
Liabilities:
Investment trade payables 2,216 --
--------------- -----------
Net assets available for benefits $ 529,438 403,790
=============== ===========
See accompanying notes to financial statements.
THE KANSAS CITY SOUTHERN RAILWAY
COMPANY UNION 401(K) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2003 and 2002
2003 2002
------------------- ------------------
Investment income (loss):
Interest and dividends $ 6,885 8,568
Net appreciation (depreciation) in fair value of investments 98,016 (94,136)
------------------- ------------------
Total investment gain (loss) 104,901 (85,568)
Participant contributions 59,274 62,520
Benefits paid (38,527) (12,516)
------------------- ------------------
Increase (decrease) in net assets available for benefits 125,648 (35,564)
Net assets available for benefits:
Beginning of year 403,790 439,354
------------------- ------------------
End of year $ 529,438 403,790
=================== ==================
See accompanying notes to financial statements.
SCHEDULE 1
THE KANSAS CITY SOUTHERN RAILWAY
COMPANY UNION 401(K) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) DESCRIPTION OF THE PLAN
(A) GENERAL
The Kansas City Southern Railway Company Union 401(k) Plan (the Plan)
is a participant-directed, contributory, defined contribution plan
subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA).
The following description of the Plan provides only general
information. Participants should refer to the plan agreement for a
more complete description of the Plan's provisions.
(B) ELIGIBILITY
The Plan covers all full-time employees of The Kansas City Southern
Railway Company (the Company) who are members of one of the following
collective bargaining units: Brotherhood of Railway Carmen, Division
of Transportation Communications International Union, Brotherhood of
Railroad Signalmen, The American Railway and Airway Supervisors
Association--Division of Transportation Communications International
Union, Transportation Communications International Union, and The
National Conference of Firemen & Oilers. Plan entry dates are January
1, April 1, July 1 and October 1 of each year.
A plan participant that ends his or her membership in any of the above
collective bargaining units is no longer eligible to make elective
deferrals under the Plan but will continue to be vested under the
Plan.
(C) CONTRIBUTIONS
Participants may contribute a portion of their annual eligible
compensation, as defined in the Plan, not to exceed an individual
annual maximum contribution of $12,000 in 2003. The Company does not
match participant contributions.
(D) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution and an allocation of Plan earnings, net of investment
expenses. Allocations are based on participant earnings or account
balances, as set forth in the plan agreement. The benefit to which a
participant is entitled is that which can be provided from the
participant's account.
(E) VESTING
Participants are immediately vested in their contributions plus actual
Plan earnings thereon.
(F) INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may direct their
contributions into any of the various funds offered by the Plan.
Effective July 1, 2002, the Plan added Kansas City Southern (NYSE:KCS)
common stock as an investment option.
Participants should refer to the respective prospectuses for a
description of the investment objective of each fund.
(G) BENEFITS
Distributions generally will be made in the event of retirement,
death, disability, resignation, or dismissal. A participant's normal
retirement age is 65. The Plan also provides for distribution at age
59 1/2.
Distributions after termination of employment will be made in a
lump-sum payment. Balances not exceeding $5,000 will be paid out
within one calendar year of termination of employment. Balances
exceeding $5,000 will be paid upon the distribution date elected by
the participant, but no later than April 1 following the calendar year
in which the participant attains the age of 70 1/2.
(H) PLAN TERMINATION
Although it has expressed no intention to do so, the Company has the
right to terminate the Plan at any time, subject to the provisions of
ERISA. Upon termination of the Plan, the participants shall receive
amounts equal to their respective account balances.
(I) PLAN EXPENSES
Investment expenses are paid by the Plan as long as plan assets are
sufficient to provide for such expenses. Administrative expenses are
principally paid by the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The Plan's financial statements are presented on the accrual basis of
accounting and present the net assets available for benefits and
changes in those net assets. Benefit payments to participants are
recorded when paid.
(B) INVESTMENTS
The fair value of marketable securities is based upon quotations from
national securities exchanges; where marketable securities are not
listed on an exchange, quotations are obtained from brokerage firms.
Securities transactions are accounted for on the trade date (the date
the order to buy or sell is executed).
The assets held in the common collective trust (Invesco Stable Value
Fund) are valued at contract value, which approximates fair value, as
determined by the AMVESCAP National Trust Company.
(C) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, and changes in net assets available
for benefits. Actual results could differ from those estimates.
(3) INVESTMENTS
Investments, which exceeded 5% of the net assets available for benefits at
December 31, 2003 and 2002, were as follows:
2003 2002
------------- -------------
Invesco Stable Value 53,586 39,796
Barclays Global Inv Equity Index Fund -- 26,826
Franklin Balance Sheet Investment A 37,904 29,244
Growth Fund of America 29,552 --
Janus Fund 118,906 90,427
MFS Value Fund 32,738 27,123
PIMCO Renaissance 43,302 29,791
PIMCO Total Return Administrative Shares 56,182 56,806
Scudder Equity 500 Index 28,119 --
Washington Mutual Investors Fund 49,255 31,398
Other 79,909 69,768
------------- -------------
Total investments 529,453 401,179
============= =============
During 2003 and 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value by $98,016 and ($94,136), respectively, as follows:
2003 2002
--------------- ------------
Kansas City Southern common stock $ 1,018 (1,502)
Mutual funds 96,998 (92,634)
--------------- ------------
$ 98,016 (94,136)
=============== ============
(4) PLAN AMENDMENT
Effective April 1, 2002, the Plan was amended and restated and a new
trustee, administrator and custodian of the Plan were appointed. Plan
assets transferred to the new trustee were transferred into funds
comparable to those offered by the previous custodian or as determined by a
formal request from each participant. The conversion initiated a "black
out" period beginning March 15, 2002, and continued through April 22, 2002.
During this period, funds could not be withdrawn from the Plan and
investment elections could not be changed until the trustee had time to
accurately complete the conversion. During this period, employee
contributions continued to be made through payroll deductions and the
contributions were deposited.
(5) PORTFOLIO RISK
The Plan provides for investments in various securities that, in general,
are exposed to various risks, such as interest rate, credit, and overall
market volatility risks. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the values
of investment securities will occur in the near term and that such changes
could materially affect the amounts reported in the statement of net assets
available for benefits.
(6) INCOME TAX STATUS
The Plan has received a favorable determination letter from the Internal
Revenue Service, dated August 9, 2002, indicating that it is qualified
under Section 401(a) of the Internal Revenue Code and, therefore, the
related trust is exempt from tax under Section 501(a) of the Internal
Revenue Code. The determination letter is applicable for amendments
executed through April 1, 2002.
The Company is not aware of any activity or transactions that may adversely
affect the qualified status of the Plan.
THE KANSAS CITY SOUTHERN RAILWAY
COMPANY UNION 401(K) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
IDENTITY DESCRIPTION FAIR VALUE
------------------------------------------------------ ------------------------------------------- ------------------
Common stock:
*Kansas City Southern common stock 601.955 shares, with a fair value of
$14.32 per share $ 8,620
Common collective trust:
Invesco Stable Value 53,585.88 shares, with a fair value of
$1.00 per share 53,586
Mutual funds:
AIM Small Cap Growth Fund 913.32 shares, with a fair value of
$25.71 per share 23,481
EuroPacific Growth 546.597 shares with a fair value of
$30.21 per share 16,513
Franklin Balance Sheet Investment A 796.813 shares, with a fair value of
$47.57 per share 37,904
Growth Fund of America 1,204.235 shares, with a fair value of
$24.54 per share 29,552
ING International Value Fund 695.029 shares, with a fair value of
$15.11 per share 10,502
Janus Fund 5,066.299 shares, with a fair value of
$23.47 per share 118,906
Janus Twenty Fund 76.481 shares, with a fair value of
$36.17 per share 2,770
MFS Value Fund 1,609.549 shares, with a fair value of
$20.34 per share 32,738
Oppenheimer Quest Balanced Value 1,100.991 shares, with a fair value of
$16.37 per share 18,023
PIMCO Renaissance 1,865.65 shares, with a fair value of
$23.21 per share 43,302
PIMCO Total Return Administrative Shares 5,245.751 shares, with a fair value of
$10.71 per share 56,182
Scudder Equity 500 Index 225.076 shares, with a fair value of
$124.93 per share 28,119
Washington Mutual Investors Fund 1,711.421 shares, with a fair value of
$28.78 per share 49,255
------------------
Total investments $ 529,453
==================
*Party-in-interest.
See accompanying report of independent registered public accounting firm.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
THE KANSAS CITY SOUTHERN RAILWAY COMPANY
UNION 401(K) PLAN
By /s/ Eric B. Freestone
------------------------------------------
Eric B. Freestone
Title: Vice President Human Resources
Dated June 28, 2004