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:
MidSouth Rail Union 401(k) Retirement Savings 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
Statement of Net Assets Available for Benefits as of December 31, 2003
and 2002
Statement of Changes in Net Assets Available for Benefits for Years
Ended December 31, 2003 and 2002
Notes to Financial Statements
EXHIBIT:
Exhibit 23 - Consent of KPMG LLP
MIDSOUTH RAIL UNION 401(K)
RETIREMENT SAVINGS PLAN
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm Thereon)
MIDSOUTH RAIL UNION 401(K)
RETIREMENT SAVINGS 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 years ended December 31, 2003 and 2002 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULE*
1 Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
as of December 31, 2003 9
* 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
MidSouth Rail Union 401(k) Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the MidSouth Rail Union 401(k) Retirement Savings 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
MIDSOUTH RAIL UNION 401(K)
RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
------------- --------------
Assets:
Cash $ 9,673 11,202
Investments, at fair value:
Common stock of Kansas City Southern 60,215 3,972
Common collective trust 1,034,694 1,046,922
Mutual funds 1,619,031 1,182,831
------------- --------------
Total investments 2,713,940 2,233,725
------------- --------------
Total assets 2,723,613 2,244,927
Investment trades payable 9,654 --
------------- --------------
Net assets available for benefits $ 2,713,959 2,244,927
============= ==============
See accompanying notes to financial statements.
MIDSOUTH RAIL UNION 401(K)
RETIREMENT SAVINGS 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 $ 62,779 88,677
Net appreciation (depreciation) in fair value of investments 320,409 (216,986)
-------------------- --------------------
Total investment gain (loss) 383,188 (128,309)
-------------------- --------------------
Contributions:
Participant contributions 235,260 259,366
Company contributions 69,872 68,732
-------------------- --------------------
Total contributions 305,132 328,098
-------------------- --------------------
Benefits paid (219,288) (123,503)
-------------------- --------------------
Increase in net assets available for benefits 469,032 76,286
Net assets available for benefits:
Beginning of year 2,244,927 2,168,641
-------------------- --------------------
End of year $ 2,713,959 2,244,927
==================== ====================
See accompanying notes to financial statements.
MIDSOUTH RAIL UNION 401(K)
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) DESCRIPTION OF THE PLAN
The following description of the MidSouth Rail Union 401(k) Retirement
Savings Plan (the Plan) provides only general information. Participants
should refer to the plan agreement for a more complete description of the
Plan's provisions.
(A) GENERAL
The Plan is a participant-directed, contributory, defined contribution
plan subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
During 1993, the MidSouth Corporation was acquired by Kansas City
Southern Industries, Inc. and was merged into The Kansas City Southern
Railway Company (the Company), a wholly owned subsidiary of Kansas
City Southern Industries, Inc., on January 1, 1994. Effective May 2,
2002, Kansas City Southern Industries, Inc. changed its name to Kansas
City Southern.
On January 1, 2001, the SouthRail Corporation Union Savings Plan was
merged into the Plan.
(B) ELIGIBILITY
The Plan covers all full-time employees of the Company who are members
of one of the following collective bargaining units with the former
MidSouth Rail Corporation: Brotherhood of Locomotive Engineers,
Brotherhood of Maintenance of Way Employees, Brotherhood of Railway
Carmen, Brotherhood of Railroad Signalmen, International Association
of Machinists and Aerospace Workers, International Brotherhood of
Electrical Workers, Transportation Communications International Union,
or United Transportation Union. Plan entry dates are the first day of
each quarter.
A participant that ends his or her membership in any of the above
collective bargaining units is no longer eligible to receive Company
contributions. However, such participant will continue to receive
credit for vesting under the provisions of the Plan and continues to
share fully in trust fund allocations, as set forth in the Plan. Upon
rejoining any of the above collective bargaining units, such
participant is then immediately eligible to participate in all future
Company contributions, as set forth in the Plan.
Participants in the former SouthRail Corporation Union Savings Plan
and the participants in the MidSouth Rail Union 401(k) Retirement
Savings Plan and Trust Agreement who were employees of the Company on
January 1, 2001, continue to be participants in 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 matches
100% of the first $200 of participant salary deferral contributions
and 50% of the second $600 of participant salary deferral
contributions, with a maximum annual Company matching contribution of
$500 per participant.
(D) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution, the Company's matching 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 salary deferral
contributions plus actual earnings thereon.
Company contributions vest according to the following schedule:
Years of Percent
service
-------------------------------- -----------
Less than 1 %
--
1 20
2 40
3 60
4 80
5 or more 100
(F) INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may direct their
contributions and Company matching 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 AMVESCAP National Trust Company.
(C) FORFEITURES
Nonvested amounts forfeited by employees are allocated to the other
participants as a part of and in the same manner as the Company
contribution for the Plan year in which the forfeiture occurs.
Allocated forfeitures were $190 and $5,463 for the Plan years ended
December 31, 2003 and 2002, respectively.
(D) 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 $ 1,034,694 1,046,912
Franklin Balance Sheet Investment A 184,332 132,750
PIMCO Renaissance 204,707 114,339
PIMCO Total Return Administrative Shares 351,186 321,001
Other 939,021 618,723
------------ ------------
Total Investments $ 2,713,940 2,233,725
============ ============
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 $320,409 and ($216,986), respectively, as
follows:
2003 2002
------------ ------------
Kansas City Southern common stock $ 8,805 (642)
Mutual funds 311,604 (216,344)
------------ ------------
$ 320,409 (216,986)
============ ============
(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.
Accordingly, the Plan was renamed MidSouth Rail Union 401(k) Retirement
Savings Plan. 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 by 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 March 7, 2003, 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 the amendments executed through
April 1, 2002.
The Company is not aware of any activity or transaction that may adversely
affect the qualified status of the Plan.
SCHEDULE 1
MIDSOUTH RAIL UNION 401(K)
RETIREMENT SAVINGS 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 4,203 shares, with a fair value of
$14.32 per share $ 60,215
Common Collective Trust:
Invesco Stable Value 1,034,721.93 shares, with a fair value of
$1.00 per share 1,034,694
Mutual Funds:
AIM Small Cap Growth Fund 1,521.626 shares, with a fair value of
$25.71 per share 39,121
EuroPacific Growth 3,028.708 shares with a fair value of
$30.21 per share 91,497
Franklin Balance Sheet Investment A 3,874.963 shares, with a fair value of
$47.57 per share 184,332
Growth Fund of America 4,769.48 shares, with a fair value of
$24.54 per share 117,043
ING International Value Fund 5,028.589 shares, with a fair value of
$15.11 per share 75,982
Janus Fund 5,370.99 shares, with a fair value of
$23.47 per share 126,057
Janus Twenty Fund 667.868 shares, with a fair value of
$36.17 per share 24,157
MFS Value Fund 5,911.71 shares, with a fair value of
$20.34 per share 120,244
Oppenheimer Quest Balanced Value 6,277.833 shares, with a fair value of
$16.37 per share 102,768
PIMCO Renaissance 8,819.771 shares, with a fair value of
$23.21 per share 204,707
PIMCO Total Return Administrative Shares 32,790.476 shares, with a fair value of
$10.71 per share 351,186
Scudder Equity 500 Index 418.532 shares, with a fair value of
$124.93 per share 52,287
Washington Mutual Investors Fund 4,504.849 shares, with a fair value of
$28.78 per share 129,650
------------------
Total investments $ 2,713,940
==================
*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.
MIDSOUTH RAIL UNION 401(k)
RETIREMENT SAVINGS PLAN
By /s/ Eric B. Freestone
--------------------------------------
Eric B. Freestone
Title: Vice President Human Resources
Dated June 28, 2004