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:
Gateway Western Railway 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
GATEWAY WESTERN RAILWAY UNION
401(K) PLAN
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm Thereon)
GATEWAY WESTERN RAILWAY 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 Sponsor
Gateway Western Railway Union 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Gateway Western Railway 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
GATEWAY WESTERN RAILWAY UNION
401(K) PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
--------------- -------------
Assets:
Cash and temporary investments $ 11,766 11,496
Investments, at fair value:
Common collective trust 286,031 242,591
Common stock of Kansas City Southern 247 12,024
Mutual funds 2,395,421 1,722,909
--------------- -------------
Total investments 2,681,699 1,977,524
Contributions receivable:
Employee -- 10,014
Employer -- 4,078
--------------- -------------
Total contributions receivable -- 14,092
--------------- -------------
Total assets 2,693,465 2,003,112
Investment trades payable 11,752 11
--------------- -------------
Net assets available for benefits $ 2,681,713 2,003,101
=============== =============
See accompanying notes to financial statements.
GATEWAY WESTERN RAILWAY 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 $ 36,603 44,297
Net appreciation (depreciation) in fair value of investments 483,657 (418,415)
-------------------- -------------------
Total investment gain (loss) 520,260 (374,118)
-------------------- -------------------
Contributions:
Employee 190,830 233,921
Employer 80,031 95,994
-------------------- -------------------
Total contributions 270,861 329,915
-------------------- -------------------
Benefits paid (112,509) (97,384)
-------------------- -------------------
Increase (decrease) in net assets available for benefits 678,612 (141,587)
Net assets available for benefits:
Beginning of year 2,003,101 2,144,688
-------------------- -------------------
End of year $ 2,681,713 2,003,101
==================== ===================
See accompanying notes to financial statements.
GATEWAY WESTERN RAILWAY UNION
401(K) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) DESCRIPTION OF THE PLAN
(A) GENERAL
The Gateway Western Railway 401(k) Plan (the Plan) is a contributory,
defined contribution plan adopted on July 1, 1997. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
The following brief description of the Plan is provided for general
information purposes only. Participants should refer to the plan
agreement for a more complete description of the Plan.
(B) ELIGIBILITY
The Plan covers union employees of Kansas City Southern Railway
Company, located from Kansas City to East St. Louis (the Company), who
are members in a craft represented by one of the following
organizations: Transportation Communications International Union,
Brotherhood of Locomotive Engineers, Brotherhood of Maintenance of Way
Employees, Brotherhood of Railway Signalmen, International Brotherhood
of Electrical Workers, International Association of Machinists and
Aerospace Workers, or Brotherhood of Railway Carmen. Employees are
eligible to participate in the Plan on the January 1, April 1, July 1,
or October 1 coincident with or immediately following his or her first
day of employment.
(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
50% of participant contributions, up to 6% of annual eligible
compensation.
(D) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution, Company 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 contributions, Company
matching contributions, plus actual plan earnings thereon.
(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 distributions 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
All administrative expenses of the Plan are 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 a common collective trust (Invesco Stable Value
Fund) are valued at contract 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 plan
benefits at December 31, 2003 and 2002, were as follows:
2003 2002
------------- -------------
Invesco Stable Value Fund $ 286,031 242,588
Barclay's Global Inv Equity Index Fund I -- 236,167
Growth Fund of America 670,630 481,751
Oppenheimer Quest Balanced Value 178,314 141,376
PIMCO Rennaissance 195,396 --
PIMCO Total Return Administrative Shares 365,363 341,530
Scudder Equity 500 Index 289,025 --
Washington Mutual Investors Fund 186,719 116,647
Other 510,221 417,465
------------- -------------
Total investments $ 2,681,699 1,977,524
============= =============
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 $483,657 and ($418,415), respectively, as
follows:
2003 2002
------------ ------------
Kansas City Southern common stock $ 4,071 (1,944)
Mutual funds 479,586 (416,471)
------------ ------------
$ 483,657 (418,415)
============ ============
(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 received a favorable determination letter from the Internal
Revenue Service, dated July 15, 2003, indicating that it is qualified under
Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the
related trust is exempt from tax under Section 501(a) of the Code. The
determination letter is applicable for amendments executed through June 30,
2003.
The Company is not aware of any activity or transactions that may adversely
affect the qualified status of the Plan.
SCHEDULE 1
GATEWAY WESTERN RAILWAY 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 17.249 shares, with a fair value of
$14.32 per share $ 247
Common collective trust:
Invesco Stable Value 286,031.00 shares, with a fair value of
$1.00 per share 286,031
Mutual Funds:
AIM Small Cap Growth Fund 2,122.117 shares, with a fair value of
$25.71 per share 54,560
EuroPacific Growth 2,878.98 shares with a fair value of
$30.21 per share 86,974
Franklin Balance Sheet Investment A 1,968.291 shares, with a fair value of
$47.57 per share 93,632
Growth Fund of America 27,328.04 shares, with a fair value of
$24.54 per share 670,630
ING International Value Fund 6,619.461 shares, with a fair value of
$15.11 per share 100,020
Janus Fund 2,777.9 shares, with a fair value of
$23.47 per share 65,197
Janus Twenty Fund 334.913 shares, with a fair value of
$36.17 per share 12,114
MFS Value Fund 4,792.396 shares, with a fair value of
$20.34 per share 97,477
Oppenheimer Quest Balanced Value 10,892.74 shares, with a fair value of
$16.37 per share 178,314
PIMCO Renaissance 8,418.622 shares, with a fair value of
$23.21 per share 195,396
PIMCO Total Return Administrative Shares 34,114.174 shares, with a fair value of
$10.71 per share 365,363
Scudder Equity 500 Index 2,313.497 shares, with a fair value of
$124.93 per share 289,025
Washington Mutual Investors Fund 6,487.815 shares, with a fair value of
$28.78 per share 186,719
------------------
Total investments $ 2,681,699
==================
* 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.
GATEWAY WESTERN RAILWAY UNION 401(K) PLAN
By /s/ Eric B. Freestone
----------------------------------------
Eric B. Freestone
Title: Vice President Human Resources
Dated June 28, 2004