SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 29, 2004
KANSAS CITY SOUTHERN
(Exact name of company as specified in its charter)
DELAWARE 1-4717 44-0663509
(State or other jurisdiction (Commission file (IRS Employer
of incorporation) number) Identification Number)
427 West 12th Street, Kansas City, Missouri 64105
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code:
(816) 983 - 1303
Not Applicable
(Former name or former address if changed since last report)
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No. Document
(99) Additional Exhibits
99.1 Press Release issued by Kansas City
Southern dated July 29, 2004
entitled, "Kansas City Southern Posts
Strong Second Quarter & Year to Date
Results," is attached hereto as
Exhibit 99.1
Item 12. Results of Operations and Financial Condition.
Kansas City Southern ("KCS" or "Company") is furnishing under Item 12 of this
Current Report on Form 8-K the information included as Exhibit 99.1 of this
report. Exhibit 99.1 is the Company's press release, dated July 29, 2004,
announcing KCS's second quarter earnings and operating results.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
Kansas City Southern
Date: July 30, 2004 By: /s/ Ronald G. Russ
-------------------------------------------
Ronald G. Russ
Executive Vice President and Chief Financial Officer
EXHIBIT 99.1
Date: July 29, 2004
Media Contact: William H. Galligan Phone: 816/983-1551
william.h.galligan@kcsr.com
Kansas City Southern Posts Strong
Second Quarter & Year-to-Date Results
Kansas City Southern (KCS or Company) (NYSE:KSU) reported consolidated net
income of $ 9.2 million, or $0.11 per diluted share, for the second quarter of
2004, compared to a net loss of $0.5 million, or ($0.03) per diluted share for
the second quarter of 2003. The results were driven by The Kansas City Southern
Railway Company's (KCSR) and Grupo Transportacion Ferroviaria Mexicana, S.A. de
C.V.'s (Grupo TFM) improved operating and financial results.
KCS reported consolidated net income of $12.6 million, or $0.13 per diluted
share, for the 6 months ended June 30, 2004. This compares to $4.2 million, or
$0.05 per diluted share, in 2003, exclusive of a one-time $8.9 million benefit
related to the cumulative effect of a required change in accounting (Statement
of Financial Accounting Standards No. 143 "Accounting for Asset Retirement
Obligations," SFAS 143) that was recorded in the first quarter of 2003.
Second Quarter
Second quarter revenues for KCSR were $152.9 million, an increase of $8.3
million (5.7%) over second quarter 2003. Four of KCSR's five commodity groups
posted substantial quarter-over-quarter revenue increases. Overall yields also
increased, led by Agriculture & Minerals which posted a 6.2% yield gain.
KCSR revenues from Chemical & Petroleum products increased by $3.2 million
(10.3%) in the second quarter of 2004 over comparable 2003, led by strong growth
in petroleum products and industrial gases. Agriculture & Minerals continued to
be a consistently strong revenue producer with a quarter-over-quarter increase
of $2.8 million (10.2%) driven by strong export and domestic grain volumes.
Intermodal & Automotive second quarter 2004 revenues grew by $1.6 million
(10.8%) over the comparable 2003 period due to significant growth in intermodal
volumes and increases in intermodal haulage business. Second quarter 2004 coal
revenues grew $1.2 million (5.3%) over second quarter 2003 due to increased
volumes. Strong increases in lumber and paper traffic were offset by reduced
military shipments and log and chip volumes, resulting in a very slight
quarter-over-quarter decline (0.4%) in the Paper & Forest products group, the
only group not to show a substantial gain.
Second quarter 2004 KCSR costs and expenses increased by $4.1 million over
second quarter 2003. Lower equipment costs ($ 3.8 million), depreciation ($3.0
million), and material and supplies ($0.8 million) were more than offset by
increases in compensation costs ($4.4 million), from price pressure on fuel
($3.0 million), and from casualties and insurance ($2.6 million).
KCSR's 2004 second quarter operating income was $23.1 million, compared to $18.9
million the previous year, a $4.2 million, or 22%, quarter-over-quarter
increase. KCSR's operating ratio for the second quarter of 2004 improved by two
points, to 84.9% from second quarter 2003.
Grupo TFM's second quarter 2004 revenues were $184.9 million, a 4.7% increase
over second quarter 2003. Costs and expenses in second quarter 2004 were $148.2
million, $4.4 million higher than in 2003, which included higher locomotive fuel
costs of $3.8 million. Operating income increased 12% to $36.8 million from
$32.8 million. Equity earnings from Grupo TFM, the parent company of TFM which
operates the primary rail corridor between Mexico City and the United States,
increased $5.2 million to $2.9 million from second quarter 2003. Grupo TFM's
operating ratio improved to 80.1% in the second quarter 2004 versus 81.4% in the
prior year. The Company reports its equity in Grupo TFM under U.S. GAAP, while
Grupo TFM reports under International Financial Reporting Standards (IFRS).
Year-to-Date
Year-to-date 2004 revenues for KCSR increased $16.5 million (5.8%) to $299.9
million from 2003. KCSR's year-to-date 2004 costs and expenses decreased $1.8
million compared to 2003, driven by $6.1 million in lower depreciation expense
and $4.8 million in lower equipment costs, partially offset by $4.6 million in
increased compensation costs and $5.1 million in higher fuel costs.
KCSR's 2004 year-to-date operating income was $46.6 million, or a 65% increase
($18.3 million), compared to $28.3 million in 2003. KCSR's year-to-date
operating ratio improved more than 5 1/2 points to 84.4% from 90.0% for the
corresponding 2003 period.
The Company's equity earnings from Grupo TFM for the six-month period ended June
30, 2004, decreased slightly ($0.4 million) despite TFM's improved operating
performance, due principally to reduced deferred tax benefits net of current tax
provisions (calculated under U.S. GAAP), and a less favorable period-over-period
exchange rate due to a 5.2% devaluation of the Mexican peso versus the U.S.
dollar. These factors more than offset a 2.9% increase in Grupo TFM's operating
income, driven by a $7.3 million increase in revenues year-over-year. Grupo
TFM's operating ratio improved to 81.1% in the first half of 2004 versus 81.3%
in the first half of 2003.
Comments from the Chairman
Michael R. Haverty, KCS's Chairman, President and Chief Executive Officer
stated, "KCSR has now had five consecutive quarters of positive
quarter-over-quarter revenue growth comparisons. During that time, KCSR has
significantly improved its operating metrics and customer service. There are
still more opportunities at KCSR to increase revenues throughout the remainder
of this year, and there are areas in which further reduction in costs will be
targeted.
It has now been two full years since MCS, KCSR's computer operating platform,
was installed. The results have been exceptional in providing a powerful tool to
more efficiently handle every aspect of the transportation service plan. During
the second quarter 2004, MCS was installed on the Texas Mexican Railway
(Tex-Mex), providing greater operational integration of KCSR and Tex-Mex. Over
the last 18 months, KCSR has reduced its equipment costs by approximately $16
million.
"The increase in Grupo TFM's revenues in the second quarter was encouraging.
Cross border traffic interchange volumes and revenues between Grupo TFM and KCSR
continue to increase, which speaks to the growing cooperation of the railroads
as well as a strengthening North American economy. Like KCSR, Grupo TFM is
committed to growing its top line and keeping its operating expenses under
control.
"As KCSR moves into the peak transport season in North America, it is positioned
to handle increased volume and maintain high levels of customer service. We
believe TFM is, as well. The Company looks forward to an even stronger second
half."
KCS is comprised of, among others, The Kansas City Southern Railway Company
("KCSR") and equity investments in Grupo Transportacion Ferroviaria Mexicana,
S.A. de C.V. (Grupo TFM), Southern Capital Corporation ("Southern Capital") and
Panama Canal Railway Company ("PCRC").
This press release includes statements concerning potential future events
involving the Company, which could materially differ from the events that
actually occur. The differences could be caused by a number of factors including
those factors identified in the "Risk Factors" and the "Cautionary Information"
sections of the Company's Form 10-K for the year-ended December 31, 2003 filed
by the Company with the Securities and Exchange Commission ("SEC") (Commission
file no. 1-4717). The Company will not update any forward-looking statements in
this press release to reflect future events or developments.
Financial information attached
KANSAS CITY SOUTHERN
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
--------------------------- -----------------------------
2004 2003 2004 2003
---------- ----------- ------------ ------------
Revenues $ 153.9 $ 146.3 $ 301.7 $ 286.5
Costs and expenses
Compensation and benefits 52.2 47.5 103.0 98.0
Purchased services 15.4 15.2 31.0 30.3
Fuel 14.6 11.3 29.4 24.1
Equipment costs 11.6 15.4 24.6 29.4
Depreciation and amortization 13.1 16.0 25.9 31.9
Casualties and insurance 10.9 8.4 16.6 16.5
Other leases 3.0 2.3 5.7 4.8
Other 13.6 16.0 28.6 30.5
---------- ----------- ------------ ------------
Total costs and expenses 134.4 132.1 264.8 265.5
Operating income 19.5 14.2 36.9 21.0
Equity in net earnings (losses) of unconsolidated affiliates:
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (preliminary) 2.9 (2.3) 4.2 4.6
Other 0.3 (0.2) 0.4 (0.1)
Interest expense (10.9) (11.7) (21.7) (23.2)
Debt retirement costs - - (4.2) -
Other income 1.7 1.5 3.2 2.8
------------ ----------- ------------ ------------
Income before income taxes and
Cumulative effect of accounting change 13.5 1.5 18.8 5.1
Income tax provision 4.3 2.0 6.2 0.9
------------ ----------- ------------ ------------
Income (loss) before cumulative effect of accounting change 9.2 (0.5) 12.6 4.2
Cumulative effect of accounting change, net of income taxes - - - 8.9
------------ ----------- ------------ ------------
Net income (loss) $ 9.2 $ (0.5) $ 12.6 $ 13.1
Preferred stock dividends 2.2 1.3 4.4 1.4
------------ ----------- ------------ ------------
Net income (loss) available to Common shareholders $ 7.0 $ (1.8) $ 8.2 $ 11.7
============ =========== ============ ============
Per Share Data:
------------------------------------------------------------------------------------------------------------------------------------
Basic Weighted Average Common shares outstanding (in thousands) 62,655 61,649 62,570 61,525
Basic earnings per Common share
Income before cumulative effect of accounting change $ 0.11 $ (0.03) $ 0.13 $ 0.05
Cumulative effect of accounting change - - - 0.14
------------ ----------- ------------ ------------
Net income $ 0.11 $ (0.03) $ 0.13 $ 0.19
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Diluted Weighted Average Common shares outstanding (in thousands) 63,830 61,649 63,812 62,922
Diluted earnings per Common share
Income before cumulative effect of accounting change $ 0.11 $ (0.03) $ 0.13 $ 0.05
Cumulative effect of accounting change - - - 0.14
------------ ----------- ------------ ------------
Net income $ 0.11 $ (0.03) $ 0.13 $ 0.19
------------------------------------------------------------------------------------------------------------------------------------
KANSAS CITY SOUTHERN
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Preliminary)
June 30, 2004 December 31, 2003
------------- -----------------
(Unaudited)
Assets
Cash $ 156.5 $ 135.4
Accounts receivable, net 116.9 114.6
Inventories 44.7 36.8
Other current assets 25.9 21.3
------------------------ ------------------------
Total current assets 344.0 308.1
Investments 446.8 442.7
Properties, net of depreciation 1,401.6 1,362.5
Other assets 42.0 39.6
------------------------ ------------------------
Total assets $ 2,234.4 $ 2,152.9
======================== ========================
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 8.8 $ 9.9
Accounts and wages payable 50.7 45.5
Accrued liabilities 124.1 119.4
------------------------ ------------------------
Total current liabilities 183.6 174.8
Long-term debt 563.9 513.5
Deferred income taxes 397.2 391.5
Other liabilities 111.6 109.4
Stockholders' equity 978.1 963.7
------------------------ ------------------------
Total liabilities and stockholders' equity $ 2,234.4 $ 2,152.9
======================== ========================
KANSAS CITY SOUTHERN
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
(Preliminary)
Six Months
Ended June 30,
--------------------------------------
2004 2003
----------------- ----------------
CASH FLOWS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES:
Net income $ 12.6 $ 13.1
Adjustments to reconcile net income to net cash
Provided by operating activities
Depreciation and amortization 25.9 31.9
Deferred income taxes 3.3 7.1
Equity in undistributed earnings of unconsolidated affiliates (4.6) (4.5)
Distributions from unconsolidated affiliates 8.8 -
Gain on sale of property (0.7) (1.8)
Cumulative effect of accounting change - (8.9)
Tax benefit realized upon exercise of stock options 0.9 0.9
Changes in working capital items
Accounts receivable (2.3) 1.8
Inventories (7.9) (1.4)
Other current assets (1.2) 4.0
Accounts and wages payable 3.7 (10.3)
Accrued liabilities 10.7 15.9
Other, net 4.4 (5.2)
------------------ ------------------
Net cash provided by operating activities 53.6 42.6
------------------ ------------------
INVESTING ACTIVITIES:
Property acquisitions (69.6) (32.6)
Proceeds from disposal of property 1.9 7.7
Investment in and loans to affiliates (4.8) (32.8)
Other, net (5.0) (4.7)
------------------ ------------------
Net cash used for investing activities (77.5) (62.4)
------------------ ------------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 150.0 -
Repayment of long-term debt (100.6) (2.5)
Issuance of preferred stock, net - 193.2
Debt issuance costs (2.9) -
Proceeds from stock plans 2.9 2.1
Cash dividends paid (4.4) (0.1)
------------------ ------------------
Net cash provided by financing activities 45.0 192.7
------------------ ------------------
CASH AND CASH EQUIVALENTS:
Net increase in cash and cash equivalents 21.1 172.9
At beginning of year 135.4 19.0
------------------ ------------------
At end of period $ 156.5 $ 191.9
================== ==================
Kansas City Southern Railway
Operating Statements
Dollars in Millions
Second Quarter Second Quarter Year to Date Year to Date
2004 2003 2004 2003
-------------------- -------------------- ------------------- ------------------
Revenues
Chemical and Petroleum $ 33.8 $ 30.6 $ 65.7 $ 61.8
Paper and Forest 38.3 38.4 75.0 72.3
Agricultural and Mineral 30.0 27.2 60.7 52.4
Intermodal and Automotive Revenue 16.5 14.9 31.2 28.4
Unit Coal Revenue 22.9 21.6 44.5 45.5
Haulage Revenue 2.7 2.7 5.3 5.2
Other Revenue 8.7 9.2 17.5 17.8
-------------------- -------------------- ------------------- ------------------
Total Revenues 152.9 144.6 299.9 283.4
-------------------- -------------------- ------------------- ------------------
Operating Expenses
Compensation and Benefits 50.9 46.5 100.6 96.0
Purchased Services 14.4 13.0 28.3 27.3
Fuel 14.4 11.4 29.4 24.3
Equipment Costs 11.6 15.4 24.6 29.4
Casualties & Insurance 9.8 7.2 14.3 14.5
Material and Supplies 6.4 7.2 11.9 14.6
Other 2.8 3.2 5.6 5.4
-------------------- -------------------- ------------------- ------------------
Net Operating Expenses 110.3 103.9 214.7 211.5
-------------------- -------------------- ------------------- ------------------
Fixed Expenses
Other Lease 2.9 2.3 5.7 4.8
Depreciation 12.9 15.9 25.5 31.6
Taxes (Other Than Income) 3.7 3.6 7.4 7.2
-------------------- -------------------- ------------------- ------------------
Total Fixed Expenses 19.5 21.8 38.6 43.6
-------------------- -------------------- ------------------- ------------------
Total Expenses 129.8 125.7 253.3 255.1
-------------------- -------------------- ------------------- ------------------
Operating Income $ 23.1 $ 18.9 $ 46.6 $ 28.3
==================== ==================== =================== ==================
Operating Ratio 84.9% 86.9% 84.4% 90.0%
Note:
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Kansas City Southern Railway
Carloadings By Commodiaty - Second Quarter 2004
Dollars in Thousands
Carloadings Revenue
Second Quarter % Second Quarter %
-------------------------- --------------------------
2004 2003 Change 2004 2003 Change
------------ ------------ --------- ------------ ------------ ---------
Coal
47,128 44,886 5.0% Unit Coal $ 22,902 $ 21,610 6.0%
556 870 (36.1)% Other Coal 344 471 (27.0)%
------------ ------------ ------------ ------------
47,684 45,756 4.2% Total 23,246 22,081 5.3%
------------ ------------ ------------ ------------
Chemical & Petroleum Products
1,520 1,419 7.1% Agri Chemicals 1,005 930 8.1%
4,339 3,815 13.7% Gases 4,339 3,796 14.3%
6,969 5,451 27.8% Organic 6,209 5,934 4.6%
5,526 5,552 (0.5)% Inorganic 6,030 5,837 3.3%
14,561 13,299 9.5% Petroleum 10,808 9,164 18.0%
4,679 4,757 (1.6)% Plastics 5,404 4,980 8.5%
------------ ------------ ------------ ------------
37,594 34,293 9.6% Total 33,795 30,641 10.3%
------------ ------------ ------------ ------------
Agriculture and Minerals
12,241 11,937 2.5% Domestic Grain 10,623 10,205 4.1%
5,701 2,949 93.3% Export Grain 4,866 2,220 119.1%
7,588 8,961 (15.3)% Food Products 6,882 7,269 (5.3)%
6,718 7,012 (4.2)% Ores and Minerals 4,091 4,060 0.7%
4,334 4,405 (1.6)% Stone, Clay & Glass 3,555 3,487 2.0%
------------ ------------ ------------ ------------
36,582 35,264 3.7% Total 30,017 27,241 10.2%
------------ ------------ ------------ ------------
Paper & Forest Products
23,915 23,715 0.8% Pulp/Paper 19,400 19,105 1.5%
1,931 1,693 14.1% Scrap Paper 1,355 1,074 26.2%
6,239 8,089 (22.9)% Pulpwood/Logs/Chips 2,993 3,645 (17.9)%
8,459 7,920 6.8% Lumber/Plywood 8,700 7,764 12.1%
4,377 4,390 (0.3)% Metal/Scrap 3,830 4.034 (5.1)%
1,547 1,645 (6.0)% Military/Other carloads 1,978 2,781 (28.9)%
------------ ------------ ------------ ------------
46,468 47,452 (2.1)% Total 38,256 38,403 (0.4)%
------------ ------------ ------------ ------------
Intermodal & Automotive
1,429 1,750 (18.3)% Automotive 1,159 1,457 (20.5)%
85,639 76,119 12.5% Intermodal 15,369 13,458 14.2%
------------ ------------ ------------ ------------
87,068 77,869 11.8% Total 16,528 14,915 10.8%
------------ ------------ ------------ ------------
255,396 240,634 6.1% TOTAL FOR BUSINESS UNITS 141,842 133,281 6.4%
4,677 7,252 (35.5)% Haulage 2,653 2,711 (2.1)%
(475) (918) 48.3% Adjustments - - 0.0%
Other KCSR Revenue 8,378 8,632
------------ ------------ ------------ ------------
259,598 246,968 5.1% TOTAL $ 152,873 $ 144,624 5.7%
============ ============ ============ ============
Note:
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Kansas City Southern Railway
Carloadings By Commodiaty - Year to Date June 30, 2004
Dollars in Thousands
Carloadings Revenue
Year to Date % Year to Date %
-------------------------- --------------------------
2004 2003 Change 2004 2003 Change
------------ ------------ -------- ------------ ------------ ---------
Coal
94,985 91,366 4.0% Unit Coal $ 44,459 $ 45,501 (2.3)%
1,238 1,528 (19.0)% Other Coal 708 813 (12.9)%
------------ ------------ ------------ ------------
96,223 92,894 3.6% Total 45,167 46,314 (2.5)%
------------ ------------ ------------ ------------
Chemical & Petroleum Products
2,975 2,833 5.0% Agri Chemicals 1,916 1,883 1.8%
8,350 7,479 11.6% Gases 8,361 7,359 13.6%
14,011 10,758 30.2% Organic 12,606 11,364 10.9%
10,584 11,186 (5.4)% Inorganic 11,374 11,660 (2.5)%
28,164 27,739 1.5% Petroleum 20,758 18,629 11.4%
9,190 10,309 (10.9)% Plastics 10,731 10,899 (1.5)%
------------ ------------ ------------ ------------
73,274 70,304 4.2% Total 65,746 61,794 6.4%
------------ ------------ ------------ ------------
Agriculture and Minerals
24,716 23,228 6.4% Domestic Grain 20,958 18,878 11.0%
13,191 8,227 60.3% Export Grain 11,981 6,610 81.3%
14,687 16,576 (11.4)% Food Products 12,934 13,381 (3.3)%
13,627 12,690 7.4% Ores and Minerals 8,085 7,232 11.8%
8,363 7,988 4.7% Stone, Clay & Glass 6,786 6,256 8.5%
------------ ------------ ------------ ------------
74,584 68,709 8.6% Total 60,744 52,357 16.0%
------------ ------------ ------------ ------------
Paper & Forest Products
47,199 46,400 1.7% Pulp/Paper 38,191 36,311 5.2%
3,757 3,387 10.9% Scrap Paper 2,497 2,099 19.0%
12,781 15,248 (16.2)% Pulpwood/Logchips 5,915 6,999 (15.5)%
16,564 14,911 11.1% Lumber/Plywood 16,639 14,483 14.9%
8,742 9,038 (3.3)% Metal/Scrap 7,418 7,603 (2.4)%
3,676 3,266 12.6% Military/Other Carloads 4,312 4,791 (10.0)%
------------ ------------ ------------ ------------
92,719 92,250 0.5% Total 74,972 72,286 3.7%
------------ ------------ ------------ ------------
Intermodal & Automotive
2,508 3,145 (20.3)% Automotive 2,030 2,613 (22.3)%
165,200 146,508 12.8% Intermodal 29,125 25,815 12.8%
------------ ------------ ------------ ------------
167,708 149,653 12.1% Total 31,155 28,428 9.6%
------------ ------------ ------------ ------------
504,508 473,810 6.5% TOTAL FOR BUSINESS UNITS 277,784 261,179 6.4%
9,298 14,952 (37.8)% Haulage 5,298 5,198 1.9%
(1,334) (1,735) 23.1% Adjustments - (1,025) 100.0%
Other KCSR Revenue 16,769 18,036
------------ ------------ ------------ ------------
512,472 487,027 5.2% TOTAL $ 299,851 $ 283,388 5.8%
============ ============ ============ ============
Note:
Certain prior year amounts have been reclassified to conform to the current year
presentation.