8-K 1 earningsreleased8k102904.txt EARNINGS RELEASED 8K 102904 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): October 28, 2004 KANSAS CITY SOUTHERN (Exact name of company as specified in its charter) DELAWARE 1-4717 44-0663509 (State or other (Commission file number) (IRS Employer jurisdiction of Identification incorporation) Number) 427 West 12th Street, Kansas City, Missouri 64105 ------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (816) 983 - 1303 Not Applicable (Former name or former address if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition Kansas City Southern ("the Company, "KCS") is furnishing under Item 2.02 of this Current Report on Form 8-K the information included as Exhibit 99.1 to this report. Exhibit 99.1 is the Company's press release, dated October 28, 2004, announcing the Company's third quarter and year to date earnings and operating results. Included in Exhibit 99.1 are schedules regarding certain financial information discussed during the Company's third quarter 2004 analyst presentation and conference call. The information included in this Item 2.02, and Exhibit 99.1 to this Current Report on Form 8-K, shall not be deemed "filed" for the purposes of or otherwise subject to the liabilities under Section 18 of the Securities Exchange Act of 1934 as amended (the "Exchange Act"). Unless expressly incorporated into a filing of KCS under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act made after the date hereof , the information contained in this item 2.02 and Exhibit 99.1 hereto shall not be incorporated by reference into any filing of KCS, whether made before or after the date hereof, regardless of any general incorporation language in such filing. Item 9.01. Financial Statements and Exhibits (c) Exhibits Exhibit No. Document (99) Additional Exhibits 99.1 Press Release issued by Kansas City Southern dated October 28, 2004 entitled "Kansas City Southern Announces Third Quarter 2004 Earnings Release Date, Conference Call," is attached hereto as Exhibit 99.1. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Kansas City Southern Date: October 28, 2004 By: /s/ James S. Brook ------------------------------------------- James S. Brook Vice President and Comptroller (Principal Accounting Officer) EXHIBIT 99.1 Date: October 28, 2004 Media Contact: William H. Galligan 816/983-1551 William.h.galligan@kcsr.com Kansas City Southern Reports Strong Third Quarter 2004 Results o Kansas City Southern's (KCS) third quarter 2004 consolidated net income of $11.1 million, increased 158% compared with third quarter 2003 consolidated net income of $4.3 million. o Kansas City Southern Railway (KCSR) operating revenue reached record levels for third quarter 2004, increasing by 11.9 % over third quarter 2003 to $162.1 million. o KCSR's operating income increased 35.9 % over the comparable 2003 period to $24.6 million. Kansas City, MO. Kansas City Southern (KCS) (NYSE:KSU) today reported net income available to common shareholders for third quarter 2004 was $8.9 million, or $0.14 diluted earnings per share, compared to $1.0 million, or $0.02 diluted earnings per share, for third quarter 2003. KCSR posted record third quarter 2004 operating revenues of $162.1 million, an increase of $17.2 million, or 11.9%, over the comparable 2003 period. Four of its five commodity groups attained quarter-over-quarter double digit revenue growth led by Paper & Forest Products, which increased 23.3% with strong gains in all its market segments. Intermodal revenues, including Norfolk Southern and CSX haulage business, increased 14.1% in third quarter 2004 compared with a year earlier. Agriculture & Minerals, led by strong gains in domestic grain, ores and minerals, and glass, stone and clay, grew 12.9%. Chemicals & Petroleum Products increased 11.7% based on strong growth in gases, plastics, petroleum, and inorganic chemicals business. Coal, the only business segment to experience a quarter-over-quarter decline, experienced a 3.7% decrease in revenues, due primarily to sharply lower deliveries to one plant served by KCSR. KCSR third quarter 2004 total operating expenses of $137.5 million were $10.7 million higher than the same period in 2003, driven by higher fuel prices, compensation, and casualty and insurance costs. KCSR third quarter 2004 operating income increased $6.5 million, or 35.9 % year-over-year. KCSR's operating ratio improved to 84.8 % compared with 87.5% for the prior year period. Third quarter 2004 equity earnings from Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (Grupo TFM), KCS' Mexican affiliate railroad, increased 19% from the comparable prior year period to $1.9 million, excluding the impact of the Mexrail transaction. Grupo TFM's third quarter 2004 revenues were $174.5 million compared to $178.2 million for the comparable 2003 period. The decline was primarily due to the impact of peso devaluation to the U.S. dollar quarter-over-quarter. KCS reports its equity in Grupo TFM under U.S. GAAP, while Grupo TFM reports under International Financial Reporting Standards (IFRS). Year-to-Date KCS year-to-date 2004 consolidated net income is $23.7 million, compared with $17.4 million for 2003. Net income available to common shareholders was $17.1 million or $0.27 diluted earnings per share for the first nine months of 2004 compared with $12.7 million or $0.20 diluted earnings per share year-to-date 2003. Results for 2003 included the cumulative effect of an accounting change, which increased net income by $8.9 million. KCSR year-to-date 2004 operating revenues of $462.0 million increased $33.7 million, or 7.9%, over the comparable nine-month period in 2003. Total KCSR year-to-date 2004 expenses of $390.8 million increased $8.9 million over the same 2003 period. KCSR's operating ratio for the first nine months of 2004 of 84.6% was an improvement of 460 basis points from 89.2% in the prior year. Chairman, President & Chief Executive Officer Michael R. Haverty commented, "KCSR has continued to grow its carload volume and revenues throughout the first nine months of 2004, and that positive trend should continue through the remainder of the year. As KCSR continues to expand its market presence, an equal degree of effort is being placed on controlling costs while operating its rail network efficiently. "During the third quarter there were a number of positive developments in KCS' effort to complete the Grupo TFM acquisition process. KCS received the approval of the Mexican National Foreign Investment Commission, which combined with an extension of the previous approval by the Mexican Competition Commission, gives KCS the approval of the two Mexican regulatory bodies needed for it to become the majority owner of TFM. KCS continues to work closely with its partner, Grupo TMM, S.A. (Grupo TMM), and with Mexican government officials in its attempt to complete the acquisition process in a timely manner." 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. More KANSAS CITY SOUTHERN CONSOLIDATED STATEMENTS OF INCOME (Dollars in millions, except share and per share data) (Unaudited) (Preliminary) Three Months Nine Months Ended September 30, Ended September 30, ----------------------------------- ---------------------------------- 2004 2003 2004 2003 ----------------- ----------------- ---------------- ----------------- Revenues $ 163.2 $ 146.3 $ 464.9 $ 432.8 Operating expenses Compensation and benefits 52.9 48.4 155.9 146.4 Purchased services 16.1 15.8 47.1 46.1 Fuel 16.4 11.2 45.8 35.3 Equipment costs 13.3 15.2 37.9 44.6 Depreciation and amortization 13.4 16.2 39.3 48.1 Casualties and insurance 13.9 9.7 30.5 26.2 Other leases 3.2 2.5 8.9 7.3 Other 14.8 12.4 43.4 42.9 ----------------- ----------------- ---------------- ----------------- Total operating expenses 144.0 131.4 408.8 396.9 ----------------- ----------------- ---------------- ----------------- Operating income 19.2 14.9 56.1 35.9 Equity in net earnings of unconsolidated affiliates: Grupo Transportacion Ferroviaria Mexicana, S.A. de 1.9 1.6 6.1 6.2 C.V. Other (0.8) (0.9) (0.4) (1.0) Interest expense (11.3) (11.6) (33.0) (34.8) Debt retirement costs - - (4.2) - Other income 8.6 2.0 11.8 4.8 ----------------- ----------------- ---------------- ----------------- Income before income taxes and cumulative effect of accounting change 17.6 6.0 36.4 11.1 Income tax provision 6.5 1.7 12.7 2.6 ----------------- ----------------- ---------------- ----------------- Income (loss) before cumulative effect of accounting 11.1 4.3 23.7 8.5 change Cumulative effect of accounting change, net of income - - - 8.9 taxes ----------------- ----------------- ---------------- ----------------- Net income (loss) $ 11.1 $ 4.3 $ 23.7 $ 17.4 Preferred stock dividends 2.2 3.3 6.6 4.7 ----------------- ----------------- ---------------- ----------------- Net income (loss) available to Common shareholders $ 8.9 $ 1.0 $ 17.1 $ 12.7 ================= ================= ================ ================= Per Share Data Basic earnings per Common share Income (loss) before cumulative effect of accounting $ 0.14 $ 0.02 $ 0.27 $ 0.06 change Cumulative effect of accounting change, net of income taxes - - - 0.15 ----------------- ----------------- ----------------- --------------- Total basic earnings (loss) per Common share $ 0.14 $ 0.02 $ 0.27 $ 0.21 ================= ================= ================ ================= Diluted earnings per Common share Income (loss) before cumulative effect of accounting $ 0.14 $ 0.02 $ 0.27 $ 0.06 change Cumulative effect of accounting change, net of income taxes - - - 0.14 ----------------- ----------------- ---------------- ----------------- Total diluted earnings (loss) per Common share $ 0.14 $ 0.02 $ 0.27 $ 0.20 ================= ================= ================ ================= Weighted average Common shares outstanding (in thousands) Basic 62,683 61,765 62,605 61,607 Potential dilutive Common shares 1,272 1,378 1,251 1,391 ----------------- ----------------- ---------------- ----------------- Diluted 63,955 63,143 63,856 62,998 ================= ================= ================ =================
KANSAS CITY SOUTHERN CONSOLIDATED BALANCE SHEETS (Dollars in millions) (Preliminary) September 30, December 31, 2004 2003 ------------------ ------------------ (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 170.0 $ 135.4 Accounts receivable, net 125.3 114.6 Inventories 42.1 36.8 Other current assets 27.9 21.3 ------------------ ------------------ Total current assets 365.3 308.1 ------------------ ------------------ Investments 481.5 442.7 Properties (net of $742.6 and $734.3 accumulated depreciation and amortization, respectively) 1,414.8 1,362.5 Goodwill 10.6 10.6 Other assets 33.7 29.0 ------------------ ------------------ Total assets $ 2,305.9 $ 2,152.9 ================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Debt due within one year $ 7.9 $ 9.9 Accounts and wages payable 56.4 45.5 Accrued liabilities 161.7 119.4 ------------------ ------------------ Total current liabilities 226.0 174.8 ------------------ ------------------ Other Liabilities Long-term debt 563.5 513.5 Deferred income taxes 419.1 391.5 Other noncurrent liabilities and deferred credits 111.3 109.4 Stockholders' Equity 986.0 963.7 ------------------ ------------------ Total liabilities and stockholders' equity $ 2,305.9 $ 2,152.9 ================== ==================
KANSAS CITY SOUTHERN CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions) (Unaudited) (Preliminary) Nine Months Ended September 30, ------------------------------------- 2004 2003 ------------------ ------------------ CASH FLOWS PROVIDED BY (USED FOR): OPERATING ACTIVITIES: Net income $ 23.7 $ 17.4 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39.3 48.1 Deferred income taxes 26.7 7.8 Equity in undistributed earnings of unconsolidated affiliates (5.7) (5.2) Distributions from unconsolidated affiliates 8.8 - Gain on sale of property (1.1) (4.1) Cumulative effect of accounting change - (8.9) Tax benefit realized upon exercise of stock options 1.0 1.4 Changes in working capital items: Accounts receivable (10.7) 5.5 Inventories (5.3) (2.0) Other current assets (3.9) 14.5 Accounts and wages payable 10.6 (1.3) Accrued liabilities 41.0 10.5 Other, net 7.9 (8.6) ------------------ ------------------ Net cash provided by operating activities 132.3 75.1 ------------------ ------------------ INVESTING ACTIVITIES: Property additions (93.4) (51.2) Proceeds from disposal of property 2.5 8.6 Investment in and loans to affiliates (41.2) (37.5) Proceeds from sale of investments, net - 32.7 Other, net (7.8) (6.8) ------------------ ------------------ Net cash used for investing activities (139.9) (54.2) ------------------ ------------------ FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 150.0 - Repayment of long-term debt (102.0) (3.9) Issuance of preferred stock, net - 193.2 Debt issuance costs (2.9) - Proceeds from stock plans 3.6 3.6 Cash dividends paid (6.5) (2.6) ------------------ ------------------ ------------------ ------------------ Net cash provided by financing activities 42.2 190.3 ------------------ ------------------ CASH AND CASH EQUIVALENTS: Net increase in cash and cash equivalents 34.6 211.2 At beginning of year 135.4 19.0 ------------------ ------------------ At end of period $ 170.0 $ 230.2 ================== ==================
Kansas City Southern Railway Operating Statements Dollars in Millions Third Quarter Third Quarter Year to Date Year to Date 2004 2003 2004 2003 ------------------- ------------------- ------------------- ------------------- Revenues Chemical and Petroleum $ 34.4 $ 30.8 $ 100.1 $ 92.6 Paper and Forest 46.4 37.6 121.3 109.9 Agricultural and Mineral 29.1 25.7 89.8 78.1 Intermodal and Automotive Revenue 17.4 15.3 48.5 43.7 Unit Coal Revenue 22.2 23.0 66.7 68.6 Haulage Revenue 2.7 2.7 8.0 7.9 Other Revenue 9.9 9.8 27.6 27.5 ------------------- ------------------- ------------------- ------------------- Total Revenues 162.1 144.9 462.0 428.3 ------------------- ------------------- ------------------- ------------------- Operating Expenses Compensation and Benefits 51.9 47.4 152.5 143.4 Purchased Services 14.5 14.6 42.8 41.9 Fuel 16.4 11.2 45.8 35.5 Equipment Costs 13.3 15.2 37.9 44.6 Casualties & Insurance 10.8 8.6 25.1 23.0 Material and Supplies 7.1 6.8 19.0 21.4 Other 3.6 0.9 9.2 6.4 ------------------- ------------------- ------------------- ------------------- Variable Operating Expenses 117.6 104.7 332.3 316.2 ------------------- ------------------- ------------------- ------------------- Fixed Expenses Other Lease 3.1 2.5 8.8 7.3 Depreciation 13.2 15.9 38.7 47.5 Taxes (Other Than Income) 3.6 3.7 11.0 10.9 ------------------- ------------------- ------------------- ------------------- Fixed Operating Expenses 19.9 22.1 58.5 65.7 ------------------- ------------------- ------------------- ------------------- Total Operating Expenses 137.5 126.8 390.8 381.9 ------------------- ------------------- ------------------- ------------------- Operating Income $ 24.6 $ 18.1 $ 71.2 $ 46.4 =================== =================== =================== =================== Operating Ratio 84.8% 87.5% 84.6% 89.2% Note: Certain prior year amounts have been reclassified to conform to the current year presentation.
Kansas City Southern Railway Carloadings By Commodity - Third Quarter 2004 Dollars in Thousands Carloadings Revenue Third Quarter % Third Quarter % -------------------------- ------------------------- 2004 2003 Change 2004 2003 Change ------------ ------------ -------- ------------ ------------ ---------- Coal 47,376 47,751 (0.8)% Unit Coal $ 22,202 $ 23,049 (3.7)% 642 847 (24.2)% Other Coal 472 508 (7.1)% ------------ ----------- ----------- ----------- 48,018 48,598 (1.2)% Total 22,674 23,557 (3.7)% ------------ ----------- ----------- ----------- Chemical & Petroleum Products 1,360 1,455 (6.5)% Agri Chemicals 907 975 (7.0)% 4,251 3,637 16.9% Gases 4,355 3,658 19.1% 7,482 5,802 29.0% Organic 6,538 6,168 6.0% 5,791 5,305 9.2% Inorganic 6,268 5,522 13.5% 14,116 13,537 4.3% Petroleum 10,525 9,368 12.5% 4,846 4,363 11.1% Plastics 5,766 5,065 13.8% ------------ ----------- ----------- ----------- 37,846 34,099 11.0% Total 34,359 30,756 11.7% ------------ ----------- ----------- ----------- Agriculture and Minerals 10,158 9,644 5.3% Domestic Grain 8,915 7,881 13.1% 4,704 4,993 (5.8)% Export Grain 3,826 3,929 (2.7)% 8,042 8,367 (3.9)% Food Products 7,001 6,868 1.9% 7,795 6,424 21.3% Ores and Minerals 4,751 3,722 27.5% 5,187 4,372 18.6% Stone, Clay & Glass 4,558 3,332 36.8% ------------ ----------- ----------- ----------- 35,886 33,800 6.2% Total 29,051 25,732 12.9% ------------ ----------- ----------- ----------- Paper & Forest Products 26,084 24,439 6.7% Pulp/Paper 21,606 19,932 8.4% 2,065 1,797 14.9% Scrap Paper 1,555 1,120 38.8% 7,801 7,503 4.0% Pulpwood/Logs/Chips 4,101 3,437 19.3% 8,722 7,950 9.7% Lumber/Plywood 9,010 7,699 17.0% 4,968 4,544 9.3% Metal/Scrap 4,345 4,053 7.2% 3,299 1,459 126.1% Military/Other carloads 5,752 1,368 320.5% ------------ ----------- ----------- ----------- 52,939 47,692 11.0% Total 46,369 37,609 23.3% ------------ ----------- ----------- ----------- Intermodal & Automotive 2,193 2,080 5.4% Automotive 1,676 1,532 9.4% 86,066 77,799 10.6% Intermodal 15,715 13,774 14.1% ------------ ----------- ----------- ----------- 88,259 79,879 10.5% Total 17,391 15,306 13.6% ------------ ----------- ----------- ----------- 262,948 244,068 7.7% TOTAL FOR BUSINESS UNITS 149,844 132,960 12.7% 3,740 6,067 (38.4)% Haulage 2,669 2,746 (2.8)% (469) (1,074) 56.3% Adjustments - - 0.0% Other KCSR Revenue 9,599 9,216 ------------ ----------- ----------- ----------- 266,219 249,061 6.9% TOTAL $162,112 $144,922 11.9% ============ =========== =========== ===========
Note: Certain prior year amounts have been reclassified to conform to the current year presentation. Kansas City Southern Railway Carloadings By Commodity - Year to Date September 30, 2004 Dollars in Thousands Carloadings REVENUE Year to Date % Year to Date % -------------------------- ------------------------- 2004 2003 Change 2004 2003 Change ------------ ------------ -------- ------------ ------------ ---------- Coal 142,361 139,117 2.3% Unit Coal $ 66,661 $ 68,550 (2.8)% 1,880 2,375 (20.8)% Other Coal 1,180 1,321 (10.7)% ------------ ----------- ----------- ----------- 144,241 141,492 1.9% Total 67,841 69,871 (2.9)% ------------ ----------- ----------- ----------- Chemical & Petroleum Products 4,335 4,288 1.1% Agri Chemicals 2,823 2,858 (1.2)% 12,601 11,116 13.4% Gases 12,716 11,017 15.4% 21,493 16,560 29.8% Organic 19,144 17,532 9.2% 16,375 16,491 (0.7)% Inorganic 17,642 17,182 2.7% 42,280 41,276 2.4% Petroleum 31,283 27,997 11.7% 14,036 14,672 (4.3)% Plastics 16,497 15,964 3.3% ------------ ----------- ----------- ----------- 111,120 104,403 6.4% Total 100,105 92,550 8.2% ------------ ----------- ----------- ----------- Agriculture and Minerals 34,874 32,872 6.1% Domestic Grain 29,873 26,759 11.6% 17,895 13,220 35.4% Export Grain 15,807 10,539 50.0% 22,729 24,943 (8.9)% Food Products 19,935 20,249 (1.6)% 21,422 19,114 12.1% Ores and Minerals 12,836 10,954 17.2% 13,550 12,360 9.6% Stone, Clay & Glass 11,344 9,588 18.3% ------------ ----------- ----------- ----------- 110,470 102,509 7.8% Total 89,795 78,089 15.0% ------------ ----------- ----------- ----------- Paper & Forest Products 73,283 70,839 3.5% Pulp/Paper 59,797 56,243 6.3% 5,822 5,184 12.3% Scrap Paper 4,052 3,219 25.9% 20,582 22,751 (9.5)% Pulpwood/Logchips 10,016 10,436 (4.0)% 25,286 22,861 10.6% Lumber/Plywood 25,649 22,182 15.6% 13,710 13,582 0.9% Metal/Scrap 11,763 11,656 0.9% 6,975 4,725 47.6% Military/Other Carloads 10,064 6,159 63.4% ------------ ----------- ----------- ----------- 145,658 139,942 4.1% Total 121,341 109,895 10.4% ------------ ----------- ----------- ----------- Intermodal & Automotive 4,701 5,225 (10.0)% Automotive 3,706 4,145 (10.6)% 251,266 224,307 12.0% Intermodal 44,840 39,589 13.3% ------------ ----------- ----------- ----------- 255,967 229,532 11.5% Total 48,546 43,734 11.0% ------------ ----------- ----------- ----------- 767,456 717,878 6.9% TOTAL FOR BUSINESS UNITS 427,628 394,139 8.5% 13,038 21,019 (38.0)% Haulage 7,967 7,944 0.3% (1,803) (2,809) 35.8% Adjustments - (1,025) 100.0% Other KCSR Revenue 26,368 27,252 ------------ ----------- ----------- ----------- 778,691 736,088 5.8% TOTAL $461,963 $428,310 7.9% ============ =========== =========== =========== Note: Certain prior year amounts have been reclassified to conform to the current year presentation.