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KCS Files 2003 Form 10-K with SEC; Reports Final Earnings Results for 2003; KCS to Seek Renewed Authority From Mexican Competition Commission.

Business Editors

KANSAS CITY, Mo.--(BUSINESS WIRE)--March 30, 2004

Kansas City Southern (KCS or the Company) (NYSE:KSU) today filed its Annual Report on Form 10-K with the Securities and Exchange Commission (SEC), and released its final earnings for the year ended December 31, 2003.

On January 29, 2004, KCS released its financial earnings results for 2003, which included estimated equity earnings from Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (Grupo TFM). The 10-K filing today reflects an increase in net income to $12.2 million from $11.2 million reported earlier, and a corresponding $0.02 increase in 2003 annual earnings per share to $0.10 from $0.08. These adjustments in earnings primarily resulted from additional U.S. GAAP deferred tax adjustments at Grupo TFM.

Attached to this release is KCS's revised Consolidated Statement of Income for 2003. Also attached are further details of Grupo TFM's U.S. GAAP earnings, and a reconciliation of these earnings to equity earnings reported by KCS. The Company believes the additional information provides the investor with a better understanding of those components of Grupo TFM's earnings and how they impact KCS's net income.

In a separate matter, KCS announced it intends to seek renewed authority from the Mexican Competition Commission (FCC) for the proposed NAFTA Rail transaction. The FCC granted that authority on June 19, 2003, and the authority was previously extended for 180 days by the Executive Secretary of the FCC. As a procedural matter, the Executive Secretary of the FCC declined to provide an additional extension, consistent with past practice.

KCS is continuing to review its alternatives in light of the recent decision by the AAA International Centre for Dispute Resolution that the Acquisition Agreement remains valid and in effect. KCS remains committed to completing the acquisition in accordance with the terms of the Acquisition Agreement.

KCS is comprised of, among others, The Kansas City Southern Railway Company, and equity investments in Grupo TFM, Southern Capital Corporation, and Panama Canal Railway Company.


 KANSAS CITY SOUTHERN
 CONSOLIDATED STATEMENTS OF INCOME
 (dollars in millions, except per share data)


 Three Months Year Ended
 Ended December 31, December 31,
 ----------------- ----------------
 2003 2002 2003 2002
 ------- ------- ------- -------
 (Unaudited)
Revenues $ 148.5 $ 144.2 $ 581.3 $ 566.2
Operating expenses
Compensation and benefits 51.4 50.7 197.8 197.8
Depreciation and amortization 16.2 16.1 64.3 61.4
Purchased services 17.4 16.1 63.5 59.6
Casualties and insurance 30.2 3.2 56.4 25.2
Operating leases 13.8 13.9 57.2 55.0
Fuel 12.1 10.7 47.4 38.4
Car hire 1.5 4.8 10.0 19.7
Other 12.7 14.8 55.6 61.1
 -------- ------- ------- -------
Total operating expenses 155.3 130.3 552.2 518.2
Operating income (loss) (6.8) 13.9 29.1 48.0
Equity in net earnings (losses)
 of unconsolidated affiliates
 Grupo Transportacion
 Ferroviaria Mexicana, S.A. de
 C.V. 6.1 18.2 12.3 45.8
 Other (0.3) (0.5) (1.3) (2.4)
Gain on sale of Mexrail, Inc. - - - 4.4
Interest expense (11.6) (11.7) (46.4) (45.0)
Debt retirement costs - - - (4.3)
Other income 2.0 2.3 6.8 17.6
 -------- ------- ------- -------
Income (loss) before income taxes
 and Cumulative effect of
 accounting change (10.6) 22.2 0.5 64.1
Income tax provision (benefit) (5.4) 1.8 (2.8) 6.9
 -------- ------- ------- -------
Income (loss) before cumulative
 effect of accounting change (5.2) 20.4 3.3 57.2
Cumulative effect of accounting
 change, net of income taxes - - 8.9 -
 -------- ------- ------- -------
Net income (loss) $ (5.2) $ 20.4 $ 12.2 $ 57.2
Preferred stock dividends 1.2 0.1 5.9 0.2
 -------- ------- ------- -------
Net income (loss) available to
 Common shareholders $ (6.4) $ 20.3 $ 6.3 $ 57.0
 ======== ======= ======= =======
Per Share Data
-------------------
Basic weighted average Common
 shares outstanding (in
 thousands) 62,053 60,987 61,725 60,336
Basic earnings (loss) per Common
 share
 Income (loss) before
 cumulative effect of
 accounting change $ (0.10) $ 0.33 $ (0.04) $ 0.94
 Cumulative effect of
 accounting change - - 0.14 -
 -------- ------- ------- -------
Net income (loss) $ (0.10) $ 0.33 $ 0.10 $ 0.94
------------------- -------- ------- ------- -------

------------------------------------------------------------------
Diluted weighted average Common
 shares outstanding (in
 thousands) 62,053 62,642 61,725 62,318
Diluted earnings (loss) per
 Common share
 Income (loss) before
 cumulative effect of
 accounting change $ (0.10) $ 0.32 $ (0.04) $ 0.91
 Cumulative effect of
 accounting change - - 0.14 -
 -------- ------- ------- -------
Net income (loss) $ (0.10) $ 0.32 $ 0.10 $ 0.91
------------------- -------- ------- ------- -------



 GRUPO TRANSPORTACION FERROVIARIA MEXICANA S.A. de C.V.
 CONSOLIDATED INCOME STATEMENT
 U.S. GAAP BASIS
 (dollars in millions)


 Year Ended
 December 31,
 ---------------
 2003 2002
 ------- ------

Transportation revenues $ 698.5 $712.1
Costs and expenses 558.4 541.2

 ---------------
Income on transportation 140.1 170.9
 ---------------

Other expenses, net (32.5) (11.7)
 ---------------
Operating income 107.6 159.2

Interest expense (111.2) (95.9)
Exchange gain (loss) (13.7) (17.4)
 ---------------
Income (loss) before taxes and minority interest (17.3) 45.9

Income tax provision (benefit) (51.5) (91.5)

 ---------------
Income before minority interest 34.2 137.4

Minority interest (6.9) (27.2)

 --------------
Net income $ 27.3 $110.2
 ===============

U.S. GAAP Operating Ratio 84.6% 77.6%
 ---------------


KCS Equity in Net Earnings of Grupo TFM $ 12.3 $ 45.8

Less: Allocation of Interest (15.1) (14.7)

Adjusted Contribution to Net Income of KCS(1) $ (2.8)$ 31.1



(1)This schedule includes a measurement that is not presented under U.S. GAAP. The adjusted contribution of Grupo TFM to the net income of KCS includes an internal allocation of interest expense applied against the equity in net earnings of the Company's investment in Grupo TFM. Management believes this interest expense allocation results in a more accurate reflection of the contribution of Grupo TFM to the consolidated net income of KCS. The interest expense allocation is based upon the initial amount of capital invested by KCS in Grupo TFM and is calculated utilizing a blended interest rate applicable to the Company's indebtedness composition. This measurement is presented to provide the reader of these financial statements with a better understanding of the impact of financing costs on the contribution of Grupo TFM to the consolidated net income of KCS. The nearest U.S. GAAP measurement is included in the consolidated statements of income included in this press release. KCS is comprised of, among others, The Kansas City Southern Railway Company ("KCSR") and equity investments in 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.
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Publication:Business Wire
Date:Mar 30, 2004
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