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, 2002 and 2001
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 Auditors
Statement of Net Assets Available for Benefits December 31, 2002 and
2001
Statement of Changes in Net Assets Available for Benefits Year
Ended December 31, 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, 2002 and 2001
(With Independent Auditors' Report Thereon)
Gateway Western Railway Union
401(k) Plan
Table of Contents
Page
Independent Auditors' Report 1
Financial Statements:
Statements of Net Assets Available for Benefits as of
December 31, 2002 and 2001 2
Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 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, 2002 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.
Independent Auditors' Report
The Participants and Plan Sponsor of the
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,
2002 and 2001, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2002. 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 auditing standards generally accepted
in the United States of America. 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, 2002 and 2001, and the changes in net assets available for benefits
for the year ended December 31, 2002, 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 30, 2003
GATEWAY WESTERN RAILWAY UNION
401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
----------------- --------------
Assets:
Cash and temporary investments $ 11,496 ---
Investments, at fair value:
Money market accounts 242,591 211,313
Common stock of Kansas City Southern 12,024 ---
Mutual funds 1,722,909 1,933,375
----------------- --------------
Total investments 1,977,524 2,144,688
Contributions receivable:
Employee 10,014 ---
Employer 4,078 ---
----------------- --------------
Total contributions receivable 14,092 ---
----------------- --------------
Total assets 2,003,112 2,144,688
Accrued liabilities 11 ---
----------------- --------------
Net assets available for benefits $ 2,003,101 2,144,688
================= ==============
See accompanying notes to financial statements.
GATEWAY WESTERN RAILWAY UNION
401(k) PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2002
Investment income (loss):
Interest and dividends $ 44,297
Net depreciation in fair value of
investments (418,415)
-----------------------
Total investment loss (374,118)
Contributions:
Employee 233,921
Employer 95,994
-----------------------
Total contributions 329,915
Benefits paid (97,384)
-----------------------
Decrease in net assets available for
benefits (141,587)
Net assets available for benefits:
Beginning of year 2,144,688
-----------------------
End of year $ 2,003,101
=======================
See accompanying notes to financial statements.
GATEWAY WESTERN RAILWAY UNION
401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(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 all permanent union employees of Kansas City Southern
Railway (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,
United Transportation Union, 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 $11,000 in 2002. 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).
(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.
(d) Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
(3) Investments
Investments, which exceeded 5% of the net assets available for plan
benefits at December 31, 2002 and 2001, were as follows:
2002 2001
----------- -----------
Fidelity Growth Company Fund $ - 509,649
Fidelity Growth & Income Fund - 269,321
Fidelity Balanced Fund - 208,743
Fidelity Blue Chip Growth Fund - 607,196
Fidelity Retirement Money Market Portfolio - 211,313
Invesco Stable Value Fund 242,588 -
Barclay's Global Inv Equity Index Fund I 236,167 -
Growth Fund of America 481,751 -
Oppenheimer Quest Balanced Value 141,376 -
PIMCO Total Return Administrative Shares 341,530 -
Washington Mutual Investors Fund 116,647 -
Spartan U.S. Equity Index Fund - 225,214
Fidelity Ginnie Mae Portfolio - 113,252
Other 417,465 -
--------- ---------
Total Investments $ 1,977,524 2,144,688
=========== ===========
During 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by $418,415, as follows:
Kansas City Southern common stock $ (1,944)
Mutual funds (416,471)
-------------
$ (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 May 25, 1995, 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 Plan
has been amended since receiving the determination letter, and an
application for determination was submitted to the Internal Revenue
Service. The plan administrator believes the Plan is currently designed and
being operated in compliance with the applicable requirements of the Code.
Therefore, no provision for income taxes is included in these financial
statements.
Schedule l
GATEWAY WESTERN RAILWAY UNION
401(k) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
Identity Description Fair value
----------------------------------------------------- ------------------------------------------------ ------------------
Common Stock
*Kansas City Southern common stock 1,002 shares, with a fair value of $ 12,024
$12.00 per share
Money Markets
Barclays Money Market 3.00 shares, with a fair value of 3
$1.00 per share
Invesco Stable Value 242,587.70 shares, with a fair value of 242,588
$1.00 per share
Mutual Funds
AIM Small Cap Growth Fund 1,677.271 shares, with a fair value of 30,996
$18.48 per share
Barclays Global Inv Equity Index Fund 1 9,327.28 shares, with a fair value of 236,167
$25.32 per share
EuroPacific Growth 2,276.554 shares, with a fair value of 52,292
$22.97 per share
Franklin Balance Sheet Investment A 1,999.389 shares, with a fair value of 74,157
$37.09 per share
Growth Fund of America 26,082.878 shares, with a fair value of 481,751
$18.47 per share
ING International Value Fund 5,263.407 shares, with a fair value of 54,160
$10.29 per share
JanusFund 2,137.691 shares, with a fair value of 38,094
$17.82 per share
Janus Twenty Fund 275.238 shares, with a fair value of 7,985
$29.01 per share
MFS Value Fund 3,929.764 shares, with a fair value of 64,918
$16.52 per share
Oppenheimer Quest Balanced Value 11,193.647 shares, with a fair value of 141,376
$12.63 per share
PIMCO Renaissance 5,658.185 shares, with a fair value of 82,836
$14.64 per share
PIMCO Total Return Administrative Shares 32,008.394 shares, with a fair value of 341,530
$10.67 per share
Washington Mutual Investors Fund 4,961.572 shares, with a fair value of 116,647
$23.51 per share
------------------
Total investments $ 1,977,524
==================
* Party-in-interest.
See accompanying independent auditors' report.
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
----------------------------------------
Eric B. Freestone
Title: Vice President Human Resources
Dated June 30, 2003