Kansas City Southern

20
15

Annual
Report

KANSAS CITY SOUTHERN

Kansas  City  Southern  is  a  transportation  holding  company  with  two  primary  subsidiaries.  The 

Kansas  City  Southern  Railway  Company  is  one  of  seven  Class  I  railroads  operating  in  the  United 

States. Kansas City Southern de México, S.A. de C.V. is one of two large regional railroads in Mexico. 

KCS  also  owns  50%  of  the  Panama  Canal  Railway  Company  in  Panama.  The  combined  North 

American  rail  network  comprises  approximately  6,600  route  miles  that  link  commercial  and 

industrial markets in the United States and Mexico.

2 0 1 5   F I N A N C I A L   H I G H L I G H T S
2 0 1 5   F I N A N C I A L   H I G H L I G H T S

Dollars in millions, except share and per share amounts. Years ended December 31.

OPERATIONS

Revenues 

Operating income 

Net income attributable to Kansas City Southern
and subsidiaries  
PER COMMON SHARE

2015  

2014 

2013 

2012 

$  2,418.8 

$    2,577.1 

$ 

2,369.3 

$ 

2,238.6 

803.8 

809.1 

738.6 

715.9 

483.5 

502.6 

351.4 

377.3 

Earnings per diluted share 

$ 

 4.40 

$  

 4.55 

$ 

3.18 

$ 

3.43  

CLOSING STOCK PRICE RANGES

Common - High 

Common - Low 

4% Non-Cumulative Preferred - High 

4% Non-Cumulative Preferred - Low 

$ 

120.42 

$ 

125.88 

$ 

125.20 

$ 

70.01 

28.85 

25.25 

91.12 

29.00  

24.15 

85.40 

27.78 

24.12 

83.82  

62.54  

26.40 

23.68  

FINANCIAL CONDITION

Total assets 

$  8,341.0 

$ 

7,976.4 

$ 

7,283.7 

$ 

6,284.7 

Total debt, including short-term borrowings 

Total stockholders’ equity  

Total equity  

2,401.1 

3,914.3 

4,224.7  

2,301.4  

3,755.5 

4,064.1 

2,168.8 

3,370.6 

3,676.6 

1,588.7 

3,096.6  

3,400.7  

COMMON STOCKHOLDER INFORMATION AT YEAR END

Stockholders of record 

Shares outstanding (in thousands) 

Average diluted shares outstanding (in thousands) 

2,289 

108,461 

109,915 

2,512 

110,392 

110,433 

2,700 

110,229 

110,340 

3,002  

110,131 

110,080  

 
 
 
 
 
 
 
 
 
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
  
  
 
 
 
 
  
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
LETTER TO OUR
STOCKHOLDERS

Kansas City Southern (KCS or the Company) began 2015 on an encouragingly 
positive note. January carloadings were up 7% from January 2014, marking the 

highest first month volume in Company history.

David L. Starling
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)
Kansas City Southern

Patrick J. Ottensmeyer
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)
Kansas City Southern

But,  almost  overnight,  the  business  landscape  changed.  Turbulent  energy 
markets started to put downward pressure on our utility coal, crude oil and frac 
sand businesses. Weakening industrial markets and unstable global economics 
began to affect certain key commodities like steel and paper. The pressure on a 
number of KCS’ commodities came swift and hard as it did for the entire North 
(cid:36)(cid:80)(cid:72)(cid:85)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:92)(cid:17)(cid:3)(cid:41)(cid:85)(cid:82)(cid:80)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:3)(cid:192)(cid:85)(cid:86)(cid:87)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:15)(cid:3)(cid:46)(cid:38)(cid:54)(cid:183)(cid:3)(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)(cid:86)(cid:3)(cid:87)(cid:85)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:86)(cid:87)(cid:72)(cid:68)(cid:71)(cid:76)(cid:79)(cid:92)(cid:3)
(cid:71)(cid:82)(cid:90)(cid:81)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:192)(cid:85)(cid:86)(cid:87)(cid:3)(cid:86)(cid:76)(cid:91)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)

An additional challenge surfaced when, despite softening economic growth, it 
(cid:69)(cid:72)(cid:70)(cid:68)(cid:80)(cid:72)(cid:3) (cid:68)(cid:83)(cid:83)(cid:68)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:85)(cid:68)(cid:76)(cid:81)(cid:3) (cid:70)(cid:85)(cid:72)(cid:90)(cid:3) (cid:86)(cid:87)(cid:68)(cid:73)(cid:192)(cid:81)(cid:74)(cid:3) (cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:3) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:183)(cid:86)(cid:3) (cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)
(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:92)(cid:15)(cid:3) (cid:46)(cid:68)(cid:81)(cid:86)(cid:68)(cid:86)(cid:3) (cid:38)(cid:76)(cid:87)(cid:92)(cid:3) (cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3) (cid:71)(cid:72)(cid:3) (cid:48)(cid:112)(cid:91)(cid:76)(cid:70)(cid:82)(cid:15)(cid:3) (cid:54)(cid:17)(cid:36)(cid:17)(cid:3) (cid:71)(cid:72)(cid:3) (cid:38)(cid:17)(cid:57)(cid:17)(cid:3) (cid:11)(cid:46)(cid:38)(cid:54)(cid:48)(cid:12)(cid:3) (cid:75)(cid:68)(cid:71)(cid:3) (cid:73)(cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:3)
(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:80)(cid:68)(cid:79)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:73)(cid:192)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:17)

KCS  management  took  immediate  and  decisive  actions  responding  to  both 
(cid:72)(cid:70)(cid:82)(cid:81)(cid:82)(cid:80)(cid:76)(cid:70)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:70)(cid:75)(cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:72)(cid:86)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:192)(cid:85)(cid:86)(cid:87)(cid:3) (cid:86)(cid:87)(cid:72)(cid:83)(cid:3) (cid:90)(cid:68)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:73)(cid:82)(cid:70)(cid:88)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:81)(cid:87)(cid:76)(cid:85)(cid:72)(cid:3)
organization on the importance of controlling every aspect of the Company 
that was in our power to control. Underlying this message was the core belief 
(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:46)(cid:38)(cid:54)(cid:183)(cid:3)(cid:192)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)
skilled, motivated and committed to at least partially mitigate the economic 
and  service  headwinds.  While  KCS  could  not  fully  escape  the  impacts  of  an 
unsettled  economy  and  service  issues,  it  could  manage  every  aspect  of  its 
operations to attain the highest levels of productivity given the circumstances, 
(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:83)(cid:85)(cid:88)(cid:71)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:86)(cid:70)(cid:68)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3)
them to match business conditions.

(cid:36)(cid:81)(cid:71)(cid:15)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3) (cid:72)(cid:91)(cid:68)(cid:70)(cid:87)(cid:79)(cid:92)(cid:3) (cid:90)(cid:75)(cid:68)(cid:87)(cid:3) (cid:90)(cid:72)(cid:3) (cid:71)(cid:76)(cid:71)(cid:17)(cid:3) (cid:37)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:82)(cid:88)(cid:85)(cid:87)(cid:75)(cid:3) (cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:15)(cid:3) (cid:46)(cid:38)(cid:54)(cid:3) (cid:75)(cid:68)(cid:71)(cid:3) (cid:86)(cid:70)(cid:68)(cid:79)(cid:72)(cid:71)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3)
operations to more effectively match demand and had turned the corner with 
(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:3)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:72)(cid:71)(cid:17)(cid:3)
Our success was evidenced by the marked improvement in velocity and dwell 
(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:80)(cid:72)(cid:87)(cid:85)(cid:76)(cid:70)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:87)(cid:75)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:3)(cid:82)(cid:73)(cid:3)(cid:25)(cid:22)(cid:17)(cid:23)(cid:8)(cid:17)

(cid:41)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:46)(cid:38)(cid:54)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:7)(cid:21)(cid:17)(cid:23)(cid:3)(cid:69)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:25)(cid:8)(cid:3)(cid:79)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)
(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:3)(cid:22)(cid:8)(cid:3)(cid:71)(cid:72)(cid:70)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)(cid:86)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:72)(cid:71)(cid:3)(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)
(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:3)(cid:90)(cid:72)(cid:68)(cid:78)(cid:72)(cid:81)(cid:72)(cid:71)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:83)(cid:72)(cid:86)(cid:82)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:73)(cid:88)(cid:72)(cid:79)(cid:3)
(cid:86)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:3) (cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:86)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:183)(cid:86)(cid:3) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:3) (cid:90)(cid:68)(cid:86)(cid:3) (cid:25)(cid:25)(cid:17)(cid:27)(cid:8)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:73)(cid:88)(cid:79)(cid:79)(cid:16)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)
(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:7)(cid:27)(cid:19)(cid:23)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:3)(cid:20)(cid:8)(cid:3)(cid:71)(cid:72)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:17)(cid:3)(cid:39)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)
per share was $4.40 compared to $4.55 in 2014.

Marketing

(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:54)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:9)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:79)(cid:92)(cid:3)(cid:73)(cid:72)(cid:79)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:68)(cid:79)(cid:3)(cid:49)(cid:82)(cid:85)(cid:87)(cid:75)(cid:3)
American  economic  growth  in  2015,  the  underlying  strengths  and  diversity  of 
(cid:46)(cid:38)(cid:54)(cid:183)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)(cid:87)(cid:92)(cid:3)(cid:80)(cid:76)(cid:91)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:17)

(cid:41)(cid:82)(cid:85)(cid:3) (cid:72)(cid:91)(cid:68)(cid:80)(cid:83)(cid:79)(cid:72)(cid:15)(cid:3) (cid:46)(cid:38)(cid:54)(cid:183)(cid:3) (cid:38)(cid:75)(cid:72)(cid:80)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3) (cid:9)(cid:3) (cid:51)(cid:72)(cid:87)(cid:85)(cid:82)(cid:79)(cid:72)(cid:88)(cid:80)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)(cid:87)(cid:92)(cid:3) (cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3) (cid:71)(cid:72)(cid:80)(cid:82)(cid:81)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)
(cid:86)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:17)(cid:3)(cid:50)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:3)(cid:70)(cid:68)(cid:85)(cid:79)(cid:82)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:88)(cid:83)(cid:3)
(cid:24)(cid:8)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:21)(cid:19)(cid:20)(cid:23)(cid:17)(cid:3) (cid:44)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:56)(cid:17)(cid:54)(cid:17)(cid:15)(cid:3) (cid:90)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:69)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:73)(cid:3) (cid:90)(cid:75)(cid:68)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3)
(cid:68)(cid:81)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:68)(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80)(cid:15)(cid:3)(cid:86)(cid:88)(cid:86)(cid:87)(cid:68)(cid:76)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:86)(cid:87)(cid:76)(cid:70)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:88)(cid:79)(cid:73)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:48)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:83)(cid:72)(cid:87)(cid:85)(cid:82)(cid:16)(cid:70)(cid:75)(cid:72)(cid:80)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)

billions of dollars to build ethane crackers in the region 
(cid:69)(cid:72)(cid:81)(cid:72)(cid:192)(cid:87)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:68)(cid:69)(cid:88)(cid:81)(cid:71)(cid:68)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:90)(cid:16)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:81)(cid:68)(cid:87)(cid:88)(cid:85)(cid:68)(cid:79)(cid:3)(cid:74)(cid:68)(cid:86)(cid:3)
resources which will be used as the feedstock in the 
production of plastics to be used in a wide variety of 
industrial  and  consumer  goods.  KCS  has  been 
actively  engaged  in  discussions  with  many  of  the 
companies building the facilities to develop plans for 
transporting  plastic  pellets  not  only  to  U.S.  markets, 
(cid:69)(cid:88)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:71)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:90)(cid:72)(cid:79)(cid:79)(cid:17)

(cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:46)(cid:38)(cid:54)(cid:3)(cid:68)(cid:81)(cid:81)(cid:82)(cid:88)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:87)(cid:3)(cid:75)(cid:68)(cid:71)(cid:3)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)
(cid:68)(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:54)(cid:68)(cid:86)(cid:82)(cid:79)(cid:3)(cid:38)(cid:75)(cid:72)(cid:80)(cid:76)(cid:70)(cid:68)(cid:79)(cid:86)(cid:15)(cid:3)(cid:68)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)
(cid:36)(cid:73)(cid:85)(cid:76)(cid:70)(cid:68)(cid:81)(cid:16)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:69)(cid:88)(cid:76)(cid:79)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:3)(cid:7)(cid:27)(cid:17)(cid:20)(cid:3)(cid:69)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)
ethane cracker in Lake Charles, Louisiana. As part of 
its agreement with Sasol, KCS is constructing a new 
(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:92)(cid:68)(cid:85)(cid:71)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:3)(cid:88)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:72)(cid:73)(cid:192)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3) (cid:85)(cid:68)(cid:83)(cid:76)(cid:71)(cid:79)(cid:92)(cid:3) (cid:74)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:72)(cid:87)(cid:85)(cid:82)(cid:16)(cid:70)(cid:75)(cid:72)(cid:80)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3) (cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:92)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Gulf States region. 

(cid:44)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:46)(cid:38)(cid:54)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:51)(cid:72)(cid:80)(cid:72)(cid:91)(cid:15)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:72)(cid:81)(cid:72)(cid:85)(cid:74)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:17)(cid:3)(cid:55)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)
in addition to moving a full complement of chemical 
(cid:68)(cid:81)(cid:71)(cid:3) (cid:83)(cid:72)(cid:87)(cid:85)(cid:82)(cid:79)(cid:72)(cid:88)(cid:80)(cid:3) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:15)(cid:3) (cid:46)(cid:38)(cid:54)(cid:48)(cid:3) (cid:80)(cid:82)(cid:89)(cid:72)(cid:71)(cid:3) (cid:68)(cid:3) (cid:75)(cid:72)(cid:68)(cid:89)(cid:92)(cid:15)(cid:3)
(cid:86)(cid:72)(cid:80)(cid:76)(cid:16)(cid:85)(cid:72)(cid:192)(cid:81)(cid:72)(cid:71)(cid:3)(cid:70)(cid:85)(cid:88)(cid:71)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:51)(cid:72)(cid:80)(cid:72)(cid:91)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:47)(cid:68)(cid:93)(cid:68)(cid:85)(cid:82)(cid:3)(cid:38)(cid:68)(cid:85)(cid:71)(cid:72)(cid:81)(cid:68)(cid:86)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:76)(cid:87)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:80)(cid:68)(cid:85)(cid:76)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)
vessels to Asian destinations.

(cid:58)(cid:76)(cid:87)(cid:75)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:72)(cid:81)(cid:72)(cid:85)(cid:74)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:80)(cid:3)(cid:79)(cid:72)(cid:74)(cid:76)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:75)(cid:68)(cid:86)(cid:72)(cid:71)(cid:16)
(cid:76)(cid:81)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:72)(cid:91)(cid:87)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:15)(cid:3)(cid:46)(cid:38)(cid:54)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)
(cid:72)(cid:91)(cid:70)(cid:72)(cid:79)(cid:79)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:82)(cid:89)(cid:72)(cid:3)(cid:85)(cid:72)(cid:192)(cid:81)(cid:72)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:15)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:3)
gasoline,  diesel,  ethanol  and  bunker  fuel  from  the 
(cid:42)(cid:88)(cid:79)(cid:73)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:41)(cid:72)(cid:69)(cid:85)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3) (cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:71)(cid:72)(cid:70)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
(cid:87)(cid:76)(cid:80)(cid:76)(cid:81)(cid:74)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:85)(cid:72)(cid:72)(cid:3) (cid:76)(cid:80)(cid:83)(cid:82)(cid:85)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:85)(cid:72)(cid:192)(cid:81)(cid:72)(cid:71)(cid:3) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:3)
(cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:45)(cid:68)(cid:81)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:21)(cid:19)(cid:20)(cid:26)(cid:3) (cid:87)(cid:82)(cid:3) (cid:36)(cid:83)(cid:85)(cid:76)(cid:79)(cid:3) (cid:82)(cid:73)(cid:3) (cid:21)(cid:19)(cid:20)(cid:25)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:46)(cid:38)(cid:54)(cid:3)
(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:81)(cid:72)(cid:79)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3)
(cid:42)(cid:88)(cid:79)(cid:73)(cid:3)(cid:85)(cid:72)(cid:192)(cid:81)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:76)(cid:93)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)
and  determine  the  best  transportation  options  and 
routes to move the products.

(cid:50)(cid:88)(cid:85)(cid:3) (cid:36)(cid:74)(cid:85)(cid:76)(cid:70)(cid:88)(cid:79)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3) (cid:9)(cid:3) (cid:48)(cid:76)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:86)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)
modest volume growth in 2015 and remains a core 
strength of the Company. KCS transports agricultural 
(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:15)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:88)(cid:79)(cid:68)(cid:85)(cid:79)(cid:92)(cid:3)(cid:70)(cid:82)(cid:85)(cid:81)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:82)(cid:88)(cid:87)(cid:75)(cid:16)(cid:70)(cid:72)(cid:81)(cid:87)(cid:85)(cid:68)(cid:79)(cid:3)
(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:85)(cid:68)(cid:79)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:15)(cid:3)
the  corn  we  move  is  primarily  to  serve  poultry 
(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3) (cid:50)(cid:88)(cid:85)(cid:3) (cid:74)(cid:85)(cid:68)(cid:76)(cid:81)(cid:3) (cid:80)(cid:82)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3)
poultry producers and facilities which produce food 
products for human consumption.

As noted earlier, energy markets in both the U.S. and 
(cid:68)(cid:69)(cid:85)(cid:82)(cid:68)(cid:71)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:3) (cid:72)(cid:91)(cid:87)(cid:85)(cid:72)(cid:80)(cid:72)(cid:79)(cid:92)(cid:3) (cid:89)(cid:82)(cid:79)(cid:68)(cid:87)(cid:76)(cid:79)(cid:72)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3)
instability  had  impacts  on  nearly  every  segment  of 

(cid:82)(cid:88)(cid:85)(cid:3) (cid:40)(cid:81)(cid:72)(cid:85)(cid:74)(cid:92)(cid:3) (cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:17)(cid:3) (cid:38)(cid:82)(cid:68)(cid:79)(cid:16)(cid:192)(cid:85)(cid:72)(cid:71)(cid:3) (cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:85)(cid:76)(cid:70)(cid:3) (cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:90)(cid:72)(cid:85)(cid:72)(cid:3)
affected  by  low  natural  gas  prices  in  2015.  This 
phenomenon  is  rippling  through  the  nation’s  coal 
industry and is resulting in reduced coal shipments for 
all railroads. KCS actually fared better than most of its 
railroad  peers,  but  still  our  coal  volumes  declined 
(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3) (cid:20)(cid:19)(cid:8)(cid:17)(cid:3) (cid:54)(cid:76)(cid:80)(cid:76)(cid:79)(cid:68)(cid:85)(cid:79)(cid:92)(cid:15)(cid:3) (cid:79)(cid:82)(cid:90)(cid:3) (cid:70)(cid:85)(cid:88)(cid:71)(cid:72)(cid:3) (cid:82)(cid:76)(cid:79)(cid:3) (cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)
have dramatically reduced drilling activity in the U.S., 
which, in turn, has reduced the demand for frac sand 
(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:85)(cid:88)(cid:71)(cid:72)(cid:3)(cid:72)(cid:91)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:17)

(cid:55)(cid:75)(cid:72)(cid:3) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:70)(cid:85)(cid:88)(cid:71)(cid:72)(cid:16)(cid:69)(cid:92)(cid:16)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:74)(cid:68)(cid:85)(cid:81)(cid:72)(cid:85)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3)
fair  share  of  attention  both  from  the  media  and 
(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)(cid:3)(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:92)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:68)(cid:3)
decline  in  crude  oil  shipments  due  to  low  crude 
prices, KCS actually saw its crude volumes grow by 
(cid:25)(cid:21)(cid:8)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)(cid:69)(cid:72)(cid:75)(cid:76)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3) (cid:82)(cid:83)(cid:72)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:70)(cid:85)(cid:88)(cid:71)(cid:72)(cid:16)(cid:69)(cid:92)(cid:16)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)
(cid:71)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:46)(cid:38)(cid:54)(cid:16)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72)(cid:68)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:88)(cid:79)(cid:73)(cid:3)
States  region,  and  the  limited  pipeline  capacity 
connecting  heavy  crude  origin  points  in  western 
Canada to the Gulf. While these factors provide KCS 
with a degree of optimism for its crude business over 
(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)(cid:72)(cid:85)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:82)(cid:90)(cid:3)(cid:70)(cid:85)(cid:88)(cid:71)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
narrow spreads between North American originated 
crude and crude from foreign sources make for an 
(cid:72)(cid:91)(cid:87)(cid:85)(cid:72)(cid:80)(cid:72)(cid:79)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:81)(cid:72)(cid:68)(cid:85)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80)(cid:17)

(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3) (cid:46)(cid:38)(cid:54)(cid:183)(cid:3) (cid:36)(cid:88)(cid:87)(cid:82)(cid:80)(cid:82)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3) (cid:193)(cid:68)(cid:87)(cid:3)
volumes in 2015, there is good reason to believe that 
(cid:87)(cid:75)(cid:72)(cid:3) (cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3) (cid:68)(cid:88)(cid:87)(cid:82)(cid:80)(cid:82)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3) (cid:86)(cid:87)(cid:82)(cid:85)(cid:92)(cid:3) (cid:76)(cid:86)(cid:3) (cid:85)(cid:72)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3) (cid:77)(cid:88)(cid:86)(cid:87)(cid:3)
getting started. According to an independent source, 
(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:68)(cid:88)(cid:87)(cid:82)(cid:80)(cid:82)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:75)(cid:76)(cid:87)(cid:3)(cid:22)(cid:17)(cid:23)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:89)(cid:72)(cid:75)(cid:76)(cid:70)(cid:79)(cid:72)(cid:86)(cid:3) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3) (cid:76)(cid:86)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:86)(cid:87)(cid:72)(cid:68)(cid:71)(cid:76)(cid:79)(cid:92)(cid:3)
(cid:74)(cid:85)(cid:82)(cid:90)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:72)(cid:91)(cid:87)(cid:3)(cid:192)(cid:89)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:85)(cid:72)(cid:68)(cid:70)(cid:75)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)
5.4  million  vehicles  by  2020.  That  number  could 
(cid:83)(cid:82)(cid:86)(cid:86)(cid:76)(cid:69)(cid:79)(cid:92)(cid:3) (cid:85)(cid:76)(cid:86)(cid:72)(cid:3) (cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:85)(cid:3) (cid:87)(cid:82)(cid:3) (cid:25)(cid:3) (cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3) (cid:76)(cid:73)(cid:3) (cid:86)(cid:82)(cid:80)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:88)(cid:87)(cid:82)(cid:3)
(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:85)(cid:86)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:72)(cid:91)(cid:83)(cid:79)(cid:82)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)
for new plants decide to move ahead with construction.

Automotive manufacturers are taking advantage 
(cid:82)(cid:73)(cid:3)(cid:46)(cid:38)(cid:54)(cid:183)(cid:3)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:16)(cid:69)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
the port of Lázaro Cárdenas. In addition, they are 
(cid:85)(cid:72)(cid:68)(cid:79)(cid:76)(cid:93)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:192)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:183)(cid:86)(cid:3)(cid:86)(cid:78)(cid:76)(cid:79)(cid:79)(cid:72)(cid:71)(cid:3)(cid:79)(cid:68)(cid:69)(cid:82)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:70)(cid:72)(cid:15)(cid:3)
(cid:79)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3) (cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:15)(cid:3) (cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:76)(cid:87)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:56)(cid:17)(cid:54)(cid:17)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
(cid:38)(cid:68)(cid:81)(cid:68)(cid:71)(cid:76)(cid:68)(cid:81)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:183)(cid:86)(cid:3)(cid:73)(cid:68)(cid:89)(cid:82)(cid:85)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:72)(cid:3)
agreements with many nations. We will continue to 
(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3) (cid:87)(cid:85)(cid:68)(cid:70)(cid:78)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:85)(cid:68)(cid:76)(cid:79)(cid:3) (cid:92)(cid:68)(cid:85)(cid:71)(cid:3)
(cid:72)(cid:81)(cid:75)(cid:68)(cid:81)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:87)(cid:68)(cid:92)(cid:3)(cid:68)(cid:75)(cid:72)(cid:68)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:17)(cid:3)(cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3) (cid:86)(cid:72)(cid:70)(cid:82)(cid:81)(cid:71)(cid:3) (cid:75)(cid:68)(cid:79)(cid:73)(cid:3) (cid:82)(cid:73)(cid:3) (cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3) (cid:90)(cid:72)(cid:3) (cid:79)(cid:82)(cid:82)(cid:78)(cid:3) (cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
opening of a new plant in the state of Nuevo Leon 

(cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:51)(cid:88)(cid:72)(cid:69)(cid:79)(cid:68)(cid:15)(cid:3) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:72)(cid:91)(cid:87)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:17)(cid:3)
The growth in auto production will also spur growth 
in  other  commodities,  including  car  parts,  steel, 
plastics and glass.

Our Intermodal group saw volumes decline from very 
(cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:17)(cid:3)(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:85)(cid:3)(cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3)(cid:82)(cid:88)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)
of  Lázaro  Cárdenas  grew  in  2015,  overall  Intermodal 
(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3)(cid:22)(cid:8)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)

(cid:44)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:16)(cid:69)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:80)(cid:82)(cid:71)(cid:68)(cid:79)(cid:3) (cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:15)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
industry, 
from  other  railroads  and  the  trucking 
combined with a period of service challenges in the 
(cid:192)(cid:85)(cid:86)(cid:87)(cid:3)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:86)(cid:82)(cid:80)(cid:72)(cid:3)(cid:46)(cid:38)(cid:54)(cid:3)(cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:76)(cid:74)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)
(cid:87)(cid:82)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:85)(cid:82)(cid:88)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:83)(cid:82)(cid:85)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)
the latter part of the year, as our service returned to 
normalized levels, we began to see a recovery in our 
market share. We are fully committed to growing our 
market position in this area gradually taking a larger 
(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:22)(cid:17)(cid:26)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:16)(cid:3)
(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:3)(cid:69)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:79)(cid:92)(cid:17)

(cid:47)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3) (cid:68)(cid:75)(cid:72)(cid:68)(cid:71)(cid:15)(cid:3) (cid:90)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:85)(cid:3) (cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3) (cid:82)(cid:88)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3)
Lázaro Cárdenas to get a boost from the opening of 
(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:51)(cid:48)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:79)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:85)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:86)(cid:70)(cid:75)(cid:72)(cid:71)(cid:88)(cid:79)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:87)(cid:75)(cid:76)(cid:85)(cid:71)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:17)(cid:3)(cid:58)(cid:75)(cid:72)(cid:81)(cid:3)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:69)(cid:88)(cid:76)(cid:79)(cid:87)(cid:3)(cid:82)(cid:88)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:28)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:36)(cid:51)(cid:48)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:79)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:68)(cid:71)(cid:71)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:23)(cid:3) (cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3) (cid:55)(cid:40)(cid:56)(cid:3)
(cid:11)(cid:87)(cid:90)(cid:72)(cid:81)(cid:87)(cid:92)(cid:16)(cid:73)(cid:82)(cid:82)(cid:87)(cid:3) (cid:72)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:3) (cid:88)(cid:81)(cid:76)(cid:87)(cid:12)(cid:3) (cid:70)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:82)(cid:85)(cid:87)(cid:17)(cid:3)
(cid:58)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:79)(cid:85)(cid:72)(cid:68)(cid:71)(cid:92)(cid:3) (cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:43)(cid:88)(cid:87)(cid:70)(cid:75)(cid:76)(cid:86)(cid:82)(cid:81)(cid:3) (cid:51)(cid:82)(cid:85)(cid:87)(cid:3) (cid:55)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:79)(cid:86)(cid:3)
(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:47)(cid:105)(cid:93)(cid:68)(cid:85)(cid:82)(cid:3)(cid:38)(cid:105)(cid:85)(cid:71)(cid:72)(cid:81)(cid:68)(cid:86)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:69)(cid:72)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:183)(cid:86)(cid:3)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86)(cid:87)(cid:3)
(cid:51)(cid:68)(cid:70)(cid:76)(cid:192)(cid:70)(cid:3) (cid:83)(cid:82)(cid:85)(cid:87)(cid:17)(cid:3) (cid:36)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:86)(cid:82)(cid:79)(cid:72)(cid:3) (cid:85)(cid:68)(cid:76)(cid:79)(cid:85)(cid:82)(cid:68)(cid:71)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3) (cid:47)(cid:105)(cid:93)(cid:68)(cid:85)(cid:82)(cid:3)
(cid:38)(cid:105)(cid:85)(cid:71)(cid:72)(cid:81)(cid:68)(cid:86)(cid:15)(cid:3) (cid:46)(cid:38)(cid:54)(cid:3) (cid:79)(cid:82)(cid:82)(cid:78)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:81)(cid:72)(cid:192)(cid:87)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)
(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:85)(cid:3)(cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3)(cid:80)(cid:82)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)
central U.S. markets.

KCS’ domestic U.S. intermodal business had become 
(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:76)(cid:81)(cid:74)(cid:79)(cid:92)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:87)(cid:85)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:75)(cid:68)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3) (cid:80)(cid:68)(cid:91)(cid:72)(cid:71)(cid:16)(cid:82)(cid:88)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
capacity of its Zacha Junction intermodal terminal in 
(cid:39)(cid:68)(cid:79)(cid:79)(cid:68)(cid:86)(cid:15)(cid:3)(cid:55)(cid:72)(cid:91)(cid:68)(cid:86)(cid:17)(cid:3)(cid:54)(cid:76)(cid:80)(cid:83)(cid:79)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:77)(cid:88)(cid:86)(cid:87)(cid:3)(cid:81)(cid:82)(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)(cid:72)(cid:85)(cid:3)
space  to  grow.  This  capacity  issue  was  addressed 
(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:75)(cid:76)(cid:85)(cid:71)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:83)(cid:72)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:58)(cid:92)(cid:79)(cid:76)(cid:72)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:80)(cid:82)(cid:71)(cid:68)(cid:79)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:79)(cid:3)(cid:82)(cid:88)(cid:87)(cid:86)(cid:76)(cid:71)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:68)(cid:79)(cid:79)(cid:68)(cid:86)(cid:17)(cid:3)
(cid:55)(cid:75)(cid:72)(cid:3) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:79)(cid:76)(cid:73)(cid:87)(cid:3) (cid:70)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:92)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:16)(cid:82)(cid:73)(cid:16)(cid:87)(cid:75)(cid:72)(cid:16)(cid:68)(cid:85)(cid:87)(cid:3)
technology  at  the  Wylie  facility  will  allow  KCS  to 
(cid:75)(cid:68)(cid:81)(cid:71)(cid:79)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3) (cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:82)(cid:81)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3) (cid:72)(cid:68)(cid:86)(cid:87)(cid:16)
west intermodal corridor.

(cid:36)(cid:79)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:79)(cid:79)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:70)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:92)(cid:3)(cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:79)(cid:82)(cid:82)(cid:78)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:16)(cid:72)(cid:81)(cid:72)(cid:85)(cid:74)(cid:76)(cid:93)(cid:76)(cid:81)(cid:74)(cid:3)(cid:46)(cid:38)(cid:54)(cid:183)(cid:3)
intermodal  business  and  being  the  preferred 
(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:76)(cid:72)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3) (cid:72)(cid:73)(cid:192)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
(cid:85)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3) (cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:16)(cid:69)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)
transportation services.

Operations

(cid:41)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:39)(cid:72)(cid:83)(cid:68)(cid:85)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:87)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)
two countries.

(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:80)(cid:82)(cid:71)(cid:68)(cid:79)(cid:3)

In  the  U.S.,  Operations  had  to  react  to  substantial 
(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)(cid:3) (cid:193)(cid:88)(cid:70)(cid:87)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)
(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:89)(cid:82)(cid:79)(cid:68)(cid:87)(cid:76)(cid:79)(cid:72)(cid:3) (cid:72)(cid:81)(cid:72)(cid:85)(cid:74)(cid:92)(cid:3)
(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:72)(cid:70)(cid:82)(cid:81)(cid:82)(cid:80)(cid:76)(cid:70)(cid:3)(cid:73)(cid:82)(cid:85)(cid:70)(cid:72)(cid:86)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:192)(cid:85)(cid:86)(cid:87)(cid:3)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)
of  the  year,  volumes  were  severely  pressured  by 
(cid:71)(cid:72)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:70)(cid:82)(cid:68)(cid:79)(cid:3) (cid:80)(cid:82)(cid:89)(cid:72)(cid:86)(cid:17)(cid:3) (cid:44)(cid:81)(cid:3) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:68)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:192)(cid:85)(cid:86)(cid:87)(cid:3)
(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:15)(cid:3)(cid:71)(cid:72)(cid:70)(cid:79)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:73)(cid:85)(cid:68)(cid:70)(cid:3)(cid:86)(cid:68)(cid:81)(cid:71)(cid:15)(cid:3)
(cid:80)(cid:72)(cid:87)(cid:68)(cid:79)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
(cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3) (cid:69)(cid:72)(cid:70)(cid:68)(cid:80)(cid:72)(cid:3) (cid:80)(cid:82)(cid:85)(cid:72)(cid:3)
pronounced. In response, KCS scaled its operations 
proportionally. We furloughed train crews and stored 
(cid:79)(cid:82)(cid:70)(cid:82)(cid:80)(cid:82)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:81)(cid:15)(cid:3) (cid:68)(cid:86)(cid:3) (cid:70)(cid:82)(cid:68)(cid:79)(cid:15)(cid:3) (cid:70)(cid:85)(cid:88)(cid:71)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:74)(cid:85)(cid:68)(cid:76)(cid:81)(cid:3) (cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3)
gained strength in the second half of the year, we 
brought  both  back  into  service.  To  illustrate  the 
challenge faced by Operations, from a very weak 
(cid:86)(cid:72)(cid:70)(cid:82)(cid:81)(cid:71)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:70)(cid:68)(cid:85)(cid:79)(cid:82)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:71)(cid:85)(cid:82)(cid:83)(cid:83)(cid:72)(cid:71)(cid:3)(cid:25)(cid:8)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:46)(cid:38)(cid:54)(cid:53)(cid:3)(cid:85)(cid:72)(cid:68)(cid:70)(cid:75)(cid:72)(cid:71)(cid:3)(cid:68)(cid:79)(cid:79)(cid:16)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:69)(cid:88)(cid:79)(cid:78)(cid:3)
(cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:74)(cid:85)(cid:82)(cid:86)(cid:86)(cid:3)(cid:87)(cid:82)(cid:81)(cid:81)(cid:68)(cid:74)(cid:72)(cid:3)(cid:72)(cid:91)(cid:76)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:75)(cid:76)(cid:85)(cid:71)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)
2015.  These  sudden  shifts  in  demand  necessitated 
(cid:81)(cid:76)(cid:80)(cid:69)(cid:79)(cid:72)(cid:15)(cid:3) (cid:72)(cid:73)(cid:192)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3) (cid:85)(cid:72)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3) (cid:36)(cid:81)(cid:71)(cid:15)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)
(cid:87)(cid:72)(cid:68)(cid:80)(cid:3)(cid:70)(cid:68)(cid:80)(cid:72)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:193)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:79)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)
by improving service metrics and operating ratio as 
the year progressed.

(cid:44)(cid:81)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:82)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:75)(cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:72)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:3)(cid:85)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:71)(cid:3)
(cid:68)(cid:85)(cid:82)(cid:88)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:85)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3) (cid:87)(cid:85)(cid:68)(cid:76)(cid:81)(cid:3) (cid:70)(cid:85)(cid:72)(cid:90)(cid:3)
(cid:86)(cid:87)(cid:68)(cid:73)(cid:192)(cid:81)(cid:74)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:3)(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:76)(cid:81)(cid:3)
back the trust of our shippers. Operations personnel, 
(cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:75)(cid:72)(cid:79)(cid:83)(cid:3) (cid:82)(cid:73)(cid:3) (cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3) (cid:53)(cid:72)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3) (cid:87)(cid:68)(cid:70)(cid:78)(cid:79)(cid:72)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
(cid:83)(cid:85)(cid:82)(cid:69)(cid:79)(cid:72)(cid:80)(cid:86)(cid:3)(cid:75)(cid:72)(cid:68)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:86)(cid:76)(cid:91)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:86)(cid:3)(cid:75)(cid:68)(cid:71)(cid:3)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:79)(cid:92)(cid:3)
(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:72)(cid:71)(cid:3) (cid:85)(cid:68)(cid:76)(cid:79)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:81)(cid:82)(cid:85)(cid:80)(cid:68)(cid:79)(cid:3) (cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:17)(cid:3) (cid:37)(cid:92)(cid:3) (cid:92)(cid:72)(cid:68)(cid:85)(cid:16)(cid:72)(cid:81)(cid:71)(cid:15)(cid:3)
(cid:46)(cid:38)(cid:54)(cid:183)(cid:3) (cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:3) (cid:75)(cid:68)(cid:71)(cid:3) (cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:21)(cid:19)(cid:20)(cid:22)(cid:3)
(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:87)(cid:3)(cid:90)(cid:72)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:90)(cid:3)(cid:72)(cid:73)(cid:192)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:75)(cid:68)(cid:81)(cid:71)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3)(cid:21)(cid:8)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:90)(cid:72)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:87)(cid:90)(cid:82)(cid:3)
years prior – a remarkable achievement given where 
(cid:90)(cid:72)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:72)(cid:70)(cid:82)(cid:81)(cid:71)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:17)

Not only did we turn around our service performance 
(cid:84)(cid:88)(cid:76)(cid:70)(cid:78)(cid:79)(cid:92)(cid:15)(cid:3)
(cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3) (cid:90)(cid:72)(cid:3) (cid:86)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:72)(cid:81)(cid:72)(cid:71)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3)
(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:48)(cid:72)(cid:91)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:88)(cid:81)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:72)(cid:85)(cid:3)
working  relationship  forged  during  2015  will  help  us 
better serve our customers as business volumes grow 
in the years ahead.

(cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
relationships with connecting carriers. The nature of 
our  rail  network  and  the  need  to  get  products 
moving on our railroad to key markets that we don’t 
directly  serve  necessitates  close  coordination  with 
(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:85)(cid:68)(cid:76)(cid:79)(cid:85)(cid:82)(cid:68)(cid:71)(cid:86)(cid:17)(cid:3) (cid:50)(cid:81)(cid:72)(cid:3) (cid:72)(cid:91)(cid:68)(cid:80)(cid:83)(cid:79)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:72)(cid:73)(cid:73)(cid:82)(cid:85)(cid:87)(cid:86)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:76)(cid:86)(cid:3)

(cid:68)(cid:85)(cid:72)(cid:68)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:85)(cid:72)(cid:68)(cid:70)(cid:75)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:56)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:68)(cid:70)(cid:76)(cid:192)(cid:70)(cid:3)(cid:87)(cid:82)(cid:3)
add capacity on their Brownsville subdivision, which 
(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:46)(cid:38)(cid:54)(cid:183)(cid:3)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:16)(cid:69)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:17)(cid:3)(cid:39)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:82)(cid:81)(cid:3)
several enhancements has begun and we anticipate 
(cid:86)(cid:82)(cid:80)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:69)(cid:72)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:17)

(cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:74)(cid:68)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:16)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:15)(cid:3)
(cid:86)(cid:83)(cid:72)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:23)(cid:19)(cid:8)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:7)(cid:25)(cid:23)(cid:28)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3)
budget  on  growth.  We  purchased  50  locomotives 
(cid:68)(cid:81)(cid:71)(cid:3) (cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3) (cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:85)(cid:68)(cid:76)(cid:79)(cid:70)(cid:68)(cid:85)(cid:3) (cid:193)(cid:72)(cid:72)(cid:87)(cid:3)
companies  to  enhance  our  customers’  access  to 
(cid:72)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:17)

(cid:55)(cid:75)(cid:72)(cid:3) (cid:54)(cid:68)(cid:81)(cid:70)(cid:75)(cid:72)(cid:93)(cid:3) (cid:60)(cid:68)(cid:85)(cid:71)(cid:3) (cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:51)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3) (cid:44)(cid:3) (cid:90)(cid:68)(cid:86)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:71)(cid:3)
successfully and eight new receiving and departing 
(cid:87)(cid:85)(cid:68)(cid:70)(cid:78)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:82)(cid:83)(cid:72)(cid:81)(cid:72)(cid:71)(cid:17)(cid:3)(cid:51)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:44)(cid:44)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:68)(cid:85)(cid:74)(cid:72)(cid:87)(cid:3)
(cid:73)(cid:82)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:83)(cid:72)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:70)(cid:79)(cid:68)(cid:86)(cid:86)(cid:76)(cid:192)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:85)(cid:68)(cid:70)(cid:78)(cid:86)(cid:3)
and improved mechanical space planned. Overall, 
(cid:54)(cid:68)(cid:81)(cid:70)(cid:75)(cid:72)(cid:93)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:74)(cid:85)(cid:72)(cid:68)(cid:87)(cid:79)(cid:92)(cid:3)(cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:3)(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:193)(cid:88)(cid:76)(cid:71)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:85)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:3)
(cid:70)(cid:82)(cid:81)(cid:74)(cid:72)(cid:86)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:87)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:48)(cid:82)(cid:81)(cid:87)(cid:72)(cid:85)(cid:85)(cid:72)(cid:92)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:49)(cid:88)(cid:72)(cid:89)(cid:82)(cid:3) (cid:47)(cid:68)(cid:85)(cid:72)(cid:71)(cid:82)(cid:3)
(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:3)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:16)(cid:69)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:85)(cid:68)(cid:73)(cid:192)(cid:70)(cid:3)(cid:193)(cid:82)(cid:90)(cid:86)(cid:17)

Finance

(cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:39)(cid:72)(cid:83)(cid:68)(cid:85)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)
opportunities  to  further  optimize  KCS’  capital 
(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)
meaningful  shareholder  return  and  continued 
profitable investment in the business.

(cid:79)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)

(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)

(cid:44)(cid:81)(cid:3) (cid:45)(cid:68)(cid:81)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3) (cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3) (cid:70)(cid:68)(cid:86)(cid:75)(cid:3) (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:3)
(cid:90)(cid:68)(cid:86)(cid:3) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:7)(cid:19)(cid:17)(cid:22)(cid:22)(cid:3) (cid:83)(cid:72)(cid:85)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:15)(cid:3) (cid:68)(cid:81)(cid:3) (cid:20)(cid:27)(cid:8)(cid:3)
(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:68)(cid:3) (cid:25)(cid:28)(cid:8)(cid:3) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3) (cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3) (cid:70)(cid:68)(cid:86)(cid:75)(cid:3)
(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:21)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:48)(cid:68)(cid:92)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:46)(cid:38)(cid:54)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)
directors 
to 
shareholders  by  authorizing  the  repurchase  of 
up to $500 million of KCS common stock through 
(cid:45)(cid:88)(cid:81)(cid:72)(cid:3) (cid:21)(cid:19)(cid:20)(cid:26)(cid:17)(cid:3) (cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3) (cid:46)(cid:38)(cid:54)(cid:3) (cid:85)(cid:72)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:21)(cid:17)(cid:20)(cid:3)
(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:68)(cid:3)(cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:7)(cid:20)(cid:28)(cid:23)(cid:17)(cid:21)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:17)

further  enhanced 

return 

the 

(cid:55)(cid:75)(cid:72)(cid:3) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:87)(cid:72)(cid:68)(cid:80)(cid:3) (cid:68)(cid:79)(cid:86)(cid:82)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3) (cid:68)(cid:3) (cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3)
further  strengthen  KCS’  capital  structure.  An 
(cid:7)(cid:27)(cid:19)(cid:19)(cid:3) (cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3) (cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:90)(cid:68)(cid:86)(cid:3) (cid:72)(cid:86)(cid:87)(cid:68)(cid:69)(cid:79)(cid:76)(cid:86)(cid:75)(cid:72)(cid:71)(cid:3) (cid:68)(cid:87)(cid:3)
(cid:46)(cid:38)(cid:54)(cid:15)(cid:3)(cid:85)(cid:72)(cid:83)(cid:79)(cid:68)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:46)(cid:38)(cid:54)(cid:53)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:46)(cid:38)(cid:54)(cid:48)(cid:3)
(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:75)(cid:68)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:74)(cid:74)(cid:85)(cid:72)(cid:74)(cid:68)(cid:87)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:7)(cid:25)(cid:24)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)
Additionally, $2 billion of Senior Notes issued by 

(cid:46)(cid:38)(cid:54)(cid:53)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:46)(cid:38)(cid:54)(cid:48)(cid:3) (cid:90)(cid:72)(cid:85)(cid:72)(cid:3) (cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)
Notes  issued  by  KCS.  Establishing  a  new  KCS 
credit  facility  and  migrating  the  Senior  Notes 
from  the  operating  subsidiaries  to  the  parent 
company provides important benefits, including 
simplification  of 
the  Company’s  capital 
(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:15)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3) (cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:183)(cid:86)(cid:3) (cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3) (cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:79)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:76)(cid:87)(cid:92)(cid:3)
and  borrowing  capacity,  and  opportunities  for 
optimizing cash availability.

Looking Ahead

As we look ahead, while we are optimistic that we 
(cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3) (cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:72)(cid:85)(cid:3) (cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:76)(cid:81)(cid:3) (cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)
(cid:78)(cid:72)(cid:92)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)(cid:87)(cid:92)(cid:3) (cid:68)(cid:85)(cid:72)(cid:68)(cid:86)(cid:15)(cid:3) (cid:86)(cid:82)(cid:80)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:86)(cid:68)(cid:80)(cid:72)(cid:3) (cid:80)(cid:68)(cid:70)(cid:85)(cid:82)(cid:16)
challenges  we  faced  in  2015  will  still  be  factors  in 
(cid:21)(cid:19)(cid:20)(cid:25)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:89)(cid:82)(cid:79)(cid:68)(cid:87)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:72)(cid:85)(cid:74)(cid:92)(cid:3)
markets  which  could  put  pressure  on  utility  coal, 
crude  and  frac  sand  volumes.  In  addition,  the 
(cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:71)(cid:82)(cid:79)(cid:79)(cid:68)(cid:85)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:85)(cid:87)(cid:86)(cid:3)
(cid:80)(cid:82)(cid:85)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:79)(cid:72)(cid:86)(cid:86)(cid:3) (cid:68)(cid:87)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:15)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:80)(cid:68)(cid:92)(cid:3)
impact  some  of  the  products  we  move,  such  as 
steel  and  paper.  Beyond  these,  there  are  various 
other  factors  that  signal  softness  in  the  global 
industrial economy.

Because  of  these  factors,  we  remain  steadfast  to 
the  operating  philosophy  that  helped  us  get 
through  the  2015  headwinds.  That  is:  “We  will 
control every aspect of our business over which we 
have  the  power  to  control.”  We  will  continue  to 
(cid:86)(cid:70)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:71)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:79)(cid:76)(cid:74)(cid:81)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3) (cid:80)(cid:68)(cid:70)(cid:85)(cid:82)(cid:16)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:72)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)
(cid:80)(cid:68)(cid:91)(cid:76)(cid:80)(cid:76)(cid:93)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:17)

That being said, KCS will proceed with the planned 
(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:70)(cid:3) (cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:71)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:71)(cid:85)(cid:76)(cid:89)(cid:72)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3)
(cid:79)(cid:82)(cid:81)(cid:74)(cid:72)(cid:85)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3) (cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3) (cid:76)(cid:81)(cid:3) (cid:68)(cid:85)(cid:72)(cid:68)(cid:86)(cid:3) (cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:68)(cid:86)(cid:3) (cid:83)(cid:79)(cid:68)(cid:86)(cid:87)(cid:76)(cid:70)(cid:86)(cid:15)(cid:3)
(cid:68)(cid:88)(cid:87)(cid:82)(cid:80)(cid:82)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:80)(cid:82)(cid:71)(cid:68)(cid:79)(cid:17)(cid:3) (cid:43)(cid:82)(cid:90)(cid:72)(cid:89)(cid:72)(cid:85)(cid:15)(cid:3) (cid:90)(cid:72)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3)
(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:72)(cid:91)(cid:87)(cid:85)(cid:72)(cid:80)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:75)(cid:82)(cid:88)(cid:74)(cid:75)(cid:87)(cid:73)(cid:88)(cid:79)(cid:3)(cid:68)(cid:69)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)
(cid:86)(cid:76)(cid:71)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:192)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
human  resource  assets  wisely.  As  such,  we  will 
(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:3) (cid:193)(cid:72)(cid:91)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:71)(cid:3) (cid:84)(cid:88)(cid:76)(cid:70)(cid:78)(cid:79)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:70)(cid:76)(cid:85)(cid:70)(cid:88)(cid:80)(cid:86)(cid:87)(cid:68)(cid:81)(cid:70)(cid:72)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:83)(cid:85)(cid:82)(cid:87)(cid:72)(cid:70)(cid:87)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:83)(cid:85)(cid:82)(cid:192)(cid:87)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
short term as well as the long.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 1-4717

KANSAS CITY SOUTHERN

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

427 West 12th Street,
Kansas City, Missouri
(Address of principal executive offices)

44-0663509
(I.R.S. Employer
Identification No.)

64105

(Zip Code)

816.983.1303
(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Preferred Stock, Par Value $25 Per Share, 4%, Noncumulative  

Common Stock, $.01 Per Share Par Value

Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  

    No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  

    No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.    Yes  

    No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File 

required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was 
required to submit and post such files).    Yes  

    No  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to 
this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 

See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  

    No  

The aggregate market value of common stock held by non-affiliates of the registrant was $10.00 billion at June 30, 2015. There were 108,498,752 

shares of $.01 par common stock outstanding at January 22, 2016.

Kansas City Southern’s Definitive Proxy Statement for the 2016 Annual Meeting of Stockholders which will be filed no later than 120 days after 

December 31, 2015, is incorporated by reference in Parts III.

DOCUMENTS INCORPORATED BY REFERENCE

 
 
 
 
KANSAS CITY SOUTHERN

2015 FORM 10-K ANNUAL REPORT

Table of Contents

PART I

PART II

Business

Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.

Properties

Item 3.
Item 4. Mine Safety Disclosures

Legal Proceedings

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity 

Securities

Selected Financial Data

Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.

Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules
Signatures

2

Page

3

10

18

18

20

21

21

24

25

45

47

101

101

101

102

102

103

103

103

104

112

 
 
 
Item 1.  Business

COMPANY OVERVIEW

Kansas City Southern, a Delaware corporation, is a holding company with domestic and international rail operations in 

North America that are strategically focused on the growing north/south freight corridor connecting key commercial and 
industrial markets in the central United States with major industrial cities in Mexico. As used herein, “KCS” or the “Company” 
may refer to Kansas City Southern or, as the context requires, to one or more subsidiaries of Kansas City Southern. KCS and its 
subsidiaries had approximately 6,670 employees on December 31, 2015.

KCS controls and owns all of the stock of The Kansas City Southern Railway Company (“KCSR”), a U.S. Class I 
railroad founded in 1887. KCSR serves a ten-state region in the midwest and southeast regions of the United States and has the 
shortest north/south rail route between Kansas City, Missouri and several key ports along the Gulf of Mexico in Alabama, 
Louisiana, Mississippi and Texas.

KCS controls and owns all of the stock of Kansas City Southern de México, S.A. de C.V. (“KCSM”). Through its 50-year 

concession from the Mexican government (the “Concession”), which could expire in 2047 unless extended, KCSM operates a 
key commercial corridor of the Mexican railroad system and has as its core route the most strategic portion of the shortest, most 
direct rail passageway between Mexico City and Laredo, Texas. Laredo is a principal international gateway through which a 
substantial portion of rail and truck traffic between the United States and Mexico crosses the border. KCSM serves most of 
Mexico’s principal industrial cities and three of its major seaports. KCSM’s rail lines provide exclusive rail access to the United 
States and Mexico border crossing at Nuevo Laredo, Tamaulipas, the largest rail freight interchange point between the United 
States and Mexico. Under the Concession, KCSM has the right to control and operate the southern half of the rail bridge at 
Laredo, Texas, which spans the Rio Grande River between the United States and Mexico. The Company also controls the 
northern half of this bridge through its ownership of Mexrail, Inc. (“Mexrail”).

KCSM also provides exclusive rail access to the Port of Lazaro Cardenas on the Pacific Ocean. The Mexican government 

is developing the port at Lazaro Cardenas principally to serve Mexican markets and as an alternative to the U.S. west coast 
ports for Asian and South American traffic bound for North America. 

The Company wholly owns Mexrail which, in turn, wholly owns The Texas Mexican Railway Company (“Tex-Mex”). 

Tex-Mex owns a 157-mile rail line extending from Laredo, Texas to the port city of Corpus Christi, Texas, which connects the 
operations of KCSR with KCSM. Through its ownership of Mexrail, the Company owns the northern half of the rail bridge at 
Laredo, Texas.

The KCS coordinated rail network (KCSR, KCSM and Tex-Mex) comprises approximately 6,600 route miles extending 
from the midwest and southeast portions of the United States south into Mexico and connects with all other Class I railroads, 
providing shippers with an effective alternative to other railroad routes and giving direct access to Mexico and the southeast and 
southwest United States through alternate interchange hubs.

Panama Canal Railway Company (“PCRC”), an unconsolidated joint venture company owned equally by KCS and Mi-

Jack Products, Inc. (“Mi-Jack”), was awarded a concession from the Republic of Panama to reconstruct and operate the Panama 
Canal Railway, a 47-mile railroad located adjacent to the Panama Canal that provides international container shipping 
companies with a railway transportation alternative to the Panama Canal. The Concession was awarded in 1998 for an initial 
term of 25 years with an automatic renewal for an additional 25 year term. The Panama Canal Railway is a north-south railroad 
traversing the Isthmus of Panama between the Atlantic and Pacific Oceans.

Other subsidiaries and affiliates of KCS include the following:

•  Meridian Speedway, LLC (“MSLLC”), a seventy percent-owned consolidated affiliate that owns the former KCSR 
rail line between Meridian, Mississippi and Shreveport, Louisiana, which is the portion of the rail line between 
Dallas, Texas and Meridian known as the “Meridian Speedway.” Norfolk Southern Corporation, through its wholly-
owned subsidiary, The Alabama Great Southern Railroad Company, owns the remaining thirty percent of MSLLC.

•  KCSM Servicios, S.A. de C.V. (“KCSM Servicios”), a wholly-owned and consolidated affiliate that provides  

employee services to KCSM;

•  Ferrocarril y Terminal del Valle de México, S.A. de C.V. (“FTVM”), a twenty-five percent-owned unconsolidated 

affiliate that provides railroad services as well as ancillary services in the greater Mexico City area; and

3

•  PTC-220, LLC (“PTC-220”), a fourteen percent-owned unconsolidated affiliate that holds the licenses to large blocks 
of radio spectrum and other assets for the deployment of positive train control (“PTC”). See Government Regulation 
section for further information regarding PTC.

MARKETS SERVED

Chemical and petroleum. This sector includes products 

such as plastics, other petroleum refined products and 
miscellaneous chemicals. KCS transports these products to 
markets in the midwest, southeast and northeast United States 
and throughout Mexico through interchanges with other rail 
carriers. The products within the chemicals and plastics 
channels are used in the automotive, housing and packaging 
industries as well as in general manufacturing. KCS hauls 
petroleum products across its network and as petroleum 
refineries have continued to increase their refining capacity, 
they have coordinated with KCS to develop additional long-
term storage opportunities which complement a fluid freight 
railroad operation.

2015 Revenues
Business Mix

Automotive
9%

Other
4%

Chemical &
Petroleum
20%

Intermodal
16%

Energy
10%

Agriculture &
Minerals
18%

Industrial &
Consumer
Products
23%

Industrial and consumer products. This sector includes metals and ores such as iron, steel, zinc and copper. The majority 
of metals, minerals and ores mined, and steel produced in Mexico are consumed within Mexico. The volume of Mexican steel 
domestic consumption and exports fluctuates based on global market prices. Higher-end finished products such as steel coils are 
used by Mexican manufacturers in automobiles, household appliances, the oil and gas industry, and other consumer goods 
which are imported from the United States through land borders and through the seaports served by KCS’s rail network. KCS 
also transports steel coils, plates and pipe from U.S. and Mexican based mini-mills to locations in the U.S. and Mexico for oil 
drilling, appliance and automotive applications.

This sector also serves paper mills directly and indirectly through its various short-line connections. KCS’s rail lines run 

through the heart of the southeast United States timber-producing region. Additionally, KCS is uniquely positioned to serve 
many paper mills in the southeast United States whose products are increasing in demand due to a general growth of consumer 
goods and industrial production in central Mexico.

Agriculture and minerals. The agriculture and minerals sector consists primarily of grain and food products. Shipper 

demand for agriculture products is affected by competition among sources of grain and grain products, as well as price 
fluctuations in international markets for key commodities. In the United States, KCS’s rail lines receive and originate shipments 
of grain and grain products for delivery to feed mills, food and industrial consumers in the U.S. and Mexico. United States 
export grain shipments and Mexico import grain shipments include primarily corn, wheat, and soybeans. Over the long term, 
export grain shipments to Mexico are expected to increase as a result of Mexico’s reliance on grain imports and KCS’s 
coordinated rail network is well positioned to meet these increases in demand. Food products consist mainly of soybean meal, 
grain meal, oils, canned goods, distillers dried grains, corn syrup and sugar. Other shipments consist of a variety of products 
including ores, minerals, clay and glass used across North America.

Energy. The energy sector includes coal, frac sand, petroleum coke and crude oil. KCS hauls unit trains (trains 
transporting a single commodity from one source to one destination) of coal for nine electric generating plants in the central 
United States. The coal originates from the Powder River Basin in Wyoming and is interchanged to KCS at Kansas City, 
Missouri. Coal mined in the midwest United States is transported in non-unit trains to industrial consumers such as paper mills, 
steel mills, and cement companies. Frac sand originating primarily in Wisconsin, Illinois or Iowa is delivered to transloads 
located in northeast Texas, northern Louisiana and south Texas for distribution to gas and oil wells in the region. KCS 
transports petroleum coke from refineries in the United States to cement companies in Mexico as well as to vessels for 
international distribution through the Pabtex export terminal located in Port Arthur, Texas. The majority of crude by rail 

4

business originates in Canada and Utah, with spot shipments coming from west Texas, Colorado and North Dakota, and is 
delivered to U.S. Gulf Coast refineries and tank farms in Texas, Louisiana and Alabama.

Intermodal. The intermodal freight sector consists primarily of hauling freight containers or truck trailers on behalf of 
steamship lines, motor carriers, and intermodal marketing companies with rail carriers serving as long-distance haulers. KCS 
serves and supports the U.S. and Mexican markets, as well as cross border traffic between the U.S. and Mexico. In light of the 
importance of trade between Asia and North America, the Company believes the Port of Lazaro Cardenas continues to be a 
strategically beneficial location for ocean carriers, manufacturers and retailers. Equally important, the increase in foreign direct 
investment in Mexico has caused the KCS Mexico/U.S. cross border corridor to emerge as an increasingly important tool for 
the North American Free Trade Agreement (“NAFTA”) freight flow. The Company also provides premium service to customers 
over its line from Dallas through the Meridian Speedway — a critical link in creating the most direct route between the 
southwest and southeast/northeast U.S.

Automotive. KCS provides rail transportation to every facet of the automotive industry supply chain, including 
automotive manufacturers, assembly plants and distribution centers throughout North America. Several U.S., European and 
Asian automakers have built or intend to build assembly plants in central Mexico to take advantage of access to lower costs, 
which has driven a shift in production and distribution patterns from the U.S. to Mexico. In addition, KCS transports finished 
vehicles imported and exported to and from Asia through a distribution facility at the Port of Lazaro Cardenas. As the 
automotive industry shifts production and distribution patterns, KCS is poised to serve the automotive industry’s evolving 
transportation requirements.

GOVERNMENT REGULATION 

The Company’s United States operations are subject to federal, state and local laws and regulations generally applicable 

to all businesses. Rail operations are also subject to the regulatory jurisdiction of the Surface Transportation Board (“STB”), the 
Federal Railroad Administration (“FRA”) of the U.S. Department of Transportation (“DOT”), the Occupational Safety and 
Health Administration (“OSHA”), as well as other federal and state regulatory agencies. The STB has jurisdiction over disputes 
and complaints involving certain rates, routes and services, the sale or abandonment of rail lines, applications for line 
extensions and construction, and consolidation or merger with, or acquisition of control of, rail common carriers. DOT and 
OSHA each has jurisdiction under several federal statutes over a number of safety and health aspects of rail operations, 
including the transportation of hazardous materials. In 2008, the President of the United States signed the Rail Safety 
Improvement Act of 2008 into law, which, among other things, revised hours of service for train and certain other employees 
and mandated implementation of PTC at certain locations by the end of 2015. PTC is a technology designed to help prevent 
train-to-train collisions, overspeed derailments, incursions into rail work zones, and entry into main line track if a switch is 
misaligned at certain locations, including main line track where toxic inhalation hazard or poison inhalation hazard movements 
occur or where passenger operations occur. The Surface Transportation Extension Act of 2015 extended the PTC 
implementation deadline from the end of 2015 to the end of 2018, conditioned upon the filing of revised PTC Implementation 
Plans, with a further two-year extension possible subject to review by the Department of Transportation. PTC will add to 
operating costs, increase the number of employees the Company employs and require KCS to make significant investments in 
new safety technology. 

KCS’s U.S. subsidiaries are subject to extensive federal, state and local environmental regulations. These laws cover 
discharges to water, air emissions, toxic substances, and the generation, handling, storage, transportation and disposal of waste 
and hazardous materials. These regulations have the effect of increasing the costs, risks and liabilities associated with rail 
operations. Environmental risks are also inherent in rail operations, which frequently involve transporting chemicals and other 
hazardous materials.

Primary regulatory jurisdiction for the Company’s Mexican operations is overseen by the Mexican Secretaría de 

Comunicaciones y Transportes (“Secretary of Communications and Transportation” or “SCT”). The SCT establishes regulations 
concerning railway safety and operations, and is responsible for resolving disputes between railways and between railways and 
customers. KCSM must register its maximum rates with the SCT and make regular reports to the SCT on investment and traffic 
volumes. The Company may freely set rates unless the Mexican government determines that there is no effective competition. 
In the event that rates charged are higher than the registered rates, KCSM must reimburse customers with interest.

5

KCSM holds a concession from the Mexican government until June 2047 (exclusive through 2027, subject to certain 
trackage and haulage rights granted to other concessionaires), which is renewable under certain conditions for an additional 
period of up to 50 years (the “Concession”). The Concession is to provide freight transportation services over rail lines which 
are a primary commercial corridor of the Mexican railroad system. KCSM is required to provide railroad services to all users on 
a fair and non-discriminatory basis and in accordance with efficiency and safety standards approved periodically by the 
Mexican government. KCSM has the right to use, but does not own, all track and buildings that are necessary for the rail lines’ 
operation. KCSM is obligated to maintain the right of way, track structure, buildings and related maintenance facilities to the 
operational standards specified in the Concession agreement and to return the assets in that condition at the end of the 
Concession period. KCSM is required to pay the Mexican government a concession duty equal 1.25% of gross revenues during 
the Concession period.

The Company’s Mexican operations are subject to Mexican federal and state laws and regulations relating to the 

protection of the environment through the establishment of standards for water discharge, water supply, emissions, noise 
pollution, hazardous substances and transportation and handling of hazardous and solid waste. The Mexican government may 
bring administrative and criminal proceedings and impose economic sanctions against companies that violate environmental 
laws, and temporarily or even permanently close non-complying facilities. 

Noncompliance with applicable legal provisions may result in the imposition of fines, temporary or permanent shutdown 
of operations or other injunctive relief, criminal prosecution or, with respect to KCSM, the termination of the Concession. KCS 
maintains environmental provisions which are believed by management to be appropriate with respect to known and existing 
environmental contamination of its properties which KCS may be responsible to remedy. In addition, KCS’s subsidiaries are 
party to contracts and other legally binding obligations by which previous owners of certain facilities now owned by KCS are 
responsible to remedy contamination of such sites remaining from their previous ownership. There are currently no material 
legal or administrative proceedings pending against the Company with respect to any environmental matters and management 
does not believe that continued compliance with environmental laws will have any material adverse effect on the Company’s 
consolidated financial statements. KCS cannot predict the effect, if any, that unidentified environmental matters or the adoption 
of additional or more stringent environmental laws and regulations would have on the Company’s consolidated financial 
statements.

COMPETITION

The Company competes against other railroads, many of which are much larger and have significantly greater financial 
and other resources. The railroad industry in North America is dominated by a few very large carriers. The larger U.S. western 
railroads (BNSF Railway Company and Union Pacific Railroad Company), in particular, are significant competitors of KCS 
because of their substantial resources and competitive routes.

In Mexico, KCSM’s operations are subject to competition from other railroads, particularly Ferrocarril Mexicano, S.A. de 

C.V. (“Ferromex”) and Ferrosur, S.A. de C.V. (“Ferrosur”), both controlled by Grupo Mexico S.A.B. de C.V. Ferromex and 
Ferrosur together are much larger and have significantly greater financial and other resources than KCSM, serving most of the 
major ports and cities in Mexico and together owning fifty percent of FTVM, which serves industries located within Mexico 
City.

The ongoing impact of past and future rail consolidation is uncertain. However, KCS believes that its investments and 
strategic alliances continue to competitively position the Company to attract additional rail traffic throughout its rail network.

The Company is subject to competition from motor carriers, barge lines and other maritime shipping, which compete 

across certain routes in KCS’s operating areas. In the past, truck carriers have generally eroded the railroad industry’s share of 
total transportation revenues. Intermodal traffic and certain other traffic face highly price sensitive competition, particularly 
from motor carriers. However, rail carriers, including KCS, have placed an emphasis on competing in the intermodal 
marketplace and working with motor carriers to provide end-to-end transportation of products.

While deregulation of U.S. freight rates has enhanced the ability of railroads to compete with each other and with 
alternative modes of transportation, this increased competition has generally resulted in downward pressure on freight rates 
since deregulation. Competition with other railroads and other modes of transportation is generally based on the rates charged, 
the quality and reliability of the service provided and the quality of the carrier’s equipment for certain commodities.

6

RAIL SECURITY 

The Company and its rail subsidiaries have continued to develop and implement multidisciplinary approaches to secure 

the Company’s assets and personnel against transnational criminal organizations that actively target transportation networks. In 
addition, the Company has developed a variety of strategies to help mitigate the risk terrorist attacks could pose to the 
Company, its personnel and assets. Many of the specific measures the Company utilizes for these efforts are required to be kept 
confidential through arrangements with government agencies, such as the Department of Homeland Security (“DHS”), or 
through jointly-developed and implemented strategies and plans with connecting carriers.

 KCSR and KCSM developed a proprietary security plan based on an industry-wide plan developed by the Association of 
American Railroads (“AAR”) members which focuses on comprehensive risk assessments in five areas — hazardous materials; 
train operations; critical physical assets; military traffic; and information technology and communications. The security plan is 
kept confidential, with access to the plan tightly limited to members of management with direct security and anti-terrorism 
implementation responsibilities. The Company participates with other AAR members in periodic drills under the industry plan 
to test and refine its various provisions.

 To protect the confidentiality and sensitivity of both the AAR plans and the proprietary strategies the Company has 
developed to safeguard against criminal enterprises, terrorism, and other security and safety threats, the following paragraphs 
will provide only a general overview of some of these efforts. 

The Company’s security activities range from periodically mailing each employee a security awareness brochure (which 

is also posted under the “Employees” tab on the Company’s internet website, www.kcsouthern.com) to its ongoing 
implementation of security plans for rail facilities in areas labeled by the DHS as High Threat Urban Areas (“HTUAs”). The 
Company’s other activities to bolster security against terrorism include, but are not limited to, the following:

•  Conferring regularly with other railroads’ security personnel and with industry experts on security issues;

•  Routing shipments of certain chemicals, which might be toxic if inhaled, pursuant to federal regulations;

• 

Initiating a series of over 20 voluntary action items agreed to between AAR and DHS as enhancing security in the rail 
industry;

•  Conducting constant and targeted security training as part of the scheduled training for operating employees and 

managers;

•  Development of smartphone applications to ensure immediate information and pictures from security supervisors and 

protection assets pertaining to potential operational risks;

•  Developing a multi-layered security model using high-speed digital imaging, system velocity and covert and overt 

security filters to mitigate the risk of illicit activity;

•  Measuring key security metrics to ensure positive risk mitigation and product integrity trends;

•  Performing constant due diligence by benchmarking security on a world-wide basis to monitor threat streams related 

to rail incidents; 

• 

Implementation of a Tactical Intelligence Center by KCSM, training core members in new technology helping to 
prevent, detect, deter, deny and respond to potentially illicit activities; and

•  Deployment of an array of non-intrusive technologies including, but not limited to, digital video surveillance and 
analytics as part of an intelligent video security solution, including a Closed Circuit Television platform with geo-
fencing for intrusion detection, to allow for remote viewing access to monitor ports of entry, intermodal and rail 
yards.

In addition, the Company utilizes dedicated security personnel with extensive law enforcement backgrounds to oversee 

the ongoing and increasingly complex security efforts of the Company in both the United States and Mexico. While the risk of 
theft and vandalism is higher in Mexico, KCSM remains among the safest methods of transportation for freight shipments in 
Mexico. KCSM’s record in rail safety is due in large part to the implementation of a multi-layered safety and security process 
throughout the KCSM network. In addition to having its own internal system, the process is connected to, and supported by a 
high level of federal, state and local law enforcement. A primary focus of this effort involves maintaining constant due 
diligence, counter intelligence, technology reporting applications and active vigilance while enhancing overall system velocity, 
which reduces the residual risk for incidents to occur.

7

RAILWAY LABOR ACT

Labor relations in the U.S. railroad industry are subject to extensive governmental regulation under the Railway Labor 
Act (“RLA”). Under the RLA, national labor agreements are renegotiated on an industry-wide scale when they become open 
for modification, but their terms remain in effect until new agreements are reached or the RLA’s procedures (which include 
mediation, cooling-off periods, and the possibility of presidential intervention) are exhausted. Contract negotiations with the 
various unions generally take place over an extended period of time and the Company rarely experiences work stoppages 
during negotiations. Wages, health and welfare benefits, work rules and other issues have traditionally been addressed during 
these negotiations.

COLLECTIVE BARGAINING

Approximately 80% of KCSR employees are covered by collective bargaining agreements. These agreements do not have 

expiration dates, but rather remain in place until modified by subsequent agreements. KCSR participates in industry-wide 
multi-employer bargaining as a member of the National Carriers’ Conference Committee, as well as local bargaining for 
agreements that are limited to KCSR's property. Multi-employer agreements are subject to a procedure that allows requests for 
changes to be served every five years. The last multi-employer agreements with all of the participating unions were reached and 
ratified during 2011 and the first half of 2012, and were retroactive to January 1, 2010. The current round of multi-employer 
bargaining began on January 1, 2015. The subjects of bargaining primarily concern salary and benefits payable to the various 
union employees. The union labor negotiation has not historically resulted in any strike, lock-out, or other disruption in the 
Company’s business operations. The Company does not believe the expected settlements will have a material impact on the 
consolidated financial statements.

KCSM Servicios union employees are covered by one labor agreement, which was signed on April 16, 2012, between 

KCSM Servicios and the Sindicato de Trabajadores Ferrocarrileros de la República Mexicana (“Mexican Railroad Union”), for 
an indefinite period of time, for the purpose of regulating the relationship between the parties. Approximately 80% of KCSM 
Servicios employees are covered by this labor agreement. The compensation terms under this labor agreement are subject to 
renegotiation on an annual basis and all other benefits are subject to negotiation every two years. The union labor negotiations 
with the Mexican Railroad Union have not historically resulted in any strike, boycott or other disruption in KCSM’s business 
operations. On July 1, 2015, the negotiation of compensation terms and all other benefits was initiated with the Mexican 
Railroad Union. The anticipated resolution of this negotiation is not expected to have a material impact to the consolidated 
financial statements. 

EXECUTIVE OFFICERS OF KCS AND SUBSIDIARIES

All executive officers are elected annually and serve at the discretion of the Board of Directors. All of the executive 
officers have employment agreements with KCS and/or its subsidiaries. The mailing address of the principal executive officers 
other than Mr. Zozaya is P.O. Box 219335, Kansas City, Missouri 64121. Mr. Zozaya’s mailing address is Montes Urales No. 
625, Col. Lomas de Chapultepec, C.P. 11000, Mexico D.F.

David L. Starling — Chief Executive Officer — 66 — Served in this capacity since August 1, 2010. Mr. Starling has been 

a director of KCS since May 6, 2010. He also served as President of KCS from July 1, 2008 to March 1, 2015 and as Chief 
Operating Officer of KCS from July 1, 2008 through August 1, 2010. Mr. Starling has also served as a Director and Chief 
Executive Officer of KCSR since July 1, 2008 and as President from July 1, 2008 to March 1, 2015. He has also served as a 
Director of KCSM since October 2013 and he served as Chairman of the Board of Directors of KCSM from October 2013 to 
June 2015. He served as Vice Chairman of the Board of Directors of KCSM from September 2009 to October 2013. Mr. 
Starling has served as Co-Chairman of the Board of Directors of PCRC and Panarail since October 2013. He served as Vice 
Chairman of the Board of Directors of PCRC and Panarail from July 2008 to September 2013. Prior to joining KCS, Mr. 
Starling served as President and Director General of PCRC from 1999 through June 2008.

Patrick J. Ottensmeyer — President — 58 — Served in this capacity since March 1, 2015. He served as Executive Vice 

President Sales and Marketing of KCS from October 16, 2008 through March 1, 2015. Mr. Ottensmeyer joined KCS in May 
2006 as Executive Vice President and Chief Financial Officer. Prior to joining KCS, Mr. Ottensmeyer served as Chief Financial 
Officer of Intranasal Therapeutics, Inc. from 2001 to May 2006. From 2000 to 2001, he served as Corporate Vice President 
Finance and Treasurer for Dade-Behring Holdings, Inc. From 1993 to 1999, Mr. Ottensmeyer served as Vice President Finance 
and Treasurer at Burlington Northern Santa Fe Corporation and BNSF Railway and their predecessor companies.

8

Warren K. Erdman — Executive Vice President — Administration and Corporate Affairs — 57 — Served in this capacity 
since April 2010. Mr. Erdman served as Executive Vice President — Corporate Affairs from October 2007 until April 2010. He 
served as Senior Vice President — Corporate Affairs of KCS and KCSR from January 2006 to September 2007. Mr. Erdman 
served as Vice President — Corporate Affairs of KCS from April 15, 1997 to December 31, 2005 and as Vice President — 
Corporate Affairs of KCSR from May 1997 to December 31, 2005. Prior to joining KCS, Mr. Erdman served as Chief of Staff 
to United States Senator Kit Bond of Missouri from 1987 to 1997.

Michael W. Upchurch — Executive Vice President and Chief Financial Officer — 55 — Served in this capacity since 

October 16, 2008. Mr. Upchurch joined KCS in March 2008 as Senior Vice President Purchasing and Financial Management. 
From 1990 through September 2006, Mr. Upchurch served in various senior financial leadership positions at Sprint Nextel 
Corporation and its predecessor, Sprint Corporation, including Senior Vice President Financial Operations, Senior Vice 
President Finance Sprint Business Solutions and Senior Vice President Finance Long Distance Division.

José Guillermo Zozaya Delano — President and Executive Representative — KCSM — 63 — Served in this position 
since April 20, 2006. Mr. Zozaya has 35 years of experience in law and government relations, most recently as the Legal and 
Government Relations Director for ExxonMobil México, S.A. de C.V., where he spent nine years prior to joining KCSM.

Brian D. Hancock — Executive Vice President and Chief Marketing Officer — 50 — Mr. Hancock has served in this 

capacity since joining KCS in August 2015. Prior to joining KCS, Mr. Hancock served as Senior Vice President of Supply 
Chain for Family Dollar Stores, Inc. from 2013 to July 2015. From 2011 to 2013, Mr. Hancock served as President – North 
America for The Martin – Brower Company, L.L.C. From 2005 to 2011, he served as Vice President – Global Supply Chain for 
Whirlpool Corporation. 

Lora S. Cheatum — Senior Vice President — Human Resources — 59 — Ms. Cheatum has served in this capacity since 

joining KCS in October 2014. Ms. Cheatum previously served as Senior Vice President Global Human Resources of Layne 
Christensen from 2012 to October 2014. From 2010 to 2012, she served as Director — Field Operations at Fitness Together 
Holdings, Inc. Ms. Cheatum spent nine years with Kansas City Power & Light, from 2001 to 2010, where she was Vice 
President of Procurement and previously as Vice President Human Resources.

Michael J. Naatz — Senior Vice President Operations Support and Chief Information Officer — 50 — Served in this 
capacity since August 2014. Mr. Naatz served as Senior Vice President and Chief Information Officer of the Company from 
May 2012 to July 2014. Prior to joining KCS, Mr. Naatz served as President of USF Holland, a YRC Worldwide, Inc. 
(“YRCW”) company, from 2011 to May 2012. From 2010 to 2011, Mr. Naatz served as President and Chief Customer Officer - 
Customer Care Division at YRCW. From 2008 to 2010, he served as Executive Vice President and Chief Information & Service 
Officer at YRCW. From 2005 to 2007, he served as President — Enterprise Services Division at YRCW. From 1994 to 2005, he 
held various leadership positions with USF Corporation.

Jeffrey M. Songer — Senior Vice President Engineering and Chief Transportation Officer — 46 — Mr. Songer has served 
in this capacity since August 2014. Mr. Songer previously was Vice President and Chief Engineer for KCSR from June 2012 to 
July 2014. Prior to serving as KCSR’s Vice President and Chief Engineer, Mr. Songer served as Assistant Vice President — 
Engineering and Planning from March 2011 to June 2012, and as its General Director — Planning, Scheduling & 
Administration from January 2007 to March 2011.

Mary K. Stadler — Senior Vice President and Chief Accounting Officer — 56 — Served in this capacity since March 2, 

2009. From April 1990 through August 2008, Ms. Stadler served in various finance leadership positions at Sprint Nextel 
Corporation and its predecessor, Sprint Corporation, most recently as Vice President — Assistant Controller.

William J. Wochner — Senior Vice President and Chief Legal Officer — 68 — Served in this capacity since February 

2007. He served as Vice President and Interim General Counsel from December 2006 to January 2007. From September 2006 
to December 2006, Mr. Wochner served as Vice President and Associate General Counsel. From March 2005 to September 
2006, Mr. Wochner served as Vice President Sales and Marketing/Contracts for KCSR. From February 1993 to March 2005, 
Mr. Wochner served as Vice President and General Solicitor of KCSR.

There are no arrangements or understandings between the executive officers and any other person pursuant to which the 
executive officer was or is to be selected as an officer of KCS, except with respect to the executive officers who have entered 
into employment agreements designating the position(s) to be held by the executive officer.

None of the above officers is related to another, or to any of the directors of KCS.

9

AVAILABLE INFORMATION

KCS’s website (www.kcsouthern.com) provides at no cost KCS’s Annual Reports on Form 10-K, Quarterly Reports on 
Form 10-Q, and Current Reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after the 
electronic filing of these reports is made with the Securities and Exchange Commission. In addition, KCS’s corporate 
governance guidelines, ethics and legal compliance policy, and the charters of the Audit Committee, the Finance Committee, 
the Nominating and Corporate Governance Committee and the Compensation and Organization Committee of the Board of 
Directors are available on KCS’s website. These guidelines, policies and charters are available in print without charge to any 
stockholder requesting them. Written requests for these materials may be made to the Corporate Secretary, P.O. Box 219335, 
Kansas City, Missouri 64121-9335 (or if by express delivery to 427 West 12th Street, Kansas City, Missouri 64105). From time 
to time, KCS publicly designates material information by posting it on the website, investors.kcsouthern.com, in lieu of press 
releases.

See Item 8, Financial Statements and Supplementary Data — Note 1 “Description of the Business” and Note 17 
“Geographic Information” for more information on the description and general development of the Company’s business and 
financial information about geographic areas.

Item 1A.  Risk Factors

KCS, as a common carrier by rail, is required by United States and Mexican laws to transport hazardous materials, which 
could expose KCS to significant costs and claims.

Under United States federal statutes and applicable Mexican laws, KCS’s common carrier responsibility requires it to 

transport hazardous materials. Any rail accident or other incident or accident on KCS’s network, facilities, or at the facilities of 
KCS’s customers involving the release of hazardous materials, including toxic inhalation hazard (or TIH) materials, could 
involve significant costs and claims for personal injury, property damage, and environmental penalties and remediation in 
excess of the Company’s insurance coverage for these risks, which could have a material adverse effect on KCS’s consolidated 
financial statements.

KCS’s business is subject to regulation by federal, state and local legislatures and agencies that could impose significant 
cost on the Company’s business operations.  

KCS is subject to legislation and regulation enacted by federal, state and local legislatures and agencies in the U.S. and 
Mexico with respect to railroad operations. Government regulation of the railroad industry is a significant determinant of the 
competitiveness and profitability of railroads. Changes in legislation or regulation could have a negative impact on KCS’s 
ability to negotiate prices for rail services, could negatively affect competition among rail carriers, or could negatively impact 
operating practices, resulting in reduced efficiency, increased operating costs or increased capital investment, all of which could 
result in a material adverse effect on KCS’s consolidated financial statements.

New economic regulation in the U.S. or Mexico in current or future proceedings could change the regulatory framework 
within which the Company operates which could materially change the Company's business and have an adverse effect on the 
Company's consolidated financial statements.

Amendments to the Mexican Regulatory Railroad Service Law became effective in January 2015 and the new Mexican 
antitrust legislation became effective in July 2014. Under Article 47 of the Mexican Railroad Services Law and its regulations, 
if the Comisión Federal de Competencia Económica (Mexican Antitrust Commission or “CFCE”) determines that effective 
competition does not exist, then the SCT has authority to impose remedies. CFCE, however, has not published guidelines 
regarding the factors that constitute a lack of competition. It is, therefore, unclear under what particular circumstances CFCE 
would deem a lack of competition to exist. If the SCT intervenes and imposes such remedies, it may negatively impact 
profitability. The Company continues to evaluate the Mexican government’s implementation of these new laws, and unexpected 
adverse implementation could have a material adverse effect on KCS’s business operations and consolidated financial 
statements.   

As part of the Rail Safety Improvement Act of 2008 in the United States, Class I railroad carriers and passenger and 
commuter rail operators must implement Positive Train Control (“PTC”), a technology designed to help prevent train-to-train 
collisions, overspeed derailments, incursions into rail work zones, and entry into main line track if a switch is misaligned. PTC 
is required to be implemented at certain locations, including main line track where toxic inhalation hazard movements regularly 
occur or where passenger operations occur. The Surface Transportation Extension Act of 2015 extended the PTC 

10

implementation deadline from the end of 2015 to the end of 2018, conditioned upon the filing of revised PTC Implementation 
Plans, with a further two-year extension possible subject to review by the Department of Transportation. PTC will add to 
operating costs, increase the number of employees the Company employs and require KCS to make significant investments in 
new safety technology. KCS’s failure to meet deadlines, including any extension, could result in fines, service interruptions or 
penalties and could have a material adverse effect on the Company’s consolidated financial statements.

KCS’s inadvertent failure or inability to comply with applicable laws and regulations could have a material adverse effect 

on the Company’s consolidated financial statements and operations, including fines, penalties, or limitations on operating 
activities until compliance with applicable requirements is achieved. Congress and government agencies may change the 
legislative or regulatory framework within which the Company operates without providing any recourse for any adverse effects 
on the Company’s business that occur as a result of such change. Additionally, some of the regulations require KCS to obtain 
and maintain various licenses, permits and other authorizations. Any failure to obtain or maintain these licenses, permits, and 
other authorizations could adversely affect KCS’s business operations.

KCSM’s Mexican Concession is subject to revocation or termination in certain circumstances which would prevent KCSM 
from operating its railroad and would have a material adverse effect on the Company’s consolidated financial statements.

KCSM operates under the Concession granted by the Mexican government until June 2047, which is renewable for an 

additional period of up to 50 years, subject to certain conditions. The Concession gives KCSM exclusive rights to provide 
freight transportation services over its rail lines for the first 30 years of the 50-year Concession, subject to certain trackage and 
haulage rights granted to other concessionaires. The SCT, which is principally responsible for regulating railroad services in 
Mexico, has broad powers to monitor KCSM’s compliance with the Concession, and it can require KCSM to supply it with any 
technical, administrative and financial information it requests. Among other obligations, KCSM must comply with the 
investment commitments established in its business plan, which forms an integral part of the Concession, and must update the 
plan every five years. The SCT treats KCSM’s business plans confidentially. The SCT also monitors KCSM’s compliance with 
efficiency and safety standards established in the Concession. The SCT reviews, and may amend, these standards every five 
years.

Under the Concession, KCSM has the right to operate its rail lines, but it does not own the land, roadway or associated 

structures. If the Mexican government legally terminates the Concession, it would own, control, and manage such public 
domain assets used in the operation of KCSM’s rail lines. All other property not covered by the Concession, including all 
locomotives and railcars otherwise acquired, would remain KCSM’s property. In the event of early termination, or total or 
partial revocation of the Concession, the Mexican government would have the right to cause the Company to lease all service-
related assets to it for a term of at least one year, automatically renewable for additional one-year terms up to five years. The 
amount of rent would be determined by experts appointed by KCSM and the Mexican government. The Mexican government 
must exercise this right within four months after early termination or revocation of the Concession. In addition, the Mexican 
government would also have a right of first refusal with respect to certain transfers by KCSM of railroad equipment within 
90 days after revocation of the Concession.

The Mexican government may also temporarily seize control of KCSM’s rail lines and its assets in the event of a natural 

disaster, war, significant public disturbance or imminent danger to the domestic peace or economy. In such a case, the SCT may 
restrict KCSM’s ability to exploit the Concession in such manner as the SCT deems necessary under the circumstances, but 
only for the duration of any of the foregoing events. Mexican law requires that the Mexican government pay compensation if it 
effects a statutory appropriation for reasons of the public interest. With respect to a temporary seizure due to any cause other 
than international war, the Mexican Railroad Services Law and regulations provide that the Mexican government will 
indemnify an affected concessionaire for an amount equal to damages caused and losses suffered. However, these payments 
may not be sufficient to compensate KCSM for its losses and may not be made timely.

The SCT may revoke the Concession if KCSM is sanctioned on a specified number of occasions for any of the following: 

unjustly interrupting the operation of its rail lines or for charging rates higher than those it has registered with the SCT; 
restricting the ability of other Mexican rail operators to use its rail lines; failing to make payments for damages caused during 
the performance of services; failing to comply with any term or condition of the Mexican Railroad Services Law and 
regulations or the Concession; failing to make the capital investments required under its five-year business plan filed with the 
SCT; or failing to maintain an obligations compliance bond and insurance coverage as specified in the Mexican Railroad 
Services Law and regulations. In addition, the Concession would revoke automatically if KCSM changes its nationality or 
assigns or creates any lien on the Concession, or if there is a change in control of KCSM without the SCT’s approval. The SCT 

11

may also terminate the Concession as a result of KCSM’s surrender of its rights under the Concession, or for reasons of public 
interest or upon KCSM’s liquidation or bankruptcy. If the Concession is terminated or revoked by the SCT for any reason, 
KCSM would receive no compensation and its interest in its rail lines and all other fixtures covered by the Concession, as well 
as all improvements made by it, would revert to the Mexican government. Revocation or termination of the Concession could 
adversely affect the Company’s consolidated financial statements.

KCS faces possible catastrophic loss and liability, and its insurance may not be sufficient to cover its damages or damages 
to others.

The operation of any railroad carries with it an inherent risk of catastrophe, mechanical failure, collision, and property 

loss. In the course of KCS’s operations, spills or other environmental mishaps, cargo loss or damage, business interruption due 
to political developments, as well as labor disputes, strikes and adverse weather conditions, could result in a loss of revenues or 
increased liabilities and costs. Collisions, environmental mishaps, or other accidents can cause serious bodily injury, death and 
extensive property damage, particularly when such accidents occur in heavily populated areas. Additionally, KCS’s operations 
may be affected from time to time by natural disasters such as earthquakes, volcanoes, floods, hurricanes or other storms. The 
occurrence of a major natural disaster could have a material adverse effect on KCS’s consolidated financial statements. The 
Company maintains insurance that is consistent with industry practice and in compliance with the requirements of the 
Concession against the accident-related risks involved in the conduct of its business, property damage and business interruption 
due to natural disasters. However, this insurance is subject to a number of limitations on coverage, depending on the nature of 
the risk insured against. This insurance may not be sufficient to cover KCS’s damages or damages to others, and this insurance 
may not continue to be available at commercially reasonable rates. In addition, KCS is subject to the risk that one or more of its 
insurers may become insolvent and would be unable to pay a claim that may be made in the future. Even with insurance, if any 
catastrophic interruption of service occurs, KCS may not be able to restore service without a significant interruption to 
operations which could have an adverse effect on KCS’s consolidated financial statements.

KCS’s ownership of KCSM and operations in Mexico subject it to economic and political risks.

The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. 
Accordingly, Mexican governmental actions concerning the economy and state-owned enterprises could have a significant 
impact on Mexican private sector entities in general and on KCSM’s operations in particular. KCS cannot predict the impact 
that the political landscape, including multiparty rule and civil disobedience, will have on the Mexican economy. Furthermore, 
KCS’s consolidated financial statements and prospects may be affected by currency fluctuations, inflation, interest rates, 
regulation, taxation and other political, social and economic developments in or affecting Mexico.

The Mexican economy in the past has suffered balance of payment deficits and shortages in foreign exchange reserves. 

Although Mexico has imposed foreign exchange controls in the past, there are currently no exchange controls in Mexico. 
Pursuant to the provisions of NAFTA, if Mexico experiences serious balance of payment difficulties or the threat of such 
difficulties in the future, Mexico would have the right to impose foreign exchange controls on investments made in Mexico, 
including those made by United States and Canadian investors. Any restrictive exchange control policy could adversely affect 
KCS’s ability to obtain U.S. dollars or to convert Mexican pesos (“pesos” or “Ps.”) into dollars for purposes of making 
payments. This could have a material adverse effect on KCS’s consolidated financial statements.

The social and political situation in Mexico could adversely affect the Mexican economy and changes in laws, public 

policies and government programs could be enacted, which could have an adverse effect on KCS’s consolidated financial 
statements.

Downturns in the United States economy or in trade between the United States and Asia or Mexico and fluctuations in the 
peso-dollar exchange rates would likely have adverse effects on KCS’s consolidated financial statements.

The level and timing of KCS’s Mexican business activity is heavily dependent upon the level of United States-Mexican 
trade and the effects of NAFTA on such trade. The Mexican operations depend on the United States and Mexican markets for 
the products KCSM transports, the relative position of Mexico and the United States in these markets at any given time, and 
tariffs or other barriers to trade. Downturns in the United States or Mexican economies or in trade between the United States 
and Mexico would likely have adverse effects on KCS’s consolidated financial statements and the Company’s ability to meet 
debt service obligations. In addition, KCS has invested significant amounts in developing its intermodal operations, including 
the Port of Lazaro Cardenas, in part to provide Asian importers with an alternative to the west coast ports of the United States, 
and the level of intermodal traffic depends, to an extent, on the volume of Asian shipments routed through Lazaro Cardenas. 
Reduction in trading volumes, which may be caused by factors beyond KCS’s control, including increased government 

12

regulations regarding the safety and quality of Asian-manufactured products, may adversely affect KCS’s consolidated financial 
statements.

Also, fluctuations in the peso-dollar exchange rates could lead to shifts in the types and volumes of Mexican imports and 
exports. Although a decrease in the level of exports of some of the commodities that KCSM transports to the United States may 
be offset by a subsequent increase in imports of other commodities KCSM hauls into Mexico and vice versa, any offsetting 
increase might not occur on a timely basis, if at all. Future developments in United States-Mexican trade beyond the Company’s 
control may result in a reduction of freight volumes or in an unfavorable shift in the mix of products and commodities KCSM 
carries.

Severe weakening of the peso against the U.S. dollar may result in disruption of the international foreign exchange 
markets and may limit the ability to transfer pesos or to convert pesos into U.S. dollars for the purpose of making timely 
payments of interest and principal on the non-peso denominated indebtedness. Although the Mexican government currently 
does not restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities to convert 
pesos into U.S. dollars or to transfer foreign currencies out of Mexico, the Mexican government could, as in the past, institute 
restrictive exchange rate policies that could limit the ability to transfer or convert pesos into U.S. dollars or other currencies for 
the purpose of making timely payments and contractual commitments. Devaluation or depreciation of the peso against the 
U.S. dollar may also adversely affect U.S. dollar prices for KCS’s securities.

Fluctuations in the peso-dollar exchange rates also have an effect on KCS’s consolidated financial statements. A 
weakening of the peso against the U.S. dollar would cause reported peso-denominated revenues and expenses to decrease, and 
would increase reported foreign exchange loss due to the Company’s net monetary assets that are peso-denominated. Exchange 
rate variations also affect the calculation of taxes under Mexican income tax law, and a strengthening of the peso against the 
U.S. dollar would cause an increase in the Company’s cash tax obligation and effective income tax rate.

Severe weather or other natural disasters could result in significant business interruptions and expenditures.  

The Company’s operations may be affected by severe weather or other natural disasters. The Company operates in and 

along the Gulf of Mexico, and its facilities may be adversely affected by hurricanes, floods and other extreme weather 
conditions that could also adversely affect KCS’s shipping, agricultural, chemical and other customers. Severe weather or other 
natural disasters could result in significant business interruption and could have a material adverse effect on KCS’s consolidated 
financial statements.

KCS’s business may be adversely affected by changes in general economic or other conditions.

KCS’s operations may be adversely affected by changes in the economic conditions of the industries and geographic areas 

that produce and consume the freight that KCS transports. The relative strength or weakness of the United States and Mexican 
economies affects the businesses served by KCS. A significant and sustained decrease in crude oil prices could adversely affect 
the transport of crude oil by rail to the U.S. Gulf region as well as negatively impact railroad volumes related to equipment and 
other materials that support crude oil production. Prolonged negative changes in domestic and global economic conditions or 
disruptions of either or both of the financial and credit markets, including the availability of short and long-term debt financing, 
may affect KCS, as well as the producers and consumers of the commodities that KCS transports and may have a material 
adverse effect on KCS’s consolidated financial statements.

The transportation industry is highly cyclical, generally tracking the cycles of the world economy. Although 

transportation markets are affected by general economic conditions, there are numerous specific factors within each particular 
market that may influence operating results. Some of KCS’s customers do business in industries that are highly cyclical, 
including the energy, automotive, housing and agriculture industries. Any downturn or change in government policy in these 
industries could have a material adverse effect on operating results. Also, some of the products transported have had a historical 
pattern of price cyclicality which has typically been influenced by the general economic environment and by industry capacity 
and demand. KCS cannot assure that prices and demand for these products will not decline in the future, adversely affecting 
those industries and, in turn, the Company’s consolidated financial statements.

Significant reductions in the volume of rail shipments due to economic or other conditions could have a material adverse 

effect on KCS’s consolidated financial statements.  

13

KCS depends on the stability, availability and security of its information technology systems to operate its business.

KCS relies on information technology in all aspects of its business. A significant disruption or failure of its information 

technology systems, including its computer hardware, software and communications equipment, could result in service 
interruptions, safety failures, security failures, regulatory compliance failures or other operational difficulties.

The security risks associated with information technology systems have increased in recent years because of the increased 

sophistication and activities of perpetrators of cyber attacks. A failure in or breach of KCS’s information technology security 
systems, or those of its third party service providers, as a result of cyber attacks or unauthorized access to its network could 
disrupt KCS’s business, result in the disclosure or misuse of confidential or proprietary information, increase its costs and/or 
cause losses. KCS also confronts the risk that a terrorist or other third parties may seek to use its property, including KCS’s 
information technology systems, to inflict major harm.

A significant disruption, failure or unauthorized access of KCS’s information technology system could have a material 

adverse effect on KCS’s consolidated financial statements.

Capacity constraints could adversely affect service and operating efficiency.

KCS may experience capacity constraints due to increased demand for rail services, unavailability of equipment, crew 
shortages, or extreme weather. Also, due to the interconnectivity between all railroads, especially in the U.S., congestion on 
other railroads could also result in operational inefficiencies for KCS.

Traffic congestion experienced in the U.S. or Mexican railroad system may result in overall traffic congestion which 

would impact the ability to move traffic to and from Mexico. In addition, the growth of cross border traffic in recent years has 
contributed to congestion on the international bridge at the Nuevo Laredo-Laredo border gateway, which is expected to 
continue in the near future. This could also result in operational inefficiencies for KCS and adversely affect KCS’s operations.

Significant expansions in the capacity of the Company’s network can require a substantial amount of time and investment. 

Although KCS constantly monitors its network in an effort to optimize its rail services, there can be no assurance that such 
measures will adequately address capacity constraints on a timely basis.   

KCS may be subject to various claims and litigation that could have a material adverse effect on KCS’s consolidated 
financial statements.

The Company may be exposed to the potential of various claims and litigation related to labor and employment, personal 

injury, commercial disputes, freight loss and other property damage, and other matters that arise in the normal course of 
business. Any material changes to litigation trends or a catastrophic rail accident or series of accidents involving any or all of 
property damage, personal injury, and environmental liability could have a material adverse effect on KCS’s consolidated 
financial statements.

KCS competes against other railroads and other transportation providers.

The Company’s domestic and international operations are subject to competition from other railroads, as well as from 
truck carriers, barge lines, and other maritime shippers. Many of KCS’s rail competitors are much larger and have significantly 
greater financial and other resources than KCS, which may enable rail competitors to reduce rates and make KCS’s freight 
services less competitive. KCS’s ability to respond to competitive pressures by matching rate reductions and decreasing rates 
without adversely affecting gross margins and operating results will depend on, among other things, the ability to reduce 
operating costs. KCS’s failure to respond to competitive pressures, and particularly rate competition, in a timely manner could 
have a material adverse effect on the Company’s consolidated financial statements.

The railroad industry is dominated by a few large carriers. These larger railroads could attempt to use their size and 
pricing power to block other railroads’ access to efficient gateways and routing options that are currently and have historically 
been available. In addition, if there is future consolidation in the railroad industry in the United States or Mexico, there can be 
no assurance that it will not have an adverse effect on the Company’s consolidated financial statements.

Trucking, maritime, and barge competitors, while able to provide rate and service competition to the railroad industry, are 

able to use public rights-of-way, require substantially smaller capital investment and maintenance expenditures than railroads 
and allow for more frequent and flexible scheduling. Continuing competitive pressures, any reduction in margins due to 

14

competitive pressures, developments that increase the quality or decrease the cost of alternative modes of transportation in the 
locations in which the Company operates, or legislation or regulations that provide motor carriers with additional advantages, 
such as increased size of vehicles and reduced weight restrictions, could result in downward pressure on freight rates, which in 
turn could have a material adverse effect on the Company’s consolidated financial statements.

A key part of KCS’s growth strategy is based upon the conversion of truck traffic to rail. There can be no assurance the 

Company will succeed in its efforts to convert traffic from truck to rail transport or that the customers already converted will be 
retained. If the railroad industry in general is unable to preserve its competitive advantages vis-à-vis the trucking industry, 
revenue growth could be adversely affected. Additionally, revenue growth could be affected by, among other factors, an 
expansion in the availability, or an improvement in the quality, of the trucking services offered by carriers resulting from 
regulatory and administrative interpretations and implementation of certain provisions of the North American Free Trade 
Agreement (“NAFTA”), and KCS’s inability to grow its existing customer base and capture additional cargo transport market 
share because of competition from the shipping industry and other railroads.

KCS’s business strategy, operations and growth rely significantly on agreements with other railroads and third parties.

Operation of KCS’s rail network and its plans for growth and expansion rely significantly on agreements with other 
railroads and third parties, including joint ventures and other strategic alliances, as well as interchange, trackage rights, haulage 
rights and marketing agreements with other railroads and third parties that enable KCS to exchange traffic and utilize trackage 
the Company does not own. KCS’s ability to provide comprehensive rail service to its customers depends in large part upon its 
ability to maintain these agreements with other railroads and third parties, and upon the performance of the obligations under 
the agreements by the other railroads and third parties. The termination of, or the failure to renew, these agreements could 
adversely affect KCS’s consolidated financial statements. KCS is also dependent in part upon the financial strength and 
efficient performance of other railroads. There can be no assurance that KCS will not be materially adversely affected by 
operational or financial difficulties of other railroads.

KCS is subject to environmental regulations, which may impose significant costs on the Company’s business operations.  

KCS operations are subject to environmental regulation enacted by federal, state and local legislatures in the U.S. and 

Mexico. From time to time, certain KCS facilities have not been in compliance with environmental, health and safety laws and 
regulations and there can be no assurance that KCS will always be in compliance with such laws and regulations in the future. 
Environmental liability under federal and state law in the United States can also extend to previously owned or operated 
properties, leased properties and properties owned by third parties, as well as to properties currently owned and used by the 
Company. Environmental liabilities may also arise from claims asserted by adjacent landowners or other third parties. Given the 
nature of its business, the Company incurs, and expects to continue to incur, environmental compliance costs, including, in 
particular, costs necessary to maintain compliance with requirements governing chemical and hazardous material shipping 
operations, refueling operations and repair facilities. KCS presently has environmental investigation and remediation 
obligations at certain sites, and will likely incur such obligations at additional sites in the future. 

The Company’s Mexican operations are subject to Mexican federal and state laws and regulations relating to the 
protection of the environment, including standards for, among other things, water discharge, water supply, emissions, noise 
pollution, hazardous substances and transportation and handling of hazardous and solid waste. Under applicable Mexican law 
and regulations, administrative and criminal proceedings may be brought and economic sanctions imposed against companies 
that violate environmental laws, and non-complying facilities may be temporarily or permanently closed. KCSM is also subject 
to the laws of various jurisdictions with respect to the discharge of materials into the environment and to environmental laws 
and regulations issued by the governments of each of the Mexican states in which KCSM’s facilities are located. The terms of 
KCSM’s Concession from the Mexican government also impose environmental compliance obligations on KCSM. Failure to 
comply with any environmental laws or regulations may result in the termination of KCSM’s Concession or in fines or penalties 
that may affect profitability.

Liabilities accrued for environmental costs represent the Company’s best estimate of the probable future obligation for the 

remediation and settlement of these sites. However, remediation  costs may exceed such estimates, due to various factors such 
as evolving environmental laws and regulations, changes in technology, the extent of other parties’ participation, developments 
in environmental surveys and studies, and the extent of corrective action that may ultimately be required. The Company cannot 
predict the effect, if any, that unidentified environmental matters or the adoption of additional or more stringent environmental 
laws and regulations would have on KCS’s consolidated financial statements. 

15

KCS’s inadvertent failure or inability to comply with applicable environmental laws and regulations could have a material 

adverse effect on the Company’s consolidated financial statements and operations, including fines, penalties, or limitations on 
operating activities until compliance with applicable requirements is achieved. These government agencies may change the 
legislative or regulatory framework within which the Company operates without providing any recourse for any adverse effects 
on the Company’s business that occur as a result of such change. Additionally, some of the regulations require KCS to obtain 
and maintain various licenses, permits and other authorizations. Any failure to obtain or maintain these licenses, permits, and 
other authorizations could adversely affect KCS’s business operations.

KCS’s business is vulnerable to fluctuations in fuel costs and disruptions in fuel supplies.

KCS incurs substantial fuel costs in its railroad operations and these costs represent a significant portion of its 

transportation expenses. Significant price increases for fuel may have a material adverse effect on operating results. If KCS is 
unable to recapture its costs of fuel from its customers, operating results could be materially adversely affected. In addition, a 
severe disruption of fuel supplies resulting from supply shortages, political unrest, a disruption of oil imports, weather events, 
war, or otherwise, and the resulting impact on fuel prices could materially adversely affect KCS’s consolidated financial 
statements.

KCS currently meets, and expects to continue to meet, fuel requirements for its Mexican operations through purchases at 

market prices from PEMEX Refinación (“PEMEX”), the national oil company of Mexico, a government-owned entity 
exclusively responsible for the distribution and sale of diesel fuel in Mexico. KCSM is party to a fuel supply contract with 
PEMEX of indefinite duration based on market prices. Either party may terminate the contract upon 30 days written notice to 
the other at any time. If the fuel contract is terminated and KCSM is unable to acquire diesel fuel from alternate sources on 
acceptable terms, the Mexican operations could be materially adversely affected.

Weaknesses in the short and long-term debt markets could negatively impact the Company’s access to capital.

Due to the significant capital expenditures required to operate and maintain a safe and efficient railroad, the Company 

regularly relies on debt markets for the issuance of long-term debt instruments, bank financing and commercial paper. 
Instability or disruptions of the capital markets, including debt markets, or the deterioration of the Company’s financial 
condition due to internal or external factors, could restrict or prohibit access and could increase the cost of financing sources. A 
significant deterioration of the Company’s financial condition could also reduce credit ratings to below investment grade, 
limiting its access to external sources of capital, and increasing the costs of short and long-term debt financing, and could have 
a material adverse effect on KCS’s consolidated financial statements. 

KCS’s business may be affected by market and regulatory responses to climate change.

KCS’s operations may be adversely affected by restrictions, caps, taxes, or other controls on emissions of greenhouse 
gases, including diesel exhaust. Restrictions on emissions could also affect KCS’s customers that use commodities that KCS 
transports to produce energy, use significant amounts of energy in producing or delivering the commodities KCS transports, or 
manufacture or produce goods that consume significant amounts of energy or burn fossil fuels, including coal-fired power 
plants, chemical producers, farmers and food producers, and automakers and other manufacturers. Significant cost increases, 
government regulation, or changes of consumer preferences for goods or services relating to alternative sources of energy or 
emissions reductions could materially affect the markets for the commodities KCS transports, which in turn could have a 
material adverse effect on KCS’s consolidated financial statements. Government incentives encouraging the use of alternative 
sources of energy could also affect certain customers and their respective markets for certain commodities KCS transports in an 
unpredictable manner that could alter traffic patterns, including, for example, the impacts of ethanol incentives on farming and 
ethanol producers. Any of these factors, individually or in conjunction with one or more of the other factors, or other unforeseen 
impacts of climate change could have a material adverse effect on KCS’s consolidated financial statements.

A majority of KCS’s employees belong to labor unions. Strikes or work stoppages could adversely affect operations.

The Company is a party to collective bargaining agreements with various labor unions in the United States and Mexico. 

As of December 31, 2015, approximately 80% of KCSR and KCSM Servicios employees were covered by labor contracts 
subject to collective bargaining. The Company may be subject to, among other things, strikes, work stoppages or work 
slowdowns as a result of disputes under these collective bargaining agreements and labor contracts or KCS’s potential inability 
to negotiate acceptable contracts with these unions. In the United States, because such agreements are generally negotiated on 
an industry-wide basis, determination of the terms and conditions of labor agreements have been and could continue to be 

16

beyond KCS’s control. KCS may, therefore, be subject to terms and conditions in industry-wide labor agreements that could 
have a material adverse effect on its consolidated financial statements. If the unionized workers in the United States or Mexico 
were to engage in a strike, work stoppage or other slowdown; if other employees were to become unionized or if the terms and 
conditions in future labor agreements were renegotiated, KCS could experience a significant disruption of its operations and 
higher ongoing labor costs. Although the U.S. Railway Labor Act imposes restrictions on the right of United States railway 
workers to strike, there is no law in Mexico imposing similar restrictions on the right of railway workers in that country to 
strike.

KCS is dependent on certain key suppliers of core rail equipment.

KCS relies on a limited number of suppliers of core rail equipment (including locomotives, rolling stock equipment, rail 

and ties). The capital intensive nature and complexity of such equipment creates high barriers of entry for any potential new 
suppliers. If any of KCS’s suppliers discontinue production or experience capacity or supply shortages, this could result in 
increased costs or difficulty in obtaining rail equipment and materials, which could have a material adverse effect on KCS’s 
consolidated financial statements.

The availability of qualified personnel could adversely affect KCS’s operations.

Changes in demographics, training requirements and the availability of qualified personnel could negatively affect KCS’s 

ability to meet demand for rail service. Unforeseen increases in demand for rail services may exacerbate such risks, which 
could have a negative impact on KCS’s operational efficiency and otherwise have a material adverse effect on KCS’s 
consolidated financial statements.

KCS’s business may be affected by future acts of terrorism, war or other acts of violence or crime.

Terrorist attacks, such as an attack on the Company’s chemical transportation activities, any government response thereto 

and war or risk of war may adversely affect KCS’s consolidated financial statements. These acts may also impact the 
Company’s ability to raise capital or its future business opportunities. KCS’s rail lines and facilities could be direct targets or 
indirect casualties of acts of terror, which could cause significant business interruption and damage to KCS’s property. In recent 
years, there have been reported incidents of train-related robberies in Mexico, including incidents involving KCSM’s trains and 
infrastructure. Other acts of violence or crime could also adversely affect the Company’s business.

As a result, acts of terrorism or war or acts of crime or violence could result in increased costs and liabilities and 
decreased revenues for KCS. In addition, insurance premiums charged for some or all of the applicable coverage currently 
maintained by KCS could increase dramatically or certain coverage may not be adequate to cover losses or may not be 
available in the future.

The price of KCS’s common stock may fluctuate significantly, which may make it difficult for investors to resell common 
stock when they choose to or at prices they find attractive.

The price of KCS’s common stock on the New York Stock Exchange (“NYSE”), listed under the ticker symbol “KSU”, 

constantly changes. The Company expects that the market price of its common stock will continue to fluctuate.

The Company’s stock price may fluctuate as a result of a variety of factors, many of which are beyond KCS’s control. 

These factors include, but are not limited to:

•  quarterly variations in operating results;

•  operating results that vary from the expectations of management, securities analysts, ratings agencies and investors;

•  changes in expectations as to future financial performance, including financial estimates by management, securities 

analysts, ratings agencies and investors;

•  developments generally affecting the railroad industry;

•  announcements by KCS or its competitors of significant contracts, acquisitions, joint marketing relationships, joint 

ventures or capital commitments;

• 

the assertion or resolution of significant claims or proceedings involving KCS;

17

•  KCS’s dividend policy and limitations on the payment of dividends;

• 

future sales of KCS’s equity or equity-linked securities;

•  general domestic and international economic conditions including the availability of short and long-term financing.

In addition, from time to time the stock market in general has experienced extreme volatility that has often been unrelated 
to the operating performance of a particular company. These broad market fluctuations may adversely affect the market price of 
KCS’s common stock.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

Track Configuration

KCSR operates over a railroad system consisting of approximately 3,400 route miles in ten states extending from the 

midwest and southeast portions of the United States south to the Mexican border, which includes approximately 635 miles of 
trackage rights that permit KCSR to operate its trains with its crews over other railroads’ tracks.

Under its Concession from the Mexican government, KCSM has the right to operate approximately 3,200 route miles, but 

does not own the land, roadway, or associated structures, and additionally has approximately 550 miles of trackage rights. The 
Concession requires KCSM to make investments as described in a business plan filed every five years with the Mexican 
government. See Item 1A, “Risk Factors — KCSM’s Mexican Concession is subject to revocation or termination in certain 
circumstances which would prevent KCSM from operating its railroad and would have a material adverse effect on the 
Company’s consolidated financial statements.”

18

Kansas City Southern Rail Network

19

Equipment Configuration

As of December 31, 2015 and 2014, KCS owned and leased the following units of equipment: 

Freight Cars:
Box cars

Hoppers (covered and open top)

Gondolas

Automotive

Flat cars (intermodal and other)

Tank cars

Total

Locomotives:

Freight

Switching

Total

Owned

2015

Leased

Total

Owned

2014

Leased

Total

3,003

4,048

3,002

2,084

807

6

3,359

2,116

1,365

808

82

651

6,362

6,164

4,367

2,892

889

657

3,053

3,012

1,647

1,457

857

15

3,272

2,559

2,681

1,061

44

588

6,325

5,571

4,328

2,518

901

603

12,950

8,381

21,331

10,041

10,205

20,246

736

187

923

121

—

121

857

187

1,044

687

187

874

121

—

121

Average Age (in Years) of Owned and Leased Locomotives:
Freight
Switching
All locomotives

Property and Facilities

2015

2014

14.0
40.0
18.7

KCS operates numerous facilities, including terminals for intermodal and other freight, rail yards for train-building, 
switching, storage-in-transit (the temporary storage of customer goods in rail cars prior to shipment) and other activities; offices 
to administer and manage operations; dispatch centers to direct traffic on the rail network; crew quarters to house train crews 
along the rail line; and shops and other facilities for fueling and maintenance and repair of locomotives, freight cars and other 
equipment.

Capital Expenditures

The Company’s cash capital expenditures for the three years ended December 31, 2015, 2014, and 2013, and planned 

2016 capital expenditures are included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results 
of Operations — Liquidity and Capital Resources — Capital Expenditures”. See also Item 7, “Management’s Discussion and 
Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Capitalization, 
Depreciation and Amortization of Property and Equipment (including Concession Assets)” regarding the Company’s policies 
and guidelines related to capital expenditures.

Item 3. 

Legal Proceedings

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. For more 

information on legal proceedings, see Item 1A, “Risk Factors — KCS may be subject to various claims and litigation that could 
have a material adverse effect on KCS’s consolidated financial statements,” Item 7, “Management’s Discussion and Analysis of 
Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Provision for Personal Injury 
Claims,” and — “Other Matters — Litigation,” and Item 8, “Financial Statements and Supplementary Data — Note 15 
Commitments and Contingencies.”

20

808

187

995

13.9
39.0
18.6

 
 
Item 4.  Mine Safety Disclosures

Not applicable.

Part II

Item 5.  Market for KCS’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s common stock is traded on the New York Stock Exchange under the ticker symbol “KSU”. The 
following table presents for the quarters indicated the dividends declared and the high and low sales price of the Company’s 
common and preferred stock.

2015
Dividends per share:
Common stock
$25 par preferred stock

Stock price ranges:
$25 par preferred:

— High
— Low
Common:
— High
— Low

2014
Dividends per share:
Common stock
$25 par preferred stock

Stock price ranges:
$25 par preferred:

— High
— Low
Common:
— High
— Low

Dividend Policy

Fourth

Third

Second

First

$

$

$

$

$

$

0.330
0.250

27.10
25.37

100.40
69.70

0.280
0.250

29.60
26.52

126.49
109.57

$

$

$

$

$

$

0.330
0.250

29.00
25.25

101.24
86.38

0.280
0.250

29.00
26.00

123.95
106.67

$

$

$

$

$

$

0.330
0.250

28.90
25.25

108.29
90.02

0.280
0.250

28.33
25.95

108.87
95.41

$

$

$

$

$

$

0.330
0.250

29.75
27.02

122.90
101.14

0.280
0.250

27.00
24.15

123.83
88.56

Common Stock. Any declarations and payments of dividends to holders of the Company’s common stock are at the 
discretion of the Board of Directors, which depends on many factors, including the Company’s financial condition, earnings, 
capital requirements and other factors that the Board of Directors deems relevant. Subject to these qualifications, the Company 
expects to continue to pay dividends on an ongoing basis.

Holders

There were 2,283 record holders of KCS common stock on January 22, 2016; however, the number of actual holders of 

KCS common stock is greater due to the practice of brokerage firms registering many shares for clients in the brokerage firm’s 
name.

21

Securities Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 

Matters” for information about securities authorized for issuance under KCS’s equity compensation plans.

Performance Graph

The following graph shows the changes in value over the five years ended December 31, 2015, of an assumed investment 

of $100 in: (i) KCS’s common stock; (ii) the stocks that comprise the Dow Jones U.S. Industrial Transportation Index; and 
(iii) the stocks that comprise the S&P 500 Index. The table following the graph shows the value of those investments on 
December 31 for each of the years indicated. The values for the assumed investments depicted on the graph and in the table 
have been calculated assuming that any cash dividends are reinvested.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Kansas City Southern, the S&P 500 Index
and the Dow Jones U.S. Industrial Transportation Index

Kansas City Southern
S&P 500 (1)
Dow Jones U.S. Industrial Transportation (2)

_____________________

2010

2011

2012

2013

2014

2015

$

100.00 $

142.10 $

176.27 $

263.52 $

262.34 $

162.84

100.00

100.00

102.11

103.90

118.45

111.03

156.82

156.45

178.29

190.36

180.75

148.19

(1) 

(2) 

The S&P 500 is a registered trademark of the McGraw-Hill Companies, Inc. The S&P 500 Index reflects the weighted 
average market value for 500 companies whose shares are traded on the New York Stock Exchange, American Stock 
Exchange and the Nasdaq Stock Market.

The Dow Jones U.S. Industrial Transportation Index is a registered trademark of Dow Jones & Co., Inc., an 
independent company.

22

Purchases of Equity Securities

On May 14, 2015, the Company announced that the Board of Directors approved a share repurchase program, pursuant to 

which up to $500 million in shares of common stock could be purchased through June 30, 2017. During 2015, KCS 
repurchased 2,133,984 shares of common stock for $194.2 million at an average price of $90.99 per share under this program. 
The following table presents common stock repurchases during each month for the fourth quarter of 2015:

(c) Total 
Number of 
Shares 
(or Units) 
Purchased 
as Part of 
Publicly 
Announced 
Plans or
Programs (1) 
435,759
240,000

$
$
— $

675,759

(d) Maximum 
Number (or 
Approximate 
Dollar Value) 
of Shares (or Units) 
that may yet be 
purchased under 
the Plans 
or Programs (1)

326,688,028
305,835,712
305,835,712

(a) Total 
Number 
of Shares 
(or Units) 
Purchased

(b) Average 
Price Paid 
per Share 
(or Unit) 

435,759
240,000

$
$
— $

675,759

85.03
86.88
—

Period

October 2015
November 2015
December 2015
Total

23

 
 
 
 
  
Item 6. 

Selected Financial Data

The selected financial data below (in millions, except per share amounts) should be read in conjunction with 
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included under Item 7 of this 
Form 10-K as well as the consolidated financial statements and the related notes.

Earnings From Continuing Operations

Revenues
Operating expenses (i) (ii) (iii)

Operating income

Net income (iv)
Earnings per common share:

Basic
Diluted

Financial Position

Total assets (v) (vi)
Total long-term debt obligations, 
    including current portion and short-term 

borrowings (v)

Total stockholders’ equity
Total equity

Other Data Per Common Share

2015

2014

2013

2012

2011

$

$

$

$

$

2,418.8
1,615.0

803.8

485.3

4.41
4.40

$

$

$

$

2,577.1
1,768.0

809.1

504.3

4.56
4.55

$

$

$

$

2,369.3
1,630.7

738.6

353.3

3.19
3.18

$

$

$

$

2,238.6
1,522.7

715.9

379.4

3.44
3.43

$

$

$

$

2,098.3
1,486.7

611.6

331.9

3.04
3.00

8,341.0

$

7,976.4

$

7,283.7

$

6,284.7

$

5,933.2

2,401.1
3,914.3
4,224.7

2,301.4
3,755.5
4,064.1

2,168.8
3,370.6
3,676.6

1,588.7
3,096.6
3,400.7

1,618.6
2,764.5
3,058.7

Cash dividends declared per common share

$

1.32

$

1.12

$

0.86

$

0.78

$

—

_____________________

(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

During 2015 and 2014, the Company recognized pre-tax lease termination costs of $9.6 million and $38.3 million, 
respectively, within operating expenses due to the early termination of certain operating leases and the related purchase 
of equipment. 

During 2012, the Company recognized a pre-tax gain of $43.0 million within operating expenses for the elimination of 
a deferred statutory profit sharing liability as a result of the organizational restructuring during the period.

During 2011, the Company recognized a pre-tax gain of $25.6 million within operating expenses for insurance 
recoveries related to 2010 hurricane damage.

During 2015, 2014, 2013, 2012 and 2011, the Company recognized pre-tax debt retirement and exchange costs of $7.6 
million, $6.6 million, $119.2 million, $20.1 million and $38.7 million, respectively, related to debt restructuring 
activities that occurred during the periods.

During the fourth quarter of 2015, the Company adopted new accounting guidance regarding the classification of debt 
issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability. 
For the years ended December 31, 2014, 2013, 2012 and 2011, the Company reclassified $14.5 million, $20.1 million, 
$19.1 million, and $20.5 million, respectively, from total assets to total long-term debt obligations. 

During the fourth quarter of 2015, the Company adopted new accounting guidance regarding the presentation of 
deferred tax assets and liabilities as non-current in a classified balance sheet. For the years ended December 31, 2014, 
2013, 2012 and 2011, the Company reclassified $100.1 million, $131.6 million, $92.1 million, and $191.4 million, 
respectively, from total assets to noncurrent liabilities. 

24

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of Kansas City Southern’s results of operations, certain changes in its financial position, 

liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included 
under Item 8 of this Form 10-K. This discussion should be read in conjunction with the included consolidated financial 
statements, the related notes, and other information included in this report.

CAUTIONARY INFORMATION

The discussions set forth in this Annual Report on Form 10-K may contain forward-looking statements within the 
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as 
amended. In addition, management may make forward-looking statements orally or in other writings, including, but not limited 
to, in press releases, quarterly earnings calls, executive presentations, in the annual report to stockholders and in other filings 
with the Securities and Exchange Commission. Readers can usually identify these forward-looking statements by the use of 
such verbs as “expects,” “anticipates,” “believes” or similar verbs or conjugations of such verbs. These statements involve a 
number of risks and uncertainties. Actual results could materially differ from those anticipated by such forward-looking 
statements. Such differences could be caused by a number of factors or combination of factors including, but not limited to, the 
factors identified below and those discussed under Item 1A of this Form 10-K, “Risk Factors.” Readers are strongly encouraged 
to consider these factors and the following factors when evaluating any forward-looking statements concerning the Company:

• 

the outcome of claims and litigation, including those related to environmental contamination, personal injuries and 
property damage;  

•  changes in legislation and regulations or revisions of controlling authority;

• 

the adverse impact of any termination or revocation of KCSM’s Concession by the Mexican government;

•  natural events such as severe weather, fire, floods, hurricanes, earthquakes or other disruptions to the Company’s 

operating systems, structures and equipment or the ability of customers to produce or deliver their products and the 
lack of adequate insurance for such catastrophic losses;

•  United States, Mexican and global economic, political and social conditions;

• 

• 

• 

• 

• 

• 

the effects of the North American Free Trade Agreement, or NAFTA, on the level of trade among the United States,  
Mexico and Canada;

the level of trade between the United States and Asia or Mexico;

the effects of fluctuations in the peso-dollar exchange rate;

the effects of adverse general economic conditions affecting customer demand and the industries and geographic 
areas that produce and consume the commodities KCS carries;

the dependence on the stability, availability and security of the information technology systems to operate its 
business;

the effect of demand for KCS’s services exceeding network capacity or traffic congestion on operating efficiencies 
and service reliability;

•  uncertainties regarding the litigation KCS faces and any future claims and litigation;

• 

the impact of competition, including competition from other rail carriers, trucking companies and maritime shippers 
in the United States and Mexico;

•  KCS’s reliance on agreements with other railroads and third parties to successfully implement its business strategy, 

operations and growth and expansion plans, including the strategy to convert customers from using trucking services 
to rail transportation services;

•  compliance with environmental regulations;

•  disruption in fuel supplies, changes in fuel prices and the Company’s ability to recapture its costs of fuel from 

customers;

•  material adverse changes in economic and industry conditions, including the availability of short and long-term 

financing, both within the United States and Mexico and globally;

•  market and regulatory responses to climate change;

25

•  changes in labor costs and labor difficulties, including strikes and work stoppages affecting either operations or 

customers’ abilities to deliver goods for shipment;

•  KCS’s reliance on certain key suppliers of core rail equipment;

•  availability of qualified personnel;

•  acts of terrorism, war or other acts of violence or crime or risk of such activities; and

• 

fluctuations in the market price for the Company’s common stock.

Forward-looking statements reflect the information only as of the date on which they are made. The Company does not 

undertake any obligation to update any forward-looking statements to reflect future events, developments, or other information. 
If KCS does update one or more forward-looking statements, no inference should be drawn that additional updates will be made 
regarding that statement or any other forward-looking statements.

CORPORATE OVERVIEW

Kansas City Southern, a Delaware corporation, is a transportation holding company that has railroad investments in the 
U.S., Mexico and Panama. In the U.S., the Company serves the central and south central U.S. Its international holdings serve 
northeastern and central Mexico and the port cities of Lazaro Cardenas, Tampico and Veracruz, and a fifty percent interest in 
Panama Canal Railway Company provides ocean-to-ocean freight and passenger service along the Panama Canal. KCS’s North 
American rail holdings and strategic alliances are primary components of a NAFTA railway system, linking the commercial and 
industrial centers of the U.S., Canada and Mexico. Its principal subsidiaries and affiliates include the following:

•  The Kansas City Southern Railway Company (“KCSR”), a wholly-owned subsidiary;

•  Kansas City Southern de México, S.A. de C.V. (“KCSM”), a wholly-owned subsidiary;

•  Mexrail, Inc. (“Mexrail”), a wholly-owned consolidated subsidiary; which, in turn, wholly owns The Texas Mexican 

Railway Company (“Tex-Mex”);

•  KCSM Servicios, S.A. de C.V. (“KCSM Servicios”), a wholly-owned subsidiary;

•  Meridian Speedway, LLC (“MSLLC”), a seventy percent-owned consolidated affiliate;

•  Panama Canal Railway Company (“PCRC”), a fifty percent-owned unconsolidated affiliate,

•  Ferrocarril y Terminal del Valle de México, S.A. de C.V. (“FTVM”), a twenty-five percent-owned unconsolidated 

affiliate that provides railroad services as well as ancillary services in the greater Mexico City area; and

•  PTC-220, LLC (“PTC-220”), a fourteen percent-owned unconsolidated affiliate that holds the licenses to large blocks 

of radio spectrum and other assets for the deployment of positive train control.

EXECUTIVE SUMMARY

2015 Financial Overview

Revenues in 2015 decreased 6% from 2014, due to a 4% decrease in revenue per carload/unit and a 3% decrease in 
carload/unit volumes. Revenue per carload/unit decreased due to the weakening of the Mexican peso against the U.S. dollar and 
lower fuel surcharge, resulting from lower U.S. fuel prices. Energy revenue decreased by $74.5 million due to lower volumes in 
utility coal as a result of lower natural gas prices. Frac sand and metals volumes decreased due to the significant decline in new 
U.S crude drilling operations and metals volumes were further reduced by higher imports from foreign sources. In addition, the 
Company experienced service-related issues in the second and third quarters of 2015, which negatively affected revenue in 
certain commodities. 

Operating expenses decreased 9% compared to 2014, due to the weakening of the Mexican peso against the U.S. dollar, 
lower U.S. fuel prices and lower incentive compensation. Expense reductions resulting from the weakening Mexican peso and 
lower U.S. fuel prices largely offset the revenue reductions driven by these same macroeconomic factors. These expense 
reductions were partially offset by increased depreciation expense. The Company’s continued focus on operating expense 
control resulted in operating expenses as a percentage of revenues of 66.8%. 

In 2015, the Company invested $648.7 million in capital expenditures. In addition, the Company purchased $144.2 
million of equipment under existing operating leases and replacement equipment as certain operating leases expired, which was 

26

primarily funded with internally generated cash flows and debt. The Company also recognized $9.6 million of lease termination 
costs during 2015, which are included in operating expenses, due to the early termination of certain operating leases and the 
related purchase of the equipment.

The Company reported 2015 earnings of $4.40 per diluted share on consolidated net income attributable to Kansas City 
Southern and subsidiaries of $483.5 million for the year ended December 31, 2015, compared to annual earnings of $4.55 per 
diluted share on consolidated net income attributable to Kansas City Southern and subsidiaries of $502.6 million for 2014. 

In May 2015, the Company announced a share repurchase program of up to $500.0 million, which expires on June 30, 

2017. During 2015, KCS repurchased 2,133,984 shares of common stock for $194.2 million at an average price of $90.99 per 
share under this program. Management's assessment of market conditions, available liquidity and other factors will determine 
the timing and volume of any future repurchases. 

In July 2015, KCSR issued $500.0 million principal amount of senior unsecured notes, which bear interest semiannually 
at a fixed annual rate of 4.95%. The net proceeds from the offering were used for the repayment of the outstanding commercial 
paper issued by KCSR, the repurchase of shares of KCS common stock and for other general corporate purposes.

During the fourth quarter of 2015, KCS completed an exchange offer for existing senior notes outstanding at KCSR and 

KCSM and replaced its credit facility to simplify its capital structure, improve its credit profile and enhance the secondary 
market liquidity of its debt securities. Pursuant to the exchange offer, approximately 96% or $2.0 billion of existing KCSR and 
KCSM senior notes were exchanged by bondholders for new KCS senior notes with the same interest rates, interest payment 
dates and maturity dates and substantially similar redemption provisions to the existing senior notes. In addition to the senior 
notes exchange, the combined KCSR and KCSM revolving credit facilities of $650.0 million were replaced with an $800.0 
million KCS revolving credit facility. 

27

RESULTS OF OPERATIONS

Year Ended December 31, 2015, compared with the Year Ended December 31, 2014

The following summarizes KCS’s consolidated income statement components (in millions):

Revenues

Operating expenses

Operating income

Equity in net earnings of unconsolidated affiliates

Interest expense

Debt retirement and exchange costs

Foreign exchange loss

Other expense, net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to noncontrolling interest

Net income attributable to Kansas City Southern and
subsidiaries

Revenues

2015

2014

Change

$

2,418.8

$

2,577.1

$

1,615.0

1,768.0

803.8

18.3
(81.9)
(7.6)
(56.6)
(3.4)
672.6
187.3

485.3

1.8

809.1

21.1
(72.8)
(6.6)
(35.5)
(2.2)
713.1
208.8

504.3

1.7

(158.3)
(153.0)
(5.3)
(2.8)
(9.1)
(1.0)
(21.1)
(1.2)
(40.5)
(21.5)
(19.0)
0.1

$

483.5

$

502.6

$

(19.1)

The following summarizes revenues (in millions), carload/unit statistics (in thousands) and revenue per carload/unit:

Revenues

2014
453.0

$

% Change
5%

Carloads and Units

Revenue per Carload/Unit

% Change

2015

5% $ 1,826

2014
$ 1,835

% Change
—

2015
259.7

320.5

238.8

280.8

990.3
126.5

2014
246.9

347.4

233.9

299.2

1,019.6
127.1

(8%)

2%

(6%)

(3%)
—

1,780

1,798

899

385
1,729

1,794

1,909

1,092

388
1,876

(1%)

(6%)

(18%)

(1%)
(8%)

(4%)

2,216.6

2,274.1

(3%) $ 1,050

$ 1,092

Chemical and petroleum $
Industrial and consumer
products
Agriculture and minerals

Energy

Intermodal

Automotive

2015
474.2

570.4

429.3

252.3

381.5
218.7

623.3

446.6

326.8

395.8
238.4

Carload revenues,
carloads and units

Other revenue

Total revenues (i)

2,326.4
92.4
$ 2,418.8

2,483.9
93.2
$ 2,577.1

(i) Included in revenues:
Fuel surcharge

$

230.1

$

334.7

(8%)

(4%)

(23%)

(4%)
(8%)

(6%)
(1%)
(6%)

Revenues include revenue for transportation services and fuel surcharges. For the year ended December 31, 2015, 

revenues and carload/unit volumes decreased 6% and 3%, respectively, compared to the prior year. Revenue decreased by 
approximately 3% or $79.0 million due to the weakening of the Mexican peso against the U.S. dollar for revenue transactions 
denominated in Mexican pesos. The average exchange rate of Mexican pesos per U.S. dollar was Ps.15.8 for 2015 compared to 
Ps.13.3 for 2014.

Energy revenue decreased $74.5 million for the year ended December 31, 2015, compared to the prior year, driven by 
lower volumes in utility coal due to lower natural gas prices. Frac sand and metals volumes decreased due to the significant 

28

 
decline in new U.S crude drilling operations and metals volumes were further reduced by higher imports from foreign sources. 
In addition, the Company experienced service-related issues in the second and third quarters of 2015, which negatively affected 
revenue in certain commodities.

 Revenue per carload/unit decreased by 4% for the year ended December 31, 2015, compared to the prior year, due to 
lower fuel surcharge and the weakening of the Mexican peso against the U.S. dollar, partially offset by positive pricing impacts.

KCS’s fuel surcharges are a mechanism to adjust revenue based upon changing fuel prices. Fuel surcharges are calculated 

differently depending on the type of commodity transported. For most commodities, fuel surcharge is calculated using a fuel 
price from a prior time period that can be up to 60 days earlier. In a period of volatile fuel prices or changing customer business 
mix, changes in fuel expense and fuel surcharge may differ.

The following discussion provides an analysis of revenues by commodity group:

Revenues by commodity
group for 2015 

Chemical and petroleum. Revenues increased $21.2 million for the 
year ended December 31, 2015, compared to 2014, due to a 5% increase 
in carload/unit volumes. Petroleum volumes increased as a result of new 
business and plastics volumes increased due to lower commodity prices. 
Revenue per carload/unit was flat for the year ended December 31, 
2015, compared to 2014, as positive pricing impacts were offset by the 
weakening of the Mexican peso against the U.S. dollar and lower fuel 
surcharge.

Industrial and consumer products. Revenues decreased $52.9 
million for the year ended December 31, 2015, compared to 2014, due to 
an 8% decrease in carload/unit volumes and a 1% decrease in revenue 
per carload/unit. Metals and scrap volumes decreased due to the decline 
in new drilling operations in the U.S. and higher imports from foreign 
sources. Revenue per carload/unit decreased due to lower fuel surcharge 
and the weakening of the Mexican peso against the U.S. dollar, partially 
offset by positive pricing impacts.

Plastics
26%

Petroleum
29%

Other
14%

Metals &
Scrap
39%

Chemicals
45%

Forest
Products
47%

29

 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture and minerals. Revenues decreased $17.3 million for 

the year ended December 31, 2015, compared to 2014, due to a 6% 
decrease in revenue per carload/unit, partially offset by a 2% increase in 
carload/unit volumes. Revenue per carload/unit decreased due to lower 
fuel surcharge and the weakening of the Mexican peso against the U.S. 
dollar. Food products volumes increased as a result of a customer's 
temporary plant shutdown during the third quarter of 2014. This increase 
was partially offset by a decrease in grain volumes due to service-related 
issues in the second and third quarters of 2015.

Energy. Revenues decreased $74.5 million for the year ended 
December 31, 2015, compared to 2014, due to an 18% decrease in 
revenue per carload/unit and a 6% decrease in carload/unit volumes. 
Revenue per carload/unit decreased due to lower fuel surcharge, a short-
term rate concession provided to a customer during the second half of 
2015 and shorter average length of haul. Volumes decreased as low 
natural gas prices have reduced the demand for utility coal and the 
decline in new crude drilling operations in the U.S. has reduced the 
demand for frac sand. These decreases were partially offset by increased 
crude oil volumes due to new business. 

Revenues by commodity
group for 2015

Stone,
Clay, &
Glass
7%

Ores &
Minerals
6%

Food
Products
33%

Frac Sand
15%

Crude Oil
13%

Coal &
Petroleum
Coke
16%

Grain
54%

Utility
Coal
56%

Intermodal. Revenues decreased $14.3 million for the year ended December 31, 2015, compared to 2014, due to a 3% 
decrease in carload/unit volumes and a 1% decrease in revenue per carload/unit. Lower volumes due to service-related issues in 
the second and third quarters of 2015 and the conversion of rail traffic to truck were partially offset by volume growth driven by 
trans-Pacific imports via the Port of Lazaro Cardenas. Revenue per carload/unit decreased due to lower fuel surcharge.

Automotive. Revenues decreased $19.7 million for the year ended December 31, 2015, compared to 2014, due to an 8% 

decrease in revenue per carload/unit. Revenue per carload/unit decreased due to the weakening of the Mexican peso against the 
U.S. dollar, partially offset by positive pricing impacts. Volumes were flat for the year ended December 31, 2015, compared to 
2014, due to service-related issues in the second and third quarters of 2015.

30

 
 
Operating Expenses

Operating expenses, as shown below (in millions), decreased $153.0 million for the year ended December 31, 2015, 
compared to 2014, due to the weakening of the Mexican peso against the U.S. dollar and lower U.S. fuel prices, partially offset 
by increased depreciation expense. The weakening of the Mexican peso against the U.S. dollar resulted in an expense reduction 
of approximately $77.0 million for expense transactions denominated in Mexican pesos. The average exchange rate of Mexican 
pesos per U.S. dollar was Ps.15.8 for 2015 compared to Ps.13.3 for 2014. Lower U.S. fuel prices reduced 2015 expenses by 
$71.5 million.

2015

2014

Dollars

Percent

Change

Compensation and benefits

$

442.2

$

474.5

$

Purchased services

Fuel

Equipment costs

Depreciation and amortization

Materials and other
Lease termination costs

Total operating expenses

223.0

306.9

119.4

284.6

229.3
9.6

245.2

415.9

119.2

258.1

216.8
38.3

$

1,615.0

$

1,768.0

$

(32.3)
(22.2)
(109.0)
0.2

26.5

12.5
(28.7)
(153.0)

(7%)

(9%)

(26%)

—

10%

6%
(75%)

(9%)

Compensation and benefits. Compensation and benefits decreased $32.3 million for the year ended December 31, 2015, 

compared to 2014, due to the weakening of the Mexican peso of approximately $23.0 million, lower incentive compensation of 
$22.4 million and a reduction in post-employment liabilities due to changes in discount rates. These decreases were partially 
offset by annual salary rate increases and a 3% growth in headcount.

Purchased services. Purchased services expense decreased $22.2 million for the year ended December 31, 2015, 
compared to 2014, due to renegotiation of maintenance contracts during 2015, the weakening of the Mexican peso and lower 
track maintenance and corporate expenses. 

Fuel. Fuel expense decreased $109.0 million for the year ended December 31, 2015, compared to 2014, due to lower U.S. 

diesel fuel prices of $71.5 million and the weakening of the Mexican peso of approximately $37.0 million. These decreases 
were partially offset by approximately $12.0 million increase due to Mexican diesel prices. The average price per gallon, 
including the weakening of the Mexican peso, was $2.32 in 2015, compared to $3.03 in 2014. In addition, fuel expense 
decreased due to improved fuel efficiency and lower fuel consumption.

Equipment costs. Equipment costs increased $0.2 million for the year ended December 31, 2015, compared to 2014, due 

to higher car hire expense due to longer cycle times, partially offset by lower lease expense as a result of the purchase of 
equipment under existing operating leases and replacement equipment as certain operating leases expired. 

Depreciation and amortization. Depreciation and amortization expense increased $26.5 million for the year ended 
December 31, 2015, compared to 2014, due to a larger asset base, including the purchase of equipment under existing operating 
leases and replacement equipment as certain operating leases expired. 

Materials and other. Materials and other expense increased $12.5 million for the year ended December 31, 2015, 

compared to 2014, due to an increase in materials and supplies, derailment expense, property taxes, environmental expense and 
the settlement of a litigation dispute during 2015. These increases were partially offset by the weakening of the Mexican peso, 
lower employee expenses and a reduction in personal injury expense recognized during 2015 as a result of changes in estimates 
due to favorable claim experience.

Lease termination costs. Lease termination costs were $9.6 million and $38.3 million for the years ended December 31, 
2015 and 2014, respectively, due to the early termination of certain operating leases and the related purchase of the equipment.

31

 
Non-Operating Expenses

Equity in net earnings of unconsolidated affiliates. Equity in net earnings from unconsolidated affiliates decreased $2.8 
million for the year ended December 31, 2015, compared to 2014. Equity in net earnings from the operations of Ferrocarril y 
Terminal del Valle de Mexico, S.A. de C.V. decreased due to higher operating expenses. In addition, equity in net earnings from 
the operations of Panama Canal Railway Company decreased due to lower container volumes.

Interest expense. Interest expense increased $9.1 million for the year ended December 31, 2015, compared to 2014, due to 
higher average interest rates and average debt balances as a result of the Company’s issuance of debt during the third quarter of 
2015. For the year ended December 31, 2015, the average debt and short-term borrowing balances were $2,257.8 million, 
compared to $2,174.7 million in 2014. The average interest rate for the year ended December 31, 2015 was 3.7%, compared to 
3.5% in 2014. 

Debt retirement and exchange costs. Debt retirement and exchange costs were $7.6 million for the year ended December 

31, 2015, related to costs that were payable to parties other than the debt holders as a result of the KCSR and KCSM senior 
notes exchanged with KCS. For the year ended December 31, 2014, debt retirement costs were $6.6 million, related to the call 
premiums, original issue discounts and write-off of unamortized debt issuance costs associated with the Company’s various 
debt redemption activities.

Foreign exchange loss. For the years ended December 31, 2015 and 2014, foreign exchange loss was $56.6 million and 

$35.5 million, respectively. Foreign exchange loss includes the re-measurement and settlement of monetary assets and liabilities 
denominated in Mexican pesos and the loss on foreign currency derivative contracts.

For the years ended December 31, 2015 and 2014, the re-measurement and settlement of monetary assets and liabilities 

denominated in Mexican pesos resulted in a foreign exchange loss of $9.5 million and $7.6 million, respectively.

The Company enters into foreign currency derivative contracts to hedge its net exposure to fluctuations in the Mexican 
cash tax obligation due to changes in the value of the Mexican peso against the U.S. dollar. For the years ended December 31, 
2015 and 2014, foreign exchange loss on foreign currency derivative contracts was $47.1 million and $27.9 million, 
respectively. 

Other expense, net. Other expense, net, increased $1.2 million for the year ended December 31, 2015 compared to 2014, 

due to lower miscellaneous income.

Income tax expense. Income tax expense decreased $21.5 million for the year ended December 31, 2015, compared to 

2014, due to lower pre-tax income and a lower effective tax rate. The effective tax rate was 27.8% and 29.3% for the years 
ended December 31, 2015 and 2014, respectively. The decrease in the effective tax rate was primarily due to the more 
significant weakening of the Mexican peso against the U.S. dollar in 2015 as compared to 2014. 

The Company enters into foreign currency derivative contracts to hedge its net exposure to fluctuations in the Mexican 

cash tax obligation due to changes in the value of the Mexican peso against the U.S. dollar, and losses on these foreign currency 
derivative contracts are recorded in foreign exchange loss. The weakening of the Mexican peso during 2015 and 2014 
decreased the cash tax obligation by $46.4 million and $27.7 million for the years ended December 31, 2015 and 2014, 
respectively. Further information on the components of the effective tax rates for the years ended December 31, 2015 and 2014, 
is presented in Note 11 to the Consolidated Financial Statements in Item 8.

32

Year Ended December 31, 2014, compared with the Year Ended December 31, 2013

The following summarizes KCS’s consolidated income statement components (in millions):

Revenues

Operating expenses

Operating income

Equity in net earnings of unconsolidated affiliates

Interest expense

Debt retirement and exchange costs

Foreign exchange loss

Other expense, net

Income before income taxes

Income tax expense
Net income

Less: Net income attributable to noncontrolling interest

Net income attributable to Kansas City Southern and
subsidiaries

2014

2013

Change

$

2,577.1

$

2,369.3

$

1,768.0

1,630.7

809.1

21.1
(72.8)
(6.6)
(35.5)
(2.2)
713.1

208.8
504.3

1.7

738.6

18.8
(80.6)
(119.2)
(5.2)
(0.8)
551.6

198.3
353.3

1.9

207.8

137.3

70.5

2.3

7.8

112.6
(30.3)
(1.4)
161.5

10.5
151.0
(0.2)

$

502.6

$

351.4

$

151.2

Revenues

The following summarizes revenues (in millions), carload/unit statistics (in thousands) and revenue per carload/unit:

Chemical and petroleum $
Industrial and consumer
products

Agriculture and minerals

Energy

Intermodal

Automotive

Carload revenues,
carloads and units

Revenues

Carloads and Units

Revenue per Carload/Unit

2014
453.0

2013
426.7

$

% Change
6%

2014
246.9

2013
243.4

% Change

2014

1% $ 1,835

2013
$ 1,753

% Change
5%

623.3

446.6

326.8

395.8

238.4

583.8

383.9

326.6

356.6

201.5

7%

16%

—

347.4

233.9

299.2

11% 1,019.6

18%

127.1

337.8

212.0

295.7

965.6

110.3

3%

10%

1%

6%

1,794

1,909

1,092

388

15%

1,876

1,728

1,811

1,104

369

1,827

2,483.9

2,279.1

9% 2,274.1

2,164.8

5% $ 1,092

$ 1,053

4%

5%

(1%)

5%

3%

4%

Other revenue

93.2

90.2

Total revenues (i)

$ 2,577.1

$ 2,369.3

3%

9%

(i) Included in revenues:

Fuel surcharge

$

334.7

$

320.2

Revenues include both revenue for transportation services and fuel surcharges. For the year ended December 31, 2014, 
revenues and carload/unit volumes increased 9% and 5%, respectively, compared to the prior year. Agriculture and minerals 
revenues increased $62.7 million for the year ended December 31, 2014, compared to the prior year, due to an increase of $57.4 
million in grain revenues. During the first half of 2013, grain volumes and average length of haul were adversely affected as a 
result of the severe drought conditions experienced in the Midwest region of the United States during 2012. Revenue per 
carload/unit increased by 4% for the year ended December 31, 2014, compared to the prior year, due to positive pricing 
impacts, partially offset by the weakening of the Mexican peso against the U.S. dollar.

33

 
 
Revenue decreased by approximately 1% or $18.0 million due to the weakening of the Mexican peso for revenue 
transactions denominated in Mexican pesos. The average exchange rate of Mexican pesos per U.S. dollar was Ps.13.3 for 2014 
compared to Ps.12.8 for 2013.

KCS’s fuel surcharges are a mechanism to adjust revenue based upon changing fuel prices. Fuel surcharges are calculated 

differently depending on the type of commodity transported. For most commodities, fuel surcharge is calculated using a fuel 
price from a prior time period that can be up to 60 days earlier. In a period of volatile fuel prices or changing customer business 
mix, changes in fuel expense and fuel surcharge may differ.

The following discussion provides an analysis of revenues by commodity group:

Revenues by commodity
group for 2014

Chemical and petroleum. Revenues increased $26.3 million for the 
year ended December 31, 2014, compared to 2013, due to a 5% increase 
in revenue per carload/unit and a 1% increase in carload/unit volumes. 
Revenues increased due to positive pricing impacts in petroleum, 
plastics and chemicals.  

Industrial and consumer products. Revenues increased $39.5 
million for the year ended December 31, 2014, compared to 2013, due to 
a 4% increase in revenue per carload/unit and a 3% increase in carload/
unit volumes. Metals and scrap revenues increased due to strong 
demand, positive pricing impacts and increased length of haul. Pulp and 
paper revenues increased due to positive pricing impacts.

Plastics
25%

Petroleum
28%

Other
13%

Metals &
Scrap
44%

Chemicals
47%

Forest
Products
43%

34

Agriculture and minerals. Revenues increased $62.7 million for 
the year ended December 31, 2014, compared to 2013, due to a 10% 
increase in carload/unit volumes and a 5% increase in revenue per 
carload/unit. Grain revenues increased $57.4 million, compared to 2013, 
as volumes and average length of haul were adversely affected in the 
first half of 2013 as a result of the severe drought conditions 
experienced in the Midwestern region of the United States during 2012. 
Record corn harvests in 2013 and 2014 also contributed to revenue 
growth.

Revenues by commodity
group for 2014

Stone,
Clay, &
Glass,
6%

Ores &
Minerals
5%

Food
Products
31%

Energy. Revenues increased $0.2 million for the year ended 
December 31, 2014, compared to 2013, due to a 1% increase in carload/
unit volumes and a 1% decrease in revenue per carload/unit. The volume 
increase was due to strong frac sand demand driven by higher natural 
gas prices in the first half of the year and new drilling technologies. This 
increase was partially offset by volume decreases due to longer cycle 
times and connecting carrier fluidity in moving utility coal.

Frac Sand
19%

Crude Oil
7%

Coal &
Petroleum
Coke
13%

Grain
58%

Utility
Coal
61%

Intermodal. Revenues increased $39.2 million for the year ended December 31, 2014, compared to 2013, due to a 6% 

increase in in carload/unit volumes and a 5% increase in revenue per carload/unit. Volume growth was driven by conversion of 
cross border and domestic general commodity truck traffic to rail, and trans-Pacific imports via the Port of Lazaro Cardenas. 
Revenue per carload/unit increased as a result of positive pricing impacts and increased average length of haul.

Automotive. Revenues increased $36.9 million for the year ended December 31, 2014, compared to 2013, due to a 15% 

increase in carload/unit volumes and a 3% increase in revenue per carload/unit. Growth was driven by the opening of three 
automotive plants in Mexico and an increase in import/export volumes through the Port of Lazaro Cardenas. The increase in
revenues was partially offset by the weakening of the Mexican peso against the U.S. dollar.

35

 
 
 
 
 
 
 
Operating Expenses

Operating expenses, as shown below (in millions), increased $137.3 million for the year ended December 31, 2014, when 

compared to 2013, due to higher carload/unit volumes and lease termination costs. Volume-based expenses increased by 
approximately $64.0 million in 2014, as compared to 2013. The weakening of the Mexican peso against the U.S. dollar resulted 
in an expense reduction of approximately $19.0 million for expense transactions denominated in Mexican pesos. The average 
exchange rate of Mexican pesos per U.S. dollar was Ps.13.3 for 2014 compared to Ps.12.8 for 2013. 

2014

2013

Dollars

Percent

Change

Compensation and benefits

$

474.5

$

441.6

$

Purchased services

Fuel

Equipment costs

Depreciation and amortization

Materials and other

Lease termination costs

Total operating expenses

245.2

415.9

119.2

258.1

216.8

38.3

217.6

389.6

160.5

223.3

198.1

—

$

1,768.0

$

1,630.7

$

32.9

27.6

26.3
(41.3)
34.8

18.7

38.3

137.3

7%

13%

7%

(26%)

16%

9%

100%

8%

Compensation and benefits. Compensation and benefits increased $32.9 million for the year ended December 31, 2014, 

compared to 2013, due to carload/unit volumes, including higher headcount resulting in an increase of approximately $18.0 
million and annual salary rate increases of approximately $17.0 million, partially offset by the weakening of the Mexican peso.

Purchased services. Purchased services increased $27.6 million for the year ended December 31, 2014, compared to 

2013, due to carload/unit volumes, increases in track and equipment maintenance and corporate expenses.

Fuel. Fuel expense increased $26.3 million for the year ended December 31, 2014, compared to 2013, due to higher 
consumption of $30.2 million. Higher diesel fuel prices were more than offset by the effects of the weakening of the Mexican 
peso. The average price per gallon, including the effects of the weakening of the Mexican peso, was $3.03 in 2014, compared to 
$3.05 in 2013.

Equipment costs. Equipment costs decreased $41.3 million for the year ended December 31, 2014, compared to 2013, 

primarily due to lower lease expense as a result of the purchase of equipment under existing operating leases and replacement 
equipment as certain operating leases expired, which resulted in a $30.7 million decrease. In addition, equipment costs 
decreased due to lower net car hire expense as a result of the increase in owned equipment. 

Depreciation and amortization. Depreciation and amortization increased $34.8 million for the year ended December 31, 
2014, compared to 2013, due to a larger asset base, including $14.8 million related to the purchase of equipment under existing 
operating leases and replacement equipment as certain operating leases expired. 

Materials and other. Materials and other increased $18.7 million for the year ended December 31, 2014, compared to 

2013, due to increases in casualty expense, materials and supplies expense, and employee expenses. In addition, the Company 
recognized a recovery from a legal dispute in the first quarter of 2013. 

Lease termination costs. Lease termination costs were $38.3 million for the year ended December 31, 2014, due to the 

early termination of certain operating leases and the related purchase of the equipment. The Company did not incur lease 
termination costs during 2013.

36

 
 
Non-Operating Expenses

Equity in net earnings of unconsolidated affiliates. Equity in net earnings from unconsolidated affiliates increased $2.3 

million for the year ended December 31, 2014, compared to 2013. Equity in earnings from the operations of Panama Canal 
Railway Company (“PCRC”) increased as PCRC’s volumes were adversely affected during the first half of 2013 as the 
movement of containers was either trucked or rerouted to other destinations as a result of delays caused by a system 
implementation at the Port of Balboa.

Interest expense. Interest expense decreased $7.8 million for the year ended December 31, 2014, compared to 2013, due 

to lower average interest rates as a result of the Company's refinancing activities during 2013 and the utilization of the 
commercial paper program during 2014. These decreases were partially offset by higher average debt balances driven by 
financing incurred during 2013. The average interest rate for the year ended December 31, 2014 was 3.5%, compared to 4.2% 
in 2013. For the year ended December 31, 2014, the average debt and short-term borrowing balances were $2,174.7 million, 
compared to $1,852.3 million in 2013. 

Debt retirement and exchange costs. Debt retirement and exchange costs were $6.6 million and $119.2 million for the 

years ended December 31, 2014, and 2013, respectively. The debt retirement costs include tender and call premiums, original 
issue discounts and the write-off of unamortized debt issuance costs associated with the Company’s various debt refinancing 
and redemption activities.

Foreign exchange loss. For the years ended December 31, 2014 and December 31, 2013, foreign exchange loss was 

$35.5 million and $5.2 million, respectively. Foreign exchange loss includes the re-measurement and settlement of monetary 
assets and liabilities denominated in Mexican pesos and the loss on foreign currency derivative contracts.

For the years ended December 31, 2014 and 2013, the re-measurement and settlement of monetary assets and liabilities 

denominated in Mexican pesos resulted in a foreign exchange loss of $7.6 million and $4.5 million, respectively.

The Company enters into foreign currency derivative contracts to hedge its net exposure to fluctuations in the Mexican 
cash tax obligation due to changes in the value of the Mexican peso against the U.S. dollar. For the years ended December 31, 
2014 and 2013, foreign exchange loss on foreign currency derivative contracts was $27.9 million and $0.7 million, respectively. 

Other expense, net. Other expense, net, increased $1.4 million for the year ended December 31, 2014, compared to 2013, 

due to higher miscellaneous expense.

Income tax expense. Income tax expense increased $10.5 million for the year ended December 31, 2014, compared to 
2013, due to higher pre-tax income, offset by a lower effective tax rate. The effective tax rate was 29.3% and 35.9% for the 
years ended December 31, 2014 and 2013, respectively. The decrease in the effective tax rate was primarily due to the more 
significant weakening of the Mexican peso against the U.S. dollar in 2014 as compared to 2013. 

The Company enters into foreign currency derivative contracts to hedge its net exposure to fluctuations in the Mexican 

cash tax obligation due to changes in the value of the Mexican peso against the U.S. dollar, and losses on these foreign currency 
derivative contracts are recorded in foreign exchange loss. The weakening of the Mexican peso during 2014 and 2013 
decreased the cash tax obligation by $27.7 million and $0.5 million for the years ended December 31, 2014 and 2013, 
respectively. Further information on the components of the effective tax rates for the years ended December 31, 2014 and 2013, 
is presented in Note 11 to the Consolidated Financial Statements in Item 8.

LIQUIDITY AND CAPITAL RESOURCES

Overview

The Company focuses its cash and capital resources on investing in the business, shareholder returns and optimizing its 

capital structure.

The Company believes, based on current expectations, that cash and other liquid assets, operating cash flows, access to 

debt and equity capital markets, and other available financing resources will be sufficient to fund anticipated operating 
expenses, capital expenditures, debt service costs, dividends, share repurchases and other commitments in the foreseeable 
future. The Company may, from time to time, incur debt to refinance existing indebtedness, purchase equipment under 
operating leases, repurchase shares or fund equipment additions or new investments.

37

During 2015, the Company invested $648.7 million in capital expenditures and purchased $144.2 million of equipment 

under existing operating leases and replacement equipment as certain operating leases expired. 

In May 2015, the Company announced a share repurchase program of up to $500.0 million, which expires on June 30, 

2017. Management's assessment of market conditions, available liquidity and other factors will determine the timing and 
volume of any future repurchases. Share repurchases are expected to be funded by cash on hand, cash generated from 
operations and debt. During 2015, KCS repurchased 2,133,984 shares of common stock for $194.2 million at an average price 
of $90.99 per share under this program.

In July 2015, KCSR issued $500.0 million amount of senior unsecured notes, which bear interest semiannually at a fixed 

annual rate of 4.95%. The net proceeds from the offering were used for the repayment of the outstanding commercial paper 
issued by KCSR, the repurchase of shares of KCS common stock and other general corporate purposes. 

During the fourth quarter of 2015, KCS completed an exchange offer for existing senior notes outstanding at KCSR and 

KCSM and replaced its credit facility to simplify its capital structure, improve its credit profile and enhance the secondary 
market liquidity of its debt securities. Pursuant to the exchange offer, approximately 96% or $2.0 billion of existing KCSR and 
KCSM senior notes were exchanged by bondholders for new KCS senior notes with the same interest rates, interest payment 
dates and maturity dates and substantially similar redemption provisions to the existing senior notes. In addition to the senior 
notes exchange, the combined KCSR and KCSM revolving credit facilities of $650.0 million were replaced with an $800.0 
million KCS revolving credit facility. 

The Company’s current financing instruments contain restrictive covenants which limit or preclude certain actions; 
however, the covenants are structured such that the Company expects to have sufficient flexibility to conduct its operations. The 
Company was in compliance with all of its debt covenants as of December 31, 2015. 

For discussion regarding the agreements representing the indebtedness of KCS, see “Note 9, Short-Term Borrowings” and 
“Note 10, Long-Term Debt” in the “Notes to the Consolidated Financial Statements” section of this annual report on Form 10-K.

During 2015, the Company’s Board of Directors declared quarterly cash dividends of $0.33 per share or $144.8 million on 
its common stock. On January 28, 2016, the Company’s Board of Directors declared a cash dividend of $0.33 per share payable 
on April 6, 2016, to common stockholders of record as of March 14, 2016. Subject to the discretion of the Board of Directors, 
capital availability and a determination that cash dividends continue to be in the best interest of its stockholders, the Company 
intends to pay a quarterly dividend on an ongoing basis.

On December 31, 2015, total available liquidity (the cash balance plus revolving credit facility availability) was $856.6 
million, compared to available liquidity at December 31, 2014 of $847.9 million. During 2016, KCS and KCSM floating rate 
senior notes totaling $250.0 million will mature. The Company expects to either repay this obligation using available liquidity 
or refinance this obligation prior to the maturity date.

As of December 31, 2015, the total cash and cash equivalents held outside of the U.S. in foreign subsidiaries was $115.1 
million. The Company expects that this cash will be available to fund company operations without incurring additional income 
taxes. 

KCS’s operating results and financing alternatives can be unexpectedly impacted by various factors, some of which are 

outside of its control. For example, if KCS were to experience a reduction in revenues or a substantial increase in operating 
costs or other liabilities, its earnings could be significantly reduced, increasing the risk of non-compliance with debt covenants. 
Additionally, the Company is subject to external factors impacting debt and equity capital markets and its ability to obtain 
financing under reasonable terms is subject to market conditions. Volatility in capital markets and the tightening of market 
liquidity could impact KCS’s access to capital. Further, KCS’s cost of debt can be impacted by independent rating agencies 
which assign debt ratings based on certain factors including competitive position, credit measurements such as interest coverage 
and leverage ratios, and liquidity.

38

Cash Flow Information and Contractual Obligations

Summary cash flow data follows (in millions): 

Cash flows provided by (used for):

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents beginning of year

Cash and cash equivalents end of year

2015

2014

2013

$

$

$

909.3
(873.0)
(247.7)
(211.4)
348.0

$

906.0
(982.9)
(4.6)
(81.5)
429.5

136.6

$

348.0

$

798.3
(833.3)
391.9

356.9

72.6

429.5

During 2015, cash and cash equivalents decreased $211.4 million as a result of the repurchase of common stock of $194.2 

million and higher dividend payments. During 2014, cash and cash equivalents decreased $81.5 million as a result of the 
purchase or replacement of certain equipment under existing leases and increased capital expenditures which were funded with 
borrowings incurred in 2013 and cash flows from operating activities.

Operating Cash Flows. Net cash provided by operating activities increased $3.3 million for 2015, as compared to 2014, 

as a decrease in net income was more than offset by higher non-cash depreciation and amortization expense and unrealized 
foreign exchange loss on foreign currency contracts. Additionally, materials and supplies increased due to timing of 
construction activities and fuel purchases. Net cash provided by operating activities increased $107.7 million for 2014, as 
compared to 2013, due to increased net income.

Investing Cash Flows. Net cash used for investing activities decreased $109.9 million for 2015, as compared to 2014, due 

to lower expenditures for the purchase or replacement of equipment under existing operating leases, partially offset by higher 
capital expenditures and other investing activities. Net cash used for investing activities increased $149.6 million for 2014, as 
compared to 2013, due higher expenditures for the purchase or replacement of equipment under operating leases and capital 
expenditures. Additional capital expenditure information is included within the Capital Expenditure section of Liquidity and 
Capital Resources.

Financing Cash Flows. Financing cash inflows are generated from the issuance of long-term debt, short-term borrowings 

and proceeds from the issuance of common stock under employee stock plans. Financing cash outflows are used for the 
repayment of debt, short-term borrowings, share repurchases and the payment of dividends and debt costs. Financing cash 
flows for 2015, 2014, and 2013 are discussed in more detail below:

•  Net financing cash outflows for 2015 were $247.7 million due to the net repayment of short-term borrowings of 

$371.1 million, the repurchase of common stock of $194.2 million, the payment of dividends of $140.1 million and 
the payment of debt costs of $20.3 million. These cash outflows were partially offset by net proceeds from long-term 
debt of $473.9 million.

•  Net financing cash outflows for 2014 were $4.6 million due to the net repayment of $333.0 million of long-term debt 

and the payment of $116.6 million of dividends, offset by the net proceeds of $448.6 million from short-term 
borrowings.

•  Net financing cash inflows for 2013 were $391.9 million due to the net proceeds of $575.2 million from long-term 

borrowings, offset by the payment of $117.8 million in debt costs and $71.2 million of dividends.

39

Contractual Obligations. The following table outlines the material obligations and commitments as of December 31, 

2015 (in millions):

Long-term debt and short-term borrowings
(including interest and capital lease obligations) (i)
Operating leases
Obligations due to uncertainty in income taxes
Capital expenditure obligations (ii)
Other contractual obligations (iii)

Total

_____________________

Payments Due by Period

Total

Less Than
1 Year

1-3 Years

3-5 Years

More than
5 years

$ 3,960.4
311.3
1.7
478.1
531.0
$ 5,282.5

$

$

445.4
68.6
1.7
212.2
142.4
870.3

$

$

231.8
103.6
—
227.8
237.7
800.9

$

$

434.3
60.4
—
38.1
68.2
601.0

$ 2,848.9
78.7
—
—
82.7
$ 3,010.3

(i) 

(ii) 

For variable rate obligations, interest payments were calculated using the December 31, 2015 rate. For fixed rate 
obligations, interest payments were calculated based on the applicable rates and payment dates.
Capital expenditure obligations include minimum capital expenditures under the KCSM Concession agreement and 
other regulatory requirements.

(iii) 

Other contractual obligations include purchase commitments and certain maintenance agreements.

In the normal course of business, the Company enters into long-term contractual commitments for future goods and 

services needed for the operations of the business. Such commitments are not in excess of expected requirements and are not 
reasonably likely to result in performance penalties or payments that would have a material adverse effect on the Company’s 
liquidity. Such commitments are not included in the above table.

The Company is party to five utilization leases covering 874 railcars in which car hire revenue as defined in the lease 

agreements is shared between the lessor and the Company. The leases expire at various times through 2024. Amounts that may 
be due to lessors under these utilization leases vary from month to month based on car hire rental with the minimum monthly 
cost to the Company being zero. Accordingly, the utilization leases have been excluded from contractual obligations above.

The SCT requires KCSM to submit a five year capital expenditures plan every five years. The five year plan was 
submitted in 2012 for the years 2013 — 2017. KCSM expects to continue capital spending at current levels in future years and 
will continue to have capital expenditure obligations past 2017, which are not included in the table above.

Off-Balance Sheet Arrangements

On November 2, 2007, PCRC completed an offering of $100.0 million of 7.0% senior secured notes due November 1, 

2026 (the “Notes”). The Notes are senior obligations of PCRC, secured by certain assets of PCRC. KCS has pledged its shares 
of PCRC as security for the Notes. The Notes are otherwise non-recourse to KCS. The Company has agreed, along with Mi-
Jack Products, Inc. (“Mi-Jack”), the other 50% owner of PCRC, to each fund one-half of any debt service reserve and liquidity 
reserve (reserves which are required to be established by PCRC in connection with the issuance of the Notes). As of 
December 31, 2015, the Company’s portion of these reserves was $5.3 million. The Company has issued a standby letter of 
credit in the amount of $5.3 million to fund its share of these reserves. 

40

 
Capital Expenditures

KCS has funded, and expects to continue to fund, capital expenditures with operating cash flows and short and long-term 

debt.

The following table summarizes capital expenditures by type for the years ended December 31, 2015, 2014, and 2013, 

respectively (in millions):

Roadway capital program
Locomotives and freight cars
Capacity
Information technology
Other

Total capital expenditures (accrual basis)
Change in capital accruals
Total cash capital expenditures

Purchase or replacement of equipment under operating leases

Freight cars
Locomotives

Total purchase or replacement of equipment under operating
leases (accrual basis)
Change in capital accruals
Total cash purchase or replacement of equipment under
operating leases

2015

2014

2013

$

$

$

306.2
205.9
86.6
39.0
11.0
648.7
39.3
688.0

144.2
—

144.2
—

$

$

$

311.1
245.1
93.0
31.9
21.6
702.7
(34.5)
668.2

224.4
76.3

300.7
1.4

144.2

$

302.1

$

315.7
194.7
63.1
15.6
10.0
599.1
(4.3)
594.8

57.9
155.3

213.2
(1.4)

211.8

$

$

$

$

Generally, the Company’s capital program consists of capital replacement and equipment. For 2016, internally generated 

cash flows and short-term borrowings are expected to fund cash capital expenditures, which are currently estimated to be 
between $580.0 million and $590.0 million. In addition, the Company continuously reviews its equipment under operating 
leases. Any additional purchase or replacement of equipment under operating leases during 2016 is expected to be funded with 
internally generated cash flows and/or short-term debt.

Property Statistics

The following table summarizes certain property statistics as of December 31:

Track miles of rail installed
Cross ties installed (thousands)

2015

2014

2013

177
829

169
880

138
929

Shelf Registration Statements and Public Securities Offerings

KCS has one current, universal shelf registration statement on file with the SEC (the “Universal Shelf” — Registration 

No. 333-200411). The Universal Shelf was filed on November 20, 2014 in accordance with the securities offering reform rules 
of the SEC that allow “well-known seasoned issuers” to register an unspecified amount of different types of securities on an 
immediately effective Form S-3 registration statement. The Universal Shelf will expire on November 20, 2017.

41

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

KCS’s accounting and financial reporting policies are in conformity with U.S. generally accepted accounting principles 

(“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make 
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and 
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. 
Management believes that the following accounting policies and estimates are critical to an understanding of KCS’s historical 
and future performance. Management has discussed the development and selection of the following critical accounting 
estimates with the Audit Committee of KCS’s Board of Directors and the Audit Committee has reviewed the selection, 
application and disclosure of the Company’s critical accounting policies and estimates.

Capitalization, Depreciation and Amortization of Property and Equipment (including Concession Assets)

Due to the highly capital intensive nature of the railroad industry, capitalization and depreciation of property and 

equipment are a substantial portion of the Company’s consolidated financial statements. Net property and equipment, including 
concession assets, comprised approximately 92% of the Company’s total assets as of December 31, 2015, and related 
depreciation and amortization comprised approximately 18% of total operating expenses for the year ended December 31, 
2015.

KCS capitalizes costs for self-constructed additions and improvements to property including direct labor and material, 
indirect overhead costs, and interest during long-term construction projects. Direct costs are charged to capital projects based on 
the work performed and the material used. Indirect overhead costs are allocated to capital projects as a standard percentage, 
which is evaluated annually, and applied to direct labor and material costs. Asset removal activities are performed in 
conjunction with replacement activities; therefore, removal costs are estimated based on a standard percentage of direct labor 
and indirect overhead costs related to capital replacement projects. For purchased assets, all costs necessary to make the asset 
ready for its intended use are capitalized. Expenditures that significantly increase asset values, productive capacity, efficiency, 
safety or extend useful lives are capitalized. Repair and maintenance costs are expensed as incurred.

Property and equipment are carried at cost and are depreciated primarily on the group method of depreciation, which the 
Company believes closely approximates a straight line basis over the estimated useful lives of the assets measured in years. The 
group method of depreciation applies a composite rate to classes of similar assets rather than to individual assets. Composite 
depreciation rates are based upon the Company’s estimates of the expected average useful lives of assets as well as expected net 
salvage value at the end of their useful lives. In developing these estimates, the Company utilizes periodic depreciation studies 
performed by an independent engineering firm. Depreciation rate studies are performed at least every three years for equipment 
and at least every six years for road property (rail, ties, ballast, etc.). The depreciation studies take into account factors such as:

•  Statistical analysis of historical patterns of use and retirements of each asset class;

•  Evaluation of any expected changes in current operations and the outlook for the continued use of the assets;

•  Evaluation of technological advances and changes to maintenance practices; and

•  Historical and expected salvage to be received upon retirement.

The depreciation studies may also indicate that the recorded amount of accumulated depreciation is deficient or in excess 

of the amount indicated by the study. Any such deficiency or excess is amortized as a component of depreciation expense over 
the remaining useful lives of the affected asset class, as determined by the study. The Company also monitors these factors in 
non-study years to determine if adjustments should be made to depreciation rates. The Company completed depreciation studies 
for its U.S. based assets in 2015 and KCSM in 2014. The impacts of the studies were immaterial to the consolidated financial 
results for all periods.

Also under the group method of depreciation, the cost of railroad property and equipment (net of salvage or sales 

proceeds) retired or replaced in the normal course of business is charged to accumulated depreciation with no gain or loss 
recognized. Actual historical costs are retired when available, such as with equipment costs. The use of estimates in recording 
the retirement of roadway assets is necessary as it is impractical to track individual, homogeneous network-type assets. Certain 
types of roadway assets are retired using statistical curves derived from the depreciation studies that indicate the relative 
distribution of the age of the assets retired. For other roadway assets, historical costs are estimated by (1) deflating current costs 
using inflation indices published by the U.S. Bureau of Labor Statistics and (2) the estimated useful life of the assets as 

42

determined by the depreciation studies. The indices applied to the replacement value are selected because they closely correlate 
with the major costs of the items comprising the roadway assets. Because of the number of estimates inherent in the 
depreciation and retirement processes and because it is impossible to precisely estimate each of these variables until a group of 
assets is completely retired, the Company continually monitors the estimated useful lives of its assets and the accumulated 
depreciation associated with each asset group to ensure the depreciation rates are appropriate.

Estimation of the average useful lives of assets and net salvage values requires management judgment. Estimated 
average useful lives may vary over time due to changes in physical use, technology, asset strategies and other factors that could 
have an impact on the retirement experience of the asset classes. Accordingly, changes in the assets’ estimated useful lives 
could significantly impact future periods’ depreciation expense. Depreciation and amortization expense for the year ended 
December 31, 2015 was $284.6 million. If the weighted average useful lives of assets were changed by one year, annual 
depreciation and amortization expense would change approximately $10.0 million.

Gains or losses on dispositions of land or non-group property and abnormal retirements of railroad property are 
recognized through income. A retirement of railroad property would be considered abnormal if the cause of the retirement is 
unusual in nature and its actual life is significantly shorter than what would be expected for that group based on the depreciation 
studies. An abnormal retirement could cause the Company to re-evaluate the estimated useful life of the impacted asset class. 
There were no significant gains or losses from abnormal retirements of property or equipment for any of the three years ended 
December 31, 2015.

Costs incurred by the Company to acquire the concession rights and related assets, as well as subsequent improvements 

to the concession assets, are capitalized and amortized using the group method of depreciation over the lesser of the current 
expected Concession term, including probable renewal of an additional 50-year term, or the estimated useful lives of the assets 
and rights. The Company’s ongoing evaluation of the useful lives of concession assets and rights considers the aggregation of 
the following facts and circumstances:

•  The Company’s executive management is dedicated to ensuring compliance with the various provisions of the 

Concession and to maintaining positive relationships with the SCT and other Mexican federal, state, and municipal 
governmental authorities;

•  During the time since the Concession was granted, the relationships between KCSM and the various Mexican 

governmental authorities have matured and the guidelines for operating under the Concession have become more 
defined with experience;

•  There are no known supportable sanctions or compliance issues that would cause the SCT to revoke the Concession 

or prevent KCSM from renewing the Concession; and

•  KCSM operations are an integral part of the KCS operations strategy, and related investment analyses and operational 

decisions assume that the Company’s cross border rail business operates into perpetuity, and do not assume that 
Mexico operations terminate at the end of the current Concession term.

Based on the above factors, as of December 31, 2015, the Company continues to believe that it is probable that the 

Concession will be renewed for an additional 50-year term beyond the current term.

Long-lived assets are reviewed for impairment when events or circumstances indicate that the carrying amount of an asset 
may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the 
carrying value of the long-lived assets, the carrying value would be reduced to the estimated fair value. Future cash flow 
estimates for an impairment review would be based on the lowest level of identifiable cash flows, which are the Company’s 
U.S. and Mexican operations. During the years ended December 31, 2015 and 2014, management did not identify any 
indicators of impairment.

Provision for Personal Injury Claims

Personal injury claims represent work-related injuries and third party liabilities resulting from crossing collisions and 

derailments. Claims are estimated and recorded for known reported occurrences as well as for incurred but not reported 
(“IBNR”) occurrences. Consistent with general practices within the railroad industry, the estimated liability is actuarially 
determined on an undiscounted basis. The actuarial analysis is performed semi-annually by an independent third party actuarial 

43

firm and reviewed by management. In estimating the liability, the actuarial study calculates an estimate using historical 
experience and estimates of claim costs as well as numerous assumptions regarding factors relevant to the derivation of an 
estimate of future claim costs.

Personal injury claims are subject to a significant degree of uncertainty, especially estimates related to incurred but not 

reported personal injuries for which a party has yet to assert a claim. In deriving an estimate of the provision for personal injury 
claims, management must make assumptions related to substantially uncertain matters (injury severity, claimant age and legal 
jurisdiction). Changes in the assumptions used for actuarial studies could have a material effect on the estimate of the provision 
for personal injury claims. The most sensitive assumptions for personal injury accruals are the expected average cost per claim 
and the projected frequency rates for the number of claims that will ultimately result in payment. Management believes that the 
accounting estimate related to the liability for personal injuries claims is critical to KCS’s results of operations. See also 
Note 15 to the Consolidated Financial Statements in Item 8 of this Form 10-K.

Income Taxes

Deferred income taxes represent a net asset or liability of the Company. For financial reporting purposes, management 

determines the current tax liability, as well as deferred tax assets and liabilities, in accordance with the liability method of 
accounting for income taxes. The provision for income taxes is the sum of income taxes both currently payable and deferred 
into the future. Currently payable income taxes represent the liability related to the Company’s U.S., state and foreign income 
tax returns for the current year and anticipated tax payments resulting from income tax audits, while the net deferred tax 
expense or benefit represents the change in the balance of net deferred tax assets or liabilities as reported on the balance sheet. 
The changes in deferred tax assets and liabilities are determined based upon the estimated timing of reversal of differences 
between the carrying amount of assets and liabilities for financial reporting purposes and the basis of assets and liabilities for 
tax purposes as measured using the currently enacted tax rates that will be in effect at the time these differences are expected to 
reverse. Additionally, management estimates whether taxable operating income in future periods will be sufficient to fully 
recognize any deferred tax assets. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount 
considered likely to be realized.

Income tax expense related to Mexican operations has additional complexities such as the impact of exchange rate 

variations, which can have a significant impact on the effective income tax rate.

Management believes that the assumptions and estimates related to the provision for income taxes are critical to the 
Company’s results of operations. For the year ended December 31, 2015, income tax expense totaled $187.3 million. For every 
1% change in the 2015 effective rate, income tax expense would have changed by approximately $6.7 million. For further 
information on the impact of foreign exchange fluctuation on income taxes, refer to Foreign Exchange Sensitivity in Item 7A.

OTHER MATTERS

Litigation. The Company is a party to various legal proceedings and administrative actions, all of which are of an 

ordinary, routine nature and incidental to its operations. Included in these proceedings are various tort claims brought by current 
and former employees for job related injuries and by third parties for injuries related to railroad operations. KCS aggressively 
defends these matters and has established liability provisions that management believes are adequate to cover expected costs. 
Although it is not possible to predict the outcome of any legal proceeding, in the opinion of the Company’s management, other 
than those proceedings described in Note 15 to the Consolidated Financial Statements in Item 8 of this Form 10-K, such 
proceedings and actions should not, individually, or in the aggregate, have a material adverse effect on the Company’s 
consolidated financial statements.

Inflation. U.S. generally accepted accounting principles require the use of historical cost, which does not reflect the 
effects of inflation on the replacement cost of property. Due to the capital intensive nature of KCS’s business, the replacement 
cost of these assets would be significantly higher than the amounts reported under the historical cost basis.

Recent Accounting Pronouncements. Refer to Note 2 to the Consolidated Financial Statements in Item 8 of this Form 

10-K for information relative to recent accounting pronouncements.

44

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

KCS utilizes various financial instruments that have certain inherent market risks. These instruments have not been 

entered into for trading purposes. The following information, together with information included in Item 7, “Management’s 
Discussion and Analysis of Financial Condition and Results of Operations” and Note 8 to the Consolidated Financial 
Statements in Item 8 of this Form 10-K, describe the key aspects of certain financial instruments that have market risk to KCS.

Interest Rate Sensitivity. Floating-rate indebtedness includes commercial paper borrowings, revolving credit facilities and 

floating rate senior notes, which totaled $330.0 million and $400.1 million at December 31, 2015 and 2014, respectively. 
Considering the balance of $330.0 million of variable rate debt at December 31, 2015, KCS is sensitive to fluctuations in 
interest rates. For example, a hypothetical 100 basis points increase in interest rates would result in additional interest expense 
of $3.3 million on an annualized basis for the floating-rate instruments issued by the Company as of December 31, 2015.

Based upon the borrowing rates available to KCS and its subsidiaries for indebtedness with similar terms and average 
maturities, the fair value of long-term debt was approximately $2,287.5 million and $1,884.1 million at December 31, 2015 and 
2014, respectively, compared with a carrying value of $2,321.1 million and $1,851.3 million at December 31, 2015 and 2014, 
respectively.

Commodity Price Sensitivity. KCS periodically participates in diesel fuel purchase commitments and derivative financial 

instruments. At December 31, 2015 and 2014, KCS did not have any outstanding fuel derivative financial instruments. The 
Company also holds fuel inventories for use in operations. These inventories are not material to KCS’s overall financial 
position. Fuel costs are expected to reflect market conditions in 2016; however, fuel costs are unpredictable and subject to a 
variety of factors outside the Company’s control. Assuming annual consumption of 132 million gallons, a 10 cent change in the 
price per gallon of fuel would cause a $13.2 million change in operating expenses. KCS mitigates the impact of increased fuel 
costs through fuel surcharge revenues from customers; however, in a period of volatile fuel prices or changing customer 
business mix, changes in fuel expense and fuel surcharge may differ.

Foreign Exchange Sensitivity. KCS’s foreign subsidiaries use the U.S. dollar as their functional currency; however, a 
portion of the foreign subsidiaries’ revenues and expenses are denominated in Mexican pesos. Based on the volume of revenue 
and expense transactions denominated in Mexican pesos, revenue and expense fluctuations largely offset.

The Company has exposure to fluctuations in the value of the Mexican peso against the U.S. dollar due to its net 
monetary assets that are denominated in Mexican pesos. The Company had Ps.477.9 million of net monetary assets at 
December 31, 2015.

The following table presents an estimate of the impact to the consolidated statements of income that would result from a 

hypothetical one Mexican peso change in the exchange rate at December 31, 2015:

Net monetary assets denominated in Mexican pesos at
December 31, 2015:
Ps.477.9 million

Ps.477.9 million

Hypothetical
Change in
Exchange Rate

Amount of Gain
(Loss)

Affected Line Item
in the Consolidated
Statements of
Income

From Ps.17.2 to
Ps.18.2

From Ps.17.2 to
Ps.16.2

($1.5 million)

$1.7 million

Foreign exchange
gain (loss)

Foreign exchange
gain (loss)

Mexican income taxes are paid in Mexican pesos, and as a result, the effective income tax rate reflects fluctuations in the 

value of the Mexican peso against the U.S. dollar. Most significantly, any gain or loss from the revaluation of net U.S. dollar-
denominated monetary liabilities into Mexican pesos is included in Mexican taxable income under Mexican tax law. As a result, 
a strengthening of the Mexican peso against the U.S. dollar for the reporting period will generally increase the Mexican cash 
tax obligation and the effective income tax rate, and a weakening of the Mexican peso against the U.S. dollar for the reporting 
period will generally decrease the Mexican cash tax obligation and the effective tax rate. 

45

The following table presents an estimate of the impact to the effective income tax rate and income tax expense that would 

result from a hypothetical one Mexican peso change in the exchange rate at December 31, 2015: 

Hypothetical Change in Exchange Rate

From Ps.17.2 to Ps.18.2

From Ps.17.2 to Ps.16.2

Increase (Decrease)
in Effective Income
Tax Rate
(2.7%)

Amount of Expense
(Benefit)
($18.0 million)

Affected Line Item
in the Consolidated
Statements of
Income
Income tax expense

3.0%

$20.1 million

Income tax expense

The Company has and may continue to enter into foreign currency derivative instruments to hedge its exposure to 
fluctuations in the Mexican cash tax obligation due to changes in the value of the Mexican peso against the U.S. dollar. 

As of December 31, 2015, the Company had outstanding foreign currency forward contracts with an aggregate notional 

amount of $300.0 million. These contracts matured on January 15, 2016, and obligated the Company to purchase a total of 
Ps.4,480.4 million at a weighted-average exchange rate of Ps.14.93 to each U.S. dollar. During January 2016, the Company 
entered into offsetting contracts with an aggregate notional amount of $251.0 million. These offsetting contracts matured on 
January 15, 2016, and obligated the Company to sell a total of Ps.4,480.4 million at a weighted-average exchange rate of 
Ps.17.85 to each U.S. dollar. 

As of December 31, 2015, the Company also had zero-cost collar contracts with an aggregate notional amount of $80.0 

million outstanding, which matured in January 2016, and resulted in a cash payment of $10.1 million.

During January 2016, the Company entered into foreign currency forward contracts with an aggregate notional amount of 

$370.0 million to hedge its exposure to fluctuations in the Mexican cash tax obligation due to changes in the value of the 
Mexican peso against the U.S. dollar. Contracts with an aggregate notional amount of $30.0 million will mature on April 29, 
2016 and obligate the Company to purchase a total of Ps.537.2 million at an exchange rate of Ps.17.91 to each U.S. dollar. The 
remaining contracts with an aggregate notional amount of $340.0 million will mature on January 17, 2017 and obligate the 
Company to purchase a total of Ps.6,207.7 million at a weighted-average exchange rate of Ps.18.26 to each U.S. dollar.

The Company has not designated these foreign currency derivative instruments as hedging instruments for accounting 

purposes. The foreign currency derivative instruments will be measured at fair value each period and any change in fair value 
will be recognized in foreign exchange gain (loss) within the consolidated statements of income.

46

Item 8.  Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm on the Company’s Internal Control over Financial 

Reporting

Report of Independent Registered Public Accounting Firm on the Company’s Consolidated Financial Statements

Consolidated Statements of Income for the Three Years ended December 31, 2015

Consolidated Statements of Comprehensive Income for the Three Years ended December 31, 2015

Consolidated Balance Sheets at December 31, 2015 and 2014

Consolidated Statements of Cash Flows for the Three Years ended December 31, 2015

Consolidated Statements of Changes in Equity for the Three Years ended December 31, 2015

Notes to Consolidated Financial Statements

Financial Statement Schedules:

Page

48

49

50

51

52

53

54

55

56

All schedules are omitted because they are not applicable, are insignificant, or the required information is shown in the 

consolidated financial statements or notes thereto.

47

 
Management’s Report on Internal Control over Financial Reporting

The management of Kansas City Southern is responsible for establishing and maintaining adequate internal control over 

financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). KCS’s internal control over financial 
reporting was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the 
preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems 

determined to be effective can provide only reasonable assurance with respect to financial statement preparation and 
presentation.

Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, 

management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of 
December 31, 2015, based on the framework established by the Committee of Sponsoring Organizations of the Treadway 
Commission in Internal Control — Integrated Framework (2013) (commonly referred to as the COSO Framework). Based on 
its evaluation, management concluded that the Company’s internal control over financial reporting was effective as of 
December 31, 2015, based on the criteria outlined in the COSO Framework.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015, has been audited 

by KPMG LLP, an independent registered public accounting firm, as stated in their attestation report, which immediately 
follows this report.

48

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Kansas City Southern:

We have audited Kansas City Southern’s (the Company) internal control over financial reporting as of December 31, 
2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring 
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective 
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, 
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to 
express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective 
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding 
of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the 
design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other 
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our 
opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the 

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally 
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures 
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and 
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit 
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and 
expenditures of the company are being made only in accordance with authorizations of management and directors of the 
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or 
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become 
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Kansas City Southern maintained, in all material respects, effective internal control over financial 
reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by 
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United 

States), the consolidated balance sheets of Kansas City Southern and subsidiaries as of December 31, 2015 and 2014, and the 
related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in 
the three-year period ended December 31, 2015, and our report dated January 29, 2016 expressed an unqualified opinion on 
those consolidated financial statements.

/s/ KPMG LLP

Kansas City, Missouri
January 29, 2016

49

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Kansas City Southern:

We have audited the accompanying consolidated balance sheets of Kansas City Southern and subsidiaries (the Company) 

as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in 
equity, and cash flows for each of the years in the three-year period ended December 31, 2015. These consolidated financial 
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 
consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial 

position of Kansas City Southern and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and 
their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally 
accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United 
States), Kansas City Southern’s internal control over financial reporting as of December 31, 2015, based on criteria established 
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway 
Commission (COSO), and our report dated January 29, 2016 expressed an unqualified opinion on the effectiveness of the 
Company’s internal control over financial reporting.

/s/ KPMG LLP

Kansas City, Missouri
January 29, 2016

50

Kansas City Southern and Subsidiaries

Consolidated Statements of Income
Years Ended December 31,

Revenues
Operating expenses:

Compensation and benefits
Purchased services
Fuel
Equipment costs
Depreciation and amortization
Materials and other
Lease termination costs

Total operating expenses
Operating income

Equity in net earnings of unconsolidated affiliates
Interest expense
Debt retirement and exchange costs
Foreign exchange loss
Other expense, net

Income before income taxes

Income tax expense
Net income

Less: Net income attributable to noncontrolling interest

Net income attributable to Kansas City Southern and subsidiaries

Preferred stock dividends

Net income available to common stockholders

Earnings per share:

Basic earnings per share
Diluted earnings per share

Average shares outstanding (in thousands):

Basic
Potentially dilutive common shares
Diluted

2015

2014

2013

(In millions, except share
and per share amounts)

$

2,418.8

$

2,577.1

$

2,369.3

442.2
223.0
306.9
119.4
284.6
229.3
9.6
1,615.0
803.8
18.3
(81.9)
(7.6)
(56.6)
(3.4)
672.6
187.3
485.3
1.8
483.5
0.2
483.3

4.41
4.40

109,709
206
109,915

$

$
$

474.5
245.2
415.9
119.2
258.1
216.8
38.3
1,768.0
809.1
21.1
(72.8)
(6.6)
(35.5)
(2.2)
713.1
208.8
504.3
1.7
502.6
0.2
502.4

4.56
4.55

110,163
270
110,433

$

$
$

441.6
217.6
389.6
160.5
223.3
198.1
—
1,630.7
738.6
18.8
(80.6)
(119.2)
(5.2)
(0.8)
551.6
198.3
353.3
1.9
351.4
0.2
351.2

3.19
3.18

109,973
367
110,340

$

$
$

See accompanying notes to consolidated financial statements.

51

Kansas City Southern and Subsidiaries

Consolidated Statements of Comprehensive Income
Years Ended December 31,

Net income
Other comprehensive income (loss):

Unrealized loss on cash flow hedges arising during the period, net of
tax of $(0.1) million

Reclassification adjustment from cash flow hedges included in net
income, net of tax of less than $0.1 million and $0.3 million

Amortization of prior service credit, net of tax of less than $(0.1)
million, $(0.1) million and $(0.1) million

Foreign currency translation adjustments, net of tax of $(0.8) million
and $(0.7) million

Other comprehensive income (loss)

Comprehensive income

Less: comprehensive income attributable to noncontrolling interest

Comprehensive income attributable to Kansas City Southern and
subsidiaries

2015

2014

(In millions)

2013

$

485.3

$

504.3

$

353.3

—

—

(0.1)

(1.4)
(1.5)
483.8
1.8

—

0.1

(0.2)

(1.1)
(1.2)
503.1
1.7

$

482.0

$

501.4

$

(0.2)

0.7

(0.1)

—

0.4

353.7
1.9

351.8

See accompanying notes to consolidated financial statements.

52

 
Kansas City Southern and Subsidiaries

Consolidated Balance Sheets
December 31,

ASSETS

Current assets:

Cash and cash equivalents
Accounts receivable, net
Materials and supplies
Other current assets

Total current assets

Investments
Property and equipment (including concession assets), net
Other assets

Total assets

Current liabilities:

LIABILITIES AND EQUITY

Long-term debt due within one year
Short-term borrowings
Accounts payable and accrued liabilities

Total current liabilities

Long-term debt
Deferred income taxes
Other noncurrent liabilities and deferred credits

Total liabilities

Commitments and contingencies
Stockholders’ equity:

$25 par, 4% noncumulative, preferred stock, 840,000 shares authorized, 649,736
shares issued, 242,170 shares outstanding
$.01 par, common stock, 400,000,000 shares authorized, 123,352,185 shares issued;
108,461,144 and 110,392,330 shares outstanding at December 31, 2015 and 2014,
respectively

Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss

Total stockholders’ equity

Noncontrolling interest

Total equity

Total liabilities and equity

$

$

$

2015

2014

(In millions, except share
and per share amounts)

$

136.6
171.9
137.9
90.6

537.0
34.7
7,705.4
63.9

348.0
181.6
111.0
77.6

718.2
36.4
7,154.7
67.1

8,341.0

$

7,976.4

$

276.1
80.0
401.5
757.6
2,045.0
1,191.1
122.6

4,116.3
—

24.8
450.1
423.9
898.8
1,826.5
1,056.2
130.8

3,912.3
—

6.1

6.1

1.1
947.1
2,964.7
(4.7)

3,914.3
310.4

4,224.7

$

8,341.0

$

1.1
949.8
2,801.7
(3.2)

3,755.5
308.6

4,064.1

7,976.4

See accompanying notes to consolidated financial statements.

53

 
Kansas City Southern and Subsidiaries

Consolidated Statements of Cash Flows
Years Ended December 31,

Operating activities:

Net income
Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation and amortization
Deferred income taxes
Equity in net earnings of unconsolidated affiliates
Share-based compensation
Excess tax benefit from share-based compensation
Distributions from unconsolidated affiliates
Debt retirement and exchange costs
Unrealized loss on foreign currency derivative instruments

Changes in working capital items:

Accounts receivable
Materials and supplies
Other current assets
Accounts payable and accrued liabilities

Other, net

Net cash provided by operating activities

Investing activities:

Capital expenditures
Purchase or replacement of equipment under operating leases
Property investments in MSLLC
Proceeds from disposal of property
Other, net

Net cash used for investing activities

Financing activities:

Proceeds from short-term borrowings
Repayment of short-term borrowings
Proceeds from issuance of long-term debt
Repayment of long-term debt
Dividends paid
Shares repurchased
Debt costs
Excess tax benefit from share-based compensation
Proceeds from employee stock plans

Net cash provided by (used for) financing activities

Cash and cash equivalents:

Net increase (decrease) during each year
At beginning of year
At end of year

Supplemental cash flow information

Non-cash investing and financing activities:

Capital expenditures and purchase or replacement of equipment under
operating lease accrued but not yet paid at end of year
Capital lease obligations incurred
Non-cash asset acquisitions
Dividends accrued but not yet paid at end of year

Cash payments:

Interest paid, net of amounts capitalized
Income tax payments, net of refunds

2015

2014

(In millions)

2013

$

485.3

$

504.3

$

353.3

284.6
135.8
(18.3)
11.4
0.1
16.5
7.6
46.0

12.0
(26.2)
(10.1)
(31.4)
(4.0)
909.3

(688.0)
(144.2)
(17.4)
4.6
(28.0)
(873.0)

10,866.2
(11,237.3)
623.7
(149.8)
(140.1)
(194.2)
(20.3)
(0.1)
4.2
(247.7)

(211.4)
348.0
136.6

43.9
4.7
7.6
35.9

81.1
40.3

$

$

$

258.1
140.1
(21.1)
10.0
0.7
25.5
6.6
4.3

17.2
9.2
(10.0)
(26.1)
(12.8)
906.0

(668.2)
(302.1)
(26.7)
9.9
4.2
(982.9)

15,368.8
(14,920.2)
175.0
(508.0)
(116.6)
—
(4.9)
(0.7)
2.0
(4.6)

(81.5)
429.5
348.0

83.2
9.1
5.9
31.0

72.5
62.9

$

$

$

$

$

$

223.3
111.2
(18.8)
13.6
(4.2)
12.5
119.2
—

(14.4)
7.1
(1.8)
0.3
(3.0)
798.3

(594.8)
(211.8)
(31.6)
8.2
(3.3)
(833.3)

—
—
1,918.4
(1,343.2)
(71.2)
—
(117.8)
4.2
1.5
391.9

356.9
72.6
429.5

50.1
—
56.7
23.8

84.1
99.2

See accompanying notes to consolidated financial statements.

54

Kansas City Southern and Subsidiaries

Consolidated Statements of Changes in Equity

(in millions, except per share amounts)

Balance at December 31, 2012
Net income
Other comprehensive income
Dividends on common stock ($0.86/share)
Dividends on $25 par preferred stock ($1.00/share)
Options exercised and stock subscribed, net of shares withheld for
employee taxes
Excess tax benefit from share-based compensation
Share-based compensation
Balance at December 31, 2013
Net income
Other comprehensive loss
Contributions from noncontrolling interest
Dividends on common stock ($1.12/share)
Dividends on $25 par preferred stock ($1.00/share)
Options exercised and stock subscribed, net of shares withheld for
employee taxes
Excess tax benefit from share-based compensation
Share-based compensation
Balance at December 31, 2014
Net income
Other comprehensive loss
Dividends on common stock ($1.32/share)
Dividends on $25 par preferred stock ($1.00/share)
Share repurchases

Options exercised and stock subscribed, net of shares withheld for
employee taxes
Excess tax benefit from share-based compensation
Share-based compensation
Balance at December 31, 2015

$25 Par
Preferred
Stock

$.01 Par
Common
Stock

Additional 
Paid in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Non-
controlling
Interest

$

6.1

$

1.1

$

925.3

$ 2,166.5
351.4

$

(94.8)
(0.2)

(2.4)

$

0.4

304.1
1.9

6.1

1.1

6.1

1.1

$

6.1

$

1.1

$

(0.6)

4.2
13.6
942.5

(2.0)

(0.7)
10.0
949.8

(18.7)

4.7

(0.1)
11.4
947.1

(2.0)

(1.2)

306.0
1.7

0.9

(3.2)

(1.5)

308.6
1.8

2,422.9
502.6

(123.6)
(0.2)

2,801.7
483.5

(144.8)
(0.2)

(175.5)

$ 2,964.7

$

(4.7)

$

310.4

Total

$ 3,400.7
353.3
0.4
(94.8)
(0.2)

(0.6)

4.2
13.6
3,676.6
504.3
(1.2)
0.9
(123.6)
(0.2)

(2.0)

(0.7)
10.0
4,064.1
485.3
(1.5)
(144.8)
(0.2)

(194.2)

4.7

(0.1)
11.4
$ 4,224.7

See accompanying notes to consolidated financial statements.

55

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Description of the Business

Kansas City Southern (“KCS” or the “Company”), a Delaware corporation, is a holding company with principal 

operations in rail transportation.

The Company is engaged primarily in the freight rail transportation business operating through a single coordinated rail 
network under one reportable business segment. The Company generates revenues and cash flows by providing its customers 
with freight delivery services both within its regions, and throughout North America through connections with other Class I rail 
carriers. KCS’s customers conduct business in a number of different industries, including electric-generating utilities, chemical 
and petroleum products, paper and forest products, agriculture and mineral products, automotive products and intermodal 
transportation.

The primary subsidiaries of the Company consist of the following:

•  The Kansas City Southern Railway Company (“KCSR”), a wholly-owned consolidated subsidiary. KCSR is a U.S. 

Class 1 railroad that services the midwest and southeast regions of the United States;

•  Kansas City Southern de México, S.A. de C.V. (“KCSM”), a wholly-owned consolidated subsidiary which operates 
under the rights granted by the Concession acquired from the Mexican government in 1997 (the “Concession”) as 
described below;

•  Mexrail, Inc. (“Mexrail”), a wholly-owned consolidated subsidiary; which wholly owns The Texas Mexican 

Railway Company (“Tex-Mex”);

•  KCSM Servicios, S.A. de C.V. (“KCSM Servicios”), a wholly-owned consolidated subsidiary which provides 

employee services to KCSM;

•  Meridian Speedway, LLC (“MSLLC”), a seventy percent-owned consolidated affiliate. MSLLC owns the former 
KCSR rail line between Meridian, Mississippi and Shreveport, Louisiana, which is the portion of the rail line 
between Dallas, Texas and Meridian known as the “Meridian Speedway”.

Including equity investments in:

•  Panama Canal Railway Company (“PCRC”), a fifty percent-owned unconsolidated affiliate which provides ocean to 

ocean freight and passenger services along the Panama Canal;

•  Ferrocarril y Terminal del Valle de México, S.A. de C.V. (“FTVM”), a twenty-five percent-owned unconsolidated 

affiliate that provides railroad services as well as ancillary services in the greater Mexico City area; and 

•  PTC-220, LLC (“PTC-220”), a fourteen percent-owned unconsolidated affiliate that holds the licenses to large 

blocks of radio spectrum and other assets for the deployment of positive train control.

The KCSM Concession. KCSM holds a concession from the Mexican government until June 2047 (exclusive through 

2027, subject to certain trackage and haulage rights granted to other concessionaires), which is renewable under certain 
conditions for an additional period of up to 50 years (the “Concession”). The Concession is to provide freight transportation 
services over rail lines which are a primary commercial corridor of the Mexican railroad system. KCSM has the right to use, but 
does not own, all track and buildings that are necessary for the rail lines’ operation. KCSM is required to pay the Mexican 
government a concession duty equal to1.25% of gross revenues during the Concession period.

Employees and Labor Relations. KCSR participates in industry-wide multi-employer bargaining as a member of the 
National Carriers’ Conference Committee, as well as local bargaining for agreements that are limited to KCSR's property. 
Approximately 80% of KCSR employees are covered by collective bargaining agreements. Long-term settlements agreements 
were reached and ratified during 2011 and the first half of 2012 covering all of the participating unions. These agreements were 
in effect through December 2015, and will remain in effect until new agreements are reached.

KCSM Servicios union employees are covered by one labor agreement, which was signed on April 16, 2012, between 

KCSM Servicios and the Sindicato de Trabajadores Ferrocarrileros de la República Mexicana (“Mexican Railroad Union”), for 
an indefinite period of time, for the purpose of regulating the relationship between the parties. Approximately 80% of KCSM 
Servicios employees are covered by this labor agreement. The compensation terms under this labor agreement are subject to 

56

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

renegotiation on an annual basis and all other benefits are subject to negotiation every two years. On July 1, 2015, the 
negotiation of compensation terms and all other benefits was initiated with the Mexican Railroad Union.

Union labor negotiations have not historically resulted in any strike, boycott, or other disruption in the Company’s 

business operations. 

Note 2. Significant Accounting Policies

Principles of Consolidation. The accompanying consolidated financial statements are presented using the accrual basis of 

accounting and include the Company and its majority-owned subsidiaries. All significant intercompany accounts and 
transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year 
presentation.

The equity method of accounting is used for all entities in which the Company or its subsidiaries have significant 

influence, but not a controlling interest. The Company evaluates less-than-majority-owned investments for consolidation 
pursuant to consolidation and variable interest entity guidance. The Company does not have any less-than-majority-owned 
investments requiring consolidation.

Use of Estimates. The accounting and financial reporting policies of the Company conform to accounting principles 
generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with 
U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 
the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues 
and expenses during the reporting period. Significant items subject to such estimates and assumptions include those related to 
the recoverability and useful lives of assets, personal injury claims, litigation provisions and income taxes. Changes in facts and 
circumstances may result in revised estimates and actual results could differ from those estimates.

Revenue Recognition. The Company recognizes freight revenue based upon the percentage of completion of a commodity 

movement as a shipment moves from origin to destination, with the related expense recognized as incurred. Other revenues, in 
general, are recognized when the product is shipped, as services are performed or contractual obligations are fulfilled.

Foreign Exchange Gain (Loss). For financial reporting purposes, foreign subsidiaries maintain records in U.S. dollars, 
which is the functional currency. The dollar is the currency that reflects the economic substance of the underlying events and 
circumstances relevant to the entity. Monetary assets and liabilities denominated in pesos are remeasured into dollars using 
current exchange rates. The difference between the exchange rate on the date of the transaction and the exchange rate on the 
settlement date, or balance sheet date if not settled, is included in the income statement as foreign exchange gain or loss.

Cash Equivalents. Short-term liquid investments with an initial maturity of three months or less are classified as cash and 

cash equivalents.

Accounts Receivable, net. Accounts receivable are net of an allowance for uncollectible accounts as determined by 
historical experience and adjusted for economic uncertainties or known trends. Accounts are charged to the allowance when a 
customer enters bankruptcy, when an account has been transferred to a collection agent or submitted for legal action, or when a 
customer is significantly past due and all available means of collection have been exhausted. At December 31, 2015 and 2014, 
the allowance for doubtful accounts was $4.9 million and $5.3 million, respectively. For the years ended December 31, 2015, 
2014 and 2013, bad debt expense was $1.0 million, $0.4 million and $0.6 million, respectively. 

Materials and Supplies. Materials and supplies consisting of diesel fuel, items to be used in the maintenance of rolling 
stock and items to be used in the maintenance or construction of road property are valued at the lower of average cost or net 
realizable value.

Derivative Instruments. Derivatives are measured at fair value and recorded on the balance sheet as either assets or 
liabilities. Changes in the fair value of derivatives are recorded either through current earnings or as other comprehensive 
income, depending on hedge designation. Gains and losses on derivative instruments classified as cash flow hedges are 
reported in other comprehensive income and are reclassified into earnings in the periods in which earnings are impacted by the 

57

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

variability of the cash flow of the hedged item. The ineffective portion of all hedge transactions is recognized in current period 
earnings.

Property and Equipment (including Concession Assets). KCS capitalizes costs for self-constructed additions and 

improvements to property including direct labor and material, indirect overhead costs, and interest during long-term 
construction projects. For purchased assets, all costs necessary to make the asset ready for its intended use are capitalized. 
Expenditures that significantly increase asset values, productive capacity, efficiency, safety or extend useful lives are 
capitalized. Repair and maintenance costs are expensed as incurred.

Property and equipment are carried at cost and are depreciated primarily on the group method of depreciation, which the 

Company believes closely approximates a straight line basis over the estimated useful lives of the assets measured in years. The 
group method of depreciation applies a composite rate to classes of similar assets rather than to individual assets. Composite 
depreciation rates are based upon the Company’s estimates of the expected average useful lives of assets as well as expected 
net salvage value at the end of their useful lives. In developing these estimates, the Company utilizes periodic depreciation 
studies performed by an independent engineering firm. Depreciation rate studies are performed at least every three years for 
equipment and at least every six years for road property (rail, ties, ballast, etc.). The Company completed depreciation studies 
for its U.S. based assets in 2015 and KCSM in 2014. The impacts of the studies were immaterial to the consolidated financial 
results for all periods. 

Under the group method of depreciation, the cost of railroad property and equipment (net of salvage or sales proceeds) 
retired or replaced in the normal course of business is charged to accumulated depreciation with no gain or loss recognized. 
Gains or losses on dispositions of land or non-group property and abnormal retirements of railroad property are recognized 
through income. A retirement of railroad property would be considered abnormal if the cause of the retirement is unusual in 
nature and its actual life is significantly shorter than what would be expected for that group based on the depreciation studies. 
An abnormal retirement could cause the Company to re-evaluate the estimated useful life of the impacted asset class.

Costs incurred by the Company to acquire the concession rights and related assets, as well as subsequent improvements to 

the concession assets, are capitalized and amortized using the group method of depreciation over the lesser of the current 
expected Concession term, including probable renewal of an additional 50-year term, or the estimated useful lives of the assets 
and rights.

Long-lived assets are reviewed for impairment when events or circumstances indicate that the carrying amount of an asset 
may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the 
carrying value of the long-lived assets, the carrying value would be reduced to the estimated fair value. Future cash flow 
estimates for an impairment review would be based on the lowest level of identifiable cash flows, which are the Company’s 
U.S. and Mexican operations. During the years ended December 31, 2015 and 2014, management did not identify any 
indicators of impairment.

Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired 

in business combinations. As of December 31, 2015 and 2014, the goodwill balance was $13.2 million, which is included in 
other assets in the consolidated balance sheets. Goodwill is not amortized, but is reviewed at least annually, or more frequently 
as indicators warrant, for impairment. An impairment loss would be recognized to the extent that the carrying amount exceeds 
the assets’ fair values. The Company performed its annual impairment review for goodwill as of November 30, 2015 and 2014, 
and concluded there was no impairment.

Fair Value of Financial Instruments. Non-financial assets and liabilities are recognized at fair value on a nonrecurring 
basis. These assets and liabilities are measured at fair value on an ongoing basis but are subject to recognition in the financial 
statements only in certain circumstances. Fair value is defined as the exchange price that would be received for an asset or paid 
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly 
transaction between market participants on the measurement date. The Company determines the fair values of its financial 
instruments based on the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize 
the use of unobservable inputs when measuring fair value. The hierarchy is broken down into three levels based upon the 
observability of inputs. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for 

58

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

identical assets or liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets 
and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs 
are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset 
or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In 
such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been 
determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s 
assessment of the significance of a particular input to the fair value in its entirety requires judgment and considers factors 
specific to the asset or liability.

Environmental Liabilities. The Company records liabilities for remediation and restoration costs related to past activities 

when the Company’s obligation is probable and the costs can be reasonably estimated. Costs of future expenditures for 
environmental remediation are not discounted to their present value. Recoveries of environmental remediation costs from other 
parties are recorded as assets when their receipt is deemed probable. Costs of ongoing compliance activities related to current 
operations are expensed as incurred.

Personal Injury Claims. Personal injury claims in excess of self-insurance levels are insured up to certain coverage 
amounts, depending on the type of claim and year of occurrence. The Company’s personal injury liability is based on actuarial 
studies performed on an undiscounted basis by an independent third party actuarial firm and reviewed by management. The 
liability is based on claims filed and an estimate of claims incurred but not yet reported. Adjustments to the liability are 
reflected as operating expenses in the period in which the adjustments are known. Legal fees related to personal injury claims 
are recorded in operating expense in the period incurred.

Health and Welfare and Postemployment Benefits. The Company provides certain medical, life and other 

postemployment benefits to certain active employees and retirees. The Company uses actuaries to assist management in 
measuring the benefit obligation and cost based on the current plan provisions, employee demographics, and assumptions about 
financial and demographic factors affecting the probability, timing and amount of expected future benefit payments. Significant 
assumptions include the discount rate, rate of increase in compensation levels, and the health care cost trend rate. Actuarial 
gains and losses determined at the measurement date (December 31) are recognized immediately in the consolidated statements 
of income.

Share-Based Compensation. The Company accounts for all share-based compensation in accordance with fair value 

recognition provisions. Under this method, compensation expense is measured at grant date fair value net of estimated 
forfeitures, and is recognized over the requisite service period in which the award is earned. The Company issues treasury stock 
to settle share-based awards.

Income Taxes. Deferred income tax effects of transactions reported in different periods for financial reporting and income 
tax return purposes are recorded under the liability method of accounting for income taxes. This method gives consideration to 
the future tax consequences of the deferred income tax items and immediately recognizes changes in income tax laws in the 
year of enactment. In addition, the Company has not provided U.S. federal income taxes on the undistributed operating 
earnings of its foreign subsidiaries because the Company intends to indefinitely reinvest the earnings outside the U.S. or the 
earnings will be remitted in a tax-free transaction.

The Company has recognized a deferred tax asset, net of a valuation allowance, for net operating loss and tax credit 
carryovers. The Company projects sufficient future taxable income to realize the deferred tax asset recorded less the valuation 
allowance. These projections take into consideration assumptions about future income, future capital expenditures and inflation 
rates. If assumptions or actual conditions change, the deferred tax asset, net of the valuation allowance, will be adjusted to 
properly reflect the expected tax benefit.

Treasury Stock. The excess of repurchase price over par value of common shares held in treasury is allocated between 

additional paid-in capital and retained earnings. 

59

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

New Accounting Pronouncements 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with 
Customers, which requires companies to recognize revenue to depict the transfer of promised goods or services to customers in 
an amount that reflects the consideration it expects to be entitled in exchange for those goods or services. The new standard will 
become effective for the Company beginning with the first quarter 2018 and can be adopted either retrospectively to each prior 
reporting period presented or as a cumulative effect adjustment as of the date of adoption. The adoption of this guidance is not 
expected to have a material impact on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest, which requires that debt issuance costs 

related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that 
debt liability, consistent with debt discounts. The recognition and measurement guidance of debt issuance costs are not affected 
by the amendments in this update. The standard is effective for financial statements issued for annual periods beginning after 
December 15, 2015, and interim periods within those annual periods. The Company early adopted the new guidance in the 
fourth quarter of 2015 and applied it retrospectively. The December 31, 2014 consolidated balance sheet and related disclosures 
were adjusted to reflect the reclassification of $14.5 million of debt issuance costs from “Other assets” to “Long-term debt.” 
There was no other impact to the consolidated financial statements from the adoption of this guidance.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires 
deferred tax assets and deferred tax liabilities be presented as noncurrent in a classified balance sheet. The standard is effective 
for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual 
periods. The Company early adopted the new guidance in the fourth quarter of 2015 and applied it retrospectively. The 
December 31, 2014 consolidated balance sheet and related disclosures were adjusted to reflect the reclassification of $100.1 
million of deferred income taxes from “Current assets” to “Noncurrent liabilities”. There was no other impact to the 
consolidated financial statements from the adoption of this guidance.

Note 3. Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common stockholders by the 
weighted-average number of common shares outstanding for the period. Diluted earnings per share adjusts basic earnings per 
common share for the effects of potentially dilutive common shares, if the effect is not anti-dilutive. Potentially dilutive 
common shares include the dilutive effects of shares issuable under the Stock Option and Performance Award Plan and shares 
issuable upon the conversion of preferred stock to common stock.

The following table reconciles the basic earnings per share computation to the diluted earnings per share computation (in 

millions, except share and per share amounts):

Net income available to common stockholders for purposes of
computing basic and diluted earnings per share

$

483.3

$

502.4

$

351.2

2015

2014

2013

Weighted-average number of shares outstanding (in thousands):

Basic shares
Effect of dilution
Diluted shares

Earnings per share:

Basic earnings per share
Diluted earnings per share

109,709
206
109,915

110,163
270
110,433

109,973
367
110,340

$
$

4.41
4.40

$
$

4.56
4.55

$
$

3.19
3.18

Potentially dilutive shares excluded from the calculation (in 
thousands):
Stock options excluded as their inclusion would be anti-dilutive

2015

2014

2013

84

57

57   

60

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 4. Property and Equipment (including Concession Assets)

The following tables list the major categories of property and equipment, including concession assets, as well as the 

weighted-average composite depreciation rate for each category (in millions): 

Cost

Accumulated
Depreciation

Net Book
Value

Depreciation
Rates for 2015

As of December 31, 2015
Land

Concession land rights

Rail and other track material

Ties

Grading

Bridges and tunnels
Ballast

Other (a)

Total road property

Locomotives

Freight cars

Other equipment

Total equipment

Technology and other

Construction in progress

$

218.1

$

— $

141.2

1,814.7

1,596.2

878.4

703.4
696.6

1,095.0

6,784.3

1,456.6

809.6

59.9

2,326.1

159.3

184.7

(23.7)
(394.6)
(357.1)
(144.9)
(130.7)
(187.7)
(301.9)
(1,516.9)
(302.7)
(123.6)
(20.7)
(447.0)
(120.7)
—

218.1

117.5

1,420.1

1,239.1

733.5

572.7
508.9

793.1

5,267.4

1,153.9

686.0

39.2

1,879.1

38.6

184.7

N/A

1.0%

1.8-3.0%

2.0-4.1%

0.9%

1.1%
2.5-4.1%

3.0%

2.7%

4.6%

3.9%

6.5%

4.4%

15.6%

N/A

N/A

Total property and equipment (including
concession assets)

$

9,813.7

$

(2,108.3) $

7,705.4

_____________

(a) 

Other includes signals, buildings and other road assets.

61

As of December 31, 2014
Land

Concession land rights

Rail and other track material

Ties

Grading

Bridges and tunnels

Ballast

Other (a)

Total road property

Locomotives
Freight cars

Other equipment

Total equipment

Technology and other

Construction in progress

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Cost

Accumulated
Depreciation

Net Book
Value

Depreciation
Rates for 2014

$

216.8

$

— $

141.2

1,707.6

1,484.7

839.6

669.5

649.8

943.5

6,294.7

1,310.3
610.6

59.0

1,979.9

160.9

241.5

(22.3)
(361.1)
(312.6)
(137.9)
(123.8)
(170.0)
(275.6)
(1,381.0)
(238.3)
(98.3)
(18.5)
(355.1)
(121.9)
—

216.8

118.9

1,346.5

1,172.1

701.7

545.7

479.8

667.9

4,913.7

1,072.0
512.3

40.5

1,624.8

39.0

241.5

N/A

1.0%

1.9-3.2%

2.0-4.2%

1.0%

1.2%

2.7-4.8%

3.1%

2.8%

4.6%
4.2%

8.2%

4.6%

13.2%

N/A

N/A

Total property and equipment (including
concession assets)

$

9,035.0

$

(1,880.3) $

7,154.7

_____________

(a) 

Other includes signals, buildings and other road assets.

Concession assets, net of accumulated amortization of $538.0 million and $483.1 million, totaled $2,070.5 million and 

$2,007.6 million at December 31, 2015 and 2014, respectively.

The Company capitalized $0.7 million, $0.9 million, and $1.1 million of interest for the years ended December 31, 2015, 

2014, and 2013, respectively.

Depreciation and amortization of property and equipment (including concession assets) totaled $284.6 million, $258.1 

million and $223.3 million, for 2015, 2014, and 2013, respectively.

Note 5. Lease Termination Costs

During 2015 and 2014, the Company purchased $144.2 million and $300.7 million, respectively, of equipment under 
existing operating leases and replacement equipment as certain operating leases expired. For the years ended December 31, 
2015 and 2014, the Company recognized $9.6 million and $38.3 million, respectively, of lease termination costs (included in 
operating expenses) due to the early termination of certain operating leases and the related purchase of the equipment. The 
Company did not incur lease termination costs during 2013.

62

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 6. Other Balance Sheet Captions

Other Current Assets. Other current assets included the following items at December 31 (in millions):

Refundable taxes

Prepaid expenses

Other

Other current assets

2015

2014

$

$

$

71.6

16.8

2.2

90.6

$

55.9

17.8

3.9

77.6

Accounts Payable and Accrued Liabilities. Accounts payable and accrued liabilities included the following items at 

December 31 (in millions): 

Accounts payable

Accrued wages and vacation

Derailments, personal injury and other claim provisions

Foreign currency derivative instruments

Dividends payable

Income and other taxes
Other

2015

2014

$

176.7

$

215.0

50.9

40.7

46.0

35.9

18.8

32.5

75.1

42.4

4.3

31.0

24.8

31.3

Accounts payable and accrued liabilities

$

401.5

$

423.9

Note 7. Fair Value Measurements 

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy as 

described in Note 2 — “Significant Accounting Policies”. As of December 31, 2015, the Company’s derivative financial 
instruments are measured at fair value on a recurring basis and consist of foreign currency forward and option contracts, which 
are classified as Level 2 valuations. The Company determines the fair value of its derivative financial instrument positions 
based upon pricing models using inputs observed from actively quoted markets and also takes into consideration the contract 
terms as well as other inputs, including market currency exchange rates and in the case of option contracts, volatility, the risk-
free interest rate and the time to expiration. The fair value of the foreign currency derivative instruments was a liability of $46.0 
million and $4.3 million as of December 31, 2015 and 2014, respectively. 

The Company’s short-term financial instruments include cash and cash equivalents, accounts receivable, accounts 
payable and short-term borrowings. The carrying value of the short-term financial instruments approximates their fair value.

The fair value of the Company’s debt is estimated using quoted market prices when available. When quoted market prices 

are not available, fair value is estimated based on current market interest rates for debt with similar maturities and credit 
quality. The fair value of the Company’s debt was $2,287.5 million and $1,884.1 million at December 31, 2015 and 2014, 
respectively. The carrying value was $2,321.1 million and $1,851.3 million at December 31, 2015 and 2014, respectively. If the 
Company’s debt were measured at fair value, the fair value measurements of the individual debt instruments would have been 
classified as either Level 1 or Level 2 in the fair value hierarchy.

63

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 8. Derivative Instruments

The Company enters into derivative transactions in certain situations based on management’s assessment of current 
market conditions and perceived risks. Management intends to respond to evolving business and market conditions and in 
doing so, may enter into such transactions as deemed appropriate.

Credit Risk. As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. The 
Company manages this risk by limiting its counterparties to large financial institutions which meet the Company’s credit rating 
standards and have an established banking relationship with the Company. As of December 31, 2015, the Company did not 
expect any losses as a result of default of its counterparties.

Foreign Currency Derivative Instruments. The Company’s Mexican subsidiaries have net U.S. dollar-denominated 
monetary liabilities which, for Mexican income tax purposes, are subject to periodic revaluation based on changes in the value 
of the Mexican peso against the U.S. dollar. This revaluation creates fluctuations in the Company’s Mexican income tax 
expense and the amount of income taxes paid in Mexico. The Company enters into foreign currency derivative contracts to 
hedge its exposure to this risk. 

In the first quarter of 2015, the Company entered into foreign currency forward contracts with an aggregate notional 
amount of $300.0 million. These contracts matured on January 15, 2016, and obligated the Company to purchase a total of 
Ps.4,480.4 million at a weighted-average exchange rate of Ps.14.93 to each U.S. dollar. During January 2016, the Company 
entered into offsetting contracts with an aggregate notional amount of $251.0 million. These offsetting contracts matured on 
January 15, 2016, and obligated the Company to sell a total of Ps.4,480.4 million at a weighted-average exchange rate of 
Ps.17.85 to each U.S. dollar. 

In the first half of 2015, the Company also entered into several foreign currency option contracts known as zero-cost 
collars. These contracts involve the Company’s purchase of a Mexican peso call option and a simultaneous sale of a Mexican 
peso put option, with equivalent U.S. dollar notional amounts for each option and no net cash premium paid by the Company. 
During 2015, zero cost collar contracts with an aggregate notional amount of $50.0 million matured resulting in a cash payment 
of $4.3 million. As of December 31, 2015, the Company had outstanding zero-cost collar contracts with an aggregate notional 
amount of $80.0 million which matured in January 2016 and resulted in a cash payment of $10.1 million.

In the first quarter of 2014, the Company entered into foreign currency forward contracts with an aggregate notional 
amount of $345.0 million. These contracts matured on December 31, 2014, and obligated the Company to purchase a total of 
Ps.4,642.5 million at a weighted-average exchange rate of Ps.13.46 to each U.S. dollar. During October and December 2014, 
the Company entered into offsetting contracts with an aggregate notional amount of $30.0 million and $291.4 million, 
respectively. These offsetting contracts matured on December 31, 2014, and obligated the Company sell a total of Ps.403.7 
million and Ps.4,238.8 million at a weighted-average exchange rate of Ps.13.46 and Ps.14.57 to each U.S. dollar, respectively. 

In December 2014, the Company entered into additional foreign currency forward contracts with an aggregate notional 

amount of $300.0 million. These contracts matured on January 15, 2015 and obligated the Company to purchase a total of 
Ps.4,364.7 million at a weighted-average rate of Ps.14.55 to each U.S. dollar. During January 2015, the Company entered into 
offsetting contracts with an aggregate notional amount of $298.8 million. These offsetting contracts matured on January 15, 
2015, and obligated the Company to sell a total of Ps.4,364.7 million at a weighted-average exchange rate of Ps.14.61 to each 
U.S. dollar. 

In the first half of 2013, the Company entered into foreign currency forward contracts with an aggregate notional amount 

of $325.0 million. These contracts matured on December 31, 2013, and obligated the Company to purchase a total of Ps.4,202.3 
million at a weighted-average exchange rate of Ps.12.93 to each U.S. dollar. During December 2013, the Company entered into 
offsetting contracts with an aggregate notional amount of $324.3 million. These offsetting contracts matured on December 31, 
2013, and obligated the Company sell a total of Ps.4,202.3 million at a weighted-average exchange rate of Ps.12.96 to each 
U.S. dollar. 

64

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The Company has not designated any of the foreign currency derivative contracts as hedging instruments for accounting 

purposes. The Company measures the foreign currency derivative contracts at fair value each period and recognizes any change 
in fair value in foreign exchange loss within the consolidated statements of income.

The following table presents the fair value of derivative instruments included in the consolidated balance sheets (in 

millions): 

Derivative Liabilities

Balance Sheet Location

December 31,
2015

December 31,
2014

Derivatives not designated as hedging instruments:

Foreign currency forward contracts

Foreign currency zero-cost collar contracts

Total derivative liabilities

Accounts payable and accrued
liabilities
Accounts payable and accrued
liabilities

$

$

39.8

$

6.2
46.0

$

4.3

—
4.3

The following table presents the effects of derivative instruments on the consolidated statements of income for the years 

ended December 31 (in millions): 

Derivatives not designated as hedging instruments:

Foreign currency forward contracts

Foreign currency zero-cost collar contracts

Total

Location of Gain/(Loss) Recognized in
Income on Derivative

Amount of Gain/(Loss) Recognized
in Income on Derivative

2015

2014

2013

Foreign exchange loss

$ (36.7) $ (27.9) $

(0.7)

Foreign exchange loss

(10.4)

—

$ (47.1) $ (27.9) $

—
(0.7)

65

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 9. Short-Term Borrowings

Short-term borrowings at December 31 (in millions):

Commercial paper

Other short-term borrowings

Total short-term borrowings

2015

2014

80.0

—

80.0

$

$

150.1

300.0

450.1

$

$

Commercial Paper. The Company’s commercial paper program generally serves as the primary means of short-term 
funding. On December 9, 2015, KCS with certain of its domestic subsidiaries named therein as guarantors, entered into a new 
$800.0 million revolving credit facility (the “KCS Revolving Credit Facility”) and also entered into agreements to establish a 
new $800.0 million commercial paper program for KCS (the “KCS Commercial Paper Program”). The KCS Commercial Paper 
Program replaced the existing $450.0 million KCSR and $200.0 million KCSM revolving commercial paper programs. As of 
December 31, 2015, KCS had $80.0 million of commercial paper outstanding at a weighted-average interest rate of 1.072%. As 
of December 31, 2014, KCSR had $150.1 million of commercial paper outstanding at a weighted-average interest rate of 
0.716% and KCSM had no commercial paper outstanding.

Short-Term Borrowing. On October 22, 2014, Kansas City Southern International Investments, S.A. de C.V. ("KCSII"), a 
wholly-owned subsidiary of the Company, KCSR, and certain other subsidiaries of the Company that guaranty KCSR’s Second 
Amended and Restated Credit Agreement dated as of November 21, 2012 (together with the Company and KCSR, the 
“Guarantors”), entered into a Credit Agreement (the “KCSII Credit Agreement”) with The Bank of Tokyo-Mitsubishi UFJ, Ltd., 
as lender ("BTM"). Pursuant to the terms of the KCSII Credit Agreement, BTM agreed to extend credit in an aggregate 
principal amount of up to $300.0 million, with repayment due 90 days after the borrowing date of each loan. KCSII borrowed 
$100.0 million on October 22, 2014, and borrowed an additional $200.0 million on December 15, 2014. The loans had a 
weighted-average interest rate of 1.49% and were repaid during the first quarter of 2015 using available cash. 

66

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 10. Long-Term Debt

Long-term debt at December 31 (in millions):

2015

Unamortized
Discount
and Debt
Issuance
Costs

Principal

2014

Unamortized
Discount
and Debt
Issuance
Costs

Net

Net

Principal

$

— $

— $

— $

— $

— $

Revolving credit facilities, variable interest rate,

due 2020

KCS Floating rate senior notes, variable interest

rate, 1.0232% at December 31, 2015, due 2016

KCS 2.35% senior notes, due 2020
KCS 3.0% senior notes, due 2023
KCS 3.85% senior notes, due 2023
KCS 4.3% senior notes, due 2043
KCS 4.95% senior notes, due 2045
KCSR senior notes 3.85% to 4.95%, due through

2045

KCSM senior notes 1.0232% to 3.00%, due

through 2023

RRIF loans 2.96% to 4.29%, due serially through

2024

Financing agreements 5.737% to 9.310%, due

serially through 2023

Capital lease obligations, due serially to 2024
Other debt obligations

Total

Less: Debt due within one year

244.8
239.5
439.1
195.0
437.6
476.7

40.7

51.5

84.9

119.9
21.4
0.4
2,351.5
276.1

1.0
2.1
5.4
2.2
9.8
7.9

0.6

0.3

0.6

0.5
—
—
30.4
—

243.8
237.4
433.7
192.8
427.8
468.8

40.1

51.2

84.3

119.4
21.4
0.4
2,321.1
276.1

—
—
—
—
—
—

650.0

975.0

88.2

136.5
21.8
0.4
1,871.9
24.8

—

—
—
—
—
—
—

—
—
—
—
—
—

11.0

639.0

8.4

0.6

0.6
—
—
20.6
—

966.6

87.6

135.9
21.8
0.4
1,851.3
24.8

Long-term debt

$2,075.4

$

30.4

$2,045.0

$1,847.1

$

20.6

$1,826.5

Revolving Credit Facility 

On December 9, 2015, KCS with certain of its domestic subsidiaries named therein as guarantors, entered into a new five 
year $800.0 million revolving credit facility (the “KCS Revolving Credit Facility”), with a $25.0 million standby letter of credit 
facility which, if utilized, constitutes usage under the revolving facility. The Company also entered into agreements to establish 
a new $800.0 million commercial paper program for KCS (the “KCS Commercial Paper Program”). The KCS Revolving 
Credit Facility serves as a backstop for the KCS Commercial Paper Program which generally serves as the Company’s primary 
means of short-term funding. The new KCS Revolving Credit Facility and KCS Commercial Paper Program replaced the 
existing $450.0 million KCSR and $200.0 million KCSM revolving credit facilities and commercial paper programs. 

Borrowings under the KCS Revolving Credit Facility will bear interest at floating rates. Depending on the Company’s 

credit rating, the margin that KCS would pay above the London Interbank Offer Rate (“LIBOR”) at any point would be 
between 1.125% and 2.0%. As of December 31, 2015, the margin is 1.5% based on KCS’s current credit rating. 

The KCS Revolving Credit Facility is guaranteed by KCSR, together with certain domestic subsidiaries named therein as 

guarantors (the “Subsidiary Guarantors”) and matures on December 9, 2020. The KCS Revolving Credit Facility agreement 
contains representations, warranties, covenants (including financial covenants related to a leverage ratio and an interest 

67

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

coverage ratio) and events of default that are customary for credit agreements of this type. The occurrence of an event of 
default could result in the termination of the commitments and the acceleration of the repayment of any outstanding principal 
balance on the KCS Revolving Credit Facility and the KCS Commercial Paper Program.

As of December 31, 2015, KCS had $800.0 million available under the KCS Revolving Credit Facility, with no 
outstanding borrowings. As of December 31, 2014, KCSR and KCSM had $299.9 million and $200.0 million available under 
their respective revolving credit facilities, with no outstanding borrowings.

Debt Exchange

On November 9, 2015, KCS announced an exchange offer to simplify its capital structure, improve its credit profile and 

enhance the secondary market liquidity of its debt securities by providing current holders of KCSR and KCSM senior notes 
(collectively, the “Existing Notes”) the option to obtain new securities issued by KCS (the “KCS Notes”). The KCS Note 
issued in exchange for an Existing Note has the same interest rate, interest payment dates and maturity date and substantially 
similar redemption provisions to the tendered Existing Note. The following table lists the outstanding notes that were 
exchanged on December 9, 2015 (in millions):

Issuer of Existing
Notes

KCSR
KCSR
KCSR
KCSM
KCSM
KCSM

$

Series of Existing Notes
3.85% Senior Notes due 2023
4.30% Senior Notes due 2043
4.95% Senior Notes due 2045
Floating Rate Senior Notes due 2016
2.35% Senior Notes due 2020
3.00% Senior Notes due 2023

Principal Amount
Outstanding

Principal Amount of
Existing Notes 
Exchanged

200.0 $
450.0
500.0
250.0
275.0
450.0

195.0
437.6
476.7
244.8
239.5
439.1

The Company has accounted for this transaction as a debt exchange as the exchanged debt instruments are not considered 

to be substantially different. The cash consideration was recorded as an adjustment to the carrying value of debt, and the 
balance of the unamortized discount and issue costs from the Existing Notes is being amortized as an adjustment of interest 
expense over the term of the new KCS Notes. There was no gain or loss recognized as a result of the exchange. Costs related to 
the debt exchange that were payable to parties other than the debt holders totaled approximately $7.6 million and were included 
in debt retirement/exchange costs. In addition, holders of Existing Notes who tendered received $12.0 million for accrued and 
unpaid interest and cash consideration of approximately $5.1 million.

Concurrently with the exchange offers, KCS also received consents (the “Consents”) from current holders of KCSR and 

KCSM senior notes relating to amendments to eliminate (i) covenants in the indentures governing the applicable Existing Notes 
with respect to (a) liens, (b) changes of control, (c) additional guarantors, (d) reports and (e) certain consolidations, mergers and 
sales of assets and (ii) all events of default with respect to the applicable Existing Notes, other than events of default relating to 
the failure to pay principal of (or premium, if any, on) and interest on such Existing Notes and the enforceability of the 
guarantees. On November 23, 2015, KCSR and KCSM executed a supplemental indenture to each indenture governing the 
Existing Notes with respect to the applicable amendments.

68

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Senior Notes

The Company’s senior notes include certain covenants which are customary for these types of debt instruments issued by 

borrowers with similar credit ratings.

The KCS Notes are unsecured and unsubordinated obligations of the Company and are unconditionally guaranteed, 

jointly and severally, by KCSR and each current and future domestic subsidiary of KCS that guarantees the KCS Revolving 
Credit Facility or certain other debt of KCS or a Note Guarantor (collectively, the “Note Guarantors”). 

KCSR’s senior notes are unconditionally guaranteed, jointly and severally, on an unsecured senior basis, by KCS and 

each current and future domestic subsidiary of KCS that guarantees the KCS Revolving Credit Facility or certain other debt of 
KCS or a note guarantor. KCSR’s senior notes and the note guarantees rank pari passu in right of payment with KCSR’s, KCS’s 
and the Note Guarantors’ existing and future unsecured, unsubordinated obligations.

KCSM’s senior notes are denominated in U.S. dollars; are unsecured, unsubordinated obligations; rank pari passu in right 

of payment with KCSM’s existing and future unsecured, unsubordinated obligations and are senior in right of payment to 
KCSM’s future subordinated indebtedness. 

Senior notes are redeemable at the issuer’s option, in whole or in part, at any time, by paying the greater of either 100% 

of the principal amount to be redeemed and a formula price based on interest rates prevailing at the time of redemption and 
time remaining to maturity. In addition, KCSM senior notes are redeemable, in whole but not in part, at KCSM’s option at any 
time at a redemption price of 100% of their principal amount, plus any accrued unpaid interest in the event of certain changes 
in the Mexican withholding tax rate.

4.95% Senior Notes. On July 27, 2015, KCSR issued $500.0 million principal amount of senior unsecured notes due 
August 15, 2045, which bear interest semiannually at a fixed annual rate of 4.95% (the “4.95% Senior Notes”). The 4.95% 
Senior Notes were issued at a discount to par value, resulting in a $1.3 million discount and a yield to maturity of 4.967%. The 
net proceeds from the offering were used to repay the outstanding commercial paper issued by KCSR, the repurchase of shares 
of KCS common stock and for other general corporate purposes. During the fourth quarter of 2015, $476.7 million of the 
4.95% Senior Notes were exchanged for the equivalent amount of KCS senior notes as part of the exchange offer described 
above.

RRIF Loan Agreements

The following loans were made under the Railroad Rehabilitation and Improvement Financing (“RRIF”) Program 

administered by the Federal Railroad Administration (“FRA”): 

KCSR RRIF Loan Agreement. On February 21, 2012, KCSR entered into an agreement with the FRA to borrow $54.6 

million to be used to reimburse KCSR for a portion of the purchase price of thirty new locomotives (the “Locomotives”) 
acquired by KCSR in the fourth quarter of 2011. The loan bears interest at 2.96% annually and the principal balance amortizes 
quarterly with a final maturity of February 24, 2037. The obligations under the financing agreement are secured by a first 
priority security interest in the Locomotives and certain related rights. In addition, the Company has agreed to guarantee 
repayment of the amounts due under the financing agreement and certain related agreements. The occurrence of an event of 
default could result in the acceleration of the repayment of any outstanding principal balance of the loan.

Tex-Mex RRIF Loan Agreement. On June 28, 2005, Tex-Mex entered into an agreement with the FRA to borrow $50.0 
million to be used for infrastructure improvements in order to accommodate growing freight rail traffic related to the NAFTA 
corridor. The loan bears interest at 4.29% annually and the principal balance amortizes quarterly with a final maturity of 
July 13, 2030. The loan is guaranteed by Mexrail, which has issued a pledge agreement in favor of the lender equal to the gross 
revenues earned by Mexrail on per-car fees on traffic crossing the International Rail Bridge in Laredo, Texas. In addition, the 
Company has agreed to guarantee the scheduled principal payment installments due to the FRA from Tex-Mex under the loan 
agreement on a rolling five-year basis.

69

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Locomotive Financing Agreements

During 2008 and 2011, KCSM entered into various financing agreements totaling $216.0 million to purchase 

locomotives. The agreements mature between December 2020 and September 2023, are payable on a quarterly or semi-annual 
basis and contain annual interest rates ranging between 5.737% and 9.310%. KCSM has either granted the lender a security 
interest in the locomotives to secure the loan or has secured the loans by transferring legal ownership of the locomotives to 
irrevocable trusts established by KCSM to which the lender is the primary beneficiary and KCSM has a right of reversion upon 
satisfaction of the obligations of the loan agreements.

KCSM’s locomotive financing agreements contain representations, warranties and covenants typical of such equipment 

loan agreements. Events of default in the financing agreements include, but are not limited to, certain payment defaults, certain 
bankruptcy and liquidation proceedings and the failure to perform any covenants or agreements contained in the financing 
agreements. Any event of default could trigger acceleration of KCSM’s payment obligations under the terms of the financing 
agreements.

Debt Covenants Compliance

The Company was in compliance with all of its debt covenants as of December 31, 2015.

Other Debt Provisions

Change in Control Provisions. Certain loan agreements and debt instruments entered into or guaranteed by the Company 
and its subsidiaries provide for default in the event of a specified change in control of the Company or particular subsidiaries of 
the Company.

Leases and Debt Maturities

The Company leases transportation equipment, as well as office and other operating facilities, under various capital and 

operating leases. Rental expenses under operating leases were $63.9 million, $76.4 million, and $106.7 million for the years 
ended December 31, 2015, 2014 and 2013, respectively. Operating leases that contain scheduled rent adjustments are 
recognized on a straight-line basis over the term of the lease. Contingent rentals and sublease rentals were not significant. 
Minimum annual payments and present value thereof under existing capital leases, other debt maturities and minimum annual 
rental commitments under non-cancelable operating leases are as follows (in millions):

Capital Leases

Years
2016
2017

2018

2019

2020

Thereafter

Total

Long-
Term
Debt

$

270.9

Minimum
Lease
Payments
7.0
$

$

22.0

35.2

15.5

259.1

1,727.4

4.7

4.6

3.4

2.4

6.3

$ 2,330.1

$

28.4

$

Less
Interest

Net
Present
Value

Total
Debt

Operating
Leases

$

5.2

3.3

3.4

2.5

1.7

5.3

$

276.1

$

25.3

38.6

18.0

260.8

1,732.7

68.6

62.9

40.7

33.8

26.6

78.7

Total

$

344.7

88.2

79.3

51.8

287.4

1,811.4

$

21.4

$ 2,351.5

$

311.3

$ 2,662.8

1.8

1.4

1.2

0.9

0.7

1.0

7.0

In the normal course of business, the Company enters into long-term contractual requirements for future goods and 
services needed for the operations of the business. Such commitments are not in excess of expected requirements and are not 
reasonably likely to result in performance penalties or payments that would have a material adverse effect on the Company’s 
liquidity.

70

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 11. Income Taxes

Current income tax expense represents the amounts expected to be reported on the Company’s income tax returns, and 

deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities 
are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the 
enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to 
reduce deferred tax assets to the amount considered likely to be realized.

Tax Expense. Income tax expense consists of the following components (in millions):

2015

2014

2013

— $
0.3
51.2
51.5

(2.5) $
1.2
70.0
68.7

109.3
15.5
11.0
135.8
187.3

112.6
16.9
10.6
140.1
208.8

2014

341.8
371.3
713.1

$

$

$

$

$

$

6.0
1.9
79.2
87.1

99.0
11.9
0.3
111.2
198.3

2013

319.2
232.4
551.6

Current:
Federal
State and local
Foreign

Total current

Deferred:
Federal
State and local
Foreign

Total deferred

Total income tax expense

$

$

Income before income taxes consists of the following (in millions):

Income before income taxes:

U.S.
Foreign

Total income before income taxes

2015

$

$

329.3
343.3
672.6

71

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax 

liabilities follow at December 31 (in millions):

Assets:

Tax credit and loss carryovers

Reserves not currently deductible for tax

Other

Gross deferred tax assets before valuation allowance

Valuation allowance

Net deferred tax assets

Liabilities:
Property

Investments

Other

Gross deferred tax liabilities

Net deferred tax liability

2015

2014

$

85.4

84.2

33.9

203.5
(1.1)
202.4

(1,314.9)
(71.3)
(7.3)
(1,393.5)
(1,191.1) $

95.2

96.3

24.5

216.0
(0.9)
215.1

(1,194.7)
(68.2)
(8.4)
(1,271.3)
(1,056.2)

$

$

Tax Rates. Differences between the Company’s effective income tax rate and the U.S. federal statutory income tax rate of 

35% follow (in millions):

Income tax expense using the statutory
rate in effect

Tax effect of:

Difference between U.S. and foreign tax
rate

Foreign exchange and inflation
adjustments (i)
State and local income tax provision, net

Other, net

2015

2014

2013

Dollars

Percent

Dollars

Percent

Dollars

Percent

$

235.4

35.0% $

249.6

35.0% $

193.1

35.0%

(17.8)

(2.6%)

(23.0)

(3.2%)

(15.4)

(2.8%)

(41.4)

(6.2%)

10.3

0.8

1.5%

0.1%

(25.6)
11.7
(3.9)
208.8

(3.6%)

1.6%

(0.5%)

4.7

8.9

7.0

0.8%

1.6%

1.3%

29.3% $

198.3

35.9%

Income tax expense

$

187.3

27.8% $

_____________________

(i) 

Mexican income taxes are paid in Mexican pesos, and as a result, the effective income tax rate reflects fluctuations in 
the value of the Mexican peso against the U.S. dollar. Most significantly, any gain or loss from the revaluation of net 
U.S. dollar-denominated monetary liabilities into Mexican pesos is included in Mexican taxable income under 
Mexican tax law. As a result, a strengthening of the Mexican peso against the U.S. dollar for the reporting period will 
generally increase the Mexican cash tax obligation and the effective income tax rate, and a weakening of the Mexican 
peso against the U.S. dollar for the reporting period will generally decrease the Mexican cash tax obligation and the 
effective tax rate. To hedge its exposure to this risk, the Company enters into foreign currency derivative contracts, 
which are measured at fair value each period and any change in fair value is recognized in foreign exchange loss 
within the consolidated statements of income. Refer to Note 8 Derivative Instruments for further information.

72

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Difference Attributable to Foreign Investments. At December 31, 2015, the Company’s cumulative undistributed earnings 

of foreign subsidiaries was $1,883.6 million. The Company has not provided a deferred income tax liability on the 
undistributed earnings because the Company intends to indefinitely reinvest the earnings outside the U.S. or remit the earnings 
in tax-free transactions. If the foreign earnings were to be remitted in a taxable transaction, as of December 31, 2015, the 
Company would incur gross federal income taxes of $659.3 million which would be partially offset by foreign tax credits.

Tax Carryovers. The Company has both U.S. federal and state net operating losses which are carried forward 20 years for 

federal tax purposes and from 5 to 20 years for state tax purposes. Both the federal and state loss carryovers are analyzed each 
year to determine the likelihood of realization. The U.S. federal loss carryover at December 31, 2015, was $61.7 million and if 
not used, would begin to expire in 2023. The consolidated financial statements do not reflect $16.6 million of federal loss 
carryovers due to a limitation on recognizing excess tax benefits related to share based compensation until they are used to 
reduce current taxes payable at which point will be recognized as an increase to additional paid in capital. In addition, the 
Company has $41.0 million of tax credit carryovers consisting primarily of $35.4 million of track maintenance credits which, if 
not used, will begin to expire in 2024.

The state loss carryovers arise from both combined and separate tax filings from as early as 1999. The loss carryovers 
may expire as early as December 31, 2016 and as late as December 31, 2035. The state loss carryover at December 31, 2015, 
was $462.9 million.

The Mexico federal loss carryovers at December 31, 2015, were $15.4 million and, if not used, will begin to expire in 
2019. A deferred tax asset was recorded in prior periods for the expected future tax benefit of these losses which will be carried 
forward to reduce only Mexican income tax payable in future years. A deferred tax asset is also recorded for an asset tax credit 
carryover in the amount of $5.1 million, which if not used, will begin to expire in 2017.

The valuation allowance for deferred tax assets as of December 31, 2015 and 2014, was $1.1 million and $0.9 million, 

respectively.

The Company believes it is more likely than not that the results of future operations will generate sufficient taxable 

income to realize the deferred tax assets, net of valuation allowances, related to loss carryovers and tax credits.

Uncertain Tax Positions. The accounting guidance for uncertainty in income taxes prescribes a recognition threshold and 
measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken 
in a tax return. The guidance requires the Company to recognize in the consolidated financial statements the benefit of a tax 
position only if the impact is more likely than not of being sustained on audit based on the technical merits of the position. A 
reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):

Balance at January 1,

Additions based on tax positions related to the current year

Additions for tax positions of prior years

Reductions for tax positions of prior years

Balance at December 31,

2015

2014

1.7

$

—

—

—

1.7

$

3.5

—

—
(1.8)
1.7

$

$

All of the unrecognized tax benefits would affect the effective income tax rate if recognized, and are reasonably possible 

to be resolved over the next twelve months as a result of a lapse of the statute of limitations.

Interest and penalties related to uncertain tax positions are included in income before taxes on the consolidated statements 

of income. Accrued interest and penalties on unrecognized tax benefits and interest and penalty expense was immaterial to the 
consolidated financial statements for all periods presented.

73

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Tax Contingencies. Tax returns filed in the U.S. for periods after 2011 and in Mexico for periods after 2009 remain open 
to examination by the taxing authorities. An Internal Revenue Service (the “IRS”) examination has been completed and settled 
for the 2012 U.S. federal tax return. The Servicio de Administración Tributaria (the “SAT”), the Mexican equivalent of the IRS, 
is currently examining the KCSM 2009 and 2010 tax returns and the KCSM Servicios 2012 and 2013 tax returns. The 
Company is litigating a Value Added Tax (“VAT”) audit assessment from the SAT for KCSM for the year ended December 31, 
2005. While the outcome of this matter cannot be predicted with certainty, the Company does not believe, when resolved, that 
this dispute will have a material effect on its consolidated financial statements. However, an unexpected adverse resolution 
could have a material effect on the consolidated financial statements in a particular quarter or fiscal year.

NAFTA Rail, S. de R.L. de C.V. (NAFTA), a wholly-owned subsidiary of KCS, recorded a receivable from the SAT for 

VAT paid by NAFTA in connection with NAFTA’s purchase of locomotives. NAFTA subsequently collected VAT in connection 
with leasing these locomotives, and offset the resulting VAT payable against the existing VAT receivable. The SAT issued a 
resolution in 2013 which denied this offset, and assessed payment. NAFTA litigated this resolution and in January 2015 a 
Mexican tax court issued a favorable ruling by dismissing the SAT resolution. The SAT appealed this tax court decision in 
February 2015. In June 2015, the SAT appeal was dismissed by the court. This court decision validates NAFTA’s ability to 
offset VAT payables against the existing VAT receivable.

KCSM has not historically assessed VAT on international import transportation services provided to its customers based 

on a written ruling that KCSM obtained from the SAT in 2008 stating that such services were exempt from VAT (the “2008 
Ruling”). Notwithstanding the 2008 Ruling, in December 2013, the SAT unofficially informed KCSM of an intended 
implementation of new criteria effective as of January 1, 2014, pursuant to which VAT would be assessed on all international 
import transportation services on the portion of the services provided within Mexico. Additionally, in November 2013, the SAT 
filed an action to nullify the 2008 Ruling, potentially exposing the application of the new criteria to open tax years. In February 
2014, KCSM filed an action opposing the SAT’s nullification action. While the SAT’s unofficial communication to KCSM is 
not enforceable and the 2008 Ruling continues to be in effect, KCSM notified its customers in December 2013 of the potential 
assessment of VAT on international import transportation services; however, implementation of any VAT assessment will 
depend on future developments and any guidance published by the SAT. Due to the pass-through nature of VAT assessed on 
services provided to customers, the Company does not believe any ultimate requirement to assess VAT on international import 
transportation services will have a significant effect on its consolidated financial statements. However, unexpected adverse 
implementation criteria imposed by the SAT for open tax years could have a material effect on the consolidated financial 
statements of the Company in a particular quarter or fiscal year.

Note 12. Stockholders’ Equity

Information regarding the Company’s capital stock at December 31 follows:

$25 par, 4% noncumulative, preferred stock

$1 par, preferred stock

$.01 par, common stock

Shares outstanding at December 31:

$25 par, 4% noncumulative, preferred stock

$.01 par, common stock

Shares Authorized

Shares Issued

2015

840,000

2,000,000

2014

840,000

2,000,000

2015

2014

649,736

—

649,736

—

400,000,000

400,000,000

123,352,185

123,352,185

2015

2014

242,170

242,170

108,461,144

110,392,330

Share Repurchase Program. In May 2015, the Company announced a share repurchase program of up to $500.0 million, 

which expires on June 30, 2017. Management's assessment of market conditions, available liquidity and other factors will 

74

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

determine the timing and volume of repurchases. Share repurchases are expected to be funded by cash on hand, cash generated 
from operations and debt. During 2015, KCS repurchased 2,133,984 shares of common stock for $194.2 million at an average 
price of $90.99 per share under this program. The excess of repurchase price over par value is allocated between additional 
paid-in capital and retained earnings.

Treasury Stock. Shares of common stock in Treasury and related activity follow:

Balance at beginning of year

Shares repurchased

Shares issued to fund stock option exercises

Employee stock purchase plan shares issued

Nonvested shares issued
Nonvested shares forfeited

Balance at end of year

2015

2014

2013

12,959,855

13,122,956

13,220,832

2,133,984
(89,035)
(52,736)
(62,936)
1,909

—
(46,100)
(33,402)
(121,865)
38,266

—
(54,209)
(42,391)
(5,723)
4,447

14,891,041

12,959,855

13,122,956

Change in Control Provisions. The Company and certain of its subsidiaries have entered into agreements with certain 

employees whereby, upon defined circumstances constituting a change in control of the Company or subsidiary, certain stock 
options become exercisable, certain benefit entitlements are automatically funded and such employees are entitled to specified 
cash payments upon termination of employment.

The Company and certain of its subsidiaries have established trusts to provide for the funding of corporate commitments 

and entitlements of certain officers, directors, employees and others in the event of a specified change in control of the 
Company or subsidiary. Assets held in such trusts on December 31, 2015 and 2014, were not material. Depending upon the 
circumstances at the time of any such change in control, the most significant of which would be the price paid for KCS 
common stock by a party seeking to control the Company, funding of the Company’s trusts could be substantial.

Accumulated Other Comprehensive Loss. The following table summarizes the changes in the after-tax balances of each 

component of accumulated other comprehensive income (loss) (in millions):

Postemployment
Benefits

Foreign Currency
Translation
Adjustment

Unrealized Loss
on Cash Flow
Hedges

Accumulated
Other
Comprehensive
Loss

Balance at December 31, 2013

$

0.3

$

(2.2) $

(0.1) $

Other comprehensive loss before
reclassifications

Amounts reclassified from accumulated
other comprehensive loss

Net current-period other comprehensive
income (loss)

Balance at December 31, 2014

Other comprehensive loss before
reclassifications

Amounts reclassified from accumulated
other comprehensive loss

Net current-period other comprehensive loss

—

(0.2)

(0.2)
0.1

—

(0.1)

(0.1)

Balance at December 31, 2015

$

— $

75

(1.1)

—

(1.1)
(3.3)

(1.4)

—

(1.4)
(4.7) $

—

0.1

0.1

—

—

—

—

— $

(2.0)

(1.1)

(0.1)

(1.2)
(3.2)

(1.4)

(0.1)

(1.5)
(4.7)

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The following table summarizes the effects on net income of significant amounts being reclassified out of each 

component of accumulated other comprehensive income (loss) for the year ended December 31 (in millions): 

Details about Accumulated Other
Comprehensive Income (Loss)
Components
Unrealized losses on cash flow
hedges:

2015

2014

2013

Affected Line Item in the
Consolidated Statements of
Income

Interest rate swaps

$

— $

(0.1) $

Total before tax

Tax effect

Net of tax

Postemployment benefits:

Amortization of prior service
credit

Total before tax

Tax effect

Net of tax

—

—

—

—

0.1

0.1

—

0.1

—
(0.1)
—
(0.1)

0.3

0.3
(0.1)
0.2

Interest expense
Debt retirement and
exchange costs

Income tax expense

Compensation and
benefits expense

Income tax expense

(0.6)

(0.4)
(1.0)
0.3
(0.7)

0.2

0.2
(0.1)
0.1

Total reclassification for the period,
net of tax

$

0.1

$

0.1

$

(0.6)

Cash Dividends on Common Stock. The following table presents the amount of cash dividends declared per common 

share by the Company’s Board of Directors:

Cash dividends declared per common share

$

1.32

$

1.12

$

0.86

2015

2014

2013

Note 13. Share-Based Compensation

On October 7, 2008, the Company’s stockholders approved the Kansas City Southern 2008 Stock Option and 

Performance Award Plan (the “2008 Plan”). The 2008 plan became effective on October 14, 2008 and replaced the Kansas City 
Southern 1991 Amended and Restated Stock Option and Performance Award Plan. The 2008 Plan provides for the granting of 
up to 2.3 million shares of the Company’s common stock to eligible persons as defined in the 2008 Plan.

Stock Options. The exercise price for options granted under the 2008 Plan equals the closing market price of the 
Company’s stock on the date of grant. Options generally have a 3 year vesting period and are exercisable over the 10 year 
contractual term, except that options outstanding become immediately exercisable upon certain defined circumstances 
constituting a change in control of the Company. The grant date fair value, less estimated forfeitures, is recorded to expense on 
a straight-line basis over the vesting period.

76

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The 

weighted-average assumptions used were as follows:

Expected dividend yield

Expected volatility

Risk-free interest rate

Expected term (years)

0.94%

37.11%

1.82%

6.0

1.19%

45.57%

1.96%

6.0

Weighted-average grant date fair value of stock options granted $

41.49

$

38.31

$

0.88%

46.12%

1.11%

6.0

40.05

2015

2014

2013

The expected dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on 
the date of grant. The expected volatility is based on the historical volatility of the Company’s stock price over a term equal to 
the estimated life of the options. The risk-free interest rate is determined based on U.S. Treasury rates for instruments with 
terms approximating the expected life of the options granted, which represents the period of time the awards are expected to be 
outstanding and is based on the historical experience of similar awards.

A summary of stock option activity is as follows:

Number of
Shares

Weighted-
Average
Exercise
Price
Per Share

Weighted-
Average
Remaining
Contractual
Term

In years

Aggregate
Intrinsic
Value

In millions

Options outstanding at December 31, 2014

356,098

$

Granted

Exercised

Forfeited or expired

Options outstanding at December 31, 2015

Vested and expected to vest at December
31, 2015

Exercisable at December 31, 2015

51,743
(89,035)
(1,061)
317,745

315,312

223,225

$

$

$

60.83

119.35

47.54

104.87

73.94

73.67

59.40

6.4

6.4

5.5

$

$

$

4.4

4.4

4.4

The aggregate intrinsic value in the table above, which is the amount by which the market value of the underlying stock 

exceeded the exercise price of outstanding options, represents the amount optionees would have realized if all in-the-money 
options had been exercised on the last business day of the period indicated.

Compensation cost of $2.0 million, $1.7 million, and $2.4 million was recognized for stock option awards for the years 

ended December 31, 2015, 2014, and 2013, respectively. The total income tax benefit recognized in the consolidated statements 
of income was $0.7 million, $0.7 million, and $0.9 million for the years ended December 31, 2015, 2014 and 2013, 
respectively.

77

 
 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Additional information regarding stock option exercises appears in the table below (in millions):

Aggregate grant-date fair value of stock options vested
Intrinsic value of stock options exercised
Cash received from option exercises
Tax benefit realized from options exercised during the annual period

$

$

2.0
6.1
4.2
2.3

$

2.3
3.3
2.0
1.3

1.8
5.0
1.5
1.9

2015

2014

2013

As of December 31, 2015, $1.1 million of unrecognized compensation cost relating to nonvested stock options is 

expected to be recognized over a weighted-average period of 0.9 year. At December 31, 2015, there were 903,527 shares 
available for future grants under the 2008 Plan.

Nonvested Stock. The 2008 Plan provides for the granting of nonvested stock awards to officers and other designated 

employees. The grant date fair value is based on the closing market price on the date of the grant. These awards are subject to 
forfeiture if employment terminates during the vesting period, which is generally 3 year or 5 year vesting for employees. 
Awards granted to the Company’s directors vest immediately on date of grant. The grant date fair value of nonvested shares, 
less estimated forfeitures, is recorded to compensation expense on a straight-line basis over the vesting period.

A summary of nonvested stock activity is as follows:

Nonvested stock at December 31, 2014

Granted
Vested
Forfeited

Nonvested stock at December 31, 2015

Number of
Shares

Weighted-
Average Grant
Date Fair
Value

Aggregate
Intrinsic
Value

In millions

156,693
51,778
(59,779)
(1,909)
146,783

$

$

86.89
112.03
76.99
100.63
99.61

$

11.0

The fair value (at vest date) of shares vested during the years ended December 31, 2015, 2014, and 2013 was $6.4 

million, $8.5 million, and $12.2 million, respectively.

The weighted-average grant date fair value of nonvested stock granted during 2015, 2014, and 2013 was $112.03, 
$105.04 and $103.38, respectively. Compensation cost for nonvested stock was $5.1 million, $4.0 million, and $5.6 million for 
the years ended December 31, 2015, 2014, and 2013, respectively. The total income tax benefit recognized in the consolidated 
statements of income was $1.9 million, $1.5 million, and $2.1 million for the years ended December 31, 2015, 2014, and 2013, 
respectively.

As of December 31, 2015, $7.5 million of unrecognized compensation costs related to nonvested stock is expected to be 

recognized over a weighted-average period of 1.7 years.

Performance Based Awards. The Company granted performance based nonvested stock awards during 2015 (the “2015 

Awards”), 2014 (the “2014 Awards”) and 2013 (the “2013 Awards”). The awards granted provide a target number of shares that 
generally vest at the end of a 3 year requisite service period following the grant date. In addition to the service condition, the 
number of nonvested shares to be received depends on the attainment of defined Company-wide performance goals based on 
operating ratio and return on invested capital over a three-year performance period. The number of nonvested shares ultimately 
earned will range between zero to 200% of the target award.

78

 
 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

A summary of performance based nonvested stock activity at target is as follows:

Nonvested stock, at December 31, 2014

Granted

Vested

Forfeited
Nonvested stock, at December 31, 2015

_____________________

Target Number of
Shares *

Weighted-Average
Grant Date Fair
Value

132,065

$

65,979
(53,781)
(2,659)
141,604

$

84.24

119.35

66.99

101.13
106.83

* For the 2015 Awards and the 2014 Awards, participants in the aggregate can earn up to a maximum of 100,968 and 

73,314 shares, respectively. For the 2013 Awards, the performance shares earned were 32,000.

The weighted-average grant date fair value of performance based nonvested stock granted during 2015, 2014 and 2013 

was $119.35, $94.23 and $82.34, respectively. The Company expenses the grant date fair value of the awards which are 
probable of being earned over the performance periods. Compensation cost on performance based awards was $3.0 million, 
$3.7 million and $5.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. Total income tax benefit 
recognized in the consolidated statements of income for performance based awards was $1.1 million, $1.3 million and $1.9 
million for the years ended December 31, 2015, 2014 and 2013, respectively.

As of December 31, 2015, $1.7 million of unrecognized compensation cost related to performance based awards is 
expected to be recognized over a weighted-average period of 0.6 year. The fair value (at vest date) of shares vested for the year 
ended December 31, 2015 was $6.2 million. 

Employee Stock Purchase Plan. The employee stock purchase plan (“ESPP”) provides substantially all full-time 
employees of the Company, certain subsidiaries and certain other affiliated entities, with the right to subscribe to an aggregate 
of 4.0 million shares of common stock of the Company. 

Prior to January 1, 2015, eligible employees could contribute, through payroll deductions, up to 5% of their regular base 
compensation during six-month purchase periods. The purchase price for shares was equal to 90% of the closing market price 
on either the exercise date or the offering date, whichever was lower. 

Effective January 1, 2015, the ESPP plan was amended to allow eligible employees to contribute up to 10% of their 
regular base compensation during six-month purchase periods at a purchase price equal to 85% of the closing market price on 
either the exercise date or the offering date, whichever is lower. 

At the end of each purchase period, the accumulated deductions are applied toward the purchase of the Company’s 
common stock. Both the discount in grant price and the share option purchase price are valued to derive the award’s fair value. 
The awards vest and the expense is recognized ratably over the offering period.

79

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The following table summarizes activity related to the various ESPP offerings:

July 2015 offering
January 2015 offering
July 2014 offering
January 2014 offering
July 2013 offering
January 2013 offering

Date
Issued

Exercise Date

Purchase
Price

Shares
Issued

Received
from
Employees(i)

In millions

$

January 8, 2016
July 6, 2015
January 9, 2015
July 10, 2014
January 13, 2014
July 12, 2013

63.47
77.52
96.48
96.76
97.58
77.53

$

40,477
35,097
17,639
17,026
16,376
19,292

2.6
2.7
1.7
1.6
1.6
1.5

_____________________
(i) 

Represents amounts received from employees through payroll deductions for share purchases under applicable 
offering.

The fair value of the ESPP stock purchase rights is estimated on the date of grant using the Black-Scholes option pricing 

model. The weighted-average assumptions used for each of the respective periods were as follows:

Year Ended December 31,

2015

2014

2013

Expected dividend yield

Expected volatility

Risk-free interest rate

Expected term (years)

1.20%

17.00%

0.10%

0.5

0.99%

19.03%

0.10%

0.5

Weighted-average grant date fair value

$

20.55

$

17.13

$

0.90%

18.30%

0.13%

0.5

14.48

Compensation expense of $1.3 million, $0.6 million, and $0.5 million was recognized for ESPP option awards for the 

years ended December 31, 2015, 2014, and 2013, respectively. At December 31, 2015, there were 3.7 million remaining shares 
available for future ESPP offerings under the plan.

Note 14. Postemployment Benefits

Health and Welfare. Certain U.S. employees that have met age and service requirements are eligible for medical benefits 

and life insurance coverage during retirement. The retiree medical plan is contributory and provides benefits to retirees, their 
covered dependents and beneficiaries. The plan provides for annual adjustments to retiree contributions, and also contains, 
depending on the coverage selected, certain deductibles, co-payments, co-insurance, and coordination with Medicare. Certain 
management employees also maintain their status under a collective bargaining agreement, which permits them access to post-
retirement medical under the multi-employer plan described below. The life insurance plan is non-contributory and covers 
union retirees only. The Company’s policy, in most cases, is to fund benefits payable under these plans as the obligations 
become due.

Postemployment Benefits. Mexican law requires that the Company provide certain postemployment benefits to its 

Mexican union and non-union employees. These plans provide statutorily calculated benefits which are payable upon 
retirement, death, disability, voluntary or involuntary termination of employees based on length of service.

The Company uses December 31 as the measurement date for its postemployment benefit obligations.

80

 
 
 
 
 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Net Periodic Benefit Cost, Plan Obligations and Funded Status

Components of the net cost (benefit) for these plans were as follows for the years ended December 31 (in millions):

Service cost
Interest cost
Actuarial (gain) loss (i)
Foreign currency gain
Prior service credit (ii)

$

Net periodic cost (benefit) recognized

$

_____________________

Health and Welfare

Postemployment Benefits

2015

2014

2013

2015

2014

2013

$

0.1
0.2
(0.8)
—
(0.1)
(0.6) $

0.1
0.2
1.0
—
(0.3)
1.0

$

$

$

0.1
0.2
(0.9)
—
(0.2)
(0.8) $

$

0.8
1.1
(1.1)
(2.3)
—
(1.5) $

0.8
1.0
3.8
(1.5)
—
4.1

$

$

0.9
0.9
(1.0)
(0.1)
—
0.7

(i) 

(ii) 

Net benefit costs above do not include a component for the amortization of actuarial gains or losses as the Company’s 
policy is to recognize such gains and losses immediately.

During 2005, the Company revised its medical plan to exclude prescription drug coverage available under Medicare 
part D. This negative plan amendment generated an unrecognized prior service benefit of $2.3 million which is being 
amortized over the estimated remaining life of the affected participants of 9.5 years. There is no remaining 
unrecognized prior service benefit as of December 31, 2015. 

The following table reconciles the change in the benefit obligation and the accrued benefit cost as of and for each of the 

years ended December 31 (in millions):

Benefit obligation at beginning of year

Service cost

Interest cost

Actuarial (gain) loss

Foreign currency gain

Benefits paid, net of retiree contributions

Benefit obligation at end of year

Health and Welfare

Postemployment Benefits

2015

2014

2015

2014

$

$

6.3

0.1

0.2
(0.8)
—
(0.4)
5.4

$

$

5.5

0.1

0.2

1.0

—
(0.5)
6.3

$

$

16.3

$

0.8

1.1
(1.1)
(2.3)
(1.0)
13.8

$

13.0

0.8

1.0

3.8
(1.5)
(0.8)
16.3

As of December 31, 2015 and 2014, the Company’s health and welfare and postemployment benefit obligations were 

unfunded. 

Assumptions

The assumptions used to determine benefit obligations and costs are selected based on current and expected market 

conditions. Discount rates are selected based on the rates on low risk government bonds with cash flows approximating the 
timing of expected benefit payments. The U.S. bond market is utilized for the U.S. health and welfare obligation and the 
Mexico bond market is utilized for the postemployment obligation.

81

 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Weighted-average assumptions used to determine benefit obligations were as follows for the years ended December 31:

Discount rate
Rate of compensation increase

Health and Welfare

2015

2014

Postemployment Benefits

2015

2014

4.00%
n/a

3.75%
n/a

9.00%
4.50%

8.00%
4.50%

Weighted-average assumptions used to determine net benefit cost for the periods were as follows for the years ended 

December 31:

Discount rate
Rate of compensation increase

Health and Welfare

Postemployment Benefits

2015

2014

2015

2014

3.75%
n/a

4.50%
n/a

8.00%
4.50%

8.25%
4.50%

The following table presents the assumed health care cost trends:

Health care trend rate for next year
Ultimate trend rate
Year that rate reaches ultimate rate

Cash Flows

2015

2014

2013

6.50%
4.75%
2022

6.50%
5.00%
2021

6.50%
5.00%
2023

The following table presents benefit payments expected to be paid, which reflect expected future service, as appropriate, 

for each of the next five years and the aggregate five years thereafter (in millions):

Year
2016
2017
2018
2019
2020
2021-2025

$

Health and
Welfare

Postemployment
Benefits

$

0.4
0.4
0.4
0.4
0.3
1.6

1.0
1.1
1.2
1.3
1.4
8.7

Multi-Employer Plan. Under collective bargaining agreements, KCSR participates in a multi-employer benefit plan, 
which provides certain post-retirement health care and life insurance benefits to eligible union employees and certain retirees. 
Premiums under this plan are expensed as incurred and were $3.3 million, $3.7 million and $3.9 million for the years ended 
December 31, 2015, 2014, and 2013, respectively.

401(k) and Profit Sharing Plan. The Company sponsors the KCS 401(k) and Profit Sharing Plan (the “401(k) plan”), 

whereby participants can choose to make contributions in the form of salary deductions pursuant to Section 401(k) of the 
Internal Revenue Code. The Company matches 401(k) contributions up to a maximum of 5% of compensation. The Company 
recognized expense of $2.9 million, $2.7 million and $2.5 million for the years ended December 31, 2015, 2014 and 2013, 
related to the KCS 401(k) and Profit Sharing Plan. The 401(k) plan previously included the Company’s common stock as an 
investment option, but it ceased being an investment option for new contributions as of January 1, 2015.

82

 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 15. Commitments and Contingencies

Concession Duty. Under KCSM’s 50-year Concession, which would expire in 2047 unless extended, KCSM pays 
concession duty expense of 1.25% of gross revenues. For the year ended December 31, 2015, the concession duty expense, 
which is recorded within materials and other in operating expenses, was $15.4 million, compared to $15.8 million and $14.3 
million for the same periods in 2014 and 2013, respectively.

Litigation. The Company is a party to various legal proceedings and administrative actions, all of which, except as set 
forth below, are of an ordinary, routine nature and incidental to its operations. Included in these proceedings are various tort 
claims brought by current and former employees for job-related injuries and by third parties for injuries related to railroad 
operations. KCS aggressively defends these matters and has established liability provisions, which management believes are 
adequate to cover expected costs. Although it is not possible to predict the outcome of any legal proceeding, in the opinion of 
management, other than those proceedings described in detail below, such proceedings and actions should not, individually, or 
in the aggregate, have a material adverse effect on the Company’s consolidated financial statements.

On April 15, 2014, a putative securities class action lawsuit was filed in the United States District Court for the Western 

District of Missouri against the Company and certain of its current and former officers and directors. The securities class action 
was styled as Gross v. Kansas City Southern, et al., 4:14-cv-00345-BCW. On April 16, 2014, the first of two shareholder 
derivative actions purportedly brought on behalf of the Company (which was named as a “nominal defendant”) was filed in the 
United States District Court for the Western District of Missouri against certain of the Company’s current and former directors 
and officers. The first derivative action was styled as Webster v. Starling, et al., 4:14-cv-00349-BCW. The second derivative 
action was filed on June 6, 2014, and was styled as Lerner v. Starling, et al., 4:14-cv-00509-BCW. The complaints alleged, 
among other things, that the Company made misrepresentations or omitted to disclose certain facts in connection with its 
volume guidance for fiscal year 2013. Pursuant to a joint agreement between the parties, these cases were dismissed by the 
District Court on June 30, 2015. These disputes were resolved without payment by the Company. 

Environmental Liabilities. The Company’s U.S. operations are subject to extensive federal, state and local environmental 
laws and regulations. The major U.S. environmental laws to which the Company is subject include, among others, the Federal 
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA,” also known as the Superfund law), the 
Toxic Substances Control Act, the Federal Water Pollution Control Act, and the Hazardous Materials Transportation Act. 
CERCLA can impose joint and several liabilities for cleanup and investigation costs, without regard to fault or legality of the 
original conduct, on current and predecessor owners and operators of a site, as well as those who generate, or arrange for the 
disposal of, hazardous substances. The Company does not believe that compliance with the requirements imposed by the 
environmental legislation will impair its competitive capability or result in any material additional capital expenditures, 
operating or maintenance costs. The Company is, however, subject to environmental remediation costs as described in the 
following paragraphs.

The Company’s Mexico operations are subject to Mexican federal and state laws and regulations relating to the protection 

of the environment through the establishment of standards for water discharge, water supply, emissions, noise pollution, 
hazardous substances and transportation and handling of hazardous and solid waste. The Mexican government may bring 
administrative and criminal proceedings, impose economic sanctions against companies that violate environmental laws, and 
temporarily or even permanently close non-complying facilities.

The risk of incurring environmental liability is inherent in the railroad industry. As part of serving the petroleum and 
chemicals industry, the Company transports hazardous materials and has a professional team available to respond to and handle 
environmental issues that might occur in the transport of such materials.

The Company performs ongoing reviews and evaluations of the various environmental programs and issues within the 
Company’s operations, and, as necessary, takes actions intended to limit the Company’s exposure to potential liability. Although 
these costs cannot be predicted with certainty, management believes that the ultimate outcome of identified matters will not 
have a material adverse effect on the Company’s consolidated financial statements.

83

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Personal Injury. The Company’s personal injury liability is based on semi-annual actuarial studies performed on an 

undiscounted basis by an independent third party actuarial firm and reviewed by management. This liability is based on 
personal injury claims filed and an estimate of claims incurred but not yet reported. Actual results may vary from estimates due 
to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. Adjustments to the 
liability are reflected within operating expenses in the period in which changes to estimates are known. Personal injury claims 
in excess of self-insurance levels are insured up to certain coverage amounts, depending on the type of claim and year of 
occurrence. The personal injury liability as of December 31, 2015 is based on an updated actuarial study of personal injury 
claims through November 30, 2015 and review of December 2015 experience. For the years ended December 31, 2015 and 
2014, the Company recorded a $6.1 million and $4.2 million reduction, respectively, in personal injury liability, due to changes 
in estimates as a result of the Company’s claims development and settlement experience.

The personal injury liability activity was as follows (in millions):

Balance at beginning of year

Accruals

Changes in estimate

Payments

Balance at end of year

2015

2014

$

$

29.3

$

6.8
(6.1)
(6.1)
23.9

$

31.2

8.8
(4.2)
(6.5)
29.3

Certain Disputes with Ferromex. KCSM and Ferrocarril Mexicano, S.A. de C.V. (“Ferromex”) use certain trackage rights, 

switching services and interline services provided by each other. KCSM and Ferromex have not agreed on the rates to be 
charged for trackage rights and switching services for periods beginning in 1998 through December 31, 2008, or for interline 
services for periods beginning in 1998 through February 8, 2010.   

If KCSM cannot reach an agreement with Ferromex regarding these rates, the Mexican Secretaría de Comunicaciones y 

Transportes (“Secretary of Communications and Transportation” or “SCT”) is entitled to set the rates in accordance with 
Mexican law and regulations. KCSM and Ferromex both initiated administrative proceedings seeking a determination by the 
SCT of the rates that KCSM and Ferromex should pay each other. The SCT issued rulings in 2002 and 2008 setting the rates for 
these services and both KCSM and Ferromex have challenged these rulings. Although KCSM and Ferromex have challenged 
these matters based on different grounds and these cases continue to evolve, management believes the amounts recorded related 
to these matters are adequate. While the outcome of these matters cannot be predicted with certainty, the Company does not 
believe that, when resolved, these disputes will have a material effect on its consolidated financial statements.

Tax Contingencies. Information regarding tax contingencies is included in Note 11 Income Taxes - Tax Contingencies.

Contractual Agreements. In the normal course of business, the Company enters into various contractual agreements 
related to commercial arrangements and the use of other railroads’ or governmental entities’ infrastructure needed for the 
operations of the business. The Company is involved or may become involved in certain disputes involving transportation rates, 
product loss or damage, charges, and interpretations related to these agreements. While the outcome of these matters cannot be 
predicted with certainty, the Company does not believe that, when resolved, these disputes will have a material effect on its 
consolidated financial statements.

Credit Risk. The Company continually monitors risks related to economic changes and certain customer receivables 
concentrations. Significant changes in customer concentration or payment terms, deterioration of customer creditworthiness or 
further weakening in economic trends could have a significant impact on the collectability of the Company’s receivables and its 
operating results. If the financial condition of the Company’s customers were to deteriorate and result in an impairment of their 
ability to make payments, additional allowances may be required. The Company has recorded provisions for uncollectability 
based on its best estimate at December 31, 2015.

84

Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Panama Canal Railway Company (”PCRC”) Guarantees and Indemnities. At December 31, 2015, the Company had 

issued and outstanding $5.3 million under a standby letter of credit to fulfill its obligation to fund fifty percent of the debt 
service reserve and liquidity reserve established by PCRC in connection with the issuance of the 7.0% Senior Secured Notes 
due November 1, 2026 (the “PCRC Notes”). Additionally, KCS has pledged its shares of PCRC as security for the PCRC 
Notes.

Note 16. Quarterly Financial Data (Unaudited)

Fourth

Third

Second

First

(In millions, except per share amounts)

2015

Revenues

Operating income

Net income

Net income attributable to Kansas City
Southern and subsidiaries
Per share data:

Basic earnings per common share

Diluted earnings per common share

2014

Revenues

Operating income

Net income

Net income attributable to Kansas City
Southern and subsidiaries
Per share data:

Basic earnings per common share

Diluted earnings per common share

_____________________

$

$

$

$

598.0

218.9

140.0

139.3

1.28

1.28

642.5

213.9

141.7

141.0

1.28

1.28

$

$

$

$

631.9

$

219.9

131.9

131.6

$

1.20

1.20

585.8

186.8

112.2

111.8

1.01

1.01

$

603.1

178.2(i)

101.2

100.8

$

0.91

0.91

677.5

$

649.7

$

607.4

229.4

138.4

138.1

$

1.25

1.25

205.8(ii)

130.2

129.8

1.18

1.18

$

160.0(iii)

94.0

93.7

0.85

0.85

(i) 

(ii) 

(iii) 

During the first quarter of 2015, the Company recognized pre-tax lease termination costs of $9.6 million, due to the 
early termination of certain operating leases and the related purchase of equipment.

During the second quarter of 2014, the Company recognized pre-tax lease termination costs of $8.4 million, due to the 
early termination of certain operating leases and the related purchase of equipment.

During the first quarter of 2014, the Company recognized pre-tax lease termination costs of $29.9 million, due to the 
early termination of certain operating leases and the related purchase of equipment.

85

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 17. Geographic Information

The Company strategically manages its rail operations as one reportable business segment over a single coordinated rail 
network that extends from the midwest and southeast portions of the United States south into Mexico and connects with other 
Class I railroads. Financial information reported at this level, such as revenues, operating income and cash flows from 
operations, is used by corporate management, including the Company’s chief operating decision-maker, in evaluating overall 
financial and operational performance, market strategies, as well as the decisions to allocate capital resources.

The following tables provide information by geographic area (in millions):

Years ended December 31,

2015

2014

2013

Revenues
U.S.
Mexico

Total revenues

$

$

1,248.4
1,170.4
2,418.8

Property and equipment (including concession assets), net

U.S.

Mexico

Total property and equipment (including concession assets), net

Note 18. Subsequent Events

Foreign Currency Hedging 

$

$

$

$

1,372.2
1,204.9
2,577.1

$

$

1,268.0
1,101.3
2,369.3

Years ended
December 31,

2015

2014

4,642.6

3,062.8

7,705.4

$

$

4,311.0

2,843.7

7,154.7

During January 2016, the Company entered into foreign currency forward contracts with an aggregate notional amount of 

$370.0 million to hedge its exposure to fluctuations in the Mexican cash tax obligation due to changes in the value of the 
Mexican peso against the U.S. dollar. Contracts with an aggregate notional amount of $30.0 million will mature on April 29, 
2016 and obligate the Company to purchase a total of Ps.537.2 million at an exchange rate of Ps.17.91 to each U.S. dollar. The 
remaining contracts with an aggregate notional amount of $340.0 million will mature on January 17, 2017 and obligate the 
Company to purchase a total of Ps.6,207.7 million at a weighted-average exchange rate of Ps.18.26 to each U.S. dollar.

The Company has not designated these foreign currency derivative instruments as hedging instruments for accounting 

purposes. The Company will measure the foreign currency derivative instruments at fair value each period and will recognize 
any change in fair value in foreign exchange gain (loss) within the consolidated statements of comprehensive income.

Common Stock Dividend 

On January 28, 2016, the Company’s Board of Directors declared a cash dividend of $0.33 per share payable on April 6, 

2016, to common stockholders of record as of March 14, 2016. The aggregate amount of the dividend declared was 
approximately $35.8 million.

86

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Note 19. Condensed Consolidating Financial Information 

 Pursuant to Securities and Exchange Commission (“SEC”) Regulation S-X Rule 3-10 “Financial statements of guarantors 

and issuers of guaranteed securities registered or being registered”, the Company is required to provide condensed 
consolidating financial information for issuers of certain of its senior notes that are guaranteed. During 2015, the Company 
completed a debt exchange offer whereby current holders of KCSR and KCSM Existing Notes had the option to exchange their 
notes for new KCS Notes. As such, condensed consolidating financial information is presented with KCS as issuer of the new 
KCS Notes and with KCSR as issuer of the remaining Existing Notes that were not exchanged.

 As of December 31, 2015, KCS had outstanding $476.7 million principal amount of 4.95% Senior Notes due August 15, 

2045, $437.6 million principal amount of 4.30% Senior Notes due May 15, 2043, $195.0 million principal amount of 3.85% 
Senior Notes due November 15, 2023, $439.1 million principal amount of 3.00% Senior Notes due May 15, 2023, $239.5 
million principal amount of 2.35% Senior Notes due May 15, 2020 and $244.8 million principal amount of Floating Rate 
Senior Notes due October 28, 2016 (collectively, the “KCS Notes”), which are unsecured obligations of KCS, and are also 
jointly and severally and fully and unconditionally guaranteed on an unsecured senior basis by KCSR and certain wholly-
owned domestic subsidiaries of KCS. The Company intends to file a registration statement on Form S-4 with the SEC for the 
KCS Notes, and as a result, is providing the following condensed consolidating financial information (in millions).

Condensed Consolidating Statements of Comprehensive Income - KCS Notes

Revenues
Operating expenses

Operating income (loss)

Equity in net earnings of unconsolidated
affiliates
Interest expense
Debt retirement and exchange costs
Foreign exchange loss
Other income (expense), net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to
noncontrolling interest

Net income attributable to Kansas City
Southern and subsidiaries
Other comprehensive loss

Comprehensive income attributable to
Kansas City Southern and subsidiaries

2015

Parent

$

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

— $
4.6
(4.6)

$

1,135.9
779.7
356.2

$

1,302.3
849.3
453.0

(19.4) $
(18.6)
(0.8)

2,418.8
1,615.0
803.8

464.0
(4.6)
0.1
—
45.9
500.8
16.5
484.3

—

484.3
(1.5)

7.4
(84.9)
(5.2)
—
(3.1)
270.4
98.3
172.1

1.8

170.3
—

16.5
(40.1)
(2.5)
(56.6)
1.4
371.7
72.5
299.2

—

299.2
(2.2)

(469.6)
47.7
—
—
(47.6)
(470.3)
—
(470.3)

—

(470.3)
2.2

18.3
(81.9)
(7.6)
(56.6)
(3.4)
672.6
187.3
485.3

1.8

483.5
(1.5)

$

482.8

$

170.3

$

297.0

$

(468.1) $

482.0

87

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Comprehensive Income - KCS Notes—(Continued)

Revenues
Operating expenses

Operating income (loss)

Equity in net earnings of unconsolidated
affiliates
Interest expense
Debt retirement and exchange costs
Foreign exchange loss
Other income (expense), net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to
noncontrolling interest

Net income attributable to Kansas City
Southern and subsidiaries

Other comprehensive income (loss)

Comprehensive income attributable to
Kansas City Southern and subsidiaries

2014

Parent

$

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

— $
7.6
(7.6)

$

1,242.0
901.0
341.0

$

1,353.7
879.1
474.6

(18.6) $
(19.7)
1.1

2,577.1
1,768.0
809.1

476.7
(0.1)
—
—
50.1
519.1
16.5
502.6

—

502.6
(1.2)

7.6
(83.3)
(2.7)
—
0.2
262.8
99.1
163.7

1.7

162.0
0.1

18.9
(39.6)
(3.9)
(35.5)
(1.2)
413.3
93.2
320.1

—

320.1
(1.8)

(482.1)
50.2
—
—
(51.3)
(482.1)
—
(482.1)

—

(482.1)
1.7

21.1
(72.8)
(6.6)
(35.5)
(2.2)
713.1
208.8
504.3

1.7

502.6
(1.2)

$

501.4

$

162.1

$

318.3

$

(480.4) $

501.4

88

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Comprehensive Income - KCS Notes—(Continued)

Revenues
Operating expenses

Operating income (loss)

Equity in net earnings of unconsolidated
affiliates
Interest expense
Debt retirement and exchange costs
Foreign exchange loss
Other income (expense), net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to
noncontrolling interest

Net income attributable to Kansas City
Southern and subsidiaries

Other comprehensive income (loss)

Comprehensive income attributable to
Kansas City Southern and subsidiaries

2013

Parent

$

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

— $
4.8
(4.8)

$

1,136.2
847.2
289.0

$

1,251.9
800.1
451.8

(18.8) $
(21.4)
2.6

2,369.3
1,630.7
738.6

318.3
(0.1)
—
—
44.6
358.0
17.6
340.4

—

340.4
0.4

9.4
(68.4)
(1.5)
(1.3)
5.0
232.2
84.1
148.1

1.9

146.2
0.5

15.7
(59.3)
(117.7)
(3.9)
(0.6)
286.0
96.6
189.4

—

189.4
(0.1)

(324.6)
47.2
—
—
(49.8)
(324.6)
—
(324.6)

—

(324.6)
(0.4)

18.8
(80.6)
(119.2)
(5.2)
(0.8)
551.6
198.3
353.3

1.9

351.4
0.4

$

340.8

$

146.7

$

189.3

$

(325.0) $

351.8

89

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Balance Sheets - KCS Notes

Assets:
Current assets
Investments
Investments in consolidated subsidiaries

Property and equipment (including
concession assets), net
Other assets
Total assets

Liabilities and equity:
Current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Stockholders’ equity
Noncontrolling interest

Total liabilities and equity

Assets:
Current assets
Investments
Investments in consolidated subsidiaries

Property and equipment (including
concession assets), net
Other assets
Total assets

Liabilities and equity:
Current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Stockholders’ equity
Noncontrolling interest

Total liabilities and equity

$

$

$

$

$

$

$

$

December 31, 2015

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

242.8
—
3,108.4

—
1,791.1
5,142.3

$

$

(566.9) $
1,759.8
20.9
3.8
3,924.7
—
5,142.3

$

189.5
3.9
479.6

3,903.2
40.6
4,616.8

1,066.6
1,260.0
998.4
94.4
887.0
310.4
4,616.8

$

$

$

$

359.5
30.8
—

3,803.0
19.3
4,212.6

268.0
1,057.1
171.8
24.4
2,691.3
—
4,212.6

$

$

$

$

(254.8) $
—
(3,588.0)

(0.8)
(1,787.1)
(5,630.7) $

(10.1) $

(2,031.9)
—
—
(3,588.7)
—
(5,630.7) $

537.0
34.7
—

7,705.4
63.9
8,341.0

757.6
2,045.0
1,191.1
122.6
3,914.3
310.4
8,341.0

December 31, 2014

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

219.0
3.9
473.4

3,578.8
38.1
4,313.2

1,599.4
694.1
900.0
95.1
716.0
308.6
4,313.2

$

$

$

$

532.0
32.5
—

3,575.9
27.4
4,167.8

489.1
1,132.2
150.7
32.0
2,363.8
—
4,167.8

$

$

$

$

(33.7) $
—
(3,089.4)

—
—
(3,123.1) $

(33.7) $
—
—
—
(3,089.4)
—
(3,123.1) $

718.2
36.4
—

7,154.7
67.1
7,976.4

898.8
1,826.5
1,056.2
130.8
3,755.5
308.6
7,976.4

0.9
—
2,616.0

—
1.6
2,618.5

$

$

(1,156.0) $
0.2
5.5
3.7
3,765.1
—
2,618.5

$

90

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Cash Flows - KCS Notes

Operating activities:
Net cash provided
Investing activities:

Capital expenditures

Purchase or replacement of equipment
under operating leases

Property investments in MSLLC

Proceeds from repayment of loans to
affiliates

Loans to affiliates

Other investing activities

Net cash provided (used)

Financing activities:

Proceeds from short-term borrowings

Repayment of short-term borrowings

Proceeds from issuance of long-term debt

Repayment of long-term debt

Dividends paid

Share repurchases

Repayment of loans from affiliates

Other financing activities

Net cash provided (used)

Cash and cash equivalents:

Net decrease
At beginning of year

At end of year

2015

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

$

45.3

$

356.6

$

526.0

$

(18.6) $

909.3

—

—

—

293.9

(80.0)

(0.8)

213.1

80.0

—

—

—

(140.1)

(194.2)

—

(4.1)

(258.4)

—

0.2

0.2

$

(382.8)

(305.2)

(82.8)
—

—

—
(31.4)
(497.0)

10,786.2
(10,937.3)
663.7
(88.4)
—

—
(293.9)
(9.2)
121.1

(19.3)
29.5

(61.4)
(17.4)

—

—

6.5
(377.5)

—
(300.0)
40.0
(61.4)
(17.8)
—

—
(1.4)
(340.6)

(192.1)
318.3

—

—

—

(293.9)
80.0

2.3
(211.6)

—

—
(80.0)
—

17.8

—

293.9
(1.5)
230.2

—

—

$

10.2

$

126.2

$

— $

(688.0)

(144.2)
(17.4)

—

—
(23.4)
(873.0)

10,866.2
(11,237.3)
623.7
(149.8)
(140.1)
(194.2)
—
(16.2)
(247.7)

(211.4)
348.0

136.6

91

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Cash Flows - KCS Notes—(Continued)

Operating activities:
Net cash provided
Investing activities:

Capital expenditures
Purchase or replacement of equipment
under operating leases
Property investments in MSLLC

Contribution to consolidated affiliates
Proceeds from repayment of loans to
affiliates

Other investing activities

Net cash used
Financing activities:

Proceeds from short-term borrowings

Repayment of short-term borrowings

Proceeds from issuance of long-term debt

Repayment of long-term debt

Dividends paid

Contribution from affiliates

Repayment of loans from affiliates

Other financing activities

Net cash provided (used)

Cash and cash equivalents:
Net increase (decrease)

At beginning of year
At end of year

2014

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

$

345.3

$

379.1

$

495.9

$

(314.3) $

906.0

—

—

—

(299.6)

70.4

(1.0)

(230.2)

—

—

—

—

(116.6)

—

—

1.3

(115.3)

(0.2)

0.4

0.2

$

(479.5)

(190.2)

(203.6)
—

—

—

8.6
(674.5)

15,068.8
(14,920.2)
175.0
(423.6)
—

300.4
(70.4)
(1.4)
128.6

(166.8)
196.3

(98.5)
(26.7)
—

—

5.8
(309.6)

300.0

—

—
(84.4)
(314.3)
1.4

—
(3.5)
(100.8)

85.5

232.8

1.5

—

—

299.6

(70.4)
0.7

231.4

—

—

—

—

314.3
(301.8)
70.4

—

82.9

—

—

$

29.5

$

318.3

$

— $

(668.2)

(302.1)
(26.7)
—

—

14.1
(982.9)

15,368.8
(14,920.2)
175.0
(508.0)
(116.6)
—

—
(3.6)
(4.6)

(81.5)
429.5

348.0

92

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Cash Flows - KCS Notes—(Continued)

Operating activities:
Net cash provided
Investing activities:

Capital expenditures
Purchase or replacement of equipment
under operating leases
Property investments in MSLLC
Proceeds from repayment of loans to
affiliates

Loans to affiliates
Other investing activities

Net cash provided (used)

Financing activities:

Proceeds from issuance of long-term debt

Repayment of long-term debt
Debt costs
Dividends paid
Proceeds from loans from affiliates
Repayment of loans from affiliates
Other financing activities

Net cash provided (used)

Cash and cash equivalents:

Net increase
At beginning of year
At end of year

2013

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

$

29.2

$

316.3

$

463.8

$

(11.0) $

798.3

—

—
—

41.5
—
(4.9)
36.6

—
—
—
(71.2)
—
—
5.7
(65.5)

(419.4)

(175.8)

(130.9)
—

181.4
(69.5)
(6.2)
(444.6)

687.6
(344.4)
(7.5)
—
—
(41.5)
0.7
294.9

(80.9)
(31.6)

—
—
10.8
(277.5)

1,230.8
(998.8)
(110.3)
(11.0)
69.5
(181.4)
4.9
3.7

0.4

—
—

(222.9)
69.5
5.2
(147.8)

—
—
—
11.0
(69.5)
222.9
(5.6)
158.8

(594.8)

(211.8)
(31.6)

—
—
4.9
(833.3)

1,918.4
(1,343.2)
(117.8)
(71.2)
—
—
5.7
391.9

0.3
0.1
0.4

$

166.6
29.7
196.3

$

190.0
42.8
232.8

$

—
—
— $

356.9
72.6
429.5

$

93

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

As of December 31, 2015, KCSR had outstanding $23.3 million principal amount of 4.95% Senior Notes due August 15, 

2045, $12.4 million principal amount of 4.30% Senior Notes due May 15, 2043 and $5.0 million principal amount of 3.85% 
Senior Notes due November 15, 2023 (collectively, the “KCSR Notes”) which are unsecured obligations of KCSR, and are also 
jointly and severally and fully and unconditionally guaranteed on an unsecured senior basis by KCS and certain wholly-owned 
domestic subsidiaries. The 4.95% Senior Notes were registered under KCS’s shelf registration filed and automatically effective 
as of November 20, 2014. KCSR filed a registration statement on Form S-4 with the SEC in connection with an exchange offer 
with respect to the 4.30% Senior Notes and 3.85% Senior Notes, which was declared effective on May 28, 2014. As a result, the 
Company is providing the following condensed consolidating financial information (in millions).

Condensed Consolidating Statements of Comprehensive Income - KCSR Notes

Revenues
Operating expenses

Operating income (loss)

Equity in net earnings (losses) of
unconsolidated affiliates
Interest expense
Debt retirement and exchange costs
Foreign exchange loss
Other income (expense), net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to
noncontrolling interest

Net income attributable to Kansas
City Southern and subsidiaries

Other comprehensive loss

Comprehensive income attributable
to Kansas City Southern and
subsidiaries

Parent

KCSR

$

— $
4.6
(4.6)

1,112.5
760.4
352.1

2015

Guarantor
Subsidiaries
42.1
$
38.0
4.1

Non-
Guarantor
Subsidiaries
1,302.3
$
849.3
453.0

Consolidating
Adjustments
$

Consolidated
KCS
2,418.8
1,615.0
803.8

(38.1) $
(37.3)
(0.8)

464.0
(4.6)
0.1
—
45.9
500.8
16.5
484.3

—

484.3
(1.5)

(1.4)
(84.8)
(5.2)
—
(3.2)
257.5
95.2
162.3

—

162.3
—

5.5
(0.1)
—
—
0.1
9.6
3.1
6.5

1.8

4.7
—

16.5
(40.1)
(2.5)
(56.6)
1.4
371.7
72.5
299.2

(466.3)
47.7
—
—
(47.6)
(467.0)
—
(467.0)

18.3
(81.9)
(7.6)
(56.6)
(3.4)
672.6
187.3
485.3

—

—

1.8

299.2
(2.2)

(467.0)
2.2

483.5
(1.5)

$

482.8

$

162.3

$

4.7

$

297.0

$

(464.8) $

482.0

94

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Comprehensive Income - KCSR Notes—(Continued)

Revenues
Operating expenses

Operating income (loss)

Equity in net earnings (losses) of
unconsolidated affiliates
Interest expense
Debt retirement and exchange costs
Foreign exchange loss
Other income (expense), net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to
noncontrolling interest

Net income attributable to Kansas
City Southern and subsidiaries
Other comprehensive income (loss)

Comprehensive income attributable
to Kansas City Southern and
subsidiaries

Parent

KCSR

$

— $
7.6
(7.6)

1,215.8
881.6
334.2

2014

Guarantor
Subsidiaries
48.7
$
41.8
6.9

Non-
Guarantor
Subsidiaries
1,353.7
$
879.1
474.6

Consolidating
Adjustments
$

Consolidated
KCS
2,577.1
1,768.0
809.1

(41.1) $
(42.1)
1.0

476.7
(0.1)
—
—
50.1
519.1
16.5
502.6

—

502.6
(1.2)

(0.1)
(83.3)
(2.7)
—
0.2
248.3
94.7
153.6

—

153.6
0.1

5.5
—
—
—
—
12.4
4.4
8.0

1.7

6.3
—

18.9
(39.6)
(3.9)
(35.5)
(1.2)
413.3
93.2
320.1

(479.9)
50.2
—
—
(51.3)
(480.0)
—
(480.0)

21.1
(72.8)
(6.6)
(35.5)
(2.2)
713.1
208.8
504.3

—

—

1.7

320.1
(1.8)

(480.0)
1.7

502.6
(1.2)

$

501.4

$

153.7

$

6.3

$

318.3

$

(478.3) $

501.4

95

 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Comprehensive Income - KCSR Notes—(Continued)

Revenues
Operating expenses

Operating income (loss)
Equity in net earnings of
unconsolidated affiliates
Interest expense
Debt retirement and exchange costs
Foreign exchange loss
Other income (expense), net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to
noncontrolling interest

Net income attributable to Kansas
City Southern and subsidiaries
Other comprehensive income (loss)

Comprehensive income attributable
to Kansas City Southern and
subsidiaries

Parent

KCSR

$

— $
4.8
(4.8)

1,115.0
829.6
285.4

2013

Guarantor
Subsidiaries
42.6
$
39.0
3.6

Non-
Guarantor
Subsidiaries
1,251.9
$
800.1
451.8

Consolidating
Adjustments
$

Consolidated
KCS
2,369.3
1,630.7
738.6

(40.2) $
(42.8)
2.6

318.3
(0.1)
—
—
44.6
358.0
17.6
340.4

—

340.4
0.4

1.1
(68.5)
(1.5)
(1.3)
5.1
220.3
81.2
139.1

—

139.1
0.5

6.3
0.1
—
—
(0.1)
9.9
2.9
7.0

1.9

5.1
—

15.7
(59.3)
(117.7)
(3.9)
(0.6)
286.0
96.6
189.4

(322.6)
47.2
—
—
(49.8)
(322.6)
—
(322.6)

—

—

189.4
(0.1)

(322.6)
(0.4)

18.8
(80.6)
(119.2)
(5.2)
(0.8)
551.6
198.3
353.3

1.9

351.4
0.4

$

340.8

$

139.6

$

5.1

$

189.3

$

(323.0) $

351.8

96

 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Balance Sheets - KCSR Notes

Parent

KCSR

December 31, 2015

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

Assets:
Current assets
Investments
Investments in consolidated
subsidiaries
Property and equipment (including
concession assets), net
Other assets
Total assets

Liabilities and equity:
Current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Stockholders’ equity
Noncontrolling interest

Total liabilities and equity

Assets:
Current assets
Investments
Investments in consolidated
subsidiaries
Property and equipment (including
concession assets), net
Other assets
Total assets

Liabilities and equity:
Current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Stockholders’ equity
Noncontrolling interest

Total liabilities and equity

$

$

$

$

$

$

$

$

537.0
34.7

—

$

242.8
—

$

182.7
3.9

$

7.7
—

$

359.5
30.8

(255.7) $
—

3,108.4

—
1,791.1
5,142.3

$

(566.9) $
1,759.8
20.9
3.8
3,924.7
—
5,142.3

$

(7.6)

3,716.4
40.5
3,935.9

959.6
1,259.9
863.7
94.2
758.5
—
3,935.9

$

$

$

477.6

186.8
—
672.1

107.8
0.1
134.7
0.2
118.9
310.4
672.1

$

$

$

—

(3,578.4)

3,803.0
19.3
4,212.6

268.0
1,057.1
171.8
24.4
2,691.3
—
4,212.6

(0.8)
(1,787.0)
(5,621.9) $

7,705.4
63.9
8,341.0

(10.9) $

(2,031.9)
—
—
(3,579.1)
—
(5,621.9) $

757.6
2,045.0
1,191.1
122.6
3,914.3
310.4
8,341.0

$

$

$

Parent

KCSR

December 31, 2014

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

$

0.9
—

$

214.1
3.9

$

5.8
—

$

532.0
32.5

(34.6) $
—

718.2
36.4

—

—

(3,083.0)

3,575.9
27.4
4,167.8

489.1
1,132.2
150.7
32.0
2,363.8
—
4,167.8

—
—
(3,117.6) $

7,154.7
67.1
7,976.4

(34.6) $
—
—
—
(3,083.0)
—
(3,117.6) $

898.8
1,826.5
1,056.2
130.8
3,755.5
308.6
7,976.4

$

$

$

471.3

193.3
—
670.4

115.6
0.2
131.8
0.7
113.5
308.6
670.4

$

$

$

2,616.0

—
1.6
2,618.5

$

(1,156.0) $
0.2
5.5
3.7
3,765.1
—
2,618.5

$

(4.3)

3,385.5
38.1
3,637.3

1,484.7
693.9
768.2
94.4
596.1
—
3,637.3

97

$

$

$

 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Cash Flows - KCSR Notes

Parent

KCSR

2015

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

$

45.3

$

355.6

$

1.0

$

526.0

$

(18.6) $

909.3

(381.5)

(1.3)

(305.2)

(61.4)
(17.4)

—
—
6.5
(377.5)

—
(300.0)

40.0
(61.4)
(17.8)
—
—
(1.4)
(340.6)

—
—

—
—
(0.7)
(2.0)

—
—

—
(0.1)
—
—
—
0.7
0.6

(0.4)
0.5
0.1

—

—
—

(293.9)
80.0
2.3
(211.6)

(688.0)

(144.2)
(17.4)

—
—
(23.4)
(873.0)

—
—

10,866.2
(11,237.3)

(80.0)
—
17.8
—
293.9
(1.5)
230.2

623.7
(149.8)
(140.1)
(194.2)
—
(16.2)
(247.7)

(211.4)
348.0
136.6

(192.1)
318.3
126.2

$

$

—
—
— $

Operating activities:
Net cash provided
Investing activities:

Capital expenditures
Purchase or replacement of
equipment under operating leases
Property investments in MSLLC
Proceeds from repayment of loans to
affiliates
Loans to affiliates
Other investing activities

Net cash provided (used)

Financing activities:

Proceeds from short-term
borrowings
Repayment of short-term borrowings
Proceeds from issuance of long-term
debt
Repayment of long-term debt
Dividends paid
Share repurchases
Repayment of loans from affiliates
Other financing activities

Net cash provided (used)

Cash and cash equivalents:

Net decrease
At beginning of year
At end of year

—

—
—

293.9
(80.0)
(0.8)
213.1

(82.8)
—

—
—
(30.7)
(495.0)

80.0
—

10,786.2
(10,937.3)

—
—
(140.1)
(194.2)
—
(4.1)
(258.4)

663.7
(88.3)
—
—
(293.9)
(9.9)
120.5

—
0.2
0.2

$

(18.9)
29.0
10.1

$

$

98

 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Cash Flows - KCSR Notes—(Continued)

Operating activities:
Net cash provided
Investing activities:

Capital expenditures
Purchase or replacement of
equipment under operating leases
Property investments in MSLLC
Contribution to consolidated
affiliates
Proceeds from repayment of loans to
affiliates

Other investing activities

Net cash used
Financing activities:

Proceeds from short-term
borrowings
Repayment of short-term borrowings

Proceeds from issuance of long-term
debt
Repayment of long-term debt
Dividends paid
Contribution from affiliates
Repayment of loans from affiliates
Other financing activities

Net cash provided (used)

Cash and cash equivalents:
Net increase (decrease)
At beginning of year
At end of year

Parent

KCSR

2014

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

$

345.3

$

377.0

$

2.1

$

495.9

$

(314.3) $

906.0

—

—
—

(299.6)

70.4
(1.0)
(230.2)

(477.8)

(203.6)
—

—

—
9.7
(671.7)

—

—

15,068.8
(14,920.2)

—
—
(116.6)
—
—
1.3
(115.3)

175.0
(423.5)
—
299.3
(70.4)
(1.4)
127.6

(1.7)

(190.2)

—
—

—

—
(1.1)
(2.8)

—

—

—
(0.1)
—
1.1
—
—
1.0

(98.5)
(26.7)

—
5.8
(309.6)

300.0

—

—
(84.4)
(314.3)
1.4
—
(3.5)
(100.8)

—

299.6

—

1.5

—
—

(668.2)

(302.1)
(26.7)

(70.4)
0.7
231.4

—
14.1
(982.9)

—

—

15,368.8
(14,920.2)

—
—
314.3
(301.8)
70.4
—
82.9

175.0
(508.0)
(116.6)
—
—
(3.6)
(4.6)

(81.5)
429.5
348.0

(0.2)
0.4
0.2

$

(167.1)
196.1
29.0

$

0.3
0.2
0.5

$

85.5
232.8
318.3

$

$

—
—
— $

99

 
 
Kansas City Southern and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidating Statements of Cash Flows - KCSR Notes—(Continued)

Operating activities:
Net cash provided
Investing activities:

Capital expenditures
Purchase or replacement of
equipment under operating leases
Property investments in MSLLC
Proceeds from repayment of loans to
affiliates

Loans to affiliates
Other investing activities

Net cash provided (used)

Financing activities:

Proceeds from issuance of long-term
debt
Repayment of long-term debt
Debt costs
Dividends paid
Proceeds from loans from affiliates
Repayment of loans from affiliates
Other financing activities

Net cash provided (used)

Cash and cash equivalents:

Net increase
At beginning of year
At end of year

Parent

KCSR

2013

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
KCS

$

29.2

$

313.7

$

2.6

$

463.8

$

(11.0) $

798.3

—

—
—

41.5
—
(4.9)
36.6

—
—
—
(71.2)
—
—
5.7
(65.5)

(417.4)

(2.0)

(175.8)

(130.9)
—

181.4
(69.5)
(5.1)
(441.5)

687.6
(344.3)
(7.5)
—
—
(41.5)
—
294.3

—
—

—
—
(1.1)
(3.1)

—
(0.1)
—
—
—
—
0.7
0.6

(80.9)
(31.6)

—
—
10.8
(277.5)

1,230.8
(998.8)
(110.3)
(11.0)
69.5
(181.4)
4.9
3.7

0.4

—
—

(222.9)
69.5
5.2
(147.8)

—
—
—
11.0
(69.5)
222.9
(5.6)
158.8

(594.8)

(211.8)
(31.6)

—
—
4.9
(833.3)

1,918.4
(1,343.2)
(117.8)
(71.2)
—
—
5.7
391.9

0.3
0.1
0.4

$

166.5
29.6
196.1

$

0.1
0.1
0.2

$

190.0
42.8
232.8

$

—
—
— $

356.9
72.6
429.5

$

100

 
 
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

(a) Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s 
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as 
amended (the “Exchange Act”), as of the end of the fiscal year for which this annual report on Form 10-K is filed. Based on 
that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the current disclosure controls and 
procedures are effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange 
Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange 
Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed 
by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and 
Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal 

quarter (the fourth quarter in the case of an annual report) that have materially affected, or are reasonably likely to materially 
affect, the Company’s internal control over financial reporting.

(c) Internal Control over Financial Reporting

The report of management on the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 

15d-15(f) under the Exchange Act) is included as “Management’s Report on Internal Control over Financial Reporting” in 
Item 8.

KPMG LLP, the independent registered public accounting firm that audited the Company’s financial statements contained 
herein, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2015. The 
attestation report is included in Item 8 of this Form 10-K.

Item 9B.  Other Information

None.

101

The Company has incorporated by reference certain responses to the Items of this Part III pursuant to Rule 12b-23 under 

the Exchange Act and General Instruction G(3) to Form 10-K. The Company’s definitive proxy statement for the annual 
meeting of stockholders scheduled for May 5, 2016 (“Proxy Statement”), will be filed no later than 120 days after 
December 31, 2015.

Part III

Item 10.  Directors, Executive Officers and Corporate Governance

(a) Directors of the Company

The sections of the Proxy Statement entitled “Proposal 1 — Election of Directors” and “The Board of Directors” are 

incorporated by reference in partial response to this Item 10.

(b) Executive Officers of the Company

See “Executive Officers of KCS and Subsidiaries” in Part I, Item 1 of this annual report incorporated by reference herein 

for information about the executive officers of the Company.

(c) Changes to Shareholder Nominating Procedures

The Information set forth in the Proxy Statement is incorporated by reference in partial response to this Item 10.

(d) Audit Committee and Audit Committee Financial Experts

The section of the Proxy Statement entitled “Board Committees — The Audit Committee” is incorporated by reference in 

partial response to this Item 10.

(e) Compliance with Section 16(a) of the Exchange Act

The response to Item 405 of Regulation S-K under “Section 16(a) Beneficial Ownership Reporting Compliance” in the 

Proxy Statement is incorporated by reference in partial response to this Item 10.

(f) Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to directors, officers 

(including, among others, the principal executive officer, principal financial officer and principal accounting officer) and 
employees. The Company has posted its Code of Ethics on its website (www.kcsouthern.com) and will post on its website any 
amendments to, or waivers from, a provision of its Code of Ethics that applies to the Company’s principal executive officer, 
principal financial officer or principal accounting officer as required by applicable rules and regulations. The Code of Ethics is 
available, in print, upon written request to the Corporate Secretary, P.O. Box 219335, Kansas City, Missouri 64121-9335.

(g) Annual Certification to the New York Stock Exchange

KCS’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “KSU”. As a result, 

the Chief Executive Officer is required to make annually, and he made on June 2, 2015, a CEO’s Annual Certification to the 
New York Stock Exchange in accordance with Section 303A.12 of the NYSE Listed Company Manual stating that he was not 
aware of any violations by KCS of the NYSE corporate governance listing standards.

Item 11.  Executive Compensation

Information required by Item 11 of Part III is incorporated by reference from the Proxy Statement pursuant to Regulation 

14A of the Exchange Act.

102

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The section of the Proxy Statement entitled “Beneficial Ownership” is incorporated by reference in partial response to 

this Item 12.

Equity Compensation Plan Information

The following table provides information as of December 31, 2015, about the common stock that may be issued upon the 
exercise of options, warrants and rights, as well as shares remaining available for future issuance under the Company’s existing 
equity compensation plans. 

Plan Category
Equity compensation plans:

Approved by security holders

Not approved by security holders

Total

Number of Securities
to Be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights

Weighted-
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights

Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans-Excluding
Securities Reflected in
the First Column (i)

506,485

—

506,485

$

$

82.07

—

82.07

4,600,142

—

4,600,142

_____________________
(i) 

Includes 3,696,615 shares available for issuance under the 2009 Employee Stock Purchase Plan and 903,527 shares 
available for issuance under the 2008 Plan as awards in the form of Nonvested Shares, Bonus Shares, Performance 
Units or Performance Shares or issued upon the exercise of Options (including ISOs), stock appreciation rights or 
limited stock appreciation rights awarded under the 2008 Plan.

The Company has no knowledge of any arrangement the operation of which may at a subsequent date result in a change 

of control of the Company.

Item 13.  Certain Relationships and Related Transactions, and Director Independence

Information required by Item 13 of Part III is incorporated by reference from the Proxy Statement pursuant to Regulation 

14A of the Exchange Act.

Item 14.  Principal Accountant Fees and Services

Information required by Item 14 of Part III is incorporated by reference from the Proxy Statement pursuant to Regulation 

14A of the Exchange Act.

103

Item 15.  Exhibits and Financial Statement Schedules

(a) List of Documents filed as part of this Report

(1) Financial Statements

Part IV

The consolidated financial statements and related notes, together with the reports of KPMG LLP, Independent Registered 

Public Accounting Firm, appear in Part II Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

(2) Financial Statement Schedules

None.

(3) List of Exhibits

(a) Exhibits

The Company has attached or incorporated by reference herein certain exhibits as specified below pursuant to 

Rule 12b-32 under the Exchange Act.

Exhibit

3.1

3.1.1

3.2

4.1

4.2

4.2.1

4.2.2

4.2.3

4.2.4

4.2.5

4.3

Description

Amended and Restated Certificate of Incorporation of Kansas City Southern, filed as Exhibit 3.1 to the
Company's Current Report on Form 8-K, filed on May 7, 2012 (File No. 1-4717), is incorporated herein by
reference as Exhibit 3.1.

Amendments to the Kansas City Southern Amended and Restated Certificate of Incorporation, filed as Exhibit
3.1 to the Company's Current Report on Form 8-K filed on May 5, 2014 (File No. 1-4717), is incorporated herein
by reference as Exhibit 3.1.1.

Kansas City Southern Bylaws, amended and restated as of September 26, 2014, filed as Exhibit 3.1 to the
Company’s Current Report on Form 8-K, filed on September 30, 2014 (File No. 1-4717), are incorporated herein
by reference as Exhibit 3.2.

As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Company has not filed with this Annual Report on
Form 10-K certain instruments defining the rights of holders of long-term debt of the Company and its
subsidiaries because the total amount of securities authorized under any of such instruments does not exceed 10%
of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a
copy of any such agreements to the Securities and Exchange Commission upon request.

2043 Notes Indenture, dated April 29, 2013, among KCSR, the Guarantors and U.S. Bank National Association,
as trustee and paying agent, filed as exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 29,
2013 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.2.

First Supplemental Indenture, dated November 23, 2015, among KCSR, the Guarantors and the U.S. Bank
National Association, as trustee and paying agent, filed as exhibit 4.2 to the Company's Current Report on Form
8-K filed on November 24, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.2.1.

Registration Rights Agreement, dated April 29, 2013, among KCSR, the Guarantors and JPM, Merrill Lynch and
Morgan Stanley, filed as exhibit 4.2 to the Company’s Current Report on Form 8-K filed on April 29, 2013 (File
No. 1-4717), is incorporated herein by reference as Exhibit 4.2.2.

Form of Rule 144A Restricted Global Note representing KCSR’s 4.30% Senior Notes due 2043, filed as Exhibit
4.2.2 to the Company's Registration Statement on Form S-4 filed on April 21, 2014 (File No. 333-195413), is
incorporated herein by reference as Exhibit 4.2.3.

Form of Regulation S Restricted Global Note representing KCSR’s 4.30% Senior Notes due 2043, filed as
Exhibit 4.2.3 to the Company's Registration Statement on Form S-4 filed on April 21, 2014 (File No.
333-195413), is incorporated herein by reference as Exhibit 4.2.4.

Form of Special Global Note representing KCSR’s 4.30% Senior Notes due 2043, filed as Exhibit 4.2.4 to the
Company's Registration Statement on Form S-4 filed on April 21, 2014 (File No. 333-195413), is incorporated
herein by reference as Exhibit 4.2.5.

2020 KCSM Notes Indenture, dated May 3, 2013, filed as exhibit 4.1 to the Company’s Current Report on Form
8-K filed on May 8, 2013 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.3.

104

Exhibit

4.3.1

4.3.2

4.3.3

4.3.4

4.3.5

4.3.6

4.3.7

4.3.8

4.3.9

Description

First Supplemental Indenture, dated November 23, 2015, filed as exhibit 4.5 to the Company's Current Report on
Form 8-K filed on November 24, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.3.1.

2023 KCSM Notes Indenture, dated May 3, 2013, filed as exhibit 4.2 to the Company’s Current Report on Form
8-K filed on May 8, 2013 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.3.2.

First Supplemental Indenture, dated November 23, 2015, filed as exhibit 4.6 to the Company's Current Report on
Form 8-K filed on November 24, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.3.3.

Registration Rights Agreement, dated May 3, 2013, filed as exhibit 4.3 to the Company’s Current Report on Form
8-K filed on May 8, 2013 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.3.4.

Form of Rule 144A Restricted Global Note representing the 2.35% Senior Notes due 2020, filed as Exhibit 4.4.1
to the Registration Statement on Form S-4 for KCSM, filed on August 26, 2013 (File No. 333-190820), is
incorporated herein by reference as Exhibit 4.3.5.

Form of Regulation S Restricted Global Note representing the 2.35% Senior Notes due 2020, filed as Exhibit
4.4.2 to the Registration Statement on Form S-4 for KCSM, filed on August 26, 2013 (File No. 333-190820), is
incorporated herein by reference as Exhibit 4.3.6.

Special Global Note representing the 2.35% Senior Notes due 2020, filed as Exhibit 4.4.3 to the Registration
Statement on Form S-4 for KCSM, filed on August 26, 2013 (File No. 333-190820), is incorporated herein by
reference as Exhibit 4.3.7.

Form of Rule 144A Restricted Global Note representing the 3.0% Senior Notes due 2023, filed as Exhibit 4.5.1 to
the Registration Statement on Form S-4 for KCSM, filed on August 26, 2013 (File No. 333-190820), is
incorporated herein by reference as Exhibit 4.3.8.

Form of Regulation S Restricted Global Note representing the 3.0% Senior Notes due 2023, filed as Exhibit 4.5.2
to the Registration Statement on Form S-4 for KCSM, filed on August 26, 2013 (File No. 333-190820), is
incorporated herein by reference as Exhibit 4.3.9.

4.3.10

Special Global Note representing the 3.0% Senior Notes due 2023, filed as Exhibit 4.5.3 to the Registration
Statement on Form S-4 for KCSM, filed on August 26, 2013 (File No. 333-190820), is incorporated herein by
reference as Exhibit 4.3.10.

4.4

4.4.1

4.4.2

4.4.3

4.4.4

4.4.5

4.5

4.5.1

2023 Notes Indenture, dated October 29, 2013, among KCSR, the Guarantors and U.S. Bank National
Association, as trustee and paying agent, filed as exhibit 4.1 to the Company’s Current Report on Form 8-K filed
on October 30, 2013 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.4.

First Supplemental Indenture, dated November 23, 2015, among KCSR, the Guarantors and U.S. Bank National
Association, as trustee and paying agent, filed as exhibit 4.1 to the Company's Current Report on Form 8-K filed
on November 24, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.4.1.

Registration Rights Agreement, dated October 29, 2013, among KCSR, the Guarantors and JPM, Merrill Lynch
and Morgan Stanley, filed as exhibit 4.3 to the Company’s Current Report on Form 8-K filed on October 30, 2013
(File No. 1-4717), is incorporated herein by reference as Exhibit 4.4.2.

Form of Rule 144A Restricted Global Note representing KCSR’s 3.85% Senior Notes due 2023, filed as Exhibit
4.4.2 to the Company's Registration Statement on Form S-4 filed on April 21, 2014 (File No. 333-195413), is
incorporated herein by reference as Exhibit 4.4.3.

Form of Regulation S Restricted Global Note representing KCSR’s 3.85% Senior Notes due 2023, filed as
Exhibit 4.4.3 to the Company's Registration Statement on Form S-4 filed on April 21, 2014 (File No.
333-195413), is incorporated herein by reference as Exhibit 4.4.4.

Form of Special Global Note representing KCSR’s 3.85% Senior Notes due 2023, filed as Exhibit 4.4.4 to the
Company's Registration Statement on Form S-4 filed on April 21, 2014 (File No. 333-195413), is incorporated
herein by reference as Exhibit 4.4.5.

2016 Notes Indenture, dated October 29, 2013, among KCSM and U.S. Bank National Association, as trustee and
paying agent, filed as exhibit 4.1 to KCSM’s Current Report on Form 8-K filed on October 30, 2013 (File No.
1-4717), is incorporated herein by reference as Exhibit 4.5.

First Supplemental Indenture, dated November 23, 2015, between KCSM and U.S. Bank National Association, as
trustee and paying agent, filed as exhibit 4.4 to the Company's Current Report on Form 8-K filed on November
24, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.5.1.

105

Exhibit

4.5.2

4.5.3

4.5.4

4.5.5

4.6

4.6.1

4.6.2

4.6.3

4.7

4.7.1

4.7.2

4.7.3

4.7.4

4.7.5

4.7.6

4.7.7

10.1

Description

Registration Rights Agreement, dated October 29, 2013, among KCSM and JPM, Merrill Lynch, Pierce,
Fenner & Smith and Morgan Stanley, filed as exhibit 4.2 to KCSM’s Current Report on Form 8-K filed on
October 30, 2013 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.5.2

Form of Rule 144A Restricted Global Note representing the Floating Rate Senior Notes due 2016 (previously
filed as Exhibit 4.7.2 to the Company’s Registration Statement on Form S-4 filed on November 7, 2013, File No.
333-192179) is incorporated herein by reference as Exhibit 4.5.3.

Form of Regulation S Restricted Global Note representing the Floating Rate Senior Notes due 2016 (previously
filed as Exhibit 4.7.3 to the Company’s Registration Statement on Form S-4 filed on November 7, 2013, File No.
333-192179) is incorporated herein by reference as Exhibit 4.5.4.

Special Global Note representing the Floating Rate Senior Notes due 2016 (previously filed as Exhibit 4.7.4 to
the Company’s Registration Statement on Form S-4 filed on November 7, 2013, File No. 333-192179) is
incorporated herein by reference as Exhibit 4.5.5.

2045 Notes Indenture, dated July 27, 2015, among KCSR, the Note Guarantors and U.S. Bank National
Association, as trustee, filed as exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 28, 2015
(File No. 1-4717), is incorporated herein by reference as Exhibit 4.6.

First Supplemental Indenture, dated July 27, 2015, among KCSR, the Note Guarantors and U.S. Bank National
Association, as trustee, filed as exhibit 4.2 to the Company's Current Report on Form 8-K filed on July 28, 2015
(File No. 1-4717), is incorporated herein by reference as Exhibit 4.6.1.

Second Supplemental Indenture, dated November 23, 2015, among KCSR, the Note Guarantors and U.S. Bank
National Association, as trustee, filed as exhibit 4.3 to the Company's Current Report on Form 8-K filed on
November 24, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.6.2.

Form of Note representing 4.950% Senior Notes due 2045 (included in Exhibit 4.2), filed as exhibit 4.3 to the
Company's Current Report on Form 8-K filed on July 28, 2015 (File No. 1-4717), is incorporated herein by
reference as Exhibit 4.6.3.

Base Indenture, dated December 9, 2015, among KCS, the Note Guarantors and U.S. Bank National Association,
as trustee, filed as exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 15, 2015 (File
No. 1-4717), is incorporated herein by reference as Exhibit 4.7.

First Supplemental Indenture, dated December 9, 2015, among KCS, the Note Guarantors and U.S. Bank
National Association, as trustee, filed as exhibit 4.2 to the Company’s Current Report on Form 8-K filed on
December 15, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.7.1.

Second Supplemental Indenture, dated December 9, 2015, among KCS, the Note Guarantors and U.S. Bank
National Association, as trustee, filed as exhibit 4.3 to the Company’s Current Report on Form 8-K filed on
December 15, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.7.2.

Third Supplemental Indenture, dated December 9, 2015, among KCS, the Note Guarantors and U.S. Bank
National Association, as trustee, filed as exhibit 4.4 to the Company’s Current Report on Form 8-K filed on
December 15, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.7.3.

Fourth Supplemental Indenture, dated December 9, 2015, among KCS, the Note Guarantors and U.S. Bank
National Association, as trustee, filed as exhibit 4.5 to the Company’s Current Report on Form 8-K filed on
December 15, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.7.4.

Fifth Supplemental Indenture, dated December 9, 2015, among KCS, the Note Guarantors and U.S. Bank
National Association, as trustee, filed as exhibit 4.6 to the Company’s Current Report on Form 8-K filed on
December 15, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.7.5.

Sixth Supplemental Indenture, dated December 9, 2015, among KCS, the Note Guarantors and U.S. Bank
National Association, as trustee, filed as exhibit 4.7 to the Company’s Current Report on Form 8-K filed on
December 15, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.7.6.

Registration Rights Agreement, dated December 9, 2015, among KCS, the Note Guarantors, Citigroup Global
Markets Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan
Stanley & Co. LLC, filed as exhibit 4.8 to the Company’s Current Report on Form 8-K filed on December 15,
2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 4.7.7.

Form of Officer Indemnification Agreement, attached as Exhibit 10.1 to the Company’s Form 10-K for the year
ended December 31, 2001, filed on March 29, 2002 (File No. 1-4717), is incorporated herein by reference as
Exhibit 10.1.

106

Exhibit

10.2

10.3*

10.4*

10.4.1*

10.4.2*

10.4.3*

10.4.4*

10.4.5*

10.4.6*

10.4.7*

10.4.8*

10.5*

10.6*

10.7*

10.8

10.8.1

Description

Form of Director Indemnification Agreement, attached as Exhibit 10.2 to the Company’s Form 10-K for the year
ended December 31, 2001, filed on March 29, 2002 (File No. 1-4717), is incorporated herein by reference as
Exhibit 10.2.

Directors Deferred Fee Plan, adopted August 20, 1982, as amended and restated effective May 2, 2007, filed as
Exhibit 10.3 to the Company’s Form 10-K for the year ended December 31, 2010, filed on February 9, 2011 (File
No. 1-4717), is incorporated herein by reference as Exhibit 10.3.

Kansas City Southern 1991 Amended and Restated Stock Option and Performance Award Plan, as amended and
restated effective as of August 7, 2007 (the “Amended 1991 Plan”), filed as Exhibit 10.2 to the Company’s
Form 10-Q for the quarter ended September 30, 2007, filed on October 26, 2007 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.4.

First Amendment to the Kansas City Southern 1991 Amended and Restated Stock Option and Performance Award
Plan, effective July 2, 2008, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 8,
2008 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.4.1.

Form of Non-Qualified Stock Option Award Agreement for employees under the Amended 1991 Plan, filed as
Exhibit 10.8.2 to the Company’s Form 10-K for the year ended December 31, 2004, filed on March 30, 2005
(File No. 1-4717), is incorporated herein by reference as Exhibit 10.4.2.

Form of Non-Qualified Stock Option Award Agreement for Directors under the Amended 1991 Plan, filed as
Exhibit 10.8.3 to the Company’s Form 10-K for the year ended December 31, 2004, filed on March 30, 2005
(File No. 1-4717), is incorporated herein by reference as Exhibit 10.4.3.

Form of Non-Qualified Stock Option Award agreement for employees under the Amended 1991 Plan (referencing
threshold dates), filed as Exhibit 10.8.4 to the Company’s Form 10-K for the year ended December 31, 2004,
filed on March 30, 2005 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.4.4.

Form of Restricted Shares Award Agreement (cliff vesting) under the Amended 1991 Plan, filed as Exhibit 10.5.6
to the Company’s Form 10-K for the year ended December 31, 2007, filed on February 15, 2008 (File
No. 1-4717), is incorporated herein by reference as Exhibit 10.4.5.

Form of Restricted Shares Award Agreement under the Amended 1991 Plan (applicable to restricted shares to be
purchased), filed as Exhibit 10.8.7 to the Company’s Form 10-K for the year ended December 31, 2004, filed on
March 30, 2005 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.4.6.

Form of Restricted Shares Award Agreement (consultants) under the Amended 1991 Plan, filed as Exhibit 10.5.9
to the Company’s Form 10-K for the year ended December 31, 2007, filed on February 15, 2008 (File
No. 1-4717), is incorporated herein by reference as Exhibit 10.4.7.

Form of Restricted Shares Award Agreement (executive plan) under the Amended 1991 Plan, filed as
Exhibit 10.5.10 to the Company’s Form 10-K for the year ended December 31, 2007, filed on February 15, 2008
(File No. 1-4717), is incorporated herein by reference as Exhibit 10.4.8.

Employment Agreement, dated February 19, 2015, between KCSR and Patrick J. Ottensmeyer filed as Exhibit
10.9 to the Company’s Current Report on Form 8-K filed on February 23, 2015 (File No. 1-4717), is incorporated
herein by reference as Exhibit 10.5.

Kansas City Southern Executive Plan (Amended and Restated February 18, 2015), filed as Exhibit 10.7 to the
Company’s Current Report on Form 8-K filed on February 23, 2015 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.6.

Kansas City Southern Annual Incentive Plan, amended and restated effective as of January 1, 2015, filed as
Exhibit 10.1 to the Company’s Form 8-K filed on May 8, 2015 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.7.
English translation of concession title granted by the Secretaría de Comunicaciones y Transportes (“SCT”) in
favor of Ferrocarril del Noreste, S.A. de C.V. (“FNE”), dated December 2, 1996, filed as Exhibit 10.10 to the
Company's Form 10-K for the year ended December 31, 2011, filed on February 8, 2012 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.8.

English translation of amendment, dated February 12, 2001, filed as Exhibit 10.10.1 to the Company's Form 10-K
for the year ended December 31, 2011, filed on February 8, 2012 (File No. 1-4717), of concession title granted by
SCT in favor of KCSM, formerly known as FNE, December 2, 1996, is incorporated herein by reference as
Exhibit 10.8.1.

107

Exhibit

10.8.2

10.9

10.10

10.11

10.12

10.12.1

10.12.2

10.12.3

10.12.4

10.13

10.13.1

10.14

Description

English translation of amendment no. 2, dated November 22, 2006, filed as Exhibit 10.10.2 to the Company's
Form 10-K for the year ended December 31, 2011, filed on February 8, 2012 (File No. 1-4717), of concession
title granted by SCT in favor of KCSM, formerly known as FNE, December 2, 1996, amended February 12,
2001, is incorporated herein by reference as Exhibit 10.8.2.

Lease Agreement, originally dated June 26, 2001 and amended March 26, 2002, between KCSR and Broadway
Square Partners LLP, filed as Exhibit 10.34 to the Company’s Form 10-K for the year ended December 31, 2001,
filed on March 29, 2002 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.9.

Agreement to Forego Compensation between A. Edward Allinson and the Company, fully executed on March 30,
2001; Loan Agreement between A. Edward Allinson and the Company, fully executed on September 18, 2001;
and the Promissory Note executed by the Trustees of The A. Edward Allinson Irrevocable Trust Agreement, dated
June 4, 2001, Courtney Ann Arnot, A. Edward Allinson III and Bradford J. Allinson, Trustees, as Maker, and the
Company, as Holder, filed as Exhibit 10.36 to the Company’s Form 10-K for the year ended December 31, 2002,
filed on March 28, 2003 (File No. 1-4717), are incorporated herein by reference as Exhibit 10.10.

Agreement to Forego Compensation between Michael G. Fitt and the Company, fully executed on March 30,
2001; Loan Agreement between Michael G. Fitt and the Company, fully executed on September 7, 2001; and the
Promissory Note executed by the Trustees of The Michael G. and Doreen E. Fitt Irrevocable Insurance Trust,
Anne E. Skyes, Colin M-D. Fitt and Ian D.G. Fitt, Trustees, as Maker, and the Company, as Holder, filed as
Exhibit 10.37 to the Company’s Form 10-K for the year ended December 31, 2002, filed on March 28, 2003 (File
No. 1-4717), are incorporated herein by reference as Exhibit 10.11.

Transaction Agreement, dated December 1, 2005, among the Company, KCSR, Norfolk Southern Corporation
and The Alabama Great Southern Railroad Company (the “Transaction Agreement”), filed as Exhibit 10.46 to the
Company’s Form 10-K for the year ended December 31, 2005, filed on April 7, 2006 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.12.

Amendment No. 1 to the Transaction Agreement, dated January 17, 2006, filed as Exhibit 10.47 to the
Company’s Form 10-K for the year ended December 31, 2005, filed on April 7, 2006 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.12.1.

Amendment No. 2 to the Transaction Agreement, dated May 1, 2006, filed as Exhibit 10.2 to the Company’s
Form 10-Q for the quarter ended March 31, 2006, filed on May 9, 2006 (File No. 1-4717), is incorporated herein
by reference as Exhibit 10.12.2.

Limited Liability Company Agreement of Meridian Speedway, LLC, dated May 1, 2006, between the Alabama
Great Southern Railroad Company and the Company, filed as Exhibit 10.3 to the Company’s Form 10-Q for the
quarter ended March 31, 2006, filed on May 9, 2006 (File No. 1-4717), is incorporated herein by reference as
Exhibit 10.12.3.

Amendment No. 1 and Waiver to Limited Liability Company Agreement, dated August 12, 2011, among
Meridian Speedway, LLC, the Company, KCS Holdings, Inc. and The Alabama Great Southern Railroad
Company, filed as Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended September 30, 2011, filed on
October 21, 2011 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.12.4.

Participation Agreement, dated August 2, 2006, among KCSR, KCSR Trust 2006-1 (acting through Wilmington
Trust Company, as owner trustee) (“2006 Trust”), HSH Nordbank AG, New York Branch, Wells Fargo Bank
Northwest, National Association, and DVB Bank AG, filed as Exhibit 10.4 to the Company’s Form 10-Q for the
quarter ended September 30, 2006, filed on November 9, 2006 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.13.

Equipment Lease Agreement, dated August 2, 2006, between KCSR and the KCSR Trust 2006-1, filed as
Exhibit 10.41 to the Company’s Form 10-Q for the quarter ended September 30, 2006, filed on November 9,
2006 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.13.1.

Participation Agreement, dated September 27, 2007, among KCSR, KCSR 2007-1 Statutory Trust (acting through
U.S. Bank Trust National Association, as owner trustee) (“2007 Trust”), U.S. Bank Trust National Association,
GS Leasing (KCSR 2007-1) LLC, Wilmington Trust Company, and KfW, filed as Exhibit 10.51 to the
Company’s Form 10-K for the year ended December 31, 2007, filed on February 15, 2008 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.14.

10.14.1

Equipment Lease Agreement, dated September 27, 2007, between KCSR and the KCSR 2007-1 Statutory Trust,
filed as Exhibit 10.52 to the Company’s Form 10-K for the year ended December 31, 2007, filed on February 15,
2008 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.14.1.

108

Exhibit

10.15*

10.15.1*

10.15.2*

10.15.3*

10.15.4*

10.15.5*

10.15.6*

10.15.7*

10.15.8*

10.15.9*

Description

Kansas City Southern 2008 Stock Option and Performance Award Plan (Amended and Restated February 18,
2015) (the “2008 Plan”), filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February
23, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.15.

Form of Non-Qualified Stock Option Award Agreement under the 2008 Plan, filed as Exhibit 10.47.1 to the
Company’s Form 10-K for the year ended December 31, 2008, filed on February 17, 2009 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.15.1.

Form of Restricted Shares Award Agreement (cliff vesting) under the 2008 Plan, filed as Exhibit 10.47.2 to the
Company’s Form 10-K for the year ended December 31, 2008, filed on February 17, 2009 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.15.2.

Form of Restricted Shares Award Agreement (graded vesting) under the 2008 Plan, filed as Exhibit 10.47.3 to the
Company’s Form 10-K for the year ended December 31, 2008, filed on February 17, 2009 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.15.3.

Form of Restricted Shares Award Agreement under the 2008 Plan (applicable to restricted shares to be
purchased), filed as Exhibit 10.47.4 to the Company’s Form 10-K for the year ended December 31, 2008, filed on
February 17, 2009 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.15.4.

Form of Restricted Shares Award and Performance Shares Award Agreement under the 2008 Plan, filed as
Exhibit 10.47.5 to the Company’s Form 10-K for the year ended December 31, 2008, filed on February 17, 2009
(File No. 1-4717), is incorporated herein by reference as Exhibit 10.15.5.

Form of Restricted Shares Award Agreement (performance based vesting) under the 2008 Plan, filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 17, 2010 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.15.6.

Form of Restricted Shares Award Agreement (Standard Form) under the 2008 Plan, filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed on February 23, 2015 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.15.7.

Form of Restricted Shares Award Agreement (for use with the Executive Plan) under the 2008 Plan, filed as
Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 23, 2015 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.15.8.

Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (United States
Employees) under the 2008 Plan for the 2012 Long-Term Incentive Program, filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K filed on February 27, 2012 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.15.9.

10.15.10* Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (Non-United
States Employees) under the 2008 Plan for the 2012 Long-Term Incentive Program, filed as Exhibit 10.4 to the
Company's Current Report on Form 8-K filed on February 27, 2012 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.15.10.

10.15.11* Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (United States

Employees) under the 2008 Plan for the 2013 Long-Term Incentive Program, filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on February 27, 2013 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.15.11.

10.15.12* Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (Non-United
States Employees) under the 2008 Plan for the 2013 Long-Term Incentive Program, filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K filed on February 27, 2013 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.15.12.

10.15.13* Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (United States

Employees) under the 2008 Plan for the 2014 Long-Term Incentive Program, filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on February 26, 2014 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.15.13.

10.15.14* Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (Non-United
States Employees) under the 2008 Plan for the 2014 Long-Term Incentive Program, filed as Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on February 26, 2014 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.15.14.

109

Exhibit

10.15.15

10.15.16

10.15.17

10.16

10.16.1

10.17

10.18

10.19*

10.19.1*

10.20*

10.20.1*

10.21*

10.21.1*

10.21.2*

10.21.3*

10.22*

Description

Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (Employees)
under the 2008 Plan, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 23,
2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.15.15.

Form of Non-Qualified Stock Option, Restricted Share and Performance Share Award Agreement (Independent
Contractors) under the 2008 Plan, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
February 23, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.15.16.

Performance Share Award Agreement for David Starling dated February 18, 2015, under the 2008 Plan, filed as
Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 23, 2015 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.15.17.

Participation Agreement (KCSR 2008-1), dated as of April 1, 2008, among KCSR, KCSR 2008-1 Statutory Trust
(acting through U.S. Bank Trust National Association, not in its individual capacity, but solely as Owner Trustee)
(“KCSR 2008-1 Statutory Trust”), U.S. Bank Trust National Association (only in its individual capacity as
expressly provided therein), MetLife Capital, Limited Partnership (as Owners Participant), Wilmington
Trust Company (as Indenture Trustee) and Export Development Canada (as Loan Participant), filed as
Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2008, filed on April 24, 2008 (File
No. 1-4717), is incorporated herein by reference as Exhibit 10.16.

Equipment Lease Agreement (KCSR 2008-1), dated as of April 1, 2008, between KCSR 2008-1 Statutory Trust
(as Lessor) and KCSR (as Lessee), filed as Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended
March 31, 2008, filed on April 24, 2008 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.16.1.

Loan and Security Agreement, dated February 26, 2008, between KCSM and Export Development Canada, filed
as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2008, filed on April 24, 2008 (File
No. 1-4717), is incorporated herein by reference as Exhibit 10.17.

Loan Agreement, dated as of September 24, 2008, between KCSM and DVB Bank AG, filed as Exhibit 10.1 to
the Company’s Form 10-Q for the quarter ended September 30, 2008, filed on October 28, 2008 (File
No. 1-4717), is incorporated herein by reference as Exhibit 10.18.

English translation of the Employment Agreement, dated April 20, 2006, between Kansas City Southern de
México, S.A. de C.V. and José Guillermo Zozaya Delano, filed as Exhibit 10.4 to the Company’s Form 10-Q for
the quarter ended March 31, 2009, filed on April 30, 2009 (File No. 1-4717), is incorporated herein by reference
as Exhibit 10.19.

English translation of Amendment Agreement to the Individual Indefinite Employment Contract of April 20,
2006, dated May 27, 2009, between KCSM and José Guillermo Zozaya Delano, filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on June 2, 2009 (File No. 1-4717), is incorporated herein by
reference as Exhibit 10.19.1.

Employment Agreement, dated August 15, 2008, between KCSR and Michael W. Upchurch, filed as Exhibit 10.1
to the Company’s Current Report on Form 8-K, filed on October 22, 2008 (File No. 1-4717), is incorporated
herein by reference as Exhibit 10.20.

Amendment to Employment Agreement dated December 17, 2012, between KCSR and Michael W. Upchurch,
filed as Exhibit 10.28.1 to the Company’s Form 10-K for the year ended December 31, 2012, filed on February 4,
2013 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.20.1.

Employment Agreement, dated September 10, 2008, between KCSR and David Starling, filed as Exhibit 10.1 to
the Company’s Current Report on Form 8-K, filed on September 15, 2008 (File No. 1-4717), is incorporated
herein by reference as Exhibit 10.21.

Addendum to Employment Agreement, dated June 28, 2010, among the Company, KCSR and David L. Starling,
filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on June 29, 2010 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.21.1.

Amendment to Employment Agreement dated December 17, 2012, between KCSR and David L. Starling, filed as
Exhibit 10.29.2 to the Company’s Form 10-K for the year ended December 31, 2012, filed on February 4, 2013
(File No. 1-4717), is incorporated herein by reference as Exhibit 10.21.2.

Retention Agreement dated February 18, 2015, between the Company and David Starling, filed as Exhibit 10.8 to
the Company’s Current Report on Form 8-K filed on February 23, 2015 (File No. 1-4717), is incorporated herein
by reference as Exhibit 10.21.3.

Employment Agreement, dated September 28, 2009, between KCSR and Mary K. Stadler, filed as Exhibit 10.1 to
the Company’s Current Report on Form 8-K, filed on October 2, 2009 (File No. 1-4717), is incorporated herein
by reference as Exhibit 10.22.

110

Exhibit

10.22.1*

10.23

10.24

10.25

10.26

10.26.1

10.27

10.28

12.1

21.1

23.1

24.1

31.1

31.2

32.1

32.2

101

Description

Amendment to Employment Agreement dated December 17, 2012, between KCSR and Mary K. Stadler, filed as
Exhibit 10.30.1 to the Company’s Form 10-K for the year ended December 31, 2012, filed on February 4, 2013
(File No. 1-4717), is incorporated herein by reference as Exhibit 10.22.1.

Trackage Rights Agreement, dated February 9, 2010, between KCSM and Ferromex, filed as Exhibit 10.2 to the
Company’s Form 10-Q for the quarter ended March 31, 2010, filed on April 27, 2010 (File No. 1-4717), is
incorporated herein by reference as Exhibit 10.23.

Form of Loan Agreement between General Electric Capital Corporation and KCSM, dated September 1, 2011,
filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2011, filed on October 21,
2011 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.24.

Financing Agreement dated as of February 21, 2012, between The Kansas City Southern Railway Company and
the United States of America represented by the Secretary of Transportation acting through the Administrator of
the Federal Railroad Administration, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
February 22, 2012 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.25.

Financing Agreement between The Texas-Mexican Railway Company and the Federal Railroad Administration,
dated June 28, 2005, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed on August 15,
2005 (File No. 1-04717), are incorporated herein by reference as Exhibit 10.26.

Pledge Agreement between Mexrail, Inc. and the Federal Railroad Administration, and Guaranty of Mexrail, Inc.
in favor of the Federal Railroad Administration, filed as Exhibit 10.4 to the Company’s Quarterly Report on Form
10-Q, filed on August 15, 2005 (File No. 1-04717), are incorporated herein by reference as Exhibit 10.26.1.

Credit Agreement dated as of October 22, 2014, by and among KCSII, the Company, the other Guarantors, and
The Bank of Tokyo-Mitsubishi UFJ, Ltd, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on October 24, 2014 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.27.

Credit Agreement, dated December 9, 2015, among the Company, the guarantors party thereto, the various
financial institutions and other persons from time to time parties thereto as lenders, Bank of America, N.A., as
administrative agent, JPMorgan Chase Bank, N.A. and Citibank, N.A., as co-syndication agents and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC and Citigroup Global Markets Inc., as
joint lead arrangers and joint bookrunning managers, filed as exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on December 15, 2015 (File No. 1-4717), is incorporated herein by reference as Exhibit 10.28.

Computation of Ratio of Earnings to Fixed Charges

Subsidiaries of the Company

Consent of KPMG LLP, Independent Registered Public Accounting Firm, is attached to this Form 10-K as
Exhibit 23.1.

Power of Attorney (contained in the signature page herein).

Certification of David L Starling, Chief Executive Officer of the Company, is attached to this Form 10-K as
Exhibit 31.1.

Certification of Michael W. Upchurch, Chief Financial Officer of the Company, is attached to this Form 10-K as
Exhibit 31.2.

Certification of David L. Starling, Chief Executive Officer of the Company, furnished pursuant to 18 U.S.C.
Section 1350, is attached to this Form 10-K as Exhibit 32.1.

Certification of Michael W. Upchurch, Chief Financial Officer of the Company, furnished pursuant to 18 U.S.C.
Section 1350, is attached to this Form 10-K as Exhibit 32.2.

The following financial information from Kansas City Southern’s Annual Report on Form 10-K for the year
ended December 31, 2015, formatted in XBRL (Extensible Business Reporting Language) includes: (i)
Consolidated Statements of Income for the years ended December 31, 2015, 2014 and 2013, (ii) Consolidated
Statements of Comprehensive Income for the years ended December 31, 2015, 2014, and 2013, (iii) Consolidated
Balance Sheets as of December 31, 2015 and December 31, 2014, (iv) Consolidated Statements of Cash Flows
for the years ended December 31, 2015, 2014, and 2013, (v) Consolidated Statements of Changes in Equity for
the Three Years ended December 31, 2015, 2014, and 2013, and (vi) the Notes to Consolidated Financial
Statements.

* Management contract or compensatory plan or arrangement.

111

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Company has duly 

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Kansas City Southern

By:

/S/    DAVID L. STARLING        

David L. Starling
Chief Executive Officer and Director

January 29, 2016

POWER OF ATTORNEY

Know all people by these presents, that each person whose signature appears below constitutes and appoints David L. 
Starling and Michael W. Upchurch, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of 
substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any 
amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto, with the Securities and 
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and 
perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents 
and purposes as he or she might or could do in person, hereby confirming all that said attorneys-in-fact and agents or either of 
them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following 

persons on behalf of the Company and in the capacities indicated on January 29, 2016.

Signature

/S/    DAVID L. STARLING
David L. Starling

/S/    MICHAEL W. UPCHURCH

Michael W. Upchurch

/S/    MARY K. STADLER

Mary K. Stadler

/S/    ROBERT J. DRUTEN
Robert J. Druten

/S/    LU M. CÓRDOVA
Lu M. Córdova

/S/    HENRY R. DAVIS
Henry R. Davis

Title

Chief Executive Officer and Director.

Executive Vice President and
Chief Financial Officer (Principal Financial Officer).

Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer).

Chairman of the Board and Director.

Director.

Director.

112

  
  
  
  
  
  
  
Signature

/S/    ANTONIO O. GARZA, JR.
Antonio O. Garza, Jr.

/S/    THOMAS A. MCDONNELL
Thomas A. McDonnell

/S/    RODNEY E. SLATER
Rodney E. Slater

Title

Director.

Director.

Director.

113

  
  
  
  
Exhibit
12.1

21.1

23.1

31.1

31.2

32.1

32.2

101

Kansas City Southern

2015 Form 10-K Annual Report

Index to Exhibits

Document

Computation of Ratio of Earnings to Fixed Charges

Subsidiaries of the Company

Consent of KPMG LLP, Independent Registered Public Accounting Firm

Certification of David L. Starling pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Michael W. Upchurch pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of David L. Starling furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

Certification of Michael W. Upchurch furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002

The following financial information from Kansas City Southern’s Annual Report on Form 10-K for the year ended
December 31, 2015, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Consolidated
Statements of Income for the years ended December 31, 2015, 2014 and 2013, (ii) Consolidated Statements of
Comprehensive Income for the years ended December 31, 2015, 2014 and 2013, (iii) Consolidated Balance Sheets
as of December 31, 2015 and December 31, 2014, (iv) Consolidated Statements of Cash Flows for the years ended
December 31, 2015, 2014 and 2013, (v) Consolidated Statements of Changes in Equity for the three years ended
December 31, 2015, 2014 and 2013, and (vi) the Notes to Consolidated Financial Statements.

114

(This page intentionally left blank)

(This page intentionally left blank)

D I R E C T O R S   A N D   O F F I C E R S
D I R E C T O R S   A N D   O F F I C E R S

K A N S A S   C I T Y   S O U T H E R N   D I R E C T O R S

Lu M. Córdova (2, 4, 5)
  Chief Executive Officer 
  Corlund Industries, LLC
  Boulder, Colorado

Henry R. Davis (3, 4)
  President, Promotora, DAC, S.A. de C.V. 
  Mexico City, D.F.

Robert J. Druten (1, 3, 4)
  Chairman of the Board, Kansas City Southern
  Retired Executive Vice President  
  & Chief Financial Officer
  Hallmark Cards, Inc.
  Kansas City, Missouri

Terrence P. Dunn (2, 4)
  Retired President & Chief Executive Officer
  J.E. Dunn Construction Group, Inc.
  Kansas City, Missouri

Antonio O. Garza, Jr. (1, 5)
  Former U.S. Ambassador to Mexico 
  Partner, ViaNovo
  Counsel, White & Case, LLP
  Mexico City, D.F.

David Garza-Santos
  Chief Executive Officer
  MADISA
  Santa Catarina, N.L. Mexico

Thomas A. McDonnell (2, 4, 5) 
  Retired President & Chief Executive Officer
  Ewing Marion Kauffman Foundation
  Kansas City, Missouri

Rodney E. Slater (3, 4)
  Partner
  Squire Patton Boggs
  Washington, DC

David L. Starling (1)
  Chief Executive Officer
  Kansas City Southern
  Kansas City, Missouri

Committees of the Board: 

(1) Executive  

(2) Audit  

(3) Compensation and Organization  

(4) Nominating and Corporate Governance  

(5) Finance

K A N S A S   C I T Y   S O U T H E R N   O F F I C E R S

David L. Starling
  Chief Executive Officer

Patrick J. Ottensmeyer
  President 

Warren K. Erdman 
  Executive Vice President  
  Administration & Corporate  Affairs

Brian D. Hancock 
  Executive Vice President  
  & Chief Marketing Officer

Jeffrey M. Songer
  Executive Vice President  
  & Chief Operating Officer 

Michael W. Upchurch
  Executive Vice President 
  & Chief Financial Officer 

Mary K. Stadler
  Senior Vice President 
  & Chief Accounting Officer

Adam J. Godderz
  Vice President 
  & Corporate Secretary

Lora S. Cheatum 
  Senior Vice President 
  Human Resources 

Michael J. Naatz
  Senior Vice President  
  Operations Support 
  & Chief Information 
  Officer

William J. Wochner 
  Senior Vice President &
  Chief Legal Officer

Michael W. Cline
  Vice President Finance 
  & Treasurer

William H. Galligan
  Vice President 
  Investor Relations 

Daniel L. Hynek
  Vice President 
  International Taxes

Julie D. Powell
  Assistant Secretary 
  & Assistant Treasurer

Brian P. Steadman
  Assistant Treasurer

Kansas City Southern companies provide 
equal employment and advancement 
opportunities to qualified employees 
without regard to race, color, religion, 
gender, national origin, age, disability, 
or other categories protected by law. 
Kansas City Southern’s U.S. companies 
are also affirmative action employers.

This annual report is printed on 
recycled papers. The recycled paper 
industry is an important part of the 
market served by Kansas City Southern. 

Find Kansas City Southern 
on the internet at: 
http://www.kcsouthern.com

Securities Listed

  New York Stock Exchange
  Common Stock
  4% Preferred Stock
  Symbol KSU

Transfer Agent and Registrar

  Computershare
  P.O. Box 30170
  College Station, TX 77842-3170

Independent Registered Public 
Accounting Firm

  KPMG LLP
  1000 Walnut Street
  Suite 1000
  Kansas City, Missouri 64106

Annual Meeting of Stockholders
 3:00 P.M., May 5, 2016 
  Kansas City Southern 
  Grand Hall
  427 West 12th Street
  Kansas City, Missouri 64105

Corporate Offices

  427 West 12th Street
  Kansas City, Missouri 64105
  (816) 983-1303

  Mailing Address
  P.O. Box 219335
  Kansas City, MO 64121-9335

 
 
 
 
 
  
KANSAS CITY SOUTHERN
427 West 12th Street
Kansas City, Missouri 64105

www.KCSouthern.com

SKU #002CSN653C