Condensed Consolidating Financial Information

As discussed in Note 10, at December 31, 2014, KCSR has outstanding $450.0 million principal amount of 4.30% Senior Notes due May 15, 2043 and $200.0 million principal amount of 3.85% Senior Notes due November 15, 2023, 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. KCSR filed a registration statement on Form S-4 with the Securities and Exchange Commission (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 accompanying condensed consolidating financial information (in millions) pursuant to SEC Regulation S-X Rule 3-10 “Financial statements of guarantors and issuers of guaranteed securities registered or being registered.”

Condensed Consolidating Statements of Comprehensive Income



	2014
	Parent			KCSR			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Revenues	$	—		$	1,215.8		$	48.7	$	1,353.7		$	(41.1	)	$	2,577.1
Operating expenses	7.6			881.6			41.8		879.1			(42.1		)	1,768.0
Operating income (loss)	(7.6		)	334.2			6.9		474.6			1.0			809.1
Equity in net earnings (losses) of unconsolidated affiliates	476.7			(0.1		)	5.5		18.9			(479.9		)	21.1
Interest expense	(0.1		)	(83.3		)	—		(39.6		)	50.2			(72.8		)
Debt retirement costs	—			(2.7		)	—		(3.9		)	—			(6.6		)
Foreign exchange loss	—			—			—		(35.5		)	—			(35.5		)
Other income (expense), net	50.1			0.2			—		(1.2		)	(51.3		)	(2.2		)
Income before income taxes	519.1			248.3			12.4		413.3			(480.0		)	713.1
Income tax expense	16.5			94.7			4.4		93.2			—			208.8
Net income	502.6			153.6			8.0		320.1			(480.0		)	504.3
Less: Net income attributable to noncontrolling interest	—			—			1.7		—			—			1.7
Net income attributable to Kansas City Southern and subsidiaries	502.6			153.6			6.3		320.1			(480.0		)	502.6
Other comprehensive income (loss)	(1.2		)	0.1			—		(1.8		)	1.7			(1.2		)
Comprehensive income attributable to Kansas City Southern and subsidiaries	$	501.4		$	153.7		$	6.3	$	318.3		$	(478.3	)	$	501.4

Condensed Consolidating Statements of Comprehensive Income—(Continued)



	2013
	Parent			KCSR			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Revenues	$	—		$	1,115.0		$	42.6		$	1,251.9		$	(40.2	)	$	2,369.3
Operating expenses	4.8			829.6			39.0			800.1			(42.8		)	1,630.7
Operating income (loss)	(4.8		)	285.4			3.6			451.8			2.6			738.6
Equity in net earnings of unconsolidated affiliates	318.3			1.1			6.3			15.7			(322.6		)	18.8
Interest expense	(0.1		)	(68.5		)	0.1			(59.3		)	47.2			(80.6		)
Debt retirement costs	—			(1.5		)	—			(117.7		)	—			(119.2		)
Foreign exchange loss	—			(1.3		)	—			(3.9		)	—			(5.2		)
Other income (expense), net	44.6			5.1			(0.1		)	(0.6		)	(49.8		)	(0.8		)
Income before income taxes	358.0			220.3			9.9			286.0			(322.6		)	551.6
Income tax expense	17.6			81.2			2.9			96.6			—			198.3
Net income	340.4			139.1			7.0			189.4			(322.6		)	353.3
Less: Net income attributable to noncontrolling interest	—			—			1.9			—			—			1.9
Net income attributable to Kansas City Southern and subsidiaries	340.4			139.1			5.1			189.4			(322.6		)	351.4
Other comprehensive income (loss)	0.4			0.5			—			(0.1		)	(0.4		)	0.4
Comprehensive income attributable to Kansas City Southern and subsidiaries	$	340.8		$	139.6		$	5.1		$	189.3		$	(323.0	)	$	351.8

Condensed Consolidating Statements of Comprehensive Income—(Continued)



	2012
	Parent			KCSR			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Revenues	$	—		$	1,079.7		$	29.9		$	1,164.7		$	(35.7	)	$	2,238.6
Operating expenses	4.2			805.0			34.0			717.7			(38.2		)	1,522.7
Operating income (loss)	(4.2		)	274.7			(4.1		)	447.0			2.5			715.9
Equity in net earnings of unconsolidated affiliates	218.9			2.6			6.6			15.5			(224.3		)	19.3
Interest expense	(0.1		)	(65.0		)	—			(88.2		)	52.9			(100.4		)
Debt retirement costs	—			(19.6		)	—			(0.5		)	—			(20.1		)
Foreign exchange gain	—			—			—			2.7			—			2.7
Other income (expense), net	46.5			11.7			—			(128.5		)	69.3			(1.0		)
Income before income taxes	261.1			204.4			2.5			248.0			(99.6		)	616.4
Income tax expense (benefit)	8.4			74.4			(0.2		)	154.4			—			237.0
Net income	252.7			130.0			2.7			93.6			(99.6		)	379.4
Less: Net income attributable to noncontrolling interest	—			—			2.1			—			—			2.1
Net income attributable to Kansas City Southern and subsidiaries	252.7			130.0			0.6			93.6			(99.6		)	377.3
Other comprehensive income (loss)	(0.2		)	(0.6		)	—			0.9			(0.3		)	(0.2		)
Comprehensive income attributable to Kansas City Southern and subsidiaries	$	252.5		$	129.4		$	0.6		$	94.5		$	(99.9	)	$	377.1

Condensed Consolidating Balance Sheets



	December 31, 2014
	Parent			KCSR			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated KCS
Assets:
Current assets	$	2.7		$	281.7		$	6.0	$	562.5	$	(34.6	)	$	818.3
Investments	—			3.9			—		32.5		—			36.4
Investments in consolidated subsidiaries	2,616.0			(4.3		)	471.3		—		(3,083.0		)	—
Property and equipment (including concession assets), net	—			3,385.5			193.3		3,575.9		—			7,154.7
Other assets	1.6			45.2			—		34.8		—			81.6
Total assets	$	2,620.3		$	3,712.0		$	670.6	$	4,205.7	$	(3,117.6	)	$	8,091.0
Liabilities and equity:
Current liabilities	$	(1,156.0	)	$	1,484.7		$	115.6	$	489.1	$	(34.6	)	$	898.8
Long-term debt	0.2			701.0			0.2		1,139.6		—			1,841.0
Deferred income taxes	7.3			835.8			132.0		181.2		—			1,156.3
Other liabilities	3.7			94.4			0.7		32.0		—			130.8
Stockholders’ equity	3,765.1			596.1			113.5		2,363.8		(3,083.0		)	3,755.5
Noncontrolling interest	—			—			308.6		—		—			308.6
Total liabilities and equity	$	2,620.3		$	3,712.0		$	670.6	$	4,205.7	$	(3,117.6	)	$	8,091.0

Condensed Consolidating Balance Sheets—(Continued)



	December 31, 2013
	Parent			KCSR			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated KCS
Assets:
Current assets	$	2.6		$	403.0		$	8.8	$	560.1	$	(32.1	)	$	942.4
Investments	—			9.6			—		31.5		—			41.1
Investments in consolidated subsidiaries	2,154.6			(2.1		)	461.8		—		(2,614.3		)	—
Property and equipment (including concession assets), net	0.1			2,780.4			198.6		3,377.2		—			6,356.3
Other assets	1.5			50.9			—		43.2		—			95.6
Total assets	$	2,158.8		$	3,241.8		$	669.2	$	4,012.0	$	(2,646.4	)	$	7,435.4
Liabilities and equity:
Current liabilities	$	(1,216.5	)	$	1,580.6		$	130.7	$	267.9	$	(32.1	)	$	730.6
Long-term debt	0.2			704.3			0.2		1,152.2		—			1,856.9
Deferred income taxes	(11.7		)	719.8			127.6		208.9		—			1,044.6
Other liabilities	6.6			92.0			0.7		27.5		(0.1		)	126.7
Stockholders’ equity	3,380.2			145.1			104.0		2,355.5		(2,614.2		)	3,370.6
Noncontrolling interest	—			—			306.0		—		—			306.0
Total liabilities and equity	$	2,158.8		$	3,241.8		$	669.2	$	4,012.0	$	(2,646.4	)	$	7,435.4

Condensed Consolidating Statements of Cash Flows



	2014
	Parent			KCSR			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Operating activities:
Net cash provided	$	415.7		$	306.6		$	2.1		$	495.9		$	(314.3	)	$	906.0
Investing activities:
Capital expenditures	—			(477.8		)	(1.7		)	(190.2		)	1.5			(668.2		)
Purchase or replacement of equipment under operating leases	—			(203.6		)	—			(98.5		)	—			(302.1		)
Property investments in MSLLC	—			—			—			(26.7		)	—			(26.7		)
Contribution to consolidated affiliates	(299.6		)	—			—			—			299.6			—
Other investing activities	(1.0		)	9.7			(1.1		)	5.8			0.7			14.1
Net cash used	(300.6		)	(671.7		)	(2.8		)	(309.6		)	301.8			(982.9		)
Financing activities:
Proceeds from short-term borrowings	—			15,068.8			—			300.0			—			15,368.8
Repayment of short-term borrowings	—			(14,920.2		)	—			—			—			(14,920.2		)
Proceeds from issuance of long-term debt	—			175.0			—			—			—			175.0
Repayment of long-term debt	—			(423.5		)	(0.1		)	(84.4		)	—			(508.0		)
Dividends paid	(116.6		)	—			—			(314.3		)	314.3			(116.6		)
Contribution from affiliates	—			299.3			1.1			1.4			(301.8		)	—
Other financing activities	1.3			(1.4		)	—			(3.5		)	—			(3.6		)
Net cash provided (used)	(115.3		)	198.0			1.0			(100.8		)	12.5			(4.6		)
Cash and cash equivalents:
Net increase (decrease)	(0.2		)	(167.1		)	0.3			85.5			—			(81.5		)
At beginning of year	0.4			196.1			0.2			232.8			—			429.5
At end of year	$	0.2		$	29.0		$	0.5		$	318.3		$	—		$	348.0

Condensed Consolidating Statements of Cash Flows—(Continued)



	2013
	Parent			KCSR			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Operating activities:
Net cash provided	$	70.7		$	272.2		$	2.6		$	463.8		$	(11.0	)	$	798.3
Investing activities:
Capital expenditures	—			(417.4		)	(2.0		)	(175.8		)	0.4			(594.8		)
Purchase or replacement of equipment under operating leases	—			(130.9		)	—			(80.9		)	—			(211.8		)
Property investments in MSLLC	—			—			—			(31.6		)	—			(31.6		)
Proceeds from repayment of loans to affiliates	—			181.4			—			—			(181.4		)	—
Loans to affiliates	—			(69.5		)	—			—			69.5			—
Other investing activities	(4.9		)	(5.1		)	(1.1		)	10.8			5.2			4.9
Net cash used	(4.9		)	(441.5		)	(3.1		)	(277.5		)	(106.3		)	(833.3		)
Financing activities:
Proceeds from issuance of long-term debt	—			687.6			—			1,230.8			—			1,918.4
Repayment of long-term debt	—			(344.3		)	(0.1		)	(998.8		)	—			(1,343.2		)
Debt costs	—			(7.5		)	—			(110.3		)	—			(117.8		)
Dividends paid	(71.2		)	—			—			(11.0		)	11.0			(71.2		)
Proceeds from loans from affiliates	—			—			—			69.5			(69.5		)	—
Repayment of loans from affiliates	—			—			—			(181.4		)	181.4			—
Other financing activities	5.7			—			0.7			4.9			(5.6		)	5.7
Net cash provided (used)	(65.5		)	335.8			0.6			3.7			117.3			391.9
Cash and cash equivalents:
Net increase	0.3			166.5			0.1			190.0			—			356.9
At beginning of year	0.1			29.6			0.1			42.8			—			72.6
At end of year	$	0.4		$	196.1		$	0.2		$	232.8		$	—		$	429.5

Condensed Consolidating Statements of Cash Flows—(Continued)



	2012
	Parent			KCSR			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Operating activities:
Net cash provided	$	53.3		$	236.4		$	2.3		$	389.2		$	(8.0	)	$	673.2
Investing activities:
Capital expenditures	—			(281.2		)	(2.1		)	(233.8		)	—			(517.1		)
Purchase or replacement of equipment under operating leases	—			(19.7		)	—			(3.2		)	—			(22.9		)
Property investments in MSLLC	—			—			—			(35.2		)	—			(35.2		)
Proceeds from repayment of loans to affiliates	—			87.2			—			—			(87.2		)	—
Other investing activities	(0.5		)	5.8			(0.5		)	17.5			1.0			23.3
Net cash used	(0.5		)	(207.9		)	(2.6		)	(254.7		)	(86.2		)	(551.9		)
Financing activities:
Proceeds from issuance of long-term debt	—			329.6			—			—			—			329.6
Repayment of long-term debt	—			(356.2		)	(0.1		)	(19.6		)	—			(375.9		)
Debt costs	—			(21.3		)	—			(0.8		)	—			(22.1		)
Dividends paid	(86.1		)	—			—			(8.0		)	8.0			(86.1		)
Repayment of loans from affiliates	—			—			—			(87.2		)	87.2			—
Other financing activities	33.4			—			0.5			0.5			(1.0		)	33.4
Net cash provided (used)	(52.7		)	(47.9		)	0.4			(115.1		)	94.2			(121.1		)
Cash and cash equivalents:
Net increase (decrease)	0.1			(19.4		)	0.1			19.4			—			0.2
At beginning of year	—			49.0			—			23.4			—			72.4
At end of year	$	0.1		$	29.6		$	0.1		$	42.8		$	—		$	72.6