Condensed Consolidating Financial Information

Pursuant to 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.

As of June 30, 2018, KCS, the parent, had outstanding $2,593.5 million senior notes due through 2048. The senior notes are unsecured obligations of KCS, and are also jointly and severally and fully and unconditionally guaranteed on an unsecured senior basis by The Kansas City Southern Railway Company (“KCSR”) and certain wholly-owned domestic subsidiaries of KCS (the “Guarantor Subsidiaries”).

As of June 30, 2018, KCSR had outstanding $2.9 million principal amount of senior notes due through 2045. The senior notes are unsecured obligations of KCSR, and are also jointly and severally and fully and unconditionally guaranteed on an unsecured senior basis by KCS and the Guarantor Subsidiaries.

The following condensed and consolidating financial information (in millions) of KCS, KCSR, the Guarantor Subsidiaries and the other KCS subsidiaries that are not guarantors (the "Non-Guarantor Subsidiaries") are being presented in order to meet the reporting requirements under Rule 3-10 of Regulation S-X. Pursuant to Rule 3-10(d) and (f) of Regulation S-X, separate financial statements for the Issuer, the Parent and the Guarantor Subsidiaries are not required to be filed with the SEC as the subsidiary debt issuer and the guarantors are directly or indirectly 100% owned by the Parent and the guarantees are full and unconditional and joint and several.

Condensed Consolidating Statements of Comprehensive Income



	Three Months Ended June 30, 2018
	Parent			KCSR			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Revenues	$	—		$	314.1		$	11.5	$	367.5		$	(10.7	)	$	682.4
Operating expenses	2.3			226.9			9.7		208.4			(10.7		)	436.6
Operating income (loss)	(2.3		)	87.2			1.8		159.1			—			245.8
Equity in net earnings (losses) of affiliates	125.3			(0.5		)	0.9		0.5			(125.2		)	1.0
Interest expense	(23.1		)	(17.8		)	—		(7.3		)	20.2			(28.0		)
Debt retirement costs	—			—			—		(2.2		)	—			(2.2		)
Foreign exchange loss	—			—			—		(21.0		)	—			(21.0		)
Other income, net	20.0			0.6			—		—			(20.1		)	0.5
Income before income taxes	119.9			69.5			2.7		129.1			(125.1		)	196.1
Income tax expense (benefit)	(28.3		)	12.6			0.9		62.2			—			47.4
Net income	148.2			56.9			1.8		66.9			(125.1		)	148.7
Less: Net income attributable to noncontrolling interest	—			—			—		0.5			—			0.5
Net income attributable to Kansas City Southern and subsidiaries	148.2			56.9			1.8		66.4			(125.1		)	148.2
Other comprehensive income (loss)	0.3			—			—		(1.2		)	1.2			0.3
Comprehensive income attributable to Kansas City Southern and subsidiaries	$	148.5		$	56.9		$	1.8	$	65.2		$	(123.9	)	$	148.5

Condensed Consolidating Statements of Comprehensive Income—(Continued)



	Three Months Ended June 30, 2017
	Parent			KCSR			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Revenues	$	—		$	306.5		$	12.0	$	347.7		$	(9.8	)	$	656.4
Operating expenses	3.0			217.6			10.1		196.2			(9.8		)	417.1
Operating income (loss)	(3.0		)	88.9			1.9		151.5			—			239.3
Equity in net earnings (losses) of affiliates	134.5			(0.2		)	0.6		2.5			(134.5		)	2.9
Interest expense	(20.1		)	(18.2		)	—		(9.2		)	22.5			(25.0		)
Debt retirement costs	—			—			—		—			—			—
Foreign exchange gain	—			—			—		14.2			—			14.2
Other income (expense), net	22.4			(0.3		)	—		—			(22.2		)	(0.1		)
Income before income taxes	133.8			70.2			2.5		159.0			(134.2		)	231.3
Income tax expense (benefit)	(0.6		)	27.2			0.9		69.1			—			96.6
Net income	134.4			43.0			1.6		89.9			(134.2		)	134.7
Less: Net income attributable to noncontrolling interest	—			—			—		0.3			—			0.3
Net income attributable to Kansas City Southern and subsidiaries	134.4			43.0			1.6		89.6			(134.2		)	134.4
Other comprehensive income (loss)	(1.8		)	—			—		0.8			(0.8		)	(1.8		)
Comprehensive income attributable to Kansas City Southern and subsidiaries	$	132.6		$	43.0		$	1.6	$	90.4		$	(135.0	)	$	132.6



	Six Months Ended June 30, 2018
	Parent			KCSR			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Revenues	$	—		$	615.9		$	20.4	$	704.3		$	(19.6	)	$	1,321.0
Operating expenses	3.5			452.7			17.9		402.0			(19.6		)	856.5
Operating income (loss)	(3.5		)	163.2			2.5		302.3			—			464.5
Equity in net earnings (losses) of affiliates	280.0			(0.7		)	1.7		1.1			(280.1		)	2.0
Interest expense	(44.4		)	(35.1		)	—		(14.2		)	40.2			(53.5		)
Debt retirement costs	—			—			—		(2.2		)	—			(2.2		)
Foreign exchange gain	—			—			—		6.8			—			6.8
Other income, net	39.6			0.3			—		0.5			(40.2		)	0.2
Income before income taxes	271.7			127.7			4.2		294.3			(280.1		)	417.8
Income tax expense (benefit)	(21.0		)	25.0			1.3		118.9			—			124.2
Net income	292.7			102.7			2.9		175.4			(280.1		)	293.6
Less: Net income attributable to noncontrolling interest	—			—			—		0.9			—			0.9
Net income attributable to Kansas City Southern and subsidiaries	292.7			102.7			2.9		174.5			(280.1		)	292.7
Other comprehensive income	6.0			—			—		—			—			6.0
Comprehensive income attributable to Kansas City Southern and subsidiaries	$	298.7		$	102.7		$	2.9	$	174.5		$	(280.1	)	$	298.7

Condensed Consolidating Statements of Comprehensive Income—(Continued)



	Six Months Ended June 30, 2017
	Parent			KCSR			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Revenues	$	—		$	595.7		$	23.1	$	666.3		$	(19.2	)	$	1,265.9
Operating expenses	4.1			430.5			19.8		380.7			(19.2		)	815.9
Operating income (loss)	(4.1		)	165.2			3.3		285.6			—			450.0
Equity in net earnings (losses) of affiliates	280.6			(0.3		)	1.2		6.0			(280.6		)	6.9
Interest expense	(40.7		)	(36.9		)	—		(18.3		)	46.2			(49.7		)
Debt retirement costs	—			—			—		—			—			—
Foreign exchange gain	—			—			—		61.0			—			61.0
Other income, net	45.9			0.8			—		0.6			(46.3		)	1.0
Income before income taxes	281.7			128.8			4.5		334.9			(280.7		)	469.2
Income tax expense	0.7			49.8			1.9		135.2			—			187.6
Net income	281.0			79.0			2.6		199.7			(280.7		)	281.6
Less: Net income attributable to noncontrolling interest	—			—			—		0.6			—			0.6
Net income attributable to Kansas City Southern and subsidiaries	281.0			79.0			2.6		199.1			(280.7		)	281.0
Other comprehensive income (loss)	(1.0		)	—			—		2.1			(2.1		)	(1.0		)
Comprehensive income attributable to Kansas City Southern and subsidiaries	$	280.0		$	79.0		$	2.6	$	201.2		$	(282.8	)	$	280.0

Condensed Consolidating Balance Sheets



	June 30, 2018
	Parent		KCSR		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated KCS
Assets:
Current assets	$	558.4	$	205.8	$	6.0	$	316.8	$	(559.2	)	$	527.8
Investments	—		3.9		2.1		39.6		—			45.6
Investments in consolidated subsidiaries	4,590.5		5.8		187.1		—		(4,783.4		)	—
Property and equipment (including concession assets), net	—		4,385.7		167.8		4,047.9		(5.7		)	8,595.7
Other assets	2,334.6		61.6		—		259.5		(2,561.7		)	94.0
Total assets	$	7,483.5	$	4,662.8	$	363.0	$	4,663.8	$	(7,910.0	)	$	9,263.1
Liabilities and equity:
Current liabilities	$	236.4	$	469.8	$	86.4	$	209.0	$	(560.7	)	$	440.9
Long-term debt	2,561.2		1,616.0		—		1,044.5		(2,539.4		)	2,682.3
Deferred income taxes	—		749.3		85.0		210.0		(23.5		)	1,020.8
Other liabilities	8.3		70.2		0.2		44.4		(0.2		)	122.9
Stockholders’ equity	4,677.6		1,757.5		191.4		2,837.3		(4,786.2		)	4,677.6
Noncontrolling interest	—		—		—		318.6		—			318.6
Total liabilities and equity	$	7,483.5	$	4,662.8	$	363.0	$	4,663.8	$	(7,910.0	)	$	9,263.1

Condensed Consolidating Balance Sheets—(Continued)



	December 31, 2017
	Parent			KCSR		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated KCS
Assets:
Current assets	$	292.0		$	214.1	$	8.8	$	475.5	$	(310.3	)	$	680.1
Investments	—			3.9		—		40.7		—			44.6
Investments in consolidated subsidiaries	4,462.4			7.4		182.2		—		(4,652.0		)	—
Property and equipment (including concession assets), net	—			4,283.2		171.6		3,954.9		(5.9		)	8,403.8
Other assets	2,159.6			46.8		—		252.5		(2,388.7		)	70.2
Total assets	$	6,914.0		$	4,555.4	$	362.6	$	4,723.6	$	(7,356.9	)	$	9,198.7
Liabilities and equity:
Current liabilities	$	277.9		$	578.7	$	94.9	$	332.0	$	(311.8	)	$	971.7
Long-term debt	2,066.8			1,517.2		—		1,040.3		(2,388.8		)	2,235.5
Deferred income taxes	(7.1		)	734.8		84.0		177.0		(1.5		)	987.2
Other liabilities	13.5			70.0		0.3		55.1		—			138.9
Stockholders’ equity	4,562.9			1,654.7		183.4		2,802.7		(4,654.8		)	4,548.9
Noncontrolling interest	—			—		—		316.5		—			316.5
Total liabilities and equity	$	6,914.0		$	4,555.4	$	362.6	$	4,723.6	$	(7,356.9	)	$	9,198.7

Condensed Consolidating Statements of Cash Flows



	Six Months Ended June 30, 2018
	Parent			KCSR			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Operating activities:
Net cash provided	$	132.3		$	164.7		$	0.2		$	271.7		$	(143.1	)	$	425.8
Investing activities:
Capital expenditures	—			(116.0		)	(0.1		)	(151.2		)	—			(267.3		)
Purchase or replacement of equipment under operating leases	—			(88.3		)	—			(10.6		)	—			(98.9		)
Property investments in MSLLC	—			—			—			(20.4		)	—			(20.4		)
Investments in and advances to affiliates	(5.2		)	—			(5.2		)	(4.3		)	8.4			(6.3		)
Proceeds from repayment of loans to affiliates	3,766.8			—			—			125.0			(3,891.8		)	—
Loans to affiliates	(3,841.9		)	—			—			(125.0		)	3,966.9			—
Proceeds from disposal of property	—			3.0			—			2.7			—			5.7
Other investing activities	—			2.2			—			0.8			—			3.0
Net cash used	(80.3		)	(199.1		)	(5.3		)	(183.0		)	83.5			(384.2		)
Financing activities:
Proceeds from short-term borrowings	3,955.0			—			—			—			—			3,955.0
Repayment of short-term borrowings	(4,303.1		)	—			—			—			—			(4,303.1		)
Proceeds from issuance of long-term debt	499.4			—			—			—			—			499.4
Repayment of long-term debt	—			(1.8		)	(0.1		)	(74.1		)	—			(76.0		)
Debt issuance and retirement costs paid	(6.2		)	—			—			(1.8		)	—			(8.0		)
Dividends paid	(74.1		)	—			—			(143.1		)	143.1			(74.1		)
Shares repurchased	(108.5		)	—			—			—			—			(108.5		)
Proceeds from loans from affiliates	125.0			3,791.9			—			50.0			(3,966.9		)	—
Repayment of loans from affiliates	(125.0		)	(3,766.8		)	—			—			3,891.8			—
Contribution from affiliates	—			—			5.2			3.2			(8.4		)	—
Other financing activities	0.7			—			—			—			—			0.7
Net cash provided (used)	(36.8		)	23.3			5.1			(165.8		)	59.6			(114.6		)
Cash and cash equivalents:
Net increase (decrease)	15.2			(11.1		)	—			(77.1		)	—			(73.0		)
At beginning of year	0.7			17.6			—			115.8			—			134.1
At end of period	$	15.9		$	6.5		$	—		$	38.7		$	—		$	61.1

Condensed Consolidating Statements of Cash Flows—(Continued)



	Six Months Ended June 30, 2017
	Parent			KCSR			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated KCS
Operating activities:
Net cash provided	$	11.1		$	250.0		$	0.1		$	160.7		$	(5.0	)	$	416.9
Investing activities:
Capital expenditures	—			(186.5		)	—			(98.9		)	—			(285.4		)
Purchase or replacement of equipment under operating leases	—			(21.9		)	—			—			—			(21.9		)
Property investments in MSLLC	—			—			—			(19.7		)	—			(19.7		)
Investment in and advances to affiliates	(0.3		)	—			(0.3		)	(6.6		)	0.6			(6.6		)
Proceeds from repayment of loans to affiliates	5,962.8			—			—			—			(5,962.8		)	—
Loans to affiliates	(5,901.5		)	—			—			—			5,901.5			—
Proceeds from disposal of property	—			4.4			—			1.1			—			5.5
Other investing activities	—			(10.4		)	—			1.1			—			(9.3		)
Net cash provided (used)	61.0			(214.4		)	(0.3		)	(123.0		)	(60.7		)	(337.4		)
Financing activities:
Proceeds from short-term borrowings	5,901.5			—			—			—			—			5,901.5
Repayment of short-term borrowings	(5,781.9		)	—			—			—			—			(5,781.9		)
Proceeds from issuance of long-term debt	—			—			—			—			—			—
Repayment of long-term debt	—			(1.7		)	(0.1		)	(10.9		)	—			(12.7		)
Debt issuance and retirement costs paid	—			—			—			—			—			—
Dividends paid	(70.3		)	—			—			(5.0		)	5.0			(70.3		)
Shares repurchased	(120.4		)	—			—			—			—			(120.4		)
Proceeds from loans from affiliates	—			5,901.5			—			—			(5,901.5		)	—
Repayment of loans from affiliates	—			(5,962.8		)	—			—			5,962.8			—
Contribution from affiliates	—			—			0.3			0.3			(0.6		)	—
Other financing activities	—			—			—			—			—			—
Net cash provided (used)	(71.1		)	(63.0		)	0.2			(15.6		)	65.7			(83.8		)
Cash and cash equivalents:
Net increase (decrease)	1.0			(27.4		)	—			22.1			—			(4.3		)
At beginning of year	0.2			32.6			—			137.8			—			170.6
At end of period	$	1.2		$	5.2		$	—		$	159.9		$	—		$	166.3