SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 25, 2002
KANSAS CITY SOUTHERN INDUSTRIES, INC.
-------------------------------------
(Exact name of company as specified in its charter)
DELAWARE 1-4717 44-0663509
--------------------- ------------- -------------------
(State or other jurisdiction (Commission file (IRS Employer
of incorporation) number) Identification Number)
427 West 12th Street, Kansas City, Missouri 64105
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code:
(816) 983 - 1303
114 West 11th Street, Kansas City, Missouri
(Former name or former address if changed since last report)
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No. Document
(99) Additional Exhibits
99.1 Press Release issued by Kansas
City Southern Industries, Inc.
dated April 25, 2002 entitled,
"Kansas City Southern's First
Quarter 2002 Earnings Per Share
Nearly Doubles Compared to Prior
Year First Quarter", is attached
hereto as Exhibit 99.1
99.2 The following schedules are
attached hereto as Exhibit 99.2
- Kansas City Southern Railway
Operating Statements, Kansas
City Southern Railway
Carloadings by Commodity, Kansas
City Southern Industries, Inc.
Consolidated Balance Sheets
Item 9. Regulation FD Disclosure
Kansas City Southern Industries, Inc. ("KCSI" or "Company") is furnishing under
Item 9 of this Current Report on Form 8-K the information included as Exhibit
99.1 and Exhibit 99.2 of this report. Exhibit 99.1 is the Company's press
release, dated April 25, 2002, announcing KCSI's first quarter 2002 operating
results. Included in Exhibit 99.2 are schedules regarding certain financial
information discussed at the Company's first quarter 2002 conference call.
The information included in this Current Report on Form 8-K, including Exhibit
99.1 and Exhibit 99.2, is furnished pursuant to Item 9 and shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that Section.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
Kansas City Southern Industries, Inc.
Date: May 1, 2002 By: /s/ Louis G. Van Horn
----------------------------
Louis G. Van Horn
Vice President and Comptroller
(Principal Accounting Officer)
EXHIBIT 99.1
Kansas City Southern Industries, Inc.
427 West 12th Street
Kansas City, Missouri 64105
Date: April 25, 2002
Media Contact: William H. Galligan 816/983-1551
William.h.galligan@kcsr.com
Kansas City Southern's First Quarter 2002 Earnings Per Share Nearly Doubles
Compared to Prior Year First Quarter
Earnings Analysis & Commentary
Kansas City Southern Industries, Inc. ("KCSI" or the "Company") reported a $5.8
million increase in net income for the first quarter of 2002 to $11.7 million
(19(cent) per diluted share) compared to $5.9 million (10(cent) per diluted
share) for the first quarter of 2001. This quarter to quarter increase resulted
primarily from a $8.8 million decline in operating expenses, a $3.9 decrease in
interest expense, a $3.4 million increase in other income and a $4.4 million
gain realized on the sale of Mexrail, Inc. ("Mexrail"- a former 49% owned
unconsolidated affiliate) to KCSI's affiliate in Mexico, TFM, S.A. de C.V.
("TFM"). These factors, which led to an increase in net income, were reduced by
a $1.5 million decline in revenue, a $6.3 million decrease in equity in net
earnings of unconsolidated affiliates and a $7.3 million increase in the income
tax provision. Net income for the first quarter of 2001 also includes a $0.4
million charge relating to the implementation of Statement of Financial
Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133"). This charge is presented as a cumulative effect of an
accounting change for the quarter ended March 31, 2001.
Diluted earnings per share information is as follows:
First Quarter
------------------
2002 2001
-------- --------
U.S. operations $ 0.18 $ 0.00
Grupo TFM and PCRC (including associated Grupo
TFM interest) 0.01 0.10
-------- --------
Income before cumulative effect of accounting
change 0.19 0.10
Cumulative effect of accounting change, net of
income tax - 0.00
-------- --------
Diluted earnings per share - Net income $ 0.19 $ 0.10
======== ========
Domestic operating income of $13.4 million for the quarter ended March 31, 2002
was more than double the $6.1 million reported for the first quarter of 2001 as
lower operating expenses of $8.8 million offset a $1.5 million decline in
revenue quarter to quarter. First quarter revenue from KCSI's principal
subsidiary, The Kansas City Southern Railway Company ("KCSR") increased slightly
compared with the prior year quarter due to increases in coal, agriculture and
minerals and paper and forest products that were mostly mitigated by declines in
chemical and petroleum products, intermodal and automotive revenues and other
non-carload revenue. Revenue from other subsidiaries was approximately $1.7
million lower quarter to quarter due to demand driven volume declines. Lower
costs and expenses at KCSR resulted mostly from declines in costs for salaries
and wages, fuel, car hire and casualties. The decline in costs for salaries and
wages reflects improved operational efficiency as well as the benefits from the
cost reduction strategy implemented at the end of March 2001, that included a 6%
reduction of employees compared to the first quarter of 2001. Fuel costs were
substantially lower due to an approximate $0.20 decline in the average price per
gallon arising
from market conditions and the Company's forward purchase position at December
31, 2001. Casualty expenses were lower due to the absence of significant
derailment and personal injury casualty events experienced during the first
quarter of 2001. These factors contributed to a lower operating ratio for KCSR,
which improved to 87.2% for the quarter ended March 31, 2002 compared to 94.0%
for the same period in 2001.
Equity in earnings from Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.
("Grupo TFM") declined approximately $6.3 million quarter to quarter. For the
quarter ended March 31, 2001, however, equity in earnings reflected the
Company's proportionate share ($9.1 million) of the income recorded by Grupo TFM
relating to the reversion of certain concession assets to the Mexican
government. Exclusive of this 2001 reversion income, KCSI's first quarter 2002
equity in earnings from Grupo TFM increased $2.8 million compared to last year's
first quarter. Grupo TFM's first quarter 2002 revenues improved 1% compared to
the first quarter of 2001 and operating expenses were slightly lower quarter to
quarter. Under International Accounting Standards ("IAS"), Grupo TFM's first
quarter 2002 operating ratio was 77.3% versus 79.8% in the same 2001 period.
First quarter 2002 results for Grupo TFM include a $3.5 million deferred income
tax benefit (calculated under accounting principles generally accepted in the
United States of America -"U.S. GAAP") compared to a deferred income tax expense
of $21.7 million in the first quarter of 2001. This variance was caused by an
income tax provision on the reversion income recorded in the first quarter of
2001, as well as fluctuations in the peso exchange rate and inflation. Also
contributing to Grupo TFM's deferred income tax calculation in the first quarter
of 2002 was an approximate $1.7 million expense arising from the change in the
Mexican corporate income tax rate, which is being reduced from 35% to 32% in one
percent increments beginning in 2003. Under U.S. GAAP, the impact of this 3%
rate reduction was recognized for deferred income tax purposes in the first
quarter of 2002. After consideration of minority interest, this rate change
resulted in a $0.5 million reduction in the Company's equity in earnings of
Grupo TFM during the first quarter of 2002. The Company reports its equity in
Grupo TFM under U.S. GAAP while Grupo TFM reports under IAS.
KCSI's consolidated first quarter 2002 interest expense decreased $3.9 million
(26%) from the prior year quarter as a result of lower interest rates and lower
overall debt balances. Other items affecting the Company's first quarter results
include a gain on the sale of Mexrail of approximately $4.4 million and a $3.3
million gain on the sale of non-operating property. The gain from the sale of
Mexrail is presented as a separate item in the accompanying financial statements
and the gain on non-operating property is reflected as other income for the
quarter ended March 31, 2002.
BUSINESS ANALYSIS AND OUTLOOK FROM THE CHAIRMAN
Michael R. Haverty, KCSI Chairman, President and Chief Executive Officer said,
"we continue to make progress toward our goal of improving domestic
profitability and reducing corporate debt. Despite the impact of the continuing
lagging economy, KCS was able to maintain its revenue during the first quarter
of 2002 and more than double its operating income versus the comparable prior
year quarter. Also, we believe the recently announced marketing agreement with
BNSF will provide important opportunities to grow our revenue base, particularly
in the chemical, grain and forest product markets.
The Company has been aggressively reducing its debt balance since the spin-off
of Stilwell Financial Inc. in July 2000. Our corporate debt balance at the date
of the spin-off was approximately $682 million. This compares to a debt balance
of approximately $658 million at December 31, 2001 and approximately $628
million at March 31, 2002. Additionally, since the end of March, we have further
reduced our debt balance by approximately $25 million through additional
payments. This trend has been made possible through focused cost control, sound
cash management and the sale of various assets, including our investment in
Mexrail
to TFM in March 2002. We will continue to place a high priority on debt
reduction and are exploring options for furthering this objective.
We are pleased that the dispute with our Mexican partner, Grupo TMM, was
resolved in a manner satisfactory for both parties. We believe that the Mexrail
transaction will help promote better operational efficiency and provide more
synergistic opportunities for the NAFTA rail network.
Grupo TFM continues to contribute solid results in a weak economy. We are more
confident than ever with the long-term growth prospects of this rail franchise.
Through its unique growth story, Grupo TFM has become one of the rail
transportation leaders in North America and comprises a significant part of the
value of our NAFTA rail network. We, along with our partner, Grupo TMM, are
continuing to pursue the purchase of the Mexican government's 24.6% ownership in
Grupo TFM. Our call option expires on July 31, 2002 and we expect this
transaction to be completed during the second quarter.
2002 is a year of renewed spirit and attitude for KCS. During early April, we
moved to a new corporate headquarters building in downtown Kansas City,
Missouri, just blocks away from the old address that housed us for approximately
75 years. Not only does this new facility provide our employees with a modern
and functional work environment, it symbolizes a new era for KCS. We are nearly
two years removed from the spin-off of the financial services companies into
Stilwell Financial and, in that time, we renewed our focus on being a
transportation company. Additionally, we are planning to change our corporate
name to Kansas City Southern, thereby dropping "Industries, Inc.", which we
believe more accurately reflects this focus as a transportation company. The new
building and name change represent, both in form and function, that KCS is
committed to being a strong player in the rail industry.
We are not certain when the economy will improve for the long term, but we are
ready. As we approach the remainder of 2002, our operations are running very
efficiently and our cost structure is well controlled. We believe that KCS is
poised to take advantage of a rebounding economy when it occurs and turn future
revenue growth into increased profitability. Our pledge to the shareholders of
KCS is to build long-term value through continued growth and by maximizing the
potential of our NAFTA rail network."
KCSI is comprised of, among others, The Kansas City Southern Railway Company
("KCSR") and equity investments in Grupo TFM, Southern Capital Corporation
("Southern Capital") and Panama Canal Railway Company ("PCRC").
This press release includes statements concerning potential future events
involving the Company, which could materially differ from the events that
actually occur. The differences could be caused by a number of factors including
those factors identified in KCSI's December 31, 2001 Form 10-K and the Current
Report on Form 8-K dated December 11, 2001, each filed by the Company with the
Securities and Exchange Commission ("SEC") (Commission file no. 1-4717). The
Company will not update any forward-looking statements in this press release to
reflect future events or developments.
(Financial Information Attached)
KANSAS CITY SOUTHERN INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in millions, except per share data)
(Unaudited)
Three Months
Ended March 31,
-----------------------------------
2002 2001
-------------- --------------
Revenues $ 142.5 $ 144.0
Costs and expenses 114.2 123.5
Depreciation and amortization 14.9 14.4
-------------- --------------
Operating income 13.4 6.1
Equity in net earnings of unconsolidated affiliates:
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (preliminary) 4.8 11.1 (1)
Other 0.1 0.1
Gain on sale of Mexrail, Inc. 4.4 -
Interest expense (11.3) (15.2)
Other, net 4.4 1.0
-------------- --------------
Income before income taxes and cumulative effect of accounting change 15.8 3.1
Income tax provision (benefit) 4.1 (3.2)
-------------- --------------
Income before cumulative effect of accounting change $ 11.7 $ 6.3
Cumulative effect of accounting change, net of income taxes - (0.4)
-------------- --------------
Net Income $ 11.7 $ 5.9
============== ==============
(1) Includes $9.1 million of income from the reversion of redundant rail line to Mexican government
Per Share Data:
Basic Weighted Average Common shares outstanding (in thousands) 59,777 58,257
Basic Earnings (Loss) per Common share
Income before cumulative effect of accounting change $ 0.20 $ 0.11
Cumulative effect of accounting change - (0.01)
-------------- --------------
Net Income $ 0.20 $ 0.10
============== ==============
Diluted Weighted Average Common shares outstanding (in thousands) 61,842 60,776
Diluted Earnings (Loss) per Common share
Income before cumulative effect of accounting change $ 0.19 $ 0.10
Cumulative effect of accounting change - 0.00
-------------- --------------
Net Income $ 0.19 $ 0.10
============== ==============
EXHIBIT 99.2
Kansas City Southern Railway
Operating Statements
Dollars in Millions
First Quarter First Quarter Year Ended
2002 2001 2001
---------------------- --------------------- ---------------------
Revenues
Freight Revenue $ 86.9 $ 83.4 $ 340.3
Intermodal and Automotive Revenue 14.2 18.6 66.0
Unit Coal Revenue 28.3 26.9 115.8
Haulage Revenue 3.1 3.0 13.0
7.9 8.2 31.3
---------------------- --------------------- ---------------------
Total Revenues 140.4 140.1 566.4
---------------------- --------------------- ---------------------
Operating Expenses
Salaries & Wages 33.3 35.3 133.7
Fringe Benefits 14.8 12.2 54.0
Fuel 9.5 12.4 43.9
Material and Supplies 7.8 7.3 27.5
Car Hire 5.2 6.5 19.8
Purchased Services 11.8 11.0 47.7
Casualties & Insurance 7.5 14.5 40.6
Other 2.0 3.2 10.3
---------------------- --------------------- ---------------------
Net Operating Expenses 91.9 102.4 377.5
---------------------- --------------------- ---------------------
Fixed Expenses
Leases, Net 13.0 13.4 54.6
Depreciation 13.9 13.4 54.1
Taxes (Other Than Income) 3.6 2.5 13.2
---------------------- --------------------- ---------------------
Total Fixed Expenses 30.5 29.3 121.9
---------------------- --------------------- ---------------------
Total Expenses 122.4 131.7 499.4
---------------------- --------------------- ---------------------
Operating Income $ 18.0 $ 8.4 $ 67.0
Kansas City Southern Railway
Carloadings By Commodity - Year to Date March 31, 2002
Dollars in Thousands
Carloadings Revenue
Year to Date % Year to Date %
------------------------------------------- ----------------------------------------
2002 2001 Change 2002 2001 Change
------------ ------------ ------------ ------------ ------------ -----------
Coal
57,592 45,194 27.4% Unit Coal $ 28,281 $ 26,941 5.0%
881 1,253 (29.7)% Other Coal 459 675 (32.0)%
------------ ------------ ------------ ------------ ------------ -----------
58,473 46,447 25.9% Total 28,740 27,616 4.1%
Chemical & Petroleum Products
1,821 1,869 (2.6)% Agri Chemicals 1,404 1,438 (2.4)%
3,240 2,795 15.9% Gases 3,119 2,602 19.9%
5,414 5,712 (5.2)% Organic 5,424 5,694 (4.7)%
4,864 4,792 1.5% Inorganic 5,158 4,887 5.5%
13,087 18,992 (31.1)% Petroleum 9,650 10,778 (10.5)%
7,454 6,995 6.6% Plastics 7,116 7,173 (0.8)%
------------- ------------ ------------ ------------
35,880 41,155 (12.8)% Total 31,871 32,572 (2.2)%
------------- ------------ ------------ ------------
Agriculture and Minerals
12,124 12,061 0.5% Domestic Grain 8,388 8,216 2.1%
4,915 3,182 54.5% Export Grain 3,811 2,292 66.3%
7,283 6,269 16.2% Food Products 5,999 5,012 19.7%
5,056 5,615 (10.0)% Ores and Minerals 2,828 3,066 (7.8)%
3,662 3,723 (1.6)% Stone, Clay & Glass 2,812 2,723 3.3%
------------- ------------ ------------ ------------
33,040 30,850 7.1% Total 23,838 21,309 11.9%
------------- ------------ ------------ ------------
Paper & Forest Products
20,569 20,581 (0.1)% Pulp/Paper 15,153 13,967 8.5%
1,543 1,648 (6.4)% Scrap Paper 897 850 5.5%
8,786 8,670 1.3% Pulpwood/Logchips 3,699 3,629 1.9%
6,798 5,991 13.5% Lumber/Plywood 6,115 5,118 19.5%
4,249 6,081 (30.1)% Metal/Scrap 3,534 4,570 (22.7)%
1,888 1,457 29.6% Military/Other Carloads 2,607 1,930 35.1%
------------- ------------ ------------ ------------
43,833 44,428 (1.3)% Total 32,005 30,064 6.5%
------------- ------------ ------------ ------------
Intermodal & Automotive
5,771 11,545 (50.0)% Automotive 3,437 7,116 (51.7)%
61,216 65,279 (6.2)% Intermodal 10,794 11,464 (5.8)%
------------- ------------ ------------- ------------
66,987 76,824 (12.8)% Total 14,231 18,580 (23.4)%
------------- ------------ ------------- ------------
238,213 239,704 (0.6)% TOTAL FOR BUSINESS UNITS 130,685 130,141 0.4%
8,276 8,615 (3.9)% Haulage 3,107 3,026 2.7%
2,062 2,164 (4.7)% Adjustments (1,266) (1,183) 7.0%
------------- ------------ ------------- ------------
244,427 246,155 (0.7)% TOTAL $ 132,526 $ 131,984 0.4%
============= ============ ============= ============
Kansas City Southern Industries, Inc.
Consolidated Balance Sheets
(Dollars in Millions)
March 31, 2002 December 31, 2001
----------------------- -----------------------
(Unaudited-Preliminary)
Assets
Cash $ 56.8 $ 24.7
Accounts receivable 129.6 130.0
Inventories 28.2 27.9
Other current assets 45.1 71.8
----------------------- -----------------------
Total current assets 259.7 254.4
Investments held for operating purposes 382.3 386.8
Properties, net of depreciation 1,325.2 1,327.4
Other assets 32.7 42.3
----------------------- -----------------------
Total assets $ 1,999.9 $ 2,010.9
======================= =======================
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 47.9 $ 46.7
Accounts payable 41.7 50.4
Accrued liabilities 163.3 160.4
----------------------- -----------------------
Total current liabilities 252.9 257.5
Long-term debt 580.0 611.7
Deferred income taxes 371.1 370.2
Other 97.2 91.2
Stockholders' equity 698.7 680.3
----------------------- -----------------------
Total liabilities and stockholders' equity $ 1,999.9 $ 2,010.9
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