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, 2001
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)
114 West 11th Street, Kansas City, Missouri 64105
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code:
(816) 983 - 1303
Not Applicable
(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, 2001 entitled,
"Kansas City Southern Industries
Reports First Quarter Operating
Results", is attached hereto as
Exhibit 99.1
99.2 The following schedules are
attached hereto as Exhibit 99.2
Combined Kansas City Southern
Railway and Gateway Western
Operating Statements, Combined
Kansas City Southern
Railway/Gateway Western
Carloadings by Commodity and
Kansas City Southern Industries,
Inc. Preliminary 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, 2001, announcing KCSI's first quarter 2001 operating
results. Included in Exhibit 99.2 are schedules regarding certain financial
information discussed at the Company's first quarter 2001 meeting and 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 4, 2001 By: /s/ Louis G. Van Horn
----------------------------
Louis G. Van Horn
Vice President and Comptroller
(Principal Accounting Officer)
EXHIBIT 99.1
Date: April 25, 2001
Kansas City Southern Media Contact: William Galligan
Industries, Inc. 816-983-1551
114 West 11th Street
Kansas City, MO 64105
NYSE Symbol: KSU
Kansas City Southern Industries Reports First Quarter Operating Results
Earnings Analysis & Commentary
Kansas City Southern Industries, Inc. ("KCSI", "the Company") reported income
from continuing operations of $6.3 million (10(cent) per diluted share) during
the first quarter of 2001 compared to income from continuing operations of $10.4
million (18(cent) per diluted share) for the first quarter of 2000. This $4.1
million quarter to quarter decline results primarily from a $4.9 million decline
in revenues, a $7.0 million increase in operating expenses, and a $1.7 million
decline in other, net, partially offset by higher equity earnings from Grupo
Transportacion Ferroviaria Mexicana, S.A. de C.V. ("Grupo TFM") of $2.9 million,
a $2.3 million decrease in interest expense and lower income taxes of $4.8
million. Equity earnings from Grupo TFM reflect the Company's proportionate
share ($9.1 million) of the income recorded by Grupo TFM relating to certain
concession assets.
Effective January 1, 2001 the Company implemented Statement of Financial
Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging
Activities ("FAS 133"). As a result of this change in the method of accounting
for derivative financial instruments, the Company recorded an after-tax charge
to earnings of $0.4 million (less than 1(cent) per diluted share) in the first
quarter of 2001. This charge is presented as a cumulative effect of an
accounting change in the accompanying financial statements. In the first quarter
of 2000, the Company completed a debt refinancing whereby it retired
approximately $400 million in debt prior to its maturity. Accordingly, the
Company recorded debt retirement costs of approximately $5.9 million, after-tax
($0.10 per diluted share) in the first quarter of 2000. This is presented as an
extraordinary item in the accompanying financial statements.
DILUTED EARNINGS PER SHARE AND COMMON SHARES COMPARISONS (1)
First Quarter
2001 2000
Income from continuing operations:
U.S. operations $ 0.00 $ 0.12
Grupo TFM and associated interest 0.10 0.06
-------- --------
Income (loss) from continuing operations 0.10 0.18
Extraordinary debt retirement costs, net of income tax - (0.10)
Cumulative effect of accounting change, net of income tax 0.00 -
Total diluted earnings (loss) per share from
continuing operations, adjusted for extraordinary
item and cumulative effect of accounting change $ 0.10 $ 0.08
-------- --------
Common Shares Outstanding (thousands):
Weighted Average Diluted 60,776 57,482
Actual 58,302 55,700
(1) Earnings per share and common share information for each period presented
reflect a one-for-two reverse stock split that occurred on July 12, 2000 in
conjunction with the spin-off of Stilwell Financial Inc., the Company's formerly
owned financial services segment.
First Quarter
KCSI is comprised of, among others, The Kansas City Southern Railway Company
("KCSR"), Gateway Western Railway Company ("Gateway Western") and equity
investments in Grupo TFM, Mexrail, Inc. and the Panama Canal Railway Company.
KCSI reported $6.3 million of income from continuing operations for the three
months ended March 31, 2001 compared to income from continuing operations of
$10.4 million for the comparable prior year quarter. KCSI's consolidated first
quarter 2001 revenues totaled $144.0 million compared to $148.9 million in the
first quarter of 2000. This $4.9 million (3.3%) decrease resulted from lower
KCSR/Gateway Western revenues of approximately $6.2 million partially offset by
higher revenues from other smaller subsidiaries. While revenue growth occurred
for plastics (34.0%), petroleum (4.3%) and automotive (147.4%) traffic, lower
revenues were noted for most other commodities served by KCSR/Gateway Western
resulting from a decline in carload volumes primarily due to decreased demand
related to the continued general slowdown in the U.S. economy.
KCSI's consolidated operating expenses increased $7.0 million (5.3%) to $137.9
million in the first quarter of 2001 compared to $130.9 million in the first
quarter of 2000. This resulted from a $5.9 million increase in KCSR/Gateway
Western expenses and higher expenses at other smaller subsidiaries commensurate
with higher revenues. The increase in KCSR/Gateway Western operating expenses is
attributable to higher casualty and insurance costs, higher costs associated
with the usage of rail cars from other rail carriers (car hire) and higher fuel
costs. During the first quarter of 2001, casualty and insurance costs increased
approximately $8.5 million as a result of several significant derailments and
the settlement of a significant personal injury claim. These derailments, when
coupled with the effects of the economic slowdown, had an impact on the
efficiency of our U.S. operations during the first quarter of 2001 and led to
some service delays. As a result, first quarter 2001 car hire costs increased
approximately $3.8 million compared to the first quarter of 2000 primarily
because of a higher number of freight cars from other railroads on the Company's
rail line. Also contributing to the increase in car hire expense was a higher
number of auto rack cars used related to our increased automotive traffic as
well as a decline in the number of KCSR cars offline and being used by other
railroads due to lower industry-wide traffic volumes. Despite an 11% decline in
usage, fuel costs increased 2% quarter to quarter due to a 15% increase in the
average price per gallon. These cost increases were partially offset by cost
declines for fringe benefits, materials and supplies and purchased services. The
Company's operating expenses also include approximately $1.3 million of one-time
costs related to severance benefits for the previously announced workforce
reduction. Higher operating expenses coupled with lower revenues resulted in a
combined KCSR/Gateway Western operating ratio of 94.0% for the first quarter of
2001 compared to 86.0% for the first quarter of 2000.
Equity earnings from the Company's investment in Grupo TFM improved to $11.1
million for the first quarter of 2001 from $8.2 million for the same prior year
quarter. The primary reason for this increase was the recognition by TFM of
approximately $60 million of pre-tax income relating to certain concession
assets. This resulted in a contribution to the Company's income from continuing
operations of approximately $9.1 million. Grupo TFM revenues improved 6% to
$156.1 million in the first quarter of 2001 compared to $146.7 million in the
first quarter of 2000. These higher revenues were offset by an approximate 16.4%
increase in operating expenses (exclusive of the income related to certain
concession assets) due primarily to higher fuel, car hire and lease costs, and
other variable costs related to increased traffic volumes. These higher expenses
led to a decline in ongoing operating income of 20% quarter to quarter. The
first quarter 2001 operating ratio increased to 79.8% versus 72.7% in the same
2000 period. Additionally, first quarter 2001 results include a $1.5 million
deferred tax benefit (calculated under U.S. generally accepted accounting
principles -"U.S. GAAP") compared to a deferred tax benefit of $15.6 million in
the first quarter of 2000, which was caused by fluctuations in the peso exchange
rate and inflation. The Company reports its equity in Grupo TFM under U.S. GAAP
while Grupo TFM reports under International Accounting Standards.
KCSI's consolidated first quarter 2001 interest expense decreased $2.3 million
(13.1%) from the prior year quarter as a result of slightly lower interest rates
and lower amortization related to debt issue costs.
BUSINESS OUTLOOK
Michael R. Haverty, KCSI Chairman, President and Chief Executive Officer, said,
"We are obviously disappointed with our operating results for the first quarter,
but continue to be optimistic about the long-term prospects of our NAFTA railway
franchise. Like most other railroads, the economic slowdown has had an adverse
effect on our revenues, particularly in the agriculture and mineral, paper and
forest and certain chemical markets where weak demand led to substantial first
quarter 2001 volume declines compared to the prior year first quarter. However,
weakness in these markets was partially offset by the continued growth of our
automotive traffic, which increased 147% quarter to quarter. Although most of
our costs fluctuated according to traffic volumes, our first quarter results
were affected by a substantial increase in casualty and car hire costs. Our
casualty costs increased dramatically quarter to quarter due to unusually large
expenses related to derailments as well as the settlement of a personal injury
claim. Derailment expense in the first quarter nearly exceeded the entire year
of 2000. These derailments had a residual effect on our service levels, which
has resulted in some operating inefficiencies. These service issues and
inefficiencies coupled with declining traffic volumes led to a higher number of
foreign cars online, which resulted in higher car hire costs. The significant
increase in derailment expense is not reflective of the well-maintained physical
plant of KCSR and Gateway Western.
In response to these profitability issues as well as the continued softness in
the economy, we were forced to make some difficult decisions to realize cost
savings in an effort to keep our Company competitive. During first quarter 2001,
we announced a cost reduction strategy that resulted in a workforce reduction of
approximately 170 employees. This included both union and management positions.
Additionally, we implemented a voluntary, temporary salary reduction for middle
and senior management and temporarily suspended certain management benefits. We
also delayed the implementation of a new computer system, MCS, putting it on
hold until economic conditions improve. We expect these actions to result in
estimated cost savings in excess of $8 million over the remainder of 2001. While
these reductions are painful, they are necessary and have been done in a way
that does not compromise our commitment to customer service. With these actions,
we believe that our cost structure is positioned to provide the framework for
improved profitability when the economy strengthens and we return to a period of
revenue growth.
Our first quarter 2001 equity earnings from Grupo TFM increased as result of our
share of the income related to certain concession assets. Although the first
quarter 2001 ongoing operating results of Grupo TFM did not match those for the
first quarter of 2000, Grupo TFM's revenue growth story is still unique. Grupo
TFM increased its revenues by 6% quarter over quarter and was able to maintain
an operating ratio below 80%, despite the sluggish U.S. economy and high fuel
costs. This is quite impressive given the operating environment that exists
today. We continue to believe that Grupo TFM holds tremendous value as a key
component of our NAFTA strategy.
As we look to the remainder of 2001, our primary focus is to increase revenues
and improve profitability for our U.S. operations and to reduce our corporate
debt structure. We believe the success of Grupo TFM will continue and are
looking forward to the second quarter re-opening of commercial service on the
Panama Canal Railway. KCSI management continues to believe in its NAFTA strategy
and has an unwavering commitment to enhance shareholder value."
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, 2000 Form 10-K and the Current
Report on Form 8-K/A dated June 3, 1997, each filed by the Company with the
Securities and Exchange Commission ("SEC") (Commission file no. 1-4717) and
those factors identified in the "Risk Factors" section of the Company's
Registration Statement on Form S-4, as amended and declared effective on March
15, 2001, which is on file with the SEC (File No. 333-54262). 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. and SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(excludes Stilwell Financial Inc.)
(dollars in millions, except per share data)
(Unaudited)
Three Months
Ended March 31,
------------------------------
2001 2000
--------------- -------------
Revenues $ 144.0 $ 148.9
Costs and expenses 123.5 116.6
Depreciation and amortization 14.4 14.3
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Operating income 6.1 18.0
Equity in net earnings of unconsolidated affiliates:
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (estimated) 11.1 8.2
Other 0.1 0.6
Interest expense (15.2) (17.5)
Other, net 1.0 2.7
--------------- -------------
Income from continuing operations before income taxes,
extraordinary item and cumulative effect of accounting change 3.1 12.0
Income tax provision (benefit) (3.2) 1.6
--------------- -------------
Income from continuing operations before extraordinary item
and cumulative effect of accounting change $ 6.3 $ 10.4
Extraordinary item, net of income taxes:
Debt retirement costs - (5.9)
Cumulative effect of accounting change, net of income taxes (0.4) -
--------------- -------------
Income from continuing operations, net of extraordinary item
and cumulative effect of accounting change $ 5.9 $ 4.5
=============== =============
Per Share Data:
Basic Weighted Average Common shares outstanding (in thousands) 58,257 55,543
Basic Earnings (Loss) per Common share from continuing operations $ 0.11 $ 0.18
Extraordinary item - (0.10)
Cumulative effect of accounting change (0.01) -
--------------- -------------
Basic Earnings per Common share, net of extraordinary item
and cumulative effect of accounting change $ 0.10 $ 0.08
=============== =============
Diluted Weighted Average Common shares outstanding (in thousands) 60,776 57,482
Diluted Earnings (Loss) per Common share from continuing operations $ 0.10 $ 0.18
Extraordinary item - (0.10)
Cumulative effect of accounting change 0.00 -
---------------- -------------
Diluted Earnings per Common share, net of extraordinary item
and cumulative effect of accounting change $ 0.10 $ 0.08
================ =============
EXHIBIT 99.2
Combined KCSR and Gateway Western
Operating Statements
Dollars in Millions
First Quarter First Quarter Year Ended
2001 2000 2000
--------------------- ---------------------- ----------------------
Revenues
Freight Revenue $ 83.4 $ 89.5 $ 347.6
Intermodal and Automotive Revenue 18.6 15.1 63.0
Unit Coal Revenue 26.9 29.0 103.6
Other Revenue 3.0 3.5 11.6
8.2 9.2 37.3
--------------------- ---------------------- ----------------------
Total Revenues 140.1 146.3 563.1
--------------------- ---------------------- ----------------------
Operating Expenses
Salaries & Wages 35.3 35.4 139.3
Fringe Benefits 12.2 14.3 52.6
Fuel 12.4 12.1 48.1
Material and Supplies 7.3 8.3 30.5
Car Hire 6.5 2.7 14.8
Purchased Services 11.0 12.9 47.9
Casualties & Insurance 14.5 6.0 34.0
Other 3.2 2.7 3.6
--------------------- ---------------------- ----------------------
Net Operating Expenses 102.4 94.4 370.8
--------------------- ---------------------- ----------------------
Fixed Expenses
Leases, Net 13.4 14.4 55.6
Depreciation 13.4 13.2 52.1
Taxes (Other Than Income) 2.5 3.8 13.3
--------------------- ---------------------- ----------------------
Total Fixed Expenses 29.3 31.4 121.0
--------------------- ---------------------- ----------------------
Total Expenses 131.7 125.8 491.8
--------------------- ---------------------- ----------------------
Operating Income 8.4 20.5 71.3
Combined Kansas City Southern Railway/Gateway Western
Carloadings By Commodity - Year to Date March 31, 2001
Dollars in Thousands
Carloadings Revenue
Year to Date % Year to Date %
- -------------------------------- ------------------------------
2001 2000 Change 2001 2000 Change
- --------------- -------------- --------- ------------- ------------- -----------
Coal
45,194 47,260 (4.4)% Unit Coal $ 26,941 $ 28,972 (7.0)%
1,253 704 78.0% Other Coal 675 235 187.2%
- --------------- -------------- ------------- -------------
46,447 47,964 (3.2)% Total 27,616 29,207 (5.4)%
Chemical & Petroleum Products
1,869 2,407 (22.4)% Agri Chemicals 1,438 1,689 (14.9)%
2,795 3,561 (21.5)% Gases 2,602 3,240 (19.7)%
5,712 6,805 (16.1)% Organic 5,694 6,393 (10.9)%
4,792 4,400 8.9% Inorganic 4,887 5,120 (4.6)%
18,572 16,641 11.6% Petroleum 10,470 10,036 4.3%
6,995 5,987 16.8% Plastics 7,173 5,355 33.9%
- --------------- -------------- ------------- -------------
40,735 39,801 2.3% Total 32,264 31,833 1.4%
- --------------- -------------- ------------- -------------
Agriculture and Minerals
12,061 13,715 (12.1)% Domestic Grain 8,216 9,901 (17.0)%
3,182 3,188 (0.2)% Export Grain 2,292 2,337 (1.9)%
6,269 7,336 (14.5)% Food Products 5,012 5,824 (13.9)%
5,615 6,496 (13.6)% Ores and Minerals 3,066 3,340 (8.2)%
3,723 4,352 (14.5)% Stone, Clay & Glass 2,723 3,218 (15.4)%
- --------------- -------------- ------------- -------------
30,850 35,087 (12.1)% Total 21,309 24,620 (13.4)%
- --------------- -------------- ------------- -------------
Paper & Forest Products
20,581 22,954 (10.3)% Pulp/Paper 13,967 15,380 (9.2)%
1,648 1,703 (3.2)% Scrap Paper 850 894 (4.9)%
8,670 9,233 (6.1)% Pulpwood/Logchips 3,629 3,684 (1.5)%
5,991 7,222 (17.0)% Lumber/Plywood 5,118 6,242 (18.0)%
6,081 6,961 (12.6)% Metal/Scrap 4,570 5,386 (15.2)%
1,877 2,308 (18.7)% Military/Other Carloads 2,238 2,138 4.7%
- --------------- -------------- ------------- -------------
44,848 50,381 (11.0)% Total 30,372 33,724 (9.9)%
- --------------- -------------- ------------- -------------
Intermodal & Automotive
11,545 5,192 122.4% Automotive 7,116 2,876 147.4%
65,279 52,546 24.2% Intermodal 11,464 12,263 (6.5)%
- --------------- -------------- ------------- -------------
76,824 57,738 33.1% Total 18,580 15,139 22.7%
- --------------- -------------- ------------- -------------
239,704 230,971 3.8% TOTAL FOR BUSINESS UNITS 130,141 134,523 (3.3)%
8,615 10,606 (18.8)% Haulage 3,026 3,460 (12.5)%
(2,164) (1,870) 15.7% Adjustments (1,183) (861) 37.4%
- --------------- -------------- ------------- -------------
246,155 239,707 2.7% TOTAL $ 131,984 $ 137,122 (3.7)%
=============== ============== ============= =============
Kansas City Southern Industries, Inc.
----------------
Consolidated Balance Sheets Preliminary
----------------
Unaudited
(Dollars in Millions)
March 31, 2001 December 31, 2000
Assets
Cash $ 28.6 $ 21.5
Accounts receivable 140.4 135.0
Inventories 31.8 34.0
Other current assets 23.8 25.9
-------------------- -----------------------
Total current assets 224.6 216.4
Investments held for operating purposes 366.7 358.2
Properties, net of depreciation 1,326.8 1,327.8
Other assets 40.7 42.1
-------------------- -----------------------
Total assets $ 1,958.8 $ 1,944.5
==================== =======================
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 38.7 $ 36.2
Accounts payable 44.4 52.9
Accrued liabilities 162.2 159.9
-------------------- -----------------------
Total current liabilities 245.3 249.0
Long-term debt 643.0 638.4
Deferred income taxes 336.9 332.2
Other 79.5 81.5
Stockholders' equity 654.1 643.4
-------------------- -----------------------
Total liabilities and stockholders' equity $ 1,958.8 $ 1,944.5
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