[Page 1 of 4]
EXHIBIT 99.1
On October 23, 1996, Kansas City Southern Industries, Inc. ("Company"; "KCSI")
and GATX Capital Corporation ("GATX") announced completion of the formation
and financing of a joint venture company, Southern Capital Corporation LLC
("Southern"), to perform certain leasing and financing activities.
GATX contributed $25 million in cash, and the Company, through its
wholly-owned subsidiaries The Kansas City Southern Railway Company ("KCSR")
and Carland, Inc. ("Carland"), contributed an equal amount through a
combination of rail equipment and long-term debt owed to KCSI and its
subsidiaries. In an associated transaction, Southern Leasing Corporation
("SLC"), a wholly-owned subsidiary of the Company, sold to Southern
approximately $75 million of loan portfolio assets and rail equipment.
Concurrent with these transactions, KCSR entered into several operating leases
with Southern for the majority of the locomotives and rail cars acquired by or
contributed to Southern. Financing of Southern was achieved through the
establishment of a $250 million credit facility.
After repayment by Southern of indebtedness owed to KCSI and its subsidiaries,
the Company reduced outstanding indebtedness by approximately $217 million
through repayments on existing lines of credit and subsidiary indebtedness.
Accordingly, the Company's debt ratio (total debt as a percent of total debt
plus equity), assuming the formation of the joint venture and associated
transactions had occurred on September 30, 1996, would have been reduced from
54% to approximately 47%. The Company's 50% ownership interest in Southern
will be reported in its financial statements as an equity investment.
In order to provide a more relevant presentation of the current financial
position of the Company as a result of these transactions, the following
selected unaudited pro forma consolidated condensed balance sheet information
is presented as if the Southern transactions had been completed on September
30, 1996. The information was derived by applying the actual transactions
recorded in the Company's accounting records (upon completion of the joint
venture and associated transactions on October 21, 1996) to the various
historical accounts and balances of the Company as of September 30, 1996. The
adjustments for indebtedness and current assets reflect the assumed payment of
estimated income taxes currently payable as a result of the completion of the
various transactions. Pro forma consolidated condensed statement of income
data is not presented as the transactions are not expected to have a material
effect on the Company's net income on a prospective basis.
[Page 2 of 4]
EXHIBIT 99.1
KANSAS CITY SOUTHERN INDUSTRIES, INC.
SELECTED UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
BALANCE SHEET INFORMATION -
AS IF COMPLETION OF THE SOUTHERN CAPITAL CORPORATION LLC JOINT
VENTURE TRANSACTIONS HAD OCCURRED ON SEPTEMBER 30, 1996
(Dollars in millions)
KCSI as if
Investment in Southern
Southern Transactions Had
Historical and Associated Occurred On
September 30, 1996 Transactions September 30, 1996
Current assets $ 297.9 $ (26.6) (a)(c) $ 271.3
Investments 343.8 (14.1) (a) 329.7
Properties, net 1,339.3 (137.2) (a) 1,202.1
Other non-current assets 215.6 - 215.6
Total Assets $2,196.6 $(177.9) $2,018.7
Current liabilities $ 245.3 $ 4.9 (b)(c)(d) $ 250.2
Long-term debt 831.3 (217.6) (c) 613.7
Deferred income taxes 316.1 (7.5) (d) 308.6
Other non-current liabilities 94.8 42.3 (b) 137.1
Stockholders' equity 709.1 - 709.1
Total Liabilities and
Stockholders' Equity $2,196.6 $(177.9) $2,018.7
See accompanying notes to Selected Unaudited Pro Forma Consolidated Condensed
Balance Sheet Information.
[Page 3 of 4]
EXHIBIT 99.1
KANSAS CITY SOUTHERN INDUSTRIES, INC.
NOTES TO SELECTED UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED BALANCE SHEET INFORMATION
(a) The Company (through its subsidiaries KCSR and Carland) contributed rail
assets and long-term debt owed to KCSI and its subsidiaries, netting to
a total investment in Southern of $25.0 million. Additionally, SLC sold
to Southern loan portfolio assets (which are classified as other current
assets or investments) and rail equipment. See table below for summary
of pro forma adjustments associated with these transactions.
(b) As a result of the repayment by Southern of indebtedness to KCSI and its
subsidiaries and associated sale of assets to Southern by SLC, the
Company received cash which exceeded the net book value of its assets by
approximately $47.2 million. Concurrent with the formation of Southern,
KCSR entered into several operating leases with Southern for the
majority of the rail equipment acquired by or contributed to Southern.
This excess fair value over book value will be amortized over the terms
of the leases. The portion of this amount to be recognized within the
next year ($4.9 million) is included in current liabilities. See note
(d) below for additional information relative to deferred taxes
associated with these transactions. See table below for summary of pro
forma adjustments associated with these transactions.
(c) The Company used the cash received in connection with the sale of assets
by SLC ($25.7 million) and from repayment by Southern of debt owed to
the Company and its subsidiaries (as described in note (a) above) to
repay subsidiary indebtedness and outstanding balances on various lines
of credit. For purposes of this presentation, estimated income taxes
currently payable as a result of the completion of the formation of the
joint venture and associated transactions ($7.5 million) are assumed to
have been paid, thereby reducing the amount repaid on the Company's
various lines of credit. See note (d) below for additional information
relative to income taxes. See table below for summary of pro forma
adjustments associated with these transactions.
(d) Upon disposition of the various assets by KCSR and SLC, all or a portion
of previously recorded deferred income taxes (primarily related to
accelerated depreciation for tax purposes), respectively, were
reversed, representing estimated income taxes currently payable. For
purposes of this presentation, estimated income taxes currently payable
as a result of the completion of the formation of Southern and
associated transactions are assumed to have been paid. See table below
for summary of pro forma adjustments associated with these transactions.
[Page 4 of 4]
EXHIBIT 99.1
SUMMARY OF PRO FORMA ADJUSTMENTS
INCREASE (DECREASE)
(in millions)
Proper- Long- Deferred Other
Current Invest- ties, Current term income non-current
assets ments net liabilities debt taxes liabilities
Effects of
Notes (a)
and (b):
Contribution of
Rail Assets $ - $ 25.0 $(127.8) $4.8 $ - $ - $41.8
Sale of Loan
Portfolio Assets
and Rail Assets (0.9)(i)(39.1) (9.4) 0.1 0.5
Effects of
Notes (c)
and (d):
Cash received
from Southern
as repayment
of contributed
debt 199.4
Repayment of
indebtedness (217.6) (217.6)
Assumed payment
of income taxes (7.5) (7.5)
$(26.6) $ (14.1) $(137.2) $4.9 $(217.6) $(7.5) $42.3
(i) Amount reflects the sale of $26.6 million of current loan portfolio
assets, offset by the $25.7 million receipt of cash in connection with
the SLC sale of assets.