PROSPECTUS SUPPLEMENT
(To Prospectus dated May 11, 1993)
$100,000,000
KANSAS CITY SOUTHERN INDUSTRIES, INC.
7% DEBENTURES DUE DECEMBER 15, 2025
The 7% Debentures (the "Debentures") will mature on December 15, 2025. Interest
on the Debentures is payable semiannually on June 15 and December 15, beginning
on June 15, 1996. The Debentures may be redeemed at the option of the Company at
any time, in whole or in part, at a redemption price equal to the greater of (i)
100% of the principal amount of such Debentures and (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semiannual basis at the Treasury Rate
(as defined herein) plus 20 basis points, plus in each case accrued interest
thereon to the date of redemption.
The Debentures will be represented by one or more Global Securities registered
in the name of the nominee of The Depository Trust Company (the "Depository").
Interests in the Global Securities will be shown on, and transfers thereof will
be effected only through, records maintained by the Depository and its
participants. Except as provided in the Prospectus accompanying this Prospectus
Supplement, Debentures in definitive form will not be issued. Settlement for the
Debentures will be made in immediately available funds. The Debentures will
trade in the Depository's Same-Day Funds Settlement System until maturity, and
secondary market trading activity for the Debentures will therefore settle in
immediately available funds. All payments of principal and interest will be made
in immediately available funds. See "Description of Debt Securities--Same-Day
Settlement and Payment" in the Prospectus accompanying this Prospectus
Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
Per Debenture................... 98.705% .875% 97.83%
Total........................... $98,705,000 $875,000 $97,830,000
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from December 18, 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by the Company estimated to be $95,000.
The Debentures are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters, subject to approval
of certain legal matters by counsel for the Underwriters. The Underwriters
reserve the right to withdraw, cancel or modify such offer and to reject orders
in whole or in part. It is expected that the Debentures will be delivered in
book-entry form only, on or about December 18, 1995, through the facilities of
The Depository Trust Company.
SALOMON BROTHERS INC
FURMAN SELZ INCORPORATED
A.G. EDWARDS & SONS, INC.
The date of this Prospectus Supplement is December 13, 1995.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMPANY
As a result of the recent public offering of common stock of one of the
Company's major subsidiaries, DST Systems, Inc. ("DST"), which reduced the
Company's interest in DST, the Company is now engaged primarily in the
businesses of transportation and financial asset management, conducted through
its other subsidiaries. The Company's principal business activities involve
operating a rail carrier system through The Kansas City Southern Railway Company
("KCSR"), a wholly-owned subsidiary, and managing investments for mutual funds
and private accounts through Janus Capital Corporation ("Janus"), an 83% owned
subsidiary, and Berger Associates, Inc. ("Berger"), an 80% owned subsidiary.
RECENT DEVELOPMENTS
On October 31, 1995, DST, at that time a wholly-owned subsidiary of the
Company, made a public offering of its common stock. In conjunction with that
offering, the Company also disposed of shares of DST common stock. As a result
of these transactions, the Company's ownership interest in DST was reduced to
approximately 41%.
On November 10, 1995, the Company completed the purchase of 49% of the
common stock of Mexrail, Inc. ("Mexrail"), including Mexrail's wholly-owned
subsidiary, The Texas Mexican Railway Company ("Tex-Mex"), from Transportacion
Maritima Mexicana, S.A. de C.V. Tex-Mex operates a rail line extending from
Corpus Christi to Laredo, Texas. The purchase price of $23 million, which is
subject to certain conditions, was financed through the Company's existing
credit lines.
USE OF PROCEEDS
Net proceeds from the sale of the Debentures will be added to the general
funds of the Company and used primarily to repay debt of the Company, for
intercompany loans to its subsidiaries for repayment of their indebtedness, to
repurchase common stock of the Company and for other general corporate purposes.
The debt to be repaid with such proceeds consists of approximately $60 million
in short-term debt owed to banks under revolving credit facilities of the
Company. Borrowings under the revolving credit facilities mature within one year
and were used for working capital and repurchases of the Company's common stock.
The interest rates on the Company's indebtedness are set at fixed rates or rates
based upon bank prime rates, certificates of deposit or federal funds rates,
Eurodollar rates, LIBOR rates, or competitive bid rates, as selected from time
to time by the Company. The weighted average interest rate on the indebtedness
to be repaid with such net proceeds is currently approximately 6.25%. None of
the net proceeds will be used to refinance indebtedness of MidSouth Corporation,
a former subsidiary which was merged into KCSR.
S-2
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN MILLIONS EXCEPT FOR RATIO INFORMATION)
NINE MONTHS ENDED
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------ DECEMBER 31, ------------------------------------------------
1995 1995 1994 1994 1994 1993 1992 1991 1990
------------- -------- -------- ------------ -------- -------- -------- -------- --------
PRO FORMA(1) PRO FORMA(1)
For The Period:
Revenues:
Transportation
Services........... $ 407.8 $ 407.8 $ 377.0 $ 508.5 $ 508.5 $ 451.1 $ 369.2 $ 350.1 $ 350.2
Information &
Transaction
Processing......... -- 353.9 297.4 -- 404.3 342.2 270.5 211.1 149.8
Financial Asset
Management......... 176.0 176.0 133.5 188.3 188.3 162.7 97.5 41.7 19.1
Eliminations,
Corporate & Other.. 9.6 (3.5) (2.2) 9.8 (3.2) 5.1 4.2 7.3 8.9
------------- -------- -------- ------------ -------- -------- -------- -------- --------
Total............. $ 593.4 $ 934.2 $ 805.7 $ 706.6 $1,097.9 $ 961.1 $ 741.4 $ 610.2 $ 528.0
------------- -------- -------- ------------ -------- -------- -------- -------- --------
------------- -------- -------- ------------ -------- -------- -------- -------- --------
Operating Income:
Transportation
Services........... $ 61.7 $ 61.7 $ 93.6 $ 124.9 $ 124.9 $ 116.7 $ 75.3 $ 67.4 $ 74.3
Information &
Transaction
Processing......... -- 32.7 27.0 -- 34.7 31.2 17.8 26.8 21.6
Financial Asset
Management......... 69.6 69.6 59.8 53.1 53.1 80.0 45.7 15.8 5.6
Eliminations,
Corporate & Other.. 2.1 (6.9) (8.5) (1.9) (10.2) (15.8) (12.9) (11.7) (13.8)
------------- -------- -------- ------------ -------- -------- -------- -------- --------
Total............. $ 133.4 $ 157.1 $ 171.9 $ 176.1 $ 202.5 $ 212.1 $ 125.9 $ 98.3 $ 87.7
------------- -------- -------- ------------ -------- -------- -------- -------- --------
------------- -------- -------- ------------ -------- -------- -------- -------- --------
Net Income............ $ 59.5 $ 64.8 $ 88.0 $ 92.3 $ 104.9 $ 90.5 $ 63.8 $ 41.9 $ 41.4
------------- -------- -------- ------------ -------- -------- -------- -------- --------
------------- -------- -------- ------------ -------- -------- -------- -------- --------
At End of Period:
Total Assets(2)..... $ 1,997.0 $2,507.1 $2,122.4 -- $2,230.8 $1,917.0 $1,248.4 $1,091.9 $1,034.0
------------- -------- -------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- -------- -------- --------
Long-Term Debt(2)... $ 763.8 $1,038.1 $ 855.5 -- $ 928.8 $ 776.2 $ 387.0 $ 317.1 $ 344.9
------------- -------- -------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- -------- -------- --------
Stockholders'
Equity(2).......... $ 637.5 $ 696.8 $ 653.5 -- $ 667.2 $ 562.7 $ 462.4 $ 411.8 $ 375.7
------------- -------- -------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- -------- -------- --------
Ratio of Earnings to
Fixed Charges(3):
Excluding Interest on
Deposits of IFTC..... 3.17 2.93 3.74 4.15 3.28 3.68 3.40 2.88 2.58
------------- -------- -------- ------------ -------- -------- -------- -------- --------
------------- -------- -------- ------------ -------- -------- -------- -------- --------
Including Interest on
Deposits of IFTC..... -- -- 3.58 -- 3.14 3.43 2.98 2.44 2.23
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- ------------------------------
(1) On October 31, 1995, DST Systems, Inc. ("DST") and the Company effected an
initial public offering for the common stock of DST. In conjunction with
the offering the Company exchanged shares of its DST common stock for
1,820,000 shares of common stock of the Company held by the Company's
Employee Stock Ownership Plan for the employees of DST. With the completion
of these transactions, the Company owns approximately 41% of the
outstanding DST common stock. The pro forma information provided herein
gives effect to the public offering of the common stock of DST by the
Company and DST and the use of the resulting net proceeds for each company
and certain other transactions as if they occurred at the beginning of the
periods presented, as more fully discussed in Part II, Item 5 of the
Company's September 30, 1995 Form 10-Q (File 1-4717), which has been filed
with the Securities and Exchange Commission (the "Commission") and is
incorporated by reference in the Prospectus accompanying this Prospectus
Supplement.
(2) Pro Forma consolidated balance sheet information as of September 30, 1995
was prepared assuming a portion of long-term debt was repaid using proceeds
from the sale of DST common stock and repayment by DST of outstanding
indebtedness to the Company as more fully disclosed in Part II, Item 5 of
the Company's September 30, 1995 Form 10-Q (File 1-4717), which has been
filed with the Commission and is incorporated by reference in the
Prospectus accompanying this Prospectus Supplement.
(3) Earnings represent income available for fixed charges, less equity in
undistributed earnings of less than 50% owned affiliates, plus
undistributed equity in 50% owned affiliates, minority interest in
consolidated subsidiaries, amortization of debt premium and costs, together
with interest and one-third of rents under long-term operating leases
deemed to be representative of an interest factor. Fixed charges represent
interest expense together with interest capitalized and one-third of rents
under long-term operating leases deemed to be representative of an interest
factor. Investors Fiduciary Trust Company ("IFTC") was sold in January 1995
(as disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated by reference in the Prospectus
accompanying this Prospectus Supplement) and therefore a ratio for the
"Including Interest on Deposits of IFTC" line item is not provided for the
nine months ended September 30, 1995 or the pro forma financial data.
S-3
DESCRIPTION OF THE DEBENTURES
GENERAL
The Debentures will be issued under an Indenture (the "Indenture") dated as
of July 1, 1992, between the Company and The Chase Manhattan Bank, N.A., as
trustee (the "Trustee"), which Indenture is more fully described in the
Prospectus accompanying this Prospectus Supplement. The Debentures will be
treated as a series of Debt Securities thereunder. The following description of
the particular terms of the Debentures offered hereby supplements and, to the
extent inconsistent therewith, replaces the description of the general terms and
provisions of the Debt Securities set forth in the Prospectus under the caption
"Description of Debt Securities." Wherever particular defined terms of the
Indenture are referred to, such defined terms are incorporated herein by
reference. The Debentures are part of the $200 million aggregate principal
amount of Debt Securities of the Company registered under the Securities Act of
1933, as amended.
The Debentures will be limited to $100,000,000 principal amount and will
mature on December 15, 2025. Interest on the Debentures will be payable
semiannually on June 15 and December 15 beginning on June 15, 1996, at the
annual rate set forth on the cover page of this Prospectus Supplement to the
Holders of record thereof at the close of business on the preceding June 1 and
December 1, respectively. The Debentures are not subject to a sinking fund.
The Debentures will represent direct, general unsecured and unsubordinated
obligations of the Company, issuable only in fully registered form, and will
rank equally with all other unsecured and unsubordinated indebtedness of the
Company. At September 30, 1995, the Company had no secured indebtedness
outstanding. The Company's assets consist of the stock of its subsidiaries and
interests in unconsolidated affiliates. Accordingly, creditors of the Company's
subsidiaries will have a claim on the assets of such subsidiaries prior to the
holders of the Debentures. At September 30, 1995, the Company's subsidiaries
(exclusive of DST) had an aggregate of $189.5 million of indebtedness
outstanding, of which $116.3 million was secured. In addition, the ability of
the Company to pay principal of, premium, if any, and interest on the Debentures
will depend on the Company's receipt of funds from its subsidiaries. KCSR,
Janus, DST and Berger are not subject to any contractual restrictions on the
payment of dividends. DST, now an approximately 41% owned equity investment,
intends on retaining its earnings for use in its business and therefore does not
anticipate paying any cash dividends in the foreseeable future.
The Indenture does not contain any provisions that afford the Holders of
Debt Securities of any series protection in the event of a highly leveraged
transaction or other transaction that may occur in connection with a change of
control of the Company. Payment of any indebtedness outstanding under the
Company's revolving credit facilities would become accelerated at the time of
any change of control of the Company, as defined in those agreements. At
September 30, 1995, the amount outstanding under the revolving credit facilities
was approximately $263.0 million. As of the third quarter of 1995, all
indebtedness under the ESOP secured term loan agreements of the Company and DST,
referred to in the Prospectus accompanying this Prospectus Supplement, has been
repaid. The Company is party to an agreement with the minority owners of Janus
which may impose financial and other obligations upon the Company in the event
of a change in control of the Company, as defined in such agreement. The Company
also has a commitment to fund, through so-called "rabbi trusts", the payment of
certain compensation and benefit continuations and severance payments of
management employees in the event of defined changes in control. The aggregate
amount of the Company's financial obligations under the agreements governing the
rabbi trusts and the Company's investment in Janus cannot be determined in
advance of any change of control event, but is expected to be material.
In May 1995, DST, a 41% owned equity investment of the Company, entered into
revolving credit facilities aggregating $250 million under which payment of any
indebtedness outstanding would become accelerated at the time of any change in
control of DST, as defined in those agreements. As of the date of this
Prospectus Supplement there are no amounts outstanding under such revolving
credit
S-4
facilities. DST also has a commitment to fund, through so-called "rabbi trusts",
the payment of certain compensation and benefit continuations and severance
payments of management employees in the event of defined changes in control.
REDEMPTION
The Debentures will be redeemable as a whole or in part, at the option of
the Company at any time, at a Redemption Price equal to the greater of (i) 100%
of the principal amount of such Debentures and (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 20 basis points,
plus in each case, accrued interest thereon to the date of redemption, but
interest installments whose Stated Maturity is on or prior to such date of
redemption will be payable to the Holders of such Debentures of record at the
close of business on the relevant regular record dates.
"Treasury Rate" means, with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Debentures to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Debentures. "Independent Investment Banker" means one of
the Reference Treasury Dealers appointed by the Trustee after consultation with
the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the
remaining Reference Treasury Dealer Quotation for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
Redemption Date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption
Date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc, Furman Selz
Incorporated and A.G. Edwards & Sons, Inc. and their respective successors;
provided, however, that if any of the foregoing shall not at the time be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Debentures to be redeemed.
Unless the Company defaults in payment of the Redemption Price, on and after
the Redemption Date interest will cease to accrue on the Debentures or portions
thereof called for redemption.
S-5
UNDERWRITING
Under the terms of and subject to the conditions contained in the Purchase
Agreement (the "Purchase Agreement"), Salomon Brothers Inc, Furman Selz
Incorporated and A.G. Edwards & Sons, Inc. (the "Underwriters") have severally
agreed to purchase from the Company the respective principal amounts of the
Debentures as set forth opposite their respective names below:
PRINCIPAL
AMOUNT OF
UNDERWRITER DEBENTURES
- ----------------------------------------------------------------- ------------
Salomon Brothers Inc ............................................ $ 50,000,000
Furman Selz Incorporated......................................... 35,000,000
A.G. Edwards & Sons, Inc......................................... 15,000,000
------------
$100,000,000
------------
------------
The Purchase Agreement provides that the obligations of the Underwriters to
pay for and accept delivery of the Debentures are subject to, among other
things, the approval of certain legal matters by counsel and certain other
conditions. The Underwriters are obligated to take and pay for all of the
Debentures to be purchased by them if any are taken. In the event of default by
any Underwriter, the Purchase Agreement provides that, in certain circumstances,
purchase commitments of non-defaulting Underwriters may be increased or the
Purchase Agreement may be terminated.
The Underwriters initially propose to offer the Debentures to the public at
the public offering price set forth on the cover page of this Prospectus
Supplement, and to certain dealers at such price less a concession not in excess
of .50% of the principal amount of the Debentures. The Underwriters may allow,
and such dealers may reallow, a discount to certain other dealers not in excess
of .25% of the principal amount of the Debentures. After the initial public
offering, the public offering price, concession and discount may be changed.
All secondary trading in the Debentures will settle in immediately available
funds. See "Description of Debt Securities--Same Day Settlement and Payment" in
the Prospectus accompanying this Prospectus Supplement.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company does not intend to apply for listing of the Debentures on a
national securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Debentures, as permitted by applicable
laws and regulations. None of the Underwriters are obligated, however, to make a
market in the Debentures and any such market-making may be discontinued at any
time at the sole discretion of such Underwriter. Accordingly, no assurance can
be given as to the liquidity of, or trading markets for, the Debentures.
Certain of the Underwriters or their affiliates perform investment banking
services for the Company in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the Debt Securities will be passed on for
the Company by Watson & Marshall L.C., Kansas City, Missouri, and for the
Underwriters by Shearman & Sterling, New York City, New York.
EXPERTS
The audited financial statements of the Company incorporated in the
Prospectus accompanying this Prospectus Supplement by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
S-6
PROSPECTUS
$200,000,000
KANSAS CITY SOUTHERN INDUSTRIES, INC.
DEBT SECURITIES
------------------------
Kansas City Southern Industries, Inc. (the "Company") may offer from time to
time one or more series of its debt securities (the "Debt Securities"), in an
aggregate initial offering price not to exceed $200,000,000, or the equivalent
thereof if any of the Debt Securities is denominated in a foreign currency or
foreign currency unit. The Debt Securities may be sold for U.S. dollars or any
other currency, including composite currencies, and the principal of and any
interest on the Debt Securities likewise may be payable in U.S. dollars or in
any other currency, including composite currencies, in each case, as the Company
specifically designates.
Each issue of Debt Securities may vary, where applicable, as to its terms.
The specific designation, aggregate principal amount, authorized denominations,
maturity, interest rate (which may be fixed or variable) or the manner of
calculation of the interest rate and time of payment of interest, if any, terms
for any extension or mandatory or optional redemption (including any sinking
fund) or any repayment option, initial public offering price or purchase price
and the other terms in connection with the offering and sale of the Debt
Securities in respect of which this Prospectus is being delivered, and
information about any listing of the Debt Securities on a securities exchange,
are set forth in the accompanying prospectus supplement (including any pricing
supplement thereto, the "Prospectus Supplement").
The Debt Securities will be unsecured general obligations of the Company and
will rank PARI PASSU with all other senior (that is, unsubordinated)
indebtedness of the Company. Because the Company is a holding company, however,
the Debt Securities will be effectively subordinated to the claims of creditors
of the Company's subsidiaries. At March 31, 1993, the Company's subsidiaries had
an aggregate of $178 million of indebtedness outstanding. See "Description of
Notes -- General."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Debt Securities may be offered directly, through agents designated from
time to time, through dealers or through underwriters. Such agents or
underwriters may be Merrill Lynch & Co., The First Boston Corporation and/or
other agents or underwriters, acting alone or with other agents or underwriters.
See "Plan of Distribution." The names of any such agents, dealers or
underwriters with respect to any particular series of Debt Securities will be
set forth in the Prospectus Supplement applicable thereto. If an agent of the
Company or a dealer or underwriter is involved in the offering of the Debt
Securities, the agent's commission, dealer's purchase price, underwriter's
discount and net proceeds to the Company will be set forth in, or may be
calculated from, the Prospectus Supplement. Any underwriters, dealers or agents
participating in the offering may be deemed "underwriters" for purposes of the
Securities Act of 1933.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------------
THE DATE OF THIS PROSPECTUS IS MAY 11, 1993.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus does not contain all of the information included in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is made to the Registration Statement
and to the exhibits relating thereto for further information with respect to the
Company and the Debt Securities offered hereby.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copies obtained at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following Regional Offices of the Commission: New York
Regional Office, Seven World Trade Center, 13th Floor, New York City, New York
10048 and Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Registration Statement can be inspected at, and copies
thereof can be obtained at prescribed prices from, the Public Reference Section
of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. In addition, such reports and other information
concerning the Company can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
(File No. 1-4717) pursuant to the Exchange Act and are incorporated by reference
and made a part of this Prospectus:
1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992;
2) The Company's Current Reports on Form 8-K dated March 30, 1993.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on written or oral
request of such person, a copy of any and all documents incorporated herein by
reference, other than exhibits to such documents not specifically incorporated
by reference. Requests for such copies should be directed to Kansas City
Southern Industries, Inc., 114 West Eleventh Street, Kansas City, Missouri
64105, Attention: Albert P. Mauro, telephone number (816) 556-0490.
2
THE COMPANY
Kansas City Southern Industries, Inc., through its operating subsidiaries,
is engaged primarily in the businesses of transportation and financial services.
The Company's principal business activities involve (i) operating a Class I rail
carrier system; (ii) designing, maintaining and operating proprietary on-line
shareowner accounting and recordkeeping data processing systems and providing
related services for the mutual fund, insurance, securities transfer,
pharmaceutical, banking and real estate industries; and (iii) managing
investments for mutual funds and private accounts. The Company was incorporated
in the State of Delaware in 1962 as part of a holding company restructuring. The
principal executive offices of the Company are located at 114 West 11th Street,
Kansas City, Missouri 64105, and the Company's telephone number is (816)
556-0303.
TRANSPORTATION DIVISION
The Kansas City Southern Railway Company ("KCSR"), a wholly-owned subsidiary
of the Company, operates a rail system of approximately 1,700 main and branch
line route miles and approximately 2,500 total track miles in a six-state
region. KCSR serves the states of Missouri, Kansas, Arkansas, Oklahoma,
Louisiana and Texas and, through haulage rights, the states of Nebraska and
Iowa.
KCSR has the shortest rail route between Kansas City, Missouri, and the Gulf
of Mexico, serving the ports of Beaumont and Port Arthur, Texas and New Orleans,
Baton Rouge, Reserve and West Lake Charles, Louisiana. Through haulage rights,
KCSR also serves the ports of Houston and Galveston, Texas. Kansas City,
Missouri, as the second largest rail center in the United States, represents an
important gateway for KCSR, where it interchanges freight with eight other major
rail carriers. KCSR also has important interchange gateways in the cities of New
Orleans and Shreveport, Louisiana and Dallas and Beaumont, Texas. The Company
has proposed a major expansion of its rail system through an acquisition (see
"Recent Developments").
The Company, through subsidiary operations, owns and operates coal,
petroleum coke and soda ash storage and barge and ship loading facilities
located in the Port Arthur, Texas area. The Company also owns approximately
three miles of deep water frontage in the same area, with direct access to the
Gulf of Mexico via the Intercoastal Waterway.
Major commodities handled by KCSR include coal, grain and other farm
products, petroleum, chemicals, paper and other forest products as well as other
general commodities and intermodal traffic. Coal is the principal commodity
handled by KCSR (amounting to approximately 31% of KCSR revenues in 1992),
through unit coal trains operating from the Powder River Basin in Wyoming and
interchanged to KCSR at Kansas City, Missouri. KCSR serves six electric
generating plants under long term contracts.
Southern Leasing Corporation, a subsidiary of Southern Credit Corporation (a
wholly-owned subsidiary of the Company), was formed in late 1983 and is involved
in finance leasing and other forms of secured financing, generally for equipment
acquisition by small to medium sized businesses.
FINANCIAL SERVICES
DST SYSTEMS, INC.
DST Systems, Inc. ("DST"), a wholly-owned subsidiary of the Company,
together with its subsidiaries and joint ventures, designs, maintains and
operates proprietary on-line shareowner accounting, record keeping and data
processing systems, and associated services, primarily for the mutual fund,
insurance, securities transfer, pharmaceutical, banking and real estate
industries. DST also provides document design, printing, mailing and storage
services for its customers. DST's financial services data center, the Winchester
Data Center, located in Kansas City, Missouri, is an 82,000 square foot facility
linked with more than 30,000 terminals through a dedicated telecommunications
network.
JANUS CAPITAL CORPORATION
Janus Capital Corporation ("Janus"), headquartered in Denver, Colorado and
81% owned by the Company, provides investment advisory and management services
to the Janus and IDEX mutual fund groups and certain other mutual funds, and
investment management services for individual, corporate,
3
charitable, and retirement accounts. Janus also manages insurance related
investment products. Janus has experienced substantial recent growth in
shareholder accounts and assets under management and, at December 31, 1992, had
approximately 1.5 million shareowner accounts and $15.5 billion of assets under
management, compared to 799,000 accounts and $8.7 billion of assets at December
31, 1991, and 337,000 accounts a $3.1 billion of assets at December 31, 1990.
RECENT DEVELOPMENTS
On September 21, 1992, the Company announced that it had entered into a
definitive merger agreement (the "Merger Agreement") whereby a subsidiary of the
Company would acquire MidSouth Corporation ("MidSouth") on certain terms and
conditions. MidSouth is a railroad holding company with four wholly-owned rail
subsidiaries operating over approximately 1,200 total track miles in
Mississippi, Louisiana, western Alabama and western Tennessee.
The Merger Agreement provides that the Company will acquire all of the
shares of MidSouth common stock for approximately $219.3 million, payable in
cash. The Company will finance the acquisition with existing funds and other
credit resources. At December 31, 1992, MidSouth and its subsidiaries had total
assets of $271 million and aggregate indebtedness of $139 million. If this
acquisition is consummated, the Company intends to refinance MidSouth's debt as
set forth under "Use of Proceeds."
The ratio of the Company's indebtedness to the sum of its total indebtedness
and total stockholders' equity (the "Debt to Equity Ratio") was 49% at December
31, 1992. If the MidSouth acquisition is consummated and financed as planned,
the Debt to Equity Ratio of the Company (assuming sale of the Debt Securities
offered hereby) will increase to approximately 60% and will in no event exceed
65%. The Company plans to reduce its Debt to Equity Ratio during the next two to
three years to a target ratio of 50% through debt repayment and earnings
retention; however, there can be no assurance that the Company will realize this
objective.
The Company and its subsidiaries own approximately 39.4% of the outstanding
shares of common stock of MidSouth and continue to purchase additional shares of
such stock from time to time in unsolicited market transactions. Under an
agreement with MidSouth, the Company cannot acquire more than 40% of MidSouth
stock, or engage in certain other transactions with respect to such stock,
without MidSouth's approval.
The acquisition has been approved by the Boards of Directors of both the
Company and MidSouth and by MidSouth shareholders, but remains subject to
exemption or approval by the Interstate Commerce Commission.
Additional information about this transaction appears in the Company's
Current Reports on Form 8-K dated March 30, 1993, which have been incorporated
herein by reference.
USE OF PROCEEDS
Net proceeds from the sale of the Debt Securities are expected to be added
to the general funds of the Company and used principally to repay debt and for
other general corporate purposes, including working capital, capital
expenditures and acquisitions of or investments in businesses and assets. In the
event that the proposed acquisition of MidSouth is consummated (see "The Company
- -- Recent Developments"), however, the net proceeds will be used to refinance
MidSouth's debt and to pay the prepayment penalties associated with such debt.
As of December 31, 1992, the debt proposed to be repaid out of the net proceeds
consisted of approximately (i) $40,000,000 of MidSouth's 11.44% senior notes,
(ii) $37,500,000 of MidSouth's 12.95% subordinated notes, and (iii) $54,100,000
of indebtedness incurred by MidSouth under term, revolving credit and other
agreements currently bearing interest ranging from approximately 6.1875% to
9.855% per annum.
4
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an indenture dated as of July 1,
1992 (the "Indenture") between the Company and The Chase Manhattan Bank, N.A.,
as trustee (the "Trustee"), as shall be set forth in the Prospectus Supplement
relating to the Debt Securities being offered thereby. The Indenture is filed as
an exhibit to the Registration Statement. The statements made under this heading
relating to the Debt Securities and the Indenture are summaries of the
provisions thereof and do not purport to be complete, and, where reference is
made to particular provisions of the Indenture, such provisions are incorporated
by reference as a part of such summaries, which are qualified in their entirety
by such references. Parenthetical references below are to the Indenture or to
sections of the Trust Indenture Act of 1939, as amended (the "TIA"), certain
provisions of which govern the terms of the Indenture, and, whenever any
particular provision of the Indenture or the TIA or any defined term used
therein is referred to, such provision or defined term is incorporated by
reference as a part of the statement in connection with which such reference is
made, and the statement in connection with which such reference is made is
qualified in its entirety by such reference. Capitalized terms used herein but
not otherwise defined shall have the meaning assigned to them in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Company and
will rank equally with all other unsecured and unsubordinated indebtedness of
the Company. At March 31, 1993, the Company had no secured indebtedness
outstanding. The Company's assets consist of the stock of its subsidiaries and
interests in unconsolidated affiliates. Accordingly, certain creditors of the
Company's subsidiaries will have a claim on the assets of such subsidiaries
prior to the holders of the Debt Securities. At March 31, 1993, the Company's
subsidiaries had an aggregate of $178 million of indebtedness outstanding, of
which $138 million was secured. In addition, the ability of the Company to pay
principal of, premium, if any, and interest on the Debt Securities will depend
on the Company's receipt of funds from its subsidiaries and unconsolidated
affiliates. Neither KCSR nor Janus is subject to any restrictions on the payment
of dividends. At December 31, 1992, DST had an aggregate of $15.6 million of
indebtedness outstanding under loan agreements maturing 1996 to 1998 with
covenants that, among other things, restrict DST's ability to declare dividends.
Under the most restrictive of such dividend covenants, dividends by DST in each
year are limited to 90% of DST's net income for such year. The amount of
dividends declared by DST in 1992 was $6.0 million, or 41% of DST's 1992 net
income. The Company does not presently anticipate that covenants will impair its
ability to meet its payment obligations with respect to the Debt Securities.
The Debt Securities may be issued in one or more series. The particular
terms of each series of Debt Securities, as well as any modifications of or
additions to the general terms of the Debt Securities as described herein that
may be applicable in the case of a particular series of Debt Securities, will be
described in the Prospectus Supplement relating to such series of Debt
Securities. Accordingly, for a description of the terms of a particular series
of Debt Securities, reference must be made to both the Prospectus Supplement
relating thereto and the description of Debt Securities set forth in this
Prospectus.
Reference is made to the Prospectus Supplement for the following terms of
the Debt Securities being offered thereby: (1) the title of such Debt
Securities; (2) any limit on the aggregate principal amount of such Debt
Securities; (3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of acceleration
of the maturity thereof or the method by which such portion shall be determined;
(4) the date or dates, or the method by which such date or dates will be
determined or extended, on which the principal of such Debt Securities will be
payable; (5) the rate or rates at which such Debt Securities will bear interest,
if any, or the method by which such rate or rates shall be determined; (6) the
date or dates from which interest, if any, on such Debt Securities shall accrue
or the method by which such date or dates shall be determined, the dates on
which such interest, if any, will be payable and the Regular Record Date, if
any, for the interest payable on any Registered Security of the series on any
Interest Payment Date, or the method by which any such date shall be determined,
and the basis on which interest shall be calculated if other than on the basis
of a 360-day year of twelve 30-day months; (7) the period or periods within
which, the price or
5
prices at which, the Currency in which and the other terms and conditions upon
which such Debt Securities may be redeemed in whole or in part, at the option of
the Company; (8) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof and the period or periods within
which or the date or dates on which, the price or prices at which, the Currency
in which and the other terms and conditions upon which such Debt Securities
shall be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation; (9) whether such Debt Securities are to be issuable as Registered
Securities or Bearer Securities or both, and whether such Debt Securities are to
be issuable, either temporarily or permanently, in global form and, if so,
whether beneficial owners of interests in any such permanent global security may
exchange such interests for Debt Securities of such series and of like tenor of
any authorized form and denomination and the circumstances under which any such
exchanges may occur, if other than in the manner provided in the Indenture, and,
if Registered Securities of the series are to be issuable as a global security,
the identity of the depository for such series; (10) if other than U.S. dollars,
the Currency in which such Debt Securities will be denominated and in which the
principal of (and premium, if any) and any interest on such Debt Securities will
be payable; (11) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or method
may be based on one or more Currencies, commodities, equity indices or other
indices) and the manner in which such amounts shall be determined; (12) whether
the Company or Holder may elect payment of the principal of (and premium, if
any) or interest, if any, on such Debt Securities in one or more Currencies
other than that in which such Debt Securities are denominated or stated to be
payable, the period or periods within which, and the terms and conditions upon
which, such election may be made, and the time and manner of determining the
exchange rate between the Currency in which such Debt Securities are denominated
or stated to be payable and the Currency in which such Debt Securities are to be
so payable; (13) the place or places, if any, other than or in addition to New
York City, New York, where the principal of (and premium, if any) and any
interest on such Debt Securities shall be payable, any Registered Securities of
the series may be surrendered for registration of transfer, such Debt Securities
may be surrendered for exchange and notice or demands to or upon the Company in
respect of such Debt Securities and the Indenture may be served; (14) if other
than denominations of $1,000 and any integral multiple thereof, the
denominations in which any Registered Securities of the series shall be issuable
and, if other than the denomination of $5,000, the denomination or denominations
in which any Bearer Securities of the series shall be issuable; (15) the
identity of the Trustee for such Debt Securities and, if other than the Trustee,
the Security Registrar and the Paying Agent; (16) the inapplicability to such
Debt Securities of the provisions of Article Fourteen of the Indenture described
herein under "Defeasance and Covenant Defeasance" and any provisions in
modification of, in addition to or in lieu of any of the provisions of such
Article; (17) the Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, the manner in which, or the Person
to whom, any interest on any Bearer Security of the series shall be payable, if
otherwise than upon presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which, or the manner in
which, any interest payable on a temporary global security on an Interest
Payment Date will be paid if other than in the manner provided in the Indenture;
(18) whether and under what circumstances the Company will pay Additional
Amounts as contemplated by Section 1005 of the Indenture on such Debt Securities
to any Holder who is not a United States person (including any modification to
the definition of such terms as contained in the Indenture as originally
executed) in respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Debt Securities rather
than pay such Additional Amounts (and the terms of any such option); (19) any
deletions from, modifications of or additions to the Events of Default or
covenants of the Company with respect to such Debt Securities, whether or not
such Events of Default or covenants are consistent with the Events of Default or
covenants set forth herein; (20) the date as of which any Bearer Securities of
the series and any temporary global security shall be dated if other than the
date of original issuance of the first of such Debt Securities; (21) if such
Debt Securities are to be issuable in definitive form (whether upon original
issue or upon exchange of a temporary security of such series) only upon receipt
of certain certificates or other
6
documents or satisfaction of other conditions, then the form or terms of such
certificates, documents or conditions; (22) the designation of the initial
Exchange Rate Agent, if any; and (23) any other terms of such Debt Securities.
The Indenture does not contain any provisions that may afford the Holders of
Debt Securities of any series protection in the event of a highly leveraged
transaction or other transaction that may occur in connection with a change of
control of the Company. Payment of any indebtedness outstanding under the
Company's revolving credit agreement, and under the ESOP secured term loan
agreements of the Company and DST, would become accelerated at the time of any
change in control of the Company, as defined in those agreements. At March 31,
1993, the amount outstanding under these credit and loan agreements aggregated
approximately $47.8 million. The Company is a party to an agreement with the
minority owners of Janus, and DST is a party to an agreement with its joint
venture partner in IFTC, which may impose financial and other obligations upon
the Company and DST, respectively, in the event of a change in control of the
Company, as defined in such agreements. The Company also has a commitment to
fund, through so-called "rabbi trusts", the payment of certain compensation and
benefit continuations and severance payments of management employees in the
event of defined changes in control. The aggregate amount of the Company's
financial obligations under the agreements governing the rabbi trusts and the
Company's investment in Janus and IFTC cannot be determined in advance of any
change-in-control event, but is expected to be material.
The Indenture provides that the Debt Securities may be issued in one or more
series thereunder, in each case as authorized from time to time by the Board of
Directors of the Company. (Section 301) The Indenture also provides that there
may be more than one Trustee under the Indenture, each with respect to one or
more different series of Debt Securities. See "Resignation of Trustee" herein.
At a time when two or more Trustees are acting, each with respect to only
certain series, the term "Debt Securities" as used herein shall mean the one or
more series with respect to which each respective Trustee is acting. In the
event there is more than one Trustee under the Indenture, the powers and trust
obligations of each Trustee as described herein shall extend only to the one or
more series of Debt Securities for which it is Trustee. If more than one Trustee
is acting under the Indenture, then the Debt Securities (whether of one or more
than one series) for which each Trustee is acting shall in effect be treated as
if issued under separate indentures.
Some of the Debt Securities may be issued as original issue discount
Securities (bearing no interest or interest at a rate which at the time of
issuance is below market rates) ("Original Issue Discount Securities"), to be
sold at a substantial discount below their stated principal amount. If any Debt
Security is not to be denominated in United States dollars, certain provisions
with respect thereto will be set forth in a foreign currency Prospectus
Supplement, which will specify the currency or currencies, including composite
currencies such as the European Currency Unit, in which the principal, premium,
if any, and any interest with respect to such Debt Security are to be paid,
along with any other terms relating to the non-United States dollar
denomination. Federal income tax, accounting and other special considerations
applicable to any such Original Issue Discount Securities or non-United States
dollar denominated Debt Securities will be described in a Prospectus Supplement
relating thereto.
The Indenture does not contain any provisions that would limit the ability
of the Company to incur indebtedness. Reference is made to the Prospectus
Supplement related to the series of Debt Securities offered thereby for
information with respect to any deletions from, modifications of or additions to
the Events of Default or covenants of the Company applicable to such Debt
Securities that are described herein.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue Debt Securities with terms different from those of Debt
Securities previously issued, without the consent of the Holders, to reopen a
previous issue of a series of Debt Securities and issue additional Debt
Securities of such series, in an aggregate principal amount determined by the
Company. (Section 301)
DENOMINATIONS, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable solely as Registered Securities,
solely as Bearer Securities or as both Registered Securities and Bearer
Securities. Registered Securities will be issuable in denominations of $1,000
and integral multiples of $1,000 and Bearer Securities will be issuable in the
denomination of
7
$5,000 or, in each case, in such other denominations as may be in the terms of
the Debt Securities of any particular series. The Indenture also provides that
Debt Securities of a series may be issuable in global form. Unless otherwise
indicated in the Prospectus Supplement, Bearer Securities will have interest
coupons attached. (Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. If (but only if)
provided in the Prospectus Supplement, Bearer Securities (with all unmatured
coupons, except as provided below, and all matured coupons in default) of any
series may be exchanged for Registered Securities of the same series of any
authorized denominations and of a like aggregate principal amount and tenor. In
such event, Bearer Securities surrendered in a permitted exchange for Registered
Securities between a Regular Record Date or a Special Record Date and the
relevant date for payment of interest shall be surrendered without the coupon
relating to such date for payment of interest, and interest will not be payable
on such date for payment of interest in respect of the Registered Security
issued in exchange for such Bearer Security, but will be payable only to the
Holder of such coupon when due in accordance with the terms of the Indenture.
Unless otherwise specified in the Prospectus Supplement, Bearer Securities will
not be issued in exchange for Registered Securities. (Section 305)
The Debt Securities may be presented for exchange as described above, and
Registered Securities may be presented for registration of transfer (duly
endorsed or accompanied by a written instrument of transfer), at the corporate
trust office of the Trustee in New York City, New York, or at the office of any
transfer agent designated by the Company for such purpose with respect to any
series of Debt Securities and referred to in the Prospectus Supplement. No
service charge will be made for any transfer or exchange of Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section 305) If a
Prospectus Supplement refers to any transfer agent (in addition to the Trustee)
initially designated by the Company with respect to any series of Debt
Securities, then the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Securities, then the Company will be required to maintain a
transfer agent in each Place of Payment for such series and, if Debt Securities
of a series may be issuable both as Registered Securities and as Bearer
Securities, then the Company will be required to maintain (in addition to the
Trustee) a transfer agent in a Place of Payment for such series located outside
the United States. The Company may at any time designate additional transfer
agents with respect to any series of Debt Securities. (Section 1002)
The Company shall not be required to i) issue, register the transfer of or
exchange Debt Securities of any series during a period beginning at the opening
of business 15 days before any selection of Debt Securities of that series to be
redeemed and ending at the close of business on (A) if Debt Securities of the
series are issuable only as Registered Securities, then the day of mailing of
the relevant notice of redemption and (B) if Debt Securities of the series are
issuable as Bearer Securities, then the day of the first publication of the
relevant notice of redemption or, if Debt Securities of the series are also
issuable as Registered Securities and there is no publication, then the mailing
of the relevant notice of redemption; (ii) register the transfer of or exchange
any Registered Security or portion thereof called for redemption, except the
unredeemed portion of any Registered Security being redeemed in part; (iii)
exchange any Bearer Security selected for redemption, except to exchange such
Bearer Security for a Registered Security of that series and of like tenor that
is simultaneously surrendered for redemption; or (iv) issue, register the
transfer of or exchange any Debt Security that has been surrendered for
repayment at the option of the Holder, except the portion, if any, thereof not
to be so repaid. (Section 305)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each a "Global Security") that will be
deposited with, or on behalf of, the "Depository" identified in the Prospectus
Supplement, or the applicable Pricing Supplement, relating to such series.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security
8
may not be transferred except as a whole by the Depository for such Global
Security to a nominee of such Depository or by a nominee of such Depository to
such Depository or another nominee of such Depository or by the Depository or
any nominee to a successor Depository or any nominee of such successor.
The Depository has advised as follows: it is a limited-purpose trust company
created to hold securities for its participating organizations and to facilitate
the clearance and settlement of securities transactions in such securities
between such participants through electronic book-entry changes in accounts of
its participants. Participants include securities brokers and dealers, banks and
trust companies, clearing corporations and certain other organizations. Access
to the Depository's system is also available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by the Depository only
through participants or indirect participants.
The specific terms of the depository arrangement with respect to a series of
Debt Securities and certain limitations and restrictions relating to a series of
Bearer Securities in the form of one or more Global Securities will be described
in the Prospectus Supplement relating to such series. Unless otherwise indicated
in the applicable Prospectus Supplement, the following provisions will apply to
all depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository. Such accounts will be designated by the
underwriters or agents with respect to such Debt Securities or by the Company if
such Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in such Global Security will be shown on, and the transfer
of that ownership will be effected only through, records maintained by the
applicable Depository or its nominee (with respect to interests of participants)
and the records of participants (with respect to interests of persons other than
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limit and such laws may impair the ability to transfer beneficial interests in a
Global Security.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Security will not be entitled to have any of the individual Debt Securities of
the series represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of such Debt Securities
of such series in definitive form and will not be considered the owners or
holders thereof under the Indenture.
Payments of principal of, premium, if any, and interest, if any, on
individual Debt Securities represented by a Global Security registered in the
name of a Depository or its nominee will be made to the Depository or its
nominee, as the case may be, as the registered owner of the Global Security
representing such Debt Securities. Neither the Company, the Trustee, any Paying
Agent, nor the Security Registrar for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global
Security for such Debt Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Subject to certain restrictions relating to Bearer Securities, the Company
expects that the Depository for a series of Debt Securities or its nominee, upon
receipt of any payment of principal, premium or interest in respect of a
permanent Global Security representing any of such Debt Securities, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Security for such Debt Securities as shown on the records of such Depository or
its nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name." Such payments will be the responsibility of such participants.
With respect to
9
owners of beneficial interests in a temporary Global Security representing
Bearer Securities, receipt by such beneficial owners of payments of principal,
premium or interest in respect thereof will be subject to additional
restrictions.
SAME-DAY SETTLEMENT AND PAYMENT
If provided in the Prospectus Supplement for a series of Debt Securities,
then settlement for such Debt Securities will be made by the agents or
underwriters in immediately available funds, and all payments of principal and
interest will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, if provided
in the Prospectus Supplement for a series of Debt Securities, such series of
Debt Securities will trade in the Depository's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in such series of Debt
Securities will therefore be required by the Depository to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading of the Debt Securities.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Subsidiary" means a corporation, partnership, joint venture, association or
other entity a majority of the outstanding voting stock or other equity interest
entitled ordinarily to vote in the election of the directors or other governing
body (however designated) of which is owned or controlled, directly or
indirectly, by the Company or by one or more other Subsidiaries of the Company
and, to the extent not otherwise included, includes IFTC. For the purposes of
this definition, "voting stock" means stock having voting power for the election
of directors, whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"Significant Subsidiary" means (i) any Subsidiary (other than Southern
Credit Corporation or any of its Subsidiaries) which at the time of
determination had total assets which, as of the date of the Company's most
recent quarterly consolidated balance sheet, constituted at least 10% of the
Company's total assets on a consolidated basis as of such date or (ii) any
Subsidiary which at the time of determination had revenues for the three-month
period ending on the date of the Company's most recent quarterly consolidated
statement of income which constituted at least 10% of the Company's total
revenues on a consolidated basis for such period.
LIMITATION ON LIENS
In the Indenture, the Company covenants that it will not nor will it permit
any Significant Subsidiary to create, assume, incur or suffer to exist any Lien
upon any stock or indebtedness, whether owned on the date of the Indenture or
thereafter acquired, of any Significant Subsidiary (other than a Significant
Subsidiary, the stock or indebtedness of which at the date of the Indenture was
subject to a Lien or required to be subject to a Lien) to secure any Obligation
(other than the Debt Securities) of the Company, any Subsidiary or any other
Person without in any such case making effective provision whereby all of the
Outstanding Debt Securities shall be directly secured equally and ratably with
such Obligation, excluding, however, from the operation of the foregoing
provisions any Lien upon stock or indebtedness of any corporation existing at
the time such corporation becomes a Significant Subsidiary or existing or
created upon stock or indebtedness of a Significant Subsidiary at the time of
acquisition of such stock or indebtedness and any extension, renewal or
replacement (or successive extensions, renewals or replacements) in whole or in
part of any such Lien; provided, however, that the principal amount of the
Obligation secured thereby shall not exceed the principal amount of the
Obligation so secured at the time of such extension, renewal or replacement; and
provided, further, that such Lien shall be limited to all or such part of the
stock or indebtedness which secured the Lien so extended, renewed or replaced.
(Section 1006)
10
EVENTS OF DEFAULT
The Indenture provides, with respect to any series of Debt Securities
Outstanding thereunder, that the following shall constitute Events of Default:
(i) default in the payment of any interest upon or any Additional Amounts
payable in respect of any Debt Security of that series or of any coupon
appertaining thereto when the same becomes due and payable, continued for 30
days; (ii) default in the payment of the principal of or any premium on any Debt
Security of that series at its Maturity; (iii) default in the deposit of any
sinking fund payment when due by the terms of any Debt Security of that series;
(iv) default in the performance or breach of any covenant or warranty of the
Company in the Indenture with respect to any Debt Security of that series,
continued for 60 days after written notice to the Company; (v) certain events in
bankruptcy, insolvency or reorganization; and (vi) any other Event of Default
provided with respect to Debt Securities of that series. (Section 501) The
Company is required to file with the Trustee, annually, an Officer's Certificate
as to the Company's compliance with all conditions and covenants under the
Indenture. (Section 1004) The Indenture provides that the Trustee may withhold
notice to the Holders of Debt Securities of any default (except payment defaults
on the Debt Securities) in the event the Trustee considers it in the interest of
the Holders of Debt Securities to do so. (Section 601)
If an Event of Default with respect to Debt Securities of a particular
series shall occur and be continuing, the Trustee or the Holders of not less
than 25% in principal amount of Outstanding Debt Securities of that series may
declare the Outstanding Debt Securities of that series due and payable
immediately. (Section 502)
Subject to the provisions relating to the duties of the Trustee, in case an
Event of Default with respect to Debt Securities of a particular series shall
occur and be continuing, the Trustee shall be under no obligation to exercise
any of its rights or powers under the Indenture at the request, order or
direction of any of the Holders of Debt Securities of such series, unless such
Holders shall have offered to the Trustee reasonable indemnity and security
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request. (Section 507 and TIA Section 315) Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
principal amount of the Outstanding Debt Securities of such series shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee under the Indenture or exercising any trust
or power conferred on the Trustee with respect to the Debt Securities of that
series. (Section 512)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
the Debt Securities of such series and any related coupons waive any past
default under the Indenture with respect to such series and its consequences,
except a default (i) in the payment of the principal of (or premium, if any) or
interest on or Additional Amounts payable in respect of any Debt Security of
such series or (ii) in respect of a covenant or provision that cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security of such series affected thereby. (Section 513)
MERGER OR CONSOLIDATION
The Indenture provides that the Company may not consolidate with or merge
into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any Person unless either the Company is the
continuing corporation or such corporation or Person assumes by supplemental
indenture all the obligations of the Company under the Indenture and the Debt
Securities and immediately after the transaction no default shall exist.
(Section 801)
MODIFICATION OR WAIVER
Modification and amendment of the Indenture as it applies to any series of
Debt Securities may be made by the Company and the Trustee with the consent of
the Holders of not less than a majority in principal amount of all Outstanding
Debt Securities of such series; provided, that no such modification or amendment
may, without the consent of the Holder of each Outstanding Debt Security of such
series affected thereby, among other things: (i) change the Stated Maturity of
the principal of (or premium, if any, on) or any installment of principal of or
interest on any Debt Security, (ii) reduce the principal amount or the rate of
interest on or any Additional Amounts payable in respect of or any premium
payable upon the redemption
11
of any Debt Security; (iii) change any obligation of the Company to pay
Additional Amounts in respect of any Debt Security; (iv) reduce the amount of
the principal of an original issue discount Debt Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof; (v)
adversely affect any right of repayment at the option of the Holder of any Debt
Security; (vi) change the place or currency of payment of principal of or any
premium or interest on any Debt Security; (vii) impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof or any Redemption Date or Repayment Date therefor; (viii) reduce the
percentage in principal amount of the Outstanding Debt Securities necessary to
modify or amend the Indenture or to consent to any waiver thereunder or reduce
the requirements for voting or quorum; or (ix) modify the foregoing requirements
or reduce the percentage in principal amount of the Outstanding Debt Securities
necessary to waive any past default. (Section 902)
Modification and amendment of the Indenture may be made by the Company and
Trustee without the consent of any Holder for any of the following purposes: (i)
to evidence the succession of another Person to the Company as obligor under the
Indenture; (ii) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Debt Securities; (iii) to add Events of Default
for the benefit of the Holders of all or any series of Debt Securities; (iv) to
add or change any provisions of the Indenture to facilitate the issuance of
Bearer Securities; (v) to change or eliminate any provisions of the Indenture,
provided, that any such change or elimination shall become effective only when
there are no Debt Securities Outstanding of any series created prior thereto
that is entitled to the benefit of such provision; (vi) to establish the form or
terms of Debt Securities of any series and any related coupons; (vii) to provide
for the acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee;
(viii) to close the Indenture with respect to the authentication and delivery of
additional series of Debt Securities, to cure any ambiguity, defect or
inconsistency in the Indenture, provided, that such action does not adversely
affect the interests of Holders of Debt Securities of any series in any material
respect; or (ix) to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of Debt Securities, provided, that such action shall not adversely affect the
interests of the Holders of any Debt Securities in any material respect.
(Section 901)
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series of Debt Securities if that series are issuable as
Bearer Securities. (Section 1501) A meeting may be called at any time by the
Trustee and, also, upon request, by the Company or the Holders of at least 10%
in principal amount of the Outstanding Debt Securities of such series, in any
such case upon notice given as provided in the Indenture. (Section 1502) Except
for any consent that must be given by the Holder of each Debt Security affected
thereby, as described above, any resolution presented at a meeting or adjourned
meeting at which a quorum is present may be adopted by the affirmative vote of
the Holders of a majority in principal amount of the Outstanding Debt Securities
of that series; provided, that any resolution with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
may be made, given or taken by the Holders of a specified percentage, which is
less than a majority, in principal amount of the Outstanding Debt Securities of
that series may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of Holders
of Debt Securities of any series duly held in accordance with the Indenture will
be binding on all Holders of Debt Securities of that series and the related
coupons. The quorum at any meeting called to adopt a resolution and at any
reconvened meeting will be the persons entitled to vote a majority in principal
amount of the Outstanding Debt Securities of that series; provided, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, then the Persons entitled
to vote such specified percentage in principal amount of the Outstanding Debt
Securities of such series will constitute a quorum. Notwithstanding the
foregoing provisions, if any action is to be taken at a meeting of Holders of
Debt Securities of any series with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that the
Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series, then (i) there shall be no minimum quorum requirement for such meeting
and (ii) the principal amount of the Outstanding Debt
12
Securities of such series that are voted in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall
determine whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture. (Section 1504)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that, unless the provisions of Article Fourteen are
made inapplicable to the Debt Securities of or within any series and any related
coupons pursuant to Section 301 of the Indenture, then the Company may elect
either (i) to defease and be discharged from any and all obligations with
respect to such Debt Securities and any related coupons (except for the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange of
such Debt Securities and any related coupons, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities and any related coupons, to maintain
an office or agency in respect of such Debt Securities and any related coupons
and to hold moneys for payment in trust) ("defeasance") (Section 1402) or (ii)
to be released from its obligations with respect to such Debt Securities and any
related coupons under Section 1006 (being the restriction described under
"Limitation on Liens") or, if provided pursuant to Section 301 of the Indenture,
then its obligations with respect to any other covenant, and any omission to
comply with such obligations shall not constitute a default or an Event of
Default with respect to such Debt Securities and any related coupons ("covenant
defeasance") (Section 1403), in either case upon the irrevocable deposit by the
Company with the Trustee (or other qualifying trustee), in trust, of an amount,
in such Currency in which such Debt Securities and any related coupons are then
specified as payable at Stated Maturity, or Government Obligations (as defined
below), or both, applicable to such Debt Securities and any related coupons
(with such applicability being determined on the basis of the Currency in which
such Debt Securities are then specified as payable at Stated Maturity) that
through the scheduled payment of principal and interest in accordance with their
terms will provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest, if any, on such Debt Securities and any related
coupons, and any mandatory sinking fund or analogous payments thereon, on the
scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the Trustee an Opinion of Counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities and any related coupons
will not recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred, and such Opinion of Counsel, in the case
of defeasance under clause (i) above, must refer to and be based upon a ruling
of the Internal Revenue Service or a change in applicable United States federal
income tax law occurring after the date of the Indenture. (Section 1404)
"Government Obligations" means securities that are (i) direct obligations of
the United States of America or the government that issued the Foreign Currency
in which the Debt Securities of a particular series are payable for the payment
of which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or such government that issued the Foreign Currency in
which the Debt Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided, that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the Government Obligation or the specific payment
of interest on or principal of the Government Obligation evidenced by such
depository receipt. (Section 101)
13
Unless otherwise provided in the Prospectus Supplement, if, after the
Company has deposited funds or Government Obligations to effect defeasance or
covenant defeasance with respect to Debt Securities of any series, (i) the
Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the terms of such Debt Security to receive payment in a Currency
other than that in which such deposit has been made in respect of such Debt
Security or (ii) the Currency in which such deposit has been made in respect of
any Debt Security of such series ceases to be used by its government of
issuance, then the indebtedness represented by such Debt Security shall be
deemed to have been, and will be, fully discharged and satisfied through the
payment of the principal of (and premium, if any) and interest, if any, on such
Debt Security as they become due out of the proceeds yielded by converting the
amount so deposited in respect of such Debt Security into the Currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable Market Exchange Rate. (Section 1405)
Unless otherwise provided in the Prospectus Supplement, all payments of
principal of (and premium, if any) and interest, if any, and Additional Amounts,
if any, on any Debt Security that is payable in a Foreign Currency that ceases
to be used by its government of issuance shall be made in U.S. dollars. (Section
312)
In the event the Company effects covenant defeasance with respect to any
Debt Securities and any related coupons and such Debt Securities and any related
coupons are declared due and payable because of the occurrence of any Event of
Default other than the Event of Default described in clause (iv) or (vi) under
"Events of Default" with respect to any covenant with respect to which there has
been defeasance, the Currency and Government Obligations on deposit with the
Trustee will be sufficient to pay amounts due on such Debt Securities and any
related coupons at the time of their Stated Maturity but may not be sufficient
to pay amounts due on such Debt Securities and any related coupons at the time
of the acceleration resulting from such Event of Default. However, the Company
would remain liable to make payment of such amounts due at the time of
acceleration.
The Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Debt Securities of or
within an particular series and any related coupons.
RESIGNATION OF TRUSTEE
The Trustee may resign or be removed with respect to one or more series of
Debt Securities and a successor Trustee may be appointed to act with respect to
such series. (Section 608) In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities, each such Trustee
shall be a Trustee of a trust under the Indenture separate and apart from the
trust administered by any other such Trustee (Section 609), and any action
described herein to be taken by the "Trustee" may then be taken by each such
Trustee with respect to, and only with respect to, the one or more series of
Indenture Securities for which it is Trustee.
THE TRUSTEE
The Company may from time to time maintain bank accounts and have other
customary banking relationships with and obtain credit facilities and lines of
credit from the Trustee in the ordinary course of business. The Trustee may also
serve as trustee under other indentures covering other debt securities of the
Company.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium, interest or Additional Amounts on Registered
Securities issued in certificated form will be made at any office or agency to
be maintained by the Company in New York City, New York, except that, at the
option of the Company, payment of any interest (including Additional Amounts, if
any) may be made (i) by check mailed to the address of the person entitled
thereto as such address shall appear in the applicable Security Register or (ii)
by wire transfer to an account maintained by the payee located inside the United
States. (Sections 307, 1001 and 1002) In the case of Global Securities, such
payment will be made to the Depository or its nominee in accordance with the
then-existing arrangements between the Paying Agent and the Depository. See
"Description of Debt Securities -- Global Securities" above. Unless otherwise
indicated
14
in an applicable Prospectus Supplement, payment of any installment of interest
on Registered Securities will be made to the person in whose name such
Registered Security is registered at the close of business on the Regular Record
Date for such payment. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium, interest or Additional Amounts on Bearer
Securities will be payable, subject to any applicable laws and regulations, at
the offices of such Paying Agents outside the United States as the Company may
designate from time to time. (Section 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of interest and certain Additional
Amounts on Bearer Securities on any Interest Payment Date will be made only
against surrender of the coupon relating to the applicable Interest Payment
Date. (Section 1001) Unless otherwise provided in an applicable Prospectus
Supplement, no payment with respect to any Bearer Security will be made at any
office or agency of the Company in the United States or by check mailed to any
address in the United States or by transfer to an account maintained with a bank
located in the United States. Notwithstanding the foregoing, payments of
principal, premium, if any, and interest, if any, and Additional Amounts, if
any, in respect of Bearer Securities payable in U.S. dollars will be made at the
office of the Company's Paying Agent in New York City, New York, if (but only
if) payment of the full amount thereof in U.S. dollars at all offices or
agencies located outside the United States is illegal or effectively precluded
by exchange controls or other similar restrictions. (Section 1002)
Any Paying Agents located outside the United States and any other Paying
Agents in the United States initially designated by the Company for the Debt
Securities will be named in the Prospectus Supplement. The Company may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that, if Debt Securities of a series are issuable only as Registered
Securities, then the Company will be required to maintain a Paying Agent in each
Place of Payment for such series and, if Debt Securities of a series are also
issuable as Bearer Securities, then the Company will be required to maintain (i)
a Paying Agent in New York City, New York, for payments with respect to any
Registered Securities of the series (and for payments with respect to Bearer
Securities of the series in the circumstances described above, but not
otherwise) and (ii) a Paying Agent in a Place of Payment located outside the
United States where Debt Securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment; provided, that if the Debt
Securities of such series are listed on any stock exchange located outside the
United States and such stock exchange shall so require, then the Company will
maintain a Paying Agent in any other required city located outside the United
States, as the case may be, for the Debt Securities of such series. (Section
1002).
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities being offered hereby (i) through
agents, (ii) through underwriters, (iii) through dealers and (iv) directly to
purchasers. The Prospectus Supplement sets forth the terms of the offering of
the Debt Securities to which such Prospectus Supplement relates, including the
name or names of the underwriters, dealers or agents, the purchase price of the
securities and the proceeds to the Company from the sale, any underwriting
discounts and other items constituting underwriters' compensation and any
discounts and commissions allowed or paid to dealers or agents. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If an underwriter or underwriters are utilized in the sale of the Debt
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached.
The underwriter or underwriters with respect to an underwritten offering of Debt
Securities are set forth in the Prospectus Supplement relating to such offering
and, if an underwriting syndicate is used, the managing underwriter or
underwriters are set forth on the cover of such Prospectus Supplement. Only
underwriters named in a Prospectus Supplement will be deemed to be underwriters
in connection with the Debt Securities described therein. Firms not so named
will have no direct or indirect participation in the offering of such Debt
Securities, although such a firm may participate in the distribution of such
Debt Securities under circumstances entitling it to a dealer's commission. If
any underwriter or underwriters are utilized in the sale of the Debt Securities,
the underwriting agreement may provide that the obligations of the
15
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of such offered Debt Securities will be
obligated to purchase all such offered Debt Securities if any are purchased. In
connection with the sale of Debt Securities, underwriters may be deemed to have
received compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Debt Securities
for whom they may act as agent. Underwriters may sell Debt Securities to or
through dealers, and any such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
Debt Securities may be offered and sold through agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Debt Securities in respect of which this Prospectus is delivered is named in,
and any commissions payable by the Company to such agent are described in, the
Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement,
any such agent will be acting on a reasonable efforts basis for the period of
its appointment.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered the Company will sell such Debt Securities to
the dealer, as principal. The dealer may then resell such Debt Securities to the
public at varying prices to be determined by such dealer at the time of resale.
Any such dealer and the terms of any such sale are set forth in the Prospectus
Supplement relating thereto.
Underwriters, dealers and agents participating in the distribution of Debt
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Debt
Securities may be deemed to be underwriting discounts and commissions, under the
Securities Act.
Underwriters, dealers and agents participating in the distribution of Debt
Securities may be entitled, under agreements which may be entered into with the
Company, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments such underwriters, dealers or agents may be required to make
in respect thereof.
The Debt Securities may be sold at a fixed price or prices, which may be
changed, or from time to time at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or negotiated prices. The
Company also may offer and sell the Debt Securities in exchange for one or more
of its outstanding issues of debt.
Underwriters, dealers or agents may be customers of, engage in transactions
with, or perform services for the Company in the ordinary course of business.
Offers to purchase Debt Securities may be solicited directly by the Company
and sales thereof may be made by the Company directly to institutional investors
or others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
are described in the Prospectus Supplement relating thereto.
LEGAL MATTERS
The legality of the Debt Securities will be passed on for the Company by
Watson, Ess, Marshall & Enggas, Kansas City, Missouri. Certain legal matters
relating to the Debt Securities will be passed upon for any underwriter or agent
by Shearman & Sterling, New York, New York.
EXPERTS
The audited financial statements and financial statement schedules of the
Company incorporated in this Prospectus by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992, have been so
incorporated in reliance on the reports of Price Waterhouse, independent
accountants, given on the authority of that firm as experts in auditing and
accounting.
16
The audited financial statements of IFTC incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, have been so incorporated in reliance on the reports of Ernst
& Young, independent auditors, given on the authority of that firm as experts in
auditing and accounting.
The audited financial statements of MidSouth Corporation incorporated in
this Prospectus by reference to the Company's Current Report on Form 8-K dated
March 30, 1993, have been so incorporated in reliance on the reports of Arthur
Andersen & Co., independent public accountants, given on the authority of that
firm as experts in auditing and accounting.
17
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS IN
CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE DEBT SECURITIES OFFERED HEREBY BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
The Company...................................................... S-2
Recent Developments.............................................. S-2
Use of Proceeds.................................................. S-2
Selected Consolidated Historical and Pro Forma Financial Data.... S-3
Description of Debentures........................................ S-4
Underwriting..................................................... S-6
Legal Matters.................................................... S-6
Experts.......................................................... S-6
PROSPECTUS
Available Information............................................ 2
Incorporation of Certain Documents by Reference.................. 2
The Company...................................................... 3
Use of Proceeds.................................................. 4
Description of Debt Securities................................... 5
Plan of Distribution............................................. 15
Legal Matters.................................................... 16
Experts.......................................................... 16
$100,000,000
KANSAS CITY SOUTHERN
INDUSTRIES, INC.
7% DEBENTURES DUE DECEMBER 15, 2025
SALOMON BROTHERS INC
FURMAN SELZ INCORPORATED
A.G. EDWARDS & SONS, INC.
PROSPECTUS SUPPLEMENT
DECEMBER 13, 1995