Kansas City Southern Industries Reports Improved Second Quarter and Year to Date Income From Continuing Operations.Business Editors KANSAS CITY Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , Mo.--(BUSINESS WIRE)--July 26, 2000 Spin-Off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. of Stilwell Financial Inc. On July 12, 2000, Kansas City Southern Industries Kansas City Southern Industries (NYSE: KSU) is the former diversified parent company of the Kansas City Southern Railway, a Class I railroad headquartered in the Quality Hill neighborhood of Kansas City, Missouri, USA. , Inc. ("KCSI KCSI Kansas City Southern Industries, Inc KCSI Knight Commander of the Star of India " or "Company") completed its spin-off of Stilwell Financial Inc. ("Stilwell") through a special dividend of Stilwell common stock distributed to KCSI common stockholders of record on June 28, 2000. The spin-off occurred after the close of business of the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. on July 12, 2000, and each KCSI stockholder received two shares of the common stock of Stilwell for every one share of KCSI common stock owned on the record date. The Internal Revenue Service has ruled that the spin-off will not be taxable for Federal income tax purposes to KCSI or KCSI stockholders. Also on July 12, 2000, KCSI completed a reverse stock split whereby every two shares of KCSI common stock was converted into one share of KCSI common stock. This reverse stock split had previously been approved by KCSI common stockholders. The results of operations discussed herein provide information only related to the continuing transportation operations of KCSI, exclusive of the discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of Stilwell. Earnings Analysis and Commentary KCSI reported second quarter 2000 income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the (i.e. net income of the Transportation segment exclusive of Stilwell) of $8.8 million (15(cent) per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share) compared to $5.2 million (9(cent) per diluted share) in second quarter 1999; a diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of improvement of 67%. This $3.6 million increase resulted primarily from an increase in equity earnings of Grupo TFM TFM Traffic Flow Management TFM TeX Font Metrics TFM Transportacion Ferroviaria Mexicana TFM Trusted Facility Manual TFM Testicular Feminization TFM Total Facility Management TFM Tentative Final Monograph TFM Transaction Flow Manager TFM Thermally Fused Melamine of $7.5 million quarter to quarter, partially offset by a decline in U.S. operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $1.3 million and an increase in interest expense of $3.8 million. KCSI's consolidated second quarter 2000 revenues and operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. declined $4.3 million and $3 million, respectively, resulting in this decline in operating income. For the six months ended June 30, 2000, income from continuing operations increased 50% to $19.2 million, or 33(cent) per diluted share, from $12.8 million, or 22(cent) per diluted share, for the six months ended June 30, 1999. Similar to the second quarter results, an increase in equity earnings of Grupo TFM of $15.2 million for the six months ended June 30, 2000, was partially offset by a decline in U.S. operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $7.7 million and an increase in interest expense of $7.3 million. Consolidated revenues declined 2% and consolidated expenses remained relatively flat compared with the same 1999 six-month period. In connection with the Company's re-capitalization of its debt structure during January 2000, KCSI retired approximately $398 million in long-term indebtedness prior to their scheduled maturities. Accordingly, KCSI recorded extraordinary debt retirement costs of approximately $5.9 million (net of income taxes), or 10(cent) per diluted share, in first quarter 2000. Income from continuing operations adjusted for the extraordinary item was $13.3 million, or 23(cent) per diluted share for the six months ended June 30, 2000.
DILUTED EARNINGS PER SHARE AND COMMON SHARES COMPARISONS
Second Quarter Year to Date
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Income from
continuing operations:
U.S. operations $ 0.11 $ 0.13 $ 0.23 $ 0.30
Grupo TFM and
associated interest 0.04 (0.04) 0.10 (0.08)
---- ---- ---- ----
Income from continuing
operations 0.15 0.09 0.33 0.22
Extraordinary debt
retirement costs - - (.10) -
---- ---- ---- ----
Total diluted earnings
per share from
continuing operations,
net of the
extraordinary item $ 0.15 $ 0.09 $ 0.23 $ 0.22
==== ==== ==== ====
Weighted Average Diluted
Common Shares
Outstanding
(thousands) (1) 57,614 57,067 57,539 56,967
(1) KCSI stockholders previously approved a reverse split of KCSI
common stock that became effective upon completion of the separation
of its Transportation and Financial Services segment. As described
further below, this separation occurred on July 12, 2000, and
accordingly, at the close of the New York Stock Exchange on July 12,
2000, each two shares of KCSI common stock was converted to one share
of KCSI common stock. All periods presented have been restated to
reflect this reverse split.
Second Quarter Following the separation of Stilwell from the Company on July 12, 2000, KCSI is comprised of, among others, The Kansas City Southern Railway The Kansas City Southern Railway (AAR reporting marks KCS) is a United States-based Class I railroad operating over 3,130 track miles in 12 central and southeastern states. Founded in 1887, the railroad provides the shortest route from Kansas City to the Gulf of Mexico. Company ("KCSR KCSR Kansas City Southern Railway Company KCSR Kansas City Street Racing "), Gateway Western Railway The Gateway Western Railway (AAR reporting marks GWWR) was a Class II railroad that operated 408 miles of former Chicago and Alton Railroad track between Kansas City and St. Louis, Missouri. Company ("Gateway Western") and equity investments in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. ("Grupo TFM") and Mexrail, Inc. KCSI reported income from continuing operations of $8.8 million for the three months ended June 30, 2000, compared to $5.2 million in the same 1999 period. KCSI's consolidated second quarter 2000 revenues totaled $144.4 million versus $148.7 million in 1999. This $4.3 million decrease resulted primarily from lower combined KCSR and Gateway Western revenues of approximately $3.6 million. Weaknesses in the chemical and agricultural/minerals sectors were partially offset by growth in the paper and forest products, automotive and intermodal businesses, along with increased yields in most lines of business. Sector declines were led by export grain as a result of very weak demand and soda ash soda ash: see sodium carbonate. revenues where a new export terminal on the origin railroad led to substantial volume reductions. In spite of diesel fuel costs, which rose approximately 43% in second quarter 2000 compared to the same period in 1999, second quarter 2000 operating costs operating costs npl → gastos mpl operacionales decreased approximately $3.0 million, primarily due to operational efficiencies at KCSR and Gateway Western. These operational improvements led to a quarter over quarter decrease in salaries, wages and fringe benefits fringe benefits, n.pl the benefits, other than wages or salary, provided by an employer for employees (e.g., health insurance, vacation time, disability income). , car hire and materials/supplies expenses. In addition to higher fuel costs, these declines were partially offset by higher lease expense associated with 50 new locomotives This is a list of locomotives (classes, or individual locomotives) that currently have articles in Wikipedia.
A ratio that shows the efficiency of management by comparing operating expense to net sales: for second quarter 2000 was 84.9% compared to 84.5% in the same 1999 period. Equity earnings from Grupo TFM increased $7.5 million quarter to quarter, reflecting primarily continued revenue improvements at Grupo TFM. Excluding the effects of deferred taxes, which may be significantly impacted by fluctuations in the relative value of the Mexican peso, Grupo TFM's contribution to the Company's second quarter 2000 income from continuing operations increased by $3.7 million over comparable 1999. In second quarter 2000, Grupo TFM's revenues and operating income increased 17% and 34%, respectively, resulting in an operating ratio of 67.7% versus 71.9% in second quarter 1999. The Company reports its equity in Grupo TFM under U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) while Grupo TFM reports under International Accounting Standards. Under U.S. GAAP, the deferred tax benefit for Grupo TFM was $3.2 million for second quarter 2000 compared to a deferred tax expense of $10.3 million for second quarter 1999. Second quarter 2000 interest expense increased 26% from the prior year quarter due to higher interest rates and amortization of debt issuance costs associated with the January 2000 debt re-capitalization. Year to Date The Company's income from continuing operations for the six months ended June 30, 2000, totaled $19.2 million versus $12.8 million in the same 1999 period. KCSI's consolidated revenues declined approximately 2%, while operating expenses remained relatively unchanged period to period. Year to date combined KCSR/Gateway Western revenues decreased $2.8 million due to volume declines in coal and chemical/petroleum traffic and export grain traffic. Similar to second quarter, these declines were partially offset by higher paper/forest and intermodal/automotive revenues, which increased 3% and 14%, respectively. Combined KCSR/Gateway Western operating costs increased approximately $3.5 million period to period, primarily as a result of higher fuel costs and lease expense (as discussed above), partially offset by improvements in salaries/wages, car hire and materials/supplies expense. Lower revenues and higher expenses during the first six months of 2000, resulted in a combined KCSR/Gateway Western operating ratio of 85.5% compared to 83.4% for the six months ended June 30, 1999. Equity earnings from Grupo TFM improved $15.2 million for the six months ended June 30, 2000, compared to the six months ended June 30, 1999. Excluding the effects of deferred taxes, Grupo TFM's contribution to the Company's year to date 2000 income from continuing operations increased by $8.3 million over the comparable 1999 period. Grupo TFM's revenues increased 23% period to period, while operating income increased nearly 47% resulting in an operating ratio of 70.1% for the six months ended June 30, 2000, compared to 75.0% for the same prior period. Under U.S. GAAP, the deferred tax benefit for Grupo TFM was $18.8 million for the six months ended June 30, 2000, compared to a deferred tax expense of $5.6 million for the same period in 1999. Business Outlook Growth Prospects Strong; Management Restricted Stock Purchase Michael R. Haverty, KCSI President and Chief Executive Officer, said: "We are pleased with the overall results of the second quarter and first six months of 2000, but certainly not satisfied with the performance of domestic operations. Equity earnings from our investment in Grupo TFM for both second quarter and year to date 2000 have increased dramatically compared to the same 1999 periods and have been the catalyst for our earnings growth during 2000. Grupo TFM's year to date revenues, operating income and pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. are up an impressive 23%, 47% and 240%, respectively. Management believes that the future opportunities for Grupo TFM are unprecedented in the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. marketplace and that the six-month results provide a tremendous beginning to what appears to be an outstanding 2000. "Although our domestic operations continue to be affected by highly competitive revenue pressures, higher fuel prices and higher interest expense, we have dramatically improved the efficiency and cost structure of our railroad operations. Improvements in locomotive locomotive, vehicle used to pull a train of unpowered railroad cars. Types of Locomotives The steam-powered locomotive played a key role during the development and golden age of railroading, but, despite its long and picturesque history, it has efficiency have led to substantially improved train speeds and coal cycle times. The number of foreign owned cars on-line has been significantly reduced resulting in lower car hire payments to other railroads. These improvements have also helped to reduce the amount of overtime hours worked and the number of relief crews used. Through the focused efforts of our marketing employees, we intend to work on improving our revenues while our operating employees provide superior customer service throughout our rail network. "With the completion of the spin-off of Stilwell behind us, KCSI management is excited about the opportunities and challenges that await us as we operate as a separate Transportation-only entity. KCSI management, from top to bottom, is confident about the future prospects of the railroad franchise. This enthusiasm is evidenced by the overwhelming response to a new restricted stock and option incentive program introduced following completion of the spin-off. Under this plan, management employees recently purchased approximately 466 thousand shares of KCSI restricted common stock at market value with the funds coming from individual employees. "As the vision of the NAFTA NAFTA in full North American Free Trade Agreement Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's railroad becomes a reality, we will continue to pursue the growth of our unique NAFTA franchise through strategic alliances, marketing agreements, focused marketing efforts and superior customer service, and we will aggressively seek new opportunities to enhance shareholder value." This press release includes statements concerning potential future events involving the Company, which could materially differ from the events that actually occur. The differences could be caused by a number of factors including those factors identified in KCSI's December 31, 1999, Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , the Current Report on Form 8-K/A dated June 3, 1997, each filed by the Company with the Securities and Exchange Commission (Commission file no. 1-4717). The Company will not update any forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. in this press release to reflect future events or developments. |
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