Date: Thu, 20 Nov 1997 17:39:39 GMT Server: Apache/1.2.4 Last-Modified: Fri, 25 Apr 1997 17:47:41 GMT ETag: "113d-3cfe-3360ee3d" Content-Length: 15614 Accept-Ranges: bytes Connection: close Content-Type: text/html KCSI First Q 1977 Financials

Wednesday April 23

Kansas City Southern Industries Inc. announces record first quarter 1997 earnings

KANSAS CITY, MO April 23, 1997
Kansas City Southern Industries Inc. ("KCSI" or "company") announced record first quarter 1997 earnings of $28.5 million (77 cents per share) compared to $19.9 million (50 cents per share) in first quarter 1996.

These record earnings were largely due to improved operating margins. Operating income increased 34% over first quarter 1996; revenues also improved 13% over 1996 or $228.1 million in first quarter 1997 vs. $201.3 million in first quarter 1996.

First quarter 1997 earnings of the Financial Asset Management ("FAM") segment increased more than 45% over comparable 1996 attributable to a 37% growth in assets under management since March 31, 1996, effective cost containment, and increased equity earnings from DST Systems Inc. ("DST").

The Transportation segment reported a 25% increase in first quarter 1997 earnings, primarily because of higher earnings from The Kansas City Southern Railway Co. ("KCSR") due to improved operations, lower interest expense, increased equity earnings and a non-recurring gain on the sale of track.

During first quarter 1997, the company repurchased more than 800,000 shares of its common stock. With these transactions, the company has repurchased over 9 million of its common shares since January 1995, effectively completing the 1995 repurchase program (for 8 million shares) and part of the 1996 program (for 3 million shares).

Effective Jan. 1, 1997, the company assigned the various components formerly comprising the Corporate & Other segment to either the Transportation or FAM segment. Transportation includes KCSR, transportation-related affiliates, and transportation-related Holding Company amounts. FAM consists of Janus Capital Corp. ("Janus"), Berger Associates Inc. ("Berger"), the company's approximate 41% investment in DST, and FAM-related Holding Company amounts. Prior year's information has been restated to reflect the new segment presentation.

  Earnings per Share and Common Shares Outstanding Comparisons

                                     Quarter Ended March 31
                                       1997           1996

Transportation                       $    .08        $ .06
Financial Asset Management                .69          .44
Total Earnings per Share             $    .77        $ .50
Weighted Average Primary Common
 Shares Outstanding (thousands)        36,739       40,010
Actual Common Shares Outstanding
 (thousands)                           35,673       38,392


Financial Asset Management

FAM first quarter 1997 earnings of $25.5 million exceeded the $17.5 million reported in first quarter 1996. Revenues were $33.1 million higher than comparable 1996, primarily from 45% higher average assets under management by Janus and Berger in first quarter 1997 compared to first quarter 1996. FAM operating income improved 64% to $41.6 million compared to first quarter 1996.

Janus and Berger assets under management increased $2.9 billion from Dec. 31, 1996 (to $53.2 billion at March 31, 1997), as a result of net asset sales of $3.3 billion during 1997, partially offset by market depreciation. Shareowner accounts grew 3% from Dec. 31, 1996, to approximately 2.8 million accounts as of March 31, 1997.

Revenues for the first quarter increased 47% over first quarter 1996, and FAM costs and expenses increased at a lower proportionate rate, leading to improved operating margins.

First quarter 1997 equity earnings from DST increased to $6.1 million vs. $1.9 million in comparable 1996, primarily due to the company's share of DST's $10.2 million non-recurring charge in first quarter 1996 related to a former DST equity affiliate, The Continuum Co. Inc. Exclusive of this item, DST's first quarter 1997 earnings reflect an increase in mutual funds, output processing and subscriber management revenues and higher operating margins compared to first quarter 1996.

Interest expense for the quarter ended March 31, 1997, increased over 1996 reflecting the company's common stock repurchases.

 

Transportation

Transportation increased its contribution to KCSI's earnings by 25%, from $2.4 million in the first quarter of 1996 to $3.0 million for comparable 1997. Results were positively impacted by continued cost control and efficiency measures at KCSR, as well as KCSR achieving during March the highest revenue month since October 1995. The Railway experienced volume increases in chemicals, paper, metal products and food products with coal showing the only significant decrease due to four unplanned outages at utilities served by KCSR, and weather problems at mines in the Powder River Basin originating the coal.

Kansas City Southern Railway, on a stand-alone basis, recorded net income of $3.1 million exclusive of special items. This represents a 63% increase over first quarter 1996. Including a one-time gain of $0.9 million on the sale of the 104 miles of abandoned rail lines, net income was $4.0 million after tax, or 110% above last year. These net income gains were achieved in spite of handling nearly 6,000 fewer carloads of coal in 1997 vs. 1996 due to the unplanned outages and weather-related problems.

Revenue per carload increased by 2.4% for the first quarter of 1997 compared to the 1996 period, indicative of a focus on higher yield business. Holding Company and transportation-related affiliates' revenues decreased $4.0 million primarily as a result of the dissolution of Southern Leasing Corp. ("SLC") in connection with the Southern Capital Corp. ("Southern Capital") joint venture formation in October 1996.

KCSR, exclusive of its subsidiary, Southern Group Inc., reported a 3% decrease in operating expenses. The decrease was attributable to reductions in salaries and wages, car hire and purchased services. KCSR's first quarter employee count was 210 people less than comparable 1996, with labor fringes as a percentage of revenue declining by 2.5% to 35.08%, which compares very favorably to industry averages. Reduced KCSR operating costs were partially offset by higher first quarter fuel costs and increased equipment lease costs attributable to the Southern Capital transaction.

Equity earnings increased $0.5 million over first quarter 1996, reflecting the inclusion of Southern Capital which became a KCSI investment in fourth quarter 1996.

Interest expense decreased from first quarter 1996 as a result of the repayment of debt associated with borrowings for the company's common stock repurchases. Interest expense related to the indebtedness incurred in connection with the company's investment in Transportacion Ferroviaria Mexicana S. de R.L. de C.V. is being capitalized until the final installment of the Ferrocarril del Noreste, S.A. de C.V. purchase price is made.

 

Business Outlook:

Landon H. Rowland, president and chief executive officer, commented: "The company's first-quarter results confirm the growth of our principal businesses, while improving our operating margins. Both Janus and KCS Railway were able to achieve this dual success. The Financial Asset Management group built on its record 1996 earnings, increasing its contribution to consolidated net income over first quarter 1996. The benefits of initiatives during the second half of 1996 to stabilize or reduce costs under KCSR's improved service structure were evident in first quarter 1997."

"The company's efforts to grow its core businesses within reasonable cost parameters, together with the activity with Transportacion Maritima Mexicana to complete the purchase of Mexico's Northeast Railway, underscore our emphasis on value-added growth."

"All of us at KCSI were saddened by the death of Mr. Paul H. Henson, who served as chairman of our board of directors since May 1990. With Mr. Henson's death on April 12, 1997, our company lost an outstanding individual and leader -- influential, dynamic, forward-thinking and respected. His contributions and leadership will continue to guide KCSI."

The comments above include forward-looking statements, and KCSI's actual operating results may differ from these comments. Readers need to refer to KCSI's Current Report on Form 8-K dated Nov. 12, 1996, for a discussion of the factors that could cause such differences, which Form 8-K is hereby incorporated by reference.


                Kansas City Southern Industries Inc.
                      and Subsidiary Companies
            Consolidated Condensed Statements of Income
            (dollars in millions, except per-share data)
                           (Unaudited)

                                              Three Months 
                                             Ended March 31,
                                          1997             1996

Revenues                                $ 228.1          $ 201.3

Costs and Expenses                        156.1            141.8
Depreciation and amortization              17.9             19.0

Operating income                           54.1             40.5

Equity in net earnings of 
  unconsolidated affiliates:
    DST Systems Inc.                        6.1              1.9
    Other                                   1.2              1.3
Interest expense                          (13.1)           (12.9)
Other, net                                  5.9              4.6

Pretax income                              54.2             35.4


Income tax provision                       21.0             12.5
Minority Interest in consolidated
  earnings                                  4.7              3.0

Net income                              $  28.5          $  19.9


Per Share Data:
Primary Common shares outstanding 
  (in thousands)                         36,739           40,010
Primary earnings per Common share       $  0.77          $  0.50

Kansas City Southern Industries Inc.

and Subsidiary Companies

Segment Financial Information

(dollars in millions)

(Unaudited)

                            Three Months Ended March 31, 1997

                                  Holding Company
                                 and Transportation-  Consolidated
Transportation            KCSR   Related Affiliates   Transportation

Revenues                $ 121.0      $   3.6             $124.6
Costs and expenses         93.5          3.7               97.2
Depreciation and 
  amortization             13.6          1.3               14.9
    Operating income 
      (loss)               13.9         (1.4)              12.5
Equity in net earnings 
  of unconsolidated
  affiliates                0.5          0.6                1.1
Interest expense           (9.7)        (1.1)             (10.8)
Other, net                  2.4                             2.4
  Pretax income (loss)      7.1         (1.9)               5.2
Income tax provision 
  (benefit)                 3.1         (0.9)               2.2
  Net Income (loss)     $   4.0      $  (1.0)            $  3.0


                            Three Months Ended March 31, 1996

                                  Holding Company
                                 and Transportation-  Consolidated
Transportation            KCSR   Related Affiliates   Transportation

Revenues                $ 123.3      $   7.6             $130.9
Costs and expenses         94.1          5.6               99.7
Depreciation and 
  amortization             14.6          1.4               16.0
    Operating income 
      (loss)               14.6          0.6               15.2
Equity in net earnings 
  of unconsolidated
  affiliates                             0.6                0.6   
Interest expense          (12.1)        (0.1)             (12.2)
Other, net                  0.9         (0.3)               0.6
  Pretax income (loss)      3.4          0.8                4.2
Income tax provision 
  (benefit)                 1.4          0.4                1.8
  Net Income (loss)     $   2.0      $   0.4             $  2.4


                            Three Months Ended March 31, 1997

                                 Holding Company and
                                   Financial Asset    Consolidated
Financial Asset        Janus and     Management-     Financial Asset
  Management             Berger   Related Affiliates   Management    

Revenues                $ 103.6      $  (0.1)            $103.5
Costs and expenses         57.6          1.3               58.9
Depreciation and 
  amortization              2.9          0.1                3.0
    Operating income 
      (loss)               43.1         (1.5)              41.6
Equity in net earnings 
  of unconsolidated
  affiliates:       
    DST Systems Inc.                     6.1                6.1
    Other                   0.1                             0.1
Interest income (expense)  (1.5)        (0.8)              (2.3)
Other, net                  0.3          3.2                3.5
  Pretax income            42.0          7.0               49.0
Income tax provision       16.4          2.4               18.8
Minority interest in 
  consolidated earnings     4.7                             4.7
  Net Income            $  20.9      $   4.6             $ 25.5


                            Three Months Ended March 31, 1996

                                 Holding Company and
                                   Financial Asset    Consolidated
Financial Asset        Janus and     Management-     Financial Asset
  Management             Berger   Related Affiliates   Management    

Revenues                $  70.1      $   0.3             $ 70.4
Costs and expenses         40.5          1.6               42.1
Depreciation and 
  amortization              3.0                             3.0
    Operating income 
      (loss)               26.6         (1.3)              25.3
Equity in net earnings 
  of unconsolidated
  affiliates:       
    DST Systems Inc.                     1.9                1.9
    Other                                0.7                0.7
Interest income (expense)  (1.1)         0.4               (0.7)
Other, net                  0.8          3.2                4.0
  Pretax income            26.3          4.9               31.2
Income tax provision       10.6          0.1               10.7
Minority interest in 
  consolidated earnings     3.0                             3.0
  Net Income            $  12.7      $   4.8             $ 17.5



CONTACT:  Kansas City Southern Industries Inc., Kansas City
	             Landon H. Rowland, 816/983-1393
	             Joseph D. Monello, 816/983-1213

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