SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 20, 2001
KANSAS CITY SOUTHERN INDUSTRIES, INC.
-------------------------------------
(Exact name of company as specified in its charter)
DELAWARE 1-4717 44-0663509
--------------------- ------------- -------------------
(State or other jurisdiction (Commission file (IRS Employer
of incorporation) number) Identification Number)
114 West 11th Street, Kansas City, Missouri 64105
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code:
(816) 983 - 1303
Not Applicable
(Former name or former address if changed since last report)
Item 4. Changes in Registrant's Certifying Accountant
This filing is made pursuant to the disclosure requirements of Item 304(a) of
Regulation S-K, Changes in and disagreements with accountants on accounting and
financial disclosure.
Changes in Registrant's Certifying Accountant
On June 20, 2001, Kansas City Southern Industries, Inc. ("the Registrant")
notified the accounting firm of PricewaterhouseCoopers LLP ("PWC"), the
Registrant's principal accountant during the two most recent fiscal years, that
PWC had been replaced as the Registrant's principal accountant. Additionally on
June 20, 2001, the Registrant engaged the accounting firm of KPMG LLP ("KPMG")
as its principal accountant for the current fiscal year.
For the two most recent fiscal years, the reports of PWC on the Registrant's
financial statements contained no adverse opinion or disclaimer of opinion and
were not qualified as to uncertainty, audit scope or accounting principle.
The decision to change certifying accountants was discussed with Registrant's
Audit Committee and approved by the Chairman of the Registrant's Audit
Committee.
The selection of KPMG was made after the completion of a competitive proposal
process, which involved all five major accounting firms and began in April 2001.
Disagreements with Accountants on Accounting and Financial Disclosure
In connection with its audits for the two most recent fiscal years and through
June 20, 2001, there have been no disagreements with PWC on any matter of
accounting principles or practices, financial statements disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
PWC would have caused them to make reference thereto in their report on the
financial statements for such years except that:
During the year ended December 31, 2000, the Registrant completed a transaction
to monetize, for a one-time payment, the rights to the future income stream
associated with certain billboard advertising sites located on the right of way
of the Registrant's railroad operating property. The transaction was completed
with a third party vendor to the Registrant, which provides advertising signage
services to other companies in the railroad industry. Based upon the details of
the transaction, the Registrant believed that the associated transaction should
be accounted for under the guidance of Staff Accounting Bulletin No. 101 -
"Revenue Recognition in Financial Statements" ("SAB 101") and consistent with
railroad industry accounting practices. After reviewing industry practice and
SAB 101 related to the specifics of this transaction, the Registrant concluded
that the appropriate criteria, of both industry accounting practices and the
guidance in SAB 101, were met to record the initial one-time payment as income
in the Statement of Income for the year ended December 31, 2000. The
Registrant's certifying accountant, PWC, believed that SAB 101 did not apply and
railroad industry accounting practice would not take precedence over standards
promulgated by the Financial Accounting Standards Board. PWC believed that the
transaction should be evaluated under lease accounting rules which, in this
instance, would require that the up-front payment be initially deferred and
recognized over future periods. After further discussion between the Registrant
and PWC, the Registrant recorded the transaction as recommended by PWC in the
financial statements for the year ended December 31, 2000.
During the period of time that the Registrant was exploring with PWC the various
accounting rules regarding this matter and following PWC's expression of its
conclusion with regard to this matter, the Registrant inquired of PWC as to
other avenues that might be available to the Registrant. PWC acknowledged that
one alternative might be for the Registrant to seek a SAS 50 opinion from
another independent accountant. In early February 2001, Registrant's management
discussed this transaction with KPMG to obtain an understanding of relevant
industry practice and application of SAB 101. Also, at the Registrant's request,
PWC discussed the issue with representatives of the other major accounting
firms, including KPMG. KPMG communicated to the Registrant that this issue was
discussed with representatives of the major accounting firms and that PWC
reaffirmed their earlier position on the proper accounting treatment of the
transaction. The Registrant did not request a SAS 50 opinion or report from
KPMG, and none was issued. Additionally, KPMG did not express any specific
viewpoint to the Registrant regarding the accounting for the transaction.
The Registrant's management and PWC discussed this matter with the Registrant's
Audit Committee.
Additionally, the Registrant has authorized PWC to respond fully to inquiries of
KPMG concerning this matter.
Other Reportable Events
The Registrant became aware that as a result of a reorganization during 2001
between two of the participants in the Grupo TFM venture (in which the
Registrant has a minority interest), Grupo TFM may be reported by one of the
participants as a consolidated subsidiary under International Accounting
Standards. The Registrant has historically treated Grupo TFM as a foreign
corporate joint venture under US generally accepted accounting principles and,
accordingly, has not provided deferred income taxes at the statutory rates on
the difference between the financial accounting and income tax bases in its
investment in Grupo TFM. PWC has informed the Registrant that at the time of
their replacement, PWC had not completed the analysis and testing necessary to
confirm the Registrant's continued accounting for Grupo TFM as a foreign
corporate joint venture under these circumstances and, accordingly, that PWC
believes this matter represents a reportable event under Regulation SK Section
304(a)(1)(v)(D).
The Registrant's management and PWC discussed this matter with the Registrant's
Audit Committee.
Additionally, the Registrant has authorized PWC to respond fully to inquiries of
KPMG concerning this matter.
Item 7. Exhibits
Exhibit No. Document
16.1 Letter of PricewaterhouseCoopers
LLP, addressed to the Securities
and Exchange Commission
indicating whether they agree
with the Registrant's
disclosures made pursuant to
item 304(a).
.SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
Kansas City Southern Industries, Inc.
Date: June 26, 2001 By: /s/ Louis G. Van Horn
----------------------------
Louis G. Van Horn
Vice President and Comptroller
(Principal Accounting Officer)
EXHIBIT 16.1
[PRICEWATERHOUSECOOPERS LLP LETTERHEAD]
June 25, 2001
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We have read the statements made by Kansas City Southern Industries, Inc. (copy
attached), which we understand will be filed with the Commission, pursuant to
Item 4 of Form 8-K, as part of the Company's Form 8-K report dated June 20,
2001. We agree with the statements concerning our Firm in such Form 8-K.
However, we make no comment with respect to comments regarding the Registrant's
consultation with KPMG LLP relating to the matter described in such Form 8-K
under "Disagreements with Accountants on Accounting and Financial Disclosure".
Very truly yours,
/s/ PRICEWATERHOUSECOOPERS LLP
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 20, 2001
KANSAS CITY SOUTHERN INDUSTRIES, INC.
-------------------------------------
(Exact name of company as specified in its charter)
DELAWARE 1-4717 44-0663509
--------------------- ------------- -------------------
(State or other jurisdiction (Commission file (IRS Employer
of incorporation) number) Identification Number)
114 West 11th Street, Kansas City, Missouri 64105
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code:
(816) 983 - 1303
Not Applicable
(Former name or former address if changed since last report)
Item 4. Changes in Registrant's Certifying Accountant
This filing is made pursuant to the disclosure requirements of Item 304(a) of
Regulation S-K, Changes in and disagreements with accountants on accounting and
financial disclosure.
Changes in Registrant's Certifying Accountant
On June 20, 2001, Kansas City Southern Industries, Inc. ("the Registrant")
notified the accounting firm of PricewaterhouseCoopers LLP ("PWC"), the
Registrant's principal accountant during the two most recent fiscal years, that
PWC had been replaced as the Registrant's principal accountant. Additionally on
June 20, 2001, the Registrant engaged the accounting firm of KPMG LLP ("KPMG")
as its principal accountant for the current fiscal year.
For the two most recent fiscal years, the reports of PWC on the Registrant's
financial statements contained no adverse opinion or disclaimer of opinion and
were not qualified as to uncertainty, audit scope or accounting principle.
The decision to change certifying accountants was discussed with Registrant's
Audit Committee and approved by the Chairman of the Registrant's Audit
Committee.
The selection of KPMG was made after the completion of a competitive proposal
process, which involved all five major accounting firms and began in April 2001.
Disagreements with Accountants on Accounting and Financial Disclosure
In connection with its audits for the two most recent fiscal years and through
June 20, 2001, there have been no disagreements with PWC on any matter of
accounting principles or practices, financial statements disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
PWC would have caused them to make reference thereto in their report on the
financial statements for such years except that:
During the year ended December 31, 2000, the Registrant completed a transaction
to monetize, for a one-time payment, the rights to the future income stream
associated with certain billboard advertising sites located on the right of way
of the Registrant's railroad operating property. The transaction was completed
with a third party vendor to the Registrant, which provides advertising signage
services to other companies in the railroad industry. Based upon the details of
the transaction, the Registrant believed that the associated transaction should
be accounted for under the guidance of Staff Accounting Bulletin No. 101 -
"Revenue Recognition in Financial Statements" ("SAB 101") and consistent with
railroad industry accounting practices. After reviewing industry practice and
SAB 101 related to the specifics of this transaction, the Registrant concluded
that the appropriate criteria, of both industry accounting practices and the
guidance in SAB 101, were met to record the initial one-time payment as income
in the Statement of Income for the year ended December 31, 2000. The
Registrant's certifying accountant, PWC, believed that SAB 101 did not apply and
railroad industry accounting practice would not take precedence over standards
promulgated by the Financial Accounting Standards Board. PWC believed that the
transaction should be evaluated under lease accounting rules which, in this
instance, would require that the up-front payment be initially deferred and
recognized over future periods. After further discussion between the Registrant
and PWC, the Registrant recorded the transaction as recommended by PWC in the
financial statements for the year ended December 31, 2000.
During the period of time that the Registrant was exploring with PWC the various
accounting rules regarding this matter and following PWC's expression of its
conclusion with regard to this matter, the Registrant inquired of PWC as to
other avenues that might be available to the Registrant. PWC acknowledged that
one alternative might be for the Registrant to seek a SAS 50 opinion from
another independent accountant. In early February 2001, Registrant's management
discussed this transaction with KPMG to obtain an understanding of relevant
industry practice and application of SAB 101. Also, at the Registrant's request,
PWC discussed the issue with representatives of the other major accounting
firms, including KPMG. KPMG communicated to the Registrant that this issue was
discussed with representatives of the major accounting firms and that PWC
reaffirmed their earlier position on the proper accounting treatment of the
transaction. The Registrant did not request a SAS 50 opinion or report from
KPMG, and none was issued. Additionally, KPMG did not express any specific
viewpoint to the Registrant regarding the accounting for the transaction.
The Registrant's management and PWC discussed this matter with the Registrant's
Audit Committee.
Additionally, the Registrant has authorized PWC to respond fully to inquiries of
KPMG concerning this matter.
Other Reportable Events
The Registrant became aware that as a result of a reorganization during 2001
between two of the participants in the Grupo TFM venture (in which the
Registrant has a minority interest), Grupo TFM may be reported by one of the
participants as a consolidated subsidiary under International Accounting
Standards. The Registrant has historically treated Grupo TFM as a foreign
corporate joint venture under US generally accepted accounting principles and,
accordingly, has not provided deferred income taxes at the statutory rates on
the difference between the financial accounting and income tax bases in its
investment in Grupo TFM. PWC has informed the Registrant that at the time of
their replacement, PWC had not completed the analysis and testing necessary to
confirm the Registrant's continued accounting for Grupo TFM as a foreign
corporate joint venture under these circumstances and, accordingly, that PWC
believes this matter represents a reportable event under Regulation SK Section
304(a)(1)(v)(D).
The Registrant's management and PWC discussed this matter with the Registrant's
Audit Committee.
Additionally, the Registrant has authorized PWC to respond fully to inquiries of
KPMG concerning this matter.
Item 7. Exhibits
Exhibit No. Document
16.1 Letter of PricewaterhouseCoopers
LLP, addressed to the Securities
and Exchange Commission
indicating whether they agree
with the Registrant's
disclosures made pursuant to
item 304(a).
.SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
Kansas City Southern Industries, Inc.
Date: June 26, 2001 By: /s/ Louis G. Van Horn
----------------------------
Louis G. Van Horn
Vice President and Comptroller
(Principal Accounting Officer)
EXHIBIT 16.1