AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 2005
REGISTRATION NO. 333-_______
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
KANSAS CITY SOUTHERN
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 44-0663509
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
JAY M. NADLMAN, ESQ.
427 WEST 12TH STREET KANSAS CITY SOUTHERN
KANSAS CITY, MISSOURI 427 WEST 12TH STREET
64105 KANSAS CITY, MISSOURI 64105
816-983-1303 816-983-1384
(Address, Including Zip Code, and
Telephone Number, Including (Name, Address, Including Zip Code,
Area Code, of Registrant's Principal and Telephone Number, Including Area
Executive Offices) Code, of Agent For Service)
----------------
COPIES TO:
JOHN F. MARVIN, ESQ.
KEVIN R. SWEENEY, ESQ.
SONNENSCHEIN NATH & ROSENTHAL LLP
4520 MAIN STREET, SUITE 1100
KANSAS CITY, MISSOURI 64111
(816) 460-2400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________
If this Form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become effective upon
filing with the Commission pursuant to Rule 462(e) under the Securities Act,
check the following box. [X]
If this Form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.D. filed to register additional
securities or additional classes of securities pursuant to Rule 413(b) under the
Securities Act, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
AMOUNT PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED(2) OFFERING PRICE(3) FEE(4)
------------------------------ ------------- ----------------- ------------
Common Stock(5) (6) (6) (6)
Preferred Stock (6) (6) (6)
Stock Purchase Contracts (6) (6) (6)
Stock Purchase Units (6) (6) (6)
Debt Securities (6) (6) (6)
(1) Kansas City Southern is registering an unspecified amount of common stock,
preferred stock, stock purchase contracts, stock purchase units, debt
securities and guarantees on debt securities in reliance on Rule 457(r) and
Rule 456(b) under the Securities Act. Any securities registered hereunder
may be sold separately or as units with other securities registered
hereunder and may include hybrid securities including a combination of
features of certain of the securities listed above.
(2) This registration statement also covers an indeterminate amount of
securities that may be issued in exchange for, or upon conversion of or
exercise of, or as dividends on, as the case may be, any securities
registered hereunder that provide for conversion, exercise, exchange or
payment of dividends. Any securities registered hereunder may be sold
separately or as units with other securities registered hereunder. An
indeterminate principal amount or number of debt securities, preferred
stock, and common stock may be issued from time to time at indeterminate
prices.
(3) No separate consideration will be received for securities that are issued
upon conversion of or for dividends on other securities.
(4) Deferred in accordance with Rule 456(b) of the Securities Act.
(5) Includes associated rights to purchase Series A Preferred Stock of KCS
pursuant to the Rights Agreement between Kansas City Southern and UMB Bank,
n.a., dated as of September 29, 2005.
(6) Not required to be included in accordance with Rule 457(r) of the
Securities Act.
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PROSPECTUS
KANSAS CITY SOUTHERN
COMMON STOCK, PREFERRED STOCK, STOCK PURCHASE CONTRACTS,
STOCK PURCHASE UNITS, AND DEBT SECURITIES*
*GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
KANSAS CITY SOUTHERN
OR THE KANSAS CITY SOUTHERN RAILWAY COMPANY,
AND CERTAIN SUBSIDIARIES OF KANSAS CITY SOUTHERN
We will provide the specific terms of these securities in supplements to
this prospectus. Information on any selling stockholder, and the time and manner
in which the Kansas City Southern or any selling stockholder may offer and sell
securities under this prospectus, will be provided under the "Selling
Stockholder" section of a prospectus supplement that will be filed supplementing
the information in this prospectus.
The common stock of Kansas City Southern ("KCS") is listed on the New York
Stock Exchange under the symbol "KSU." On December 1, 2005, the last reported
sale price of KCS's common stock was $25.56 per share.
----------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER BEFORE
INVESTING IN THE SECURITIES, SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS
PROSPECTUS.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
The date of this prospectus is December 2, 2005
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. You should not assume that the information contained or
incorporated by reference in this prospectus is accurate as of any date other
than the date on the front cover of this prospectus or the date of such
information as specified in this prospectus, if different.
3
TABLE OF CONTENTS
PAGE
ABOUT THIS PROSPECTUS................................................ 5
RISK FACTORS......................................................... 6
USE OF PROCEEDS...................................................... 14
RATIOS OF EARNINGS TO FIXED CHARGES.................................. 14
PLAN OF DISTRIBUTION................................................. 14
LEGAL MATTERS........................................................ 15
EXPERTS.............................................................. 15
WHERE YOU CAN FIND MORE INFORMATION.................................. 16
FORWARD-LOOKING STATEMENTS........................................... 17
PART II INFORMATION NOT REQUIRED IN PROSPECTUS....................... 19
SIGNATURES........................................................... 23
EXHIBIT INDEX........................................................ 27
4
5
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission ("SEC") utilizing a "shelf" registration
process or continuous offering process. Under this shelf registration process,
the Company or one or more selling stockholders ("Selling Stockholder") may,
from time to time, sell the securities described in this prospectus in one or
more offerings. This prospectus provides you with a general description of the
securities which may be offered by the Company or any Selling Stockholder. Each
time the Company sells securities, we will provide you with this prospectus and,
in certain cases a prospectus supplement containing specific information about
the terms of the securities being offered. Each time any Selling Stockholder
sells securities, the Selling Stockholder is required to provide you with this
prospectus and a prospectus supplement identifying and containing specific
information about the Selling Stockholder and the terms of the securities being
offered. That prospectus supplement may include additional risk factors or other
special considerations applicable to those securities. Any prospectus supplement
may also add, update, or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus
supplement, you should rely on the information in that prospectus supplement.
You should read both this prospectus and any prospectus supplement together with
additional information described under "Where You Can Find More Information."
Unless we have indicated otherwise, references in this prospectus to "KCS"
mean Kansas City Southern and references to the "Company," "we," "us," "our,"
and similar terms refer to KCS and our consolidated subsidiaries.
--------------
5
RISK FACTORS
RISKS RELATED TO OUR BUSINESS
WE COMPETE AGAINST OTHER RAILROADS AND OTHER TRANSPORTATION PROVIDERS.
Our domestic and international operations are subject to competition from
other railroads, many of which are much larger and have significantly greater
financial and other resources. In addition, we are subject to competition from
truck carriers and from barge lines and other maritime shipping. Increased
competition has resulted in downward pressure on freight rates. Competition with
other railroads and other modes of transportation is generally based on the
rates charged, the quality and reliability of the service provided and the
quality of the carrier's equipment for certain commodities. While we must build
or acquire and maintain our infrastructure, truck carriers and maritime shippers
and barges are able to use public rights-of-way. Continuing competitive
pressures and declining margins, future improvements that increase the quality
of alternative modes of transportation in the locations in which we operate, or
legislation that provides motor carriers with additional advantages, such as
increased size of vehicles and less weight restrictions, could have a material
adverse effect on our results of operations, financial condition and liquidity.
If the railroad industry in general, and our Mexican operations in
particular, are unable to preserve their competitive advantages vis-a-vis the
trucking industry, our projected revenue growth from our Mexican operations
could be adversely affected. Additionally, the revenue growth attributable to
our Mexican operations could be affected by, among other factors, its inability
to grow its existing customer base, negative macroeconomic developments
impacting the United States and Mexican economies, and failure to capture
additional cargo transport market share from the shipping industry and other
railroads.
In February 2001, a NAFTA tribunal ruled in an arbitration between the
United States and Mexico that the United States must allow Mexican trucks to
cross the border and operate on United States highways. NAFTA called for Mexican
trucks to have unrestricted access to highways in United States border states by
1995 and full access to all United States highways by January 2000. However, the
United States has not followed the timetable because of concerns over Mexico's
trucking safety standards. On March 14, 2002, as part of its agreement under
NAFTA, the United States Department of Transportation issued safety rules that
allow Mexican truckers to apply for operating authority to transport goods
beyond the 20-mile commercial zones along the Unites States-Mexico border. These
safety rules require Mexican carriers seeking to operate in the United States to
pass, among other things, safety inspections, to obtain valid insurance with a
United States registered insurance company, to conduct alcohol and drug testing
for drivers and to obtain a United States Department of Transportation
identification number. Mexican commercial vehicles with authority to operate
beyond the commercial zones will be permitted to enter the United States only at
commercial border crossings and only when a certified motor carrier safety
inspector is on duty. Given these recent developments, there can be no assurance
that truck transport between Mexico and the United States will not increase
substantially in the future. Such an increase could affect our ability to
continue converting traffic to rail from truck transport because it may result
in an expansion of the availability, or an improvement of the quality, of the
trucking services offered in Mexico.
We face significant competition from other railroads, in particular the
Union Pacific Railroad Company and Burlington Northern Santa Fe Railway Company
in the United States and Ferrocarril Mexicano, S.A. de C.V. ("Ferromex") in
Mexico.
Through TFM's concession with the Mexican government (the "Concession") we
have the right to control and operate the southern half of the rail-bridge at
Laredo, Texas. Under the Concession, TFM must grant to Ferromex the right to
operate over a north-south portion of its rail lines between Ramos Arizpe near
Monterrey and the city of Queretaro that constitutes over 600 kilometers of
TFM's main track. Using these trackage rights, Ferromex may be able to compete
with TFM over its rail lines for traffic between Mexico City and the United
States. The Concession also requires TFM to grant rights to use certain portions
of its tracks to Ferrosur and the "belt railroad" operated in the greater Mexico
City area by the Ferrocarril y Terminal del Valle de Mexico, S.A. de C.V. (the
Mexico City Railroad and Terminal), thereby providing Ferrosur with more
efficient access to certain Mexico City industries. As a result of having to
grant
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trackage rights to other railroads, we incur additional maintenance costs and
lose the flexibility of using a portion of our tracks at all times.
In recent years, there has been significant consolidation among major
North American rail carriers. The resulting merged railroads could attempt to
use their size and pricing power to block other railroads' access to efficient
gateways and routing options that are currently and have been historically
available. There can be no assurance that further consolidation will not have an
adverse effect on our operations.
OUR BUSINESS STRATEGY, OPERATIONS AND GROWTH RELY SIGNIFICANTLY ON JOINT
VENTURES AND OTHER STRATEGIC ALLIANCES.
Operation of our integrated rail network and our plans for growth and
expansion rely significantly on joint ventures and other strategic alliances.
Our operations are dependent on interchange, trackage rights, haulage
rights and marketing agreements with other railroads and third parties that
enable us to exchange traffic and utilize trackage we do not own. Our ability to
provide comprehensive rail service to our customers depends in large part upon
our ability to maintain these agreements with other railroads and third parties.
The termination of, or the failure to renew, these agreements could adversely
affect our business, financial condition and results of operations. We are also
dependent in part upon the financial health and efficient performance of other
railroads. For example, much of Tex-Mex's traffic moves over the UP's lines via
trackage rights, a significant portion of our grain shipments originate with
IC&E pursuant to our marketing agreement with it, and BNSF is our largest
partner in the interchange of rail traffic. There can be no assurance that we
will not be materially adversely affected by operational or financial
difficulties of other railroads.
Pursuant to the Concession, TFM is required to grant rights to use
portions of its tracks to Ferromex, Ferrosur and the Terminal Valle de Mexico
(the "TVFM"). Applicable law stipulates that Ferromex, Ferrosur and the TVFM are
required to grant to TFM rights to use portions of their tracks. Applicable law
provides that the Ministry of Transportation is entitled to set the rates in the
event that TFM and the party to whom it is granting the rights cannot agree on a
rate. TFM and Ferromex have not been able to agree upon the rates each of them
is required to pay the other for interline services and haulage and trackage
rights. In February 2001, TFM initiated an administrative proceeding requesting
a determination of such rates by the Ministry of Transportation, which
subsequently issued a ruling establishing rates using the criteria set forth in
the Mexican railroad services law and regulations. TFM and Ferromex appealed the
rulings before the Mexican Federal Courts due to, among other things, a
disagreement with the methodology employed by the Ministry of Transportation in
calculating the trackage rights and interline rates. TFM and Ferromex also
requested and obtained a suspension of the effectiveness of the ruling pending
resolution of this appeal. We cannot predict whether TFM will ultimately prevail
in this proceeding and whether the rates TFM is ultimately allowed to charge
will be adequate to compensate it.
OUR LEVERAGE COULD ADVERSELY AFFECT OUR ABILITY TO FULFILL OBLIGATIONS UNDER
VARIOUS DEBT INSTRUMENTS AND OPERATE OUR BUSINESS. WE ARE LEVERAGED AND WILL
HAVE SIGNIFICANT DEBT SERVICE OBLIGATIONS.
Our level of debt could make it more difficult for us to borrow money in
the future, will reduce the amount of money available to finance our operations
and other business activities, exposes us to the risk of increased interest
rates, makes us more vulnerable to general economic downturns and adverse
industry conditions, could reduce our flexibility in planning for, or responding
to, changing business and economic conditions, and may prevent us from raising
the funds necessary to repurchase all of certain senior notes that could be
tendered upon the occurrence of a change of control, which would constitute an
event of default on all of the Convertible Preferred Stock that could be put to
KCS under certain circumstances. Our failure to comply with the financial and
other restrictive covenants in our debt instruments, which, among other things,
require us to maintain specified financial ratios and limit our ability to incur
debt and sell assets, could result in an event of default that, if not cured or
waived, could have a material adverse effect on our business or prospects. If we
do not have enough cash to service our debt, meet other obligations and fund
other liquidity needs, we may be required to take actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing all
or part of our existing debt, or seeking additional equity capital. We cannot
assure that any of these
7
remedies, including obtaining appropriate waivers from our lenders, can be
effected on commercially reasonable terms or at all. In addition, the terms of
existing or future debt agreements may restrict us from adopting any of these
alternatives.
In addition, the level of indebtedness at TFM may also limit cash flow
available for capital expenditures, acquisitions, working capital and other
general corporate purposes because a substantial portion of cash flow from our
operations must be dedicated to servicing debt; expose us to risks in exchange
rate fluctuations, because any devaluation of the peso would cause the cost of
TFM's dollar-denominated debt to increase; and place us at a competitive
disadvantage in Mexico compared to our Mexican competitors that have less debt
and greater operating and financing flexibility than TFM does.
Our business is capital intensive and requires substantial ongoing
expenditures for, among other things, improvements to roadway, structures and
technology, acquisitions, leases and repair of equipment, and maintenance of our
rail system. Our failure to make necessary capital expenditures to maintain our
operations could impair our ability to accommodate increases in traffic volumes
or service existing customers.
In addition, the Concession will require us to make investments and
undertake capital projects, including capital projects described in a business
plan filed every five years with the Mexican government. We may defer capital
expenditures with respect to TFM's five-year business plan with the permission
of the Ministry of Transportation. However, the Ministry of Transportation may
not grant this permission, and TFM's failure to comply with the commitments in
its business plan could result in the Mexican government revoking the
Concession.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY CHANGES IN GENERAL ECONOMIC, WEATHER
OR OTHER CONDITIONS.
Our operations may be adversely affected by changes in the economic
conditions of the industries and geographic areas that produce and consume the
freight that we transport. The relative strength or weakness of the United
States and Mexican economies affect the businesses served by us. PCRC and
Panarail Tourism Company is directly affected by its local economy. Our
investment in PCRC has risks associated with operating in Panama, including,
among others, cultural differences, varying labor and operating practices,
political risk and differences between the United States and Panamanian
economies. Historically, a stronger economy has resulted in improved results for
our rail transportation operations. Conversely, when the economy has slowed,
results have been less favorable. Our revenues may be affected by prevailing
economic conditions and, if an economic slowdown or recession occurs in our key
markets, the volume of rail shipments is likely to be reduced.
Our operations also may be affected by adverse weather conditions. We
operate in and along the Gulf Coast of the United States, and our facilities may
be adversely effected by hurricanes and other extreme weather conditions. For
example, recent hurricanes have adversely effected some of our shippers located
along the Gulf Coast and caused interruptions in the flow of traffic within the
Southern United States and between the United States and Mexico. As another
example, a weak harvest in the Midwest may substantially reduce the volume of
business handled for agricultural products customers. Many of the goods and
commodities we transport experience cyclical demand. Our results of operations
can be expected to reflect this cyclical demand because of the significant fixed
costs inherent in railroad operations. Our operations may also be affected by
natural disasters or terrorist acts. Significant reductions in our volume of
rail shipments due to economic, weather or other conditions could have a
material adverse effect on our business, financial condition, results of
operations and cash flows.
The transportation industry is highly cyclical, generally tracking the
cycles of the world economy. Although transportation markets are affected by
general economic conditions, there are numerous specific factors within each
particular market segment that may influence operating results. Some of our
customers do business in industries that are highly cyclical, including the oil
and gas, automotive and agricultural sectors. Any downturn in these sectors
could have a material adverse effect on our operating results. Also, some of the
products we transport have had a historical pattern of price cyclicality which
has typically been influenced by the general economic environment and by
industry capacity and demand. For example, global steel and petrochemical prices
have decreased in the past. We cannot assure you that prices and demand for
these products will not decline in the future, adversely affecting those
industries and, in turn, our financial results.
8
OUR BUSINESS IS SUBJECT TO REGULATION BY INTERNATIONAL, FEDERAL, STATE AND LOCAL
REGULATORY AGENCIES. OUR FAILURE TO COMPLY WITH VARIOUS FEDERAL, STATE AND LOCAL
REGULATIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS.
We are subject to governmental regulation by international, federal, state
and local regulatory agencies with respect to our railroad operations, as well
as a variety of health, safety, labor, environmental, and other matters.
Government regulation of the railroad industry is a significant determinant of
the competitiveness and profitability of railroads. Our failure to comply with
applicable laws and regulations could have a material adverse effect on our
operations, including limitations on our operating activities until compliance
with applicable requirements is completed. These government agencies may change
the legislative or regulatory framework within which we operate without
providing any recourse for any adverse effects on our business that occurs as a
result of this change. Additionally, some of the regulations require us to
obtain and maintain various licenses, permits and other authorizations, and we
cannot assure you that we will continue to be able to do so.
OUR BUSINESS IS SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS AND REGULATIONS
THAT COULD REQUIRE US TO INCUR MATERIAL COSTS OR LIABILITIES RELATING TO
ENVIRONMENTAL, HEALTH OR SAFETY COMPLIANCE OR REMEDIATION.
Our operations are subject to extensive international, federal, state and
local environmental, health and safety laws and regulations concerning, among
other things, emissions to the air, discharges to waters, the handling, storage,
transportation and disposal of waste and other materials, the cleanup of
hazardous material or petroleum releases, decommissioning of underground storage
tanks and noise pollution. Violations of these laws and regulations can result
in substantial penalties, permit revocations, facility shutdowns and other civil
and criminal sanctions. From time to time, our facilities have not been in
compliance with environmental, health and safety laws and regulations and there
can be no assurances that we will always be in compliance with such laws and
regulations in the future. We incur, and expect to continue to incur,
environmental compliance costs, including, in particular, costs necessary to
maintain compliance with requirements governing chemical and hazardous material
shipping operations, refueling operations and repair facilities. New laws and
regulations, stricter enforcement of existing requirements, new spills, releases
or violations or the discovery of previously unknown contamination could require
us to incur costs or become the basis for new or increased liabilities that
could have a material adverse effect on our business, results of operations,
financial condition and cash flows.
In the operation of a railroad, it is possible that derailments,
explosions or other accidents may occur that could cause harm to the environment
or to human health. As a result, we may incur costs in the future, which may be
material, to address any such harm, including costs relating to the performance
of clean-ups, natural resources damages and compensatory or punitive damages
relating to harm to property or individuals.
The United States Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "Superfund") and similar state laws (known as
"Superfund laws") impose liability for the cost of remedial or removal actions,
natural resources damages and related costs at certain sites identified as
posing a threat to the environment or public health. CERCLA imposes joint,
strict and several liability on the owners and operators of facilities in which
hazardous waste and other hazardous substances are deposited or from which they
are released or are likely to be released into the environment. Liability may be
imposed, without regard to fault or the legality of the activity, on certain
classes of persons, including the current and certain prior owners or operators
of a site where hazardous substances have been released and persons that
arranged for the disposal or treatment of hazardous substances. In addition,
other potentially responsible parties, adjacent landowners or other third
parties may initiate cost recovery actions or toxic tort litigation against
sites subject to CERCLA or similar state laws. Given the nature of our business,
we presently have environmental investigation and remediation obligations at
certain sites, including a former foundry site in Alexandria, Louisiana, and
will likely incur such obligations at additional sites in the future. Although
we have accrued for environmental liabilities, some of these accruals have been
reduced for amounts we expect to recover from third party recoveries. We cannot
assure you that the costs associated with these obligations will not be material
or exceed the accruals we have established.
Our Mexican operations are subject to Mexican federal and state laws and
regulations relating to the protection of the environment. The primary
environmental law in Mexico is the General Law of Ecological Balance and
Environmental Protection (the "Ecological Law"). The Mexican federal agency in
charge of overseeing compliance with and enforcement of the federal
environmental law is the Ministry of Environmental Protection and Natural
Resources ("Semarnat"). The
9
regulations issued under the Mexican Ecological Law and technical environmental
requirements issued by the Semarnat have promulgated standards for, among other
things, water discharge, water supply, emissions, noise pollution, hazardous
substances and transportation and handling of hazardous and solid waste. As part
of its enforcement powers, Semarnat is empowered to bring administrative and
criminal proceedings and impose economic sanctions against companies that
violate environmental laws, and temporarily or even permanently close
non-complying facilities. Under the Ecological Law, the Mexican government has
implemented a program to protect the environment by promulgating rules
concerning water, land, air and noise pollution, and hazardous substances. We
are also subject to the laws of various jurisdictions and international
conferences with respect to the discharge of materials into the environment. We
cannot predict the effect, if any, that the adoption of additional or more
stringent environmental laws and regulations would have on TFM's results of
operations, cash flows or financial condition.
OUR BUSINESS IS VULNERABLE TO RISING FUEL COSTS AND DISRUPTIONS IN FUEL
SUPPLIES. ANY SIGNIFICANT INCREASE IN THE COST OF FUEL, OR SEVERE DISRUPTION OF
FUEL SUPPLIES, WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
We incur substantial fuel costs in our railroad operations and these costs
represent a significant portion of our transportation expenses. Fuel expense has
increased from approximately 9% of our consolidated operating costs for the full
year 2003 to its current level representing approximately 15% of our
consolidated operating costs for the third quarter of 2005. This increase has
been, in part, offset by fuel surcharges applied to our customer billings. If we
are unable to continue the existing fuel surcharge program at KCSR and expand
the fuel surcharge program for TFM, our operating results could be materially
adversely affected.
Fuel costs are affected by traffic levels, efficiency of operations and
equipment, and petroleum market conditions. The supply and cost of fuel is
subject to market conditions and is influenced by numerous factors beyond our
control, including general economic conditions, world markets, government
programs and regulations and competition. In addition, instability in the Middle
East and interruptions in domestic production and refining due to hurricane
damage may result in an increase in fuel prices. Significant price increases for
fuel may have a material adverse effect on our operating results. Additionally,
fuel prices and supplies could also be affected by any limitation in the fuel
supply or by any imposition of mandatory allocation or rationing regulations. In
the event of a severe disruption of fuel supplies resulting from supply
shortages, political unrest, a disruption of oil imports, weather events, war or
otherwise, the resulting impact on fuel prices and subsequent price increases
could materially adversely affect our operating results, financial condition and
cash flows.
We currently meet, and expect to continue to meet, fuel requirements for
our Mexican operations almost exclusively through purchases at market prices
from Petroleos Mexicanos, the national oil company of Mexico ("PEMEX"), a
government-owned entity exclusively responsible for the distribution and sale of
diesel fuel in Mexico. TFM is party to a fuel supply contract with PEMEX of
indefinite duration. Either party may terminate the contract upon 30 days
written notice to the other at any time. If the fuel contract is terminated and
we are unable to acquire diesel fuel from alternate sources on acceptable terms,
our Mexican operations could be materially adversely affected.
A MAJORITY OF OUR EMPLOYEES BELONG TO LABOR UNIONS. STRIKES OR WORK STOPPAGES
COULD ADVERSELY AFFECT OUR OPERATIONS.
We are a party to collective bargaining agreements with various labor
unions in the United States. Approximately 83% of KCSR employees are covered
under these agreements. Similarly, approximately 71% of TFM employees are
subject to collective labor contracts. We may be subject to, among other things,
strikes, work stoppages or work slowdowns as a result of disputes with regard to
the terms of these collective bargaining agreements and labor contracts or our
potential inability to negotiate acceptable contracts with these unions. In the
United States, because such agreements are generally negotiated on an
industry-wide basis, determination of the terms and conditions of future labor
agreements could be beyond our control and, as a result, we may be subject to
terms and conditions in amended or future labor agreements that could have a
material adverse affect on our results of operations, financial position and
cash flows. If the unionized workers in the United States or Mexico were to
engage in a strike, work stoppage or other slowdown, or other
10
employees were to become unionized or the terms and conditions in future labor
agreements were renegotiated, we could experience a significant disruption of
our operations and higher ongoing labor costs.
OUR BUSINESS MAY BE SUBJECT TO VARIOUS CLAIMS AND LAWSUITS.
The nature of the railroad business exposes us to the potential for
various claims and litigation related to labor and employment, personal injury
and property damage, environmental and other matters. We maintain insurance
(including self-insurance) consistent with the industry practice against
accident-related risks involved in the operation of the railroad. However, there
can be no assurance that such insurance would be sufficient to cover the cost of
damages suffered or that such insurance will continue to be available at
commercially reasonable rates. Any material changes to current litigation trends
could have a material adverse effect on our results of operations, financial
condition and cash flows.
Due to the nature of railroad operations, claims related to personal
injuries and third party liabilities resulting from crossing collisions, as well
as claims related to personal property damage and other casualties is a
substantial expense to KCS. Personal injury and casualty claims are subject to a
significant degree of uncertainty, especially estimates related to personal
injuries which have occurred but not yet been reported, therefore, the degree to
which injuries have been incurred and the related costs have not yet been
determined. Further, the cost of casualty claims is related to numerous factors,
including the severity of the injury, the age of the claimant, and the legal
jurisdiction. In determining the provision for casualty claims, management must
make estimates regarding future costs related to substantially uncertain
matters. Changes in these estimates could have a material effect on the results
of operations in future periods.
OUR BUSINESS MAY BE AFFECTED BY FUTURE ACTS OF TERRORISM OR WAR.
Terrorist attacks, such as those that occurred on September 11, 2001, any
government response thereto and war or risk of war may adversely affect our
results of operations, financial condition, and cash flows. These acts may also
impact our ability to raise capital or our future business opportunities. Our
rail lines and facilities could be direct targets or indirect casualties of an
act or acts of terror, which could cause significant business interruption and
result in increased costs and liabilities and decreased revenues. These acts
could have a material adverse effect on our results of operations, financial
condition, and cash flows. In addition, insurance premiums charged for some or
all of the coverage currently maintained by us could increase dramatically or
certain coverage may not be available in the future.
RISK FACTORS RELATING TO OUR OPERATIONS IN MEXICO
THE CONCESSION IS SUBJECT TO REVOCATION OR TERMINATION IN CERTAIN CIRCUMSTANCES.
The Mexican government may terminate the Concession granted to TFM as a
result of TFM's surrender of its rights under the Concession, or for reasons of
public interest, by revocation or upon TFM's liquidation or bankruptcy. (The
Mexican government would not, however, be entitled to revoke the Concession upon
the occurrence of a liquidation or bankruptcy of Grupo TFM.) The Mexican
government may also temporarily seize TFM's assets and its rights under the
Concession. The Mexican railroad services law and regulations provide that the
Ministry of Communications and Transports ("Ministry of Transportation") may
revoke the Concession upon the occurrence of specified events, some of which
will trigger automatic revocation. Revocation or termination of the Concession
would prevent TFM from operating its railroad and would materially adversely
affect our Mexican operations and ability to make payments on our debt. In the
event that the Concession is revoked by the Ministry of Transportation, TFM will
receive no compensation, and its interest in its rail lines and all other
fixtures covered by the Concession, as well as all improvements made by it, will
revert to the Mexican government.
OUR OWNERSHIP OF TFM AND OPERATIONS IN MEXICO SUBJECT US TO POLITICAL AND
ECONOMIC RISKS.
The Mexican government has exercised, and continues to exercise,
significant influence over the Mexican economy. Accordingly, Mexican
governmental actions concerning the economy and state-owned enterprises could
have a significant impact on Mexican private sector entities in general and on
our Mexican operations in particular, as well as on market conditions, prices
and returns on Mexican securities, including TFM's outstanding notes and
debentures. The
11
national elections held on July 2, 2000 ended 71 years of rule by the
Institutional Revolutionary Party with the election of President Vicente Fox
Quesada, a member of the National Action Party, and resulted in the increased
representation of opposition parties in the Mexican Congress and in mayoral and
gubernatorial positions. National elections will be held again on July 1, 2006.
Although there have not yet been any material adverse repercussions resulting
from this political change, multiparty rule is still relatively new in Mexico
and could result in economic or political conditions that could materially and
adversely affect our Mexican operations. We cannot predict the impact that this
new political landscape will have on the Mexican economy. Furthermore, our
financial condition, results of operations and prospects and, consequently, the
market price for TFM's outstanding notes and debentures, may be affected by
currency fluctuations, inflation, interest rates, regulation, taxation, social
instability and other political, social and economic developments in or
affecting Mexico.
The Mexican economy in the past has suffered balance of payment deficits
and shortages in foreign exchange reserves. There are currently no exchange
controls in Mexico. However, Mexico has imposed foreign exchange controls in the
past. Pursuant to the provisions of NAFTA, if Mexico experiences serious balance
of payment difficulties or the threat thereof in the future, Mexico would have
the right to impose foreign exchange controls on investments made in Mexico,
including those made by United States and Canadian investors. Any restrictive
exchange control policy could adversely affect our ability to obtain dollars or
to convert pesos into dollars for purposes of making interest and principal
payments due on indebtedness, to the extent that it may have to effect those
conversions. This could have a material adverse effect on our business and
financial condition.
Securities of companies in emerging market countries tend to be influenced
by economic and market conditions in other emerging market countries. Emerging
market countries, including Argentina and Brazil, have recently been
experiencing significant economic downturns and market volatility. These events
have had an adverse effect on the economic conditions and securities markets of
emerging market countries, including Mexico.
Our Mexican operations may also be adversely affected by currency
fluctuations, price instability, inflation, interest rates, regulations,
taxation, cultural differences, social instability, labor disputes and other
political, social and economic developments in or affecting Mexico.
DOWNTURNS IN THE UNITED STATES ECONOMY OR IN TRADE BETWEEN THE UNITED STATES AND
MEXICO AND FLUCTUATIONS IN THE PESO-DOLLAR EXCHANGE RATE WOULD LIKELY HAVE
ADVERSE EFFECTS ON OUR BUSINESS AND RESULTS OF OPERATIONS.
The level and timing of our Mexican business activity is heavily dependent
upon the level of United States-Mexican trade and the effects of NAFTA on such
trade. Downturns in the United States or Mexican economy or in trade between the
United States and Mexico would likely have adverse effects on our business and
results of operations. Our Mexican operations depend on the United States and
Mexican markets for the products TFM transports, the relative position of Mexico
and the United States in these markets at any given time, and tariffs or other
barriers to trade. Any future downturn in the United States economy could have a
material adverse effect on TFM's results of operations and its ability to meet
its debt service obligations as described above.
Also, fluctuations in the peso-dollar exchange rate could lead to shifts
in the types and volumes of Mexican imports and exports. Although a decrease in
the level of exports of some of the commodities that TFM transports to the
United States may be offset by a subsequent increase in imports of other
commodities TFM hauls into Mexico and vice versa, any offsetting increase might
not occur on a timely basis, if at all. Future developments in United
States-Mexican trade beyond our control may result in a reduction of freight
volumes or in an unfavorable shift in the mix of products and commodities TFM
carries.
ANY DEVALUATION OF THE PESO WOULD CAUSE THE PESO COST OF TFM'S
DOLLAR-DENOMINATED DEBT TO INCREASE, ADVERSELY AFFECTING ITS ABILITY TO MAKE
PAYMENTS ON ITS INDEBTEDNESS.
After a five-year period of controlled devaluation of the peso, on
December 19, 1994, the value of the peso dropped sharply as a result of pressure
against the currency. In 2004 the peso appreciated against the United States
dollar by approximately 0.8%, as compared to depreciation against the United
States dollar of 7.4% and 13.9% in 2003 and 2002, respectively.
12
Severe devaluation or depreciation of the peso may result in disruption of
the international foreign exchange markets and may limit our ability to transfer
or to convert pesos into United States dollars for the purpose of making timely
payments of interest and principal on our non-peso denominated indebtedness.
Although the Mexican government currently does not restrict, and for many years
has not restricted, the right or ability of Mexican or foreign persons or
entities to convert pesos into United States dollars or transfer foreign
currencies out of Mexico, the Mexican government could, as in the past,
institute restrictive exchange rate policies that could limit our ability to
transfer or convert pesos into United States dollars or other currencies for the
purpose of making timely payments of our United States dollar-denominated debt
and contractual commitments. Devaluation or depreciation of the peso against the
United States dollar may also adversely affect United States dollar prices for
our securities. Currency fluctuations are likely to continue to have an effect
on our financial condition in future periods.
MEXICO MAY EXPERIENCE HIGH LEVELS OF INFLATION IN THE FUTURE WHICH COULD
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Mexico has a history of high levels of inflation, and may experience
inflation in the future. During most of the 1980s and during the mid- and
late-1990s, Mexico experienced periods of high levels of inflation. The annual
rates of inflation for the last five years, as measured by changes in the
National Consumer Price Index, as provided by Banco de Mexico, were:
2000 8.96%
2001 4.40%
2002 5.70%
2003 3.98%
2004 5.20%
A substantial increase in the Mexican inflation rate would have the effect
of increasing some of TFM's costs, which could adversely affect its results of
operations and financial condition. High levels of inflation may also affect the
balance of trade between Mexico and the United States, and other countries,
which could adversely affect TFM's results of operations.
13
USE OF PROCEEDS
If securities are sold by the Company, we will describe the use of
proceeds from such sale in the prospectus supplement related to the sale of
those securities. If securities are sold by any Selling Stockholder we will
describe the use of proceeds, if any, to us in the prospectus supplement related
to the sale of those securities.
RATIOS OF EARNINGS TO FIXED CHARGES
Nine Months
September 30, Year Ended December 31,
------------------ --------------------------------------------------------
(unaudited)
2005(i) 2004 2004 2003 2002 2001 2000
------- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed
charges (ii) 1.6x 1.8x 2.0x --(iii) 1.3x 1.1x 1.0x
Ratio of earnings to combined
fixed charges and preference
dividends (iv) 1.5x 1.5x 1.6x --(v) 1.3x 1.1x 1.0x
(i) Income from continuing operations for the nine months ended September 30,
2005, reflects the acquisition of Grupo TFM, effective April 1, 2005 and
Mexrail effective January 1, 2005. The acquisitions were accounted for as
purchases and are included in the consolidated results of operations for
periods following the respective acquisition dates.
(ii) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose "earnings" represent the sum of (i) pretax
income from continuing operations adjusted for income (loss) from
unconsolidated affiliates, (ii) fixed charges, (iii) distributed income
from unconsolidated affiliates and (iv) amortization of capitalized
interest, less capitalized interest. "Fixed charges" represent the sum of
(i) interest expensed, (ii) capitalized interest, (iii) amortization of
deferred debt issuance costs and (iv) one-third of our annual rental
expense, which management believes is representative of the interest
component of rental expense.
(iii)For the year ended December 31, 2003, the ratio of earnings to fixed
charges was less than 1:1. The ratio of earnings to fixed charges would
have been 1:1 if a deficiency of $10.5 million was eliminated.
(iv) The ratio of earnings to combined fixed charges and preference dividends is
computed by dividing earnings by combined fixed charges and preference
dividends. For this purpose "earnings" represent the sum of (i) pretax
income from continuing operations adjusted for income (loss) from
unconsolidated affiliates, (ii) fixed charges, (iii) distributed income
from unconsolidated affiliates and (iv) amortization of capitalized
interest, less capitalized interest. "Fixed charges" represent the sum of
(i) interest expensed, (ii) capitalized interest, (iii) amortization of
deferred debt issuance costs, (iv) one-third of our annual rental expense,
which management believes is representative of the interest component of
rental expense and (v) the amount of pre-tax earnings that is required to
pay the dividends on outstanding preferred stock.
(v) For the year ended December 31, 2003, the ratio of earnings to combined
fixed charges and preference dividends was less than 1:1. The ratio of
earnings to combined fixed charges and preference dividends would have been
1:1 if a deficiency of $18.2 million was eliminated.
PLAN OF DISTRIBUTION
Subject to the restrictions described in this prospectus and any
prospectus supplement, the Company or any Selling Stockholder may offer and sell
or exchange the securities described in this prospectus from time to time in any
of the following ways:
- The securities may be sold through a broker or brokers, acting
as principals or agents. Agents designated by the Company or any
Selling Stockholder from time to time may solicit offers to
purchase the securities. The prospectus supplement will name any
such agent who may be deemed to be an
14
underwriter, as that term is defined in the Securities Act, involved
in the offer or sale of the securities in respect of which this
prospectus is delivered. Transactions through broker-dealers may
include block trades in which brokers or dealers will attempt to
sell the securities as agent but may position and resell the block
as principal to facilitate the transaction. The securities may be
sold through dealers or agents or to dealers acting as market
makers. Broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from us or the Company or any
Selling Stockholder and/or the purchasers of the securities for whom
such broker-dealers may act as agents or to whom they sell as
principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
- The securities may be sold on any national securities exchange or
quotation service on which the securities may be listed or quoted at
the time of sale, in the over-the-counter market, or in transactions
otherwise than on such exchanges or services or in the
over-the-counter market.
- The securities may be sold in private sales directly to purchasers.
- The Company or any Selling Stockholder may enter into derivative
transactions or forward sale agreements on shares of securities with
third parties. In such event, the Company or the Selling Stockholder
may pledge the shares underlying such transactions to the
counterparties under such agreements, to secure the Company's or any
Selling Stockholder's delivery obligation. The counterparties or
third parties may borrow shares of securities from the Company or
the Selling Stockholder or third parties and sell such shares in a
public offering. This prospectus may be delivered in conjunction
with such sales. Upon settlement of such transactions, the Company
or the Selling Stockholder may deliver shares of securities to the
counterparties that, in turn, the counterparties may deliver to the
Company or the Selling Stockholder or third parties, as the case may
be, to close out the open borrowings of securities. The counterparty
in such transactions will be an underwriter and will be identified
in the applicable prospectus supplement.
- The Company or any Selling Stockholder may also sell its shares of
securities through various arrangements involving mandatorily or
optionally exchangeable securities, and this prospectus may be
delivered in conjunction with those sales.
LEGAL MATTERS
Sonnenschein Nath & Rosenthal LLP, Kansas City, Missouri, has issued an
opinion to us relating to the legality of the securities being offered by this
prospectus. If legal matters in connection with offerings made by this
prospectus are passed on by counsel for the underwriters of an offering of the
securities, that counsel will be named in the prospectus supplement relating to
that offering.
EXPERTS
The consolidated financial statements of Kansas City Southern as of
December 31, 2004 and 2003 and for each of the years in the three-year period
ended December 31, 2004, and management's assessment of the effectiveness of
internal control over financial reporting as of December 31, 2004, have been
incorporated in this prospectus by reference to our annual report on Form 10-K
for the year ended December 31, 2004, in reliance upon the reports of KPMG LLP,
an independent registered public accounting firm, incorporated by reference in
this registration statement, and upon the authority of said firm as experts in
auditing and accounting. The audit report of KPMG LLP covering the consolidated
financial statements of Kansas City Southern indicates that KPMG LLP did not
audit the financial statements of Grupo TFM as of December 31, 2004 and 2003 and
for the years then ended. The financial statements of Grupo TFM as of and for
the years ended December 31, 2004 and 2003 were audited by other auditors whose
reports have been furnished to
15
KPMG, and KPMG's opinion, insofar as it relates to the amounts included for
Grupo TFM as of and for the year ended December 31, 2004 and 2003, was based
solely on the reports of the other auditors. In addition, the audit report of
KPMG LLP covering the consolidated financial statements of Kansas City Southern
refers to the Company's adoption, effective January 1, 2003, of Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations."
The combined and consolidated financial statements of Grupo TFM, as of
December 31, 2004 and 2003 and for each of the years in the three-year period
ended December 31, 2004, which are incorporated in this prospectus by reference
to exhibit 99.1 of our annual report on Form 10-K for the year ended December
31, 2004, have been so incorporated in reliance on the report of
PricewaterhouseCoopers, S.C., independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with
the SEC. You may inspect and copy such material at the public reference
facilities maintained by the SEC at 100 F. Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for more information on the public
reference room. You can also find our SEC filings at the SEC's website at
www.sec.gov and on our website at www.kcsi.com. Information contained on our
website is not part of this prospectus.
In addition, our reports and other information concerning us can be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005, where our common stock is listed.
The following documents we filed with the SEC pursuant to the Exchange Act
are incorporated herein by reference:
- Our annual report on Form 10-K for the fiscal year ended December
31, 2004;
- Our quarterly reports on Form 10-Q for the quarters ended March 31,
2005, June 30, 2005 and September 30, 2005;
- Our current reports on Form 8-K filed on January 6, 2005; January
26, 2005; February 1, 2005; February 15, 2005; February 23, 2005;
March 18, 2005; March 29, 2005; April 7, 2005, April 15, 2005; April
26, 2005; May 11, 2005; May 13, 2005; May 26, 2005; June 1, 2005;
June 6, 2005; June 7, 2005; June 9, 2005; June 14, 2005; July 20,
2005; July 25, 2005; September 16, 2005; October 3, 2005, October 6,
2005, November 8, 2005, November 21, 2005, and December 2, 2005, and
our current report on Form 8-K/A filed on February 14, 2005.
All documents subsequently filed by us pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act (excluding any information furnished pursuant to
Item 2.02, Item 7.01 or disclosures made in accordance with Regulation FD on
Item 8.01 in any current report on Form 8-K), prior to the termination of the
offering, shall be deemed to be incorporated by reference into this prospectus
and to be a part hereof from the date of the filing of such document. In
addition, all documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act (excluding any information furnished pursuant to Item
2.02, Item 7.01 or disclosures made in accordance with Regulation FD on Item
8.01 in any current report on Form 8-K) after the date of the initial
registration statement and prior to effectiveness of the registration statement
shall be deemed to be incorporated by reference into this prospectus and to be a
part hereof from the date of the filing of such document. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for all purposes to the extent that a statement contained
in this prospectus, or in any other subsequently filed document which is also
incorporated or deemed to be incorporated by reference, modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request of such person, a copy of any or all
documents incorporated by reference in this prospectus. Requests for such copies
should be directed to Kansas City Southern, P.O. Box 219335, Kansas City,
Missouri 64121-9335 (or if by United Parcel
16
Service or some other form of express delivery to 427 West 12th Street, Kansas
City, Missouri 64105), Attention: Corporate Secretary's Office, or if by
telephone at (816) 983-1538.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in this prospectus by
reference may contain forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. In addition,
management may make forward-looking statements orally or in other writings,
including, but not limited to, in press releases, in the annual report to
shareholders and in our other filings with the Securities and Exchange
Commission. Readers can identify these forward-looking statements by the use of
such verbs as expects, anticipates, believes or similar verbs or conjugations of
such verbs. These Statements involve a number of risks and uncertainties. Actual
results could materially differ from those anticipated by such forward-looking
statements. Such differences could be caused by a number of factors or
combination of factors including, but not limited to, the factors identified
below and the factors discussed above under the heading "Risk Factors." Readers
are strongly encouraged to consider these factors and the following factors when
evaluating any forward-looking statements concerning us:
- whether we are fully successful in executing our business strategy,
including capitalizing on NAFTA trade to generate traffic and
increase revenues, exploiting our domestic opportunities,
establishing new and expanding existing strategic alliances and
marketing agreements and providing superior customer service;
- whether we are successful in retaining and attracting qualified
management personnel;
- whether we are able to generate cash that will be sufficient to
allow us to pay principal and interest on our debt and meet our
obligations and to fund our other liquidity needs;
- material adverse changes in economic and industry conditions, both
within the United States and globally;
- the effects of adverse general economic conditions affecting
customer demand and the industries and geographic areas that produce
and consume commodities carried;
- the effect of NAFTA on the level of United States-Mexico trade;
- industry competition, conditions, performance and consolidation;
- general legislative and regulatory developments, including possible
enactment of initiatives to re-regulate the rail industry;
- legislative, regulatory, or legal developments involving taxation,
including enactment of new federal or state income tax rates,
revisions of controlling authority, and the outcome of tax claims
and litigation;
- changes in securities and capital markets;
- natural events such as severe weather, fire, floods, hurricanes,
earthquakes or other disruptions of our operating systems,
structures and equipment;
- any adverse economic or operational repercussions from terrorist
activities and any governmental response thereto;
17
- war or risk of war;
- changes in fuel prices;
- changes in labor costs and labor difficulties, including stoppages
affecting either our operations or our customers' abilities to
deliver goods to us for shipment; and
- the outcome of claims and litigation, including those related to
environmental contamination, personal injuries and occupational
illnesses arising from hearing loss, repetitive motion and exposure
to asbestos and diesel fumes.
We will not update any forward-looking statements to reflect future
events or developments. If we do update one or more forward-looking statements,
no inference should be drawn that we will make additional updates with respect
thereto or with respect to other forward-looking statements.
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this offering (all of which are to be paid by the
registrant) are estimated to be as set forth in the table below. All of the
expenses are estimated, except the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission registration fee............ $ [*]
Legal fees and expenses........................................ $ 100,000
Accounting fees and expenses................................... $ 300,000
Printing expenses..............................................
Miscellaneous..................................................
TOTAL...................................................... $
* Deferred in accordance with Rule 457(r) and Rule 456(b) of the Securities Act.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
KCS is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware (the "Delaware
Statute") provides that a Delaware corporation may indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), other than an action by or in the right of such
corporation, by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise (an "indemnified capacity"). The indemnity may include
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided such person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was illegal. Similar provisions
apply to actions brought by or in the right of the corporation, except that no
indemnification shall be made without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director has actually and reasonably incurred. Section 145 of
the Delaware Statute further authorizes a corporation to purchase and maintain
insurance on behalf of any indemnified person against any liability asserted
against him and incurred by him in any indemnified capacity, or arising out of
his status as such, regardless of whether the corporation would otherwise have
the power to indemnify him under the Delaware Statute.
The bylaws of KCS provide that each person who, at any time is, or
shall have been, a director, officer, employee or agent of KCS, and is
threatened to be or is made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is, or was, a director, officer,
employee or agent of KCS, or served at the request of KCS as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified against expense
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any such action, suit
or proceeding to the full extent provided under Section 145 of the Delaware
Statute.
The certificate of incorporation of KCS provides that to the fullest
extent permitted by the Delaware Statute and any amendments thereto, no director
of the corporation shall be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
19
In addition, KCS has entered into indemnification agreements with
its officers and directors. Those agreements are intended to supplement its
officer and director liability insurance and provide the officers and directors
with specific contractual assurance that the protection provided by its bylaws
will continue to be available regardless of, among other things, an amendment to
the bylaws or a change in management or control of KCS. The indemnification
agreements provide for prompt indemnification to the fullest extent permitted by
law and for the prompt advancement of expenses, including attorneys' fees and
all other costs and expenses incurred in connection with any action, suit or
proceeding in which the director or officer is a witness or other participant,
or to which the director or officer is a party, by reason (in whole or in part)
of service in certain capacities. Under the indemnification agreements, KCS's
determinations of indemnity are made by a committee of disinterested directors
unless a change in control of KCS has occurred, in which case the determination
is made by special independent counsel. The indemnification agreements also
provide a mechanism to seek court relief if indemnification or expense advances
are denied or not received within specified periods. Indemnification and
advancement of expenses would also be provided in connection with court
proceedings initiated to determine rights under the indemnification agreements
and certain other matters.
ITEM 16. EXHIBITS
The following exhibits are filed herewith pursuant to the
requirements of Item 601 of Regulation S-K:
EXHIBIT NO. DESCRIPTION
----------- -----------
1.1 Underwriting Agreement (to be filed by amendment)
2.1* Amended and Restated Acquisition Agreement, dated as of December 15, 2004,
by and among KCS, KARA Sub, Inc., Grupo TMM, S.A., TMM Holdings, S.A. de
C.V. and TMM Multimodal, S.A. de C.V. which is filed as Exhibit 10.1 to
KCS's current report on Form 8-K filed on December 21, 2004.
2.2* Stockholders' Agreement, dated as of December 15, 2004, by and among KCS,
Grupo TMM, S.A., TMM Holdings, S.A. de C.V., TMM Multimodal, S.A. de C.V.
and certain stockholders of Grupo TMM, S.A. which is filed as Exhibit 10.3
to KCS's current report on Form 8-K filed on December 21, 2004.
2.3* Registration Rights Agreement, dated as of December 15, 2004, by and among
KCS, Grupo TMM, S.A., TMM Holdings, S.A. de C.V. and TMM Multimodal, S.A.
de C.V. which is filed as Exhibit 10.4 to KCS's current report on Form 8-K
filed on December 21, 2004.
2.4* Consulting Agreement, dated as of December 15, 2004, by and between KCS
and Jose F. Serrano International Business, S.A. de C.V. which is filed as
Exhibit 10.5 to KCS's current report on Form 8-K filed on December 21,
2004.
2.5* Marketing and Services Agreement, dated as of December 15, 2004, by and
among KCS, Grupo TMM, S.A. and TFM, S.A. de C.V. which is filed as Exhibit
10.6 to KCS's current report on Form 8-K filed on December 21, 2004.
4.1* Rights Agreement, dated as of September 29, 2005, by and among KCS and UMB
Bank n.a. which is filed as Exhibit 10.1 to KCS's current report on Form
8-K filed on October 3, 2005.
5.1* Opinion of Sonnenschein Nath & Rosenthal LLP regarding the validity of the
securities being registered
23.1 Consent of KPMG LLP
23.2 Consent of PricewaterhouseCoopers, S.C.
20
24 Power of Attorney (included in the signature page of this registration
statement)
* Indicates previously filed or incorporated by reference herein.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are
being made of securities registered hereby, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (i), (ii) and (iii) above do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Securities and Exchange Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement, or is contained in a form of prospectus
filed pursuant to Rule 424(b) that is part of the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
(A) Each prospectus filed by the registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration statement
as of the date the filed prospectus was deemed part of and included
in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in
reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) for the purpose of providing the
information required by Section 10(a) of the Securities Act of 1933
shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of
sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any
21
person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which
that prospectus relates, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in
any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to
such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be filed
pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used or
referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about the
undersigned registrant or its securities provided by or on behalf of
the undersigned registrant; and
(iv)Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
(b) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(c) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue;
(d) to respond to requests for information that is incorporated by
reference into this prospectus pursuant to Items 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent
to the effective date of the registration statement through the date of
responding to the request.
22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement on Form S-3 to be signed on its
behalf by the undersigned.
KANSAS CITY SOUTHERN
By: /s/ Ronald G. Russ
--------------------------------
Ronald G. Russ
Executive Vice President and Chief Financial Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Kansas City Southern, hereby
severally and individually constitute and appoint Michael R. Haverty, Arthur L.
Shoener and Ronald G. Russ, and each of them severally, the true and lawful
attorneys and agents of each of us to execute in the name, place and stead of
each of us (individually and in any capacity stated below) any and all
amendments to this registration statement on Form S-3 (including post-effective
amendments thereto) and all instruments necessary or advisable in connection
therewith and to file the same with the Securities and Exchange Commission, each
of said attorneys and agents to have the power to act with or without the others
and to have full power and authority to do and perform in the name and on behalf
of each of the undersigned every act whatsoever necessary or advisable to be
done in the premises as fully and to all intents and purposes as any of the
undersigned might or could do in person, and we hereby ratify and confirm our
signatures as they may be signed by our said attorneys and agents or each of
them to any and all such amendments and instruments.
* * * * *
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities
indicated as of December 2, 2005.
SIGNATURE TITLE
/s/ Michael R. Haverty Chairman, President, Chief Executive
--------------------------- Officer and Director
Michael R. Haverty
/s/ Arthur L. Shoener Executive Vice President and Chief
--------------------------- Operating Officer
Arthur L. Shoener
/s/ Ronald G. Russ Executive Vice President and Chief
--------------------------- Financial Officer (Principal Financial
Ronald G. Russ Officer and Principal Accounting Officer)
Director
/s/ A. Edward Allinson Director
---------------------------
A. Edward Allinson
/s/ Robert J. Druten
--------------------------- Director
Robert J. Druten
23
/s/ Michael G. Fitt Director
---------------------------
Michael G. Fitt
/s/ James R. Jones Director
---------------------------
James R. Jones
___________________________ Director
Thomas A. McDonnell
/s/ Karen L. Pletz Director
---------------------------
Karen L. Pletz
___________________________ Director
Rodney E. Slater
24
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
1.1 Underwriting Agreement (to be filed by amendment)
2.1* Amended and Restated Acquisition Agreement, dated as of December 15, 2004,
by and among KCS, KARA Sub, Inc., Grupo TMM, S.A., TMM Holdings, S.A. de
C.V. and TMM Multimodal, S.A. de C.V. which is filed as Exhibit 10.1 to
KCS's current report on Form 8-K filed on December 21, 2004.
2.2* Stockholders' Agreement, dated as of December 15, 2004, by and among KCS,
Grupo TMM, S.A., TMM Holdings, S.A. de C.V., TMM Multimodal, S.A. de C.V.
and certain stockholders of Grupo TMM, S.A. which is filed as Exhibit 10.3
to KCS's current report on Form 8-K filed on December 21, 2004.
2.3* Registration Rights Agreement, dated as of December 15, 2004, by and among
KCS, Grupo TMM, S.A., TMM Holdings, S.A. de C.V. and TMM Multimodal, S.A.
de C.V. which is filed as Exhibit 10.4 to KCS's current report on Form 8-K
filed on December 21, 2004.
2.4* Consulting Agreement, dated as of December 15, 2004, by and between KCS
and Jose F. Serrano International Business, S.A. de C.V. which is filed as
Exhibit 10.5 to KCS's current report on Form 8-K filed on December 21,
2004.
2.5* Marketing and Services Agreement, dated as of December 15, 2004, by and
among KCS, Grupo TMM, S.A. and TFM, S.A. de C.V. which is filed as Exhibit
10.6 to KCS's current report on Form 8-K filed on December 21, 2004.
4.1* Rights Agreement, dated as of September 29, 2005, by and among KCS and UMB
Bank n.a. which is filed as Exhibit 10.1 to KCS's current report on Form
8-K filed on October 3, 2005.
5.1* Opinion of Sonnenschein Nath & Rosenthal LLP regarding the validity of the
securities being registered
23.1 Consent of KPMG LLP
23.2 Consent of PricewaterhouseCoopers, S.C.
24 Power of Attorney (included in the signature page of this registration
statement)
26