Powepoint created for MBA course. Kansas City Southern Railroad case study.

1. Tobi Rubin Jamie Andes Shawn Wilkinson Mike Hobick

16. Size Statistics

19. Corporate Governance Board of Directors KSC CEO KSCR and TexMex CEO

23. Board of Directors *4.5 as Chairman, 5 as Director 4 Slater 1 Pletz 2 McDonnell 8 James 19 Fitt 1 Druten 5 Allison 4.5 (5)* Haverty Years on KCS Board

26. BoD KCS CEO General Counsel Int. CEO Comptroller … Organization Structure KCSR/TexMex CEO Senior VP Inter. Eng Senior VP Transportation VP Chief Mech. Officer Southeast Division Midwest Division Texas Division Super Super Super Super Super Super Support

27. Top Management Sen VP of Marketing for CNR 6 Former Exec VP and COO Assist General Counsel 13 Assoc. Gen Counsel VP of Int. Regulation for Aquila 1 VP and Comptroller Assist VP Finance for BNSF 4 VP and Treasurer Chief of Staff for Kit Bond 8 VP Corporate Affairs VP of Sales for Pacer Global 0.5 VP Sales VP of Eng KCSR, Consultant 3 Sen VP, Int. Eng CEO of Farmland Industries 1 Sen VP, Gen Counsel CFO of Wisconsin Central 2.5 Exec VP, CFO Exec VP of UP 0.5 Exec VP, COO Previous Position Yrs w/ KSCR Position

28. Executive Comp . & Incentives 153,000 2002 160,000 2003 $371,000 20,000 186,000 165,000 2004 Assoc. Gen Counsel 312,000 2002 320,000 2003 $455,000 50,000 75,000 330,000 2004 COO 177,000 2002 206,000 2003 $770,000 29,000 529,000 212,000 2004 International Eng 128,000 2002 265,000 2003 $1,339,000 30,000 1,036,000 273,000 2004 CFO 620,00 2002 630,000 2003 $3,162,000 101,000 2,411,000 650,000 2004 CEO Comp (potential value) Total Other Stock Options Salary

31. Management Effectiveness Analysis Aggressive strategy that could pay off B+ Overall Management 10 Required “house cleaning” C Human Resources 9 Implementing a new Mgt Control Sys B+ Management Information 8 Increasing rev. while increasing debt B Financial position 7 Good brand, disassociated brands B- Market positioning 6 Exp. are decreasing, but must maint. A Expense/Cost Control 5 Improved operating efficiency in 2004 A- Operating Performance 4 Strong structure and process B+ Decision Making 3 Implementing of goals B+ Strategic Planning 2 Realizing mission and vision A Mission—Objectives 1 Reason Evaluation Factor

33. World Headquarters Pictures Borrowed from Berkebile Nelson Immenscuh Mcdowell Architects http:// www.bnim.com

36. Inventory Railroad Pictures borrowed from www.rrpicturearchives.net Road Unit Switcher Unit

37. Rolling Stock Inventory Box Car Hopper Car Flat Car Tank Car Auto-Rack Gondola

46. Operating Performance

47. Operating Performance

48. Operating Performance

49. Operating Performance

54. Product Mix Kansas City Southern Line Union Pacific (Largest Class I)

55. Product Mix Kansas City Southern Line Union Pacific (Largest Class I)

57. Stock Price

58. Stock Price Comparison

60. Industry

61. Industry

62. Operating Financials

63. Growth Rates

64. Cash Flow & Capital Spending

65. Financial Position

66. Financial Health

67. Quick Ratio

68. Current Ratio

69. Debt/Equity Ratio

70. Profitability Analysis

71. Return on Assets

72. Return on Equity

73. Net Profit Margin

74. Valuation

75. Valuation Valuation using KANSAS CITY SOUTHERN 's current multiple (P/E): 69.0 Valuation using the industry's current multiple (P/E): 18.7

77. Strategy

81. Expenses

85. Strategy: To be the NAFTA Railway

86. Strategy Matrix 6. Liquidation 5. Divestiture Growth 4. Joint Venture 4. Horizontal Integration Market 3. Conglomerate Diversification 3. Product Development Slow 2. Horizontal Diversification 2. Market Penetration 1. Concentric Diversification 1. Market Development 7. Concentric Diversification 6. Horizontal Integration 6. Liquidation 5. Backward Integration 5. Divestiture Growth 4. Forward Integration 4. Horizontal Integration Market 3. Product Development 3. Product Development Rapid 2. Market Penetration 2. Market Penetration 1. Market Development 1. Market Development Strong Competitive Position Weak Competitive Position

87. Strategy Matrix 6. Liquidation 5. Divestiture Growth 4. Joint Venture 4. Horizontal Integration Market 3. Conglomerate Diversification 3. Product Development Slow 2. Horizontal Diversification 2. Market Penetration 1. Concentric Diversification 1. Market Development 7. Concentric Diversification 6. Horizontal Integration 6. Liquidation 5. Backward Integration 5. Divestiture Growth 4. Forward Integration 4. Horizontal Integration Market 3. Product Development 3. Product Development Rapid 2. Market Penetration 2. Market Penetration 1. Market Development 1. Market Development Strong Competitive Position Weak Competitive Position