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EXHIBIT 99.2
[Duff & Phelps, LLC Letterhead]
June 14, 2000
CONFIDENTIAL
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Board of Directors
Kansas City Southern Industries, Inc.
114 West 11th Street
Kansas City, MO 64105-1804
Dear Board of Directors:
You have retained Duff & Phelps, LLC as independent financial and investment
analysts to provide an opinion as to the solvency and capitalization of Kansas
City Southern Industries, Inc. ("KCSI" or the "Company") following the spin-off
of Stilwell Financial, Inc. ("the Spin-off").
Certain terms used herein are defined in Appendix A to this letter and, for the
purposes of this letter, shall only have the meanings set forth in Appendix A.
The Company has requested us to determine whether, as of and after the Spin-off:
1) The fair salable value of the Company's assets exceeds the stated value
of the Company's liabilities, including all contingent liabilities
identified to us by the Company;
2) The Company will not have an unreasonably small amount of capital for the
operation of the businesses in which it is engaged;
3) The Company will be able to pay its stated liabilities, including
identified contingent liabilities, as they mature; and
4) The fair salable value of the Company's assets exceeds the stated value of
the Company's liabilities, including all contingent liabilities identified
to us by the Company, by an amount greater than the sum of the aggregate
par value of its issued capital stock and all amounts allocated to capital
by the Board of Directors.
In the course of our assignment, we held discussions with the senior management
of KCSI and The Kansas City Southern Railway Company at their offices in Kansas
City, Missouri and via telephone regarding the history, current operations, and
probable future outlook of KCSI after giving effect to the Spin-off. We toured
the Company's rail yard in Shreveport, Louisiana. Our
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analysis is based on audited consolidated financial information and unaudited
segment information on SEC Form 10K for the fiscal years ended December 31, 1995
to 1999; unaudited consolidated and segment financial information on SEC Form
10Q for the periods ended March 31, 1999 and 2000; a pro forma estimated balance
sheet prepared by management as of April 30, 2000 giving effect to the Spin-off;
a schedule of identified contingent liabilities giving effect to the Spin-off;
and other internal management documents provided to us, including financial
projections. We have assumed that there has been no material adverse change in
the assets, financial condition, business, or prospects of KCSI (after the Spin-
off) since the date of the most recent financial statements made available to
us. We also reviewed the terms of the agreements relating to the Spin-off.
Our analysis included a review of the financial projections provided by the
Company, supplemented by discussions with management and such other procedures
as we deemed appropriate regarding the reasonableness and completeness of the
Company's underlying assumptions. In addition, we developed our own financial
projections based on the Company's financial projections. Our analysis also
included statements by management as to their plans and intentions, our
investigation and understanding of the business, and such other information as
we deemed appropriate. We compared the Company's post-Spin-off capital
structure and cash flow generating ability with those of companies engaged in
comparable lines of business.
As part of our analysis, we inquired of senior management and of the officials
of the Company having principal responsibility for financial reporting and
accounting matters whether they were aware of any events (including the Spin-
off), conditions, or prospects that might cause the Company to: 1) incur
additional obligations that would cause the fair salable value of its assets to
be less than the stated value of its liabilities, including all identified
contingent liabilities; 2) engage in a business for which the Company would have
an unreasonably small amount of capital; 3) be unable to pay its stated
liabilities, including identified contingent liabilities, as they mature; or 4)
incur additional obligations that would cause the fair salable value of its
assets to exceed the stated value of its liabilities, including all identified
contingent liabilities, by an amount less than the aggregate par value of its
issued capital stock.
Industry information and data on comparable companies used as background for our
analysis and valuation were obtained from regularly published sources. We did
not independently verify the information obtained from Company management
including certain assumptions used in developing our financial projections nor
that obtained from published sources.
Based on all factors we regard as relevant and assuming the accuracy and
completeness of the information provided to us and assuming the substantial
continuity of current economic, competitive, and financial conditions, it is our
opinion that after giving effect to the consummation of the Spin-off: 1) the
fair salable value of the Company's assets exceeds the stated value of the
Company's liabilities, including all contingent liabilities identified to us by
the Company; 2) the Company will not have an unreasonably small amount of
capital for the operation of the business in which it is engaged; 3) the
Company will be able to pay its stated liabilities, including identified
contingent liabilities, as they mature; and 4) the fair salable value of the
Company's assets exceeds the stated value of the Company's liabilities,
including all contingent liabilities identified to us by the Company, by an
amount greater than the sum of the aggregate par value of its issued capital
stock and all amounts allocated to capital by the Board of Directors.
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This letter is confidential and intended to be seen and relied on only by
Kansas City Southern Industries, Inc. and its stockholders, except that Duff &
Phelps consents to its inclusion in any filing by Kansas City Southern
Industries, Inc. and Stilwell Financial, Inc. with the Securities Exchange
Commission, the New York Stock Exchange, or any other regulatory agency in
connection with the Spin-off.
Respectfully submitted,
/s/ Duff & Phelps, LLC
DUFF & PHELPS, LLC
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APPENDIX A
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DEFINITIONS OF TERMS USED IN THIS LETTER
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"Fair salable value" of the Company's assets means the aggregate amount (without
deduction for costs of sale or taxes, if any) of money that could be expected to
be realized, as of the valuation date, from an interested purchaser aware of all
relevant information, by a seller, equally informed, who is interested in
disposing of the entire operation as a going concern, presuming the business
will be continued in its present form and character within an approximate one
(1) year time frame. This definition does not contemplate a distress sale.
"Stated value of the Company's liabilities, including all contingent
liabilities" means solely the stated amount of liabilities as represented in the
Company's post-Spin-off, pro forma estimated balance sheet as of April 30, 2000,
and contingent liabilities as identified to us and valued by officers of the
Company without any independent verification by us.
"Not have an unreasonably small amount of capital for the operation of the
businesses in which it is engaged" and "able to pay its stated liabilities,
including identified contingent liabilities, as they mature" mean that the
Company will be able to generate enough cash from either operations, asset
dispositions, or refinancing to meet its stated obligations and those contingent
liabilities identified to us by management.
