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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Mexico | 4011 | N/A | ||
(State or Other Jurisdiction of | (Primary Standard Industrial | (IRS Employer | ||
Incorporation or Organization) | Classification Code Number) | Identification No.) |
Lomas de Chapultepec
11000 México, D.F.
México
+ (5255) 9178-5836
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)
None
Securities registered pursuant to Section 12(g) of the Act:
None
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2005 Form 10-K Annual Report
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Item 11. Executive Compensation | 111 | |||||||
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 111 | |||||||
Item 13. Certain Relationships and Related Transactions | 111 | |||||||
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Computation of Ratio of Earnings to Fixed Charges | ||||||||
Certification Pursuant to Section 302 - Michael R. Haverty | ||||||||
Certification Pursuant to Section 302 - Ronald G. Russ | ||||||||
Certification Pursuant to Section 906 - Michael R. Haverty and Ronald G. Russ |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2005 | 2004(1) | |||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||
Product Category | Carloads | Revenues | Revenues | Carloads | Revenues | Revenues | ||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||
Agro-industrial products | 120,956 | $ | 163.0 | 22.7 | 125,688 | $ | 143.4 | 21.6 | ||||||||||||||||
Cement, metals and minerals | 171,671 | 142.1 | 19.8 | 173,198 | 138.2 | 20.9 | ||||||||||||||||||
Chemical and petrochemical products | 97,058 | 126.6 | 17.6 | 101,291 | 125.7 | 18.9 | ||||||||||||||||||
Automotive products | 114,558 | 115.7 | 16.1 | 119,104 | 119.8 | 18.0 | ||||||||||||||||||
Manufactured products, industrial products | 104,720 | 100.2 | 14.0 | 97,741 | 79.3 | 11.9 | ||||||||||||||||||
Intermodal freight | 212,276 | 57.3 | 8.0 | 208,452 | 50.5 | 7.6 | ||||||||||||||||||
Other(2) | — | 12.7 | 1.8 | — | 7.3 | 1.1 | ||||||||||||||||||
�� | ||||||||||||||||||||||||
KCSM | 821,239 | $ | 717.6 | 100 | % | 825,474 | $ | 664.2 | 100.0 | % | ||||||||||||||
Tex-Mex | — | — | 60,176 | 35.0 | ||||||||||||||||||||
Total | 821,239 | $ | 717.6 | 885,650 | $ | 699.2 | ||||||||||||||||||
(1) | Tex-Mex 2004 revenues include seven months as a consequence of the sale of 51% of Mexrail (Tex-Mex’s parent company) to KCS in August 2004. | |
(2) | Other revenues include complementary railroad services such as haulage, demurrage, and fuel surcharges. |
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• | A radio-based track warrant control system is in place over approximately 1,747 miles of track, representing approximately 66% of our rail lines. It utilizes direct radio communication between dispatchers and engineers combined with specific track assignments to coordinate train movements and dispatching. | ||
• | A centralized traffic control system, or CTC system, which allows a central dispatcher in Monterrey to manage track operations between Mexico City and Nuevo Laredo, is in place over an aggregate distance of 892 track miles, representing approximately 34% of our rail lines. |
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• | electronic waybilling; | ||
• | “Track and Trace”; | ||
• | AEI (Automatic Equipment Identification) readouts; | ||
• | KCSM graphical rail network; | ||
• | equipment order monitoring; | ||
• | rate inquiries; | ||
• | equipment historical information; | ||
• | an automatic delivery reporting feature which can be customized by the user based on the day of the week and delivery time and can handle up to 10 delivery recipients; | ||
• | invoice inquiries; and | ||
• | train schedule and other information. |
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• | Rail transport prices are generally lower than truck prices. This is due in part to the fact that less labor is required to haul cargo by rail. | ||
• | With our customer service structure and substantial capital improvements, we believe that we have created a customer oriented business which, together with our other competitive advantages, is making our freight services more attractive than those presently offered by trucking concerns. |
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• | we will have to dedicate a substantial portion of our cash flow from operations to the payment of principal, premium, if any, or interest on our debt, which will reduce funds available for other purposes; | ||
• | we may not be able to fund capital expenditures, working capital and other corporate requirements; | ||
• | we may not be able to obtain additional financing, or to obtain it at acceptable rates; | ||
• | our ability to adjust to changing market conditions and to withstand competitive pressures could be limited, and we may be vulnerable to additional risk if there is a downturn in general economic conditions or in our business; | ||
• | we may be exposed to risks in exchange rate fluctuations because any fluctuation of the peso relative to the dollar could impact our ability to service debt; and | ||
• | we may be at a competitive disadvantage compared to our competitors that have less leverage and greater operating and financing flexibility than we do. |
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• | inflation can adversely affect consumer purchasing power, thereby adversely affecting demand for the products we transport; | ||
• | to the extent inflation exceeds our price increases, our prices and revenues will be adversely affected in “real” terms; and | ||
• | if the rate of Mexican inflation exceeds the rate of the depreciation of the peso against the dollar, our dollar-denominated sales will decrease in relative terms when stated in constant Mexican pesos. |
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Under | Track Usage | |||||||||||
Concession | Rights | Total | ||||||||||
(In miles) | ||||||||||||
Main track (includes 134 miles of line with double track) | 2,639 | 541 | 3,180 | |||||||||
Sidings under centralized traffic control | 117 | — | 117 | |||||||||
Spurs, yard tracks and other sidings | 510 | — | 510 | |||||||||
Total | 3,266 | 541 | 3,807 | |||||||||
Main Line — | ||||||||
Mexico City to | ||||||||
Nuevo Laredo | All Lines | |||||||
(In miles) | ||||||||
Continuously welded rail | 934 | 2,050 | ||||||
Jointed rail | — | 589 | ||||||
Total | 934 | 2,639 | ||||||
Concrete ties installed | 828 | 1,559 | ||||||
Wood ties installed | 106 | 1,080 | ||||||
Total | 934 | 2,639 | ||||||
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Number | Number of | |||||||||||||||||||||||
Make | Type | of Units | Axles | Horsepower | Year Built | Maintained By | ||||||||||||||||||
Owned | ||||||||||||||||||||||||
EMD | SW1504 | 15 | 4 | 1,500 | 1973 | MPI/GETS | ||||||||||||||||||
EMD | MP15AC | 11 | 4 | 1,500 | 1983 | MPI/GETS | ||||||||||||||||||
EMD | GP38-2 | 50 | 4 | 2,000 | 1975-83 | MPI/GETS | ||||||||||||||||||
EMD | SD45 | 1 | 6 | 3,600 | 1978 | MPI/GETS | ||||||||||||||||||
EMD | SD40 | 52 | 6 | 3,000 | 1968-72 | MPI/GETS | ||||||||||||||||||
EMD | SD40-2 | 39 | 6 | 3,000 | 1973-88 | MPI/GETS | ||||||||||||||||||
GE | B23-7 | 7 | 4 | 2,250 | 1981 | Alstom | ||||||||||||||||||
GE | C30-7 | 38 | 6 | 3,000 | 1982-89 | Alstom | ||||||||||||||||||
GE | SUPER 7 | 104 | 6 | 3,000 | 1990-94 | Alstom | ||||||||||||||||||
GE | E-60(Elect.) | 6 | 6 | 6,000 | 1984 | Alstom | ||||||||||||||||||
Total owned | 323 | |||||||||||||||||||||||
Long-Term Lease(1) | ||||||||||||||||||||||||
GE | AC4400CW | 75 | 6 | 4,400 | 1998-2000 | GETS | ||||||||||||||||||
Total | 398 | |||||||||||||||||||||||
(1) | Consists of AC-traction locomotives. |
Owned | Leased | |||||||
Box cars | 1,187 | 1,278 | ||||||
Gondolas | 1,824 | 2,922 | ||||||
Covered hoppers | 570 | 2,518 | ||||||
Flat cars | 557 | 261 | ||||||
Bi-level carriers | - | 1,556 | ||||||
Spine cars | - | - | ||||||
Tank cars | 71 | 611 | ||||||
Cabooses | 51 | - | ||||||
Open top hoppers. | 10 | - | ||||||
Office cars | 4 | - | ||||||
Total | 4,274 | 9,146 | ||||||
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Successor | Predecessor | Predecessor | |||||||||||||||||||||||
Three | |||||||||||||||||||||||||
Months | |||||||||||||||||||||||||
Nine Months ended | ended | ||||||||||||||||||||||||
December 31, | March 31, | Year Ended December 31, | |||||||||||||||||||||||
2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||||||
Results of Operations Data: | |||||||||||||||||||||||||
Revenues | $ | 547,547 | $ | 170,088 | $ | 699,225 | $ | 698,528 | $ | 712,140 | $ | 720,627 | |||||||||||||
Operating expenses | 530,321 | 144,078 | 593,170 | 591,236 | 554,244 | 538,702 | |||||||||||||||||||
Operating income (loss) | 17,226 | 26,010 | 106,055 | 107,292 | 157,896 | 181,925 | |||||||||||||||||||
VAT / PUT settlement gain net | 141,035 | — | — | — | — | — | |||||||||||||||||||
Equity in net earnings of unconsolidated affiliates | (1,466 | ) | — | 41 | 282 | 1,269 | — | ||||||||||||||||||
Interest income | 1,111 | 343 | 514 | 1,509 | 4,974 | 4,510 | |||||||||||||||||||
Interest expense | 76,039 | 27,325 | 112,296 | 112,641 | 100,789 | 87,009 | |||||||||||||||||||
Exchange gain (loss) — net | 3,510 | 183 | 429 | (13,695 | ) | (17,411 | ) | 1,850 | |||||||||||||||||
Income (loss) before income taxes and minority interest | 85,377 | (789 | ) | (5,257 | ) | (17,253 | ) | 45,939 | 101,276 | ||||||||||||||||
Net income (loss) | $ | 103,707 | $ | 116 | $ | (8,346 | ) | $ | 27,314 | $ | 1,110,184 | $ | 73,561 | ||||||||||||
Other Financial Data: | |||||||||||||||||||||||||
Depreciation and amortization. | $ | 67,689 | $ | 22,094 | $ | 88,732 | $ | 87,166 | $ | 83,011 | $ | 79,496 | |||||||||||||
Capital expenditures | 71,982 | 9,212 | 41,143 | 73,121 | 89,355 | 85,245 | |||||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||||||||||
Operating activities | 80,486 | 35,791 | 87,477 | 99,664 | 142,464 | 132,547 | |||||||||||||||||||
Investing activities | (71,343 | ) | (8,974 | ) | (13,576 | ) | (70,731 | ) | (132,713 | ) | (83,233 | ) | |||||||||||||
Financing activities | $ | (7,493 | ) | $ | (35,538 | ) | $ | (63,253 | ) | $ | (55,585 | ) | $ | (32,612 | ) | $ | (29,383 | ) |
Successor | Predecessor | ||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||
Total assets | $ | 2,413,629 | $ | 2,234,962 | $ | 2,333,664 | $ | 2,326,513 | $ | 2,272,148 | |||||||||||
Total debt and capital lease obligations | 908,226 | 906,944 | 968,016 | 1,023,105 | 838,011 | ||||||||||||||||
Total liabilities | 1,215,137 | 1,195,489 | 1,284,177 | 1,192,582 | 976,088 | ||||||||||||||||
Common stock, 57,350,802 shares, without par value, authorized, issued and outstanding | 807,008 | 807,008 | 807,008 | 807,008 | 807,008 | ||||||||||||||||
Total stockholders’ equity | $ | 1,198,492 | $ | 804,840 | $ | 813,186 | $ | 785,872 | $ | 915,341 |
Successor | Predecessor | Predecessor | |||||||||||||||||||||||
For the nine | For the three | ||||||||||||||||||||||||
months ended | months ended | For the Years Ended | |||||||||||||||||||||||
December 31, | March 31, | December 31, | |||||||||||||||||||||||
2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||
Historical | N/A | * | 1.0 | 1.0 | N/A | * | 1.4 | 2.0 |
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* | For 2003, and for the nine months ended December 31, 2005, our earnings were insufficient to cover fixed charges by $17.5 million, and $54.2 million, respectively. |
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Year Ended December 31, | ||||||||||||||||
2005 | 2004(1) | |||||||||||||||
Business Segment | Carloads | Revenues | Carloads | Revenues | ||||||||||||
(In millions) | (In millions) | |||||||||||||||
Agro-industrial products | 120,956 | $ | 163.0 | 125,688 | $ | 143.4 | ||||||||||
Cement, metals and minerals | 171,671 | 142.1 | 173,198 | 138.2 | ||||||||||||
Chemical and petrochemical products | 97,058 | 126.6 | 101,291 | 125.7 | ||||||||||||
Automotive products | 114,558 | 115.7 | 119,104 | 119.8 | ||||||||||||
Manufactured products, industrial products | 104,720 | 100.2 | 97,741 | 79.3 | ||||||||||||
Intermodal freight | 212,276 | 57.3 | 208,452 | 50.5 | ||||||||||||
Other(2) | — | 12.7 | — | 7.3 | ||||||||||||
KCSM | 821,239 | $ | 717.6 | 825,474 | $ | 664.2 | ||||||||||
Tex-Mex | — | — | 60,176 | 35.0 | ||||||||||||
Total | 821,239 | $ | 717.6 | 885,650 | $ | 699.2 | ||||||||||
(1) | Includes only seven months of Tex-Mex’s 2004 revenues as a consequence of the sale of its parent, Mexrail, to KCS in August, 2004. | |
(2) | Other revenues include railroad services including haulage, demurrage and switching. |
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Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||||||||||
For the nine months ended December 31, | For the three months ended March 31, | Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||
2005 | 2005 | 2005 | 2004 | ||||||||||||||||||||||||||||||||
% of | % of | % of | % of | ||||||||||||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Amount | Revenue | Amount | Revenue | ||||||||||||||||||||||||||||
(In thousands) | (In thousands) | (In thousands) | (In thousands) | ||||||||||||||||||||||||||||||||
Salaries, wages and employee benefits | $ | 95,593 | 17.5 | % | $ | 28,782 | 16.9 | % | $ | 124,375 | 17.3 | % | $ | 107,526 | 15.4 | % | |||||||||||||||||||
Purchased services | 108,703 | 19.8 | 36,809 | 21.6 | 145,512 | 20.3 | 154,097 | 22.0 | |||||||||||||||||||||||||||
Fuel | 83,109 | 15.2 | 23,224 | 13.7 | 106,333 | 14.8 | 79,287 | 11.3 | |||||||||||||||||||||||||||
Materials and supplies | 5,779 | 1.1 | 1,692 | 1.0 | 7,471 | 1.0 | 5,967 | 0.9 | |||||||||||||||||||||||||||
Car hire — net | 38,022 | 6.9 | 8,584 | 5.0 | 46,606 | 6.5 | 37,913 | 5.4 | |||||||||||||||||||||||||||
Rents other than car hire | 44,912 | 8.2 | 13,776 | 8.1 | 58,688 | 8.2 | 49,601 | 7.1 | |||||||||||||||||||||||||||
Casualties and insurance | 14,736 | 2.7 | 2,240 | 1.3 | 16,976 | 2.4 | 10,594 | 1.5 | |||||||||||||||||||||||||||
Employees’ statutory profit sharing | 41,081 | 7.5 | 547 | 0.3 | 41,628 | 5.8 | (6,556 | ) | (0.9 | ) | |||||||||||||||||||||||||
Other costs | 30,697 | 5.6 | 6,330 | 3.7 | 37,027 | 15.2 | 29,525 | 4.2 | |||||||||||||||||||||||||||
Depreciation and amortization | 67,689 | 12.2 | 22,094 | 13.0 | 89,783 | 12.5 | 87,207 | 12.5 | |||||||||||||||||||||||||||
KCSM | $ | 530,321 | 96.7 | % | $ | 144,078 | 84.6 | % | $ | 674,399 | 94.0 | % | $ | 555,161 | 79.4 | % | |||||||||||||||||||
Tex-Mex | — | — | — | — | — | — | 38,009 | 5.5 | % | ||||||||||||||||||||||||||
Total | $ | 530,321 | 96.7 | % | $ | 144,078 | 84.6 | % | $ | 674,399 | 94.0 | % | $ | 593,170 | 84.9 | % | |||||||||||||||||||
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Year Ended December 31, | ||||||||||||||||
2004(1) | 2003 | |||||||||||||||
Business Segment | Carloads | Revenues | Carloads | Revenues | ||||||||||||
(In millions) | (In millions) | |||||||||||||||
Agro-industrial products | 125,688 | $ | 143.4 | 122,114 | $ | 142.9 | ||||||||||
Cement, metals and minerals | 173,198 | 138.2 | 159,502 | 125.4 | ||||||||||||
Chemical and petrochemical products | 101,291 | 125.7 | 88,522 | 113.2 | ||||||||||||
Automotive products | 119,104 | 119.8 | 120,883 | 124.7 | ||||||||||||
Manufactured products, industrial products | 97,741 | 79.3 | 87,117 | 74.3 | ||||||||||||
Intermodal freight | 208,452 | 50.5 | 190,488 | 52.4 | ||||||||||||
Other(2) | — | 7.3 | — | 8.5 | ||||||||||||
KCSM | 825,474 | $ | 664.2 | 768,626 | $ | 641.4 | ||||||||||
Tex-Mex | 60,176 | 35.0 | 100,814 | 57.1 | ||||||||||||
Total | 885,650 | $ | 699.2 | 869,440 | $ | 698.5 | ||||||||||
(1) | Includes only seven months of Tex-Mex’s 2004 revenues as a consequence of the sale of its parent, Mexrail, to KCS in August, 2004. | |
(2) | Other revenues include railroad services including haulage, demurrage and switching. |
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Year Ended December 31, | ||||||||||||||||
2004 | 2003 | |||||||||||||||
% of | % of | |||||||||||||||
Amount | Revenue | Amount | Revenue | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Salaries, wages and employee benefits | $ | 107,526 | 15.4 | % | $ | 105,569 | 15.1 | % | ||||||||
Purchased services | 154,097 | 22.0 | 171,713 | 24.6 | ||||||||||||
Fuel | 79,287 | 11.3 | 58,706 | 8.4 | ||||||||||||
Materials and supplies | 5,967 | 0.9 | 7,391 | 1.1 | ||||||||||||
Car hire — net | 37,913 | 5.4 | 35,420 | 5.1 | ||||||||||||
Rents other than car hire | 49,601 | 7.1 | 51,330 | 7.3 | ||||||||||||
Casualties and insurance | 10,594 | 1.5 | 9,703 | 1.4 | ||||||||||||
Employees’ statutory profit sharing | (6,556 | ) | (0.9 | ) | (11,528 | ) | (1.7 | ) | ||||||||
Other costs | 29,525 | 4.2 | 18,158 | 2.6 | ||||||||||||
Depreciation and amortization | 87,207 | 12.5 | 84,711 | 12.0 | ||||||||||||
KCSM | $ | 555,161 | 79.4 | % | $ | 531,173 | 75.9 | % | ||||||||
Tex-Mex | 38,009 | 5.5 | % | 60,063 | 8.6 | % | ||||||||||
Total | $ | 593,170 | 84.9 | % | $ | 591,236 | 84.5 | % | ||||||||
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Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | Three months | |||||||||||||||||
ended December | ended | |||||||||||||||||
31, | March 31, | |||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
(In thousands) | ||||||||||||||||||
Net income (loss) for the period | $ | 103,707 | $ | 116 | $ | (8,346 | ) | $ | 27,314 | |||||||||
Depreciation and amortization | 67,689 | 22,094 | 88,732 | 87,166 | ||||||||||||||
Amortization of discount on 2009 Debentures(1) | — | — | 47 | 370 | ||||||||||||||
VAT / PUT settlement gain | (141,035 | ) | — | — | — | |||||||||||||
Deferred income tax | (557 | ) | (1,109 | ) | (2,920 | ) | (62,252 | ) | ||||||||||
Statutory profit sharing | 41,081 | 547 | (6,556 | ) | (11,528 | ) | ||||||||||||
Minority interest | (17,773 | ) | 204 | (1,621 | ) | 6,922 | ||||||||||||
Loss on sale of property, machinery and equipment — net | 3,662 | 723 | 3,704 | 2,909 | ||||||||||||||
Loss on sale of 51% of Mexrail and related call option | — | — | 12,221 | — | ||||||||||||||
Changes in current assets and liabilities | 23,712 | 13,216 | 2,216 | 48,763 | ||||||||||||||
Net operating cash flows | $ | 80,486 | $ | 35,791 | $ | 87,477 | $ | 99,664 | ||||||||||
(1) | Includes amortization of discount on senior discount debentures and commercial paper. |
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Successor | Predecessor | Predecessor | |||||||||||||||
Nine months | Three months | ||||||||||||||||
ended | ended | ||||||||||||||||
December 31, | March 31, | Year Ended December 31, | |||||||||||||||
2005 | 2005 | 2004 | 2003 | ||||||||||||||
(In millions of dollars) | |||||||||||||||||
Capital Expenditures | |||||||||||||||||
Locomotives and freight cars (1) | $ | 17.5 | $ | 0.7 | $ | 7.9 | $ | 18.4 | |||||||||
Rail track | 44.1 | 7.7 | 24.3 | 48.7 | |||||||||||||
Telecommunication | 3.1 | 0.4 | 1.1 | 1.7 | |||||||||||||
Other | 7.3 | 0.4 | 7.8 | 4.3 | |||||||||||||
Total | $ | 72.0 | $ | 9.2 | $ | 41.1 | $ | 73.1 | |||||||||
Successor | Predecessor | Predecessor | |||||||||||||||
Nine months | Three months | ||||||||||||||||
ended | ended | ||||||||||||||||
December 31, | March 31, | Year Ended December 31, | |||||||||||||||
2005 | 2005 | 2004 | 2003 | ||||||||||||||
(In million of dollars) | |||||||||||||||||
Capital Divestitures(2) | |||||||||||||||||
Freight cars | $ | 0.1 | $ | 0.1 | $ | 0.1 | $ | 3.4 | |||||||||
Concession equipment | 1.3 | 0.7 | 3.6 | 1.5 | |||||||||||||
Other assets | 4.0 | — | 0.4 | 0.4 | |||||||||||||
Total | $ | 5.4 | $ | 0.8 | $ | 4.1 | $ | 5.3 | |||||||||
(1) | Locomotives and freight cars capital expenditures do not include costs incurred relating to certain locomotives expenses where payment has been deferred in accordance with agreements with its vendors suppliers. | |
(2) | Capital divestitures are shown in our cash flow statement included elsewhere in this Annual Report in the line items “Loss on sale of properties and write-off of cost of properties, net” included in our operating activities, |
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Year ended December 31 | Less than 1 | 1-3 | 3-5 | More than | ||||||||||||||||
Indebtedness(1) | Year | Years | Years | 5 Years | Total | |||||||||||||||
2012 Senior Notes 12.50% | $ | 23,659 | $ | 47,319 | $ | 47,319 | $ | 215,489 | $ | 333,786 | ||||||||||
2007 Senior Notes 10.25% | 16,167 | 158,084 | — | — | 174,251 | |||||||||||||||
2012 Senior Notes 9 3/8% | 45,346 | 90,692 | 90,692 | 528,019 | 754,749 | |||||||||||||||
Term loan facility(2) | — | 71,572 | — | — | 71,572 | |||||||||||||||
Capital leases | 314 | 596 | 362 | — | 1,272 | |||||||||||||||
Total indebtedness | $ | 85,486 | $ | 368,263 | $ | 138,373 | $ | 743,508 | $ | 1,335,630 | ||||||||||
Less than 1 | 1-3 | 3-5 | More than | |||||||||||||||||
Operating Leases(3) | Year | Years | Years | 5 Years | Total | |||||||||||||||
Locomotive operating leases | $ | 14,419 | $ | 28,839 | $ | 28,839 | $ | 120,045 | $ | 192,142 | ||||||||||
Railcar operating leases | 38,578 | 62,206 | 40,644 | 37,080 | 178,508 | |||||||||||||||
Total operating leases | $ | 52,997 | $ | 91,045 | $ | 69,483 | $ | 157,125 | $ | 370,650 | ||||||||||
Less than 1 | 1-3 | 3-5 | More than | |||||||||||||||||
Purchase Obligations | Year | Years | Years | 5 Years | Total | |||||||||||||||
Locomotive maintenance agreement | $ | 50,090 | $ | 100,131 | $ | 50,381 | $ | 104,342 | $ | 304,944 | ||||||||||
Track maintenance and rehabilitation agreement | 5,891 | 11,322 | 10,699 | 9,142 | 37,054 | |||||||||||||||
Total purchase obligations | $ | 55,981 | $ | 111,453 | $ | 61,080 | $ | 113,484 | $ | 341,998 | ||||||||||
(1) | These amounts include principal and interest payments and withholding tax where applicable. | |
(2) | On October 28, 2005, we refinanced our existing term loan facility by replacing the 2004 Credit Agreement with the New Credit Agreement. | |
(3) | These amounts include the minimum lease payments. |
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Redemption | ||||
Year | Price | |||
2007 | 106.250 | % | ||
2008 | 104.167 | % | ||
2009 | 102.083 | % | ||
2010 and thereafter | 100.000 | % |
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Maturity | Fixed Rate Debt(1) | Variable Rate Debt(2) | ||||||
(In thousands of dollars) | ||||||||
2006 | $ | — | $ | 102,142 | ||||
2007 | 150,000 | — | ||||||
2008 | — | — | ||||||
Thereafter | 640,000 | — | ||||||
Total | $ | 790,000 | $ | 102,142 | ||||
Fair Value | $ | 858,150 | $ | 102,140 | ||||
(1) | Includes $150.0 million principal amount of the 2007 Senior Notes, $460.0 million principal amount of the 9 3/8% Notes and $180.0 million principal amount of the 2012 Senior Notes. | |
(2) | On October 28, 2005, we refinanced our term loan facility by replacing the 2004 Credit Agreement with the New Credit Agreement. |
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Page | ||||
Consolidated Financial Statements: | ||||
55 | ||||
56 | ||||
57 | ||||
58 | ||||
59 | ||||
61 | ||||
62 |
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Grupo Transportacion Ferroviaria Mexicana, S. A. de C. V.
Mexico City, April 16, 2005
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Independent Registered Public Accounting Firm
Grupo Transportación Ferroviaria Mexicana S.A. de C.V.
56
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SUBSIDIARIES
Successor | Predecesor | ||||||||
Assets | 2005 | 2004 | |||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 7,174 | 14,245 | ||||||
Accounts receivable, net (note 6) | 92,970 | 106,014 | |||||||
Related company receivable (note 14) | 35,843 | 31,569 | |||||||
Other accounts receivable, net (note 7) | 44,640 | 72,057 | |||||||
Inventories, net (note 8) | 18,746 | 21,738 | |||||||
Other current assets (note 9) | 17,613 | 7,036 | |||||||
Total current assets | 216,986 | 252,659 | |||||||
Non current assets: | |||||||||
Concession value, net (note 10) | 1,360,470 | 1,130,917 | |||||||
Property, machinery and equipment, net (note 11) | 593,364 | 558,669 | |||||||
Investments held in associate company (note 2(a)) | 37,992 | 8,060 | |||||||
Deferred charges | 16,895 | 24,573 | |||||||
Other assets | 37,324 | 5,003 | |||||||
Deferred income tax (note 18) | 150,598 | 255,081 | |||||||
Total assets | $ | 2,413,629 | 2,234,962 | ||||||
Successor | Predecesor | ||||||||
Liabilities and Stockholders’ Equity | 2005 | 2004 | |||||||
Current liabilities: | |||||||||
Short term debt and capital lease due within one year (note 12) | $ | 4,482 | 66,749 | ||||||
Interest payable | 9,887 | 4,073 | |||||||
Accounts payable (note 15} | 145,178 | 130,058 | |||||||
Related company payable (note 14) | 13,299 | 3,907 | |||||||
Other current liabilities | 22,475 | 6,615 | |||||||
Total current liabilities | 195,321 | 211,402 | |||||||
Long-term debt (note 12) | 903,744 | 840,195 | |||||||
Liability under association in participation agreement | — | 118,688 | |||||||
Deferred statutory profit sharing (note 18) | 28,881 | — | |||||||
Other long-term liabilities and deferred credits (note 16) | 87,191 | 25,204 | |||||||
Total long-term liabilities | 1,019,816 | 984,087 | |||||||
Total liabilities | 1,215,137 | 1,195,489 | |||||||
Minority interest (note 2 (p)) | 234,633 | ||||||||
Stockholders’ equity (note 17): | |||||||||
Common stock, 57,350,802 shares authorized, issued without par value | 807,008 | 807,008 | |||||||
Treasury shares | (256,125 | ) | (204,904 | ) | |||||
Additional paid in capital | 323,935 | — | |||||||
Retained earnings | 323,674 | 219,851 | |||||||
Total stockholders’ equity | 1,198,492 | 804,840 | |||||||
Commitments and contingencies (note 19) | |||||||||
Total liabilities and stockholders’ equity | $ | 2,413,629 | 2,234,962 | ||||||
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SUBSIDIARIES
(Amounts in thousands of US dollars, except per share amounts)
Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | Three months | |||||||||||||||||
ended | ended | Year ended | ||||||||||||||||
December 31, | March 31, | December 31, | ||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
Transportation revenues | $ | 547,547 | 170,088 | 699,225 | 698,528 | |||||||||||||
Costs and expenses: | ||||||||||||||||||
Salaries, wages and employee benefits | 95,593 | 28,782 | 117,386 | 121,762 | ||||||||||||||
Purchased services | 108,703 | 36,809 | 165,396 | 190,344 | ||||||||||||||
Fuel, material and supplies | 88,888 | 24,916 | 89,382 | 71,843 | ||||||||||||||
Statutory profit sharing | 41,081 | 547 | (6,556 | ) | (11,528 | ) | ||||||||||||
Other costs | 128,367 | 30,930 | 138,830 | 131,649 | ||||||||||||||
Depreciation and amortization | 67,689 | 22,094 | 88,732 | 87,166 | ||||||||||||||
Total operating expenses | 530,321 | 144,078 | 593,170 | 591,236 | ||||||||||||||
Operating income | 17,226 | 26,010 | 106,055 | 107,292 | ||||||||||||||
Interest expense | (76,039 | ) | (27,325 | ) | (112,296 | ) | (112,641 | ) | ||||||||||
Interest income | 1,111 | 343 | 514 | 1,509 | ||||||||||||||
Exchange (loss) gain, net | 3,510 | 183 | 429 | (13,695 | ) | |||||||||||||
Net financing cost | (71,418 | ) | (26,799 | ) | (111,353 | ) | (124,827 | ) | ||||||||||
VAT/Put settlement gain, net (note5) | 141,035 | — | — | — | ||||||||||||||
Net (losses) earnings of unconsolidated affiliates (note 2a) | (1,466 | ) | — | 41 | 282 | |||||||||||||
(Loss)/income before income taxes and minority interest | 85,377 | (789 | ) | (5,257 | ) | (17,253 | ) | |||||||||||
Income tax (benefit) expense (note 18) | (557 | ) | (1,109 | ) | 4,710 | (51,489 | ) | |||||||||||
Income (loss) before minority interest | 85,934 | 320 | (9,967 | ) | 34,236 | |||||||||||||
Minority interest | 17,773 | (204 | ) | 1,621 | (6,922 | ) | ||||||||||||
Net income (loss) | $ | 103,707 | 116 | (8,346 | ) | 27,314 | ||||||||||||
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SUBSIDIARIES
(Amounts in thousands of US dollars)
Successor | Predecessor | Predecessor | |||||||||||||||
Nine months | Three | ||||||||||||||||
ended | months | ||||||||||||||||
December | ended March | Year Ended | |||||||||||||||
31, | 31, | December 31, | |||||||||||||||
2005 | 2005 | 2004 | 2003 | ||||||||||||||
Operating activities: | |||||||||||||||||
Net income (loss) for the year | $ | 103,707 | 116 | (8,346 | ) | 27,314 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 67,689 | 22,094 | 88,732 | 87,166 | |||||||||||||
VAT/Put settlement gain, net | (141,035 | ) | — | — | — | ||||||||||||
Amortization of discount on senior unsecured debentures and commercial paper | — | — | 47 | 370 | |||||||||||||
Deferred income tax | (557 | ) | (1,109 | ) | (2,920 | ) | (62,252 | ) | |||||||||
Statutory profit sharing | 41,081 | 547 | (6,556 | ) | (11,528 | ) | |||||||||||
Minority interest | (17,773 | ) | 204 | (1,621 | ) | 6,922 | |||||||||||
Loss on sale and write-off of properties, net | 3,662 | 723 | 3,704 | 2,909 | |||||||||||||
Loss on sale of Mexrail’s shares | — | — | 12,221 | — | |||||||||||||
Changes in assets and liabilities: | |||||||||||||||||
Accounts receivable | 24,390 | (10,582 | ) | (12,399 | ) | (10,999 | ) | ||||||||||
Accounts receivable to related parties | (13,350 | ) | 106 | (14,217 | ) | 741 | |||||||||||
Other accounts receivable | 23,698 | 2,954 | 7,680 | 21,338 | |||||||||||||
Inventories | 6,550 | (3,559 | ) | (5,696 | ) | 3,568 | |||||||||||
Other current assets | 3,177 | (3,051 | ) | (5,792 | ) | (957 | ) | ||||||||||
Accounts payable and accrued expenses | (11,354 | ) | 28,138 | 3,717 | 38,032 | ||||||||||||
Other non-current assets and long-term liabilities | (9,399 | ) | (790 | ) | 28,923 | (2,960 | ) | ||||||||||
Total adjustments | (23,221 | ) | 35,675 | 95,823 | 72,350 | ||||||||||||
Net cash provided by operating activities | 80,486 | 35,791 | 87,477 | 99,664 | |||||||||||||
Investing activities: | |||||||||||||||||
Proceeds from sale of Mexrail’s shares net of cash | — | — | 27,147 | — | |||||||||||||
Acquisition of property and equipment | (71,982 | ) | (9,212 | ) | (41,143 | ) | (73,121 | ) | |||||||||
Proceeds from sale of equipment | 639 | 238 | 420 | 2,390 | |||||||||||||
Net cash used in investing activities | (71,343 | ) | (8,974 | ) | (13,576 | ) | (70,731 | ) | |||||||||
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SUBSIDIARIES
Successor | Predecessor | Predecessor | |||||||||||||||
Nine months | Three | ||||||||||||||||
ended | months | ||||||||||||||||
December | ended March | Year Ended | |||||||||||||||
31, | 31, | December 31, | |||||||||||||||
2005 | 2005 | 2004 | 2003 | ||||||||||||||
Financing activities: | |||||||||||||||||
Proceeds from commercial paper | — | — | 20,000 | — | |||||||||||||
Proceeds from senior notes | 460,000 | — | — | — | |||||||||||||
Payments under senior discount debentures | (443,500 | ) | — | — | — | ||||||||||||
Payments under commercial paper | — | — | (10,000 | ) | (37,001 | ) | |||||||||||
Payment of term loan facility | (98,550 | ) | (35,520 | ) | (71,129 | ) | (18,286 | ) | |||||||||
Payments under capital lease obligations | (293 | ) | (18 | ) | (339 | ) | (298 | ) | |||||||||
Proceeds of bridge loan | 30,993 | — | — | — | |||||||||||||
Payments of bridge loan | (30,993 | ) | — | — | — | ||||||||||||
Proceeds from new credit agreement | 111,640 | — | — | — | |||||||||||||
Payment of new credit agreement | (9,714 | ) | — | — | — | ||||||||||||
Debt issuance cost | (14,040 | ) | — | (1,785 | ) | — | |||||||||||
Loan to related party | (13,036 | ) | — | — | — | ||||||||||||
Net cash provided by (used in) financing activities | (7,493 | ) | (35,538 | ) | (63,253 | ) | (55,585 | ) | |||||||||
(Decrease) increase in cash and cash equivalents | 1,650 | (8,721 | ) | 10,648 | (26,652 | ) | |||||||||||
Cash and cash equivalents: | |||||||||||||||||
At beginning of the year/period | 5,524 | 14,245 | 3,597 | 30,249 | |||||||||||||
At end of the year/period | 7,174 | 5,524 | 14,245 | 3,597 | |||||||||||||
Supplemental information: | |||||||||||||||||
Cash paid during the year for interest | $ | 83,561 | 2,012 | 97,604 | 98,626 | ||||||||||||
Assets acquired through capital lease obligation | $ | — | — | — | 120 | ||||||||||||
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IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED
(Amounts in thousands of US dollars)
Additional | ||||||||||||||||||||
Common | Treasury | paid in | Retained | |||||||||||||||||
Predecessor: | stock | shares | capital | earnings | Total | |||||||||||||||
Balances at December 31, 2002 | $ | 807,008 | (204,904 | ) | (17,115 | ) | 200,883 | 785,872 | ||||||||||||
Net income for the year | — | — | — | 27,314 | 27,314 | |||||||||||||||
Balances at December 31, 2003 | $ | 807,008 | (204,904 | ) | (17,115 | ) | 228,197 | 813,186 | ||||||||||||
Net loss for the year | — | — | — | (8,346 | ) | (8,346 | ) | |||||||||||||
Balances at December 31, 2004 | $ | 807,008 | (204,904 | ) | (17,115 | ) | 219,851 | 804,840 | ||||||||||||
Net income for the year for the period | — | — | — | 116 | 116 | |||||||||||||||
Balances at March 31, 2005 | $ | 807,008 | (204,904 | ) | (17,115 | ) | 219,967 | 804,956 | ||||||||||||
Successor: | ||||||||||||||||||||
Push down of additional basis from aquisition by shareholders | — | — | 289,829 | — | 289,829 | |||||||||||||||
Treasury shares received from the Government related to the VAT/PUT settlement | — | (51,221 | ) | 51,221 | — | — | ||||||||||||||
Net income for the period | — | — | — | 103,707 | 103,707 | |||||||||||||||
Balances at December 31, 2005 | $ | 807,008 | (256,125 | ) | 323,935 | 323,674 | 1,198,492 | |||||||||||||
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
the three months ended March 31, 2005, and for the
nine months ended December 31, 2005
except per share amounts)
(1) | Description of the Company and its subsidiary | |
Grupo Transportación Ferroviaria Mexicana, S.A. de C.V. (“Grupo TFM” or the Company) was incorporated on July 12, 1996. In December 1996, Grupo TFM was awarded the right to acquire (the “Acquisition”) an 80% interest in KCSM, S.A. de C.V. (“KCSM”) (formerly known as TFM, S.A. de C.V.) (“KCSM”), formerly Ferrocarril del Noreste, S.A. de C.V. pursuant to a stock purchase agreement. | ||
Grupo TFM is a non-operating holding company with no material assets or operations other than its investment in the Company and Arrendadora TFM, S. A. de C. V. (“Arrendadora TFM”). | ||
Arrendadora TFM S.A. de C.V.(“Arrendadora TFM”) 98% owned subsidiary was incorporated on September 27, 2002 under the Mexican Law regulations and its only operation is the leasing to KCSM of the locomotives and freight cars acquired through the privatization previously transferred by KCSM (locomotives in 2002 and cars in 2003). Arrendadora TFM is a subsidiary of KCSM. | ||
KCSM lines form a strategically important rail link within Mexico and to the North American Free Trade Agreement corridor. KCSM lines directly link Mexico City and Monterrey (as well as Guadalajara through trackage rights) with the ports of Lázaro Cárdenas, Veracruz and Támpico and the Mexican/United States border crossings of Nuevo Laredo, Tamaulipas-Laredo, Texas and Matamoros-Brownsville, Texas. |
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
(Amounts in thousands of US dollars ($) or thousands of Mexican pesos (Ps),
except number of shares)
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
except number of shares)
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
except number of shares)
On September 12, 2005, we, Grupo TFM, and KCS, along with Grupo TMM, entered into a settlement agreement with the Mexican government resolving certain disputes and controversies between the companies and the Mexican government concerning the payment of a value added tax, or VAT, refund to us and the purchase of our remaining shares owned by the Mexican government. As a result of this settlement, KCS and its subsidiaries now own 100% of Grupo TFM and us, and the Mexican government’s remaining 20% ownership interest in us has been eliminated; the potential obligation of KCS, Grupo TFM and Grupo TMM to acquire the Mexican government’s remaining 20% interest in us has been eliminated; and the legal obligation of the Mexican government to issue the VAT refund to us has been satisfied. | ||
Basis of presentation | ||
Due to the acquisition of Grupo TFM by KCS on April 1, 2005, as mentioned in note 4, and the effects of the push down accounting to the Company, the consolidated financial statements included herein are not comparable to the financial statements for periods prior to April 1, 2005. The Company’s consolidated financial statements are separated between “Successor” and Predecessor” to reflect the Company’s results and financial position before and after the change in control. For the three months ended March 31, 2005 and the nine months ended December 31, 2005, the consolidated financial statements include the effects of the push down of the purchase accounting allocation of the Company by KCS, as more fully described in note 5. | ||
(2) | Summary of significant accounting policies- | |
Following the acquisition by KCS on April 1, 2005, Grupo TFM and its subsidiaries have prepared the accompanying consolidated financial statements in accordance with Generally Accepted Accounting Principles in the United States of America, or (“U.S. GAAP”). The Company had previously prepared its consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS. The Company continues to evaluate its accounting policies and practices compared to those used by KCS and may make refinements to such policies and practices. |
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
except number of shares)
The most significant accounting policies are described below. | ||
(a) | Consolidation- | |
The consolidated financial statements include subsidiaries which are fully consolidated from the date on which control is transferred to Grupo TFM. | ||
Subsidiaries- | ||
Subsidiaries are all entities over which Grupo TFM has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. They are de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, without considering of the extent of any minority interest. | ||
All intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by Grupo TFM. | ||
Associates- | ||
Associates are all entities over which Grupo TFM has significant influence but not control, generally representing shareholding between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognized at cost. | ||
KCSM’s 25% interest in Mexico City Rail Terminal, or FTVM is accounted for using the equity method of accounting. |
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
except number of shares)
When Grupo TFM’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. | ||
Unrealized gains on transactions between Grupo TFM and its associates are eliminated to the extent of Grupo TFM’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. | ||
(b) | Foreign currency translation- | |
Although Grupo TFM and its subsidiaries are required to maintain their books and records in Mexican pesos (“Ps”) for tax purposes, (except Mexrail and its subsidiary until August 2004), Grupo TFM and subsidiaries keep records and use the US dollar as their functional and reporting currency, as the US dollar is the currency that reflects the economic substance of the underlying events and circumstances relevant to the entity. | ||
Monetary assets and liabilities denominated in Mexican pesos are translated into US dollars using current exchange rates. The difference between the exchange rate on the date of the transaction and the exchange rate on the settlement date, or balance sheet date if not settled, is included in the income statement as a foreign exchange gain/loss. Non-monetary assets or liabilities, capital stock transactions and minority interest originally denominated in Mexican pesos are translated into US dollars using the historical exchange rate at the date of the transaction. Depreciation and amortization of non-monetary assets are recorded using the historical cost in US dollars. | ||
(c) | Cash and cash equivalents- | |
Cash and cash equivalents represent highly liquid interest-bearing deposits and investments with an original maturity of less than three months. |
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
except number of shares)
(d) | Accounts receivable- | |
Accounts receivable are carried at original invoice amount less an allowance for these receivables. The allowance for doubtful accounts represents the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on the historical write-off and collection experience and thorough analysis of each case. | ||
(e) | Inventories- | |
Inventories consist mainly of materials and supplies, fuel and items for maintenance of property, machinery and equipment and are valued at the lower of the average cost and net realizable value. | ||
(f) | Concession rights and related assets- | |
Costs incurred by the Company to acquire the concession rights and related assets were capitalized and are amortized over the estimated useful lives of the related assets and rights acquired. The initial purchase price to acquire the concession rights and related assets was allocated to the identifiable assets acquired and liabilities assumed in connection with the privatization process based on their estimated fair value and has been adjusted as described in note 10. | ||
The assets acquired and liabilities assumed include: |
(i) | The tangible assets acquired pursuant to the asset purchase agreement, consisting of locomotives, freight cars and materials and supplies; | ||
(ii) | The rights to utilize the right of way, track structure, buildings and related maintenance facilities of the KCSM lines; | ||
(iii) | The 25% equity interest in the company established to operate FTVM facilities; and | ||
(iv) | Capital lease obligations assumed. |
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
except number of shares)
Replacements and improvements to concession assets are capitalized when incurred and are included in property and equipment. | ||
(g) | Property, machinery and equipment- | |
Machinery and equipment acquired through the asset purchase agreement were initially recorded at their estimated fair value. Subsequent acquisitions are stated at cost. Prior to April, 2005 depreciation is calculated using the straight-line method based on the estimated useful lives of the respective fixed assets. | ||
Concession replacements and improvements are stated at cost. Major repairs and track rehabilitation are capitalized. Amortization is calculated using the straight-line method based on the estimated useful lives of the respective improvements or, the term of the concession, if shorter. | ||
Recurring maintenance and repair expenditures are charged to operating expenses as incurred. The cost of rebuilding locomotives is capitalized once the expenditure is incurred and is amortized over the period in which benefits are expected to be received (estimated to be eight years). | ||
As a result of the acquisition by KCS on April 1, 2005, during the third quarter of 2005, the Company adopted KCS capitalization policy/group method of depreciation. Under group method of depreciation, normal retirements reflected as reductions accumulated depreciation which following adoption resulted in a $4.5 million reduction in expenses from April 1 to December 31, 2005. During the year ended December 31, 2005, the Company engaged a civil engineering firm with expertise in railway property usage to conduct an analysis to evaluate depreciation rates for properties and equipment. The analysis centered on evaluating actual historical replacement patterns to assess future lives and indicated that we were depreciating its property over shorter periods than we actually utilize the assets. As a result, depreciation expense recorded in the fourth quarter of 2005 reflected and adjustment totaling $5.5 million, to reduce depreciation expense as recorded in the second and third quarters of 2005. Concession rights and related assets are amortized over the shorter of their remaining useful life as determined by our depreciation review. | ||
(h) | Long-lived assets- | |
The Company evaluates the recoverability of its operating properties when there is an indication that an asset value has been impaired. |
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MEXICANA, S. A. DE C. V. AND SUBSIDIARIES
except number of shares)
The measurement of possible impairment is based primarily on the ability to recover the carrying value of the asset from expected future operating cash flows related to the assets on an undiscounted basis. At December 31, 2005, there were no assets which required an impairment adjustment. | ||
(i) | Fair value of financial instruments | |
The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate to the carrying values because of the short maturity of these financial instruments. | ||
The related fair value based on the quoted market prices for the senior notes due 2007 at December 31, 2005 and 2004, was $158,250 and $159,750, respectively. The related fair value based on the quoted market prices for the senior notes due 2012 at December 31, 2005 and 2004, was $196,200 and $209,700, respectively. The related fair value based on the quoted market prices for the senior notes due May 2012 at December 31, 2005, was $503,700. The fair value based on the quoted market prices for the First Amended and Restated Credit Agreement (“FARCA”) and Senior Discount Debentures at December 31, 2004 was $133,685 and $451,816, respectively. | ||
(j) | Deferred income taxes- | |
Deferred income taxes are provided using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax. | ||
Deferred tax assets are recognized to the extent that it is more likely than not that future taxable profit, against which the temporary differences can be utilized, will be available. | ||
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. |
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except number of shares)
(k) | Employees’ statutory profit sharing- | |
Employees’ statutory profit sharing is determined at the statutory rate of ten percent (10%) of taxable income, adjusted as prescribed by Mexican law and included in the operating expenses. | ||
KCSM is subject to employees’ statutory profit sharing requirements under Mexican law and calculates profit sharing liability as 10% of KCSM net taxable income. Under U.S. GAAP, employees’ statutory profit sharing is an operating expense. In calculating its net taxable income for statutory profit sharing purposes, KCSM previously deducted Net Operating Losses (“NOL”) carryforwards. The application of NOL carryforwards can result in a deferred profit sharing asset for a given period instead of a profit sharing liability. The Mexican tax authorities had challenged the calculation of statutory profit sharing liabilities in the late 1990s, but the Company prevailed with a Mexican Fiscal Court ruling in 1999 followed by a Tax Authority Release acknowledging the ability to continue to calculate statutory profit sharing the way the Company had been, including the deduction of NOL carryforwards in the calculation of net taxable income for statutory profit sharing purposes. However, since a technical amendment to the Mexican tax law in 2002, the Mexican tax authorities have objected to the deduction of NOL carryforwards in the calculation of net taxable income for statutory profit sharing purposes following such amendment, which objection the Company has challenged in court. | ||
Due to a series of decisions in 2005 by the Mexican Supreme Court declaring that NOLs from previous years may not be deducted, KCSM changed the method of calculating its statutory profit sharing liability. KCSM no longer deducts NOLs from prior years when calculating employees’ statutory profit sharing. This change required KCSM to write off its deferred tax assets related to statutory profit sharing resulting in a charge to operating expenses of $35.6 million, after purchase accounting adjustments. | ||
(l) | Borrowings- | |
Borrowings are recognized at the face amount of the debt issued, minus any discount or plus any premium. Borrowings are subsequently stated at amortized cost using the effective yield method. Discounts, premiums and transaction costs associated with the issuance of the debt are amortized and recognized in the consolidated statement of operations as interest expense over the period of the borrowings. | ||
(m) | Seniority premiums. | |
Seniority premiums to which employees are entitled upon termination of employment after 15 years of service are expensed in the years in which the services are rendered. At December 31, 2005 and 2004, the Company had a provision of $1.2 million and $1.0 million, respectively, which is included in other non-current liabilities in the consolidated balance sheets. |
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Other compensation based on length of service to which employees may be entitled in the event of dismissal, in accordance with the Mexican Federal Law, is charged to expense in the year in which they become payable. | ||
(n) | Revenue recognition- | |
The Company recognizes freight revenue based upon the percentage of completion of a commodity movement. Other revenues, in general, are recognized when the product is shipped, as services are performed or contractual obligations fulfilled. |
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except number of shares)
(o) | Leases- | |
Leases of property, machinery and equipment where KCSM has assumed substantially all of the risks and rewards of ownership are classified as capital leases under SFAS No. 13. Capital leases are capitalized at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the consolidated finance balance outstanding. The interest element of the finance cost is charged to the statement of operations over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. | ||
Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases under SFAS No. 13. Payments made under operating leases are charged to the consolidated statement of operations on a straight-line basis over the period of the lease. | ||
(p) | Minority interest- | |
Minority interest reflects the Mexican government’s 20% ownership of KCSM which includes its 4.9% indirect ownership interest in Grupo TFM through KCSM through the date of the VAT/Put Settlement. In connection with the VAT/Put Settlement dated on September 12, 2005, the Minority interest has been eliminated. | ||
(q) | Net income (loss) per share- | |
Net income (loss) per share is calculated based on the weighted average number of shares outstanding during the period. There are no potentially dilutive instruments outstanding, therefore basic and diluted earnings per share are the same. |
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except number of shares)
(r) | Use of estimates- | |
The preparation of the consolidated financial statements requires management to make earnings estimates and assumptions that could affect the reported amounts of assets and liabilities at the date of the financial statements. Actual results could differ from these estimates. | ||
(s) | Accruals- | |
Based on management’s estimates, accruals for claims from customers for merchandise damaged during transportation, legal claims and property damage claims as a result of derailments are recognized, net of expected insurance recoveries, when Grupo TFM has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation. | ||
(t) | Share capital- | |
Grupo TFM has two classes of outstanding capital stock: Series A Shares and Series L Shares. All of the shares of the capital stock of Grupo TFM currently outstanding are fully paid and non-assessable. | ||
Series L Shares may represent up to 25.0% of the total amount of the capital stock of Grupo TFM. Series A Shares are common, full-voting and nominative shares of the capital stock, without par value. Series L Shares have limited voting rights, without par value, and may only be representative of the variable portion of the capital stock of Grupo TFM. | ||
Incremental costs directly attributable to the issuance of new shares are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issuance of new shares or options, for the acquisition of a business, are included in the cost of acquisition as part of the purchase consideration. |
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except number of shares)
Where any subsidiary purchases Grupo TFM equity share capital (Treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the equity holders until the shares are cancelled, reissued or disposed off. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the equity holders. | ||
(u) | Financial instruments and hedging activities- | |
Derivative financial instruments are initially recognized in the balance sheet at cost and subsequently are recognized at their fair value. The method of recognizing the resulting gain or loss is dependent on the nature of the item being hedged. The Company may occasionally designate certain derivatives as either (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), or (2) a hedge of a forecasted transaction or of a firm commitment (cash flow hedge). | ||
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective, are recorded in the statement of operations, along with any changes in the fair value of the hedged asset or liability that is attributable to the hedged risk. | ||
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective, are recognized in equity. Where the forecasted transaction or firm commitment results in the recognition of an asset (for example, property, machinery and equipment) or of a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. | ||
Otherwise, amounts deferred in equity are transferred to the statement of operations and classified as revenue or expense in the same periods during which the hedged firm commitment or forecasted transaction affects the statement of operations (for example, when the forecasted sale takes place). |
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(v) | Segments- | |
Grupo TFM is organized into one business segment (railways) and operates in one geographical segment (México). | ||
(w) | Financial risk management- | |
Foreign exchange risk — Grupo TFM operates foreign transactions and is exposed to foreign currency exchange rate risk arising from exposure primarily with respect to the Mexican peso. KCSM occasionally enters into derivative instruments to cover a portion of this risk. These contracts meet Grupo TFM’s policy for financial risk management, however, they do not meet the conditions to qualify for hedge accounting. Consequently, the instruments are marked to market and accordingly, gains and losses related to such transactions are recognized in the statement of operations. | ||
Interest-rate risk — Grupo TFM’s income and operating cash flows are substantially independent of changes in market interest rates. The interest rates of the capital leases to which Grupo TFM is a lessee are fixed at the inception of the lease. Grupo TFM’s policy is to maintain at least 75% of its borrowings in fixed-rate instruments. At year end December 31, 2005 and 2004, 89% and 85%, respectively of borrowings were at fixed rates. | ||
(x) | Concentration of risk- | |
Over 16.2% of KCSM’s transportation revenues are generated by the automotive industry, which is made up of a relatively small number of customers. In addition, KCSM’s largest customer accounted for approximately 7.5% of its transportation revenues in 2005. KCSM performs ongoing credit valuations of its customers’ financial conditions and maintains a provision for allowance of those receivables. As of December 31, 2005, the Company has no customers which represents more than 10% of its revenues. |
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except number of shares)
(3) | New accounting pronouncements- | |
In December 2004, the Financial Accounting Standards Board, or FASB, revised SFAS No. 123R, Accounting for Stock Based Compensation, or SFAS 123R. The revision established standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services, particularly transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. | ||
That cost is to be recognized over the period during which the employee is required to provide service in exchange for the award. Changes in fair value during the requisite service period are to be recognized as compensation cost over that period. In addition, the revised statement amends SFAS No. 95, Statement of Cash Flows, to require that excess tax benefits be reported as a financing cash flow rather than as a reduction of taxes paid. Effective April 21, 2005, SFAS 123R was amended to change the effective date to the first interim or annual reporting period of the registrants first fiscal year beginning after June 15, 2005. This Financial Accounting Standard is non applicable to KCSM, because the Company does not have any stock compensation plans. | ||
In May 2005, the FASB issued FASB No. 154, Accounting Changes and Error Corrections. Statement 154 establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirement specific to a newly adopted accounting principle. This statement will be effective for the Company of all accounting changes and any error corrections occurring after January 1, 2006. |
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except number of shares)
(4) | Change in Control- | |
On April 1, 2005, KCS and Grupo TMM S.A.. (“Grupo TMM”), completed a transaction under which KCS acquired control of Grupo TFM through the purchase of shares of the common stock of Grupo TFM belonging to Grupo TMM, representing a 48.5% effective interest (51% of the shares of Grupo TFM entitled to full voting rights) (“the Acquisition Agreement”). | ||
As a result of the acquisition and the subsequent purchase and reduction of the Mexican government’s ownership of KCSM, KCS has controlled KCSM since April 1, 2005 and indirectly owned 100% of the common stock of the Company since September 12, 2005. | ||
(5) | Push down accounting- | |
April 1, 2005 — Acquisition Agreement. On December 15, 2004, KCS entered into the Amended and Restated Acquisition Agreement (the “Acquisition Agreement”) with TMM and other parties under which KCS would acquire control of KCSM through the purchase of shares of common stock of Grupo TFM. At the time, Grupo TFM held an 80% interest in KCSM and all of the shares of stock with full voting rights of KCSM. The remaining 20% economic interest in KCSM was owned by the Mexican government in the form of shares with limited voting rights. | ||
Under the terms of the Acquisition Agreement, KCS acquired all of TMM’s 48.5% effective interest in Grupo TFM on April 1, 2005 in exchange for $200.0 million in cash, 18 million shares of KCS common stock, and two-year promissory notes in the aggregate amount of $47.0 million (the “Escrow Notes”), as well as $27.5 million in transaction costs for a total purchase price of $594.3 million. The $47.0 million Escrow Notes are subject to reduction pursuant to the indemnification provisions of the Acquisition Agreement for certain potential losses related to breaches of certain representations, warranties, or covenants in the Acquisition Agreement or claims relating thereto, or under other conditions specified in the Indemnity Escrow Agreement. | ||
In exchange for the purchase price of $594.3 million, KCS acquired 48.5% of Grupo TFM (or 38.8% of KCSM). On a preliminary basis, the excess of purchase price over the historical book value of the assets resulted in a net increase in the basis of the assets of approximately $199.6 million. As a result of the ongoing valuation of certain assets and liabilities, during the fourth quarter of 2005, Grupo TFM and KCSM, recognized changes to the preliminary allocation of purchase price, which was pushed down by KCS. In addition, the KCS purchase price was increased by $4.4 million, relating primarily to an increase in the estimates for severance and relocation costs. | ||
In connection with the evaluation of the fair values of the assets and liabilities of Grupo TFM, certain assets were identified as having little or no value to KCS as the acquiring company. Because KCS acquired only 48.5% of Grupo TFM (or 38.8% of KCSM) in this transaction, the allocation of the excess purchase price over book value of net assets was limited to the acquired percentage. Accordingly, a reduction in the assets of Grupo TFM was limited to acquired percentage and any residual was charged to expense. Grupo TFM operating expenses include $39.5 million relating to decreases in the basis of certain assets, the most significant of which was the write off of deferred employee profit sharing asset of approximately $35.6 million as a result of recent legal rulings in Mexico. |
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Resolution of pre-acquisition contingencies. |
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KCSM Acquisition of Mexican government Shares. |
Purchase Price Allocation |
Increase in current assets | $ | 11.0 | |||
Decrease in property and equipment | (34.8 | ) | |||
Increase in concession assets | 285.4 | ||||
Decrease in deferred income tax | (86.9 | ) | |||
Increase in non-current assets | 83.6 | ||||
Increase in current liabilities | (15.3 | ) | |||
Increase in non-current liabilities | (95.9 | ) | |||
Total | $ | 147.1 | |||
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except number of shares)
Current assets | $ | 269.2 | |||
Property, plant and equipment | 524.7 | ||||
Concession rights | 1,380.0 | ||||
Other assets | 219.5 | ||||
Total assets acquired | $ | 2,393.4 | |||
Current liabilities | $ | 288.3 | |||
Long-term debt acquired | 802.6 | ||||
Other liabilities | 112.6 | ||||
Minority Interest | — | ||||
Total liabilities acquired | $ | 1,203.5 | |||
Deferred Assets and Liabilities. |
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except number of shares)
(6) | Accounts receivable- |
2005 | 2004 | |||||||
Accounts receivable | $ | 105,968 | 109,885 | |||||
Allowance for doubtful accounts | (12,998 | ) | (3,871 | ) | ||||
$ | 92,970 | 106,014 | ||||||
2005 | 2004 | |||||||
Special tax on production and services | $ | 531 | 27,700 | |||||
Recoverable income tax | 6,097 | 14,119 | ||||||
Service to foreign railroads | 11,386 | 12,150 | ||||||
Car repairs | 11,830 | 8,701 | ||||||
Insurance claims | 5,154 | 3,670 | ||||||
Helm Financial Corporation (from the sale of fixed assets) | 2,873 | 3,600 | ||||||
Value added tax | 4,829 | 83 | ||||||
Other | 1,940 | 2,034 | ||||||
$ | 44,640 | 72,057 | ||||||
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except number of shares)
2005 | 2004 | |||||||
Materials and supplies | $ | 20,096 | 19,994 | |||||
Locomotive fuel stock | 2,119 | 2,603 | ||||||
Inventory reserve | (3,469 | ) | (859 | ) | ||||
$ | 18,746 | 21,738 | ||||||
2005 | 2004 | |||||||
Fair value adjustment related to push down accounting | $ | 11,356 | — | |||||
Prepaid expenses | 2,938 | 3,413 | ||||||
Advance to suppliers | 2,154 | 1,623 | ||||||
Prepaid insurance premiums | 1,165 | 2,000 | ||||||
$ | 17,613 | 7,036 | ||||||
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except number of shares)
2005 | 2004 | |||||||
Land | $ | 132,812 | 132,878 | |||||
Buildings | 27,833 | 33,113 | ||||||
Bridges | 85,377 | 75,350 | ||||||
Tunnels | 104,341 | 94,043 | ||||||
Rail | 230,949 | 317,268 | ||||||
Concrete and wood ties | 78,884 | 137,351 | ||||||
Yards | 119,708 | 106,174 | ||||||
Ballast | 62,878 | 107,189 | ||||||
Grading | 502,478 | 391,808 | ||||||
Culverts | 14,098 | 14,942 | ||||||
Signals | 1,066 | 1,418 | ||||||
Others | 41,243 | 57,537 | ||||||
1,401,667 | 1,469,071 | |||||||
Accumulated amortization (1) | (41,197 | ) | (338,154 | ) | ||||
Total concession rights and related assets — net | $ | 1,360,470 | 1,130,917 | |||||
(1) | This amortization is for the nine months ended December 31, 2005. |
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(11) | Property, machinery and equipment-net- |
2005 | 2004 | |||||||
Locomotives | $ | 30,320 | 174,939 | |||||
Freight cars | 62,925 | 87,136 | ||||||
Machinery of workshop | 4,840 | 17,651 | ||||||
Machinery of road | 25,872 | 34,517 | ||||||
Terminal and other equipment | 64,598 | 73,837 | ||||||
Track improvement | 262,605 | 288,065 | ||||||
Buildings | 5,415 | 5,283 | ||||||
Overhaul | 76,310 | 94,191 | ||||||
532,885 | 775,619 | |||||||
Accumulated depreciation (2) | (21,816 | ) | (259,425 | ) | ||||
511,069 | 516,194 | |||||||
Land (1) | 52,144 | 26,907 | ||||||
Construction in progress | 30,151 | 15,568 | ||||||
Total properties machinery and equipment — net | $ | 593,364 | 558,669 | |||||
(1) | Includes land under capital lease amounting to $2,981 and $2,981 in 2005 and 2004, respectively. | |
(2) | This depreciation is for the nine months ended December 31, 2005. | |
(3) | Depreciation of property, machinery and equipment was $12,070, $22,250, $46,871 and $46,957 for the three months ended March 31, 2005, for the nine months ended December 31, 2005 and for the years ended December 31, 2004 and 2003, respectively. |
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2005 | 2004 | |||||||
Short-term debt: | ||||||||
First Amended and Restated Credit Agreement (1) | $ | — | 66,376 | |||||
Capital lease | 314 | 373 | ||||||
Current portion of fair value adjustment arising from push down accounting | 4,168 | — | ||||||
Total short-term debt and capital lease | $ | 4,482 | 66,749 | |||||
Long-term debt: | ||||||||
Senior notes due 2007 (2) | $ | 150,000 | 150,000 | |||||
Senior discount debentures (3) | — | 443,500 | ||||||
Senior notes due 2012 (5) | 460,000 | — | ||||||
Senior notes due 2012 (4) | 178,383 | 178,131 | ||||||
Term loan 2007 (6) | 102,142 | |||||||
First Amended and Restated Credit Agreement (1) | — | 67,309 | ||||||
Capital lease | 958 | 1,255 | ||||||
891,483 | 840,195 | |||||||
Non-current portion of fair value adjustment arising from purchase accounting | 12,261 | — | ||||||
Total long term debt and capital leases | $ | 903,744 | 840,195 | |||||
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except number of shares)
(1) | First Amended and Restated Credit Agreement due 2006 (“FARCA”) — |
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(2) | Senior notes due 2007 |
(3) | Senior discount debentures (“SDD”) |
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(4) | Senior notes due 2012 |
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except number of shares)
(5) | Senior notes due 2012 |
(i) | File a registration statement with respect to a registered offer to exchange the 9 3/8% notes for new exchange notes having terms identical in all material respects to the 9 3/8% notes (except that the exchange notes will not contain transfer restrictions); and | ||
(ii) | Complete the registered exchange offer within 270 days after the closing date of the offering of the 9 3/8% notes of April 19, 2005. |
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except number of shares)
KCSM incurred and accounted for as transaction costs $11.5 million in consent and professional services fees in connection with the issuance of these notes and is being amortized based on the interest method over the term of the senior notes. | ||
Interest expense related with the Senior notes due 2012 amounted to $31,617, for the nine months ended December 31, 2005. | ||
(6) | 2005 KCSM Credit Agreement- | |
On October 24, 2005, KCSM paid all the outstanding amount of the term loan facility. On October 24, 2005, KCSM entered into a new credit agreement, or the 2005 KCSM Credit Agreement, in an aggregate amount of up to $106,000 with Bank of America, N. A., BBVA Bancomer, S. A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, and the other lenders named in the 2005 KCSM Credit Agreement. Proceeds from the credit facility were used by KCSM to pay all amounts outstanding under the Bridge Loan Agreement, dated September 15, 2005, and all remaining amounts outstanding under the $186.4 million Credit Agreement, dated June 24, 2004. The maturity date for the 2005 KCSM Credit Agreement is October 28, 2008. The 2005 KCSM Credit Agreement contains covenants that restrict or prohibit certain actions, including, but not limited to, KCSM’s ability to incur debt, create or suffer to exist liens, make prepayments of particular debt, pay dividends, make investments, engage in transactions with stockholders and affiliates, issue capital stock, sell certain assets, and engage in mergers and consolidations or in sale-leaseback transactions. Except for certain circumstances, KCSM’s capital expenditures may not exceed certain amounts for any period of four consecutive fiscal quarters. In addition, KCSM must meet certain consolidated interest coverage ratios, consolidated leverage ratios, and fixed charge coverage ratios. Failure to maintain compliance with covenants would constitute a default. Other events of default include, but are not limited to, certain payment defaults, certain bankruptcy and liquidation proceedings, a change of control, and certain adverse judgments or government actions. Any event of default would trigger acceleration of the time for payment of any amounts outstanding under the 2005 KCSM Credit Agreement. | ||
On April 7, 2006 KCSM entered into an Waiver and Amendment (the “2005 Waiver and Amendment”) to the KCSM 2005 Credit Agreement. The KCSM 2005 Credit Agreement was amended to (i) exclude certain payment obligations accrued under two locomotive maintenance agreements and under a track maintenance rehabilitation agreement from the definition of Indebtedness, (ii) eliminate certain minimum and multiple borrowing thresholds for Mexican peso borrowings under the revolving credit facility and (iii) eliminate the reporting requirement to provide unaudited consolidated financial statements for the fourth fiscal quarter. The Waiver and Amendment also waived (iv) certain reporting requirements, including the requirement of KCSM to provide audited consolidated financial statements 90 days after the end of the 2005 fiscal year, provided such reports are delivered by April 30, 2006, and (v) compliance with the Consolidated Leverage Ratio obligations of Section 7.1(c) of the 2005 KCSM Credit Agreement for the four quarters ending December 31, 2005 if compliance therewith was calculated without giving effect to the amendment to the definition of “Indebtedness” in the 2005 Waiver and Amendment,provided that KCSM is in compliance therewith after giving effect to the 2005 Waiver and Amendment. |
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except number of shares)
Covenants | ||
The agreements related to the above-mentioned loans include certain affirmative and negative covenants and customary covenants and require KCSM to maintenance certain financial ratios. KCSM and its subsidiary entered into an Waiver and Amendment to the KCSM 2005 Credit Agreement. |
2005 | ||||
2007 | $ | 150,298 | ||
2008 | 102,440 | |||
2009 | 298 | |||
2010 | 63 | |||
2011 and thereafter | 638,384 | |||
$ | 891,483 | |||
(13) | Financial instruments- | |
Fuel swap contracts | ||
KCSM may occasionally seek to assure itself of more predictable fuel expenses through U.S. fuel swap contracts. Hedge positions are also closely monitored to ensure that they will not exceed actual fuel requirements in any period. | ||
As a result of the fuel swaps contracts acquired during 2003, the realized gain was $849. |
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The Company had not acquired any fuel future contracts during 2005 and 2004 therefore, the Company did not have any fuel futures contracts at December 31, 2005 and 2004. | ||
Foreign exchange contracts | ||
The purpose of the Company’s foreign exchange contracts is to limit the risks arising from its peso-denominated monetary assets and liabilities. | ||
The nature and quantity of any hedging transactions will be determined by Management based upon net assets exposure and market conditions. | ||
As of December 31, 2005, the Company had two Mexican peso call options outstanding in the notional amount of $1.2 million and $1.7 million, respectively, based on the average exchange rate of Ps13.00 and 12.50 each one per dollar. These options will expire in September 6 and May 30, 2006, respectively. The premiums paid were $16 and $34, respectively, and were expensed since these contracts did not qualify for hedge accounting. | ||
As of December 31, 2005 and 2004 the Company did not have any outstanding forward contracts. | ||
As of December 31, 2003, the Company had two Mexican peso call options outstanding in the notional amount of $11.8 million and $1.7 million, respectively, based on the exchange rate of Ps13.00 and Ps.12.50 per dollar. These options expired on September 8, and May 29, 2004, respectively. The premiums paid were $250 and $40, respectively. |
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except number of shares)
Foreign currency balances | ||
At December 31, 2005 and 2004 the Company had monetary assets and liabilities denominated in Mexican pesos of Ps1,088 million and Ps549 million and of Ps1,137 million and Ps374 million, respectively. At December 31, 2005 and 2004 the exchange rate was Ps10.73 and Ps11.14 per US dollar, respectively. | ||
(14) | Balances and transactions with related parties- |
2005 | 2004 | |||||||
Accounts receivable: (1) | ||||||||
Tex Mex Railroad | $ | 1,337 | — | |||||
Nafta Rail (2) | 13,578 | — | ||||||
KCS (4) | 20,928 | — | ||||||
KCS — receivable related to Mexrail (3) | — | 31,398 | ||||||
Other Grupo TMM’s subsidiaries | — | 171 | ||||||
$ | 35,843 | 31,569 | ||||||
Accounts payable: (1) | ||||||||
KCS (5) | $ | 12,897 | 746 | |||||
Terminal Ferroviaria del Valle de México, S. A. de C. V. | 402 | 3,068 | ||||||
Tex-Mex Railway | — | 93 | ||||||
$ | 13,299 | 3,907 | ||||||
(1) | The accounts receivable and payable due from or due to related parties were driven by the services disclosed in the transactions with related parties. |
(2) | This amount is comprised primarily of a loan receivable denominated in Mexican pesos of Ps138,670 ($13,036), bearing interest at Tasa de Interést Interbancario de Equilibrio (“TIIE”) plus 350 basis points. TIIE is the benchmark for the Mexican interbank money market. |
(3) | As of December 31, 2004 this amount represented the price for KCS to acquire the 49% ownership of Mexrail. With the acquisition of Grupo TFM by KCS, the Company has indirect ownership of Grupo TFM’s interest remaining 49% interest, for that reason this amount was reclassified to investment as of December 31, 2005. (see note 1) |
(4) | This balance is comprised mainly of severance and relocation reserves of $15.3 million, which did not affect our results. |
(5) | During 2005, these balances were affected by capital expenditures of ($3.8) million, which did not affect our results, and other recurring transactions. |
The most important transactions with related parties are summarized as follows: |
Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | Three months | |||||||||||||||||
ended | ended | Year ended December 31, | ||||||||||||||||
December 31, | March 31, | |||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
Transportation revenues | 346 | — | 8,148 | 13,784 | ||||||||||||||
Terminal service | — | — | (10,713 | ) | (8,605 | ) | ||||||||||||
Car lease | 394 | (91 | ) | (2,482 | ) | (2,256 | ) | |||||||||||
Locomotive and car repair | 158 | 22 | 123 | 8 | ||||||||||||||
Management fee(a)(b) | — | (312 | ) | (2,500 | ) | (2,500 | ) | |||||||||||
Locomotive equipment lease | 5,503 | — | 3,638 | 2,127 | ||||||||||||||
Transition cost | (3,006 | ) | — | — | — | |||||||||||||
Severance and Relocation | 15,300 | — | — | — | ||||||||||||||
Capital Expenditures | (3,766 | ) | — | — | — | |||||||||||||
Administrative and Expatriates | (504 | ) | (768 | ) | — | — | ||||||||||||
Other | (48 | ) | (2,498 | ) | 448 | 299 |
The principal services sold by KCSM were general freight and locomotive equipment lease and the principal services received by KCSM were terminal services, care hire and management services. These services are usually negotiated with related parties on a cost-plus basis. |
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except number of shares)
(a) | Grupo TMM management services agreement- | |
The Company and Grupo TMM entered into a management services agreement pursuant to which Grupo TMM provides certain consulting and management services to the Company commencing in May 1997 for a term of 12 months and which may be renewed for additional one-year periods by agreement of the parties. Under the terms of the agreement, Grupo TMM is to be reimbursed for its costs and expenses incurred in the performance of such services. | ||
The agreement was terminated on April 1, 2005, upon the consummation of the acquisition by KCS from Grupo TMM of all of its shares of Grupo TFM. | ||
KCS Transportation Company (“KCSTC”) management services agreement- | ||
The Company and KCSTC, a wholly owned subsidiary of KCS, entered into a management services agreement pursuant to which KCSTC makes available to the Company certain railroad consulting and management services commencing May 1997 for a term of 12 months and which may be renewed for additional one-year periods by agreement of the parties. Under the terms of the agreement, KCSTC is to be reimbursed for its costs and expenses incurred in the performance of such services. | ||
The agreement was terminated on April 1, 2005, upon the consummation of the acquisition by KCS from Grupo TMM of all of its shares of Grupo TFM. | ||
Amendments- | ||
On April 30, 2002, KCSM and KCS, as successor in interest through merger with KCSTC, as well as KCSM and Grupo TMM, entered into amendments to the management services agreements that provide for automatic annual renewal of the agreements and compensates KCS and Grupo TMM for their services under the agreements. The amendments state that KCS and Grupo TMM each are entitled to receive management fees equivalent to an annual rate of $1,250,000. The management services agreements are terminable by either party upon 60 days written notice. |
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except number of shares)
December 31, | ||||||||
2005 | 2004 | |||||||
Suppliers | $ | 61,048 | 57,169 | |||||
Car hire | 7,894 | 8,171 | ||||||
Freight charges due other railroads | 4,724 | 31,962 | ||||||
Purchased services | 22,931 | 14,207 | ||||||
Insurance reserve | 14,963 | 4,746 | ||||||
Severance and relocation reserve | 9,895 | — | ||||||
Freigh car repairs reserve | 5,484 | �� | 6,728 | |||||
Other | 18,239 | 7,075 | ||||||
$ | 145,178 | 130,058 | ||||||
December 31, | ||||||||
2005 | 2004 | |||||||
Fair value adjustment related to unfavorable lease and maintenance contract arising from push down accounting | $ | 54,252 | — | |||||
Alstom transportes (1) | 10,540 | 13,867 | ||||||
Overhual Alstom | 14,600 | — | ||||||
General Electric | 6,275 | — | ||||||
Taxes payable (2) | — | 9,956 | ||||||
Seniority premium | 1,180 | 1,037 | ||||||
Other | 344 | 344 | ||||||
$ | 87,191 | 25,204 | ||||||
(1) | Relates to an account payable due to a track maintenance and rehabilitation agreement net of fair value adjustments arising from purchase accounting. | |
(2) | Withholding tax payable derived from senior discount debentures due in 2009. (See note 12). |
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except number of shares)
(17) | Stockholder’s equity- | |
After the acquisition by KCS on April 1, 2005 and the VAT/Put Settlement on September 12, 2005, the following table sets forth information as of September 30, 2005, with respect to the ownership of Grupo TFM’s Series A shares, without par value, and Grupo TFM’s Series L shares, without par value: |
Series “A” | Series “L” | |||||||||||
Stockholders | A- 1A-2 | L | ||||||||||
Kara Sub, Inc.* | 12,750 | 10,784,724 | — | |||||||||
KCS Investment I, Ltd.* | 12,750 | 10,784,724 | — | |||||||||
Caymex Transportation, Inc.* | — | 450,499 | — | |||||||||
Nafta Rail, S.A de C. V.* | 24,500 | 21,156,420 | — | |||||||||
KCSM* | — | — | 14,124,435 | |||||||||
Total | 50,000 | 43,176,367 | 14,124,435 | |||||||||
SHARES A-1, A-2, L | 57,350,802 |
* | Entities controlled by KCS. |
Grupo TFM has two classes of outstanding capital stock: Series A Shares and Series L Shares. Serie A-1 shares, representing the minimum fix portion of the stated capital, and Serie A-2 shares, representing the variable portion of the sated capital. All of the shares of the capital stock of Grupo TFM currently outstanding are fully paid and non-assessable. Series L Shares may represent up to 25.0% of the total amount of the capital stock of Grupo TFM. Series A Shares are common, full-voting and nominative shares of the capital stock, without par value. Series L Shares have limited voting rights, without par value, and may only be representative of the variable portion of the capital stock of Grupo TFM. |
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except number of shares)
(18) | Income tax, employee statutory profit sharing, asset tax, and tax loss carryforwards- | |
Income tax | ||
Current income tax expense represents the amounts expected to be reported on the Company’s income tax return, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities are measured by enacted tax rates that will be in effect when these differences reverse. Valuation allowances are used to reduce deferred tax assets to the amount considered likely to be realized. | ||
Tax Expense- | ||
Income tax provision (benefit) consists of the following components: |
Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | Three months | |||||||||||||||||
ended | ended | |||||||||||||||||
December 31, | March 31, | Year ended December 31, | ||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
Current | ||||||||||||||||||
Income Tax | $ | — | — | 7,630 | 10,763 | |||||||||||||
Tax on Assets | 296 | — | — | — | ||||||||||||||
Total current | 296 | — | 7,630 | 10,763 | ||||||||||||||
Deferred | ||||||||||||||||||
Deferred income tax provision (benefit) | (853 | ) | (1,109 | ) | (2,920 | ) | (62,252 | ) | ||||||||||
Total deferred | (853 | ) | (1,109 | ) | (2,920 | ) | (62,252 | ) | ||||||||||
Total income tax provision (benefit) | (557 | ) | (1,109 | ) | 4,710 | (51,489 | ) | |||||||||||
According to the amendments to the Mexican Income Tax Law in 2004, the income tax rate will decrease one percent per year from 30% starting in 2005 down to 28% in 2007. |
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except number of shares)
Deferred Tax in Additional Paid in Capital- | ||
Income tax decrement (increment) to additional paid in capital consists of the following components: |
Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | Three months | |||||||||||||||||
ended | ended | |||||||||||||||||
December 31, | March 31, | Year ended December 31, | ||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
Total income tax in Additional Paid in Capital | $ | 49,774 | — | — | — | |||||||||||||
Write off of the investment in Mexrail, Inc. Income tax effect due to the deinvestment in Mexrail, Inc. in 2004 that affected balance sheet accounts consists of the following components(in thousands of USD): |
Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | Three months | |||||||||||||||||
ended | ended | |||||||||||||||||
December 31, | March 31, | Year ended December 31, | ||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
Write off of the investment in Mexrail, Inc. | $ | — | — | (8,034 | ) | — | ||||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: |
2005 | 2004 | |||||||
Liabilities: | ||||||||
Machinery & Equipment | $ | 57,662 | 36,140 | |||||
Concession rights | 277,462 | 239,037 | ||||||
Gross deferred tax liabilities | 335,124 | 275,177 | ||||||
Assets: | ||||||||
Loss carryovers | (435,187 | ) | (443,785 | ) | ||||
Inventories and provisions | (50,535 | ) | (30,130 | ) | ||||
Gross deferred tax assets | (485,722 | ) | (473,915 | ) | ||||
Net deferred tax asset | $ | (150,598 | ) | (198,738 | ) | |||
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except number of shares)
Tax Rates- | ||
Differences between the Company’s effective income tax rates and the Mexican income tax statutory rate of 30% are as follows: |
Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | Three months | |||||||||||||||||
ended | ended | |||||||||||||||||
December 31, | March 31, | Year ended December 31, | ||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
Income tax provision using the Statutory rate in effect | 25,614 | (237 | ) | (1,735 | ) | (5,866 | ) | |||||||||||
Tax effect of: | ||||||||||||||||||
Inflationary and devaluation components | 9,698 | 1,995 | 14,925 | 14,122 | ||||||||||||||
Profit sharing | — | — | (1,967 | ) | 3,804 | |||||||||||||
Tax indexation of depreciation and amortization | (2,262 | ) | (505 | ) | (17,597 | ) | (89,313 | ) | ||||||||||
Net exchange losses | 9,782 | 1,183 | 7,337 | (11,472 | ) | |||||||||||||
Inflation and remeasurement of loss carryforwards | (12,927 | ) | (3,653 | ) | (25,098 | ) | 39,507 | |||||||||||
Non-deductible expenses | 1,101 | 10 | 453 | 1,863 | ||||||||||||||
Change in tax rates | (125 | ) | (79 | ) | 25,221 | (3,398 | ) | |||||||||||
Write off of deferred profit sharing | 10,105 | — | — | — | ||||||||||||||
VAT Settlement | (42,311 | ) | — | — | — | |||||||||||||
Tax on Assets | 296 | — | — | — | ||||||||||||||
Other — Net | 472 | 177 | 3,171 | (736 | ) | |||||||||||||
Income tax provision (benefit) | $ | (557 | ) | (1,109 | ) | 4,710 | (51,489 | ) | ||||||||||
Effective tax rate | (1 | )% | 141 | % | (90 | )% | 298 | % | ||||||||||
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except number of shares)
Employees’ Statutory Profit Sharing- | ||
Employees’ Statutory Profit Sharing provision (benefit) consists of the following components: |
Successor | Predecessor | Predecessor | |||||||||||||||
Nine months | |||||||||||||||||
ended | Three months | ||||||||||||||||
December 31, | ended March 31, | Year ended December 31, | |||||||||||||||
2005 | 2005 | 2004 | 2003 | ||||||||||||||
Deferred Profit Sharing | $ | 41,081 | 547 | (6,556 | ) | (11,528 | ) | ||||||||||
Deferred Profit Sharing in Additional Paid in Capital- | ||
Deferred profit sharing decrement (increment) to additional paid in capital consists of the following components: |
Successor | Predecessor | Predecessor | ||||||||||||||||
Nine months | ||||||||||||||||||
ended | Three months | |||||||||||||||||
December 31, | ended March 31, | Year ended December 31, | ||||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||||
Total profit sharing in additional paid in capital | $ | 43,596 | — | — | — | |||||||||||||
The profit sharing effects of temporary differences that give rise to significant portions of the deferred profit sharing assets and deferred profit sharing liabilities are as follows: |
2005 | 2004 | |||||||
Liabilities: | ||||||||
Machinery & Equipment | $ | 23,344 | 20,293 | |||||
Concession rights | 16,661 | 76,380 | ||||||
Gross deferred profit sharing liabilities | 40,005 | 96,673 | ||||||
Assets: | ||||||||
Loss carryovers | — | (151,991 | ) | |||||
Inventories and provisions | (11,124 | ) | (1,025 | ) | ||||
Gross deferred tax assets | (11,124 | ) | (153,016 | ) | ||||
Net deferred profit sharing liability (asset) | $ | 28,881 | (56,343 | ) | ||||
The Company recognizes deferred profit sharing taxes for the 10% profit sharing effect of temporary differences. The Mexican Tax authorities challenged the Company’s calculation of deferred profit sharing in the late 1990’s, but the Company prevailed with a Supreme Court ruling in 1999, followed by a Tax Authority release acknowledging the Company’s ability to continue to calculate profit sharing the way it had been, as well as the Company’s ability to utilize NOL carry forwards in the calculation of Profit Sharing. Due to a technical amendment to the Income Tax Law in 2002, the Mexican Tax Authorities have been able to reassert their earlier objections. As a result of a Supreme Court Ruling in 2005, in which it was determined that the NOL carry forward may not be deducted in the calculation of profit sharing. |
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except number of shares)
Inflation-indexed | |||||||
Year in which | amounts as of | Year of | |||||
loss arose | December 31, 2005 | expiration | |||||
1997 | $ | 72,301 | 2046 | ||||
1998 | 388,312 | 2046 | |||||
1999 | 10,354 | 2046 | |||||
2000 | 182,617 | 2046 | |||||
2001 | 78,654 | 2046 | |||||
2002 | 456,284 | 2012 | |||||
2003 | 330,260 | 2046 | |||||
2005 | 30,049 | 2046 | |||||
$ | 1,548,831 | ||||||
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except number of shares)
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except number of shares)
Year ending December 31, | ||||
2006 | $ | 14,419 | ||
2007 | 14,419 | |||
2008 | 14,419 | |||
2009 | 14,419 | |||
2010 and thereafter | 134,464 | |||
$ | 192,140 | |||
Decrease in Property and equipment | $ | (1.6 | ) | |
Increase in deferred income tax and deferred profit sharing liabilities- net | (6.7 | ) | ||
Decrease in non current liabilities | 20.7 | |||
Increase in additional paid in capital | (12.4 | ) | ||
Net adjustment | $ | — | ||
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except number of shares)
Year ending December 31, | ||||
2006 | $ | 38,578 | ||
2007 | 34,465 | |||
2008 | 27,741 | |||
2009 | 22,932 | |||
2010 and thereafter | 54,792 | |||
$ | 178,508 | |||
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except number of shares)
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except number of shares)
Disputes Relating to Payments for the use of Trackage and Haulage Rights and Interline Services.KCSM and Ferrocarril Mexicano, S.A. de C.V. (“Ferromex”) both initiated administrative proceedings seeking a determination by theSecretaria de Comunicaciones y Transportes (“Secretaria of Communications and Transports” or “SCT”) of the rates that we should pay each other in connection with the use of trackage and haulage rights and interline and terminal services. The SCT, on March 13, 2002, issued a ruling setting the rates for trackage and haulage rights. On August 5, 2002, the SCT issued a ruling setting the rates for interline and terminal services. KCSM and Ferromex appealed both rulings and, following trial and appellate court decisions, the Mexican Supreme Court on February 24, 2006, in a ruling from the bench, sustained KCSM’s appeal of the SCT’s trackage and haulage rights ruling, vacating the ruling and ordering the SCT to issue a new ruling consistent with the Court’s opinion. KCSM has not yet received the written opinion of the Mexican Supreme Court relating to the decision announced on February 24, 2006, nor has the Mexican Supreme Court decided the interline and terminal services appeal. We believe that even if the rates set in 2002 become effective, there will be no material adverse effect on our results of operation. | ||
Disputes Relating to the Exercise of Trackage Rights.KCSM and Ferromex are also parties to various civil cases involving disputes over the application and proper interpretation of the mandatory trackage rights, none of which we believe to be material individually or in the aggregate. |
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except number of shares)
Disputes Relating to the Scope of the Mandatory Trackage Rights.In August 2002, the SCT issued rulings determining Ferromex’s trackage rights in Monterrey and KCSM’s trackage rights in Altamira. KCSM and Ferromex both appealed the SCT’s rulings. At the administrative federal court level, KCSM obtained favorable rulings in both cases. Ferromex appealed these rulings. In connection with the Altamira proceedings, on August 10, 2005, an appellate court granted Ferromex’s appeal and ordered the Administrative Federal Court determined to vacate its prior resolution and issue a new resolution declaring as null and void the SCT’s determination that KCSM’s trackage rights should include access to the Port of Altamira. In connection with the Monterrey proceedings, the case was remanded to the Administrative Federal Court with instructions to consider additional arguments before issuing its ruling. KCSM is still awaiting that ruling, but do not expect that ruling would have a material adverse effect upon our results of operations. |
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except number of shares)
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
Audit fees(1) | $ | 109.6 | $ | 474.7 | ||||
Audit-related fees(2) | 109.1 | 51.0 | ||||||
Tax fees(3) | — | — | ||||||
All other fees(4) | 115.5 | 38.2 | ||||||
Total | $ | 334.2 | $ | 563.9 | ||||
(1) | Audit fees include fees for services performed by the independent accountants for the audit or review of financial statements. Audit fees also include fees for services provided by the independent accountants in connection with statutory and regulatory filings or engagements, comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the SEC. | |
(2) | Audit-related fees include fees for employee benefit plan audits, accounting consultations and audits in connection with internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. | |
(3) | Tax fees include fees for tax compliance, tax planning and tax advice. Tax compliance generally involves preparation of original and amended tax returns, claims for refund and tax payment-planning services. Tax planning and tax advice encompass assistance with tax audits and appeals, employee benefit plans and requests for rulings or technical advice from taxing authorities. | |
(4) | All other fees include fees for services other than those described in the above categories. |
Exhibit No. | Exhibit | |||||
3.1 | Current Corporate By-laws (Estatutos Sociales) of Grupo Transportación Ferroviaria Mexicana, S.A. de C.V., as amended and restated on December 2, 2005, together with an English translation (incorporated by reference to Exhibit 3.1 to KCSM’s |
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Exhibit No. | Exhibit | |||||
Registration Statement on Form S-4, File No. 333-129566) Instruments Defining the Right of Security Holders, Including Indentures | ||||||
4.1 | Indenture, dated as of June 16, 1997, among TFM, Grupo TFM, The Bank of New York, as Trustee, and Bankers Trust Luxembourg, S.A., as a Paying Agent, covering up to $150,000,000 of TFM’s 10.25% Senior Notes due 2007 (incorporated herein by reference to Exhibit 4.1 of KCSM’s Registration Statement on Form F-4, File No. 333-8322) | |||||
4.2 | First Supplemental Indenture, dated as of May 21, 2002, among TFM, Grupo TFM, S.A. de C.V., as guarantor, The Bank of New York, as trustee, and Deutsche Bank Luxembourg S.A., as the paying agent, to the Indenture, dated June 16, 1997 (incorporated herein by reference to Exhibit 2.2 of KCSM’s annual report on Form 20-F for fiscal year 2002, File No. 333-102222) | |||||
4.3 | Indenture, dated as of June 13, 2002, between TFM and The Bank of New York, as Trustee, covering up to $180,000,000 of TFM’s 12.50% Senior Notes due 2012 (incorporated herein by reference to Exhibit 4.3 of KCSM’s Registration Statement on Form F-4, File No. 333-8322) | |||||
4.4 | Indenture, dated as of April 19, 2005, between TFM and The Bank of Nova Scotia Trust Company of New York, covering up to $460,000,000 of TFM’s 9 3/8% Senior Notes due 2012 (incorporated herein by reference to Exhibit 4.2 of KCSM’s Current Report on Form 8-K filed on April 25, 2005, File No. 333-8322) | |||||
4.8 | Registration Rights Agreement, dated as of April 19, 2005, between TFM and the Placement Agents (incorporated herein by reference to KCSM’s Current Report on Form 8-K filed on April 25, 2005, File No. 333-08322) | |||||
10.1 | Concession title granted by the Secretaria de Comunicaciones y Transportes (“Ministry of Transportation” or “SCT”) in favor of Ferrocarril del Noreste, S.A. de C.V., (“FNE”), dated December 2, 1996, together with an English translation (incorporated herein by reference to Exhibit 2.1 of KCSM’s Registration Statement on Form F-4, File No. 333-8322) | |||||
10.2 | Amendment, dated February 12, 2001, of Concession title granted by SCT in favor of TFM, formerly known as FNE, December 2, 1996, together with an English translation (incorporated herein by reference to Exhibit 4.2 from TFM and Grupo TFM’s Annual Report on Form 20-F for fiscal year 2000) | |||||
10.3 | Sale Purchase Agreement respecting Capital Stock of FNE, among the United Mexican States (through SCT), FNE and Ferrocarriles Nacionales de Mexico, S.A. de C.V. (“FNM”), dated December 2, 1996, together with an English translation (incorporated herein by reference to Exhibit 2.2 of KCSM’s Registration Statement on Form F-4, File No. 333-8322) | |||||
10.4 | Sale Purchase Agreement respecting Property and Equipment, among the United Mexican States (through SCT), FNE and FNM, dated December 2, 1996, together with an English translation (incorporated herein by reference to Exhibit 2.3 of KCSM’s Registration Statement on Form F-4, File No. 333-8322) | |||||
10.5 | Stock Purchase Agreement, dated as of August 16, 2004, by and among TFM, KCS and Grupo TMM, S.A. de C.V. (incorporated herein by reference to Exhibit 4.7 of our annual report on Form 20-F for fiscal year 2004, File No. 333-8322) | |||||
10.6 | Omnibus Agreement, dated June 9, 1997, among Grupo TFM, Caymex Transportation, Inc., TMM Multimodal, S.A. de C.V. and FNM, together with an English translation (incorporated herein by reference to Exhibit 10.5 of KCSM’s Registration Statement on Form F-4, File No. 333-10222) | |||||
10.7 | English translation of the Purchase-Sale Agreement, dated July 29, 2002, by and between TFM, FNM and Nacional Financiera, S.N.C., Institucion de Banca de Desarrollo (incorporated herein by reference to Exhibit 10.16 of KCSM’s Registration Statement on Form F-4, File No. 333-102222) | |||||
10.8 | Credit Agreement dated as of October 24, 2005, among TFM, as Borrower, Arrendora TFM, S.A. de C.V., as Guarantor, Bank of America, N.A. as Administrative Agent, BBVA Bancomer, S.A. Institucion de Banco Multiple, Grupo Financiero BBVA Bankcomer, as Collateral Agent, and BBVA Securities, Inc. and Banc of America Securities, LLC as Arrangers (incorporated herein by reference to exhibit 10.9 of KCSM’s Registration Statement on Form S-4, File No. 333-129566) | |||||
10.9 | Compliance and Settlement Agreement dated as of September 12, 2005 among TFM, Grupo TFM, Kansas City Southern, and the Federal Government of the United Mexican States (incorporated herein by reference to Exhibit 10.1 of KCSM’s Current Report on Form 8-K, File No. 333-83220) | |||||
10.10 | Amendment No. 1 and Waiver No. 1 to the Credit Agreement, dated as of April 7, 2006 among KCSM, as Borrower, Arrendaderra TFM, S.A. de C.V., as Guarantor, Bank of America, as Administrative Agent, BBVA Bancomer, S.A. Institución de Banco Multiple, Grupo Financiero BBVA Bancomer, as Collateral Agent, and certain other Lenders (incorporated herein by reference to KCSM’s annual report on Form 10-K for fiscal year 2005, File No. 333-08322) | |||||
12.1 | Computation of Ratio of Earnings to Fixed Charges is attached to this Form 10-K as Exhibit 12.1 | |||||
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Exhibit No. | Exhibit | |||||
31.1 | Certification of Michael R. Haverty, Chairman of the Board of Directors of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 31.1 | |||||
31.2 | Certification of Ronald G. Russ, Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 31.2 | |||||
32.1 | Certification of Michael R. Haverty, Chairman of the Board of Directors of the Company, and Ronald G. Russ, Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 32.1 |
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Kansas City Southern de México, S.A. de C.V. | ||
By | /s/ Michael R. Haverty | |
Michael R. Haverty | ||
Chairman of the Board of Directors |
Signature | Title | Date | ||
/s/ Michael R. Haverty | Chairman of the Board of Directors | |||
(Principal Executive Officer) | April 12, 2006 | |||
/s/ Ronald G. Russ | Chief Financial Officer (Principal Financial | |||
Officer and Principal Accounting Officer) | April 12, 2006 | |||
/s/ Michael R. Haverty | ||||
Chairman of the Board of Directors | April 12, 2006 | |||
/s/ Arthur L. Shoener | ||||
Director | April 12, 2006 | |||
/s/ James R. Jones | ||||
Director | April 12, 2006 | |||
/s/ Robert B. Terry | ||||
Director | April 12, 2006 | |||
/s/ Larry M. Lawrence | ||||
Director | April 12, 2006 |
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