March 25, 2019
Kansas City, Mo., March 25, 2019. Kansas City Southern (KCS) (NYSE:KSU) confirmed that on Thursday March 21st, 2019 the Investigation Authority (Investigation Authority) of the Mexican Federal Competition Commission (COFECE) published an extract of its preliminary report (Preliminary Report) regarding its assessment of effective competition in the market of freight railway transportation services regarding certain chemical and petrochemical products (Relevant Product) shipped in certain specific routes with an origin or destination in the southern region of the State of Veracruz (Market).
The scope of the Preliminary Report is limited to 31 routes with specific points of origin and destination in the Market and each route is tied to a specific Relevant Product. Kansas City Southern de Mexico (KCSM) is only involved in rendering freight transportation services in limited portions of 7 (seven) routes. During 2018, KCS’ revenue associated with these routes represented less than $3 million of revenue.
The issuance of the Preliminary Report has no impact on KCSM’s current business, operations, or rights under the concession. KCSM will file a brief challenging the Preliminary Report and offering evidentiary support for its challenge. The Panel of the Commission must issue a final report by mid-October taking into account the Preliminary Report, as well as the arguments, challenges and evidence rendered by KCSM and other parties within the scope of that report.
If the Panel of COFECE confirms a lack of effective competition in any of the routes (narrowed by product) included in the Preliminary Report, then the Railway Regulatory Agency would initiate the specific procedure arising from the railway regulatory law that could include, among others, imposition of remedies in the form of mandatory trackage rights on KCSM and other concessionaries, for specific products, routes or segments thereof, in addition to the mandatory trackage rights already provided in their corresponding concession titles. The Agency may also impose the service conditions and rates for these mandatory trackage rights. However, before any such action, the Agency must first evaluate the evidence and arguments offered by the applicable concessionaires. In this case, a hearing with the Railway Regulatory Agency would be held with the corresponding concessionaries, and the concessionaries can offer their own remedies if they wish.
Should the final report issued by the Panel of COFECE affirm the Preliminary Report and the Railway Regulatory Agency consider specific remedies for such findings, KCSM will exercise all of its rights under its concession and the law to ensure that any actions considered by the Agency are workable and consistent with KCSM’s rights under law and under its concession.
Headquartered in Kansas City, Mo., Kansas City Southern (KCS) (NYSE: KSU) is a transportation holding company that has railroad investments in the U.S., Mexico and Panama. Its primary U.S. holding is The Kansas City Southern Railway Company, serving the central and south central U.S. Its international holdings include Kansas City Southern de Mexico, S.A. de C.V., serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal. KCS’ North American rail holdings and strategic alliances with other North American rail partners are primary components of a unique railway system, linking the commercial and industrial centers of the U.S., Mexico and Canada. More information about KCS can be found at www.kcsouthern.com.
This news release contains “forward-looking statements” within the meaning of the securities laws concerning potential future events involving KCS and its subsidiaries, which could materially differ from the events that actually occur. Words such as “projects,” “estimates,” “forecasts,” “believes,” “intends,” “expects,” “anticipates,” and similar expressions are intended to identify many of these forward-looking statements. Such forward-looking statements are based upon information currently available to management and management’s perception thereof as of the date hereof. Differences that actually occur could be caused by a number of external factors over which management has little or no control, including: competition and consolidation within the transportation industry; the business environment in industries that produce and use items shipped by rail; loss of the rail concession of KCS’ subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination of, or failure to renew, agreements with customers, other railroads and third parties; access to capital; disruptions to KCS’ technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents on KCS’ rail network or at KCS’ facilities or customer facilities involving the release of hazardous materials, including toxic inhalation hazards; fluctuation in prices or availability of key materials, in particular diesel fuel; dependency on certain key suppliers of core rail equipment; changes in securities and capital markets; unavailability of qualified personnel; labor difficulties, including strikes and work stoppages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic, political and social conditions; the level of trade between the United States and Asia or Mexico; fluctuations in the peso-dollar exchange rate; increased demand and traffic congestion; the outcome of claims and litigation involving KCS or its subsidiaries; and other factors affecting the operation of the business. More detailed information about factors that could affect future events may be found in filings by KCS with the Securities and Exchange Commission, including KCS’ Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 1-4717) and subsequent reports. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. KCS is not obligated to update any forward-looking statements to reflect future events or developments. All reconciliations to GAAP can be found on the KCS website, kcsouthern.com/investors.
Contact: Ashley Thorne, 816-983-1530