Full Description

Kansas City Southern (KCS) is a holding company with domestic and international rail operations in North America that are focused on the north/south freight corridor connecting key commercial and industrial markets in the central United States with many industrial cities in Mexico. The Company is engaged primarily in the freight rail transportation business. It generates revenues and cash flows by providing its customers with freight delivery services both within its regions, and throughout North America through connections with other Class I rail carriers. KCS’ customers conduct business in a number of different industries, including electric-generating utilities, chemical and petroleum products, paper and forest products, agriculture and mineral products, automotive products and intermodal transportation. The Kansas City Southern Railway Company (KCSR), the Company’s subsidiary is a United States Class I railroad. KCSR serves a 10 state region in the midwest and southeast regions of the United States and has a north/south rail route between Kansas City, Missouri and several key ports along the Gulf of Mexico in Alabama, Louisiana, Mississippi, and Texas.

KCS controls and owns all of the stock of Kansas City Southern de Mexico, S.A. de C.V. (KCSM). KCS previously owned this stock through its wholly owned subsidiary, Grupo KCSM, S.A. de C.V. (Grupo KCSM), formerly known as Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., or Grupo TFM. Through its 50-year Concession from the Mexican government (the Concession), which will expire in 2047, unless extended, KCSM operates a key commercial corridor of the Mexican railroad system and has as its core route the most strategic portion of the shortest, most direct rail passageway between Mexico City and Laredo, Texas. KCSM serves most of Mexico’s principal industrial cities and three of its major seaports.

KCSM’s rail lines provide exclusive rail access to the United States and Mexico border crossing at Nuevo Laredo, Mexico, the largest rail freight interchange point between the United States and Mexico. Under the Concession, KCSM has the right to control and operate the southern half of the rail bridge at Laredo, Texas, which spans the Rio Grande River between the United States and Mexico.

The Company wholly owns, directly and indirectly through its wholly-owned subsidiaries, Mexrail, Inc. (Mexrail) which, in turn, wholly owns The Texas Mexican Railway Company (Tex-Mex). Tex-Mex owns a 157-mile rail line extending from Laredo, Texas to the port city of Corpus Christi, Texas, which connects the operations of KCSR with KCSM. Tex-Mex connects with KCSM at the United States/Mexico border at Laredo, Texas, and connects to KCSR through trackage rights at Beaumont, Texas. Through its ownership of Mexrail, the Company owns the northern half of the rail bridge at Laredo, Texas. The Company also controls the southern half of this bridge through its ownership of KCSM.

The KCS coordinated rail network (KCSR, KCSM and Tex-Mex) comprises approximately 6,000 miles of main and branch lines extending from the midwest and southeast portions of the United States south into Mexico and connects with other Class I railroads, providing shippers with an effective alternative to other railroad routes and giving direct access to Mexico and the southeast and southwest United States through less congested interchange hubs.

Other subsidiaries and affiliates of KCS include Meridian Speedway, LLC (MSLLC), a 73% owned consolidated affiliate that owns the former KCSR rail line between Meridian, Mississippi and Shreveport, Louisiana, which is the portion of the KCSR rail line between Dallas, Texas and Meridian known as the Meridian Speedway. Norfolk Southern Corporation (NS) through its wholly owned subsidiary, The Alabama Great Southern Railroad Company, owns the remaining 27% of MSLLC. Ultimately KCS will own 70% and NS will own 30% of MSLLC upon the contribution of additional capital by NS to MSLLC or its subsidiaries.

PABTEX I, L.P., a wholly owned subsidiary and consolidated owner of a bulk materials handling facility with deep-water access to the Gulf of Mexico at Port Arthur, Texas that stores and transfers petroleum coke from rail cars to ships, primarily for export; Trans-Serve, Inc. (doing business as Superior Tie and Timber), a wholly owned and consolidated operator of a railroad wood tie treatment facility, and Transfin Insurance, Ltd., a wholly owned and consolidated captive insurance company, providing property, general liability and certain other insurance coverage to KCS and its subsidiaries and affiliates.

Southern Capital Corporation, LLC (Southern Capital), a 50% owned unconsolidated affiliate that leases locomotives and other equipment and Ferrocarril y Terminal del Valle de México, S.A. de C.V. (FTVM), a 25% owned unconsolidated affiliate that provides railroad services, as well as ancillary services in the greater Mexico City area.

The Company competes with BNSF Railway Company and Union Pacific Railroad Company.