KANSAS CITY, Mo. -Kansas City Southern announced previously (on October 11, 2002 and on October 24, 2002), in joint press releases with Grupo TMM, S.A. (“TMM”), a favorable court ruling in Mexico on a value added tax (“VAT”) claim of an affiliated company, TFM, S.A. de C.V. (“TFM”).
In those releases the parties indicated that while they were optimistic about the ultimate outcome of the matter, the recovery, including its timing and final amount, would have to be determined after the conclusion of the legal process.
Kansas City Southern has been advised by TFM that after reviewing the matter further, TFM has concluded that it is appropriate to reflect the recovery on the VAT claim in its financial statements for the period ended September 30, 2002. In TFM’s Report of Operations, released yesterday, TFM has recorded, as Other Income, an amount that includes $534.4 million for the after-tax effect of the VAT refund.
Despite this action by TFM, Kansas City Southern does not intend to reflect any recovery on the VAT refund claim in Kansas City Southern’s financial statements for the period ended September 20, 2002. It is taking this action for the reasons set forth in the press releases referred to above. Kansas City Southern does not believe it to be appropriate to recognize this gain on its financial statements at this time.
Kansas City Southern owns approximately 36.9% of the stock of Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (“Grupo TFM”), TFM’s parent company, and Kansas City Southern includes its equity in the earnings of Grupo TFM in its consolidated statements of income.
KCS is comprised of, among others, The Kansas City Southern Railway Company (“KCSR”) and equity investments in Grupo TFM, Southern Capital Corporation (“Southern Capital”) and Panama Canal Railway Company (“PCRC”).