UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2013



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 333-08322

KANSAS CITY SOUTHERN DE MÉXICO, S.A. DE C.V.

(Exact name of Company as specified in its charter)

Kansas City Southern of Mexico

(Translation of Registrant’s name into English)



Mexico				98-0519243
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
Montes Urales 625 Lomas de Chapultepec 11000 Mexico, D.F. Mexico (Address of Principal Executive Offices)

(5255) 9178-5686

(Company’s telephone number, including area code)

No Changes

(Former name, former address and former fiscal year, if changed since last report.)

______________________________________________________________

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of ~~June~~September 30, 2013: 4,785,510,235

Kansas City Southern de México, S.A. de C.V. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

Kansas City Southern de México, S.A. de C.V. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Form 10-Q

~~June~~September 30, 2013

Index

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Introductory Comments	3
	Consolidated Statements of Comprehensive Income (Loss) — Three and Six Months Ended June 30, 2013 and 2012	4
	Consolidated Statements of Comprehensive Income — Three and Nine Months Ended September 30, 2013 and 2012	4
	Consolidated Balance Sheets — June 30, 2013 and December 31, 2012	5
	Consolidated Balance Sheets — September 30, 2013 and December 31, 2012	5
	Consolidated Statements of Cash Flows — Six Months Ended June 30, 2013 and 2012	6
	Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2013 and 2012	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1213
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2123
Item 4.	Controls and Procedures	2123
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	2324
Item 1A.	Risk Factors	2324
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2324
Item 3.	Defaults Upon Senior Securities	2324
Item 4.	Mine Safety Disclosures	2324
Item 5.	Other Information	2324
Item 6.	Exhibits	2425
	SIGNATURES	2526

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Form 10-Q

~~June~~September 30, 2013

PART I—FINANCIAL INFORMATION


Item 1.	Financial Statements

Introductory Comments

The unaudited Consolidated Financial Statements included herein have been prepared by Kansas City Southern de México, S.A. de C.V. (“KCSM” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). For the purposes of this report, unless the context otherwise requires, all references herein to “KCSM” and the “Company” shall mean Kansas City Southern de México, S.A. de C.V. and its subsidiaries. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. The Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-Q should be read in conjunction with the consolidated financial statements and the related notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. Results for the three and ~~six~~nine months ended ~~June~~September 30, 2013, are not necessarily indicative of the results expected for the full year ending December 31, 2013.

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Consolidated Statements of Comprehensive Income ~~(Loss)~~

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2013			2012			2013			2012
	(In millions)(Unaudited)
Revenues	$	~~266~~286.56		$	~~248~~266.21		$	~~521~~808.84		$	~~493~~759.45
Operating expenses:
Compensation and benefits	3133.41			2829.68			6093.01			6393.75
Purchased services	3338.72			36.73			69107.57			72109.92
Fuel	4448.69			3942.25			86135.65			78121.72
Equipment costs	1821.93			1820.76			3860.92			3657.84
Depreciation and amortization	2526.32			2223.40			4976.91			4467.5
Materials and other	1917.61			1317.12			3451.34			2441.46
Elimination of deferred statutory profit sharing liability, net	—			~~(43.0~~—		)	—			(43.0		)
Total operating expenses	~~173~~184.58			~~115~~169.74			~~339~~524.20			~~278~~447.04
Operating income	93101.08			~~132~~96.57			~~182~~284.64			~~215~~312.41
Equity in net earnings of unconsolidated affiliate	0.47			0.76			1.18			12.51
Interest expense	(1412.59		)	(22.20		)	(3648.09		)	(4466.7		)
Debt retirement costs	(~~109~~2.94		)	—			(~~109~~112.93		)	—
Foreign exchange gain (loss)	(171.5		)	(24.8		)	(4.6.1		)	04.19
Other expense, net	—(0.2		)	—(0.1		)	(0.13		)	(0.12		)
Income (loss) before income taxes	(48.5		)	108.2			33.1			172.2
Income before income taxes	85.5			80.0			118.6			252.2
Income tax expense (benefit)	(13.1		)	36.8			14.3			64.0
Income tax expense	26.0			39.5			40.3			103.5
Net income (loss)	(35.4		)	71.4			18.8			108.2
Net income	59.5			40.5			78.3			148.7
Other comprehensive income (loss), net of tax:
Other comprehensive income, net of tax:
Foreign currency translation adjustments, net of tax of $0.0 million for all periods presented	(0.71		)	(0.78		)	~~(0.1~~—		)	01.20
Other comprehensive income (loss)	(0.7		)	(0.7		)	(0.1		)	0.2
Other comprehensive income	0.1			0.8			—			1.0
Comprehensive income (loss)	$	(36.1	)	$	70.7		$	18.7		$	108.4
Comprehensive income	$	59.6		$	41.3		$	78.3		$	149.7

See accompanying notes to consolidated financial statements.

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Consolidated Balance Sheets

	June 30, 2013			December 31, 2012
	September 30, 2013			December 31, 2012
	(In millions, exceptshare amounts)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1518.89		$	9.2
Accounts receivable, net	~~115~~130.92			109.9
Related company receivables	0.21			40.0
Materials and supplies	4944.58			32.9
Deferred income taxes	43.8			42.8
Other current assets	9793.5			79.0
Total current assets	~~322~~331.73			313.8
Investments	1213.64			13.1
Property and equipment (including concession assets), net	2,~~617~~629.96			2,522.3
Other assets	3428.04			60.3
Total assets	$	23,~~987~~002.27		$	2,909.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Debt due within one year	$	19.23		$	18.8
Accounts payable and accrued liabilities	9597.25			87.4
Related company payables	919.41			6.9
Total current liabilities	~~123~~135.89			113.1
Long-term debt	~~989~~960.0			938.0
Related company debt	~~169~~148.12			178.3
Deferred income taxes	~~136~~134.45			131.6
Other noncurrent liabilities and deferred credits	127.06			10.3
Total liabilities	1,~~430~~386.32			1,371.3
Commitments and contingencies	—			—
Stockholders’ equity:
Common stock, 4,785,510,235 shares authorized, issued without par value	286.1			286.1
Additional paid-in capital	243.6			243.6
Retained earnings	1,~~030~~090.50			1,011.7
Accumulated other comprehensive loss	(3.32		)	(3.2		)
Total stockholders’ equity	1,~~556~~616.95			1,538.2
Total liabilities and stockholders’ equity	$	23,~~987~~002.27		$	2,909.5

See accompanying notes to consolidated financial statements.

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Consolidated Statements of Cash Flows

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2013			2012
	(In millions)(Unaudited)
Operating activities:
Net income	$	1878.83		$	~~108~~148.27
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4976.91			4467.5
Deferred income taxes	31.89			4576.8
Equity in net earnings of unconsolidated affiliate	(1.18		)	(12.51		)
Deferred compensation	—			7.3
Elimination of deferred statutory profit sharing liability	—			(47.8		)
Distributions from unconsolidated affiliate	1.5			2.3
Debt retirement costs	~~109~~112.93			—
Changes in working capital items:
Accounts receivable	(620.35		)	(1832.14		)
Related companies	7189.96			27.51
Materials and supplies	(159.05		)	14.78
Other current assets	(2925.68		)	(19.54		)
Accounts payable and accrued liabilities	611.53			011.83
Other, net	1(0.97		)	34.23
Net cash provided by operating activities	~~212~~312.27			~~147~~238.4
Investing activities:
Capital expenditures	(78123.47		)	(71116.64		)
Acquisition of equipment under operating lease	(66.5		)	—
Purchase of equipment under operating lease	(66.5		)	—
Proceeds from disposal of property	13.41			45.20
Other, net	(01.42		)	(0.47		)
Net cash used for investing activities	(~~143~~188.93		)	(67112.81		)
Financing activities:
Proceeds from issuance of long-term debt	~~927~~980.8			—
Proceeds from related company debt	5269.5			—9.0
Repayment of long-term debt	(~~882~~964.10		)	(814.96		)
Repayment of related company debt	(5997.4		)	(4165.86		)
Debt costs	(~~100~~103.56		)	—
Net cash used for financing activities	(61114.7		)	(5071.72		)
Cash and cash equivalents:
Net increase during each period	69.67			2855.91
At beginning of year	9.2			15.7
At end of period	$	1518.89		$	4470.68

See accompanying notes to consolidated financial statements.

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Notes to Consolidated Financial Statements


1.	Accounting Policies, Interim Financial Statements and Basis of Presentation

In the opinion of the management of KCSM, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of the results for interim periods. All adjustments made were of a normal and recurring nature. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013, are not necessarily indicative of the results to be expected for the full year ending December 31, 2013.


2.	Elimination of Deferred Statutory Profit Sharing Liability, Net

During the second quarter of 2012, Kansas City Southern (“KCS”) completed an organizational restructuring whereby ~~all~~ employees of KCSM became employees of KCSM Servicios, S.A. de C.V. (“KCSM Servicios”), a wholly-owned subsidiary of KCS. KCSM Servicios provides employee services to KCSM, and KCSM pays KCSM Servicios market-based rates for these services. The effective date of this organizational restructuring was May 1, 2012.

Mexican employees are entitled to receive statutory profit sharing. The related cash payment to employees is based on an employer’s net profit determined under accounting principles prescribed in Mexican law, rather than its net profit determined under U.S. GAAP. U.S. GAAP requires the recording of deferred liabilities or assets for financial reporting purposes on the differences between the amounts determined under the two different accounting principles.

As a result of the organizational restructuring, KCSM’s obligation to pay statutory profit sharing terminated on the effective date. Accordingly, in the second quarter of 2012, KCSM recognized a $43.0 million net reduction to operating expense. This reduction includes the elimination of $47.8 million of the deferred statutory profit sharing liability, net of $4.8 million of transaction costs. KCSM Servicios became obligated to pay statutory profit sharing to its employees beginning on the effective date of the organizational restructuring.


3.	Property and Equipment (including Concession Assets)

Property and equipment, including concession assets, and related accumulated depreciation and amortization are summarized below (in millions):

	June 30, 2013		December 31, 2012
	September 30, 2013		December 31, 2012
Land	$	76.9	$	76.9
Concession land rights	141.2		141.2
Road property	2,~~297~~323.07		2,244.1
Equipment	~~632~~639.72		552.5
Technology and other	3334.65		31.6
Construction in progress	4739.69		50.4
Total property	3,~~229~~255.04		3,096.7
Accumulated depreciation and amortization	~~611~~625.18		574.4
Property and equipment (including concession assets), net	$	2,~~617~~629.96	$	2,522.3

Concession assets, net of accumulated amortization of $~~437~~431.31 million and $~~413~~402.37 million, totaled $1,~~942~~938.83 million and $1,~~916~~893.59 million at ~~June~~September 30, 2013 and December 31, 2012, respectively.

4. Fair Value Measurements

Assets and liabilities recognized at fair value are required to be classified into a three-level hierarchy. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

~~hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety~~4. ~~The~~Fair ~~Company’s~~Value ~~assessment of the significance of a particular input to the fair value in its entirety requires judgment and considers factors specific to the asset or liability.~~Measurements

~~The~~Assets ~~Company’s~~and ~~derivative~~liabilities ~~financial~~recognized ~~instruments~~at fair value are ~~measured~~required atto ~~fair~~be ~~value~~classified oninto a ~~recurring~~three-level ~~basis~~hierarchy. ~~and~~In ~~consist~~general, offair ~~foreign~~values ~~currency~~determined ~~forward~~by ~~contract~~Level ~~agreements,~~1 ~~which~~inputs ~~are~~utilize ~~classified~~quoted asprices ~~Level~~(unadjusted) 2in ~~instruments.~~active ~~The~~markets ~~Company~~for ~~determines~~identical assets or liabilities that the ~~fair~~Company ~~value~~has ofthe ~~its~~ability ~~derivative~~to ~~financial~~access. ~~instrument~~Level ~~positions~~2 ~~based~~inputs ~~upon~~include ~~pricing~~quoted ~~models~~prices ~~using~~for ~~inputs~~similar ~~observed~~assets ~~from~~and ~~actively~~liabilities ~~quoted~~in active markets and ~~also~~inputs ~~takes~~other ~~into~~than ~~consideration~~quoted prices that are observable for the ~~contract~~asset ~~terms~~or asliability. ~~well~~Level as3 ~~other~~inputs are unobservable inputs, ~~including~~for ~~forward~~the ~~interest~~asset ~~rate~~or ~~curves~~liability and include situations where there is little, if any, market ~~currency~~activity ~~exchange~~for ~~rates~~the asset or liability. ~~The~~In certain cases, the inputs used to measure fair value may fall into different levels of the ~~foreign~~fair ~~currency~~value ~~forward~~hierarchy. ~~contract~~In ~~liabilities~~such ~~was~~cases, $5the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.0 ~~million~~The asCompany’s assessment of ~~June 30,~~the ~~2013~~significance of a particular input to the fair value in its entirety requires judgment and considers factors specific to the asset or liability.

The Company’s derivative financial instruments are measured at fair value on a recurring basis and consist of foreign currency forward contract agreements, which are classified as Level 2 instruments. The Company determines the fair value of its derivative financial instrument positions based upon pricing models using inputs observed from actively quoted markets and also takes into consideration the contract terms as well as other inputs, including forward interest rate curves and market currency exchange rates. The fair value of the foreign currency forward contract liabilities was $6.3 million as of September 30, 2013.

The Company’s short-term financial instruments include cash and cash equivalents, accounts receivable and accounts payable. The carrying value of the short-term financial instruments approximates their fair value.

The fair value of the Company’s debt, including related company debt, is estimated using quoted market prices when available. When quoted market prices are not available, fair value is estimated based on current market interest rates for debt with similar maturities and credit quality. The fair value of the Company’s debt was $1,~~152~~097.83 million and $1,240.9 million at ~~June~~September 30, 2013 and December 31, 2012, respectively. The carrying value was $1,~~177~~127.35 million and $1,135.1 million at ~~June~~September 30, 2013 and December 31, 2012, respectively. If the Company’s debt were measured at fair value, the fair value measurements of the individual debt instruments would have been classified as either Level 1 or Level 2 in the fair value hierarchy.


5.	Derivative Instruments

In general, the Company enters into derivative transactions in certain situations based on management’s assessment of current market conditions and perceived risks. Management intends to respond to evolving business and market conditions and in doing so, may enter into such transactions as deemed appropriate.

Credit Risk. As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. The Company manages this risk by limiting its counterparties to large financial institutions which meet the Company’s credit rating standards and have an established banking relationship with the Company. As of ~~June~~September 30, 2013, the Company did not expect any losses as a result of default of its counterparties.

Foreign Currency Forward Contracts. The Company has net U.S. dollar-denominated liabilities (primarily debt) which, for Mexican income tax purposes, are subject to periodic revaluation based on changes in the value of the U.S. dollar against the Mexican peso. This revaluation creates fluctuations in the Company’s income tax expense and the amount of income taxes paid. During the first half of 2013, the Company entered into foreign currency forward contracts with an aggregate notional amount of $325.0 million to hedge its exposure to this risk. These contracts mature on December 31, 2013, and obligate the Company to purchase a total of Ps.4,202.3 million at a weighted average exchange rate of Ps.12.93 to each U.S. dollar. The Company has not designated these forward contracts as hedging instruments for accounting purposes. The foreign currency forward contracts are measured at fair value each period and any change in fair value is recognized in foreign exchange gain (loss) within the consolidated statements of comprehensive income ~~(loss)~~.

	Derivative Liability
	Balance Sheet Location	June 30,2013		December 31,2012
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Accounts payable and accrued liabilities	$	5.0	$	—
Total derivatives not designated as hedging instruments		5.0		—
Total derivative liability		$	5.0	$	—

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

The following table presents the fair value of derivative instruments included in the consolidated balance sheets (in millions):

The following table presents the amounts affecting the consolidated statements of comprehensive income (loss) for the three months ended June 30 (in millions):



	Derivative Liability
	Balance Sheet Location	September 30, 2013		December 31, 2012
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Accounts payable and accrued liabilities	$	6.3	$	—
Total derivatives not designated as hedging instruments		6.3		—
Total derivative liability		$	6.3	$	—

	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative
Derivatives not designated as hedging instruments:		2013			2012
Foreign currency forward contracts	Foreign exchange loss	$	(14.1	)	$	—
Total		$	(14.1	)	$	—

The following table presents the amounts affecting the consolidated statements of comprehensive income for the three months ended September 30 (in millions):

	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative
Derivatives not designated as hedging instruments:		2013			2012
Foreign currency forward contracts	Foreign exchange gain (loss)	$	(51.03	)	$	—
Total		$	(51.03	)	$	—

The following table presents the amounts affecting the consolidated statements of comprehensive income for the nine months ended September 30 (in millions):



	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative
Derivatives not designated as hedging instruments:		2013			2012
Foreign currency forward contracts	Foreign exchange gain (loss)	$	(6.3	)	$	—
Total		$	(6.3	)	$	—


6.	Long-Term Debt

12½% Senior Notes. On April 1, 2013, the Company redeemed all of the remaining $98.1 million aggregate principal amount of the 12½% senior unsecured notes due April 1, 2016 (the “12½% Senior Notes”) at a redemption price equal to 106.250% of the principal amount. The Company redeemed the 12½% Senior Notes using $65.0 million of borrowings under the revolving credit facility and ~~available~~ cash on hand.

8.0% Senior Notes, 6⁵/8% Senior Notes and 6¹/8% Senior Notes. On April 10, 2013, KCSM commenced a cash tender offer for the 8.0% senior unsecured notes due February 1, 2018 (the “8.0% Senior Notes”), the 6⁵/8% senior unsecured notes due December 15, 2020 (the “6⁵/8% Senior Notes”) and the 6¹/8% senior unsecured notes due June 15, 2021 (the “6¹/8% Senior Notes”). In addition, KCSM concurrently commenced consent solicitations to amend the indentures governing the 8.0% Senior Notes and 6⁵/8% Senior Notes to eliminate substantially all of the restrictive covenants and certain events of default contained therein, which became operative on May 3, 2013.

Through May 8, 2013, KCSM purchased $237.2 million principal amount of the tendered 8.0% Senior Notes, $181.0 million principal amount of the tendered 65/8% Senior Notes and $149.7 million principal amount of the tendered 61/8% Senior Notes (collectively, the “Senior Notes Tendered”), in accordance with the terms and conditions of the tender offer using a portion of the proceeds received from the issuance of $275.0 million principal amount of 2.35% senior unsecured notes due May 15, 2020 (the “2.35% Senior Notes”) and $450.0 million principal amount of 3.0% senior unsecured notes due May 15, 2023 (the “3.0% Senior Notes”).

Subsequent to the expiration of the cash tender offer, ~~through June 26, 2013,~~ KCSM ~~purchased an additional $7.9 million principal amount of the 61/8% Senior Notes and~~ redeemed the remaining $4.0 million outstanding principal amount of the 65/8% Senior Notes. Onand ~~July 2, 2013, KCSM~~ purchased an additional $120.09 million principal amount of the 61/8% Senior Notes.

2.35% Senior Notes. On May 3, 2013, KCSM issued $275.0 million principal amount of 2.35% Senior Notes, which bear interest semiannually at a fixed annual rate of 2.35%. The 2.35% Senior Notes were issued at a discount to par value, resulting in a $0.3 million discount and a yield to maturity of 2.368%. KCSM used the net proceeds from the issuance of the 2.35% Senior Notes and the 3.0% Senior Notes to purchase the Senior Notes Tendered, pay all fees and expenses incurred in connection with the 2.35% Senior Notes and 3.0% Senior Notes offerings and the tender offers, to finance the purchase of certain leased equipment and for other general corporate purposes. The 2.35% Senior Notes are redeemable at KCSM’s option, in whole or in part, prior to April 15, 2020, by paying the greater of either (i) 100% of the principal amount of the 2.35% Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the then-current U.S. Treasury rate plus 20 basis points, plus accrued interest and any additional amounts to but excluding the redemption date. On or after April 15, 2020, the 2.35% Senior Notes may be redeemed at KCSM’s option, in whole or in part at any time at a redemption price equal to 100% of the principal

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

2.35% Senior Notes. On May 3, 2013, KCSM issued $275.0 million principal amount of 2.35% Senior Notes, which bear interest semiannually at a fixed annual rate of 2.35%. The 2.35% Senior Notes were issued at a discount to par value, resulting in a $0.3 million discount and a yield to maturity of 2.368%. KCSM used the net proceeds from the issuance of the 2.35% Senior Notes and the 3.0% Senior Notes to purchase the Senior Notes Tendered, pay all fees and expenses incurred in connection with the 2.35% Senior Notes and 3.0% Senior Notes offerings and the tender offers, to finance the purchase of certain leased equipment and for other general corporate purposes. The 2.35% Senior Notes are redeemable at KCSM’s option, in whole or in part, prior to April 15, 2020, by paying the greater of either (i) 100% of the principal amount of the 2.35% Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the then-current U.S. Treasury rate plus 20 basis points, plus accrued interest and any additional amounts to but excluding the redemption date. On or after April 15, 2020, the 2.35% Senior Notes may be redeemed at KCSM’s option, in whole or in part, at any time at a redemption price equal to 100% of the principal amount, plus any accrued and unpaid interest. In addition, the notes are redeemable, in whole but not in part, at KCSM’s option at their principal amount, plus any accrued unpaid interest in the event of certain changes in the Mexican withholding tax rate.

3.0% Senior Notes. On May 3, 2013, KCSM issued $450.0 million principal amount of the 3.0% Senior Notes, which bear interest semiannually at a fixed annual rate of 3.0%. The 3.0% Senior Notes were issued at a discount to par value, resulting in a $1.9 million discount and a yield to maturity of 3.048%. KCSM used the net proceeds from the issuance of the 3.0% Senior Notes and the 2.35% Senior Notes to purchase the Senior Notes Tendered, pay all fees and expenses incurred in connection with the 2.35% Senior Notes and 3.0% Senior Notes offerings and the tender offers, to finance the purchase of certain leased equipment and for other general corporate purposes. The 3.0% Senior Notes are redeemable at KCSM’s option, in whole or in part, prior to February 15, 2023, by paying the greater of either (i) 100% of the principal amount of the 3.0% Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the then-current U.S. Treasury rate plus 20 basis points, plus accrued interest and any additional amounts to but excluding the redemption date. On or after February 15, 2023, the 3.0% Senior Notes may be redeemed at KCSM’s option, in whole or in part, at any time at a redemption price equal to 100% of the principal amount plus, any accrued and unpaid interest. In addition, the notes are redeemable, in whole but not in part, at KCSM’s option at their principal amount, plus any accrued unpaid interest in the event of certain changes in the Mexican withholding tax rate.

The 2.35% Senior Notes and 3.0% Senior Notes are denominated in U.S. dollars; are unsecured, unsubordinated obligations; rank pari passu in right of payment with KCSM’s existing and future unsecured, unsubordinated obligations; and are senior in right of payment to KCSM’s future subordinated indebtedness. In addition, the senior notes include certain covenants which are customary for these types of debt instruments issued by borrowers with similar credit ratings.

Revolving Credit Facility. ~~During the second quarter of 2013, the Company borrowed $65.0 million against the revolving credit facility for the redemption of the 12½% Senior Notes.~~ As of ~~June~~September 30, 2013, ~~the~~and ~~outstanding amount under the revolving credit facility was $10.0 million. As of~~ December 31, 2012, KCSM had no amount outstanding under the revolving credit facility.

Related Company Revolving Credit Agreement. The Kansas City Southern Railway Company (“KCSR”), as a lender, and KCSM, as a borrower, entered into a Revolving Credit Agreement effective as of June 7, 2013 (the “Revolving Agreement”), pursuant to the terms of which KCSM may borrow up to $100.0 million from KCSR on a revolving basis at any time during the term of the Revolving Agreement. The Revolving Agreement is unsecured and terminates on December 31, 2018. As of ~~June~~September 30, 2013, KCSM had borrowed $5231.5 million under the terms of the Revolving Agreement at a weighted average interest rate of 1.4847%.

Debt Retirement Costs. The Company recognized debt retirement costs of $~~109~~112.93 million during the ~~second~~nine ~~quarter~~months ofended September 30, 2013, related to the tender and call premiums as well as the write-off of unamortized debt issuance costs and the original issue discounts as a result of the refinancing and purchasing activities described above.

7. Commitments and Contingencies

Concession Duty. Under KCSM’s 50-year railroad concession from the Mexican government (the “Concession”), KCSM paid concession duty expense of 0.5% of gross revenues for the first 15 years of the Concession period, and on June 24, 2012, KCSM began paying 1.25% of gross revenues, which is effective for the remaining years of the Concession. For the three and six months ended June 30, 2013, the concession duty expense, which is recorded within materials and other in operating expenses, was $3.4 million and $6.8 million, respectively, compared to $1.4 million and $2.7 million for the same periods in 2012.

Litigation. The Company is a party to various legal proceedings and administrative actions, all of which, except as set forth below, are of an ordinary, routine nature and incidental to its operations. KCSM aggressively defends these matters and has established liability provisions, which management believes are adequate to cover expected costs. Although it is not possible to predict the outcome of any legal proceeding, in the opinion of management, other than those proceedings described in detail below, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on the Company’s consolidated financial statements.

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)


7.	Commitments and Contingencies

Concession Duty. Under KCSM’s 50-year railroad concession from the Mexican government (the “Concession”), KCSM paid concession duty expense of 0.5% of gross revenues for the first 15 years of the Concession period, and on June 24, 2012, KCSM began paying 1.25% of gross revenues, which is effective for the remaining years of the Concession. For the three and nine months ended September 30, 2013, the concession duty expense, which is recorded within materials and other in operating expenses, was $3.7 million and $10.5 million, respectively, compared to $3.5 million and $6.2 million for the same periods in 2012.

Environmental Liabilities. The Company’s operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment through the establishment of standards for water discharge, water supply, emissions, noise pollution, hazardous substances and transportation and handling of hazardous and solid waste. The Mexican government may bring administrative and criminal proceedings, impose economic sanctions against companies that violate environmental laws and temporarily or even permanently close non-complying facilities.

The risk of incurring environmental liability is inherent in the railroad industry. As part of serving the petroleum and chemicals industry, the Company transports hazardous materials and has a professional team available to respond to and handle environmental issues that might occur in the transport of such materials.

The Company performs ongoing reviews and evaluations of the various environmental programs and issues within the Company’s operations and, as necessary, takes actions intended to limit the Company’s exposure to potential liability. Although these costs cannot be predicted with certainty, management believes that the ultimate outcome of identified matters will not have a material adverse effect on the Company’s consolidated financial statements.

Certain Disputes with Ferromex. KCSM and Ferrocarril Mexicano, S.A. de C.V. (“Ferromex”) use certain trackage rights, haulage rights and interline services (the “Services”) provided by each other. The rates to be charged after January 1, 2009, were agreed to pursuant to the Trackage Rights Agreement, dated February 9, 2010 (the “Trackage Rights Agreement”), between KCSM and Ferromex. The rates payable for these Services for the period beginning in 1998 through December 31, 2008, are still not resolved. KCSM is currently involved in discussions with Ferromex regarding the amounts payable to each other for the Services for this period. If KCSM cannot reach an agreement with Ferromex for rates applicable for Services which were provided prior to January 1, 2009, which are not subject to the Trackage Rights Agreement, the Secretaría de Comunicaciones y Transportes (“Secretary of Communications and Transportation” or “SCT”) is entitled to set the rates in accordance with Mexican law and regulations. KCSM and Ferromex both initiated administrative proceedings seeking a determination by the SCT of the rates that KCSM and Ferromex should pay each other in connection with the Services. The SCT issued rulings in 2002 and 2008 setting the rates for the Services, and both KCSM and Ferromex challenged these rulings. Although KCSM and Ferromex have challenged these matters based on different grounds and these cases continue to evolve, management believes the amounts recorded related to these matters are adequate.

While the outcome of these matters cannot be predicted with certainty, the Company does not believe that, when resolved, these disputes will have a material effect on its consolidated financial statements.

Contractual Agreements. In the normal course of business, the Company enters into various contractual agreements related to commercial arrangements and the use of other railroads’ or governmental entities’ infrastructure needed for the operations of the business. The Company is involved or may become involved in certain disputes involving transportation rates, product loss or damage, charges and interpretations related to these agreements. While the outcome of these matters cannot be predicted with certainty, the Company does not believe that, when resolved, these disputes will have a material effect on its consolidated financial statements.

Credit Risk. The Company continually monitors risks related to economic changes and certain customer receivables concentrations. Significant changes in customer concentration or payment terms, deterioration of customer creditworthiness or further weakening in economic trends could have a significant impact on the collectability of KCSM’s receivables and its operating results. If the financial condition of KCSM’s customers were to deteriorate and result in an impairment of their ability to make payments, additional allowances may be required. The Company has recorded provisions for uncollectability based on its best estimate at June 30, 2013.

Income Tax. Tax returns filed for periods after 2006 remain open to examination by the taxing authorities. KCSM’s 2007 tax return is currently under examination by the Servicio de Administracion Tributaria (the “SAT”), the Mexican equivalent of the U.S. Internal Revenue Service. The Company received an audit assessment for the year ended December 31, 2005, from the SAT. The Company initiated administrative proceedings with the SAT, and if a settlement is not reached, the matter will be litigated. The Company believes it has strong legal arguments in its favor and more likely than not will prevail in challenging the 2005 assessment. The Company believes that an adequate provision has been made for any adjustment (taxes and interest) that will be due for all open years. However, an unexpected adverse resolution could have a material effect on the consolidated financial statements in a particular quarter or fiscal year.

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Kansas City Southern de México, S.A. de C.V. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Income Tax. Tax returns filed for periods after 2006 remain open to examination by the taxing authorities. KCSM’s 2007 and 2010 tax returns are currently under examination by the Servicio de Administracion Tributaria (the “SAT”), the Mexican equivalent of the U.S. Internal Revenue Service. The Company received an audit assessment for the year ended December 31, 2005, from the SAT. The Company initiated administrative proceedings with the SAT, and if a settlement is not reached, the matter will be litigated. The Company believes it has strong legal arguments in its favor and more likely than not will prevail in challenging the 2005 assessment. The Company believes that an adequate provision has been made for any adjustment (taxes and interest) that will be due for all open years. However, an unexpected adverse resolution could have a material effect on the consolidated financial statements in a particular quarter or fiscal year.

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion below, as well as other portions of this Form 10-Q, contain forward-looking statements that are not based upon historical information. Readers can identify these forward-looking statements by the use of such verbs as “expects,” “anticipates,” “believes” or similar verbs or conjugations of such verbs. Such forward-looking statements are based upon information currently available to management and management’s perception thereof as of the date of this Form 10-Q. However, such statements are dependent on and, therefore, can be influenced by, a number of external variables 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; revocation of KCSM’s concession; the termination of, or failure to renew, agreements with customers, other railroads and third parties; interest rates; access to capital; disruptions to the Company’s technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; credit risk of customers and counterparties and their failure to meet their financial obligations; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents ~~along~~on KCSM’s rail network, or at 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; loss of key personnel; labor difficulties, including strikes and work stoppages; insufficiency of insurance to cover lost revenue, profits or other damages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic conditions; political and economic conditions in Mexico and the level of trade between Mexico and the United States; and the outcome of claims and litigation involving the Company or its subsidiaries. For more discussion about each risk factor, see Part I, Item 1A –“Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, which is on file with the U.S. Securities and Exchange Commission (File No. 333-08322) and any updates contained herein. Readers are strongly encouraged to consider these factors when evaluating forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the timing when, or by which, such performance or results will be achieved. As a result, actual outcomes or results could materially differ from those indicated in forward-looking statements. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements.

This discussion is intended to clarify and focus on Kansas City Southern de México, S. A. de C.V.’s (“KCSM” or the “Company”) results of operations, certain changes in its financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included under Item 1 of this Form 10-Q, and has been abbreviated pursuant to General Instruction H(2)(a) of Form 10-Q. This discussion should be read in conjunction with those consolidated financial statements and the related notes and is qualified by reference to them.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial position and results of operations is based upon its consolidated financial statements. The preparation of these consolidated financial statements requires estimation and judgment that affect the reported amounts of revenue, expenses, assets and liabilities. The Company bases its estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the accounting for assets and liabilities that are not readily apparent from other sources. If the estimates differ materially from actual results, the impact on the consolidated financial statements may be material. The Company’s critical accounting policies are disclosed in the 2012 Annual Report on Form 10-K.

~~Second~~Third Quarter Analysis

The Company reported a net ~~loss~~income of $3559.45 million for the three months ended ~~June~~September 30, 2013, compared to net income of $7140.45 million for the same period in 2012. ~~This decrease is attributable to $109.9 million of debt retirement costs recognized in 2013 and the elimination of $43.0 million of deferred statutory profit sharing liability recognized in 2012.~~

The Company reported aan 78% increase in revenues, a 6% increase in revenue per carload/unit and a 1% increase in ~~carloads~~carload/unit volumes during the three months ended ~~June~~September 30, 2013, as compared to the same period in 2012. Revenues increased for all commodity groups, ~~other than agriculture and minerals,~~ driven by ~~the effect of fluctuations in the value of the Mexican peso against the U.S. dollar, fuel surcharge and~~ positive pricing impacts, ~~partially offset by commodity mix due to the unfavorable impact from agriculture~~ and ~~minerals.~~fuel ~~Agriculture and minerals revenues decreased by $11~~surcharge.~~9 million due to a 28% decrease in import grain volumes resulting from the severe drought conditions experienced in the Midwestern region of the United States during 2012.~~

12Operating expenses increased 9% during the three months ended September 30, 2013, as compared to the same period in 2012, due to higher fuel prices, compensation and benefits, and depreciation and amortization expenses. Operating expenses as a percentage of revenues increased to 64.5% for the three months ended September 30, 2013, as compared to 63.7% for the same period in 2012.

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~~Operating~~KCSM’s ~~expenses~~revenues ~~increased~~and 50% during the three months ended June 30, 2013, as compared to the same period in 2012, due to the elimination of $43.0 million of deferred statutory profit sharing liability as a result of the organizational restructuring in the second quarter of 2012. In addition, operating expenses ~~increased~~are ~~due~~affected toby ~~the effect of~~ fluctuations ~~in the value~~ of the Mexican peso against the U.S. dollar ~~for operating expenses denominated in Mexican pesos~~. ~~Operating~~Based ~~expenses~~on asthe avolume ~~percentage~~ of ~~revenues~~revenue ~~increased~~and toexpense ~~65.1%~~transactions ~~for~~denominated ~~the~~in ~~three~~Mexican ~~months ended June 30~~pesos, ~~2013,~~revenue asand ~~compared~~expense tofluctuations ~~46.6%~~generally ~~for~~offset, ~~the~~with ~~same~~insignificant ~~period~~net inimpacts ~~2012. This increase is attributable~~ to ~~the~~operating ~~elimination of the deferred statutory profit sharing liability in 2012~~income.

KCSM’s revenues and operating expenses are affected by fluctuations in the value of the Mexican peso against the U.S. dollar. Based on the volume of revenue and expense transactions denominated in Mexican pesos, revenue and expense fluctuations generally offset, with insignificant net impacts to operating income.

During the second quarter of 2013, the Company refinanced a significant portion of its existing debt at lower interest rates and extended the debt maturities. As a result of the refinancing, the Company recognized debt retirement costs of $109.9 million for the quarter for the tender and call premiums as well as the write-off of unamortized debt issuance costs and the original issue discounts.

Results of Operations

The following summarizes KCSM’s consolidated statements of comprehensive income components (in millions):

	Three Months Ended						ChangeDollars
	June 30,
	September 30,
	2013			2012
Revenues	$	~~266~~286.56		$	~~248~~266.21		$	1820.35
Operating expenses	~~173~~184.58			~~115~~169.74			5715.84
Operating income	93101.08			~~132~~96.57			~~(39.~~5.1		)
Equity in net earnings of unconsolidated affiliate	0.47			0.76			(0.31		)
Interest expense	(1412.59		)	(22.20		)	79.71
Debt retirement costs	(~~109~~2.94		)	—			(~~109~~2.94		)
Foreign exchange loss	(17.5		)	(2.8		)	(14.7		)
Foreign exchange gain (loss)	(1.5		)	4.8			(6.3		)
Income (loss) before income taxes	(48.5		)	108.2			(156.7		)
Other expense, net	(0.2		)	(0.1		)	(0.1		)
Income tax expense (benefit)	(13.1		)	36.8			(49.9		)
Income before income taxes	85.5			80.0			5.5
Net income (loss)	$	(35.4	)	$	71.4		$	(106.8	)
Income tax expense	26.0			39.5			(13.5		)
	Six Months Ended						ChangeDollars
Net income	$	59.5		$	40.5		$	19.0
	June 30,
	Nine Months Ended						ChangeDollars
	September 30,
	2013			2012
Revenues	$	~~521~~808.84		$	~~493~~759.45		$	2848.49
Operating expenses	~~339~~524.20			~~278~~447.04			6176.26
Operating income	~~182~~284.64			~~215~~312.41			(3227.87		)
Equity in net earnings of unconsolidated affiliate	1.18			12.51			(0.43		)
Interest expense	(3648.09		)	(4466.7		)	817.78
Debt retirement costs	(~~109~~112.93		)	—			(~~109~~112.93		)
Foreign exchange gain (loss)	(4.6.1		)	04.19			(411.70		)
Other expense, net	(0.13		)	(0.12		)	—(0.1		)
Income before income taxes	33118.16			~~172~~252.2			(~~139~~133.16		)
Income tax expense	1440.3			64103.05			(4963.72		)
Net income	$	1878.83		$	~~108~~148.27		$	(8970.4	)

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Revenues

The following summarizes revenues (in millions), carload/unit statistics (in thousands) and revenue per carload/unit:

	Revenues						Carloads and Units				Revenue per Carload/Unit
	Three Months EndedJune 30,						Three Months EndedJune 30,				Three Months EndedJune 30,
	Three Months EndedSeptember 30,						Three Months EndedSeptember 30,				Three Months Ended September 30,
	2013		2012		% Change		2013	2012	% Change		2013		2012		% Change
Chemical and petroleum	$	5352.79	$	4451.58	212	%	2524.50	2326.64	8(9	%)	$	2,~~106~~204	$	1,~~886~~962	12	%
Industrial and consumer products	6366.41		6064.0		63	%	41.16	4044.71	1(6	%)	1,~~543~~589		1,~~474~~451		510	%
Agriculture and minerals	3742.89		4942.76		~~(24~~1	%)	21.49	2623.4	(196	%)	1,~~766~~959		1,~~883~~821		(68	%)
Energy	8.25		67.60		2421	%	7.69	7.32	410	%	1,~~079~~076		~~904~~972		1911	%
Intermodal	5562.02		4652.80		1820	%	~~123~~138.47	~~119~~131.92	36	%	~~446~~448		~~390~~396		1413	%
Automotive	4347.02		3643.16		198	%	2225.81	2124.38	71	%	1,~~886~~880		1,~~695~~758		117	%
Carload revenues, carloads and units	~~261~~279.18		~~243~~261.70		7	%	~~241~~259.82	~~239~~257.21	1	%	$	1,~~080~~079	$	1,~~019~~015	6	%
Other revenue	56.48		4.5.1		2033	%
Total revenues (i)	$	~~266~~286.56	$	~~248~~266.21	78	%
(i) Included in revenues:
Fuel surcharge	$	4248.90	$	3538.09

	Revenues						Carloads and Units				Revenue per Carload/Unit
	Six Months EndedJune 30,						Six Months EndedJune 30,				Six Months EndedJune 30,
	Nine Months EndedSeptember 30,						Nine Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2013		2012		% Change		2013	2012	% Change		2013		2012		% Change
Chemical and petroleum	$	~~103~~156.21	$	91143.53	139	%	4973.2	4773.59	4(1	%)	$	2,~~098~~133	$	1,~~926~~939	910	%
Industrial and consumer products	~~130~~196.23		~~120~~184.6		86	%	84125.28	82126.01	3—	%	1,~~546~~560		1,~~471~~464		57	%
Agriculture and minerals	70113.98		~~100~~143.51		(2920	%)	4062.65	5477.59	(2620	%)	1,~~746~~821		1,~~844~~837		(51	%)
Energy	1523.27		1320.0		1719	%	1422.76	1421.35	35	%	1,~~034~~049		~~909~~930		1413	%
Intermodal	~~105~~167.24		89141.0		1819	%	~~237~~376.96	~~229~~360.46	4	%	~~442~~445		~~388~~391		14	%
Automotive	87134.68		70114.62		2418	%	4671.89	4266.08	118	%	1,~~872~~875		1,~~681~~710		1110	%
Carload revenues, carloads and units	~~512~~792.31		~~485~~746.2		6	%	~~473~~732.46	~~469~~726.78	1	%	$	1,~~082~~081	$	1,~~033~~027	5	%
Other revenue	916.53		813.23		1623	%
Total revenues (i)	$	~~521~~808.84	$	~~493~~759.45	6	%
(i) Included in revenues:
Fuel surcharge	$	81129.8	$	68107.43

Freight revenues include revenue for transportation services and fuel surcharges. For the three months ended ~~June~~September 30, 2013, revenues and carload/unit volumes increased 78% and 1%, respectively, compared to the same period in 2012. For the ~~six~~nine months ended ~~June~~September 30, 2013, revenues and ~~carloads~~carload/unit volumes increased 6% and 1%, respectively, compared to the same period in 2012. ~~Revenues~~For ~~increased~~the ~~for~~nine ~~all~~months ~~commodity~~ended ~~groups~~September 30, ~~other~~2013, ~~than~~ agriculture and minerals, ~~which~~revenues decreased $~~11.9 million and $~~29.63 million ~~for the three and six months ended June 30, 2013, respectively,~~ due to aan 2818% ~~and~~reduction ~~33% decrease, respectively,~~ in import grain volumes ~~resulting~~as ~~from~~ the severe drought conditions experienced in the Midwestern region of the United States ~~during~~affected grain volumes in the third quarter of 2012 through the second quarter of 2013. Revenue per carload/unit increased by 6% and 5% for the three and ~~six~~nine months ended ~~June~~September 30, 2013, respectively, compared to the same periods in 2012, due to positive pricing impacts, and fuel surcharge, ~~and~~partially offset by commodity mix. In addition, revenue per carload/unit increased for the ~~effect~~nine ofmonths ~~fluctuations~~ended inSeptember 30, 2013 due to the ~~value~~strengthening of the Mexican peso against the U.S. dollar~~, partially offset by commodity mix~~.

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KCSM’s fuel surcharge is a mechanism to adjust revenue based upon changing fuel prices. Fuel surcharge is calculated using a fuel price from a prior time period that can be up to 60 days earlier. In a period of volatile fuel prices or changing customer business mix, changes in fuel expense and fuel surcharge may differ.

The following discussion provides an analysis of revenues by commodity group:

	Revenues by commodity groupfor the three months ended June 30, 2013
	Revenues by commodity groupfor the three months ended September 30, 2013
Chemical and petroleum. Revenues increased $9.2 million for the three months ended June 30, 2013, compared to the same period in 2012, due to a 12% increase in revenue per carload/unit and an 8% increase in carload/unit volumes. Revenues increased $11.7 million for the six months ended June 30, 2013, compared to the same period in 2012, due to a 9% increase in revenue per carload/unit and a 4% increase in carload/unit volumes. Revenues increased due to positive pricing impacts for petroleum and plastics and volume increased due to the recovery of a portion of a customer’s lost business. In addition, revenues increased due to the effect of fluctuations in the value of the Mexican peso against the U.S. dollar.
Chemical and petroleum. Revenues increased $1.1 million for the three months ended September 30, 2013, compared to the same period in 2012, due to a 12% increase in revenue per carload/unit, partially offset by a 9% decrease in carload/unit volumes due to lower petroleum volumes as a result of weather related delays. Revenues increased $12.8 million for the nine months ended September 30, 2013, compared to the same period in 2012, due to a 10% increase in revenue per carload/unit. Revenues increased due to positive pricing impacts for petroleum and plastics.
Industrial and consumer products. Revenues increased $3.4 million for the three months ended June 30, 2013, compared to the same period in 2012, due to a 5% increase in revenue per carload/unit and a 1% increase in carload/unit volumes. Revenues increased $9.6 million for the six months ended June 30, 2013, compared to the same period in 2012, due to a 5% increase in revenue per carload/unit and a 3% increase in carload/unit volumes. Metals and scrap revenues increased due to a high demand for slab and steel coil driven by strength in the automotive and oil and gas industries. Pulp and paper revenues increased due to inventory restocking due to short-term market pricing. In addition, revenues increased due to the effect of fluctuations in the value of the Mexican peso against the U.S. dollar.
Industrial and consumer products. Revenues increased $2.1 million for the three months ended September 30, 2013, compared to the same period in 2012, due to a 10% increase in revenue per carload/unit, partially offset by a 6% decrease in carload/unit volumes, due to lower other volumes as a result of lost business. Revenues increased $11.7 million for the nine months ended September 30, 2013, compared to the same period in 2012, due to a 7% increase in revenue per carload/unit. Metals and scrap revenues increased due to a longer average length of haul. In addition, revenues increased due to the strengthening of the Mexican peso against the U.S. dollar.
Agriculture and minerals. Revenues decreased $11.9 million for the three months ended June 30, 2013, compared to the same period in 2012, due to a 19% decrease in carload/unit volumes and a 6% decrease in revenue per carload/unit. For the six months ended June 30, 2013, revenues decreased $29.6 million due to a 26% decrease in carload/unit volumes and a 5% decrease in revenues per carload/unit. Import grain volumes decreased 28% and 33% for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012, as a result of the severe drought conditions experienced in the Midwestern region of the United States during 2012.
Agriculture and minerals. Revenues increased $0.3 million for the three months ended September 30, 2013, compared to the same period in 2012, due to an 8% increase in revenue per carload/unit, partially offset by a 6% decrease in carload/unit volumes. For the nine months ended September 30, 2013, revenues decreased $29.3 million due to a 20% decrease in carload/unit volumes. Import grain volumes and average length of haul decreased in the third quarter of 2012 through the second quarter of 2013 as a result of the severe drought conditions experienced in the Midwestern region of the United States during 2012. Additionally, volumes decreased during the three and nine months ended September 30, 2013, as higher dried distillers grain prices for imports from the United States drove a product substitution in Mexico.

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Revenues by commodity groupfor the three months ended June 30, 2013 Energy. Revenues increased $1.6 million for the three months ended June 30, 2013, compared to the same period in 2012, due to a 19% increase in revenue per carload/unit due to pricing and a 4% increase in carload/unit volumes. Revenues increased $2.2 million for the six months ended June 30, 2013, compared to the same period in 2012, due a 14% increase in revenue per carload/unit due to pricing and a 3% increase in carload/unit volumes. In addition, revenues increased due to the effect of fluctuations in the value of the Mexican peso against the U.S. dollar.

Intermodal. Revenues increased $8.2 million for the three months ended June 30, 2013, compared to the same period in 2012, due to a 14% increase in revenue per carload/unit and a 3% increase in carload/unit volumes. Revenues increased $16.2 million for the six months ended June 30, 2013, compared to the same period in 2012, due to a 14% increase in revenue per carload/unit and a 4% increase in carload/unit volumes. The increase in revenue per carload/unit is due to increases in pricing and fuel surcharge. The increase in volume was driven by conversion of cross border general commodity truck traffic to rail.

Automotive. Revenues increased $6.9 million for the three months ended June 30, 2013, compared to the same period in 2012, due to an 11% increase in revenue per carload/unit and a 7% increase in carload/unit volumes. Revenues increased $17.0 million for the six months ended June 30, 2013, compared to the same period in 2012, due to 11% increases in revenue per carload/unit and in carload/unit volumes. The growth was driven by new business, increased import/export volume through the Port of Lazaro Cardenas and strong year-over-year growth in North American automobile sales for Original Equipment Manufacturers. In addition, revenues increased due to the effect of fluctuations in the value of the Mexican peso against the U.S. dollar.

Operating Expenses

Operating expenses, as shown below (in millions), increased $57.8 million and $61.2 million for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012, due to the elimination of deferred statutory profit sharing liability as a result of the organizational restructuring in the second quarter of 2012. In addition, operating expenses increased due to the effect of fluctuations in the value of the Mexican peso against the U.S. dollar for operating expenses denominated in Mexican pesos.

KCSM pays KCSM Servicios, a wholly-owned subsidiary of KCS, market-based rates for employee services. For comparative purposes, amounts paid to KCSM Servicios are classified according to the nature of the services provided to KCSM and the market-based premium paid to KCSM Servicios is included within materials and other expense.

	Three Months Ended
	June 30,					Change
	2013		2012			Dollars			Percent
Compensation and benefits	$	31.4	$	28.6		$	2.8		10	%
Purchased services	33.7		36.7			(3.0		)	(8	%)
Fuel	44.6		39.2			5.4			14	%
Equipment costs	18.9		18.7			0.2			1	%
Depreciation and amortization	25.3		22.4			2.9			13	%
Materials and other	19.6		13.1			6.5			50	%
Elimination of deferred statutory profit sharing liability, net	—		(43.0		)	43.0			(100	%)
Total operating expenses	$	173.5	$	115.7		$	57.8		50	%

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	Six Months Ended
	June 30,					Change
	2013		2012			Dollars			Percent
Compensation and benefits	$	60.0	$	63.7		$	(3.7	)	(6	%)
Purchased services	69.5		72.9			(3.4		)	(5	%)
Fuel	86.6		78.7			7.9			10	%
Equipment costs	38.9		36.8			2.1			6	%
Depreciation and amortization	49.9		44.5			5.4			12	%
Materials and other	34.3		24.4			9.9			41	%
Elimination of deferred statutory profit sharing liability, net	—		(43.0		)	43.0			(100	%)
Total operating expenses	$	339.2	$	278.0		$	61.2		22	%



	Revenues by commodity group for the three months ended September 30, 2013
Energy. Revenues increased $1.5 million for the three months ended September 30, 2013, compared to the same period in 2012, due to an 11% increase in revenue per carload/unit and a 10% increase in carload/unit volumes. Revenues increased $3.7 million for the nine months ended September 30, 2013, compared to the same period in 2012, due to a 13% increase in revenue per carload/unit and a 5% increase in carload/unit volumes. The volume increases were driven by higher demand for pet coke used in cement for highway projects.

~~Compensation and benefits~~Intermodal. ~~Compensation~~Revenues ~~and benefits~~ increased $210.82 million for the three months ended ~~June~~September 30, 2013, compared to the same period in 2012, due to ~~fluctuations~~a in13% ~~the~~increase ~~value~~in ofrevenue ~~the~~per ~~Mexican~~carload/unit ~~peso~~and ~~against~~a ~~the~~6% ~~U.S.~~increase ~~dollar,~~in ~~and~~carload/unit ~~annual salary rate increases~~volumes. ~~Compensation~~Revenues ~~and~~increased ~~benefits decreased~~ $326.74 million for the ~~six~~nine months ended ~~June~~September 30, 2013, compared to the same period in 2012, due to a ~~$7.3~~14% ~~million~~increase ~~reduction~~ in ~~deferred~~revenue ~~statutory~~per ~~profit~~carload/unit ~~sharing~~and ~~expense~~a as4% aincrease ~~result~~in ofcarload/unit ~~the~~volumes. ~~organizational~~Revenue ~~restructuring~~per incarload/unit ~~2012.~~increased ~~This~~as ~~decrease~~a ~~was~~result ~~partially~~of ~~offset~~cross byborder ~~fluctuations~~length inof ~~the~~haul, ~~value~~and ofvolume ~~the~~growth ~~Mexican~~was ~~peso~~driven ~~against~~by ~~the~~conversion ~~U.S.~~of ~~dollar~~cross ~~and~~border ~~annual~~general ~~salary~~commodity ~~rate~~truck ~~increases~~traffic to rail.

~~Purchased services~~Automotive. ~~Purchased~~Revenues ~~services~~increased ~~expense decreased~~ $3.06 million ~~and $3.4 million~~ for the three ~~and six~~ months ended ~~June~~September 30, 2013, ~~respectively,~~ compared to the same ~~periods~~period in 2012, due to a ~~decrease~~7% increase in ~~track~~revenue per carload/unit and ~~equipment~~a ~~maintenance~~1% ~~expenses~~increase in carload/unit volumes. Volume increased as a result of new business, partially offset by anlower ~~increase~~production indue ~~security~~to ~~services~~demand ~~expense~~and a customer’s plant shutdown. ~~Track~~Revenues ~~maintenance~~increased ~~expense~~$20.6 ~~decreased~~million ~~due~~for the nine months ended September 30, 2013, compared to the ~~termination~~same ofperiod ain ~~maintenance~~2012, ~~contract~~due asto a ~~result~~10% ofincrease in revenue per carload/unit and an 8% increase in carload/unit volumes. For the nine months ended September 30, 2013, the growth was driven by new business, increased import/export volume through the Port of Lazaro Cardenas and strong year-~~sourcing~~over-year growth in North American automobile sales for Original Equipment Manufacturers for the first half of ~~certain~~2013. ~~maintenance~~In ~~activities~~addition, ~~and~~revenues increased due to the ~~timing~~strengthening of ~~maintenance~~the ~~activities~~Mexican peso against the U.S. dollar.

~~Fuel. Fuel~~Operating expense increased $5.4 million and $7.9 million for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012, due to higher diesel fuel prices as the average price per gallon, including the unfavorable impact of fluctuations in the value of the Mexican peso against the U.S. dollar, was $3.00 and $2.94 for the three and six months ended June 30, 2013, respectively, compared to $2.49 and $2.52 for the same periods in 2012. These increases were partially offset by lower consumption. Expenses

~~Equipment~~Operating ~~costs. Equipment~~expenses, ~~costs~~as ~~increased~~shown ~~$0.2~~below ~~million~~(in ~~and~~millions), increased $215.14 million for the three ~~and six~~ months ended ~~June~~ September 30, 2013, ~~respectively,~~ compared to the same ~~periods~~period in 2012, due to anhigher ~~increase~~fuel inprices, ~~the~~compensation ~~use~~and ofbenefits, ~~other~~and ~~railroads’~~depreciation ~~freight~~and ~~cars~~amortization asexpense. aOperating ~~result~~expenses of increased ~~automotive~~$76.6 ~~traffic~~million ~~volumes.~~for ~~Equipment~~the ~~costs~~nine ~~are~~months ~~expected~~ended September 30, 2013, compared to ~~decrease~~the onsame aperiod ~~quarterly~~in ~~basis~~2012, bydue ~~approximately~~to ~~$1.6~~the ~~million~~elimination of deferred statutory profit sharing liability as a result of the ~~acquisition~~organizational ofrestructuring ~~30 locomotives~~ in ~~June 2013~~2012, ~~which~~higher ~~were~~fuel ~~previously~~prices ~~leased~~and bythe strengthening of the ~~Company~~Mexican ~~under~~peso anagainst ~~operating~~the ~~lease~~U.S. ~~agreement~~dollar.

~~Depreciation~~KCSM ~~and~~pays ~~amortization.~~KCSM ~~Depreciation~~Servicios, ~~and amortization expense increased $2~~S.9A. ~~million~~de ~~and $5~~C.4V. ~~million~~(“KCSM ~~for~~Servicios”) ~~the~~a ~~three~~wholly-owned ~~and~~subsidiary ~~six~~of ~~months ended June 30~~KCS, ~~2013,~~market-based ~~respectively,~~rates ~~compared~~for toemployee ~~the~~services. For ~~same~~comparative ~~periods in 2012~~purposes, ~~due~~amounts paid to aKCSM ~~larger~~Servicios ~~asset~~are ~~base.~~classified ~~Depreciation~~according ~~and amortization expense is expected~~ to ~~increase~~the onnature ~~a quarterly basis by approximately $0.9 million as a result~~ of the ~~acquisition~~services ofprovided 30to ~~locomotives~~KCSM inand ~~June~~the ~~2013,~~market-based ~~which~~premium ~~were~~paid ~~previously~~to ~~leased~~KCSM byServicios ~~the~~is ~~Company~~included ~~under~~within anmaterials ~~operating~~and ~~lease~~other ~~agreement~~expense.

Materials and other. Materials and other expense increased $6.5 million and $9.9 million for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012, due to an increase in casualty and concession duty expenses. KCSM paid concession duty expense of 0.5% of gross revenues for the first 15 years of the Concession period and on June 24, 2012, KCSM began paying 1.25% of gross revenues, which is effective for the remaining years of the Concession. In addition, materials and other expense increased for the six months ended June 30, 2013, compared to the same period in 2012, due to the market-based premium for employee services paid to KCSM Servicios, S.A. de C.V. (“KCSM Servicios”) as a result of the organizational restructuring in the second quarter of 2012.



	Three Months Ended
	September 30,				Change
	2013		2012		Dollars			Percent
Compensation and benefits	$	33.1	$	29.8	$	3.3		11	%
Purchased services	38.2		36.3		1.9			5	%
Fuel	48.9		42.5		6.4			15	%
Equipment costs	21.3		20.6		0.7			3	%
Depreciation and amortization	26.2		23.0		3.2			14	%
Materials and other	17.1		17.2		(0.1		)	(1	%)
Total operating expenses	$	184.8	$	169.4	$	15.4		9	%

Elimination of deferred statutory profit sharing liability, net. As a result of the organizational restructuring in the second quarter of 2012, KCSM’s obligation to pay statutory profit sharing terminated as of May 1, 2012 and accordingly, KCSM recognized a $43.0 million net reduction to operating expense. This reduction includes the elimination of $47.8 million of the deferred statutory profit sharing liability, net of $4.8 million of transaction costs.

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	Nine Months Ended
	September 30,					Change
	2013		2012			Dollars			Percent
Compensation and benefits	$	93.1	$	93.5		$	(0.4	)	—
Purchased services	107.7		109.2			(1.5		)	(1	%)
Fuel	135.5		121.2			14.3			12	%
Equipment costs	60.2		57.4			2.8			5	%
Depreciation and amortization	76.1		67.5			8.6			13	%
Materials and other	51.4		41.6			9.8			24	%
Elimination of deferred statutory profit sharing liability, net	—		(43.0		)	43.0			(100	%)
Total operating expenses	$	524.0	$	447.4		$	76.6		17	%

Compensation and benefits. Compensation and benefits increased $3.3 million for the three months ended September 30, 2013, compared to the same period in 2012, due to annual salary and benefits rate increases and the strengthening of the Mexican peso against the U.S. dollar. Compensation and benefits decreased $0.4 million for the nine months ended September 30, 2013, compared to the same period in 2012, due to a $7.3 million reduction in deferred statutory profit sharing expense as a result of the organizational restructuring in 2012. This decrease was partially offset by the strengthening of the Mexican peso against the U.S. dollar and annual salary and benefits rate increases.

Purchased services. Purchased services expense increased $1.9 million for the three months ended September 30, 2013, compared to the same period in 2012, due to an increase in security services. Purchased services expense decreased $1.5 million for the nine months ended September 30, 2013, compared to the same period in 2012, due to a decrease in track and equipment maintenance expenses, partially offset by an increase in security services. Track maintenance expense decreased due to the termination of a maintenance contract as a result of in-sourcing of certain maintenance activities.

Fuel. Fuel expense increased $6.4 million and $14.3 million for the three and nine months ended September 30, 2013, respectively, compared to the same periods in 2012, due to higher diesel fuel prices as the average price per gallon, including the effects of the strengthening of the Mexican peso against the U.S. dollar, was $2.97 and $2.95 for the three and nine months ended September 30, 2013, respectively, compared to $2.61 and $2.55 for the same periods in 2012. The increase for the nine months ended September 30, 2013, compared to the same period in 2012, was partially offset by lower consumption and improved fuel efficiency.

Equipment costs. Equipment costs increased $0.7 million and $2.8 million for the three and nine months ended September 30, 2013, respectively, compared to the same periods in 2012, due to an increase in cycle time of other railroads’ freight cars as a result of weather related delays. These increases were partially offset by the decrease in locomotive lease expense as a result of the purchase of 30 locomotives in June 2013, which were previously leased by the Company under an operating lease agreement. Equipment costs are expected to decrease in the fourth quarter of 2013, as compared to the same period in 2012, by approximately $1.6 million as a result of this locomotive lease buyout.

Depreciation and amortization. Depreciation and amortization expense increased $3.2 million and $8.6 million for the three and nine months ended September 30, 2013, respectively, compared to the same periods in 2012, due to a larger asset base, including the purchase of 30 locomotives in June 2013, which were previously leased by the Company under an operating lease agreement. Depreciation and amortization expense is expected to increase in the fourth quarter of 2013, as compared to the same period in 2012, by approximately $0.9 million as a result of the locomotive purchase.

Materials and other. Materials and other expense decreased $0.1 million for the three months ended September 30, 2013, compared to the same period in 2012, due to a decrease in the use of roadway materials and other rent and lease expense, partially offset by higher casualty expense. Materials and other expense increased $9.8 million for the nine months ended September 30, 2013, compared to the same periods in 2012, due to an increase in casualty and concession duty expenses. KCSM paid concession duty expense of 0.5% of gross revenues for the first 15 years of the Concession period and on June 24, 2012, KCSM began paying 1.25% of gross revenues, which is effective for the remaining years of the Concession. In addition, materials and other expense increased for the nine months ended September 30, 2013, compared to the same period in 2012, due to the market-based premium for employee services paid to KCSM Servicios as a result of the organizational restructuring in the second quarter of 2012.

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Elimination of deferred statutory profit sharing liability, net. As a result of the organizational restructuring in the second quarter of 2012, KCSM’s obligation to pay statutory profit sharing terminated as of May 1, 2012, and accordingly, KCSM recognized a $43.0 million net reduction to operating expense. This reduction includes the elimination of $47.8 million of the deferred statutory profit sharing liability, net of $4.8 million of transaction costs.

Non-Operating Income and Expenses

Equity in net earnings of unconsolidated affiliate. Equity in earnings from the operations of Ferrocarril y Terminal del Valle de Mexico, S.A. de C.V. ~~decreased~~(“FTVM”) increased $0.31 million ~~and~~ for the three months ended September 30, 2013, compared to the same period in 2012, due to an increase in volumes. Equity in earnings from the operations of FTVM decreased $0.43 million for the ~~three~~nine ~~and six~~ months ended ~~June~~September 30, 2013, ~~respectively,~~ compared to the same ~~periods~~period in 2012, due to higher track maintenance costs, partially offset by an increase in volumes.

Interest expense. Interest expense decreased $79.71 million and $817.78 million for the three and ~~six~~nine months ended ~~June~~September 30, 2013, respectively, compared to the same periods in 2012, due to lower average interest rates as a result of the Company’s refinancing activities. During the three and ~~six~~nine months ended ~~June~~September 30, 2013, the average debt balances were $1,~~112~~153.93 million and $1,~~106~~122.61 million, respectively, compared to $1,~~189~~164.56 million and $1,~~203~~190.23 million, for the same periods in 2012. Average interest rates during the three and ~~six~~nine months ended ~~June~~September 30, 2013 were 5 4.23% and 65.47%, respectively, compared to 7.5% and 7.4%, respectively, for the same periods in 2012. Interest expense is expected to decrease onin athe ~~quarterly~~fourth ~~basis~~quarter of 2013, as compared to the same period in 2012, by approximately $9.2 million as a result of the refinancing activities in the second quarter of 2013.

Debt retirement costs. Debt retirement costs were $~~109~~2.94 million and $112.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2013. During the second and third quarter of 2013, KCSM recognized debt retirement costs of $109.9 million and $2.4 million, respectively, related to the tender and call premiums as well as the write-off of unamortized debt issuance costs and the original issue discounts associated with the ~~purchase and redemption of~~ various senior notes refinanced and purchased. The Company did not incur debt retirement costs during the first ~~half~~nine months of 2012.

Foreign exchange gain (loss). ~~Fluctuations~~Foreign inexchange ~~the~~gains ~~value~~(losses) ofare ~~the~~generated ~~Mexican~~by ~~peso against~~ the ~~U.S.~~re-measurement ~~dollar~~and ~~resulted~~settlement inof amonetary ~~foreign~~assets ~~exchange~~and ~~loss~~liabilities ofdenominated ~~$17.5~~in ~~million~~Mexican ~~and $4~~pesos.6 ~~million~~For ~~for~~ the three and ~~six~~nine months ended ~~June~~September 30, 2013, ~~respectively, compared to a~~ foreign exchange loss ofwas $20.82 million and a foreign exchange gain of $0.12 million, ~~for~~respectively, ~~the~~compared ~~same~~to ~~periods~~a ~~in 2012. For the three end six months ended June 30, 2013,~~ foreign exchange gain ~~(loss) includes a loss~~ of $144.18 million and $54.09 million, ~~respectively,~~for onthe ~~foreign~~same ~~currency~~periods ~~forward~~in ~~contracts~~2012.

~~Other~~During ~~expense~~the first half of 2013, ~~net~~the Company entered into foreign currency forward contracts with an aggregate notional amount of $325. ~~Other~~0 ~~expense~~million, ~~net~~maturing on December 31, ~~was~~2013, ~~flat~~to ~~for~~hedge its exposure to fluctuations in income tax expense and the amount of income taxes paid. For the three and ~~six~~nine months ended ~~June~~September 30, 2013, ~~compared~~foreign exchange loss on the foreign currency forward contracts was $1.3 million and $6.3 million, respectively, due to the ~~same~~weakening ~~periods~~of inthe ~~2012~~forward exchange rate of the Mexican peso against the U.S. dollar.

~~Income~~Other ~~tax~~ expense, ~~(benefit)~~net. ~~Income tax benefit was $13.1 million for the three months ended June~~ ~~30,~~Other ~~2013, compared to income tax~~ expense ~~of $36.8 million for the same period in 2012. For the six months ended June 30~~, ~~2013~~net, ~~income~~increased ~~tax expense was~~ $140.31 million, ~~compared to $64.0 million~~ for the ~~same period in 2012. The effective income tax rates were 27.0% and 43.2% for the~~ three and ~~six~~nine months ended ~~June~~September 30, 2013, respectively, compared to ~~34.0% and 37.2% for~~ the same periods in 2012., ~~The variances in income tax expense (benefit) were~~ due to ~~the~~higher ~~decrease~~miscellaneous ~~in pre-tax income~~expenses. ~~The effective tax rate variances were due to the reversal in the second quarter of 2013 of a previously recognized benefit as a result of a court ruling and foreign exchange rate fluctuations.~~

Income tax expense. Income tax expense decreased $13.5 million and $63.2 million for the three and nine months ended September 30, 2013, respectively, compared to the same periods in 2012, due to lower pre-tax income in the nine months ended September 30, 2013, and a lower effective tax rate in the three and nine months ended September 30, 2013. The components of the effective tax rates for the three and nine months ended September 30, 2013, compared to the same periods in 2012 are as follows:



	Three months ended				Nine months ended
	September 30,				September 30,
	2013		2012		2013		2012
Income tax expense using the statutory rate in effect	30.0	%	30.0	%	30.0	%	30.0	%
Tax effect of:
Foreign exchange (i)	—		18.4	%	0.3	%	9.4	%
Reversal of previously recognized benefit due to court ruling	—		—		3.7	%	—
Inflation and other, net	0.4	%	1.0	%	—		1.6	%
Effective tax rate	30.4	%	49.4	%	34.0	%	41.0	%

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(i) Income taxes paid in Mexico are paid in Mexican pesos, and as a result, the effective income tax rate reflects fluctuations in the value of the Mexican peso against the U.S. dollar measured by the forward exchange rate. Most significantly, any gain or loss from the revaluation of net U.S. dollar-denominated monetary liabilities (primarily debt) into Mexican pesos is included in Mexican taxable income under Mexican tax law. As a result, a strengthening of the Mexican peso against the U.S. dollar for the reporting period will generally increase the Mexican cash tax obligation and the effective income tax rate, and a weakening of the Mexican peso against the U.S. dollar for the reporting period will generally decrease the Mexican cash tax obligation and the effective tax rate. To hedge its exposure to this risk, during the first half of 2013, the Company entered into foreign currency forward contracts with an aggregate notional amount of $325.0 million. The foreign currency forward contracts are measured at fair value each period and any change in fair value is recognized in foreign exchange gain (loss) within the consolidated statements of comprehensive income as described above.

Liquidity and Capital Resources

Overview

In recent years, KCSM has improved its financial strength and flexibility by extending debt maturities, increasing liquidity and reducing interest expense. As a result, the Company received investment grade credit ratings from rating agencies as described in the Credit Ratings section below. This improved credit profile allowed the Company to refinance a significant portion of its existing debt at lower interest rates and extend debt maturities during the second quarter of 2013. The Company estimates annualized pre-tax interest savings as a result of this refinancing to be approximately $37.0 million.

Though KCSM’s cash flows from operations are sufficient to fund operations, capital expenditures and debt service, the Company may, from time to time, incur debt to refinance existing indebtedness, ~~buy~~purchase ~~out~~equipment under operating leases, or to fund equipment additions or new investments. On ~~June~~September 30, 2013, total available liquidity (the unrestricted cash balance plus revolving credit facility availability) was $~~253~~287.34 million.

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3.0% Senior Notes. On May 3, 2013, KCSM issued $450.0 million principal amount of the 3.0% Senior Notes, which bear interest semiannually at a fixed annual rate of 3.0%. The 3.0% Senior Notes were issued at a discount to par value, resulting in a $1.9 million discount and a yield to maturity of 3.048%. KCSM used the net proceeds from the issuance of the 3.0% Senior Notes and the 2.35% Senior Notes to purchase the Senior Notes Tendered, pay all fees and expenses incurred in connection with the 2.35% Senior Notes and 3.0% Senior Notes offerings and the tender offers, to finance the purchase of certain leased equipment and for other general corporate purposes. The 3.0% Senior Notes are redeemable at KCSM’s option, in whole or in part, prior to February 15, 2023, by paying the greater of either (i) 100% of the principal amount of the 3.0% Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the then-current U.S. Treasury rate plus 20 basis points, plus accrued interest and any additional amounts to but excluding the redemption date. On or after February 15, 2023, the 3.0% Senior Notes may be redeemed at KCSM’s option, in whole or in part at any time at a redemption price equal to 100% of the principal amount plus any accrued and unpaid interest. In addition, the notes are redeemable, in whole but not in part, at KCSM’s option at their principal amount, plus any accrued unpaid interest in the event of certain changes in the Mexican withholding tax rate.

The 2.35% Senior Notes and 3.0% Senior Notes are denominated in U.S. dollars; are unsecured, unsubordinated obligations; rank pari passu in right of payment with KCSM’s existing and future unsecured, unsubordinated obligations and are senior in right of payment to KCSM’s future subordinated indebtedness. In addition, the senior notes include certain covenants which are customary for these types of debt instruments issued by borrowers with similar credit ratings.

Revolving Credit Facility. During the second quarter of 2013, the Company borrowed $65.0 million against the revolving credit facility for the redemption of the 12½% Senior Notes. As of June 30, 2013, the outstanding amount under the revolving credit facility was $10.0 million. As of December 31, 2012, KCSM had no amount outstanding under the revolving credit facility.

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~~Related~~may ~~Company~~be ~~Revolving~~redeemed ~~Credit~~at ~~Agreement.~~KCSM’s ~~The Kansas City Southern Railway Company (“KCSR”)~~option, asin awhole ~~lender,~~or ~~and~~in ~~KCSM~~part, asat aany ~~borrower,~~time ~~entered~~at ~~into~~ a ~~Revolving~~redemption ~~Credit~~price ~~Agreement~~equal ~~effective~~to as100% of ~~June 7, 2013 (~~the ~~“Revolving~~principal ~~Agreement”)~~amount, ~~pursuant~~plus toany ~~the~~accrued ~~terms~~and ofunpaid ~~which KCSM may borrow up to $100~~interest.0 ~~million~~In ~~from~~addition, ~~KCSR on a revolving basis at any time during~~ the ~~term~~notes ofare ~~the~~redeemable, ~~Revolving~~in ~~Agreement.~~whole ~~The~~but ~~Revolving~~not ~~Agreement~~in ispart, ~~unsecured~~at ~~and~~KCSM’s ~~terminates~~option onat ~~December~~their ~~31,~~principal ~~2018. As of June 30~~amount, ~~2013,~~plus ~~KCSM~~any ~~had~~accrued ~~borrowed~~unpaid ~~$52.5~~interest ~~million~~in ~~under~~ the ~~terms~~event of ~~the~~certain ~~Revolving~~changes ~~Agreement~~in atthe aMexican ~~weighted~~withholding ~~average~~tax ~~interest~~ rate ~~of 1~~.~~48%.~~

~~Debt~~3.0% ~~Retirement~~Senior ~~Costs~~Notes. ~~The~~On ~~Company~~May ~~recognized~~3, ~~debt~~2013, ~~retirement~~KCSM ~~costs~~issued $450.0 million principal amount of the 3.0% Senior Notes, which bear interest semiannually at a fixed annual rate of 3.0%. The 3.0% Senior Notes were issued at a discount to par value, resulting in a $~~109~~1.9 million ~~during~~discount and a yield to maturity of 3.048%. KCSM used the ~~second~~net ~~quarter~~proceeds from the issuance of ~~2013~~the ~~related~~3.0% Senior Notes and the 2.35% Senior Notes to purchase the Senior Notes Tendered, pay all fees and expenses incurred in connection with the 2.35% Senior Notes and 3.0% Senior Notes offerings and the tender offers, to finance the purchase of certain leased equipment and ~~call~~for ~~premiums~~other asgeneral ~~well~~corporate aspurposes. The 3.0% Senior Notes are redeemable at KCSM’s option, in whole or in part, prior to February 15, 2023, by paying the ~~write~~greater of either (i) 100% of the principal amount of the 3.0% Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-~~off~~day year consisting of ~~unamortized~~twelve ~~debt~~30-day ~~issuance~~months) ~~costs~~at the then-current U.S. Treasury rate plus 20 basis points, plus accrued interest and any additional amounts to but excluding the ~~original~~redemption ~~issue~~date. ~~discounts~~On asor after February 15, 2023, the 3.0% Senior Notes may be redeemed at KCSM’s option, in whole or in part, at any time at a ~~result~~redemption price equal to 100% of the ~~refinancing~~principal ~~activities~~amount, ~~described~~plus ~~above~~any accrued and unpaid interest. In addition, the notes are redeemable, in whole but not in part, at KCSM’s option at their principal amount, plus any accrued unpaid interest in the event of certain changes in the Mexican withholding tax rate.

The ~~Company~~2.35% ~~believes,~~Senior ~~based~~Notes onand ~~current~~3.0% ~~expectations,~~Senior ~~that~~Notes ~~cash~~are ~~and~~denominated ~~other~~in ~~liquid~~U.S. ~~assets,~~dollars; ~~operating~~are ~~cash flows~~unsecured, ~~access~~unsubordinated toobligations; ~~debt~~rank ~~capital~~pari ~~markets~~passu ~~and~~in ~~other~~right ~~available~~of ~~financing~~payment ~~resources~~with ~~will~~KCSM’s beexisting ~~sufficient~~and tofuture ~~fund anticipated operating expenses~~unsecured, ~~capital~~unsubordinated ~~expenditures,~~obligations; ~~debt service costs~~ and ~~other~~are ~~commitments~~senior in ~~the~~right ~~foreseeable~~of ~~future.~~payment ~~The~~to ~~Company~~KCSM’s ~~current~~future ~~financing~~subordinated ~~instruments~~indebtedness. ~~contain~~In ~~restrictive~~addition, ~~covenants~~the ~~which~~senior ~~limit~~notes orinclude ~~preclude~~ certain ~~actions; however, the~~ covenants which are ~~structured~~customary ~~such~~for ~~that~~these ~~the~~types ~~Company~~of ~~has~~debt ~~sufficient~~instruments ~~flexibility~~issued toby ~~conduct~~borrowers ~~its operations. The Company was in compliance~~ with ~~all~~similar ofcredit ~~its debt covenants as of June 30, 2013~~ratings.

Revolving Credit Facility. As of September 30, 2013, and December 31, 2012, KCSM had no amount outstanding under the revolving credit facility.

Related Company Revolving Credit Agreement. The Kansas City Southern Railway Company (“KCSR”), as a lender, and KCSM, as a borrower, entered into a Revolving Credit Agreement effective as of June 7, 2013 (the “Revolving Agreement”), pursuant to the terms of which KCSM may borrow up to $100.0 million from KCSR on a revolving basis at any time during the term of the Revolving Agreement. The Revolving Agreement is unsecured and terminates on December 31, 2018. As of September 30, 2013, KCSM had borrowed $31.5 million under the terms of the Revolving Agreement at a weighted average interest rate of 1.47%.

Debt Retirement Costs. The Company recognized debt retirement costs of $112.3 million during the nine months ended September 30, 2013, related to the tender and call premiums as well as the write-off of unamortized debt issuance costs and the original issue discounts as a result of the refinancing and purchasing activities described above.

The Company believes, based on current expectations, that cash and other liquid assets, operating cash flows, access to debt capital markets, and other available financing resources will be sufficient to fund anticipated operating expenses, capital expenditures, debt service costs and other commitments in the foreseeable future. The Company’s current financing instruments contain restrictive covenants which limit or preclude certain actions; however, the covenants are structured such that the Company has sufficient flexibility to conduct its operations. The Company was in compliance with all of its debt covenants as of September 30, 2013.

For additional discussion of the agreements representing the indebtedness of KCSM, see “Item 8 Financial Statements and Supplemental Data – Note 7. Long-Term Debt” in KCSM’s Annual Report on Form 10-K for the year ended December 31, 2012.

KCSM’s operating results and financing alternatives can be unexpectedly impacted by various factors, some of which are outside of its control. For example, if KCSM were to experience a reduction in revenues or a substantial increase in operating costs or other liabilities, its earnings could be significantly reduced, increasing the risk of non-compliance with debt covenants. Additionally, KCSM is subject to external factors impacting debt and capital markets and its ability to obtain financing under reasonable terms is subject to market conditions. Volatility in capital markets and the tightening of market liquidity could impact KCSM’s access to capital. Further, KCSM’s cost of debt can be impacted by independent rating agencies which assign debt ratings based on certain factors including credit measurements such as interest coverage and leverage ratios, liquidity and competitive position.

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Credit Ratings. Three credit rating agencies provide their views of the Company’s outlook and ratings. Standard & Poor’s Rating Services (“S&P”) rates the senior unsecured debt and corporate credit of KCSM as investment grade. Moody’s Investor Service (“Moody’s”) rates KCSM’s senior unsecured debt as investment grade. Fitch Ratings (“Fitch”) has assigned an investment grade Issuer Default Rating to KCSM and rates the senior unsecured debt as investment grade. Ratings and outlooks change from time to time and can be found on the websites of S&P, Moody’s and Fitch.

Cash Flow Information

Summary cash flow data follows (in millions):

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2013			2012
Cash flows provided by (used for):
Operating activities	$	~~212~~312.27		$	~~147~~238.4
Investing activities	(~~143~~188.93		)	(67112.81		)
Financing activities	(61114.7		)	(5071.72		)
Net increase in cash and cash equivalents	69.67			2855.91
Cash and cash equivalents beginning of year	9.2			15.7
Cash and cash equivalents end of period	$	1518.89		$	4470.68

20Cash flows from operating activities increased $74.3 million for the nine month period ended September 30, 2013, compared to the same period in 2012, primarily due to an increase in changes in working capital items, resulting mainly from the timing of certain payments and receipts. Net cash used for investing activities increased $76.2 million, due to an increase in capital expenditures and the purchase of equipment under an operating lease. Additional information regarding capital expenditures is provided below. Net cash used for financing activities increased $43.5 million due to debt refinancing activities and associated debt cost payments incurred during 2013, and related company debt activity.

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Cash flows from operating activities increased $64.8 million for the six month period ended June 30, 2013, compared to the same period in 2012, primarily due to an increase in changes in working capital items, resulting mainly from the timing of certain payments and receipts. Net cash used for investing activities increased $76.1 million, due to an increase in capital expenditures and the acquisition of equipment under operating lease. Additional information regarding capital expenditures is provided below. Net cash used for financing activities increased $11.0 million due to debt refinancing activities and associated debt cost payments incurred during the second quarter of 2013, and related company debt activity.

Capital Expenditures

KCSM’s cash flows from operations are sufficient to fund capital expenditures; however, the Company may, from time to time, use external sources of cash (principally bank debt, public debt and private debt) to fund capital expenditures and the purchase of equipment under operating leases.

The following table summarizes capital expenditures by type (in millions):

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2013			2012
Roadway capital program	$	5383.89		$	4882.76
Equipment	1518.42			512.50
Information technology	2.3.4			12.85
Capacity	17.92			16.86
Other	59.87			35.43
Total capital expenditures (accrual basis)	79122.24			61109.20
Change in capital accruals	(01.83		)	107.4
Total cash capital expenditures	$	78123.47		$	71116.64

~~Acquisition~~Purchase of equipment under operating lease $ 66.5 $ —

For 2013, internally generated cash flows, excess proceeds from debt refinancing activities and other borrowings are expected to fund cash capital expenditures ~~and the acquisition of equipment under operating lease~~, which are currently estimated atto ~~approximately~~be between $~~250~~170.0 million and $180.0 million.

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The Company is continuously reviewing its equipment under operating leases. Any additional purchases of equipment under operating leases through the end of 2013 are expected to be funded with external borrowings.

Other Matters

KCSM Servicios union employees are covered by one labor agreement, which was signed on June 23, 1997, between KCSM and the Sindicato de Trabajadores Ferrocarrileros de la República Mexicana (“Mexican Railroad Union”), for a term of fifty years, for the purpose of regulating the relationship between the parties. Approximately 80% of KCSM Servicios employees are covered by this labor agreement. The compensation terms under this labor agreement are subject to renegotiation on an annual basis and all other benefits are subject to negotiation every two years. In July of 2013, the negotiation of compensation terms and all other benefits was initiated with the Mexican Railroad Union. The anticipated resolution of this negotiation is not expected to have a material impact to the consolidated financial statements. The union labor negotiations with the Mexican Railroad Union have not historically resulted in any strike, boycott or other disruption in KCSM’s business operations.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Omitted pursuant to General Instruction H(2)(c) of Form 10-Q.


Item 4.	Controls and Procedures

(a) Disclosure Controls and Procedures.

As of the end of the period for which this Quarterly Report on Form 10-Q is filed, the Company’s President and Executive Representative and Chief Financial Officer have each reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the President and Executive Representative and Chief Financial Officer have each concluded that the Company’s current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the President and Executive Representative and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Officer have each concluded that the Company’s current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the President and Executive Representative and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting.

There have not been any changes in the Company’s internal control over financial reporting that occurred during the ~~second~~third quarter of 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION


Item 1.	Legal Proceedings

For information related to the Company’s legal proceedings, see Note 7 “Commitments and Contingencies,” under Part I, Item 1, of this quarterly report on Form 10-Q.

Item 11A. Risk Factors

There were no material changes during the quarter to the Risk Factors disclosed in Item 1A, “Risk Factors,” in KCSM’s Annual Report on Form 10-K for the year ended December 31, 2012.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.


Item 3.	Defaults Upon Senior Securities

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.


Item 4.	Mine Safety Disclosures

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.


Item 5.	Other Information

None.

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Item 6.	Exhibits

ExhibitNo.		Description of Exhibits Filed with this Report
31.1		Principal Executive Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached to this Form 10-Q as Exhibit 31.1.
31.2		Principal Financial Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached to this Form 10-Q as Exhibit 31.2.
32.1		Principal Executive Officer’s Certification furnished Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached to this Form 10-Q as Exhibit 32.1.
32.2		Principal Financial Officer’s Certification furnished Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached to this Form 10-Q as Exhibit 32.2.
101		The following unaudited financial information from Kansas City Southern de México, S.A. de C.V.’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2013, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, (ii) Consolidated Balance Sheets as of ~~June~~September 30, 2013 and December 31, 2012, (iii) Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, and (iv) the Notes to Consolidated Financial Statements.

ExhibitNo.		Description of Exhibits Incorporated by Reference
4.1		~~Indenture,~~Form ~~dated~~of ~~May~~Rule 3,144A ~~2013,~~Restricted ~~between~~Global ~~KCSM~~Note ~~and~~representing ~~U.S.~~the ~~Bank National Association, as trustee, transfer agent, principal paying agent and registrar, covering up to $275,000,000 of KCSM’s~~ 2.35% Senior Notes due 2020 (previously filed as Exhibit 4.4.1 to the Company’s ~~Current~~Registration ~~Report~~Statement on Form 8S-K4 filed on ~~May~~August 826, 2013, File No. 333-~~08322~~190820) is incorporated herein by reference as Exhibit 4.1.
4.2		~~Indenture,~~Form ~~dated~~of ~~May~~Regulation ~~3, 2013, between KCSM and U.~~S. ~~Bank~~Restricted ~~National~~Global ~~Association,~~Note asrepresenting ~~trustee,~~the ~~transfer agent, principal paying agent and registrar, covering up to $450,000,000 of KCSM’s 3~~2.035% Senior Notes due ~~2023~~2020 (previously filed as Exhibit 4.4.2 to the Company’s ~~Current~~Registration ~~Report~~Statement on Form 8S-K4 filed on ~~May~~August 826, 2013, File No. 333-~~08322~~190820) is incorporated herein by reference as Exhibit 4.2.
4.3		~~Registration~~Special ~~Rights~~Global ~~Agreement,~~Note ~~dated~~representing ~~May~~the ~~3, 2013, among KCSM; J~~2.P.35% ~~Morgan~~Senior ~~Securities~~Notes ~~LLC;~~due ~~Merrill~~2020 ~~Lynch, Pierce, Fenner & Smith Incorporated; and Morgan Stanley & Co. LLC~~ (previously filed as Exhibit 4.4.3 to the Company’s ~~Current~~Registration ~~Report~~Statement on Form 8S-K4 filed on ~~May~~August 826, 2013, File No. 333-~~08322~~190820) is incorporated herein by reference as Exhibit 4.3.
4.4		~~Supplemental~~Form ~~Indenture,~~of ~~dated~~Rule ~~April~~144A ~~23,~~Restricted ~~2013,~~Global ~~between~~Note ~~KCSM~~representing ~~and~~the U3.S.0% ~~Bank~~Senior ~~National~~Notes ~~Association,~~due as2023 ~~trustee~~(previously filed as Exhibit 4.45.1 to the Company’s ~~Current~~Registration ~~Report~~Statement on Form 8S-K4 filed on ~~May~~August 826, 2013, File No. 333-~~08322~~190820) is incorporated herein by reference as Exhibit 4.4.
4.5		~~Supplemental~~Form ~~Indenture,~~of ~~dated~~Regulation ~~April~~S ~~23,~~Restricted ~~2013,~~Global ~~between~~Note ~~KCSM~~representing ~~and~~the U3.S.0% ~~Bank~~Senior ~~National~~Notes ~~Association,~~due as2023 ~~trustee~~(previously filed as Exhibit 4.5.2 to the Company’s ~~Current~~Registration ~~Report~~Statement on Form 8S-K4 filed on ~~May~~August 826, 2013, File No. 333-~~08322~~190820) is incorporated herein by reference as Exhibit 4.5.
10.1		Purchase Agreement, dated April 24, 2013, among KCSM; J.P. Morgan Securities LLC; Merrill Lynch, Pierce, Fenner & Smith Incorporated; and Morgan Stanley & Co LLC, (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 29, 2013, File No. 333-08322) is incorporated herein by reference as Exhibit 10.1.
4.6		Special Global Note representing the 3.0% Senior Notes due 2023 (previously filed as Exhibit 4.5.3 to the Company’s Registration Statement on Form S-4 filed on August 26, 2013, File No. 333-190820) is incorporated herein by reference as Exhibit 4.6.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in the capacities indicated on ~~July~~October 1918, 2013.



	Kansas City Southern de México, S.A. de C.V.

	/s/ MICHAEL W. UPCHURCH
	Michael W. Upchurch
	Chief Financial Officer
	(Principal Financial Officer)

	/s/ MARY K. STADLER
	Mary K. Stadler
	Chief Accounting Officer
	(Principal Accounting Officer)

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Filing Compare · Kansas City Southern de Mexico, S.A. de C.V.