ASR

SEC Filing Summary: Southeast Airport Group (ASUR)

Business Context and Reporting Period

Company: Grupo Aeroportuario del Sureste, S.A. de C.V. (ASUR)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2002
Business Overview: ASUR operates nine airports in the southeast region of Mexico under 50-year concessions. The portfolio is heavily concentrated in Cancun International Airport, which generated 72.2% of total revenues in 2002. The company provides aeronautical services (landing, passenger charges) and non-aeronautical services (commercial leasing, access fees). Financial statements are prepared under Mexican GAAP, which includes inflation restatement.

Key Financial Metrics (Year Ended Dec 31, 2002)

Note: U.S. GAAP net income for 2002 reflects a significant charge of Ps. 286.4 million for deferred tax adjustments and Ps. 258.9 million for taxes on dividends paid, resulting in a net loss.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 0.8% to Ps. 1,240.6 million, driven by a 28.9% increase in non-aeronautical services (commercial revenues) due to new commercial spaces in Cancun, Merida, and Cozumel. This offset a 4.2% decline in aeronautical revenues.
• Passenger Traffic: Total passengers decreased 2.2% to 10.99 million, reflecting the lingering impact of the September 11, 2001 terrorist attacks and a downturn in the U.S. economy. International traffic declined, particularly at Cozumel.
• Operating Expenses: Increased 6.4% to Ps. 885.4 million. Key drivers included a 12.9% rise in cost of services (due to higher insurance premiums for terrorism and liability, and maintenance costs) and increased depreciation from new commercial assets.
• Dividends: The company paid a total dividend of Ps. 469.3 million in May 2002, significantly impacting cash flow from financing activities.

Guidance, Outlook, Risks, and Contingencies

• Regulatory Risks: Approximately 86.1% of revenues are subject to price regulation. The Ministry of Communications and Transportation sets maximum rates per "work load unit." Exceeding these rates can result in fines or concession termination. A new independent regulatory agency is planned but not yet established.
• Concentration Risk: Cancun International Airport accounts for over 70% of revenues and passenger traffic. The business is highly dependent on tourism to Cancun and the U.S. economy (approx. 69% of international passengers travel to/from the U.S.).
• Legal Proceedings:
  • Tariff Disputes: Five Mexican airlines sued the Ministry of Communications and Transportation challenging tariff increases and the regulatory framework (Annex 7). A ruling against ASUR could revoke the current tariff regime.
  • Property Tax: Municipalities in Cancun and Cozumel are claiming property taxes on airport land. ASUR believes these claims are invalid as the land is public domain.
  • Lease Disputes: Litigation is ongoing regarding the termination of certain commercial lease agreements (duty-free stores).
• Capital Expenditures: Committed investments under Master Development Plans total Ps. 1,079 million through 2003. The company expects to fund these through operating cash flow.
• Accounting Differences: Significant divergence exists between Mexican GAAP and U.S. GAAP regarding the treatment of airport concessions (capitalized vs. expensed) and deferred taxes, leading to a reported net loss under U.S. GAAP despite profitability under Mexican GAAP.

Investor Verification Checklist

• U.S. GAAP Reconciliation: Verify the impact of the Ps. 545 million in tax-related charges (deferred tax adjustment and dividend tax) that caused the U.S. GAAP net loss, as this significantly alters the profitability picture compared to Mexican GAAP.
• Regulatory Compliance: Confirm the status of the lawsuit challenging Annex 7 of the concessions, as a loss could fundamentally alter the revenue model and maximum allowable rates.
• Cash Flow Sustainability: Assess the ability to fund Ps. 187 million in committed capital expenditures for 2002 and future years given the Ps. 432 million decrease in cash and marketable securities during the year.
• Customer Concentration: Monitor the financial health of major airline customers (Cintra-controlled airlines, American, Continental), which collectively represent a significant portion of revenues.
• Exchange Rate Sensitivity: Evaluate the impact of peso devaluation on dollar-denominated passenger charges and the potential to exceed regulated maximum rates.