Grupo TFM and Subsidiaries Report Third Quarter and First Nine Months Results.Business Editors MEXICO Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. CITY--(BUSINESS WIRE)--Oct. 28, 2003 Grupo Transportacion Ferroviaria Mexicana, SA. de C.V. and its subsidiaries ("TFM TFM Traffic Flow Management TFM TeX Font Metrics TFM Transportacion Ferroviaria Mexicana TFM Trusted Facility Manual TFM Testicular Feminization TFM Total Facility Management TFM Tentative Final Monograph TFM Transaction Flow Manager TFM Thermally Fused Melamine ") reported financial results for the third quarter and first nine months of 2003. THREE MONTHS Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net revenues for the three months ended September September: see month. 30, 2003, were $178.2 million, which represents an increase of $2.9 million or 1.7 percent from revenues of $175.3 million for the same period in 2002. An 8.2 percent devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. of the peso quarter to quarter affected revenues by $4.7 million, and a significant downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in the Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum automobile industry automobile industry, the business of producing and selling self-powered vehicles, including passenger cars, trucks, farm equipment, and other commercial vehicles. of 20 percent in unit production impacted revenues by $5 million. Conversion from truck to rail and growth in chemical, agroindustrial ag·ro·in·dus·tri·al adj. Of or relating to the production or supply of various needs, such as water or power, for agriculture and industry. and cement cement, binding material used in construction and engineering, often called hydraulic cement, typically made by heating a mixture of limestone and clay until it almost fuses and then grinding it to a fine powder. and mineral product segments increased revenues by $8.3 million. Revenues include $13.6 million from Mexrail operations, consolidated with TFM since the second quarter 2002. Consolidated operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the third quarter of 2003 was $36.0 million, including a $1.8 million operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. from Mexrail operations, representing a decrease of $2.7 million from the third quarter of 2002. The operating ratio Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: (operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. as a percentage of revenues) for the third quarter of 2003 was 79.8 percent including Mexrail operations and 76.6 percent without Mexrail. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite an increase of 15 percent, or $1.9 million, in fuel cost, operating expenses were lower in the third quarter compared with the same period in 2002: salaries, wages and fringe benefits fringe benefits, n.pl the benefits, other than wages or salary, provided by an employer for employees (e.g., health insurance, vacation time, disability income). down 3.8 percent, other employee expenses down 14.8 percent, and purchased services down 28 percent due to cost control measures in locomotive locomotive, vehicle used to pull a train of unpowered railroad cars. Types of Locomotives The steam-powered locomotive played a key role during the development and golden age of railroading, but, despite its long and picturesque history, it has maintenance and a more efficient operation and renegotiation of contracts. NINE MONTHS Consolidated net revenues for the nine months ended September 30, 2003, were $523.4 million, which represents a decrease of $9.0 million, or 1.7 percent from the same period of 2002. TFM's revenues were negatively impacted by a 12.2 percent devaluation of the peso, representing $21.6 million less revenue than the same period of 2002, and by $24.1 million lower revenues from a significant downturn in the Mexican automobile industry. However, these losses in revenue were partially offset by increased volume in truck to rail conversion; chemical, agroindustrial and cement and mineral product segments; and Mexrail operations. Consolidated operating profit for the nine months ended September 30, 2003, was $99.9 million, resulting in an operating ratio of 80.9 percent with Mexrail and 78.2 percent without Mexrail. Operating expenses for the nine-month period reflected the benefit of cost control measures: salaries, wages and fringe benefit fringe benefit Any nonwage payment or benefit granted to employees by employers. Examples include pension plans, profit-sharing programs, vacation pay, and company-paid life, health, and unemployment insurance. reduction of 6.4 percent, purchased services reduction of 3.5 percent due to savings in locomotive maintenance, and other employee expense reduction of 3.0 percent. Operating expenses also contained a 32.0 percent, or $10.6 million, increase in fuel costs due to the increased prices during the nine months of 2003. FINANCIAL EXPENSES Net financial expenses incurred in the nine-month period were $83.4 million, including $17.7 million related to the $180.0 million 2012 bond issued in July July: see month. 2002. TFM recognized a $10.1 million foreign exchange loss resulting from the depreciation of the Mexican peso relative to the U.S. dollar. INCOME TAX Deferred income tax reflected a $37.8 million charge to the nine months results due to devaluation of the peso, which increased temporary differences of the base assets for tax and accounting purposes and reduced the balance of the NOL's are denominated in pesos. Net loss carry forward as of September 30, 2003, was $1.392 million. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2003, accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying had decreased to $190.2 million from $ 204.5 million at December December: see month. 31, 2002, mainly due to the recovery of tax receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed . TFM made capital expenditures of $17.0 million in the third quarter of 2003 and $51.0 million in the nine months of 2003, invested in the improvement of TFM and Mexrail lines. During September 2003 the company repurchased from Kansas City Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). Railroad railroad or railway, form of transportation most commonly consisting of steel rails, called tracks, on which freight cars, passenger cars, and other rolling stock are drawn by one locomotive or more. 51 percent of the capital stock of Mexrail for $32.6 million, the same price received by TFM for the asset sale in May 2003. As of September 30, 2003, outstanding net debt balance was $969.6 million, a leverage of $23.2 million lower than at December 31, 2002. Debt includes $95.0 million of U.S. commercial paper, a term loan of $118 million and senior notes of $773.5 million. This report contains historical information and forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding the current belief or expectations of the company concerning the company's future financial condition and results of operations. The words "believe", "expect" and "anticipate" and similar expressions identify some of these forward-looking statements. Statements looking forward in time involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. Such factors include, among others, global, U.S. and Mexican economic and social conditions; the effect of the North American Free Trade Agreement North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. ("NAFTA NAFTA in full North American Free Trade Agreement Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's ") on the level of U.S.-Mexico trade; the company's ability to convert customers from using trucking services to rail transport services The collective functions of layers 1 through 4 of the OSI model. ; competition from other rail carriers and trucking companies in Mexico; the company's ability to control expenses; and the effect of the company's employee training, technological improvements and capital expenditures on labor productivity, operating efficiencies and service reliability. Readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of their respective dates. The company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For further information, reference should be made to the company's filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 20-F. Financial tables to follow.
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.
and Subsidiaries
Consolidated Statement of Income
( Amounts expressed in thousands of US dollars )
( Unaudited )
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2003 2002 2003 2002
--------- --------- --------- ---------
--------- --------- --------- ---------
Transportation revenues 178,247 $175,307 523,365 $532,402
--------- --------- --------- ---------
Operating expenses (120,457) (115,506) (358,803) (348,973)
Depreciation and amortization (21,808) (21,115) (64,660) (63,065)
--------- --------- --------- ---------
Total cost (142,265) (136,621) (423,463) (412,038)
--------- --------- --------- ---------
Operating profit 35,982 38,686 99,902 120,364
--------- --------- --------- ---------
Other expenses - net (15,793) (219) (25,104) (6,554)
--------- --------- --------- ---------
Financial expenses - net (27,785) (27,130) (83,403) (68,306)
Exchange profit (loss) - net (7,168) (3,085) (10,119) (14,397)
--------- --------- --------- ---------
Net comprehensive financing
cost (34,953) (30,215) (93,522) (82,703)
--------- --------- --------- ---------
Income (loss) before taxes (14,764) 8,252 (18,724) 31,107
and minority interest
Deferred income tax (18,895) (21,888) (37,780) (19,360)
--------- --------- --------- ---------
Income (loss) before minority
interest (33,659) (13,636) (56,504) 11,747
Minority interest 6,838 2,710 11,248 (2,119)
--------- --------- --------- ---------
Net income (loss) for the
period ($26,821) ($10,926) ($45,256) $9,628
--------- --------- --------- ---------
The consolidated financial statements were prepared in accordance with
International Accounting Standards.
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.
and Subsidiaries
Consolidated Balance Sheet
( Amounts expressed in thousands of US dollars )
( Unaudited )
September 30, December 31,
2003 2002
(Audited)
------------- ------------
Assets
Current assets
Cash and cash equivalents $8,380 $30,249
Accounts receivable - net 190,240 204,484
Materials and supplies 16,188 20,261
Other current assets 8,522 10,256
------------- ------------
Total current assets 223,330 265,250
Concession, property and equipment - net 1,815,480 1,832,289
Other assets 32,452 36,034
Deferred income tax 63,228 100,972
------------- ------------
Total assets $2,134,490 $2,234,545
------------- ------------
Liabilities and stockholders' equity
Current liabilities
Commercial paper and capital
lease due within one year $131,949 $18,553
Accounts payable and accrued expenses 134,779 128,742
------------- ------------
Total current liabilities 266,728 147,295
Long-term debt and capital lease
obligation 846,028 1,004,552
Other non-current liabilities 36,266 40,735
------------- ------------
Long-term liabilities 882,294 1,045,287
------------- ------------
Total liabilities 1,149,022 1,192,582
------------- ------------
Minority interest 318,380 329,619
------------- ------------
Stockholders' equity
Capital stock 807,008 807,008
Treasury shares -204,904 -204,904
Effect on purchase of subsidiary
shares -33,562 -33,562
Retained earnings 98,546 143,802
------------- ------------
Total stockholders' equity 667,088 712,344
------------- ------------
Total liabilities and stockholders'
equity $2,134,490 $2,234,545
------------- ------------
The consolidated financial statements were prepared in accordance with
International Accounting Standards.
Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.
and Subsidiaries
Consolidated Statement of Cash Flows
( Amounts expressed in thousands of US dollars )
( Unaudited )
Three months ended Nine months ended
------------------- -------------------
September 30, September 30,
--------- --------- --------- ---------
2003 2002 2003 2002
--------- --------- --------- ---------
Cash flows from operating
activities:
Net income for the period ($26,821) ($10,926) ($45,256) $9,628
--------- --------- --------- ---------
Adjustments to reconcile net
income to net cash
provided by operating
activities :
Depreciation and
amortization 21,808 21,115 64,660 63,065
Discount on senior
unsecured debentures 0 0 0 22,560
Amortization of deferred
financing costs 1,601 (701) 4,804 3,555
Other non cash item 13,219 20,376 29,498 25,342
Changes in working capital (14,691) (14,913) 18,949 (36,774)
--------- --------- --------- ---------
Total adjustments 21,937 25,877 117,911 77,748
--------- --------- --------- ---------
Net cash provided by operating
activities (4,884) 14,951 72,655 87,376
--------- --------- --------- ---------
Cash flows from investing
activities:
Investment in Mex-Rail 0 0 0 (44,000)
Acquisitions of property
and equipment - net (17,028) (18,324) (51,003) (52,974)
Sale of equipment (391) 589 1,062
Acquisition of treasury
shares 1,766 (162,575) 1,766 (162,575)
--------- --------- --------- ---------
Net cash used in investing
activities (15,653) (180,310) (49,237) (258,487)
--------- --------- --------- ---------
Cash flows from financing
activities:
Proceeds payments of
commercial paper - net 30,000 (173,190) (27,000) (143,262)
Proceeds from senior notes 0 22,535 0 175,191
Payment of term loan (18,287) 128,000 (18,287) 128,000
--------- --------- --------- ---------
Net cash (used in) provided by
financing activities 11,713 (22,655) (45,287) 159,929
--------- --------- --------- ---------
Increase in cash and cash
equivalents (8,824) (188,014) (21,869) (11,182)
Cash and cash equivalents
Beginning of period 17,204 229,935 30,249 53,103
--------- --------- --------- ---------
End of period $8,380 $41,921 $8,380 $41,921
--------- --------- --------- ---------
The consolidated financial statements were prepared in accordance with
International Accounting Standards.
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