(KCS issued the following news release on January 29.)
KANSAS CITY, Mo. — Kansas City Southernreported net income of $11.2 million ($0.08 per diluted share) for the year ended December 31, 2003 compared to $57.2 million ($0.91 per diluted share) for the year ended December 31, 2002.
The Company’s domestic business, excluding an adjustment in claims reserves of $21.1 million, improved its operating income from $48.0 million in 2002 to $50.2 million in 2003. The Company experienced positive effects year over year from revenue growth, which increased $15.1 million (2.7%) to $581.3 million in 2003. Additionally, The Kansas City Southern Railway Company (KCSR) car hire costs declined ($9.7 million) as did consolidated other operating expenses ($5.5 million). These improvements were partially offset by higher KCSR fuel costs, which rose $9.0 million in 2003 compared to 2002, and increases in certain other volume-related operating costs.
Based on preliminary results, equity in earnings from Grupo Transportacion Ferroviaria Mexicana, S.A. de. C.V. (Grupo TFM) were $11.3 million in 2003 compared to $45.8 million in 2002. This decline resulted primarily from a $19.0 million reduction in the deferred tax benefit during 2003 compared to 2002 (calculated under U.S. GAAP) and the devaluation of the peso, which resulted in an approximate $34 million decline in Grupo TFM revenues year over year. In 2002, equity earnings from Grupo TFM included a $39.2 million deferred tax benefit compared to $20.2 million in 2003.
For the fourth quarter of 2003, KCS reported a net loss of $6.2 million (loss per diluted share of $0.12) compared to net income of $20.4 million for the same 2002 period. The decrease in net income was primarily attributable to an increase in claims reserves of $13.5 million (after tax). The increase in these reserves was necessary to better reflect the claims risk in the U.S. rail sector, which includes occupational illness, third party liability, Federal Employers Liability Act (FELA) and property damage. The earnings per share impact of this increase to claims reserves was $0.22 per diluted share in the fourth quarter of 2003. Excluding this adjustment, net income for the fourth quarter 2003 would have been $7.3 million ($0.10 per diluted share) and operating income would have been 2.9% higher than the fourth quarter of 2002. This increase in ongoing operating income was driven by higher consolidated fourth quarter revenue, which rose to $148.5 million, a 3% increase over fourth quarter 2002. Preliminary results from Grupo TFM yielded a $13.1 million decline in equity earnings to $5.1 million in fourth quarter 2003 compared to $18.2 million in fourth quarter 2002.