Annual Report 2004 Deutsche Bahn AGDeutsche Bahn Annual Report 2004 21,5 mm 216 mm We present the economic development according to German GAAP (HGB) in addition to the audited consolidated financial statements according to IFRS. The EBITDA is a reasonable figure to illustrate the economic progress since the start of the German Rail Reform. In 2001 we fore- casted the return to positive operating income figures for the financial year 2004. We were able to realize that despite tough market and competition conditions. Revenues EBITDA Operating income Gross capital in € million in € million after interest expenditures in € million in € million 28,228 23,963 3,092 3,509 –172 253 9,121 7, 232 25,000 4,000 250 10,000 200 20,000 150 8,000 3,000 100 15,000 6,000 50 2,000 0 10,000 4,000 – 50 1,000 5,000 – 100 2,000 – 150 – 200 2003 2004 2003 2004 2003 2004 2003 2004 2003 to 2004: 2003 to 2004: 2003 to 2004: 2003 to 2004: –15.1% +13.5% € + 425 million –20.7% German German Key figures GAAP GAAP Change in € million 20041) 2003 in % Revenues 23,963 28,228 – 15.1 Revenues – comparable 23,963 23,029 + 4.1 Income before taxes 372 – 133 – Income after taxes 280 – 245 – Total assets 46,348 47,647 – 2.7 Fixed assets 41,530 41,362 + 0.4 Equity 5,286 5,076 + 4.1 Interest-bearing debt 14,020 12,731 + 10.1 EBITDA 3,509 3,092 + 13.5 EBIT 951 465 + 104.5 Operating income after interest 253 – 172 – Cash flow before taxes 3,011 2,600 + 15.8 Gross capital expenditures 7,232 9,121 – 20.7 Net capital expenditures 2) 3,244 4,013 – 19.2 Employees (as of Dec 31) 225,512 242,759 – 7.1 1) Pro forma figures Change 2) Gross capital expendi- Performance figures 2004 2003 in % tures less investment grants from third parties Passenger Transport 3) Passenger kilometers Passengers in million 1,694.9 1,681.7 + 0.8 (pkm): product of number 3) Passenger kilometers in million pkm 70,260 69,534 + 1.0 of passengers and Train kilometers in million train-path km 4) 717.7 722.8 – 0.7 mean travel distance 4) Train-path kilometers: Freight Transport 5) driving performance Freight carried in million t 283.6 282.3 + 0.5 in km of trains on rail 6) Ton kilometers in million tkm 83,982 79,864 + 5.2 5) Please note: all ton fig- Mean transport distance in km 296.1 282.9 + 4.7 ures represent metric tons Train kilometers in million train-path km 4) 205.1 204.1 + 0.5 (1,000 kg = 2,200 lbs.) 6) Ton kilometers (tkm): prod- 7) Number of passenger stations 5,697 5,665 + 0.6 uct of freight carried and Train kilometers on track infrastructure in million train-path km 4) 1,000.7 988.2 + 1.3 mean transport distance thereof non-Group companies in million train-path km 4) (88.0) (70.4) + 25.0 7) Thereof in 2004: 5,477 as- Length of line operated in km 34,718 35,593 – 2.5 signed to the Group Pas- senger Stations division 185 mm Successful Rail Reform Rail passenger transport performance in billion pkm +12.0% 62.7 64.5 70.3 71.0 71.6 71.9 72.8 74.4 74.5 69.8 69.5 70.3 120 100 80 60 40 20 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Rail freight transport performance in billion tkm +30.1% 64.5 70.6 69.5 67.9 72.6 73.3 71.5 80.6 80.3 78.0 79.9 84.0 120 100 80 60 40 20 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Productivity in 1,000 ptkm per employee +187% 328 413 468 533 603 656 699 798 840 833 862 941 1, 200 1,000 800 600 400 200 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 EBITDA before special burden compensation in € billion € +5.52 billion –2.01 –1.52 –0.91 –0.45 0.04 0.43 1.26 1.43 2.02 3.09 3.51 3 2 1 0 –1 –2 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 er Operating income after interest in € billion € +3.28 billion 0.23 0.25 0.33 0.27 0.17 –0.09 0.20 –0.20 –0.45 –0.17 0.25 –3.03 –2.67 –2.24 –2.09 –1.79 –1.70 –1.03 –1.04 –0.90 –0.17 0.25 after special burden compensation 1 ns 0 –1 d- before special burden compensation d –2 e –3 s- s- 19949961995 1997 1996 1998 1997 1999 1998 19992000 20002001 2001 2002 2002 2003 2003 2004 216 mm 21,5 mm DB AG – management holding company Vertically integrated Group structure 24.0 Portfolio focused on core business € billion Group revenues Excellent ratings: Aa1/AA Economic development according to German GAAP p. 46 Group Management Report according to IFRS p. 66 #1 in European rail passenger transport #1 in European public urban transport 11. 2 #1 in German bus transport € billion revenues in Passenger Transport Passenger Transport p.128 #1 in European rail freight transport #1 in European land transport 11. 6 #3 in sea freight € billion revenues in #5 in air freight Transport and Logistics Transport and Logistics p.136 Attractive stations Largest rail track infrastructure in Europe 290 Functioning competition on the rails non-Group railways take advantage of the open access to our infrastructure Passenger Stations p.142 Track Infrastructure p.148 Services for internal and 31,500 external customers employees in the Services division Services p.156 185 mm Contents 2Chairman’s Letter 6 The Management Board 8 Financial Communication 11 Rating 12 Deutsche Bahn Bond Issues 13 Corporate Governance 17 DB – Mobility, Transport and Logistics 44 Report of the Management Board 46 Economic Development According to German GAAP 66 Group Management Report According to IFRS 116 Employees 122 Environmental Protection 126Group Divisions 128 Passenger Transport 136Transport and Logistics 14 2 Passenger Stations 14 8Track Infrastructure 156 Services 160 Rolling Stock and Stations 166Consolidated Financial Statements 168Pro Forma Consolidated Financial Statements According to German GAAP 208 Consolidated Financial Statements According to IFRS 283 Additional Information 287 Major Subsidiaries 290 The Boards of Deutsche Bahn AG 294 Report of the Supervisory Board 298 Deutsche Bahn Advisory Board 300 Glossary 302 Events in 2004 304 Imprint Five-Year Summary 1 Chairman’s Letter Hartmut Mehdorn CEO and Chairman of the Management Board of Deutsche Bahn AG Dear Ladies and Gentlemen, The Deutsche Bahn Group saw a good performance in the 2004 financial year. In light of the challenging economic environment, this was not a matter of course. Our German home market in particular continued to show weak economic development. In addition, the fierce competition between individual rail companies and other modes of transport has intensified. Cost optimizations and a constantly increasing level of efficiency are therefore entrepreneurial necessities and normal business also for us. The fact that we have clearly achieved our defined goals, mainly the return to positive operating income, is primarily due to the noticeable improvements in our service and quality. These have satisfied our customers in various business units. Additionally we have reinforced our restructuring efforts where necessary. This impacted revenues and earn- 2 Deutsche Bahn Group | Annual Report 2004 Chairman’s Letter ings with a four percent growth in revenues in the core business to around 24 billion euro and positive operating income after interest of 253 million euro, representing an im- provement of 425 million euro compared to the previous year. Even though our original forecasts were given against the background of better economic expectations, we have achieved the income forecasts that we had announced in spring 2001 upon the launch of our “DB Campaign” and the related capital expenditure and modernization programs. The EBITDA adjusted for special burden compensations which were paid through 2002, has become the relevant figure to measure our operating improvements since the start of the German Rail Reform. Since the founding of Deutsche Bahn AG, we have improved EBITDA by more than 500 million euro per year and today achieve an EBITDA 5.5 billion euro higher than that of 1994. In addition to the growth in rail passenger and rail freight transport, this is the best argument in favor of our model of an entrepreneurial-driven, vertically integrated railroad. While the aforementioned figures refer to our previous accounting standards according to German GAAP (HGB), this includes Consolidated Financial Statements for the first time according to International Financial Reporting Standards (IFRS). We have proactively opted for the transition to international accounting standards, as our corporate manage- ment approach is closely linked to capital market standards. The IFRS will be established as a mandatory standard for companies oriented towards the capital market in the coming years via corresponding EU regulations. The strong increase in earnings compared to the previous year is also shown under IFRS, and is even more pronounced than under HGB. The key operating figures reveal the mostly positive performance of our business units: due to a considerably enhanced on-time performance, well-accepted price offers and an improvement in service. The Long-Distance Transport business unit thereby managed to achieve a turnaround. Together with the Regional and Urban Transport business units, we were able to increase rail passenger transport performance by more than one percent and thus gain market shares in a once again shrinking overall market.