Revenues and Costs
|Other operating revenue||347,567||606,571||522,959||609,529||679,723|
|Cash operating expenses||−9,484,615||−10,210,530||−9,441,068||?||?|
|Operating cash flow||4,018,173||12,837,053||13,882,644||?||?|
|Other financial expenses||−381,733||−1,950,748||−173,828||-1,600,299||?|
|Net pre-tax income||−29,398,694||−25,009,697||−4,791,125||-1,210,889||5,783,743|
Most of THSRC's revenue comes from ticket sales; income from non-core activities like renting advertisement and shop space amounts to about a tenth of the total. Revenues grew along with ridership over the first three years, but both measurements remained below expectations. In 2008 the second year of operation, revenues fell barely short of THSRC's expectations a year earlier of a doubling of first-year results.
The cost of running the trains and infrastructure, or cash operating costs, was initially over NT$1 billion a month, but was reduced to around NT$0.85–0.9 billion a month by 2008. Revenues first exceeded this level, thus generating a positive operating cash flow, in the fourth month of operation (April 2007).
For THSRC, the delayed accounting of the fixed cost of fixed assets like rolling stock and infrastructure (depreciation) is a significant non-cash element of total operating costs. In its first two years of operation, THSRC applied straight-line depreciation, distributing costs evenly over a period of 26.5 years. As a result, the balance of operating revenues and costs (operating income) showed a high loss in the first year of operation, which was only reduced as revenues grew in the second year. The depreciation period set for THSRC reflected the length of the BOT franchise rather than the much longer lifespan of the infrastructure, and the company blamed that factor for the operating loss. After adopting an activity depreciation method which is variable in time, THSRC posted its first operating profit for 2009, the third year of operation. The company reported its first annual profit of NT$5.78 billion for 2011 after five years of operation.
While THSRC's financial earnings are insignificant, the interest cost of financing the project with loans is a major item. In the first few years of operation, interest rates were well above market rates. Interest expense stood at around NT$1.3 billion per month in April 2008, when THSRC first achieved break-even cash flow, with revenue and cash expenses (which exclude depreciation) both around NT$2.1 billion. Interest rates fell in the first half of 2009, reducing interest expenses and contributing to a reduced net loss.
Famous quotes containing the word costs:
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—Friedrich Nietzsche (18441900)