Chrysler 2003 Annual Report Download - page 31

The principal applications of funds during the year consisted of:
❚2,011 million euros in fixed assets (2,771 million euros in
2002), including investments in vehicles to be leased on a long-
term basis for 358 million euros (844 million euros in 2002). A
significant portion of the decrease is attributable to the sale of
Fraikin (long-term vehicle leasing business) and FiatAvio S.p.A.
❚488 million euros in intangible fixed assets (518 million euros
in 2002).
❚A total increase of 3,065 million euros in securities subscribed
to as a temporary and immediately disposable investment
for the cash generated by the sale of assets made in 2003.
Financing activities absorbed 1,228 million euros, compared
with 1,793 million euros absorbed in 2002.
In 2003, the absorption of cash flows was mainly attributable
to the net reimbursement of loans totaling 4,189 million euros –
which also includes reclassification under payables due within
the year of the exchangeable bond of 1,765 million euros
(generation of 2,655 million euros in resources in 2002) – which
was offset by the increase of 1,134 million euros in short-term
payables, although this was due to the previously mentioned
reclassification (absorption of 5,358 million euros in resources in
2002), and the capital increases for a total of 1,860 million euros,
including the capital increase of 1,836 million euros at Fiat S.p.A.
Financial Position and Operating Results by Activity Segment
The following analyses of the statement of operations and
the balance sheet illustrate the contribution made to the
consolidated results by the Group’s continuing operations,
broken down by “Industrial Activities” and “Financial Activities,”
(which include the Fiat Auto, CNH and Iveco companies that
operate retail financing, leasing and rental businesses) and the
activities that were sold or whose sale was pending in 2003
(discontinuing operations).
The figures for discontinuing operations were classified in
accordance with the provisions of Paragraph 3, Article 39 of
Legislative Decree no. 127/91, in view of the significance of
the changes in the composition of the Group that occurred
in 2003 or are pending.
Principles of Analysis
The classification between Industrial and Financial Activities
(for continuing operations only) was realized by defining
specific sub-consolidated financial statements according to
the normal business performed by each Group company.
The equity investments held by companies belonging to an
activity segment in companies included in another segment
were valued according to the equity method.
To avoid skewing the operating result of normal operations
to be represented here, the effect of this valuation on the
statement of operations is illustrated under the item “Result
of intersegment equity investments.”
The holding companies (Fiat S.p.A., IHF-International Holding
Fiat S.A., Fiat Partecipazioni S.p.A., Fiat Netherlands Holding
N.V.) were classified under Industrial Activities.
The sub-consolidated financial statements of the Industrial
Activity segment also includes companies that operate
centralized cash management activities, i.e. that raise financial
resources on the market and finance Group companies, without
providing financial services to others.
When the sub-consolidated figures for the various activities
were identified, the relative goodwill was allocated to the
activities themselves.
The transactions relating to the sale of receivables executed
at market conditions between the industrial and financial
companies of the Group are posted as financial receivables and
payables under Financial Activities. The portion of these items
that, according to the last contractual relationship established
with others, is still of a commercial nature, insofar as it does not
yield interest, was reclassified directly in the sub-consolidated
results of Financial Activities under trade receivables and
payables.
The discontinuing operations include the activities that were
deconsolidated following the sales concluded during fiscal
2003 (Toro Assicurazioni Group, Fraikin, IPI, FiatAvio S.p.A.,
Fidis Retail Italia, and the Brazilian retail financing activities),
and the remaining financial company which is active in the
United Kingdom and is still to be sold to Fidis Retail Italia.
Operating Performance by Activity Segment
Industrial Activities
The net revenues for Industrial Activities, including changes in
contract work in progress, totaled 43,380 million euros, for a
decrease of 7% with respect to the previous year. This decrease
was caused in particular by the negative foreign exchange
effect, the lower volumes of Fiat Auto, and the reduction in
Teksid revenues, which in 2002 included the revenues of the
Aluminum Business Unit until its disposal in September 2002.
The operating result for Industrial Activities in 2003 was a
loss of 938 million euros, reflecting a significant improvement
from the operating loss of 1,585 million euros reported in the
previous year, thanks to a lower operating loss at Fiat Auto
and improved results at CNH, Magneti Marelli, and Comau.
In 2003 EBIT for Industrial Activities was -476 million euros,
compared with -4,169 million euros in 2002.
The change reflected a better operating result, the improved
results of equity investments and, in particular, the positive
balance of non-operating items due to gains realized on
disposals, which were partially reduced by expenses and
provisions to reserves for restructuring, writedowns and
other non-operating expenses and provisions, compared
with an extremely negative balance in fiscal 2002.
30 Report on Operations Analysis of the Financial Position and Operating Results
of the Fiat Group and Fiat S.p.A