Chrysler 2004 Annual Report Download - page 44

REPORT ON
OPERATIONS
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FINANCIAL REVIEW OF FIAT S.P.A.
OPERATING PERFORMANCE
The Parent Company Statement of Operations showed a loss of
949 million euros, as compared to the loss of 2,359 million euros
in the previous fiscal year.
The breakdown of this result is illustrated in the following table:
(in millions of euros) 2004 2003
Investment income 683 400
Adjustments to financial assets (1,641) (2,379)
Net financial expenses (137) (169)
Cost of personnel and services net of revenues (119) (130)
Non-operating income (expenses) (13) (20)
Income taxes 278 (61)
Net result (949) (2,359)
Investment income totaled 683 million euros, and consisted
of dividends and the gain of 606 million euros resulting from
partial reimbursement of capital stock by the subsidiary
IHF – Internazionale Holding Fiat S.A.
The adjustments to financial assets posted in 2004 totaled
1,641 million euros, reflecting the 1,624 million euro writedown
in the book value of the investment in Fiat Partecipazioni S.p.A.,
which was mainly impacted by the negative performance of the
Automobiles Sector.
In 2003, these adjustments totaled 2,379 million euros and
stemmed from the writedown of the investment in Fiat
Partecipazioni (again, impacted by the negative performance
of the Automobiles Sector), in Fiat Netherlands Holding N.V.
(for the losses generated by Iveco and CNH) and Magneti
Marelli Holding S.p.A.
Net financial expenses totaled 137 million euros, down from
the 169 million euros reported in 2003, thanks to lower interest
expenses in consequence of the decline in interest rates and
reduced indebtedness.
The cost of personnel and services net of revenues totaled
119 million euros, as compared with 130 million euros in 2003.
In particular:
■the cost of personnel and services totaled 207 million euros
and consisted of service costs totaling 110 million euros,
personnel costs totaling 53 million euros, and, for the
remainder, amortization and other operating costs. The 36
million euro decrease stems from the lower cost of personnel.
The average number of employees was 151 persons
(including 12 persons seconded to the principal companies
of the Group), against an average number of 167 persons
in 2003 (including 15 persons who were seconded);
■Revenues totaled 88 million euros, consisting of licensing fees
for use of the Fiat brand, calculated as a percentage of the
revenues generated by the individual Group companies that
use it, and the services rendered by executives. The decrease
of 25 million euros with respect to the previous year derives
from lower charges to Group companies following the sale
of activities in 2003.
Net non-operating expenses totaled 13 million euros, consisting
mainly of the extraordinary expenses incurred in 2004 following
implementation of the Parent Company restructuring and
reorganization plan.
In 2003, they consisted mainly of commissions paid to
Mediobanca S.p.A for extension of the commitments it had
assumed as part of the 2002 agreement for sale of 34% of Ferrari.
Income taxes totaled a positive 278 million euros, due almost
entirely to the posting of deferred tax assets on tax losses
carried forward and temporary differences, the recovery of which
became reasonably certain in consequence of the settlement
received in February 2005 upon cancellation of the Master
Agreement with General Motors.
Instead, in 2003 they were negative, due to the cancellation
of tax prepayments whose recovery in following years was
no longer reasonably certain (61 million euros).
BALANCE SHEET
The following table illustrates highlights of the Parent Company
Balance Sheet:
(in millions of euros) At 12/31/2004 At 12/31/2003
Fixed assets 5,342 7,404
of which: equity investments 5,249 7,282
Working capital 99 77
Total net invested capital 5,441 7,481
Stockholders’ equity 4,466 5,415
Net financial position (975) (2,066)
Fixed assets consist mainly of investments in the most
important companies of the Group.
The principal increase was represented by the purchase from
Fiat Partecipazioni S.p.A of the investments in Comau S.p.A.,
Teksid S.p.A., and Business Solutions S.p.A. for 244 million euros
as part of the plan to streamline the Group corporate structure
and portfolio of investments in Fiat S.p.A.
The greatest decreases consisted of the partial reimbursement
of the capital stock of IHF – Internazionale Holding Fiat S.A.
(reduction in its book value by 635 million euros) and
writedowns of the previously analyzed investments.
Working capital is comprised by inventories net of advances,
trade, tax, and employee receivables/payables, and credits for
tax prepayments, totaling 73 million euros, as well as ordinary
treasury stock in the amount of 26 million euros (4,384,019
shares). The 22 million euro increase with respect to December
31, 2003 is mainly the result of increased deferred tax assets net
of higher trade payables.
Stockholders’ equity totaled 4,466 million euros at December
31, 2004, down by 949 million euros with respect to December
31, 2003 due to the loss for the year.