Mercedes 1999 Annual Report Download - page 71

ANALYSIS OF THE FINANCIAL SITUATION
65
99 98
€€
Reconciliation to
Net Operating Income
in millions
5,746 4,820
480 530
6,226 5,350
18 130
127 131
661 748
7,032 6,359
Net income
Non-recurring items
Net income adjusted for non-
recurring items
Minority interests
Interest expense related to
industrial activities, after taxes
Interest cost of pensions related
to industrial acivities, after taxes
Net Operating Income
GERMAN PENSION TRUST FOUNDED. In the future we intend
to administer the liquidity relating to the pension obliga-
tions of DaimlerChrysler AG in Germany in a separate pen-
sion fund according to common international standards. For
this purpose we founded the DaimlerChrysler Pension Trust
in 1999, and initially transferred into it more than €4 billion
of securities. In January 2000, we transferred further secu-
rities in the amount of €1.3 billion to the DaimlerChrysler
Pension Trust. By means of a long-term investment policy
with a larger proportion of stocks, we aim to achieve a higher
rate of return, which we expect will reduce our future
pension expenses. Despite the establishment of the
DaimlerChrysler Pension Trust, DaimlerChrysler AG contin-
ues to retain the ultimate future obligation for the pension
benefits. With the newly founded Pension Trust we are ad-
justing the financing of the pension obligations of
DaimlerChrysler AG to conform with the practices of other
Group companies in the U.S. and other countries, which use
pension funds according to country-specific circumstances.
Because the resources of the pension fund are to be used
exclusively for the purpose of providing retirement pension
payments and are permanently separated from the other as-
sets of the Group in accordance with US GAAP, the trans-
ferred investments are reported net against the correspond-
ing pension provisions. This gives us better international
comparability, especially with US companies, which finance
their pension obligations through separate funds.
CONTINUED GROWTH OF THE BALANCE SHEET TOTAL. Sig-
nificantly higher business volume and the continuing ex-
pansion of the leasing and sales financing business, as well
as the considerably higher valuation of the US dollar on the
balance sheet date, have led to an increase in the balance
sheet total over last year’s level by €38.5 billion, or 28%, to
€174.7 billion, despite the foundation of the DaimlerChrysler
Pension Trust. The assets and liabilities of the Group’s US
companies were translated on December 31, 1999 at a rate
of exchange of €1 = $1.005 (1998: €1 = $1.169), which
resulted in correspondingly higher balance sheet positions
in euros. Of the aggregate rise in total assets, €13.0 billion
was explained by currency effects alone.
On the assets side, primarily equipment on operating leases
and receivables from financial services have increased dis-
proportionately in relation to the increases in other asset
categories. After growth of 86% and 46%, respectively, these
items now account for a total of €66.0 billion, which is 38%
of our total assets. This is mirrored by financial liabilities
amounting to €64.5 billion (1998: €40.4 billion). The stron-
ger US dollar contributed €5.2 billion to the increase in the
total of equipment on operating leases and receivables from
financial services. Property, plant and equipment rose by
23% to €36.4 billion. In addition to substantially higher capi-
tal expenditures, the US dollar denominated fixed assets of
DaimlerChrysler Corporation, translated into euros, contrib-
uted to the increase. Inventories – net of advance payments
received – totaled €15.0 billion (1998: €11.8 billion) in the
consolidated balance sheet. Their share of the balance sheet
total declined from 8.7% to 8.6%. Due to expanded business
volume, trade receivables and other receivables increased
by €3.0 billion to €21.4 billion overall. The level of liquid
funds fell to €18.2 billion (1998: €19.1 billion) due to the
transfer of more than €4 billion of securities into the
DaimlerChrysler Pension Trust.