Mercedes 2003 Annual Report Download - page 132
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Please find page 132 of the 2003 Mercedes annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Financial Reporting | Overview | Analysis of the Financial Situation | Statement by the Board of Management | Independent Auditors’ Report | Financial Statements
DaimlerChrysler’s equity in the earnings or losses of EADS, MMC
and MFTBC, as well as investor-level adjustments such as other-
than-temporary impairment charges made by DaimlerChrysler are
included in the Group’s consolidated statement of income (loss)
in the line item “financial income (expense), net” (see Note 8) and
are as follows:
Variable Interest Entities Accounted for Under the Equity
Method. DaimlerChrysler holds significant variable interests in a
number of associated companies that are not special purpose
entities but that could be “variable interest entities.” If Daimler-
Chrysler determines that any of these associated companies
are variable interest entities and that it is the primary beneficiary
of any of them, such entities will be required to be consolidated
by the Group as of March 31, 2004 in accordance with FIN 46R.
DaimlerChrysler specifically identified two variable interest entities
for which the maximum exposure to loss is considered material
from a Group perspective – debis AirFinance (“dAF”) and Toll Col-
lect GmbH (“Toll Collect”). DaimlerChrysler has determined, that it
is not the primary beneficiary of dAF or Toll Collect and
therefore DaimlerChrysler is not required to consolidate them.
In November 1995, DaimlerChrysler assumed a 45% equity owner-
ship interest in dAF, an Amsterdam registered Private Limited
Liability Company that was established for purposes of leasing air-
craft and related technical equipment to airlines and financial
intermediaries. Several banks hold the remaining ownership inter-
ests in dAF. dAF’s consolidated total assets, financial liabilities,
total liabilities, and net shareholders’ equity at December 31, 2003
were €2.6 billion, €1.8 billion, €2.5 billion and €0.1 billion, respec-
tively. dAF’s consolidated revenues for the year ended December
31, 2003, were €0.3 billion. DaimlerChrysler’s involvement with
dAF consists primarily of its equity interest and also subordinated
loans receivable and unsecured loans that have been provided
to dAF. DaimlerChrysler believes that its maximum exposure to loss
as a result of its involvement with dAF is primarily limited to the
carrying value of its total investments (including loans) in dAF, which
was €0.6 billion at December 31, 2003.
In December 2002, DaimlerChrysler, Deutsche Telekom AG
(“Deutsche Telekom”), and Compagnie Financiere et Industrielle
des Autoroutes S.A. (“Cofiroute”) (together the “Consortium”)
entered into a partnership agreement to develop a system for the
electronic collection of tolls and to establish a separate joint ven-
ture company to perform under a contract entered into in Septem-
ber 2002 between the consortium and the Federal Republic of Ger-
many to build up and operate a toll collection system for the use of
German roadways by certain commercial vehicles. DaimlerChrysler
has a 45% equity ownership interest, Deutsche Telekom also holds
a 45% equity ownership interest and Cofiroute holds the remaining
10% equity ownership interest in both the partnership and the joint
venture company (together “Toll Collect”). Toll Collect’s total
assets, financial liabilities and total liabilities at December 31,
2003 were €1.1 billion, €0.5 billion and €1.1 billion, respectively.
DaimlerChrysler’s involvement with Toll Collect is comprised of its
equity interest, receivables and certain guarantees. Due to the
risks associated with these guarantees, which are described in
more detail in Note 31, DaimlerChrysler reduced its investment in
Toll Collect, to zero, and recorded an additional accrual of €0.1 bil-
lion. DaimlerChrysler believes that its maximum exposure to loss
as a result of its involvement with Toll Collect could exceed the cur-
rent recognized obligation.
Furthermore, DaimlerChrysler holds significant variable interests
in a number of other associated companies, but determined that
it is not the primary beneficiary of those entities. Total assets and
total liabilities of these entities amounted to €0.6 billion and
€0.4 billion as of December 31, 2003, respectively. The maximum
exposure to loss arising from DaimlerChrysler’s involvement
with those entities totaled €0.3 billion.
4. Acquisitions and Dispositions
On December 31, 2003, as part of the Group’s ongoing strategy
to focus on its core automotive business, DaimlerChrysler sold its
100% equity interest in MTU Aero Engines GmbH (“MTU Aero
Engines”) to Kohlberg, Kravis and Roberts & Co. Ltd. (“KKR”), an
investment company. The purchase price for the operative business
amounted to €1,450 million. Excluding cash, cash equivalents and
debts, which remain at MTU Aero Engines, the net sales price
amounted to €1,052 million. Consideration received by Daimler-
Chrysler included a note receivable from KKR and cash of €877
million. Also as a result of this transaction, DaimlerChrysler is
obligated to pay a compensation of $250 million to United Technolo-
gies Corporation, the parent company of Pratt & Whitney, in 2004.
DaimlerChrysler realized an after-tax gain of €882 million from
this sale. The operating results and cash flows from MTU Aero
Engines’ business are included in DaimlerChrysler’s consolidated
financial statements through December 31, 2003. However, the
operating results and gain are presented as discontinued operations
in accordance with SFAS 144 (see Note 10). The following classes
of assets and liabilities were part of this disposal group in 2003:
€366 million fixed assets, €805 million current assets, €378 million
liabilities and €863 million accrued liabilities.
(in millions of €)
6863
(436)
2001
2002
(1,845)1
(281)
56
2003
2812
(88)
–
EADS
MMC
MFTBC4
1 Includes €1.96 billion impairment charge on DaimlerChrysler’s investment in EADS (see Note 8).
2 Excludes DaimlerChrysler’s proportionate share of EADS transitional goodwill impairment charge
of €114 million resulting from the adoption of SFAS 142 reported in DaimlerChrysler’s consolidat-
ed statement of income (loss) in the income statement line item “cumulative effects of changes in
accounting principles” (see Note 1 and Note 11).
3 From the issuance of new shares by an EADS subsidiary DaimlerChrysler recognized its share of a
gain in the amount of €747 million in 2001 (see Note 8).
4 Acquisition in 2003. DaimerChrysler applied the equity method beginning on March 14, 2003.