Mercedes 2006 Annual Report Download - page 74

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Cash flow
Cash provided by operating activities increased from €12.4
billion to €14.0 billion. This development was primarily caused
by the shift within the financial-services business from financing
contracts towards operating-lease contracts. The resulting
increase in cash provided by operating activities is due to the fact
that with operating-lease contracts the entire leasing install-
ments are recognized in the cash flow from operating activities.
With financing contracts, however, only the interest portion of
the lease payment is reflected in the cash inflow from operating
activities, while the amortization portion is considered in the
cash flow from investing activities. The expansion of the operating-
lease business also led to an increase in advance rental payments
received.
There were additional positive effects from the development of
business at the Mercedes Car Group, despite significant increases
in severance payments related to the headcount-reduction
actions and higher payments in connection with the restructuring
of smart. The development of business at the Truck Group
also contributed to the increase in cash provided by operating
activities. But the generally negative development of business
at the Chrysler Group reduced cash provided by operating activi-
ties. Cash provided by operating activities was also reduced by
higher tax payments than in the prior year, due in particular to
payments for prior years in Germany.
The development of working capital was mainly affected by
changes in inventories. Whereas in the prior year, the increase in
inventories had a negative impact on cash provided by operating
activities, in 2006 there was a decrease in inventories.
Contributions to pension funds of €1.2 billion were lower than in
2005 (€1.7 billion).
Cash used for investing activities increased by €3.4 billion to
€14.6 billion. The change compared with the prior year was prima-
rily caused by the renewed expansion of the financial-services
business and the related increase in additions to equipment on
operating leases. That increase was only partially offset by the
increased cash inflow from receivables in the financial-services
business which had its main reason in higher proceeds from
the sale of such receivables.
In addition, the acquisition and sale of securities increased the
cash outflow for investing activities. This development was
primarily due to the proceeds from the sale of the Group’s remain-
ing shares in MMC which were recognized in the prior year.
There were opposing effects reducing the cash outflow for invest-
ing activities due to higher proceeds from the sale of businesses;
in 2006, €0.9 billion resulted from the sale of the off-highway
business.
Lower capital expenditure for property, plant and equipment was
mainly caused by a product-cycle related decrease at Mercedes-
Benz Vans and changes in currency exchange rates.
The cash flow from financing activities resulted in a net cash
inflow of €0.5 billion in 2006. The major cash outflow was the
dividend distribution at DaimlerChrysler AG for the 2005 financial
year (€1.5 billion), which was more than offset by net borrowing.
In the prior year, the cash flow from financing activities resulted
in a net cash outflow. This was mainly due to the dividend
distribution.
Cash and
cash
equivalents
12/31/2005
Cash
provided by
operating
activities
Cash
used for
investing
activities
Cash
provided by
financing
activities
Effect of
foreign
exchange
rate changes
Cash and
cash
equivalents
12/31/2006
7,619
14,016
-14,581
496
-467
7,083
Net increase (decrease) in cash and cash equivalents
(maturing within 3 months or less)
(in millions of €)