Mercedes 1999 Annual Report Download - page 69

ANALYSIS OF THE FINANCIAL SITUATION
63
a significant additional tax burden as a result of a broaden-
ing of the tax base including an additional tax imposed on
dividends distributed by non-German Group companies. The
broadening of the tax base, which was considered in the
consolidated financial statements for 1999 through asset
write-ups and additional tax provisions, will result in
increased taxable income in future years and therefore
partially offset the effect of the tax rate reduction. Adjusted
for the foregoing one-time effects in both years, net income
for 1999 of €6.23 billion was 16% higher than the compa-
rable figure for the previous year of €5.35 billion. Based on
Group net income, earnings per share increased from €5.03
to €5.73; adjusted for one-time effects, earnings per share
increased from €5.58 to €6.21.
ing the industrial business separately for the first time. The
eliminations from transactions within the Group, which
mainly comprise the supply of vehicles, as well as inter-
company loans and the related interest payments, are allo-
cated to the industrial business. For reasons of comparabil-
ity with other financial services companies, we report our
financial services activities as if they were performed by an
independent company (stand-alone view). For example, the
vehicles included under equipment on operating leases are
shown in the balance sheet of the financial services busi-
ness at market prices and not at original Group production
costs. The inter-company loans granted within the
DaimlerChrysler Group are shown as financial liabilities.
In the industrial business we achieved a total operating
profit (net of one-time items) of €9.4 billion, which was 23%
higher than in the preceding year. At the same time, the
operating profit of the financial services business rose from
€890 million to €939 million.
In prior years we published the amounts of net assets and
return on net assets (RONA) for the industrial business and
the equity ratio for the DaimlerChrysler Group, assuming
the leasing and sales financing activities of the financial ser-
vices business were performed by an independent company.
For the calculation of the equity ratio, we included the fi-
nancial services business as if it were an equity method in-
vestment by the industrial business. In connection with our
separate presentation of the industrial and financial serv-
ices business, we modified the computations of net assets
and RONA, as if both businesses were separate companies.
However, we have allocated the effects of transactions be-
tween the industrial and financial services businesses to
the industrial business. The prior year amounts for net as-
sets, RONA and the equity ratio have been adjusted to con-
form with our computations in the current year.
PERFORMANCE MEASURES SUPPORT VALUE-BASED
MANAGEMENT. As a result of the merger, the DaimlerChrysler
Group has developed uniform performance measures which
are intended to secure the value-based management and
performance of the company as a whole as well as the indi-
vidual business units. These performance measures allow
and encourage decentralized responsibility, inter-divisional
transparency and capital-market-oriented investment per-
formance in all areas of the DaimlerChrysler Group.
For performance purposes we differentiate between the
Group level and the operating levels of the divisions and
business units. At the Group level we use net operating in-
come, a capital-market-oriented after-tax performance meas-
ure. This is compared to the capital employed by the Group
for the determination of the Group performance measure,
return on net assets (RONA). Return on net assets demon-
strates the extent to which the DaimlerChrysler Group
earns or exceeds the rate of return required by its investors.
The required rate of return, or the Group’s average cost of
DIVIDEND OF €2.35 PER SHARE. Due to the continued posi-
tive earnings trend, we propose to the Annual Meeting
taking place on April 19, 2000, that for 1999 a dividend of
€2.35 per share be distributed - the same as for 1998. With
a total of 1,003 million shares outstanding, the amount to be
distributed is €2,358 million.
SEPARATE REPORTING OF INDUSTRIAL AND FINANCIAL
SERVICES BUSINESSES IN THE CONSOLIDATED FINANCIAL
STATEMENTS. Our leasing and sales financing business con-
tinued to grow in the 1999 financial year. In recent years, in
order to make the impact of this rapidly expanding business
on our financial statements more transparent, we presented
in the balance sheets and statements of income and cash
flows, not only the figures for the Group as a whole, but
also corresponding figures for our leasing and sales financ-
ing activities. To provide an even better view of our financial
position, in the 1999 financial statements we are also show-
Development of Earnings
in billions of €
2
4
6
8
10
12
Operating Profit
Net income
1996 1997 1998 1999
1
)Net income for 1997 includes €2.5 billion
of special non-recurring tax benefits
1
)