Mercedes 2002 Annual Report Download - page 119

Notes to Consolidated Statements of Income (Loss) |113
11. Extraordinary Items
In October 2000, Adtranz sold its fixed installations business
which primarily focuses on rail electrification and traction
power to Balfour Beatty for 1153 million resulting in an extra-
ordinary after-tax gain of 189 million (net of income tax
expense of 152 million).
In October 2000, DaimlerChrysler and Deutsche Telekom
combined their information technology activities in a joint
venture. In accordance with an agreement announced on
March 27, 2000, Deutsche Telekom received a 50.1% interest
in T-Systems ITS through an investment of approximately 14.6
billion for new shares of T-Systems ITS. In 2000, the transaction
resulted in an extraordinary after-tax gain of 12,345 million.
The agreements also confer on Deutsche Telekom the option
to acquire from the Group, and on DaimlerChrysler the option
to sell to Deutsche Telekom, the Group’s 49.9% interest
in T-Systems ITS. The DaimlerChrysler option was exercised in
January 2002 (see Note 4). DaimlerChrysler accounted for
its interest in T-Systems ITS using the equity method until
February 28, 2002.
In July 2000, the Group exchanged its controlling interest in
DaimlerChrysler Aerospace for shares of EADS, which subse-
quently completed its initial public offering. EADS is a global
aerospace and defense company which was established
through a merger of Aerospatiale Matra S.A., DaimlerChrysler
Aerospace AG and Construcciones Aeronauticas S.A.
(“CASA”). DaimlerChrysler accounted for the shares of EADS
received in the exchange at their fair value on that date and
recorded an extraordinary after-tax gain of 13,009 million. The
Group accounts for its 33% interest in EADS using the equity
method of accounting. DaimlerChrysler has the right to sell all
of its ownership interest in EADS to certain French shareholders.
This put option may be exercised immediately in the event of
a voting deadlock on certain matters or at certain times after
three years. The price is based on the average closing mid-
market price of EADS shares during the 30 trading days prior
to the exercise of the put option.
In 2000, Ballard Power Systems Inc., a developer of fuel cells
and related power generation systems, issued additional
common shares to its shareholders. DaimlerChrysler elected
not to purchase additional shares thereby reducing its owner-
ship interest. The dilution of its ownership interest resulted in
an extraordinary gain of 173 million.
The gains from each of the foregoing transactions are
reported as extraordinary items in the consolidated statements
of income (loss) for the year 2000 because U.S. GAAP
requires such presentation when a significant disposition of
assets or businesses occurs within two years subsequent
to accounting for a business combination using the pooling-
of-interests method.