Mercedes 2006 Annual Report Download - page 75

Management Report | Liquidity and Capital Resources | 59
The free cash flow was reduced by higher tax payments caused
by payments for previous years as well as lower payments
received by the industrial business from companies in the finan-
cial-services business in connection with tax groups. To a
lesser extent, the decrease in contributions to pension funds
increased the free cash flow.
In the prior year, there had been proceeds from the sale of the
Group’s remaining shares in MMC and its interest in debis
AirFinance, while in 2006, there were proceeds from the sale of
the off-highway activities and higher proceeds from the sale
of real-estate.
The free cash flow of the industrial business again significantly
surpassed the total dividend distribution planned by Daimler-
Chrysler to its shareholders for the 2006 financial year.
The net liquidity of the industrial business (the difference
between nominal debt and liquidity on the balance-sheet date)
decreased by €0.9 billion to €6.4 billion.
This is mainly due to the dividend distribution by DaimlerChrysler
AG for the 2005 financial year as well as currency effects. There
were opposing effects increasing the net liquidity of the industrial
business from the positive free cash flow and to a lesser extent
from the dividend payments by the financial-services business to
the industrial business.
In 2006, the exercise of stock options resulted in a cash inflow
from the issue of shares of €0.3 billion (2005: €0.2 billion).
Cash and cash equivalents with an original maturity of three
months or less decreased by €0.5 billion compared with
December 31, 2005 as a result of currency-translation effects.
Total liquidity, which also includes longer-term investments
and securities, increased from €12.6 billion to €13.1 billion.
The free cash flow of the industrial business, the parameter
used by DaimlerChrysler to measure the Group’s financing capa-
bility, decreased slightly by €0.2 billion to €1.9 billion.
The decrease was mainly due to higher cash outflows in connec-
tion with the restructuring of smart, the personnel reductions
at Mercedes Car Group, and the negative course of business at
the Chrysler Group. Positive effects resulted primarily from the
significant improvement in operating profit at the Mercedes Car
Group and the Truck Group, as well as from inventory reduc-
tions compared with increases in the prior year.
Amounts in billions of € Change
Free cash flow industrial business
(1.0)
-
0.8
(0.2)
6.2
(4.8)
0.7
2.1
5.2
(4.8)
1.5
1.9
2006 2005
Cash provided by operating activities
Cash used for investing activities
Changes in cash and cash
equivalents (maturing after 3 months)
and short term securities
Free cash flow industrial
business
06/05
Amounts in billions of € Change
Net liquidity industrial business
(1.0)
1.1
0.1
(1.0)
(0.9)
6.9
4.5
11.4
(4.1)
7.3
5.9
5.6
11.5
(5.1)
6.4
2006 2005
Cash and cash equivalents
Short-term securities
Liquidity
Nominal debt1
Net liquidity
1 Bookvalue of financial liabilities adjusted for market valuation
06/05