Siemens 2006 Annual Report Download - page 102

Management’s discussion and analysis
98
Business overview and economic environment
Financial highlights
We achieved a great deal in an eventful fiscal year 2006, particularly in shaping Siemens for
profitable growth. We executed a major part of our strategic reorientation of the Information
and Communications business area and the Logistics and Assembly Systems Group (L&A),
while building on our strengths with focused acquisitions in energy, industrial automation,
and healthcare. In our view, sales and order growth for the year confirmed that our portfolio
is well aligned with customer demands.
Net income was €3.033 billion and basic earnings per share were €3.40, both 35% higher
compared to €2.248 billion and €2.52, respectively, a year earlier. Diluted earnings per share
rose to €3.26 from €2.42 a year earlier. Income from continuing operations was €3.087 billion,
a 1% increase from €3.058 billion a year earlier. Basic and diluted earnings per share from
continuing operations were €3.47 and €3.31, respectively. A year earlier, basic and diluted
earnings per share from continuing operations were €3.43 and €3.29, respectively.
A majority of the Groups in Operations posted higher profits year-over-year. Major earn-
ings contributions came from Automation and Drives (A&D), Medical Solutions (Med), Power
Generation (PG), Siemens VDO Automotive (SV), Osram, and Power Transmission and Distrib-
ution (PTD). Severance charges at Communications (Com) were higher year-over-year, at €393
million compared to €113 million. This rise was partially offset by higher gains on sale of
shares in Juniper Networks, Inc. (Juniper), which increased to €356 million in fiscal 2006 from
€208 million a year earlier. Severance charges rose at Siemens Business Services (SBS) as well,
totaling €393 million compared to €228 million. A year earlier, SBS also took a goodwill
impairment of €262 million. The net effect of severance, Juniper gains and the goodwill
impairment was a negative €430 million in fiscal 2006 compared to a negative €395 million
in the prior year.
Sales rose 16%, to €87.325 billion, on a balance of organic growth and acquisitions. The
increase in sales included double-digit growth at A&D, Industrial Solutions and Services (I&S),
PG and PTD. Orders increased 15%, to €96.259 billion on strong demand at the Groups men-
tioned above, as well as Siemens Building Technologies (SBT) and Transportation Systems
(TS). Both sales and order growth included new volume from acquisitions, including VA Tech-
nologie AG (VA Tech), Flender Holding GmbH (Flender) and Robicon Corp. (Robicon), all
acquired late in fiscal 2005. Sales and orders in fiscal 2006 also reflect significant divestments.
For additional information on portfolio transactions in fiscal 2006 see “Strategic Overview.”
Excluding currency translation and the net effect of acquisitions and dispositions, growth for
Siemens on an organic basis was 8% in sales and 6% in orders.
Net cash provided by operating and investing activities was €367 million, compared to net
cash used of €2.703 billion in fiscal 2005. On a continuing basis, net cash provided by operat-
ing and investing activities was €739 million in fiscal 2006 compared to net cash used of
€1.489 billion a year earlier. Both periods included substantial outflows for acquisitions and
investments. Fiscal 2006 benefited from €1.127 billion in proceeds from the sale of Siemens’
remaining shares in Infineon Technologies AG (Infineon), while fiscal 2005 included €1.496
billion in cash used for supplemental contributions to Siemens pension plans.
Siemens Managing and Supervisory Boards have proposed a dividend of €1.45 per share.
The dividend in the prior year was €1.35 per share.
Management’s discussion and analysis