Siemens 2006 Annual Report Download - page 124

Management’s discussion and analysis
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Within Operations, net cash provided by operating activities rose to €3.738 billion in fiscal
2006 from €3.565 billion a year earlier. The current period included higher cash payouts for
severance at Com and SBS, which rose to €612 million from €171 million in fiscal 2005, while
the prior-year period included €1.496 billion in cash outflows for supplemental pension con-
tributions. Net working capital increased approximately €1.4 billion in fiscal 2006 compared to
an increase of approximately €0.3 billion in fiscal 2005, reflecting business growth combined
with an increase in net working capital turnover year-over-year. Net cash provided by operat-
ing activities in Corporate Treasury and Financing and Real Estate rose to €1.436 billion from
€652 million a year earlier, primarily due to higher proceeds from foreign currency exchange
derivatives. For Siemens overall, net cash provided by operating activities on a continuing
basis rose to €5.174 billion from €4.217 billion in fiscal 2005.
Within Operations, investing activities used net cash of €3.115 billion in fiscal 2006, com-
pared to net cash used of €4.787 billion in the prior year. The major changes year-over-year
were cash proceeds of €1.127 billion from the sale of Infineon shares in the current period and
higher cash outflows for acquisitions and investments in the prior period. In fiscal 2006, cash
used for acquisitions and investments totaled €2.421 billion. The acquisitions include the
major acquisition DPC at Med with approximately €1.3 billion net of €94 million cash acquired,
as well as Electrium at A&D, Bewator at SBT, and the coal gasification business of Sustec-Group
and Wheelabrator at PG with a combined preliminary purchase price of approximately €0.4 bil-
lion. We made a higher number of major acquisitions a year earlier, including VA Tech, allocat-
ed primarily to PTD and I&S, for a total of €514 million, net of €535 million cash acquired; CTI
at Med for €734 million, net of €60 million cash acquired; Flender and Robicon at A&D, and
Bonus at PG, in total for approximately €1.2 billion in fiscal 2005. Investing activities at Corpo-
rate Treasury and Financing and Real Estate in fiscal 2006 used net cash of €1.320 billion com-
pared to net cash used of €919 million a year earlier, mainly due to higher net investment in
marketable securities. For Siemens overall, net cash used in investing activities in continuing
operations declined to €4.435 billion from €5.706 billion in fiscal 2005.
On a continuing basis, operating and investing activities for Siemens overall provided net
cash of €739 million in fiscal 2006, compared to net cash used of €1.489 billion in fiscal 2005.
Within Operations, net cash from operating and investing activities increased particularly at
A&D, due to the factors mentioned above. Investing activities at Med and higher severance
payments at Com and SBS contributed to declines in net cash from operating and investing
activities at these Groups compared to fiscal 2005.
Financing activities for Siemens in fiscal 2006 provided net cash of €1.802 billion compared
to net cash used in financing activities of €1.403 billion in fiscal 2005. The primary factor in
this change was €6.701 billion in proceeds from new debt in fiscal 2006, which we issued for
general corporate purposes including financing of recently announced acquisitions and
replacement of other borrowings. In fiscal 2006, we issued two tranches of U.S. dollar-denomi-
nated bonds totaling U.S.$1.0 billion (€0.8 billion). Further we issued four tranches of U.S. dol-
lar-denominated bonds totaling U.S.$5.0 billion (€3.9 billion), as well as a hybrid bond in two
tranches, one denominated in euros (€900 million) and one denominated in British pounds
(£750 million, or €1.1 billion). Repayment of debt used €1.710 billion in cash in fiscal 2006,
including a €1.6 billion payment for a bond, which was due on July 4, 2006. A year earlier,
repayment of debt used €848 million. At the end of fiscal 2006, Siemens had no amount out-
standing under its commercial paper program, which was the major effect for net cash out-
flows for short-term debt of €1.762 billion. A year earlier, issuance of commercial paper con-
tributed to the cash inflows from short-term debt of €711 million. Dividends paid to
shareholders rose year-over-year, to €1.201 billion from €1.112 billion in fiscal 2005.