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Net Assets Position

 

Total assets
As of December 31, 2010, total assets increased by €1,341.3 million from €23,049.2 million to €24,390.5 million in comparison with the previous year's closing date. This is mainly due to the increase in inventories and trade accounts receivable totaling €1,367.7 million, accompanied by increased business activities. Increasing investment activities were the main reason for the €314.4 million increase in property, plant and equipment. Contrary to this, other intangible assets decreased by €345.4 million, mainly due to amortization from the purchase price allocation (PPA). The decrease in cash and cash equivalents of €241.5 million was due to repayments of short-term indebtedness, among other reasons.

Non-current assets
Non-current assets increased by €163.3 million to €14,887.9 million (PY: €14,724.6 million), mainly due to the increase in property, plant and equipment by €314.4 million to €6,098.7 million (PY: €5,784.3 million) and the increase in long-term derivatives and interest-bearing loans by €79.5 million to €157.9 million (PY: €78.4 million) especially resulting from the buy-back options of the high-yield bonds. The increase in goodwill by €107.0 million to €5,643.6 million (PY: €5,536.6 million) is due in particular to exchange rate changes. Other intangible assets fell by €345.4 million to €1,723.3 million (PY: €2,068.7 million). The deferred tax assets included in other non-current assets decreased by €48.2 million to €680.7 million (PY: €728.9 million). Other non-current assets showed no material changes from the previous year.

Current assets
Current assets increased by €1,178.0 million to €9,502.6 million (PY: €8,324.6 million). The increase in inventories and trade receivables is offset by a decline in cash and cash equivalents. The €805.9 million gain in trade receivables from €3,648.1 million in the previous year to €4,454.0 million is attributable primarily to higher sales at the end of 2010 as compared with December 2009. Increased business activities also led to a €561.8 million rise in inventories to €2,637.8 million (PY: €2,076.0 million). Cash and cash equivalents fell in the year under review by €241.5 million to €1,471.3 million (PY: €1,712.8 million) due in particular to the repayment of short-term indebtedness. Other current assets showed no material changes from the previous year.

Total equity
 At €6,202.9 million, equity was up by €2,141.2 million from €4,061.7 million, mainly due to the income from the capital increase in January 2010 of €1,073.3 million taking into consideration the issue costs and incurred tax effects, positive exchange rate effects of €410.6 million, and the net income attributable to the shareholders of the parent of €576.0 million. The equity ratio improved from 17.6% to 25.4%.

Non-current liabilities
At €9,730.2 million, non-current liabilities were up by €1,833.1 million from €7,897.1 million in the previous year. Non-current financial indebtedness increased by €1,784.7 million to €7,752.4 million (PY: €5,967.7 million), mainly due to the bond issues in 2010 totaling a nominal amount of €3,000.0 million. The partial repayment of tranche C of the VDO loan in the amount of €1,015.1 million had the opposite effect. Pension provisions increased by €59.5 million to €1,404.5 million (PY: €1,345.0 million). Other non-current liabilities showed no material changes from the previous year.

Current liabilities
At €8,457.4 million, current liabilities were down by €2,633.0 million from €11,090.4 million in the previous year, mainly due to the reduction of short-term indebtedness. This indebtedness decreased by €3,506.7 million to €1,238.1 million (PY: €4,744.8 million) especially because of the repayment of tranche B of the VDO loan with income from the capital increase and from the bond issues in 2010. The changes in other current provisions resulted in particular from expenses for restructuring measures introduced in previous years and changes in the warranty provisions. The increase in trade accounts payable by €691.0 million to €3,510.5 million (PY: €2,819.5 million) resulting from increased production volumes had the opposite effect. The increase in other current financial liabilities of €323.1 million to €1,203.4 million (PY: €880.3 million) was due mainly to increased deferrals for interest, sales commissions, bonus payments and special payments. Other current liabilities showed no material changes from the previous year.

Consolidated balance sheets
Assets in € millions Dec. 31, 2010 Dec. 31, 2009
Goodwill 5,643.6 5,536.6
Other intangible assets 1,723.3 2,068.7
Property, plant, and equipment 6,098.7 5,784.3
Investments in associates 440.4 398.0
Other long-term assets 981.9 937.0
Non-current assets 14,887.9 14,724.6
Inventories 2,637.8 2,076.0
Trade accounts receivable 4,454.0 3,648.1
Other short-term assets 939.5 887.7
Cash and cash equivalents 1,471.3 1,712.8
Current assets 9,502.6 8,324.6
Total assets 24,390.5 23,049.2
     
Total equity and liabilities in € millions Dec. 31, 2010 Dec. 31, 2009
Total equity 6,202.9 4,061.7
Non-current liabilities 9,730.2 7,897.1
Trade accounts payable 3,510.5 2,819.5
Other short-term provisions and liabilities 4,946.9 8,270.9
Current liabilities 8,457.4 11,090.4
Total equity and liabilities 24,390.5 23,049.2
     
Net indebtedness 7,317.0 8,895.5
Gearing Ratio in % 118.0 219.0
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Operating assets
The corporation's operating assets increased year-on-year by €700.1 million to €15,282.8 million (PY: €14,582.7 million) as of December 31, 2010.

The key factor in this development was the increase in working capital by €669.7 million to €3,588.0 million (PY: €2,918.3 million). Inventories increased by €561.8 million to €2,637.8 million (PY: €2,076.0 million). Despite the decrease in operating receivables as a percentage of sales by 1.1 percentage points to 17.1% (PY: 18.2%), their total amount increased by €798.9 million to €4,460.7 million (PY: €3,661.8 million) as at the reporting date due to the significant year-on-year improvement in business. Operating liabilities increased by €691.0 million to €3,510.5 million (PY: €2,819.5 million).

Non-current assets amounted to €13,975.6 million (PY: €13,846.5 million), up by €129.1 million from the previous year. Goodwill rose by €107.0 million to €5,643.6 million (PY: €5,536.6 million), of which €100.2 million was due to exchange rate effects.

Property, plant and equipment increased by €314.4 million to €6,098.7 million (PY: €5,784.3 million) as a result of investment activity being increased again during the year under review. Other intangible assets fell by €345.4 million to €1,723.3 million (PY: €2,068.7 million). The decisive factor for this decline was the amortization of intangible assets from the purchase price allocation (PPA) in the amount of €454.3 million (PY: €455.2 million).

The sale of the holding in VDO Automotive Huizhou Co. Ltd, Huizhou, China, in February 2010 resulted in a decrease in operating assets of €25.3 million in the Interior division. ContiTech Transportbandsysteme GmbH, Hanover, Germany, acquired a Metso Minerals (Deutschland) GmbH plant in Moers, Germany, as part of an asset deal, leading to an increase in operating assets of €10.4 million. In March 2010, ContiTech AG, Hanover, Germany, gained control of ContiTech Fluid Shanghai, Co. Ltd., Shanghai, China, (previously an investment accounted for using the equity method) due to a change in the partnership agreement. The initial consolidation led to the addition of €5.2 million in operating assets. Other changes in the scope of consolidation and asset deals did not result in any notable additions or disposals of operating assets at the corporation level.

In the 2010 fiscal year, exchange rate effects increased the corporation's total operating assets by €522.8 million (PY: €167.3 million). Despite the increase in operating assets as of the reporting date, the average operating assets of the corporation fell yearon- year by €444.1 million to €15,580.0 million (PY: €16,024.1 million).

Employees
 The workforce of the Continental Corporation increased by 13,794 employees from 134,434 in 2009 to 148,228. Due to the volume increase and the expansion in low-wage countries, the staff in the Automotive Group increased by 8,693 employees. In the Rubber Group, increased market demand also caused the number of employees to rise by 5,082.

Employees by region in %
  2010 2009
Germany 31 33
Europe excluding Germany 32 33
NAFTA 14 14
Asia 16 14
Other countries 7 6
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Continental Value Contribution (CVC). The CVC represents the absolute amount of additional value created, and the Delta CVC represents the change in absolute value creation over the prior year. This change in the absolute contribution measured by Delta CVC allows us to monitor the extent to which management units generate value-creating growth or resources must be employed more efficiently. The CVC is measured by subtracting the weighted average cost of capital (WACC) from the ROCE and multiplying this by the average operating assets for the fiscal year. The weighted average cost of capital calculated for the Continental Corporation corresponds to the required minimum return. The cost of capital is calculated as the weighted average ratio of the cost of equity and borrowing costs.

Currency swap. Swap of principal payable or receivable in one currency into similar terms in another currency. Often used when issuing loans denominated in a currency other than that of the lender.

Defined Benefit Obligation (DBO). DBO is defined as the present value of all vested and non-vested benefits calculated on the basis of estimated salary levels at retirement. The only actuarial method that may be used to calculate the DBO is the projected unit credit method. DBO corresponds to PBO (projected benefit obligation).

Derivative financial instruments. Transactions used to manage interest rate and/or currency risks.

Dividend payout ratio. The dividend payout ratio is the ratio between the dividend for the fiscal year and the earnings per share.

EBIT. Earnings Before Interest and Taxes. EBIT represents the results of operations. Since 2002, when the amortization of goodwill was discontinued, EBITDA has been equal to EBIT.

EBITA. EBIT before scheduled goodwill amortization.

EBITDA. Earnings before interest, taxes, depreciation and amortization.

Finance lease. Under a finance lease, the lessor transfers the investment risk to the lessee. This means that the lessor bears only the credit risk and any agreed services. The lessee is the beneficial owner of the leased asset. Finance leases are characterized by a fixed basic term during which the lease may not be terminated by the lessee.

Gearing ratio. The gearing ratio represents the net indebtedness divided by total equity, expressed as a percentage.

Hedging. Securing a transaction against risks, such as fluctuations in exchange rates, by entering into an offsetting hedge transaction, typically in the form of a forward contract.

IAS. International Accounting Standards.

IASB. International Accounting Standards Board. The authority that defines the International Financial Reporting Standards.

IFRIC. International Financial Reporting Interpretations Committee. Committee that reviews and determines appropriate treatment of accounting issues within the context of IFRS and IAS.

IFRS. International Financial Reporting Standards. The accounting standards issued by the IASB.

Interest rate cap. An interest rate cap sets an upper limit for a variable interest rate in relation to a notional debt amount. To the extent that the variable interest due on the underlying debt exceeds the cap amount, the holder of the cap receives income as compensation in the amount of the difference to the cap. An up-front premium is paid as consideration for the cap.

Interest rate swap. An interest rate swap is the exchange of interest payments between two parties. For example, this allows variable interest to be exchanged for fixed interest, or vice versa.

Net indebtedness. The net amount of interest-bearing liabilities as recognized in the balance sheet, cash and cash equivalents, the positive fair values of the derivative financial instruments as well as other interest-bearing investments.

Operating assets. Operating assets are the assets less liabilities as reported in the balance sheet, without recognizing the net indebtedness, discounted trade bills, deferred tax assets, income tax receivable and payable, as well as other financial assets and debts.

Operating lease. A form of lease that is largely similar to rental. Leased assets are recognized in the lessor's balance sheet and capitalized.

PPA. Purchase Price Allocation. PPA is the process of breaking down the purchase price and assigning the values to the identified assets, liabilities, and contingent liabilities following a business combination. Subsequent adjustments to the opening balance sheet – resulting from differences between the preliminary and final fair values at the date of initial consolidation – are recognized as "PPA adjustments".

Rating. Standardized indicator for the international finance markets that assesses and classifies the creditworthiness of a debtor. The classification is the result of an economic analysis of the debtor by specialist rating companies.

ROCE. Return On Capital Employed. We define ROCE as the ratio of EBIT to average operating assets for the fiscal year.

SIC. Standing Interpretations Committee (predecessor to the IFRIC).

US GAAP. United States Generally Accepted Accounting Principles. These principles are subdivided into binding and guiding principles.

Weighted Average Cost of Capital (WACC). The WACC represents the weighted average cost of the required return on equity and net interest-bearing liabilities.