5.3 Net assets

As at 31 December 2010, total assets had decreased minimally by 1.0 per cent to €5,759 million (31 December 2009: €5,815 million).

The structure of the KION Group's balance sheet continued to reflect its acquisition finance and the KION purchase price allocation. The net loss for the year of €197 million considerably increased the negative amount of equity reported on the balance sheet. As at 31 December 2010, the KION Group's equity stood at minus €400 million (31 December 2009: minus €213 million).

Condensed balance sheet, assets

As at 31 December 2010, non-current assets (€4,105 million) and current assets (€1,654 million) were almost unchanged on a year earlier.

Reported under non-current assets, goodwill was largely unchanged at €1,507 million. Other intangible assets, which also include trademark rights, declined as normal by €10 million to €986 million due to amortisation of, among other things, core technologies.

Other property, plant and equipment reduced by €24 million to €566 million. This is mainly due to depreciation (€87 million). However, this was partly offset by capital expenditure on other property, plant and equipment of €53 million.

Leased assets decreased by €35 million to €501 million due to the decline in leases. Non-current lease receivables declined by €13 million to €247 million for the same reason.

Reported under current assets, inventories increased by €65 million to €536 million. The larger volume of business caused a rise in inventories of raw materials, supplies and finished goods. At 13.7 per cent, the rate of increase in inventories was slightly lower than that of revenue growth. Even as its new trucks business grows, the KION Group still strives to optimise inventories by closely managing working capital.

Overall, the larger volume of business contributed to the €122 million rise in trade receivables to €633 million. Moreover, the KION Group's optimised receivables management and the improved payment record of trade debtors meant that there was no increase in valuation allowances.

Cash and cash equivalents declined by €210 million year on year to €253 million (2009: €463 million). This decrease was mainly due to the net repayment of loans (€96 million), the repayment of short-term bank loans by individual Group companies (€38 million) and the reduction in other funding (€4 million).

Condensed balance sheet, equity and liabilities

The equity and liabilities side of the balance sheet primarily reflects the financial liabilities related to the KION Group's acquisition finance. The Company's syndicated loan liabilities were placed with a wide group of international banks and investors in 2007.

Credit terms

The acquisition finance was originally drawn in euros but some of this finance was then converted to US dollars. The last dates for the repayment of amounts drawn down under the syndicated loan are between 2013 and 2016. In both currencies, the interest payable is based on a variable rate. The KION Group has entered into interest rate and currency derivatives – primarily interest rate swaps, currency swaps and currency options – to hedge the interest-rate and exchange-rate risk arising in connection with the acquisition finance. Financial debt as at 31 December 2010 was €2,894 million (gross), a year-on-year decline of €54 million. The main financing activities during 2010 were the net repayment of loans (SFA) (€96 million) and the repayment of other short-term bank loans (€38 million). Currency effects from translating the US dollar tranche of the SFA caused a rise in liabilities to banks of €38 million.

The KION Group had been granted bank credit lines totalling €3,144 million as at 31 December 2010. For more information about the volume of credit lines and their use, see note 27 of the notes to the consolidated financial statements.

The transaction costs of €32 million incurred in connection with the loan negotiations, which took place in 2009, were allocated to the individual tranches on a pro rata basis and deducted from the carrying amounts of the liabilities in accordance with IAS 39.

As at the balance sheet date, the weighted average interest rate for liabilities to banks was 4.6 per cent (31 December 2009: 4.3 per cent).

Net financial debt

Despite lower liabilities to banks, net financial debt taking into account deferred refinancing costs increased by €157 million or 6 per cent to €2,641 million due to the year-on-year decline in cash and cash equivalents.

Non-current lease liabilities fell by 15 per cent to €411 million because the new leases taken out in 2010 did not make up for the leases that expired, thereby reflecting the market conditions in the most important western European markets. In 2010, the volumes in the markets that are most significant to the lease business were below the level in the five years leading up to the crisis.

In line with the rising level of production and the growth in capital expenditure, trade payables increased by 42 per cent to €508 million.

The net loss of €197 million resulted in reported equity of minus €400 million; in 2009, the KION Group had reported equity of minus €213 million. Additional factors affecting equity are other comprehensive income/loss and changes in non-controlling interests.

The equity calculated on the basis of these consolidated financial statements for the KION Group is of no relevance under the covenants agreed with the financing banks or under the German Commercial Code (HGB). The relevant figure under HGB in Germany is primarily the equity of KION GROUP GmbH as reported in that company's single-entity financial statements in accordance with HGB. As at 31 December 2010, this equity figure was €333 million. The equity of KION Holding 1 GmbH reported in the single-entity financial statements of that company in accordance with HGB as at 31 December 2010 was €230 million.