page 29 of 98 in connection with the internal revenue service 2019s ( irs ) examination of ball 2019s consolidated income tax returns for the tax years 2000 through 2004 , the irs has proposed to disallow ball 2019s deductions of interest expense incurred on loans under a company-owned life insurance plan that has been in place for more than 20 years . ball believes that its interest deductions will be sustained as filed and , therefore , no provision for loss has been recorded . the total potential liability for the audit years 1999 through 2004 , unaudited year 2005 and an estimate of the impact on 2006 is approximately $ 31 million , excluding related interest . the irs has withdrawn its proposed adjustments for any penalties . see note 13 accompanying the consolidated financial statements within item 8 of this annual report . results of equity affiliates equity in the earnings of affiliates in 2006 is primarily attributable to our 50 percent ownership in packaging investments in the u.s . and brazil . earnings in 2004 included the results of a minority-owned aerospace business , which was sold in october 2005 , and a $ 15.2 million loss representing ball 2019s share of a provision for doubtful accounts relating to its 35 percent interest in sanshui jfp ( discussed above in 201cmetal beverage packaging , europe/asia 201d ) . after consideration of the prc loss , earnings were $ 14.7 million in 2006 compared to $ 15.5 million in 2005 and $ 15.8 million in 2004 . critical and significant accounting policies and new accounting pronouncements for information regarding the company 2019s critical and significant accounting policies , as well as recent accounting pronouncements , see note 1 to the consolidated financial statements within item 8 of this report . financial condition , liquidity and capital resources cash flows and capital expenditures cash flows from operating activities were $ 401.4 million in 2006 compared to $ 558.8 million in 2005 and $ 535.9 million in 2004 . management internally uses a free cash flow measure : ( 1 ) to evaluate the company 2019s operating results , ( 2 ) for planning purposes , ( 3 ) to evaluate strategic investments and ( 4 ) to evaluate the company 2019s ability to incur and service debt . free cash flow is not a defined term under u.s . generally accepted accounting principles , and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures . the company defines free cash flow as cash flow from operating activities less additions to property , plant and equipment ( capital spending ) . free cash flow is typically derived directly from the company 2019s cash flow statements ; however , it may be adjusted for items that affect comparability between periods . an example of such an item included in 2006 is the property insurance proceeds for the replacement of the fire-damaged assets in our hassloch , germany , plant , which is included in capital spending amounts . based on this , our consolidated free cash flow is summarized as follows: .
did cash flows from operating activities increase in 2006 compared to 2005?
cash flows from operating activities in 2006 were negatively affected by higher cash pension funding and higher working capital levels compared to the prior year . the higher working capital was a combination of higher than planned raw material inventory levels , higher income tax payments and higher accounts receivable balances , the latter resulting primarily from the repayment of a portion of the accounts receivable securitization program and late payments from customers in europe . management expects the increase in working capital to be temporary and that working capital levels will return to normal levels by the end of the first half of 2007. .