Siemens 2005 Annual Report Download - page 115

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In fiscal 2000, Siemens Nederland N.V., as the owner of the underlying shares of stock of
Infineon, issued €2.5 billion of 1% exchangeable notes due in 2005. In August 2005, Siemens
redeemed the remaining outstanding amount of principal €596 million.
In fiscal 2005, the Company acquired Flender including its outstanding debt. Following the
acquisition, Siemens announced a cash tender offer with respect to Flender’s €250 million 11%
senior notes due in 2010. We subsequently repurchased an aggregate principal amount of €176
million of the notes outstanding.
The capital structure of the Financing and Real Estate component at September 30, 2005 and
2004 consisted of the following:
Both Moody’s and Standard & Poor’s view SFS as a captive finance company. These ratings
agencies generally recognize and accept higher levels of debt attributable to captive finance sub-
sidiaries in determining long-term and short-term credit ratings.
The allocated equity for SFS is determined and influenced by the respective credit ratings of
the rating agencies and by the expected size and quality of its portfolio of leasing and factoring
assets and equity investments and is determined annually. This allocation is designed to cover
the risks of the underlying business and is in line with common credit risk management banking
standards. The actual risk profile of the SFS portfolio is monitored and controlled monthly and is
evaluated against the allocated equity.
Purchase obligations – At September 30, 2005, the Company had €10.456 billion in purchase
obligations. Purchase obligations include agreements to purchase goods or services that are
enforceable and legally binding and which specify all of the following items: (i) fixed or mini-
mum quantities, (ii) fixed, minimum or variable price provisions and (iii) approximate timing
of the transaction.
Operating leases – At September 30, 2005, the Company had a total of €2.681 billion in total
future payment obligations under non-cancelable operating leases.
Furthermore, we are subject to asset retirement obligations related to certain tangible long-
lived assets. Such asset retirement obligations are primarily attributable to environmental clean-
up costs, which amounted to €499 million as of September 30, 2005 and to costs associated with
the removal of leasehold improvements at the end of the lease term, amounting to €43 million as
of September 30, 2005. For additional information with respect to asset retirement obligations,
see “Notes to Consolidated Financial Statements.”
Management’s discussion and analysis
Consolidated Financial Statements Notes to Consolidated Financial Statements
September 30, 2005 September 30, 2004
(€ in millions) SFS SRE SFS SRE
Assets 10,148 3,496 9,055 3,455
Allocated equity 983 920 1,015 920
Total debt 8,529 1,349 7,245 1,420
Therein intracompany financing 8,041 930 6,975 1,061
Therein debt from external sources 488 419 270 359
Debt to equity ratio 8.68 1.47 7.14 1.54