Siemens 2006 Annual Report Download - page 125

Management’s discussion and analysis 121
Capital resources and capital requirements
Siemens is committed to a strong financial profile, characterized by a conservative capital
structure that gives us excellent financial flexibility.
Ratings
Our current corporate credit ratings from Moody’s Investors Service and Standard & Poor’s are
noted below:
Following Siemens’ announcement of the planned acquisition of the Diagnostics division
of Bayer AG, on June 30, 2006, both credit rating agencies changed their rating outlook for
Siemens from “stable” to “negative” (Moody’s Investors Service) and from “stable” to “Credit-
Watch negative” (Standard & Poor’s). Neither agency changed its long-term or its short-term
credit rating.
Moody’s Investors Service rates our long-term corporate credit Aa3 (negative outlook).
The rating classification of Aa is the second highest rating within the agency’s debt ratings
category. The numerical modifier 3 indicates that our long-term debt ranks in the lower end
of the Aa category. The Moody’s rating outlook is an opinion regarding the likely direction of
an issuer’s rating over the medium-term. Rating outlooks fall into the following six categories:
Positive, Negative, Stable, Developing, Ratings Under Review and No Outlook.
Moody’s Investors Service’s rating for our short-term corporate credit and commercial
paper is P-1, the highest available rating in the prime rating system, which assesses issuers’
ability to honor senior financial obligations and contracts. It applies to senior unsecured obli-
gations with an original maturity of less than one year.
In addition, Moody’s Investors Service published an assessment of liquidity risk. The most
recent liquidity risk assessment for Siemens as of August 25, 2006 classified the liquidity pro-
file of the Company as “very healthy.”
Standard & Poor’s rates our long-term corporate credit AA – (CreditWatch negative). Within
Standard & Poor’s long-term issue and issuer credit ratings, an obligation rated AA has the
second highest rating category assigned. The modifier “ – ” indicates that our long-term debt
ranks in the lower end of the AA category. The Standard & Poor’s rating outlook is an opinion
regarding the likely direction of an issuer’s rating over the medium-term. Rating outlooks fall
into the following four categories: Positive, Negative, Stable and Developing. Outlooks have a
time frame of typically two years. Ratings appear on CreditWatch when an event or deviation
from an expected trend has occurred or is expected, and additional information is necessary
to take a rating action. A rating review will normally be completed within approximately
90 days, unless the outcome of a specific event is pending.
Our short-term debt and commercial paper is rated A-1+ within Standard & Poor’s short-
term issue credit ratings, giving Siemens the highest-ranking short-term rating.
Siemens has no other agreements with nationally recognized statistical rating organiza-
tions to provide long-term and short-term credit ratings.
Management’s discussion and analysis
Moody’s
Investors Standard
Service &Poor’s
Long-term debt Aa3 AA–
Short-term debt P-1 A–1+