Siemens 2006 Annual Report Download - page 127

Management’s discussion and analysis 123
In addition, we have a medium-term note program of €5.0 billion. The amount outstanding
under this program was €1.713 billion at September 30, 2006. In March 2006, we updated our
medium-term note program. Also in March 2006, we issued under the medium-term-note pro-
gram a bond of U.S.$1.0 billion in a tranche of U.S.$500 million due 2012 and a tranche of
U.S.$500 million due 2016.
None of our commercial paper and medium-term note programs or our credit facilities
contain specific financial covenants such as rating triggers or interest coverage, leverage or
capitalization ratios that could trigger remedies, such as acceleration of repayment or addi-
tional collateral.
In August 2006, Siemens Financieringsmaatschappij N.V., a wholly owned Dutch subsidiary
of Siemens AG issued two series of notes of U.S.$750 million maturing 2009 and 2012, as well
as two series of notes of U.S.$1.750 billion maturing 2016 and 2026. In addition, Siemens
Financieringsmaatschappij N.V. issued a Hybrid Capital bond in a euro tranche of €900 million
and a British pound tranche of £750 million. The reason for these issuances was to better
match fund capital and currency requirements, to diversify our investor base and to strength-
en the overall balance sheet. For further detail to these bonds see “Capital Requirements.”
In addition to the above described sources of liquidity, we constantly monitor funding
options available in the capital markets, as well as trends in the availability and cost of such
funding, with a view to maintaining financial flexibility and limiting repayment risks.
Further information about our bonds and the other components of debt is given in “Notes
to Consolidated Financial Statements.”
Capital requirements
Capital requirements include scheduled debt service and regular capital spending and cash
requirements. €2.175 billion of debt, including €1.149 billion of bonds, is scheduled to become
due in fiscal 2007. For the Operating Groups, we plan a capital expenditures rate (capital
expenditures expressed as a percentage of depreciation) for property, plant and equipment in
fiscal 2007 that is below the rate of 144% in fiscal 2006. Especially due to strong investment
activity at SFS the capital expenditures rate for Siemens was 152% in fiscal 2006. In addition,
we expect significant cash outflows in connection with portfolio realignments for fiscal 2007,
e.g. for the purchase price of approximately €4.2 billion relating to the diagnostics division of
Bayer Aktiengesellschaft, as well as cash outflows of €500 million for a long-term loan to NSN.
For further information, see “Business Overview and Economic Environment – Strategic
Overview”, as well as “Notes to Consolidated Financial Statements.” Furthermore we expect
substantial cash outflows for severance programs at Com and SBS in the coming year.
In June 2003, the Company issued €2.5 billion of convertible notes through its wholly
owned Dutch subsidiary, Siemens Finance B.V., which are fully and unconditionally guaran-
teed by Siemens AG. The convertible notes have a 1.375% coupon and are convertible into
approximately 44.5 million shares of Siemens AG at a conversion price of €56.1681 per share,
which is subject to change under certain circumstances. The conversion right is contingently
exercisable by the holders upon the occurrence of one of several conditions, including, upon
the Company’s share price having exceeded 110% of the conversion price on at least 20 trading
days in a period of 30 consecutive trading days ending on the last trading day of any calendar
quarter. The Company may, at any time from June 18, 2007, redeem the notes outstanding at
their principal amount together with interest accrued thereon, if Siemens’ share price exceeds
130% of the conversion price on any 15 of 30 consecutive trading days before notice of early
redemption. Unless previously redeemed, converted or repurchased and cancelled, the notes
mature on June 4, 2010. The conversion condition described above was met at the end of the
first quarter of fiscal 2004. In fiscal 2006, €3 million of convertible notes were exercised and
were settled primarily in cash. In the third quarter of fiscal 2006, Siemens irrevocably waived
its option to pay a cash amount in lieu of the delivery of shares.
Management’s discussion and analysis