Siemens 2007 Annual Report Download - page 142

142 Management’s discussion and analysis
Capital Structure
As of September 30, 2007 and 2006, our capital structure was as follows:
In fi scal 2007, total equity increased by 15% compared to fi scal 2006 primarily
due to an increase in retained earnings. Total debt increased during the last fi scal
year by 1%. This resulted in an increase in equity as a percentage of total capital to
65% compared to 62% in fi scal 2006. Debt as a percentage of total capital decreased
to 35% from 38% in the prior year.
Siemens is not subject to any statutory capital requirements. Commitments
exist to sell or otherwise issue common shares in connection with established
share-based payment plans. In fi scal 2007, commitments for share-based payment
were fulfi lled through capital increases. Beginning in fi scal 2008, we plan to ful-
fi ll commitments for share-based compensation through repurchases of the Com-
pany’s shares. For additional information with respect to stock-based compensa-
tion and treasury shares, see “Notes to Consolidated Financial Statements.”
As part of our Fit42010 program, we decided to optimize our capital structure.
A key consideration is to maintain ready access to capital markets through various
debt products and to preserve our ability to repay and service our debt obligations
over time. We therefore set a capital structure goal that is measured by Adjusted
industrial net debt divided by Earnings before interest taxes depreciation and
amortization (EBITDA) as adjusted. The calculation of Adjusted industrial net debt
is set forth in the table below. Adjusted EBITDA is calculated as earnings before
income taxes (EBIT) (adjusted) before amortization (defi ned as amortization and
impairments of intangible assets other than goodwill) and depreciation and
impairments of property, plant and equipment and goodwill. Adjusted EBIT is
income from continuing operations before income taxes less fi nancial income
(expense), net and income (loss) from investments accounted for using the equity
method, net.
September 30,
(€ in millions) 2007 2006 % Change
Total equity 28,996 25,193 15%
As a % of total capital 65% 62%
Short-term debt 5,637 2,175
Long-term debt 9,860 13,122
Total debt 15,497 15,297 1%
As a % of total capital 35% 38%
Total capital (total debt and total equity) 44,493 40,490 10%