Siemens 2010 Annual Report Download - page 124

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis
50 Business and operating environment
78 Fiscal  – Financial summary
81 Results of operations
98 Financial position
110 Net assets position
113 Overall assessment of the economic position

related to Diagnostics and the above-mentioned charges re-
lated to the strategic reorientation of Siemens IT Solutions and
Services reduced ROCE by . percentage points in fiscal .
For comparison, the above-mentioned impairment charges
related to NSN reduced ROCE by . percentage points in fiscal
.
Cash conversion rate was our liquidity measure in our Fit
program. It showed us how much of our income we were con-
verting to Free cash flow. The calculation of the cash conver-
sion rate is shown below. Free cash flow, as presented in the
“Notes to Consolidated Financial Statements,” is defined as Net
cash provided by (used in) operating activities (continuing
operations) minus Additions to intangible assets and property,
plant and equipment (continuing operations). Our target for
the cash conversion rate was  minus our annual organic rev-
enue growth rate. Our cash conversion rate was . in fiscal
, above the target of .. The total of the above-men-
tioned impairment charges related to Diagnostics and the
above-mentioned charges related to the strategic reorientation
of Siemens IT Solutions and Services increased the cash con-
version rate by . in fiscal . For comparison, the above-
mentioned impairment charges related to NSN increased the
cash conversion rate by . in fiscal . During the aggre-
gate period in which we applied Fit, we achieved a cash
conversion rate of .. Considering a compound annual
growth rate for organic revenue of %, our target for cash con-
version rate was . for this period.
Capital structure management
As part of the Fit program, we also adopted a measure to
assess our capital structure management and complement our
operational performance measures. A key consideration for us
in this regard is maintenance of ready access to the capital
markets through various debt products and preservation of our
ability to repay and service our debt obligations over time.
For purposes of the Fit program, we calculated our capi-
tal structure measure as the ratio of adjusted industrial net
debt to adjusted EBITDA. For further information on this calcu-
lation and the respective components, see “Financial position
– Capital structure” and “Additional information for supple-
mental financial measures.” We aimed to achieve a ratio in the
range of . – .. However, in light of the global economic
crisis we consciously chose to not adjust our capital structure
by increasing our debt to the extent originally planned. Our
capital structure ratio for fiscal  was ..
ROCE (continuing operations)
FY 2010  10.4%
FY 2009  6.1%
Target corridor: 14 – 16%
1 Adjusted by the net of Assets classified as held for disposal less Liabilities
associated with assets classified as held for disposal presented as discontinued
operations.
2 The total of the impairment charges related to Diagnostics and the charges related
to the strategic reorientation of Siemens IT Solutions and Services reduced ROCE
by 3.6pp in fiscal 2010.
3 The impairment charges related to NSN reduced ROCE by 4.6pp in fiscal 2009.
Income from continuing operations (before interest)
× 100%
Average capital employed 1
Cash conversion rate (continuing operations)
FY 2010  1.73
FY 2009  1.54
Target: 1 minus revenue growth rate
1 The total of the impairment charges related to Diagnostics and the charges related
to the strategic reorientation of Siemens IT Solutions and Services increased the
cash conversion rate by 0.44 in fiscal 2010.
2 The impairment charges related to NSN increased the cash conversion rate by
0.66 in fiscal 2009.
Free cash flow from continuing operations
Income from continuing operations
Capital structure (continuing operations)
FY 2010 0.08
FY 2009 0.31
Target corridor: 0.8 – 1.0
Adjusted industrial net debt
Adjusted EBITDA