Siemens 2010 Annual Report Download - page 270

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis

September ,
 
Short-term debt 2,416 698
Plus: Long-term debt 17,497 18,940
Less: Cash and cash equivalents (14,108) (10,159)
Less: Current available-for-sale financial assets (246) (170)
Net debt 5,560 9,309
Less: SFS debt (10,028) (9,521)
Plus: Funded status principal pension benefit
plans 6,357 4,015
Plus: Funded status principal other post
employment benefit plans 738 646
Plus: Credit guarantees 597 313
Less: % nominal amount hybrid bond (886) (862)
Less: Fair value hedge accounting
adjustment  (1,518) (1,027)
Adjusted industrial net debt 819 2,873
Adjusted EBITDA (continuing operations) 10,034 9,219
Adjusted industrial net debt / adjusted EBITDA
(continuing operations) 0.08 0.31
1 Long-term debt including fair value hedge accounting adjustment of €1,518 and
€1,027 for the fiscal year ended September 30, 2010 and 2009, respectively.
2 The adjustment for our hybrid bond considers the calculation of this financial ratio
applied by rating agencies to classify 50 percent of our hybrid bond as equity and
50 percent as debt. This assignment follows the characteristics of our hybrid bond
such as a long maturity date and subordination to all senior and debt obligations.
3 Debt is generally reported with a value representing approximately the amount to
be repaid. However for debt designated in a hedging relationship (fair value
hedges), this amount is adjusted by changes in market value mainly due to changes
in interest rates. Accordingly we deduct these changes in market value in order to
end up with an amount of debt that approximately will be repaid, which we believe
is a more meaningful figure for the calculation presented above.
A key factor in maintaining a strong financial profile is our
credit rating which is affected by capital structure, profitability,
ability to generate cash flow, geographic and product diversifi-
cation as well as our competitive market position, among other
factors. Our current corporate credit ratings from Moody ’s In-
vestors Service and Standard & Poor’s are noted below:
September ,  September , 
Moody’s
Investors
Service
Standard
& Poor’s
Moody’s
Investors
Service
Standard
& Poor’s
Long-term debt A1 A+ A1 A+
Short-term debt P-1 A-1 P-1 A-1
In fiscal , Moody ’s Investors Service made no rating
changes. Moody ’s applied a long-term credit rating of “A,”
outlook stable, on November , . The rating classification
A is the third highest rating within the agency ’s debt ratings
category. The numerical modifier  indicates that our long-
term debt ranks in the higher end of the A category. The
Moody ’s rating outlook is an opinion regarding the likely direc-
tion of an issuer’s rating over the medium-term. Rating out-
looks 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-, 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 obligations with an original maturity of less
than one year.
In addition, Moody ’s Investors Service publishes credit opin-
ions relating to Siemens. The most recent credit opinion as of
June ,  classified our liquidity profile as “very healthy.”
During fiscal  Standard & Poor’s made no changes in
Siemens’ credit ratings. Standard & Poor’s applied a long-term
credit rating of “A+,” outlook stable, on June , . Within
Standard & Poor’s ratings definitions an obligation rated “A” has
the third highest long-term rating category. The modifier “+”
indicates that our long-term debt ranks in the upper end of the
A category. The Standard & Poor’s rating outlook assesses the
potential direction of a long-term credit rating over the medi-
um-term. Rating outlooks fall into the following four catego-
ries: “positive,” “negative,” ”stable” and “developing.” On June
, , Standard & Poor’s assigned “A-” for our corporate
short-term credit rating. This is the second highest short-term
rating within the S&P rating scale.
 – Commitments and contingencies
Guarantees and other commitments
The following table presents the undiscounted amount of
maximum potential future payments for each major group of
guarantee:
September ,
 
Guarantees
Credit guarantees 597 313
Guarantees of third-party performance 1,093 1,092
HERKULES obligations 3,090 3,490
Other 3,216 2,703
7,996 7,598