Siemens 2011 Annual Report Download - page 316

6 A. To our shareholders 51 C. Combined management’s discussion and analysis 23 B. Corporate Governance

A key factor in maintaining a strong financial profile is
Siemens’ credit rating which is affected by, among other fac-
tors, Siemens’ capital structure, profitability, ability to gener-
ate cash flow, geographic and product diversification as well
as Siemens’ competitive market position. Siemens’ current
corporate credit ratings from Moody ’s Investors Service and
Standard & Poor’s are noted as follows:
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
On November , , Moody ’s applied a long-term credit rat-
ing of A. The rating classification A is the third highest rating
within the agency ’s debt ratings category. The numerical mod-
ifier  indicates that Siemens’ long-term debt ranks in the high-
er end of the A category. On September ,  Moody ’s re-
vised its outlook for Siemens’ credit rating from stable to posi-
tive. The outlook change recognizes that over the past years,
Siemens’ large business portfolio has become more balanced
and resilient to cyclicality as a result of disposals. Furthermore,
it reflects Siemens’ strengthened profitability. The Moody ’s rat-
ing outlook is an opinion regarding the likely direction of an is-
suer’s rating over the medium-term. Rating outlooks fall into
the following six categories: positive, negative, stable, devel-
oping, ratings under review and no outlook.
Moody ’s Investors Service’s rating for the Company ’s short-
term corporate credit and commercial paper is P-, the highest
available rating in the prime rating system, which assesses is-
suers’ ability to honor senior financial obligations and con-
tracts. It applies to senior unsecured obligations with an origi-
nal maturity of less than one year. On September , ,
Moody ’s affirmed Siemens’ P- short-term rating.
On June , , Standard & Poor’s applied a long-term credit
rating of A+. Within Standard & Poor’s ratings definitions an
obligation rated A has the third highest long-term rating cate-
gory. The modifier + indicates that Siemens’ long-term debt
ranks in the upper end of the A category. On April , ,
Standard & Poor’s revised its outlook for Siemens’ credit rating
from stable to positive. The outlook revision reflects Siemens’
solid operating and financial performance throughout the
 –  global financial and economic downturn. A rating
outlook indicates the potential direction of a long-term credit
rating over the medium-term. Rating outlooks fall into the
following four categories: positive, negative, stable and devel-
oping.
Furthermore, Standard & Poor’s raised the Company ’s short-
term corporate credit rating from A- to A-+ on April , .
This is the highest short-term rating within the Standard &
Poor’s short-term rating scale. The upgrade of the short-term
rating is based on Standard & Poor’s assessment of the Compa-
ny ’s liquidity.
 – 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 ,
(in millions of €)  
Guarantees
Credit guarantees 591 597
Guarantees of third-party performance 2,643 1,093
HERKULES obligations 2,690 3,090
Other 3,424 3,300
9,348 8,080
Item Credit guarantees cover the financial obligations of third
parties in cases where Siemens is the vendor and / or contrac-
tual partner. These guarantees generally provide that in the
event of default or non-payment by the primary debtor,
Siemens will be required to settle such financial obligations.
In addition, Siemens provides credit guarantees generally as
credit-line guarantees with variable utilization to joint ven-
tures and associated and other companies see
Note 19
Investments accounted for using the equity method and
Note 39 Related party transactions. The maximum amount
of these guarantees is subject to the outstanding balance of
the credit or, in case where a credit line is subject to variable
utilization, the nominal amount of the credit line. These guar-