Siemens 2012 Annual Report Download - page 173

135 D. Consolidated Financial Statements
239 E. Additional Information
130 C. Siemens AG (Discussion on basis of
German Commercial Code)
134 C. Notes and forward-looking statements
129 C. Compensation Report, Corporate Governance
statement pursuant to Section a of the
German Commercial Code, Takeover-relevant
information and explanatory report

A key factor in maintaining a strong financial profile is our
credit rating which is affected by, among other factors, our
capital structure, profitability, ability to generate cash flow,
geographic and product diversification as well as our competi-
tive market position. Our current corporate credit ratings from
Moody ’s Investors Service (Moody ’s) and Standard & Poor’s
Ratings Services (S&P) are noted as follows:
Moody ’s S&P
Long-term debt Aa3 A+
Short-term debt P-1 A-1+
On June ,  Moody ’s raised its long-term Siemens’ credit
rating from “A” to “Aa.” The rating classification “Aa” is the
second highest rating within Moody ’s debt ratings category.
The numerical modifier “” indicates a ranking in the lower end
of that rating category. At the same time Moody ’s revised its
outlook for our credit rating from “positive” to “stable.” 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 of Moody ’s fall into the following six categories: “posi-
tive,” “negative,” “stable,” “developing,” “ratings under review”
and “no outlook.” Moody ’s announced that the rating action
was prompted by the higher levels of profitability and cash
flow leverage that the company has been able to achieve over
the past few years, and Moody ’s assessment that these levels
are likely to be sustainable through economic cycles, including
the current period of economic weakness in Europe.
Moody ’s rating for our short-term corporate credit and commer-
cial 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 obliga-
tions with an original maturity of less than one year. On June ,
 Moody ’s affirmed our “P-” short-term rating.
On November , , S&P revised its outlook for Siemens’
credit rating from “positive” to “stable”. At the same time, S&P
affirmed the “A+” long-term corporate rating and the “A-+”
short-term rating, which is the highest short-term rating with-
in the S&P’s short-term rating scale.
The outlook revision to “stable” captures the contraction of op-
erating margin during fiscal  as well as Siemens’ pursuit of
more shareholder friendly actions in the form of a share buy-
back and a revision of the shareholder distribution policy from
%-% payout range to %-% including share buybacks.
Within S&P’s long-term credit rating definitions “A” has the
third highest long-term rating category. The modifier “+” indi-
cates that our long-term debt ranks in the upper end of the “A”
category. A rating outlook indicates the potential direction of a
long-term credit rating over the medium-term. Rating outlooks
of S&P’s fall into the following four categories: “positive,” ”neg-
ative,” ”stable” and “developing.”
The U.S. Securities and Exchange Commission granted Moody ’s
and S&P the status of nationally recognized statistical rating or-
ganizations (NRSROs). Siemens does not have any agreements
with other nationally recognized statistical rating organiza-
tions to provide long-term and short-term credit ratings.
We believe that our high credit rating for our long-term debt
applied by Moody ’s and S&P’s allows us to raise funds in the
capital markets with attractive conditions or to obtain flexible
financing from banks. A high credit rating generally leads to
lower credit spreads and therefore our rating also positively af-
fects our funding costs. We expect no impact on our funding
costs as a consequence of the revised rating outlook by S&P on
November , .
Security ratings are not a recommendation to buy, sell or hold
securities. Credit ratings may be subject to revision or with-
drawal by the rating agencies at any time and each rating
should be evaluated independently of any other rating.
... Capital structure
Given the favorable capital market conditions at the end of fis-
cal , Siemens announced in August  that it would ad-
just its capital structure through share buybacks amounting to
up to € billion by December , . The shares repurchased
may be used for the purposes of cancellation and reduction of
capital stock, issuance to employees, board members of affili-
ated companies and members of the Managing Board as well
as to meet obligations arising under and in connection with
convertible bonds and warrant bonds. In fiscal , the Com-
pany repurchased ,, treasury shares at a weighted av-
erage share price of €.. Additionally, the Managing Board
decided to cancel ,, treasury shares, which reduced
common stock from  million shares to  million shares.
After the end of fiscal  Siemens repurchased additional
,, treasury shares at a weighted average price of
€. and completed this share buyback program in Novem-
ber .
In September , Siemens issued €. billion and £. billion
(€. billion) in fixed-rate instruments, which were partly used
to finance this share buyback program.