Siemens Healthcare – Workflow & Solutions Division · Workflow optimization in breast cancer...

Copyright © Siemens AG 2008. All rights reserved.Copyright © Siemens AG 2008. All rights reserved.

Siemens Healthcare – Workflow & Solutions Division Tom Miller, CEO Workflow & Solutions Division

Capital Market Day Siemens Healthcare Munich, February 28, 2008

February 28, 2008 Capital Market Day Siemens HealthcareCopyright © Siemens AG 2008. All rights reserved.

This document contains forward-looking statements and information – that is, statements related to future, not past, events. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,”“estimates,” “will,” “project” or words of similar meaning. Such statements are based on our current expectations and certain assumptions, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’control, affect our operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens to be materially different from any future results, performance or achievements that may be expressed orimplied by such forward-looking statements. For us, particular uncertainties arise, among others, from changes in general economic and business conditions (including margin developments in major business areas); the challenges of integrating major acquisitions and implementing joint ventures and other significant portfolio measures; changes in currency exchange rates and interest rates;introduction of competing products or technologies by other companies; lack of acceptance of new products or services by customers targeted by Siemens; changes in business strategy; the outcome of pending investigations and legal proceedings, especially the corruption investigation we are currently subject to in Germany, the United States and elsewhere; the potential impact of such investigations and proceedings on our ongoing business including our relationships with governments and other customers;the potential impact of such matters on our financial statements; as well as various other factors. More detailed information about certain of these factors is contained throughout this report and in our other filings with the SEC, which are available on the Siemens website, www.siemens.com, and on the SEC's website, www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. Siemens does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.

EBITDA (adjusted), Return on capital employed, Free cash flow, Cash conversion and Net debt are Non-GAAP financial measures.A reconciliation of these amounts to the most directly comparable IFRS financial measures is available on our Investor Relationswebsite under www.siemens.com/ir, Financial Publications, Quarterly Reports. 'Group profit from operations' is reconciled to 'Income before income taxes' of Operations under 'Reconciliation to financial statements' in the table 'Segment Information'.

Safe Harbour Statement


Our Customers’ Decisions are bothProduct- and Solution-Oriented

Workflow-oriented IT

In VitroDiagnostics(IVD)

Diagnosis

TherapyIn VivoDiagnostics(Imaging)

Oncology

Cardiology

Neurology

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Prevention and Early Detection

Care

DiagnosticsJim Reid-Anderson

Imaging & ITBernd Montag

Workflow & SolutionsTom Miller


Our Customers’ Decisions are bothProduct- and Solution-Oriented

Workflow-oriented IT

In VitroDiagnostics(IVD)

Diagnosis

TherapyIn VivoDiagnostics(Imaging)

Oncology

Cardiology

Neurology

…

Prevention and Early Detection

Care

Workflow & SolutionsTom Miller


Our organization aligns with the marketClinical Workflow has both vertical and horizontal elements

Challenge/Opportunity

Patient careWorkflow follows diseases

Rad

.

Car

d.

Onc

o. …

…

Neurological disease

Oncological disease

Cardiac disease

Rad

iolo

gist

Car

diol

ogis

t

Onc

olog

ist

Surg

eon

Gen

eral

phy

sici

ans

and

prac

titio

ners…

Organization in healthcareaccording to disciplines and competencies

Disciplines are important to secure medical competence and quality of education and continued training.

Process orientation (workflow) is important for patient flow and efficiency.


We are prepared for the next major trend in healthcareAccredited Quality and Pay for Performance

US hospitals must have accreditation to be paid by Medicare/Medicaid

JCAHO, primary accreditation body, conducts onsite audits, without advance notice, every three years

Disease-specific (stroke, cardio) certifications require annual audits

Hospitals must report quality data every three months

In 2008, US hospitals’ reimbursements reduce if quality measures are not met for preventable events

80% of US insurers now have to Pay for Performance (P4P). P4P is a model for primary care physicians in UK (since 2004)

IOM report (August 2006) concluded that P4P improves healthcare quality

P4P hospitals have greater improvement in all measures of quality (NEJM, February 2007)

JCI operates in 60 countries and collaborates with World Health Organization

Currently, hospitals in 30 countries have received accreditation from JCI

Most European countries have mandated accreditationrequirements


What is workflow in healthcare?

Workflow \wərk-flō\ n:a series of activities to produce a pre-determined result

Linear

Unidirectional

Continuous

Have limited complexity

Industrial workflows are: Healthcare workflows are:

Non-linear

Multi-directional

Interrupt-driven

Have unlimited complexity


Achieve ConsistentWorld-Class Standard

of Care

Innovate NextGeneration

Standard of Care

Automate

Healthcare Workflow Is an N-Dimensional ProblemSiemens has competence in all dimensions

System level

Department / workplace level

Enterprise level

Disease level

Regional level

The space provides an opportunity for incremental market share gains

Clinical DimensionsCardiologyNeurologyOncologyRadiologyetc.


The dimensions equal customer segmentationOur present portfolio allows workflow offerings for every segment


Standard of Care

Minister of Health: “How do I reduce costs as % of GDP without rationing?”

Hospital CEO: “How do I increase my bottom line, deal with the nursing shortage, and pass the JCAHO Audit.”

Cardiology Department Chair: “How do I become the #1 department in my region?”

Radiologist: “How do I get through all these cases and deliver quality care?”

Tech: “We are short-handed again. How do I complete all of these tests?”

Achieve ConsistentWorld-Class Standard of

Care


In the short-term, market share gains will be realized by creating efficiencies in current standards of care

Automate

System level

Department/ workplace level

Enterprise level

Disease level

Regional level

We follow recognizedclinical standards …

JCAHOACCNINDSACRetc.

… to achieve world-class performance.


of Care


Standard of Care


Workflow optimization in audiology

Expanding the Target Audience and Acceptance

Customer challengesUntapped consumer base due to lowpenetration (stigma associated with hearing instruments) – offers futuregrowth potential

Increasing price pressure

Low efficiency due to high effortsin fitting of instruments

4.5%6.0%

Market growth

Our growth

CAGR 06-08, Currency adjusted


Hearing trainingFittingOrderingCounseling

Siemens offers hearing instruments for an active lifestyle and workflow to support the hearing care professional

Diagnosis

UNITY CONNEXX Demo eForms/iScan CONNEXX eARena

HearCheck:Hearing loss screening deviceUNITY2:Diagnostics

iScan: 3Dear impression scanner

USP

USP

Diagnosing the individual’s hearing loss

Finding the appropriate solution for the individual

Auditory training program for consumer to increase customer satisfaction and reduce credit returns

Fine tuning the hearing instruments and verifying the fitting

Scanning ear impressionand ordering custom solution

UNITY2:Real-ear measure-ments

USP

USP Rechargeable, Water-resistant micro-design

Discreet, easyto use, reliable in every situation

This allows us to achieve price and margin premiums

Diagnosis Counseling Ordering Fitting Hearing training


5%

17%

Workflow optimization in orthopedic surgery

Enhancing Surgical Decision Making and PrecisionMarket growth

Our growth

Customer challengesQuality control

Trend to minimally invasive procedures

Cost containment

Complex multi-disease cases

CAGR 06-08 Currency adjusted


Clinical and Proven OutcomesMore predictable screw and implant placement

Talus Study, Ekkehard Euler et al., Clinic of the University of Munich, Germany


Clinical and Proven Outcomes No post-op CT scan required

Pre-op CT

Preparation for 2nd intervention

Conventional C-arm

ARCADIS Orbic 3D

“... promises routinely performed intra-operative 3D imaging at considerablygreater cost savings than was the case with the previous CT procedures.”(Ekkehard Euler et al., Clinic of the University of Munich, Germany)

Intraoperative check instead of post-operative CT

OR procedureconventional 2D Post-op CT

Pre-op CT Intra-op check Orbic 3D

Intra-op revision(if necessary)

QualityCosts


Clinical and Proven OutcomesIntra-operative “revision” – second surgery not necessary

34.3%

30.2%

25.0%

13.2%

13.1%

11.5%

9.5%

7.8%

0.0% 10.0% 20.0% 30.0% 40.0%

Calcaneus

Ankle joint

Pilon

Acetabulum

Distal radius

Tibial head

Pelvic girdle

Spine

> 2,000 patients over last 5 yearsIntra-operative revisions in approx. 16% of all cases

Data provided by: BGU D-Ludwigshafen (2006)


5%10%

Workflow optimization in radiation therapy

Efficiently Increasing the Quality of TherapyMarket growth

Our growth

Radiation oncology products

Can I introduce complex newtreatments without reducing throughput?

Customer challengesHow will I be sure my technology investment is protected for the future?

CAGR 06-08 Currency adjusted


ARTISTE™: 160 MLC with DAO*The ideal combination for dose and time efficiency

*Direct Aperture Optimization

Siemens with DAO575 MU~ 6 min.

Leading competitor2174 MU~ 4 min.

High plan qualityFully verified uncompromised IMRT

Lowest dose to healthy tissue

Lowest MUs due to DAO-IMRT

Lowest leakage with 160 MLC™

Fast and efficient treatmentdelivery

Treat complex cases in 5-10 minutes

Verify with MVision™ in 2-3 minutes


Siemens DAO-IMRT vs. a leading competitor

575 MU ca. 6 min 81 seg. 2174 MU ca. 4 min.

Source: Year End Review, Investor Relations Meeting ASTRO, Oct. 30, 2007

Larger dose area to healthy tissue

Siemens DAO-IMRT Leading competitor


22%28%

Workflow optimization in breast cancer

Individualized Treatment with Reproducable EfficiencyMarket growth

Our growth

Customer challenges1.3m new cases worldwide in 2007465,000 deaths worldwide30% increase in incidence, but deaths have decreased/stabilized in western countries

Mammography alone misses 6-27% of cancers in women over 50MRI more effective than mammography in detecting DCISTypes/treatment requires complex workflow

Sources: Global Cancer Facts and Figures 2007, The Lancet, August 2007

CAGR 06-08, Currency adjusted


ReaderQC

Screening mammography workflowScreening mammography workflow

Central location

DR Mammo/US/ MR/Biopsy/Pathology

Clarification

Case conference

Acquisition 1st/2nd Reading

SISScreening Information System

Screening locationReader

QCServer

Mobile unit

Consensus conference

Screening/reading location

Invitation

SISSISSISSIS

SIS

SIS

SIS

Server

Server

SIS

PACS


Breast cancer workflow

Abnormal

Routinefollow-up

Calc

Diagnosticexam

W/Hand-heldUltrasound

MRI

Mass

Normal

AbnormalDiagnostic

Mammo

W/Mag View +Spot compressionScreening

MammoAsymptomatic

patients(75-90%)

Symptomatic(palpable)patients(10-25%)

BiopsyExam

Benign

Normal

Malignant

Normal

Treatment plan B

Treatment plan C

. . .

HER-2-positive

Baseline

HER-2/New level

Herceptin Tykerb

treatment

HER-2/New decreasing

Monitor

HER-2/New level

HER-2/New increasingStop Herceptin treatment

Develop new treatment plan


Workflow optimization in hospital quality audits

Streamlining Acceditation Outcomes

Customer challengesJCAHO/JCI accreditation process includes 300 standards, 12,000 measurable elementsOne-third of 5,000 accredited US hospitals are audited annually and randomly; all report data monthly

JCI has accreditation programs in 60 countries; 30 countries currently have accredited hospitalsPay for Performance proven to improve quality of care

Growing number of Soarian contracts

IT orders have strong follow -on business

Leading healthcare providers chose Soarian

303 305 315361 367 370 375

450427

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

+22% p.a .

Growing number of contracted Soarian Modules

IT orders have strong follow -on business

Leading healthcare providers chose Soarian

303 305 315361 367 370 375

450427

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

+22% p.a .


Live Soarian Workflows Automate all JCAHO Core Measures

23hr Observation ManagerAcute Myocardial InfarctionAdmission Assessment CompletionAdmission ManagerAdvance DirectiveAdverse Drug Event – INR & CoumadinAllergy Assessment TrackingAssessment ManagerBed Cleaning Manager Central Scheduling Script ManagerClinical LetterClinic Visit NotificationCongestive Heart Failure (CHF)Consult Order ManagerCritical LabsDiabetes ManagerDietary Trayline ManagerDeep Vein Thrombosis (DVT)HIM N tifi ti

Live Soarian Workflows automate all JCAHO Core Measures


Workflow innovation in acute myocardial infarction

Achieve consistent world-class standard of care

Innovatenext-generationstandard of care

Automate

System level


Enterprise level

Disease level

Regional level

Customer challenges“How do I diagnose accurately, meet JCAHO 90 min criteria, and reduce ED backlog and costs?”

50% hospital admissions through ED, ED visits have 20% increase over the past decade, waiting times increasingED backlog of non-critical patients leads to ambulance diversions, 25% of MI patients wait over 50 minutes~4m (65%) of 6.2m annual ED chest pain visits have low clinical risk profileMost undergo “unnecessary” admission and testing –6-24 hours at a cost of $2,400-$9,600

The cardiovascular segment represents the single largest disease category worldwide

Cardiovascular disease is already more prevalent in India and China than in all economically developed nationsin the world combined.

Atlas of Heart Disease and Stroke, WHO, Sept. 2004

Optimal and Efficient Care for Suspect MI Patients


Our large customer base asset: world-class benchmarksExample: door-to-balloon time in ACS

Best-practice process elements Use of telemetric 12-lead field-EKG by paramedics

Having the ED activate the cath lab while patient still en route

Having a single call to a central page operator to activate cath lab

Expecting staff to arrive at cath within 20 minutes after page

Having an attending cardiologist always on site

Having staff in ED and cath lab use and receive real-time feedback

Use designated elevator for cath patients

First evaluation by specialized nurses

Pre-packaged medication at ED

Pre-stocked angio suite

Role-independent patient preparation

Source: Siemens assessment of selected best practice sites, Bradley EH et al. N Engl J Med 2006

Siemens offers concreteauditable performanceimprovement

Door-to-balloontime reductionby 60-70 minutes!


Solve ED overcrowding, save money, and offer better careACS is a high cost, low probability, high liability ED evaluation

Only 8% of suspect-ACS patients are diagnosed with ACS

12-18 hour average time to release for negative suspect ACS patients

30-40% of catheterizations are negative

1% of catheterizations have complications

Missed MI is the highest cost medical malpractice lawsuit

US cost of CHD estimated at $142.1bn annually


Current standard of care leads to ED overcrowding and loss of time in non-STEMI ACS

STEMI120

Others54,000

ED visits/year60,000

13-18 hrs for suspected ACS

Actual Site

Chest pain6,000

Suspected ACS5,880

Conventional Troponin time = 6 hours

Typical CCTA requires beta-blockers

Myocardial infarction941 Non ACS/other

4,939


Goal: Innovate new standard of care then automateunique Siemens technologies could save time at critical steps

Efficiency value – 4939 pts x $450/hr x 7 hrs (avg. red.) = $15,557,850/yr

STEMI120

Others54,000

ED visits/year60,000

Non ACS/other4,939

Suspected ACS Triage Time- reduced from 18 to as little as 2 hrs

Actual Site

Chest pain6,000

Suspected ACS5,880

Unique enabling technologies

Myocardial infarction941

High Sens. Troponin I (6 hours reduced to 30 min) ADVIA Centaur TnI-Ultra™

CCTA - no beta-blockers, up to 1 hour saved)SOMATOM® Definition - Dual Source CT


Future workflow innovation in prostate cancer

Innovating the Next Generation Standard of Care

Achieve consistent world-class standard of care

Innovatenext-generationstandard of care

Automate

System level


Enterprise level

Disease level

Regional level

Customer challenges1 in 6 men will be struckIn USA alone, a new case every 2.5 minutesA man dies of prostate cancer every 18 minutes

… and screening, diagnosis, and treatment are all suboptimal

Mortality rate decreasesIncidence increases


Prostate cancer: Three major points of failure

Screening: Sensitive but non-specific

Diagnosis: Random biopsies & imprecise staging

Blood Test (PSA): Cancer, when detected, is detected earlier than with DRE but …False reassurances:

25% of men have cancer when PSA is normal

False alarms:Only 12% of men have cancer when PSA is abnormalUp to 88% of men have unnecessary biopsies as a result of PSA results

One million men per year in USA alonehave unnecessary biopsies

Estimated healthcare costs of over $2bn annually 20% of cancers are missed even with biopsy20-30% of cancers underestimated in virulence and extent; inability to accurately distinguish virulent from non-aggressive

Treatment: Blind and often not matched to disease virulence3.

1. 2.

Best treatment for low-risk cancer:Active surveillance (“watchful waiting”)

Best treatments for high-risk cancer:Radical prostatectomy, but 10% of men have unnecessary surgeryRadiation treatment, but 44% of men have unnecessary radiation

Complications:50-80% rate of impotence50-60% rate of incontinence

Treatment failures:70,000 men per year (about 1 in 2 men)


Screening specificity improved through new DX tests and innovative imaging technology

Improve low specificity of current PSA testing by using a multi-marker panel for prostate cancer

tPSA

fPSA

cPSA

Testosterone

Her-2/new

in combination with REMIND™clinical decision support software.

50% reduction of false-positive results is possible, thus saving unnecessary biopsies.


New shared molecular markers focus on more precise staging and “watchful waiting” with minimal risk

In vitro diagnostics In vivo diagnostics

Existing serum/plasma-based test for CA-IXTissue-based test for CA-IX in development

PET imaging agent for CA-IX in development

Goals: Identification of invasive tumorsDiagnosis of carcinomas, amenable to treatment

The goal:Discover all indicators of whether the cancer is virulent or passive.

Must we treat or just watch?

CA-IX

Hypoxia response: Identified proprietary CA-IX ligandsIn vivo proof of concept establishedLead optimization in progress

Hypoxia relevance: Hypoxic tumor tissue is not as responsive to radiotherapy as normoxic tissue

Cell proliferation Hypoxia Hypoxia response Angiogenesis Apoptosis

Carbonic Anhydrase-IX is a cancer biomarker, indicative of invasive, often hypoxic tumors


Healthcare IT the strategic factor in building future knowledge based new businesses

Treatment plans

Genomics

Proteomics

Lab pharmacy text notes

Images

Probabilisticinferenceover time

Combineconflicting local evidence

Clinical decision support application(to “planning”)

Healthcare IT unleashed new business opportunities:Expanding the workflow orchestration to guidance on clinical decisions

REMIND: Reliable Extraction and Meaningful Inference from Non-structured Data


Targeted radiotherapy as an alternative to surgeryavoids unnecessary complications and cost


Prostate cancer: Three major points of failure

Screening: Sensitive but non-specific

Diagnosis: Random biopsies & imprecise staging

Blood Test (PSA): Cancer, when detected, is detected earlier than with DRE but …False reassurances:

25% of men have cancer when PSA is normal

False alarms:Only 12% of men have cancer when PSA is abnormalUp to 88% of men have unnecessary biopsies as a result of PSA results

One million men per year in USA alonehave unnecessary biopsies

Estimated healthcare costs of over $2 billion annually 20% of cancers are missed even with biopsy20-30% of cancers underestimated in virulence and extent; inability to accurately distinguish virulent from non-aggressive

Treatment: Blind and often not matched to disease virulence3.

1. 2.

Best treatment for low-risk cancer:Active surveillance (“watchful waiting”)

Best treatments for high-risk cancer:Radical prostatectomy, but 10% of men have unnecessary surgeryRadiation treatment, but 44% of men have unnecessary radiation

Complications:50-80% rate of impotence50-60% rate of incontinence

Treatment failures:70,000 men per year (about 1 in 2 men)

Prostate cancer potential savings is hugewith simultaneous improvement in clinical outcomes

Unnecessary biopsiesCost = $2bn

Potential cost of additional screening (Imaging and IVD) = $600m

Savings with improved imaging techniques for diagnosis

= $1.4 billion(assuming cancer yield of only 25%)

Unnecessary treatment andcomplications:

Potential cost savings if unnecessary treatment is replaced with active surveillance with imaging

= $1.6 billion

Invasive treatments often not appropriate:Current costs of treatment = $8bn per yearImage-guided procedure = 1/2 to 1/3 of cost of standard treatmentPotential cost savings if 50% of procedures replaced with minimally invasive treatment

= $2 billion


The Workflow and Solutions will accelerate share and margin growth in sector

Modalities Installed

Base

DX Installed

Base

IT Installed

Base

The installed base of our three principle technologies is the critical asset

Sales cross coverage will exploit relationships

With each “combined solution”Siemens can “pull” more of our portfolio into existing customers

Result:

Installed base increase

Sales cost leverage

Opportunity for value-added consulting



of Care


Standard of Care

Automate

Being THE workflow company in healthcare by 2010

System level

Department / workplace level

Enterprise level

Disease level

Regional levelClinical Dimensions

CardiologyNeurologyOncologyRadiologyetc.

.

DiscoverBest-in-class hospitals

Study in depth

Package and train

Replicate globally pulling products/ services

Results short-term

AutomateUsing existing IT infrastructure

Eventually Siemens IT

Ultimately Soarian WF Engine

Replicate globally pulling products/ services

Results medium-term

InnovateTechnical solution to critical medical problem

Find academic partner

Conduct trials

Publish

Replicate at academic centers until general acceptance

Results long-term


Focus and deliver

Driving profitable growth and cash returns

Getting the most out of the integrated diagnostics company

Achieving best-in-class cost position incl. SG&A reduction

Innovating for fast growth and competitiveness

+Drive organic growth above market growth

+

Deliver target margin

+

Convert to cash


Reconciliation and Definitions for Non-GAAP Measures (I)

Group profit from Operations is reconciled to Income before income taxes of Operations under Reconciliation to financial statements on thetable Segment Information. See our Financial Publications at our Investor Relations website under www.siemens.com/ir.

Earnings before interest and taxes (EBIT) (adjusted) is Income from continuing operations before income taxes less Financial income (expense), net and Income (loss) from investments accounted for using the equity method, net.

Earnings before interest, taxes, depreciation and amortization (EBITDA) (adjusted) is EBIT before Depreciation and Amortization, definedas amortization and impairments of intangible assets depreciation and impairments of property, plant and equipment.

Group profit is reconciled to EBIT and EBITDA on the table Segment Information Analysis (II). See our Financial Publications at our Investor Relations website under www.siemens.com/ir.

Return on Capital Employed (ROCE) is a measure of how capital invested in the Company or the Group yields competitive returns. For the Company, ROCE is calculated as Net income (before interest) divided by average Capital employed (CE). Net income (before interest) is defined as Net income excluding Other interest income (expense), net and excluding taxes on Other interest income (expense), net. Taxes on Other interest income (expense), net are calculated in simplified form by applying the current tax rate which can be derived from the Consolidated Statements of Income, to Other interest income (expense), net. CE is defined as Total equity plus Long-term debt plus Short-term debt and current maturities of long-term debt minus Cash and cash equivalents. Because Siemens reports discontinued operations, Siemens also calculates ROCE on a continuing operations basis, using Income from continuing operations rather than Net income. For purposes of this calculation, CE is adjusted by the net figure for Assets classified as held for disposal included in discontinued operations less Liabilities associated with assets classified as held for disposal included in discontinued operations.For the Operations Groups, ROCE is calculated as Group profit divided by average Net capital employed (NCE). Group profit for the Operations Groups is principally defined as earnings before financing interest, certain pension costs and income taxes. Group profit excludes various categories of items which are not allocated to the Groups since the Managing Board does not regard such items as indicative of the Groups’performance. NCE for the Operations Groups is defined as total assets less tax assets, provisions and non-interest bearing liabilities other than tax liabilities.Average (Net) Capital employed for the fiscal year is calculated as a 'five-point average' obtained by averaging the (Net) Capital employed at the beginning of the first quarter plus the final figures for all four quarters of the fiscal year. For the calculation of the average during for the quarters, see below:


Reconciliation and Definitions for Non-GAAP Measures (II)

• NCE for Operations Groups

Our cash target is based on the Cash Conversion Rate (CCR), which serves as a target indicator for the Company’s or the Group’s cash flow. For the Company, CCR is defined as the ratio of Free cash flow to Net income, where Free cash flow equals the Net cash provided by (used in) operating activities less Additions to intangible assets and property, plant and equipment. Because Siemens reports discontinued operations, this measure is also shown on a continuing operations basis, using Income from continuing operations, Net cash provided by (used in) operating activities – continuing operations and Additions to intangible assets and property, plant and equipment for continuing operations for the calculation. For the Groups, CCR is defined as Free cash flow divided by Group profit.

All values needed for the calculation of ROCE and CCR can be obtained from the Consolidated Financial Statements and Notes to Consolidated Financial Statements.Group profit, Net capital employed and Free cash flow for the Company and the Groups can be found on the table Segment information. Our Consolidated Financial Statements are available on our Investor Relations website under www.siemens.com/ir.

Siemens ties a portion of its executive incentive compensation to achieving economic value added (EVA) targets. EVA measures the profitability of a business (using Group profit for the Operating Groups and Income before income taxes for the Financing and Real estate businesses as a base) against the additional cost of capital used to run a business (using NCE for the Operating Groups and risk-adjusted equity for the Financing and Real estate businesses as a base). A positive EVA indicates that a business has earned more than its cost of capital, and is therefore defined as value-creating. A negative EVA indicates that a business is earning less than its cost of capital and is therefore defined as value-destroying. Other organizations that use EVA may define and calculate EVA differently.

Average calculation for CE*:

4 Point average: (CE ending Q4 Prior year + CE ending Q1 + CE ending Q2 + CE ending Q3) / 4Q33 Point average: (CE ending Q4 Prior year + CE ending Q1 + CE ending Q2) / 3Q22 Point average: (CE ending Q4 Prior year + CE ending Q1) / 2Q1

Year-to-Date

2 Point average: (CE ending Q3 + CE ending Q4) / 2Q42 Point average: (CE ending Q2 + CE ending Q3) / 2Q32 Point average: (CE ending Q1 + CE ending Q2) / 2Q22 Point average: (CE ending Q4 Prior year + CE ending Q1) / 2Q1

Quarter-to-Date


Reconciliation and Definitions for Non-GAAP Measures (III)

Our capital structure target is based on an Adjusted industrial net debt divided by EBITDA (adjusted). For the calculation of Adjusted industrial net debt, we subtract from Net debt (defined as Long-term debt plus Short-term debt and current maturities of long-term debt less Cash and cash equivalents less Available-for-sale financial assets) (1) SFS debt excluding SFS internally purchased receivables and (2) 50% of the nominal amount of our hybrid bond; and add/subtract (3) Funded status of Pension benefits, (4) Funded status of Other post-employment benefits; andadd (5) Credit guarantees. The components of Net debt are available on our Consolidated Balance Sheets, SFS debt less internally purchased receivables is available in our Management Discussion & Analysis under Capital Resources and Requirements. The Funded status of our principle pension plans and Other post-employment benefits, the amount of credit guarantees and the nominal amount of our Hybrid bond is available in the Notes to our Consolidated Financial Statements.

To measure Siemens’ achievement of the goal to grow at twice the rate of global GDP, we use GDP on real basis (i.e. excluding inflationand currency translation effects) with data provided by Global Insight Inc. and compare those growth rates with growth rates of our revenue(under IFRS). In accordance with IFRS, our revenue numbers are not adjusted by inflation and currency translation effects.

Return on equity (ROE) margin for SFS was calculated as SFS’ Income before income taxes divided by the allocated equity for SFS.Allocated equity for SFS for the financial year 2007 is €1.041 billion. The allocated equity for SFS is determined and influenced by the respective credit ratings of the rating agencies and by the expected size and quality of its portfolio of leasing and factoring assets and equity investments and is determined annually. This allocation is designed to cover the risks of the underlying business and is in line with common credit risk management standards in banking. The actual risk profile of the SFS portfolio is monitored and controlled monthly and is evaluated against the allocated equity.

Group profit from Operations, EBIT (adjusted), EBITDA (adjusted), ROCE, CCR, EVA and Adjusted industrial net debt are or may be Non-GAAP financial measures as defined in relevant rules of the U.S. Securities and Exchange Commission. Our management takes these measures,among others, into account in its management of our business, and for this reason we believe that investors may find it useful to consider these measures in their evaluation of our performance. None of Group profit from Operations, EBIT (adjusted), EBITDA (adjusted), ROCE and EVA should be viewed in isolation as an alternative to IFRS net income for purposes of evaluating our results of operations; CCR should not be viewed in isolation as an alternative to measures reported in our IFRS cash flow statement for purposes of evaluating our cash flows; and Adjusted industrial net debt should not be viewed in isolation as an alternative to liabilities reported in our IFRS balance sheet for purposes of evaluating our financial condition.


Siemens Investor Relations Team

Webpage: http://www.siemens.com/investorrelations

e-mail: [email protected]

Telephone: +49-89-636-32474

Fax: +49-89-636-32830

Michael Sen +49-89-636-33780

Florian Flossmann +49-89-636-34095

Sabine Groß +49-89-636-35755

Dr. Martin Meyer +49-89-636-33693

Christof Schwab +49-89-636-32677

Dr. Gerd Venzl +49-89-636-44144

Susanne Wölfinger +49-89-636-30639

Siemens Healthcare – Workflow & Solutions Division · Workflow optimization in breast cancer...

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