How To Understand And Understand The Financial Situation Of Cargotime.Com

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1 27. Income Tax Liabilities Tax liabilities changed as follows: in millions At January Additions Utilizations and advance payments for the current fiscal year Reversals Additions from the initial consolidation of subsidiaries Foreign currency translation At December In addition to the utilizations and advance payments for the current fiscal year, the changes in income tax receivables are also included in income taxes paid in the cash flow statement. The rise in income tax liabilities resulted in particular from units outside of Germany. In this context, there is also a 29.2 million increase in income tax receivables from 94.2 million to million caused by higher advance payments. 28. Indebtedness in millions Dec. 31, 2010 Dec. 31, 2009 Maturity Maturity Total up to 1 year over 1 year Total up to 1 year over 1 year Bonds 2, , Bank loans and overdrafts 1 5, , , , ,672.2 Derivative financial instruments Financial lease liabilities Liabilities from factoring/asset-backed securitization programs Other indebtedness Indebtedness 8, , , , , , Thereof 7.9 million (PY: 8.0 million) secured by land charges, mortgages and similar securities. 2 In 2010, other indebtedness includes 86.5 million (PY: 73.4 million) drawn down from the commercial paper program and 0.9 million (PY: 0.7 million) in liabilities on bills drawn and issued. 214

2 Bond issues Issuer/type Amount of issue in millions Carrying amount at Dec. 31, 2010 Stock market at Dec. 31, 2010 Coupon p.a. Issue/maturity and fixed interest until Issue price CGF Euro Bond ,500% 2010/ % CGF Euro Bond ,500% 2010/ % CGF Euro Bond 1, , , ,500% 2010/ % CGF Euro Bond ,125% 2010/ % Continental Tire Andina S.A. US $ Bonds Floating miscellaneous 97.61% 1 1 Average issue price. 3, , ,132.8 The change in the of the bonds from 5.2 million at the end of 2009 to 2,988.5 million at the end of fiscal year 2010 is due to the four bonds with a total volume of 3.0 billion placed by Conti-Gummi Finance B.V., Amsterdam, Netherlands, in the third quarter of All bonds are denominated in euros and participate in the extensive collateral package that was granted to the lending banks for the VDO loan in line with the renegotiations described below. The five-year bond of million with an interest rate of 8.5% p.a. was placed in July 2010, the seven-year bond of 1,000.0 million with an interest rate of 7.5% p.a. was placed at the beginning of September 2010, and the two other bonds were placed at the end of September 2010, each in the amount of million but with different maturities. The first bond matures in January 2016 and has an interest rate of 6.5% p.a., while the second matures in October 2018 and has an interest rate of 7.125% p.a. Interest payments on the bonds are made semi-annually in arrears. The issue conditions of all four bonds grant the issuer the option of early repayment. In line with IAS 39, these options were measured as an embedded derivative (please see Note 29). 215

3 Breakdown of credit lines and available financing from banks in millions Dec. 31, 2010 Dec. 31, 2009 Company Type 1 of issue Amount CAG, Conti Automotive, CRoA, CGF, Conti Benelux Book Fair Amount of issue Book Fair Interest Maturity , ,497.1 Euribor SEL 6, , , , , ,999.1 margin 2012 Conti Automotive % 2011 LBL % 2011 CGF % 2011 Conti Temic Electronics PL Euribor + margin 2011 USD- Libor + margin 2012 LBL % Conti Mabor LBL Euribor + margin CRoA LBL % 2011 Conti Automotive LBL % 2012 Conti Teves LBL % Conti Brazil LBL % CAG % LBL % Conti Brazil % LBL % CT Fluid Hungary LBL % Conti Tire China Production LBL EUR- Libor + margin 2015 CAS Changshu LBL % 2014 Various bank lines Credit lines and available financing from banks 7, ,339.0 Liabilities to banks 5, , , , SEL: syndicated euro loan; LBL: long-term bank loan; PL: promissory loan. 2 The credit line permits an extension of any drawdown until August Annual redemption payments. 4 Average interest rate (PY: 8.23%). 5 Originally to mature in Early repayment of million in January Interest rate at December 31, 2009: 6.34%. 7 Semi-annual redemption payments. 8 Monthly redemption payments. 9 Average interest rate (PY: 4.91%). 10 Average interest rate (PY: 3.44%). mainly variable mainly < 1 year The amounts for the prior year are presented comparably. 216

4 Explanation of company names q CAG, Continental Aktiengesellschaft, Hanover, Germany q CAS Changshu, Continental Automotive Systems Changshu, Co. Ltd., Changshu, China q CGF, Conti-Gummi Finance B.V., Amsterdam, Netherlands q Conti Automotive, Continental Automotive GmbH, Hanover, Germany q Conti Benelux, Continental Benelux S.A., Zaventem, Belgium q Conti Brazil, Continental do Brasil Produtos Automotivos Ltda., Varzea Paulista, Brazil q Conti Mabor, Continental Mabor Indústria de Pneus S.A., Lousado, Portugal q Conti Temic Electronics, Continental Temic Electronics (Phils.), Inc., Manila, Philippines q Conti Tire China Production, Continental Tires (Hefei) Co. Ltd., Hefei, China q CRoA, Continental Rubber of America, Corp., Wilmington, Delaware, U.S.A. q Conti Teves, Continental Teves Hungária Kft., Veszprém, Hungary q CT Fluid Hungary, ContiTech Fluid Automotive Hungária Kft., Mako, Hungary On December 31, 2010, credit lines and available financing from banks amounted to 7,925.6 million (PY: 12,339.0 million). Of these, a nominal amount of 2,774.2 million was not drawn down as of the reporting date (PY: 2,196.3 million). The share of long-term credit lines in this nominal amount was 2,196.7 million (PY: 1,803.9 million). In the year under review, the Continental Corporation utilized its commercial paper program, its factoring programs, and its various bank lines to meet short-term credit requirements. The VDO loan was utilized on December 31, 2010, by Continental AG and Continental Rubber of America, Corp. (CRoA), Wilmington, U.S.A., and d at a total of 4,297.0 million (PY: 9,180.1 million). As of the end of 2010, the amount promised under this loan was 6,484.9 million (PY: 11.0 billion). The significant reduction of the VDO loan is due to several effects: A material effect was the capital increase in January 2010 and the resulting reduction in net indebtedness. Continental generated net proceeds before tax effects from the capital increase of 1,056.0 million, which, in line with contract requirements, was used to partially repay tranche B of the VDO loan, which matured in August With the capital increase, Continental also established the conditions for the provision of a forward start facility (FSF) with a maximum volume of 2,500.0 million to refinance tranche B in August This connection was a component of the refinancing package to improve the finance and capital structure that was agreed in December 2009 in the framework of the successful conclusion of the renegotiation of the VDO loan. In the summer of 2010, in light of the positive market environment and the strong demand for its bonds, Continental implemented a further component of the refinancing package and, in the third quarter of 2010, placed four bonds with a total volume of 3.0 billion through Conti-Gummi Finance B.V., Amsterdam, Netherlands. The net proceeds from these were used for the partial repayment of the utilization of the VDO loan and for the repayment of loan borrowed to refinance tranche B of the VDO loan which matured in August 2010 (forward start facility). Also, a further repayment of tranche C of the VDO loan was made with a nominal amount of million in December 2010 in view of the positive business performance. For tranche C, due in August 2012, there were still interest hedges as of the end of 2010 amounting to 3,125.0 million. The resulting average fixed interest rate to be paid is 4.19% plus margin. Due in particular to the higher expected cash flows for the VDO loan as a result of rising margins, the carrying amount was adjusted in profit and loss in 2009 and in June At the end of 2010, the of these adjustments totaled 44.7 million (PY: 64.5 million). This deferral will be amortized over the term of the loan and reduces expenses accordingly. Against the backdrop of the global economic crisis, the need emerged for the first time at the end of 2008 to adjust selected conditions of the agreement for the VDO loan in line with the changing economic environment. A concept prepared by Continental AG was submitted to the banking syndicate in December 2008 and was approved by almost all lending banks in January Although Continental AG reacted well to the effects of the global crisis and, in particular, succeeded in creating and maintaining sufficient liquidity, a further need for adjustment of selected financial covenants associated with the VDO loan emerged at the end of The result of the renegotiations for 217

5 the VDO loan, which were concluded successfully at the end of December 2009, is an agreement on increased flexibility with regard to the ratio of net indebtedness to EBITDA and the ratio of EBITDA to net interest income. In addition, a further margin increase in comparison to the previous conditions and restrictions of the scope for dividend payments were agreed. The adjusted financial covenants also stipulate for the first time a limitation of the annual investment volume and the provision of an extensive collateral package by various companies in the Continental Corporation. In 2010, the agreed financial covenants were complied with as of the respective quarterly balance sheet date. Please see Note 29 about the structure of maturities of indebtedness. Financial lease liabilities The future payment obligations resulting from financial leases are shown in the following tables: December 31, 2010 in millions from 2016 Total Minimum lease payments Interest component Financial lease liabilities December 31, 2009 in millions from 2015 Total Minimum lease payments Interest component Financial lease liabilities The fair of the financial lease liabilities is million (PY: million). The effective interest rate of the leasing contracts lies between 5.1% and 8.8% (PY: between 5.5% and 8.7%). Minimum lease payments in 2013 result mainly from a purchase option for the new passenger and light truck tire factory in Hefei, China. 218