Electrolux 2005 Annual Report Download - page 68

Notes
64 Electrolux Annual Report 2005
Amounts in SEKm, unless otherwise stated
Note 17 continued
in more detail. Note 16, Trade receivables, describes the trade receiv-
ables and related credit risks. The information in this note highlights
and describes the principal financial instruments of the Group regard-
ing specific major terms and conditions when applicable, and the
exposure to risk and the fair values at year-end.
Net borrowing
At year-end 2005, the Group’s net borrowing amounted to SEK 2,974m
(1,140). The table below presents how the Group calculates net
borrowing and what it consists of. As from 2005, liquid funds also
include prepaid interest expense and accrued interest income and
short-term borrowings include prepaid interest income and accrued
interest expense. This change is due to the Group’s view in classifying
assets and liabilities either as net assets related to operations or net
borrowings.
Net borrowing
2005 2004
Short-term loans 1,784 1,643
Short part of long-term loans 1,291 3,896
Fair-value derivative, liabilites 384 364
Accrued interest expense and prepaid interest income 198 —
Short-term borrowing 3,657 5,903
Long-term borrowing 5,257 3,940
Total borrowing 8,914 9,843
Cash and cash equivalents 4,420 7,675
Investments with maturities over three months 623 265
Fair-value derivative, assets 539 762
Prepaid interest expense and accrued interest income 358 —
Liquid funds 5,940 8,702
Revolving credit facility (EUR 500m) 1) 4,699 —
Net borrowing 2,974 1,140
1) The revolving credit facility of EUR 500m is not included in net borrowing, but can,
however, be used for short- and long-term funding.
Liquid funds
Liquid funds as defined by the Group consist of cash on hand, bank
deposits, prepaid interest expense and accrued interest income and
other short-term investments, of which the majority has original matu-
rity of three months or less. The table below presents the key data of
liquid funds. The book value of liquid funds is approximately equal to
fair value.
Liquidity profile
2005 2004
Investments with maturities over three months 623 265
Cash and cash equivalents 4,420 7,675
Fair-value derivative assets included in
short-term investments 539 762
Prepaid interest expense/accrued interest income 358 —
Liquid funds 5,940 8,702
% of annualized net sales1) 7.9 7.7
Net liquidity 2,283 2,799
Fixed interest term, days 43 61
Effective yield, % (average per annum) 2.4 2.4
1) Liquid funds plus an revolving credit facility of EUR 500m divided by annualized net sales.
For 2005, liquid funds, including an unused revolving credit facility of
EUR 500m, amounted to 7.9% (7.7) of annualized net sales. The net
liquidity is calculated by deducting short-term borrowings from liquid
funds. From 2005, liquid funds also consist of prepaid interest
expense and accrued interest income when calculating net borrowing
and net liquidity. In 2005, prepaid interest expense and accrued inter-
est income, reported as part of other operating assets in the balance
sheet, amounted to SEK 358m.
Interest-bearing liabilities
At year-end 2005, the Group’s total interest-bearing liabilities
amounted to SEK 8,332m (9,479), of which SEK 5,257m (3,940)
referred to long-term loans. Long-term loans with maturities within 12
months, SEK 1,291m (3,896), are reported as short-term loans in the
Group’s balance sheet. A significant portion of the outstanding long-
term borrowings has been made under the Electrolux global medium
term note program. This program allows for borrowings up to EUR
2,000m. As of December 31, 2005, Electrolux utilized approximately
EUR 300m (627) of the capacity of the program.
The majority of total long-term borrowings, SEK 5,661m, is taken
up at the parent company level. Electrolux has in 2005 negotiated
a committed credit facility of EUR 500m, which can be used as either
a long-term or short-term back-up facility. However, Electrolux
expects to meet any future requirements for short-term borrowings
through bilateral bank facilities and capital-market programs such as
commercial-paper programs.
At year-end 2005, the average interest-fixing period for long-term
borrowings was 1.4 years (1.3). The calculation of the average inter-
est-fixing period includes the effect of interest-rate derivatives used
to manage the interest-rate risk of the debt portfolio. The interest-rate
at year-end for the total borrowings was 5.1% (4.9).
The fair value of the interest-bearing loans was SEK 7,976m. The
fair value including swap transactions used to manage the interest
fixing was approximately SEK 7,879m. The loans and the interest-
rate swaps are valued marked-to-market in order to calculate the fair
value. When valuating the loans, the Electrolux credit rating is taken
into consideration.
The table on the following page sets out the carrying amount of
the Group’s interest-bearing liabilities that are exposed to fixed and
floating interest-rate risk.