Annual Report 2006 ISS Global A/S

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 January – 31 December. Amounts in DKK millions
30. Contingent liabilities
Senior Facility Agreement
FS Funding A/S has executed a share pledge over its shares in ISS A/S as security for ISS Global´s senior facilities and a secondary
share pledge over such shares as security for the subordinated notes issued by FS Funding A/S.
ISS Global A/S, a 100% owned subsidiary of ISS A/S, acceded to the senior facilities agreement and thereby obtained a right to
make borrowings under the senior facilities.
ISS A/S, ISS Global A/S and certain material subsidiaries of ISS Global A/S in Australia, Belgium, Denmark, Finland, France, the
Netherlands, Norway, Spain, Sweden, and the United Kingdom have provided guarantees for ISS Global A/S' borrowings under the
senior facilities. The guarantees have been backed up by security over bank accounts, trade receivables, intra-group receivables and
intellectual property rights of ISS A/S and these subsidiaries. In addition, the shares in the material subsidiaries and shares in certain
of their subsidiaries as well as shares in certain subsidiaries in Austria, Germany, Hong Kong, Ireland, Portugal, Singapore and
Switzerland have been pledged. Neither ISS A/S nor any of its direct of indirect subsidiaries have guaranteed or granted any security
for FS Funding's borrowing used for financing the acquisition of ISS A/S.
Operating leases
Operating leases consist of leases and rentals of properties, vehicles (primarily cars) and other equipment. The total expense under
operating leases in the income statement amounted to DKK 1,679 million (DKK 1,462 million in 2005). Assuming the current car fleet
etc. is maintained, the future minimum lease payments under operating leases are:
Year 1 Year 2 Year 3 Year 4 Year 5
After
5 years
Total lease
payment
At 31 December 2006 1,161 820 574 393 262 424 3,634
At 31 December 2005 1,029 749 511 323 205 303 3,120
Additional future lease payments of DKK 10 million (DKK 26 million in 2005) existed regarding associates at 31 December.
Commitment vehicle leases
On 1 January 2005 ISS Global entered into a new global car fleet lease framework agreement for three years, including an option for
extension for another subsequent three year term. The framework agreement contains an option for ISS Global to terminate the
underlying agreement for an entire country or the entire commitment with four weeks notice, to the end of a quarter subject to payment
of a termination amount. The majority of the underlying agreements have a duration of 3-5 years. The disclosed contingent liablity
includes ISS Global's total leasing commitment assuming no early termination of any agreement.
Guarantee commitments
Indemnity and guarantee commitments at 31 December 2006 amounted to DKK 361 million (DKK 243 million in 2005).
Performance guarantees
ISS Global issued performance guarantee bonds for service contracts with an annual revenue of DKK 983 million (DKK 869 million in
2005) of which DKK 758 million (DKK 667 million in 2005) were bankguaranteed performance bonds. Such performance bonds are
issued in the ordinary course of business in the service industry.
Outsourcing of IT
ISS Global has an IT outsourcing agreement with Computer Sciences Corporation (CSC) running until 2015. ISS Global's contractual
obligations related to the agreement at 31 December 2006 amounted to approximately DKK 388 million (DKK 430 million in 2005). ISS
Global and CSC have been in discussions on implications of certain aspects of the outsourcing agreement. These discussions
included various claims of each party and have lead to change of scope of the contract. As part of the re-scoping of the IT outsourcing
agreement ISS Global has incurred costs amounting to DKK 100 million, which have been recognised at 31 December 2006 in Other
income and expenses, net. The subsequent discussions regarding re-scoping of the contract between ISS Global and CSC as well as
the incurred costs, which have been recognised at 31 December 2006, have resulted in a reduction of ISS Global's contractual
obligations of at least DKK 160 million.
Continues
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ANNUAL REPORT 2006 / Consolidated Financial Statements
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