Philips 2004 Annual Report Download - page 128

Investments in, and loans to, unconsolidated companies
The changes during 2004 are as follows:
total investments loans
Balance of equity method investments as of January 1, 2004 4,762 4,703 59
Changes:
Reclassification to other non-current financial assets (364) (364) –
Transfer to/from consolidated companies (33) (33) –
Acquisitions/additions 388 387 1
Sales/repayments (411) (404) (7)
Share in income/value adjustments 1,287 1,287 –
Dividends received (59) (59) –
Translation and exchange rate differences 20 24 (4)
Balance of equity method investments as of December 31,
2004 5,590 5,541 49
Cost method investments 80 80 –
Balance as of December 31, 2004 5,670 5,621 49
Included in investments is EUR 980 million (2003: EUR 967 million), representing the excess of
the Company’s investment over its underlying equity in the net assets of the unconsolidated
companies. The principal amounts are EUR 857 million (2003: EUR 906 million) for LG.Philips
LCD, EUR 35 million (2003: EUR 38 million) for LG.Philips Displays, and EUR 68 million for
NAVTEQ.
Acquisitions primarily relate to the equity contribution to LPD (EUR 202 million) and the
investment in Crolles2 (EUR 105 million).
As a consequence of impairment charges at LPD in previous years, the equity of the company
became negative, and LPD commenced negotiations with its financiers about a refinancing
package, as it had breached some covenants in its financing agreements. In 2004, a refinancing
package was concluded with the financiers of LPD for restructuring of its debt, resulting in
extended maturities and reduced interest rates. The parent companies LG Electronics and the
Company each agreed to provide an equity contribution of USD 250 million and a guarantee of
USD 50 million as security for principal, interest and fees payable by LPD. At the same time, the
USD 200 million guarantees from each shareholder lapsed.
In August, our subsidiary NAVTEQ sold shares in an IPO, as discussed in note 1. Following this
IPO, Philips’ interest in NAVTEQ decreased to 34.8%, and the equity method has been applied.
The occurrence of an IPO was a triggering condition for a subsequent exercise of a put-and-call
option between Philips and NavPart I B.V., a consortium that holds a stake in NAVTEQ.
Subsequently, Philips exercised its call option, representing approximately 2.9% of NAVTEQ’s
shares. The exercise of the call has been preliminarily recognized in the caption Investments in
unconsolidated companies, while the offsetting liability is recognized in the caption Other
current liabilities.
Sales mainly consist of the sale of Atos Origin shares, amounting to a book value of EUR 391
million.
127Philips Annual Report 2004