Philips 2004 Annual Report Download - page 49

In 2004 the Crolles2 waferfab venture with STMicroelectronics
and Freescale for the advanced development of silicon
manufacturing technology unveiled its 90-nm process, thus
confirming its progress towards strong manufacturing cost savings.
Philips’ share in the costs of this facility amounted to EUR 60
million.
Results on the sale of shares in 2004 were primarily attributable to
the gain on the sale of 11 million shares in Atos Origin (EUR 151
million), resulting in a reduction of the Company’s shareholding in
Atos Origin from 31.9% to 15.4% at year-end 2004. The amount in
2003 mainly resulted from the sale of 100 million American
Depository Shares (each representing 5 common shares) of TSMC
(EUR 695 million).
Gains and losses arising from dilution effects were primarily due to
a EUR 156 million gain recorded as a result of a reduction of the
Company’s shareholding in Atos Origin (from 44.7% to 31.9%)
following the Schlumberger Sema acquisition by Atos Origin in
January 2004 and a EUR 108 million gain recorded as a result of a
dilution of the Company’s shareholding in LG.Philips LCD (from
50% to 44.6%) in conjunction with the latter’s IPO.
In accordance with TSMC’s Articles of Incorporation, yearly
bonuses to employees have been granted partially in shares.
Generally, stock dividends will also be paid. In 2004 and 2003, new
shares were issued in grants to employees and as a stock dividend.
Because Philips only participates in the stock dividend distribution,
its shareholding in TSMC was diluted as a result of shares issued to
employees. Accordingly, Philips recorded a dilution loss of EUR 10
million in 2004 and EUR 15 million in 2003. This dilution loss
decreased the book value of Philips’ investment in TSMC and is
charged to income under results relating to unconsolidated
companies.
On August 16, 2002, Atos Origin purchased all of the common
stock of KPMG Consulting in the UK and the Netherlands. The
consideration for the acquisition consisted of the issue of
3,657,000 bonds redeemable in shares (ORA bonds) with stock
subscription warrants attached at a price of EUR 64.20 each,
representing a total amount of EUR 235 million, and a cash
payment of EUR 417 million. The bonds and warrant bonds were
redeemed in shares on August 16, 2003. As a consequence, Philips’
shareholding was diluted from 48.4% to 44.7%, resulting in a
dilution gain in 2003 of EUR 68 million. This dilution gain increased
the book value of Philips’ investment in Atos Origin and was
credited to income under results relating to unconsolidated
companies.
Furthermore, in 2003, the Company recorded an investment
(goodwill) impairment charge of EUR 411 million with respect to
its investment in LG.Philips Displays.
Minority interests
The share of minority interests in the income of group companies
in 2004 amounted to EUR 51 million, compared with a share of
EUR 56 million in 2003. This was mainly influenced by the effect of
the consolidation of SSMC (EUR 29 million), which was more than
offset by NAVTEQ (EUR 32 million).
Net income
Income before the cumulative effect of a change in accounting
principles in 2004 amounted to EUR 2,836 million (EUR 2.22 per
common share – basic) compared to EUR 709 million in 2003
(EUR 0.55 per common share – basic).
The cumulative effect of the change in accounting principles in
2003 was EUR 14 million (EUR 0.01 per common share – basic).
Net income in 2004 was EUR 2,836 million (EUR 2.22 per
common share – basic) compared to EUR 695 million in 2003
(EUR 0.54 per common share – basic).
48 Philips Annual Report 2004
Operating and financial review and prospects