Philips 2004 Annual Report Download - page 64

The venture with STMicroelectronics and Motorola for the
development of new semiconductor technology in Crolles, France,
advanced to the test production stage during 2003. Philips’ share in
the costs since then amounted to EUR 45 million.
Results from unconsolidated companies included a non-cash
dilution gain of EUR 68 million related to Atos Origin. This gain
was due to an increase in the value of Philips’ equity in Atos Origin
as a result of a mandatory conversion into stock of Atos Origin’s
convertible bonds, issued in connection with an acquisition.
In January 2003, the Company acquired 49.5% of InterTrust, which
develops and licenses intellectual property relating to Digital
Rights Management and trusted computing. InterTrust performed
in line with expectations.
Minority interests
In 2003, the share of minority interests in income of group
companies amounted to EUR 56 million, compared with a share in
losses of EUR 26 million in 2002.
Minority interests in the income of the group companies in 2003
included EUR 36 million in respect of improved results at
NAVTEQ, which were partly attributable to a tax benefit.
Net income
Income before the cumulative effect of a change in accounting
principles amounted to a profit of EUR 709 million (EUR 0.55 per
common share – basic) in 2003, compared to a loss of EUR 3,206
million in 2002 (EUR 2.51 per common share – basic).
In 2003, the Company adopted SFAS No. 143 ‘Accounting for
Asset Retirement Obligations’.
The cumulative effect of this change in accounting principles
related to prior years was a one-time, non-cash charge to income
of EUR 14 million (net of taxes).
Net income in 2003 amounted to a profit of EUR 695 million
(EUR 0.54 per common share – basic), compared to a loss of
EUR 3,206 million in 2002 (EUR 2.51 per common share – basic).
Performance by sector
Medical Systems
2002 2003
Sales 6,844 5,990
% nominal (decrease) increase 42 (12)
% comparable increase 5 7
Income from operations 309 431
asa%ofsales 4.5 7.2
Net operating capital 4,849 3,671
Employees (FTEs) 31,027 30,611
See pages 210 and 211 for a reconciliation to the most directly comparable US GAAP measures.
In 2003 sales increased by 7% compared to 2002, excluding the
effect of the divestment of Health Care Products in 2002 and
currency movements. Sales were strong at Patient Monitoring,
Medical IT and Customer Services. All regions contributed to the
comparable sales growth in 2003.
In 2003 income from operations totaled EUR 431 million, including
an impairment charge of EUR 139 million for MedQuist and net
restructuring charges of EUR 7 million. In addition, a valuation
adjustment of EUR 35 million, related to the alignment of
inventory valuations across the Medical Systems business,
impacted income from operations unfavorably. Cardiac and
Monitoring Systems, Ultrasound, and Healthcare IT were the main
drivers of income improvements in 2003. Positive synergy effects
yielded EUR 342 million savings, close to the target of EUR 350
million.
Supply chain management resulted in a EUR 248 million reduction
in working capital, mainly in net inventories.
Domestic Appliances and Personal Care
2002 2003
Sales 2,273 2,131
% nominal (decrease) increase 2 (6)
% comparable increase 6 3
Income from operations 401 398
asa%ofsales 17.6 18.7
Net operating capital 529 464
Employees (FTEs) 8,766 8,180
See pages 210 and 211 for a reconciliation to the most directly comparable US GAAP measures.
Despite market weakness and a weakening US dollar, DAP was
able to mirror the excellent result of 2002 in 2003.
63Philips Annual Report 2004