Philips 2004 Annual Report Download - page 68

Restructuring and impairment
charges
During 2004, the Company continued its efforts to realign its
portfolio, further improve efficiency and develop a more flexible
cost base. A net charge of EUR 288 million was recorded for
restructuring and asset impairments. Additionally, the Company
recorded goodwill impairment charges aggregating to EUR 596
million, primarily related to MedQuist.
Restructuring and impairment charges
in millions of euros 2003 2004
charges estimated
annualized
future savings
charges estimated
annualized
future savings
Restructuring:
Medical Systems 18 35 3–
DAP – – 85
Cons. Electronics 72 50 140 105
Lighting 29 25 35 20
Semiconductors 304 185 41 25
Other Activities 32 35 35 25
Release of excess
provisions (83) (27)
Total restructuring 372 330 235 180
Asset impairment:
Lighting – 30
Semiconductors 5 –
Other Activities 30 23
Total asset impairment 35 53
Goodwill impairment:
Medical Systems 139 590
Semiconductors 8 4
Other Activities 12
Total goodwill
impairment 148 596
Total restructuring
and impairment 555 884
The components of restructuring and impairment charges
recognized in 2002, 2003 and 2004 are as follows:
2002 2003 2004
Personnel lay-off costs 245 173 153
Write-down of assets 214 254 125
Other restructuring costs 103 63 37
Release of excess provisions (78) (83) (27)
Net restructuring and asset
impairment charges 484 407 288
Goodwill impairment 19 148 596
Total restructuring and impairment
charges 503 555 884
For a presentation of the December 31 balances and rollforwards
of the activity during the year with respect to the restructuring
projects listed hereafter, please refer to note 2 of the consolidated
financial statements.
The most significant new projects in 2004 were:
GWithin Consumer Electronics, the R&D and production of the
Creative Display Solutions front-projection activity was stopped
together with the engine activities of LCoS. Furthermore,
worldwide the Business Renewal Program was accelerated. The
gross charge for these restructurings to the income statement
amounted to EUR 140 million and consisted of:
Lay-off costs EUR 61 million (related to approximately
1,000 people)
Asset write-downs EUR 50 million
Other costs EUR 29 million (contract obligations)
Annual savings are expected to total approximately EUR 105
million. At year-end 2004, the outstanding accrual amounted to
EUR 33 million.
GWithin Other Activities, the panel activities of LCoS have been
stopped. Total charges to the income statement for these
projects, together with asset impairment charges for buildings in
Aachen and Vienna, amounted to EUR 58 million and consisted of:
Lay-off costs EUR 11 million (related to approximately
100 people)
Asset write-downs EUR 42 million
Other costs EUR 5 million (contract obligations)
Annual savings are expected to total approximately EUR 25
million. At year-end 2004, the outstanding accrual amounted to
EUR 29 million.
67Philips Annual Report 2004