Philips 2004 Annual Report Download - page 69

GWithin Semiconductors, despite the improved market situation, a
further reduction of excess capacity, overhead and R&D costs in
Europe was realized. Related restructuring costs recognized in the
2004 income statement amounted to EUR 41 million and consisted
of:
Lay-off costs EUR 40 million (related to approximately
700 people)
Other costs EUR 1 million (contract obligations)
Annual savings are expected to total approximately EUR 25
million. At year-end 2004, the outstanding accrual amounted to
EUR 39 million.
GWithin Lighting, further rationalization took place in Lamps and
Luminaires through the downsizing of capacity. Costs related to
these actions and to asset impairments in Spain and the
Netherlands recognized in the 2004 income statement amounted
to EUR 65 million and consisted of:
Lay-off costs EUR 30 million (related to approximately
300 people)
Asset write-downs EUR 33 million
Other costs EUR 2 million (contract obligations)
Annual savings are expected to total approximately EUR 20
million. At year-end 2004, the outstanding accrual amounted to
EUR 11 million.
GThe remaining restructuring projects in 2004 for the Philips Group
amounted to EUR 11 million and covered a number of smaller
projects, all relating to lay-offs.
Restructuring projects started in 2004 are expected to lead to a
headcount reduction of approximately 2,200 persons (total lay-offs
in 2003 approximately 4,900 persons, and in 2002 approximately
6,700 persons).
The following table presents the changes in the restructuring
liability during 2004:
Dec. 31,
2003
add-
itions
utilized released*other
changes**
Dec. 31,
2004
Personnel costs 155 153 (177) (13) (5) 113
Write-down of
assets – 125 (125) – – –
Other costs 86 37 (63) (14) (11)35
Total 241 315 (365) (27) (16) 148
*In 2004, releases of surplus provisions amounted to EUR 27 million and were caused by
reduced lay-off costs. Natural turnover and the fact that certain people, originally expected to
be laid off, were able to find other employment elsewhere within the Company, made it
possible for the restructuring provision to be reduced and released.
** Other changes primarily related to translation differences.
Restructuring and impairment charges in 2003 amounted to
EUR 555 million, consisting of additions totaling EUR 490 million,
which were partly offset by releases of EUR 83 million, and
goodwill impairment charges of EUR 148 million.
The most important projects in 2003 were in:
GSemiconductors, to adjust capacity, overheads and R&D to the
decline in the market. Total costs were EUR 309 million (including
asset impairment);
GConsumer Electronics, in relation to the decision to relocate the
monitor activities in Hungary and Taiwan to China, for a total
amount of EUR 72 million;
GLighting, for an amount of EUR 29 million to transfer activities to
low-wage countries;
GOther Activities, for an amount of EUR 62 million in connection
with the decision to change the business model of Philips Business
Communications and to reduce the Research activities in the
United Kingdom, as well as for asset impairment in Sunnyvale,
USA.
68 Philips Annual Report 2004
Operating and financial review and prospects