Philips 2005 Annual Report Download - page 72

Philips Annual Report 200572
Earnings before interest and tax for Other Activities
in millions of euros 2004 2005
Corporate Technologies (323 ) (219 )
Corporate Investments 35 (62 )
Other 654 125
366 (156 )
The results of Other Activities in 2005 included improvements
at Corporate Technologies (due to the closure of Liquid
Crystal on Silicon (LCoS) and the divestment of PolyLED)
and the Global Service Units (as a result of gains on real
estate transactions). At Corporate Investments, income
fell mainly due to the weak operational performance of
Assembléon, as well as impairment and restructuring charges.
The 2004 EBIT at Other Activities benefi ted from the
initial public offering of NAVTEQ, which resulted in a gain
of EUR 635 million.
The Unallocated sector consists mainly of costs of the
corporate and regional organizations, pension costs not
allocated to the sectors and costs for the global brand
campaign. The total loss of Unallocated was reduced by
EUR 69 million to a loss of EUR 471 million in 2005.
Total pension (costs) / benefi ts1)
in millions of euros
(600)
(300)
0
300
600
of which divisions of which Unallocated
350
411
2001
(164)
34
(130)
2002
(217)
(223)
(440)
2003
(169)
(112)
(281)
2004
(164)
(94)
(258)
2005
61
1) Restated to present the MDS activities as a discontinued operation
Pension costs in Unallocated were EUR 18 million lower
than in 2004 as a result of reduced costs in the Netherlands.
Higher expenditures were made for the global brand
campaign (EUR 138 million in 2005 compared to EUR 80
million in 2004).
Postretirement benefi t costs in Unallocated included
EUR 116 million from a total provision release of EUR 187
million. The latter was triggered by a change in Dutch law
relating to the treatment of medical insurance costs.
Financial income and expenses
Financial income and expenses consist of:
in millions of euros 2004 2005
Interest expenses (net) (258 ) (197 )
Sale of securities 442 233
Other 32 72
216 108
Net interest expenses were EUR 61 million lower than in
2004, mainly as a result of the higher average cash position
of the Company during 2005 compared to 2004.
Income from the sale of securities reported under
fi nancial income and expenses contained the following
main items:
in millions of euros 2004 2005
Income from the sale of securities:
Gain on sale of Atos Origin shares − 185
Gain on sale of Great Nordic shares − 48
Gain on sale of ASML shares 140 −
Gain on sale of Vivendi Universal shares 300 −
The sale of the remaining shares in Atos Origin and Great
Nordic, which were accounted for under available-for-sale
securities, resulted in gains of EUR 185 million and EUR 48
million respectively. In 2004, the remaining shares in
Vivendi Universal and ASML were sold.
Other fi nancial income of EUR 72 million mainly related
to a fair value gain on a share option (EUR 53 million)
within the convertible bond received in connection with
the sale and transfer of certain activities within Philips’
monitors and entry-level fl at TV business to TPV.
Other fi nancial income in 2004 primarily related to the
recognition of interest (EUR 46 million) resulting from a
favorable resolution of fi scal audits.
Income taxes
Income taxes amounted to EUR 586 million, compared to
EUR 358 million in 2004. Income taxes in 2005 included an
amount of EUR 240 million related to the transfer of shares
of TSMC to the Company from its fully owned subsidiary
Philips Electronics Industries Taiwan. This was partly offset
by tax gains of EUR 119 million relating to fi nal agreements
on prior-year taxes in various jurisdictions.
Management discussion and analysis