Philips 2005 Annual Report Download - page 91

Philips Annual Report 2005 91
Other Activities
Key data
in millions of euros 2003
1) 2004 1)
Sales 2,218 2,482
Sales growth
% (decrease) increase, nominal (25 ) 12
% (decrease) increase, comparable (5 ) 18
EBIT Corporate Technologies (293 ) (323 )
EBIT Corporate Investments (63 ) 35
EBIT Other 93 654
Total earnings before interest and tax (EBIT) (263 ) 366
as a % of sales (11.9 ) 14.7
Net operating capital (NOC) 150 117
Number of employees 27,086 23,869
1) Restated to present the MDS activities as a discontinued operation
For a reconciliation to the most directly comparable US GAAP measures, see the
section that begins on page 120.
Corporate Technologies
EBIT of Corporate Technologies in 2004 amounted to
a loss of EUR 323 million, compared to a loss of EUR 293
million in 2003, and was impacted by the discontinuation
of Liquid Crystal on Silicon activities, which led to a
restructuring charge of EUR 34 million. Following the
successful start of the Incubator program in 2003, the
number of innovative new projects captured by the Philips
Incubator accelerated during 2004, resulting in higher
investments. Research costs were less than in 2003,
due to the lower cost base. Total Philips research and
development expenditures were EUR 2.5 billion, slightly
below the 2003 level.
Corporate Investments
Within the Corporate Investments portfolio, almost all
businesses posted an improved performance. In particular,
the technology-related activities such as RF Solutions,
Philips Enabling Technologies Group and Assembléon,
benefi ting from prior-year restructuring, took full advantage
of the upswing in related technology markets. No major
divestments were made in 2004.
Other
The Finance Shared Services, People Services and IT Services
organizations were key contributors to the effi ciencies
achieved in 2004. The Real Estate Service Unit recorded
impairment charges for buildings in Aachen and Vienna,
which had a negative effect of EUR 18 million on EBIT.
Following its return to profi tability in 2003, Optical Storage
continued its upward trend, with EBIT increasing from
EUR 51 million to EUR 68 million in 2004. The initial public
offering of NAVTEQ was successfully completed in
August 2004, resulting in a EUR 635 million gain on the
sale of shares and a net cash infl ow of EUR 672 million.
Following the IPO, Philips’ interest in NAVTEQ decreased
from 83.5% to 34.8%.
Unallocated
The costs of the corporate center, including the Company’s
global brand management and sustainability programs, as
well as country and regional overheads, are not attributable
to the sectors but are reported separately under Unallocated.
After showing a decrease during 2003, the corporate
and regional overhead costs increased by EUR 82 million
in 2004, mainly due to spending on the global brand
campaign, which totaled EUR 80 million.
The total pension costs for the Company in 2004 amounted
to EUR 284 million, a decrease of EUR 158 million compared
to 2003, mainly caused by the renegotiated pension
agreements in the Netherlands. Of these pension costs of
EUR 284 million, a total of EUR 172 million was absorbed
by the divisions and the remaining EUR 112 million at
Corporate level. Net postretirement benefi t costs amounted
to EUR 39 million. The change agreed with Dutch trade
unions from a fi nal-pay to an average-pay pension system
in the Netherlands, which includes a limitation of the
indexation, has resulted in a reduction of the Company’s
projected benefi t obligation. In addition, the transfer of
existing pension obligations into a pre-retirement fund led
to a further reduction of the projected benefi t obligations
together with a reduction of pension plan assets.
The increase in the number of employees occurred mainly
in Asia, refl ecting our continued focus on growth areas,
especially China and India.