Philips 2005 Annual Report Download - page 94

Philips Annual Report 200594
Cash fl ows from investing activities
Cash fl ows from divestments and acquisitions
in millions of euros
4,500
3,000
1,500
0
(1,500)
(3,000)
(4,500)
divestments acquisition
s
1,305
(3,713)
2001
1,333
(641)
2002
2,086
(488)
2003
2,302
(449)
2004
3,368
(1,251)
2005
Net cash provided by investing activities of EUR 1,298
million in 2005 (2004: EUR 668 million) mainly consisted of:
Net capital expenditures of EUR 819 million, EUR 366
million below the level of 2004, the reduction evident
mainly at Semiconductors, which lowered investments
by EUR 247 million. The division remained, however,
the most capital-intensive with EUR 313 million in
total expenditure.
Acquisitions totaling EUR 1,205 million, mainly the
acquisition of the additional 47.25% share in Lumileds
which had a cash impact of EUR 788 million. Stentor
was acquired for EUR 194 million. The cash outfl ow
related to Crolles2 (Semiconductors venture) amounted
to EUR 55 million. In addition, cash payments of EUR 46
million were made for maturing currency hedges.
Cash proceeds from divestments of EUR 3,368 million,
mainly related to the sale of shares in NAVTEQ
(EUR 932 million), TSMC (EUR 770 million), Atos
Origin (EUR 554 million), LG.Philips LCD (EUR 938
million) and Great Nordic (EUR 67 million).
Net cash provided by investing activities of EUR 668 million
in 2004 (2003: EUR 766 million) mainly consisted of:
Net capital expenditures of EUR 1,185 million,
EUR 353 million above the level of 2003, primarily at
Semiconductors. Net capital expenditures at
Semiconductors amounted to EUR 560 million, of
which EUR 216 million related to Systems on Silicon
Manufacturing Company (SSMC), consolidated for the
fi rst time in 2004, and to investments to balance capacity.
Acquisitions totaling EUR 449 million, mainly consisting
of an equity contribution to LG.Philips Displays
(EUR 202 million) and cash outfl ows related to Crolles2
(EUR 105 million), the Philips-Neusoft Medical Systems
venture and Gemini (CE investment in the USA).
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Cash proceeds of EUR 2,302 million, mainly relating to
the NAVTEQ IPO (EUR 672 million), the sale of part
of our investment in Atos Origin (EUR 552 million) and
the sale of shares in Vivendi Universal (EUR 720 million)
and ASML (EUR 163 million). In addition, there was
a cash receipt of EUR 125 million for maturing
currency hedges.
In 2003, net cash provided by investing activities amounted
to EUR 766 million. The Company received EUR 908 million
from the sale of 100 million American Depository Shares
(ADS) and EUR 357 million from the redemption of
preference shares by TSMC. Additionally, proceeds from
the sale of shares of Vivendi Universal, ASML and JDS
Uniphase amounting to EUR 272 million were received.
Furthermore, EUR 391 million was received due to the
resetting of currency swaps.
During 2003, EUR 470 million was used for investments
in business interests, the most signifi cant of which were
a 49.5% investment in InterTrust (EUR 202 million), an
expansion of the investment in Crolles2 (EUR 99 million)
and a loan to the Company’s Lumileds venture
(EUR 54 million).
As a result of the items mentioned above, cash fl ows before
fi nancing activities were positive EUR 3,388 million in 2005,
compared to EUR 3,291 million in 2004 and EUR 2,778
million in 2003.
Cash fl ows from fi nancing activities
Net cash used for fi nancing activities in 2005 amounted
to EUR 2,589 million. The impact of changes in debt was
a reduction of EUR 324 million, including EUR 251 million
of scheduled bond repayments. Philips’ shareholders were
paid EUR 504 million in dividend. Additionally, EUR 1,836
million was used to acquire approximately 84 million
shares as a part of the Company’s share repurchase
programs. The fi rst share repurchase program, which was
completed in June 2005, resulted in a total cash outfl ow of
EUR 750 million. Of this, EUR 250 million was related to
the hedging of obligations under the long-term employee
incentive and employee stock purchase programs, with
the remaining EUR 500 million of shares repurchased for
cancellation. The second share repurchase program, which
began in August 2005, is expected upon completion to
result in a total of EUR 1.5 billion worth of shares
repurchased for cancellation. Offsetting these amounts
in part was a cash infl ow due to the exercise of stock
options for an amount of EUR 75 million.
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Management discussion and analysis