Philips 2006 Annual Report Download - page 137

Philips Annual Report 2006 137
33
Other business income
Other business income consists of the following:
2004 2005 2006
Results on disposal of businesses 635 175 103
Results on disposal of fi xed assets 45 148 107
Remaining business income (expense) (49 ) 94 24
631 417 234
Results on the disposal of businesses consisted of:
2004 2005 2006
Philips Sound Solutions − − 43
CryptoTec − − 31
Connected Displays (Monitors) − 136 23
Philips Pension Competence Center − 42 −
Initial public offering NAVTEQ 635 − −
Other − (3 ) 6
635 175 103
The result on disposal of businesses in 2006 is related mainly to the
sale of the CryptoTec activities which resulted in a gain of EUR 31
million, the sale of Philips Sound Solutions PSS to D&M Holding
at a gain of EUR 43 million and the sale of the monitor business in
Connected Displays at a gain of EUR 23 million. The result on disposal
of fi xed assets is mainly related to the sale of certain real estate assets
in Austria with a gain of EUR 31 million. The remaining business
income consists of the settlement of certain legal claims and some
releases of provisions.
The result on disposal of businesses in 2005 related mainly to the sale
of certain activities within the Company’s monitors and fl at TV business
to TPV at a gain of EUR 136 million, and the sale of asset management
and pension administration activities to Merrill Lynch and Hewitt
respectively at a gain of EUR 42 million (refer to note 2). The result on
disposal of fi xed assets in 2005 mainly related to the sale of buildings in
Suresnes, France (EUR 67 million) and in the Netherlands (EUR 36
million). In 2005, remaining business income (expense) consisted of
the settlement of some legal claims and some releases of provisions.
The result on disposal of businesses in 2004 consisted of a non-taxable
gain of EUR 635 million on the initial public offering of NAVTEQ
which included cumulative translation losses of EUR 11 million. In
2004, remaining business income consisted of a variety of items, the
most signifi cant being insurance recoveries of EUR 58 million, releases
of provisions related to the disentanglement of some former businesses,
and the payment of EUR 133 million for the settlement of litigation in
the US with Volumetrics, net of insurance.
4
Restructuring and impairment charges
In 2006, a charge of EUR 116 million was recorded for restructuring.
Goodwill impairment charges were zero in 2006 and 2005, while in
2004 the Company recorded goodwill impairment charges aggregating
EUR 592 million, primarily related to MedQuist. There was an amount
of EUR 1 million on inventory write-downs as part of restructuring
projects included in the cost of sales in 2006 (2005: nil. 2004: EUR 33
million). The components of restructuring and impairment charges
recorded in 2004, 2005 and 2006 are as follows:
44
2004 2005 2006
Personnel lay-off costs 113 106 78
Write-down of assets 125 31 38
Other restructuring costs 36 18 5
Release of excess provisions (18 ) (8 ) (5 )
Net restructuring and
impairment charges 256 147 116
Goodwill impairment 592 − −
Total restructuring and
impairment charges 848 147 116
The restructuring and impairment charges are included in the
following line items in the income statement:
2004 2005 2006
Cost of sales 177 89 63
Selling expenses 41 32 8
G&A expenses 12 4 7
Research & development expenses 26 22 38
Net restructuring and
impairment charges 256 147 116
Research & development expenses include EUR 33 million as a result
of in-process R&D written-off in conjunction with the acquisition of
Intermagnetics and Witt Biomedical (in 2005 EUR 6 million was
included for Lumileds).
The most signifi cant new projects in 2006
Within Lighting: the relocation of parts of the loss-making activities
in Weert, Netherlands, to low-cost areas, the relocation in Mexico
of all Juarez plant activities to the Monterrey plant and the relocation
of the standard Lead in Wire business in the Netherlands (Deurne)
to Poland
Within Medical Systems: the transfer of the production of SPECT
cameras from Milpitas to Cleveland
Within DAP: the restructuring of the Klagenfurt site in Austria,
reduction of the fi xed cost base and providing a more diverse
and fl exible supply base .
The movements in the provisions and liabilities for restructuring costs
in 2006 are presented by sector as follows:
Dec. 31,
2005 additions utilized released
other
changes
1)
Dec. 31,
2006
Medical
Systems − 48 (35 ) − 13
DAP 3 13 (10 ) − 6
CE 23 12 (19 ) (3 ) (1 ) 12
Lighting 6 48 (7 ) (2 ) 45
Other
Activities 30 − (11 ) − (3 ) 16
62 121 (82 ) (5 ) (4 ) 92
1) Other changes primarily relate to translation differences
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226 Corporate governance224 Reconciliation of
non-US GAAP information
234 The Philips Group
in the last ten years
236 Investor information