Philips 2006 Annual Report Download - page 171

Philips Annual Report 2006 171
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Company recorded a gain of EUR 236 million in other comprehensive
income under currency translation differences as a result of net
investment hedges of investments in foreign subsidiaries. A loss of
EUR 3 million was booked to the income statement as a result
of ineffectiveness of net investment hedges.
Philips partially hedges the interest-rate risk inherent in external
debt. As of year-end 2006, the Company had 6 USD interest rate
swaps outstanding, on which the Company receives fi xed interest and
pays fl oating interest on the equivalent of EUR 387 million. Fair value
hedge accounting is applied to these interest rate swaps.There was
no material ineffectiveness on these hedges during 2006.
Philips also has an embedded derivative within a convertible bond that
was issued to Philips in September 2005 by TPV Technology Ltd, the
face value of the bond being EUR 160 million and the value of the
option at year end was EUR 40 million. Changes in the value of the
embedded derivative are reported in fi nancial income and expense
and during 2006 a total loss of EUR 61 million was recorded within
the income statement.
37
Subsequent events
P hilips Mobile Phones
On February 12, 2007, Philips and China Electronics Corporation
(CEC) signed an agreement to transfer Phlips’ remaining Mobile Phone
activities tot CEC. CEC will take over the responsibility for Philips’
Mobile Phones business, which had sales of approximately EUR 320
million in 2006 and has approximately 240 employees, mainly in Asia
Pacifi c and Eastern Europe. This transaction is conditional on all required
shareholder, government and regulatory approvals and consents, and is
expected to be closed by the end of the fi rst quarter 2007. The
transaction is estimated to result in a cash infl ow of approximately
EUR 25 million.
The transaction involves the transfer of the “Xenium” brand, which
is associated with long-battery life, to CEC under the terms of the
agreement. CEC will receive an exclusive license to market and sell
mobile phones under the Philips brand for the coming fi ve years.
Certain mobile phone-related patents will be transferred and licensed
to CEC. In addition, Philips will transfer to CEC its excisting marketing
network in some key countries for the mobile phone business, as
well as its 25% equity stake in Shenzhen Sangfei Consumer
Communications Co. Ltd.
Partners in Lighting
On February 5, 2007, Philips acquired Partners in Lighting (PLI),
a leading European manufacturer of home luminaires. PLI markets
its products under brand names such as Massive, Modular and Lirio.
The total cost of the acquisition, paid in cash, was EUR 584 million.
PLI develops, manufactures and markets a wide portfolio of more
than 10,000 distinct home lighting luminaire products currently mainly
for the European market. PLI’s revenue for 2006 was approximately
EUR 406 million.
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The following table summarizes the fair value of the assets acquired
and liabilities assumed with respect to the acquisition of PLI:
February 5, 2007
Total purchase price 584
Less: net cash of PLI at acquisition date (13 )
Net purchase price 571
Allocated to:
Property, plant and equipment 84
Other non-current fi nancial assets 7
Working capital 101
Deferred tax liabilities (73 )
Long-term debt (49 )
Non-current liabilities (6 )
Intangible assets 214
Goodwill 293
571
Intangible assets comprise:
amount
amortization
period in years
Customer relationships 153 20
Trademarks and trade names 61 20
214
Share repurchase
On January 22, 2007, Philips initiated a EUR 1,633 million share
repurchase program for capital reduction purposes to complete the
planned return of a total of EUR 4 billion to its shareholders. It is
expected that the program will be completed before the end of 2007.
226 Corporate governance224 Reconciliation of
non-US GAAP information
234 The Philips Group
in the last ten years
236 Investor information