Philips 2006 Annual Report Download - page 36

Philips Annual Report 200636
The sector Unallocated mainly refl ects costs of the
corporate and regional organizations, pension and other
postretirement costs, and investments in the global brand
campaign. The total loss for Unallocated increased by
EUR 130 million over 2005, mainly due to a release
of a postretirement medical benefi ts provision in 2005
(EUR 116 million) and higher costs in the corporate
center in 2006. The increased overhead costs were
mainly due to implementation costs related to compliance
with section 404 of the US Sarbanes-Oxley Act.
Pensions
Net periodic pension costs of defi ned-benefi t pension
plans amounted to EUR 75 million in 2006 (2005: EUR
157 million). The contributions to defi ned-contribution
pension plans amounted to EUR 80 million (2005: EUR
59 million).
Total pension (costs) / benefits
in millions of euros of which operating divisions of which Unallocated
100
0
(100)
(200)
(300)
(400)
(500)
(126)
34
(92)
2002
(162)
(223)
(385)
2003
(123)
(112)
(235)
2004
(122)
(94)
(216)
2005
(93)
(62)
(155)
2006
The new accounting rule for pensions and other
postretirement benefi ts (SFAS No. 158) requires Philips to
post the funded status of pensions and other postretirement
benefi t plans on the balance sheet. As a consequence,
actuarial gains and losses will directly affect stockholders’
equity through changes in other comprehensive income,
while there will no longer be any additional minimum
pension liability. These changes resulted in a net reduction
of stockholders’ equity of EUR 477 million in 2006.
This new accounting standard has no impact on the
Company’s income statement.
Restructuring and impairment charges
During 2006, a net charge of EUR 116 million was
included in EBIT for restructuring and impairments.
Restructuring and impairment charges
in millions of euros
20041) 20051) 2006
Restructuring:
Medical Systems- 3 2 15
DAP- 8 4 13
Consumer Electronics- 140 67 12
Lighting- 35 35 48
Other Activities- 35 26 −
Release of excess provisions (18) (8) (5)
Total restructuring 203 126 83
Asset impairment:
Lighting- 30 − −
Other Activities- 23 15 −
Write-off of in-process R&D − 6 33
Total asset impairment 53 21 33
Goodwill impairment:
Medical Systems- 590 − −
Other Activities- 2 − −
Total goodwill impairment 592 − −
Total restructuring and
impairment 848 147 116
1) Restated to present the Semiconductors division as a discontinued operation
The most signifi cant new restructuring projects in
2006 were:
Medical Systems: transfer of the production of SPECT
cameras from Milpitas to Cleveland;
DAP: restructuring of the Klagenfurt site (Austria),
reduction of the fi xed cost base and the creation of
a more diverse and fl exible supply base;
Lighting: reallocation of parts of the 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 Deurne, Netherlands, to Poland.
The Company’s remaining restructuring in 2006 covered
a number of smaller projects.
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6 Financial highlights 8 Message from the President 14 Our leadership 20 The Philips Group
Management discussion
and analysis