Philips 2007 Annual Report Download - page 140

Philips Annual Report 2007146
1
Discontinued operations
MedQuist
On November 2, 2007, the Company announced the decision to proceed
with the sale of its approximately 70% ownership interest in MedQuist.
The nancial results attributable to the Company’s interest in
MedQuist have been presented as discontinued operations. Prior-year
consolidated nancial statements have been restated to conform
to this presentation. The decision has resulted in an impairment charge
of EUR 325 million in 2007, presented under discontinued operations.
This non-cash charge does not affect equity as it relates to the cumulative
translation differences of the USD-denominated investment in MedQuist,
which have accumulated within equity since the date of acquisition.
The following table summarizes the results of the MedQuist business
included in the consolidated statements of income as discontinued
operations for 2005, 2006 and 2007:
2005 2006 2007
Sales 330 293 244
Costs and expenses (412) (304) (271)
Impairment charge − − (360)1)
Income (loss) before taxes (82) (11) (387)
Income tax 20 29 (8)
Result of equity- accounted investees − − 1
Minority interests 14 − 4
Results from discontinued operations (48) 18 (390)
1) Including EUR 35 million following the annual impairment test.
The following table presents the assets and liabilities of the MedQuist
business, classied as discontinued operations, in the consolidated
balance sheets as at December 31, 2006 and 2007:
2006 2007
Cash and cash equivalents 137 108
Accounts receivable 41 41
Equity-accounted investees 4 4
Property, plant and equipment 15 16
Intangible assets including goodwill 199 141
Other assets 35 23
Assets of discontinued operations 431 333
Accounts payable 6 9
Provisions 32 32
Other liabilities 40 37
Minority interest 91 79
Liabilities of discontinued operations 169 157
Semiconductors
On September 29, 2006, the Company sold a majority stake in its
Semiconductors division to a private equity consortium led by
Kohlberg Kravis Robert & Co. (KKR). The transaction consisted
of the sale of the division for a total consideration of EUR 7,913
million and a simultaneous acquisition of a minority interest in the
recapitalized organization NXP Semiconductors at a cost of EUR 854
million. A gain of EUR 4,283 million was recorded on the sale, net
of taxes, and net of costs directly associated with this transaction
of approximately EUR 367 million.
The operations of the Semiconductors division and the aforementioned
gain have been presented as discontinued operations. Prior-year
consolidated nancial statements have been restated to conform
to this presentation.
The Company’s ownership interest in NXP Semiconductors consists
of 19.9% of the preferred shares and 17.5% of the common shares.
The Company cannot exert signicant inuence over the operating
or nancial policies of NXP and the investment is accounted for as
a cost-method investment under other non-current nancial assets.
Philips and NXP have continuing relationships through shared
research and development activities and through license agreements.
Additionally, through the purchase of component products, namely
semiconductor products for the consumer electronic sector, Philips
and NXP have a continuing relationship for the foreseeable future.
The Company assessed the expected future transactions and determined
that the cash ows from these transactions are not signicant direct
cash ows.
The following table summarizes the results of the Semiconductors
division included in the consolidated statements of income as
discontinued operations for 2005 and the period through its
divestment on September 29, 2006. The 2007 results mainly relate
to the settlement of pensions and income taxes.
2005 2006 2007
Sales 4,620 3,681 −
Costs and expenses (4,313) (3,319) −
Result on sale of discontinued
operations − 4,953 (69)
Income (loss) before taxes 307 5,315 (69)
Income taxes (80) (768) 26
Result of equity- accounted investees (73) (63) −
Minority interests (34) (49) −
Results from discontinued operations 120 4,435 (43)
The following table shows the components of the gain from the sale
of the Semiconductors division, net of tax on December 31, 2006:
2006
Consideration 7,913
Carrying value of net assets disposed (2,593)
Cost of disposal (367)
Gain on disposal before taxes 4,953
Income taxes (670)
Gain on sale 4,283
Notes to the Group nancial statements
All amounts in millions of euros unless otherwise stated. The years 2005 and 2006 have been restated to present the MedQuist
business as a discontinued operation. Also, the years 2005 and 2006 have been restated to reect certain reclassications
between the sectors related to: key portfolio changes, and the allocation of certain central costs to the operating divisions.
128 Group nancial statements
Notes to the group nancial statements
188 IFRS information 240 Company nancial statements