Philips 2007 Annual Report Download - page 141

Philips Annual Report 2007 147
with the sale of its approximately 70% ownership interest in MedQuist.
The nancial results attributable to the Company’s interest in
consolidated nancial statements have been restated to conform
operations for 2005, 2006 and 2007:
Costs and expenses
− −
Income (loss) before taxes
Income tax
− −
−
business, classied as discontinued operations, in the consolidated
balance sheets as at December 31, 2006 and 2007:
1Philips Mobile Display Systems
On November 10, 2005, Philips and Toppoly Optoelectronics
Corporation of Taiwan announced that they had signed a binding
letter of intent to merge Philips’ Mobile Display Systems (MDS)
business with Toppoly. The company was named TPO, and the
transaction was completed in the rst half of 2006.
Philips separately reported the results of the MDS business as
a discontinued operation, and previous years were restated.
The following table summarizes the results of the MDS business
included in the consolidated statements of income as discontinued
operations for 2005 and 2006:
2005 2006
Sales 653 194
Costs and expenses (736) (165)
Income (loss) before taxes (83) 29
Income taxes − −
Results from discontinued operations (83) 29
The 2006 results of EUR 29 million mainly relate to translation
differences upon completion of the transaction. The 2005 results
included an impairment loss of EUR 69 million.
2
Acquisitions and divestments
2007
During 2007, Philips entered into a number of acquisitions and
completed several disposals of activities. All business combinations
have been accounted for using the purchase method of accounting.
Major business combinations in 2007 relate to the acquisitions
of Partners in Lighting and Color Kinetics, currently Philips Solid-State
Lighting Solutions. The remaining business combinations, both
individually and in the aggregate, were deemed immaterial in
respect of the SFAS No. 141 disclosure requirements.
Sales and income from operations related to activities divested in 2007,
included in the Company’s consolidated statement of income for 2007,
amounted to EUR 262 million and a loss of EUR 39 million, respectively.
The most signicant acquisitions and divestments are summarized in
the next two tables and described in the section below.
Acquisitions
cash
outow
net
assets
acquired1)
other
intangible
assets goodwill
Partners in Lighting 561 47 217 297
Color Kinetics 515 (29) 187 357
1) Excluding cash acquired
Divestments
cash inow1)
net assets
divested2)
recognized
gain (loss)
LG.Philips LCD 1,548 1,040 508
1) Net of cash divested
2) Includes the release of cumulative translation differences
Partners in Lighting (PLI)
On February 5, 2007, Philips acquired 100% of the shares of PLI,
a leading European manufacturer of home luminaires. Philips acquired
PLI from CVC Capital Partners, a private equity investment company,
at a net cash consideration of EUR 561 million paid upon completion
of the transaction. As of the date of acquisition, PLI has been
consolidated within the Lighting division.
2
The following table summarizes the fair value of PLI’s assets
and liabilities acquired on February 5, 2007:
February 5, 2007
Total purchase price (net of cash) 561
Allocated to:
Property, plant and equipment 97
Other non-current nancial assets 1
Working capital 114
Deferred tax liabilities (67)
Long-term debt (50)
Short-term debt (34)
Provisions (14)
Intangible assets 217
Goodwill 297
561
The goodwill recognized is related to the complementary technical
skills and talent of PLI’s workforce and the synergies expected to
be achieved from integrating PLI into the Lighting division.
Intangible assets comprise:
amount
amortization
period in years
Customer relationships 156 20
Trademarks and trade names 61 20
217
PLI contributed a positive income from operations of EUR 24 million
to the Group for the period from February 5 to December 31, 2007.
Color Kinetics
On August 24, 2007, Philips completed the acquisition of 100% of the
shares Color Kinetics, a leader in designing and marketing innovative
lighting systems based on Light Emitting Diode (LED) technology at
a net cash consideration of EUR 515 million. As of the date of acquisition
Color Kinetics has been consolidated within the Lighting division.
The following table summarizes the initial fair value of Color Kinetics’
assets and liabilities acquired on August 24, 2007:
August 24, 2007
Total purchase price (net of cash) 515
Allocated to:
Property, plant and equipment 7
Working capital 16
Deferred tax (52)
Intangible assets 186
In process R&D 1
Goodwill 357
515
The allocation of the purchase price to the net assets acquired had
not yet been nalized as of December 31, 2007, as further information
related to intangible asset valuations and certain other matters
remained outstanding. The goodwill recognized is related mainly
to the complementary technological expertise of Color Kinetics’
workforce and the synergies expected to be achieved from integrating
Color Kinetics into the Lighting division.
Group nancial statements
Notes to the group nancial statements
Company nancial statements 250 Corporate governance246 Reconciliation of
non-US GAAP information 258 The Philips Group in the last ten years 260
Investor information