Philips 2007 Annual Report Download - page 147

Philips Annual Report 2007 153
Other social security and similar charges:
− Required by law
− Voluntary
Salaries and wages include an amount of EUR 35 million (2006: EUR 78
million, 2005: EUR 106 million) relating to restructuring charges.
as follows (in FTEs):
agreements, of which a signicant portion expires within a year.
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Depreciation and amortization
Depreciation of property, plant and equipment and amortization
of intangibles are as follows:
2005 2006 2007
Depreciation of property, plant and
equipment 542 554 562
Amortization of internal-use software 78 71 76
Amortization of other intangible assets 87 152 200
Write-off of in-process R&D 6 33 13
713 810 851
Depreciation of property, plant and equipment includes an additional
write-off in connection with the retirement of property, plant and
equipment amounting to EUR 28 million (2006: EUR 20 million, 2005:
EUR 13 million).
Included in depreciation of property, plant and equipment is an amount
of EUR 22 million (2006: EUR 17 million, 2005: EUR 42 million) relating
to impairment charges.
Depreciation of property, plant and equipment and amortization
of software are primarily included in cost of sales.
In 2007, no goodwill impairments were recorded (2006: nil, 2005: nil).
Rent
Rent expenses amounted to EUR 334 million (2006: EUR 392 million,
2005: EUR 378 million).
Selling expenses
Advertising and sales promotion costs incurred totaled EUR 994 million
(2006: EUR 865 million, 2005: EUR 829 million) and are included
in selling expenses. Shipping and handling costs of EUR 496 million
are also included (2006: EUR 558 million, 2005: EUR 497 million).
General and administrative expenses
General and administrative expenses include the costs related to
management and staff departments in the corporate center, divisions
and country/regional organizations, amounting to EUR 820 million
(2006: EUR 882 million, 2005: EUR 758 million). Additionally, the pension
costs and costs of other postretirement benet plans relating to
employees, not allocated to current division activities, amounted to a
net cost of EUR 34 million (2006: EUR 87 million, 2005: EUR 16 million).
Research and development expenses
Expenditures for research and development activities amounted to
EUR 1,629 million, representing 6.1% of Group sales (2006: EUR 1,659
million, 6,2% of Group sales; 2005: EUR 1,593 million, 6.3% of Group sales).
For information related to research and development expenses on
a segmental basis, see the section Information by sectors and main
countries that begins on page 137 of this Annual Report.
Other business income
Other business income consists of the following:
2005 2006 2007
Results on disposal of businesses 175 103 1
Results on disposal of xed assets 152 107 92
Remaining business income (expense) 90 24 53
417 234 146
Results on the disposal of businesses consisted of:
2005 2006 2007
Philips Sound Solutions − 43 −
CryptoTec − 31 −
Connected Displays (Monitors) 136 23 −
Philips Pension Competence Center 42 − −
Other (3) 6 1
175 103 1
In 2007, the results on the sale of xed assets mainly related to the
sale of certain buldings in Austria and the Netherlands as well as land
in the US. Remaining business income is mainly attributable to certain
settlements and the nalization of several divestitures.
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 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.
The result on disposal of businesses in 2005 related mainly to the sale
of certain activities within the Company’s monitors and 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 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.
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Restructuring charges
In 2007, a charge of EUR 37 million was recorded for restructuring.
There were no goodwill impairment charges in 2007, 2006 and 2005.
The components of restructuring charges recorded in 2005, 2006
and 2007 are as follows:
2005 2006 2007
Personnel lay-off costs 106 78 35
Write-down of assets 10 5 4
Other restructuring costs 18 4 3
Release of excess provisions (8) (5) (5)
126 82 37
The restructuring charges are included in the following line items
in the income statement:
2005 2006 2007
Cost of sales 74 63 24
Selling expenses 32 8 4
G&A expenses 4 6 4
R&D expenses 16 5 5
126 82 37
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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