Philips 2007 Annual Report Download - page 205

Philips Annual Report 2007 211
38
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 16 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 − − (63)1)
Income (loss) before taxes (82) (11) (90)
Income taxes 20 29 (8)
Result of equity-accounted investees − − 1
Minority interests 14 − 4
Results from discontinued operations (48) 18 (93)
1) Including EUR 47 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 196 127
Other assets 34 23
Assets of discontinued operations 427 319
Accounts payable 7 9
Provisions 32 32
Other liabilities 39 37
Liabilities of discontinued operations 78 78
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 3,683 million was recorded on the sale, net of taxes, and net
of costs directly associated with this transaction of approximately
EUR 68 million.
38
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, accordingly, 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 the deal and various local income taxes.
2005 2006 2007
Sales 4,620 3,681 −
Costs and expenses (4,163) (3,144) −
Gain on sale of discontinued operations − 4,323 15
Income (loss) before taxes 457 4,860 15
Income taxes (134) (790) 5
Result of equity- accounted investees (73) (63) −
Minority interests (34) (49) −
Results from discontinued operations 216 3,958 20
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 (3,522)
Cost of disposal (68)
Gain on disposal before taxes 4,323
Income taxes (640)
Gain on sale 3,683
Philips 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.
Notes to the IFRS consolidated nancial statements of the Philips Group
All amounts in millions of euros unless otherwise stated.
The US GAAP notes 33 and 34 are deemed incorporated and repeated herein by reference.
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.
Group nancial statements
Notes to the IFRS 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