Philips 2008 Annual Report Download - page 142

Notes to the US GAAP consolidated financial
statements of the Philips Group
All amounts in millions of euros unless otherwise stated.
1
Discontinued operations
MedQuist
On August 6, 2008, the Company announced that it had completed
the sale of its approximately 70% ownership interest in MedQuist
to CBaySystems Holdings (CBAY) for a consideration of USD 287
million. The consideration was composed of a cash payment of
USD 98 million, a promissory note of USD 26 million, a convertible
bond of USD 91 million, and a pre-closing cash dividend of USD 72
million. The promissory note is included in Other receivables, the
convertible bond in Other non-current financial assets.
The financial results attributable to the Company’s interest in MedQuist
have been presented as discontinued operations. The decision to
proceed with the sale, which was made in 2007, resulted in an
impairment of EUR 325 million in 2007. This charge did not affect
equity as it related to the cumulative translation differences of the
USD-denominated investment in MedQuist, which 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 2006, 2007 and 2008:
2006 2007 2008
Sales 293 244 128
Costs and expenses (304) (271) (132)
Gain on sale of discontinued operations −−5
Impairment charge −(360)1) −
Income (loss) before taxes (11) (387) 1
Income tax 29 (8) (3)
Result of equity- accounted investees −1–
Minority interests −41
Results from discontinued operations 18 (390) (1)
Including EUR 35 million following the 2007 annual impairment test.
1)
The following table presents the assets and liabilities of the MedQuist
business, classified as discontinued operations, in the consolidated
balance sheets as at December 31, 2007.
2007
Cash and cash equivalents 108
Accounts receivable 41
Equity-accounted investees 4
Property, plant and equipment 16
Intangible assets including goodwill 141
Other assets 23
Assets of discontinued operations 333
Accounts payable 9
Provisions 32
Other liabilities 37
Minority interest 79
Liabilities of discontinued operations 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.
The Company’s ownership interest in NXP Semiconductors is 19.8%.
The Company cannot exert significant influence over the operating
or financial policies of NXP and the investment is accounted for as
a cost-method investment under other non-current financial assets.
Philips and NXP have continuing relationships through shared
research and development activities and through license agreements.
Additionally, through the purchase of semiconductor products by
the Consumer Lifestyle sector, Philips and NXP will have a continuing
relationship for the foreseeable future. The Company assessed the
expected future transactions and determined that the cash flows
from these transactions are not significant direct cash flows.
The following table summarizes the results of the Semiconductors
division included in the consolidated statements of income as
discontinued operations for the period through its divestment
on September 29, 2006. The 2007 results mainly related to the
settlement of pensions and income taxes. The 2008 results mainly
related to the settlement of income taxes, largely operational in nature.
2006 2007 2008
Sales 3,681 −−
Costs and expenses (3,319) −−
Gain (loss) on sale of discontinued
operations 4,953 (69) (3)
Income (loss) before taxes 5,315 (69) (3)
Income taxes (768) 26 (4)
Result of equity- accounted investees (63) −−
Minority interests (49) −−
Results from discontinued operations 4,435 (43) (7)
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
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 first half of 2006.
Philips separately reported the results of the MDS business
as a discontinued operation.
The following table summarizes the results of the MDS business
included in the consolidated statements of income as discontinued
operations for 2006, which mainly relate to translation differences
upon completion of the transaction.
Philips Annual Report 2008142
180
Sustainability performance
192
IFRS financial statements
244
Company financial statements
124
US GAAP financial statements
Notes to the US GAAP
financial statements