Philips 2008 Annual Report Download - page 149

Employees
The average number of employees by category is summarized
as follows (in FTEs):
2006 2007 2008
Production 59,955 61,447 66,675
Research & development 13,227 12,804 11,926
Other 27,694 28,469 34,365
Permanent employees 100,876 102,720 112,966
Temporary employees 16,225 16,660 13,493
Continuing operations 117,101 119,380 126,459
Discontinued operations1) 44,040 6,276 −
Average number of discontinued operations relates to MDS, Semiconductors
1)
and MedQuist. MDS was reported until June 2006, Semiconductors until
September 2006 and MedQuist until August 2008.
In many countries, employees render services under collective labor
agreements, of which a significant portion expires within a year.
Depreciation and amortization
Depreciation of property, plant and equipment and amortization
of intangibles are as follows:
2006 2007 2008
Depreciation of property, plant
and equipment 554 562 725
Amortization of internal-use software 71 76 85
Amortization of other intangible assets 152 200 365
Write-off of in-process R&D 33 13 15
810 851 1,190
Depreciation of property, plant and equipment includes an additional
write-off in connection with the retirement of property, plant and
equipment amounting to EUR 40 million (2007: EUR 28 million, 2006:
EUR 20 million).
Included in depreciation of property, plant and equipment is an amount
of EUR 56 million (2007: EUR 22 million, 2006: EUR 17 million) relating
to impairment charges.
Depreciation of property, plant and equipment and amortization
of software are primarily included in cost of sales.
Rent
Rent expenses amounted to EUR 322 million (2007: EUR 334 million,
2006: EUR 392 million).
Selling expenses
Advertising and sales promotion costs totaled EUR 949 million (2007:
EUR 994 million, 2006: EUR 865 million) and are included in selling
expenses. Shipping and handling costs of EUR 595 million are also
included (2007: EUR 533 million, 2006: EUR 558 million).
General and administrative expenses
General and administrative expenses include the costs related to
management and staff departments in the corporate center, sectors
and country/regional organizations, amounting to EUR 983 million
(2007: EUR 885 million, 2006: EUR 882 million). Additionally, the pension
costs and costs of other postretirement benefit plans relating to
employees, not allocated to current sector activities, amounted to a
net cost of EUR 33 million (2007: EUR 34 million, 2006: EUR 87 million).
Research and development expenses
Expenditures for research and development activities amounted to
EUR 1,622 million, representing 6.1% of Group sales (2007: EUR 1,629
million, 6.1% of Group sales 2006: EUR 1,659 million, 6.2% of Group sales).
For information related to research and development expenses on a
sector basis, see the section Information by sector and main country
that begins on page 133 of this Annual Report.
Impairment of goodwill
In 2008, a EUR 234 million goodwill impairment charge was recorded
of which EUR 232 million was related to Lumileds (2007: EUR nil,
2006: EUR nil).
Other business income
Other business income consists of the following:
2006 2007 2008
Results on disposal of businesses 103 1 106
Results on disposal of fixed assets 107 92 58
Remaining business income 24 53 31
234 146 195
Results on the disposal of businesses consisted of:
2006 2007 2008
Philips Sound Solutions 43 −−
CryptoTec 31 −−
Connected Displays (Monitors) 23 −−
Set-Top Boxes and Connectivity
Solutions −−63
Philips Speech Recognition Systems −−45
Other 6 1 (2)
103 1 106
The results on the sale of businesses in 2008 are mainly related to
the sale of the Set-Top Boxes (STB) and Connectivity Solutions (CS)
activities to Pace Micro Technology which resulted in a gain of EUR 63
million, and the sale of Speech Recognition activities to Nuance
Communications which resulted in a gain of 45 million. The result on
the disposal of fixed assets is mainly related to the sale of fixed assets
in Taiwan with a gain of EUR 39 million.
In 2007, the results on the sale of fixed assets mainly related to the
sale of certain buildings in Austria and the Netherlands as well as land
in the US. Remaining business income is mainly attributable to certain
settlements and the finalization of several divestitures.
The result on the disposal of businesses in 2006 is mainly related 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
Television at a gain of EUR 23 million. The result on the disposal of
fixed
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.
4
Restructuring and impairment
In 2008, a EUR 520 million charge was recorded as a result of
restructuring projects, including related asset impairments and
inventory write-downs. Inventory write-downs were recorded in cost
of sales and amounted to EUR 19 million in 2008. In 2006 and 2007
there were no inventory write-downs as a result of restructuring
projects. The components of restructuring program charges
recognized in 2006, 2007 and 2008 are as follows:
2006 2007 2008
Personnel lay-off costs 78 35 376
Write-down of assets 5 4 116
Other restructuring costs 4 3 30
Release of excess provisions (5) (5) (2)
82 37 520
4
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Philips Annual Report 2008 149
254
Corporate governance
250
Reconciliation of
non-US GAAP information
262
Ten-year overview
266
Investor information