Philips 2008 Annual Report Download - page 216

Notes to the IFRS consolidated financial
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
38
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 16 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 adoption of IFRS.
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) (131)
Gain on sale of discontinued operations −−15
Impairment charge −(63)1) −
Income (loss) before taxes (11) (90) 12
Income taxes 29 (8) (3)
Result of equity-accounted investees −1−
Minority interests −41
Results from discontinued operations 18 (93) 10
Including EUR 47 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 127
Other assets 23
Assets of discontinued operations 319
Accounts payable 9
Provisions 32
Other liabilities 37
Liabilities of discontinued operations 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 (NXP) 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.
The operations of the Semiconductors division and the aforementioned
gain have been presented as discontinued operations.
The Company’s ownership interest in NXP is 19.8%. The Company
cannot exert significant influence over the operating or financial
policies of NXP and, accordingly, the investment is accounted for
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 for 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 relate to the settlement
of the transaction and various local 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 (3,000) (65) −
Gain (loss) on sale of discontinued
operations 4,323 15 (3)
Income (loss) before taxes 5,004 (50) (3)
Income taxes (790) 5 (4)
Result of equity- accounted investees (63) −−
Minority interests (49) −−
Results from discontinued operations 4,102 (45) (7)
Prior-period amounts have been restated to reflect a change in accounting
policy related to pensions (see Significant accounting policies, Change in
accounting policy).
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 first half of 2006.
Philips separately reported the results of the MDS business
as a discontinued operation.
Philips Annual Report 2008216
180
Sustainability performance
244
Company financial statements
124
US GAAP financial statements
192
IFRS financial statements
Notes to the IFRS financial
statements