Philips 2008 Annual Report Download - page 47

Healthcare’s EBITA of EUR 863 million was in line with
2007 and included EUR 69 million of restructuring
charges and EUR 90 million of acquisition-related
costs, partially offset by a EUR 45 million gain on the
sale of Philips Speech Recognition Services. In 2007,
acquisition-related charges were EUR 11 million.
As a percentage of sales, EBITA declined from 13.0%
in 2007 to 11.3% in 2008. However, adjusted for the
aforementioned items, EBITA profitability was 12.8%
in relation to sales, broadly in line with 2007.
Consumer Lifestyle’s EBITA declined from EUR 848
million in 2007 to EUR 281 million in 2008, largely
due to lower sales-driven earnings in all businesses
except Health & Wellness and Domestic Appliances,
deteriorating margins within Television, and restructuring
charges of EUR 195 million. The sector’s 2008 EBITA
included a EUR 63 million gain on the sale of the Set-Top
Boxes activity.
EBITA at Lighting declined from EUR 722 million,
or 11.9% of sales, in 2007 to EUR 538 million, or 7.6%
of sales, in 2008. Additional earnings from acquisitions
were offset by EUR 221 million of restructuring charges,
EUR 41 million of acquisition-related charges and margin
compression in mature markets
. In 2007, restructuring
and acquisition-related charges were EUR 55 million.
The EBITA loss at Innovation & Emerging Businesses
amounted to EUR 226 million, compared to a loss of
EUR 81 million in 2007. The decline was mainly due to
EUR 81 million lower license income, EUR 18 million
restructuring charges at Assembléon, a EUR 13 million
loss on the sale of the High Tech Plastics – Optics business,
and higher investments in the Healthcare and Lighting
& Cleantech incubator activities.
EBITA at Group Management and Services declined
EUR 228 million in 2008 to a loss of EUR 525 million,
mainly due to a EUR 239 million asbestos-related
settlement charge. Adjusted for this settlement, GM&S
costs saw a year-on-year decline due to lower brand
campaign spending.
For further information regarding the performance of
the sectors, see the Our sector performance chapter,
starting on page 70 of this Annual Report.
Pensions
The net periodic pension costs of defined-benefit
pension plans amounted to EUR 10 million in 2008
compared to EUR 27 million in 2007. The payments
to defined-contribution pension plans amounted to
EUR 96 million, EUR 12 million higher than in 2007,
largely due to acquisitions and a gradual shift from
defined-benefit to defined-contribution pension plans.
Restructuring and impairment charges
in millions of euros
2006 2007 2008
Restructuring:
Healthcare 14 1 68
Consumer Lifestyle 25 8 171
Lighting 43 24 132
I&EB −118
GM&S −417
Reduction of excess provisions (5) (5) (2)
Total restructuring 77 33 404
Asset impairment:
Healthcare −−1
Consumer Lifestyle −−24
Lighting 5491
I&EB −−−
GM&S −−−
Total asset impairment 54116
Goodwill impairment:
Lighting −−234
Total goodwill impairment −−234
Total restructuring and impairment 82 37 754
Restructuring and impairment charges
In 2008, EBIT included net charges totaling EUR 520
million for restructuring and related asset impairments.
Besides the annual goodwill impairment tests for Philips,
due to the economic circumstances, trigger-based
impairment tests were performed in the latter half of
the year, resulting in goodwill impairment charges of
EUR 234 million, mainly related to Lumileds.
The most significant restructuring projects in 2008
were related to Lighting, Consumer Lifestyle and
Healthcare. Restructuring projects in Lighting – aimed
at further increasing organizational effectiveness and
reducing the fixed cost base – mainly centered on
Lamps (principally North America and Poland),
Professional Luminaires (notably Germany), Special
Lighting Applications (primarily the Netherlands and
Belgium), Automotive (mainly Korea and Germany)
and Lighting Electronics (primarily the Netherlands).
Consumer Lifestyle’s restructuring projects were
concentrated on the integration of the former Domestic
Appliances and Consumer Electronics businesses, the exit
of Television from North America, restructuring of the
Television factory in Juarez (Mexico) and restructuring
charges taken to re-align the European industrial footprint.
Healthcare restructuring projects – undertaken to reduce
operating costs and simplify the organization – spanned
many locations, including sites in Hamburg (Germany),
Helsinki (Finland) and Andover (USA).
Philips Annual Report 2008 47
122
Performance statements
114
Supervisory Board report
110
Our leadership
94
Risk management
70
Our sector performance