Siemens 2007 Annual Report Download - page 122

122 Management’s discussion and analysis
Income from investments accounted for using the equity method, net
decreased to €108 million from €404 million a year earlier, due to the loss of €429
million in fi scal 2007 from NSN. Financial income (expense), net decreased from
a positive contribution of €254 million in fi scal 2006 to a negative €8 million in
fi scal 2007, primarily due to higher interest for fi nancial liabilities, which were
raised primarily at the end of the prior fi scal year. Fiscal 2006 benefi ted from a
pre-tax gain of €84 million related to the sale of the Company’s interest in SMS
Demag AG.
Income from continuing operations before income taxes increased by 49% to
€5.101 billion in fi scal 2007, from €3.418 billion a year earlier, driven by a combi-
nation of increased revenue and margins, partly offset with negative equity
investment income of €429 million related to NSN and expenses related to major
legal and regulatory matters totaled in the current period. Fiscal 2006 included
severance charges at SIS of €576 million. In the last quarter of fi scal 2007, all
groups reached their group profi t margin targets.
Income from continuing operations in fi scal 2007 was €3.909 billion, up 48%
from €2.642 billion in fi scal 2006, due to an increased income from continuing
operations before income taxes. The effective tax rate was 23% in fi scal 2007 and
2006. Income tax expenses include adjustments related to the previously reported
compliance investigation. As a result of that investigation, payments were identi-
fi ed that had been recorded as deductible business expenses in prior periods when
determining income tax provisions. The Company’s investigation has determined
that certain of these payments were non-deductible under the tax laws of Germany
and other jurisdictions. For further information, please refer to “Notes to the
Consolidated Financial Statements.”
Discontinued operations includes enterprise networks business, which is held
for disposal, the carrier-related business, which was transferred into NSN, the
Mobile Devices business sold to BenQ Corporation, and SV, which is held for dis-
posal pending the closing of the sale of those operations to Continental AG. SV is
included within discontinued operations on a retroactive basis to provide a mean-
ingful comparison with prior periods. For fi scal 2007, income from discontinued
operations contributed €129 million to net income, compared to €703 million a
Year ended
September 30,
(€ in millions) 2007 2006 % Change
Income from continuing operations before income taxes 5,101 3,418 49%
Income taxes (1,192) (776) 54%
as percentage of income from continuing
operations before income taxes 23% 23% –
Income from continuing operations 3,909 2,642 48%
Income from discontinued operations, net of income taxes 129 703 (82)%
Net income 4,038 3,345 21%
Net income attributable to Minority interest 232 210 –
Net income attributable to Shareholders of Siemens AG 3,806 3,135 21%