Siemens 2008 Annual Report Download - page 158

62 Management’s discussion and analysis
Other operating expense was €2.228 billion in scal 2008, up from €1.053 billion in scal 2007. The difference
year-over-year is due primarily to the provision of approximately €1 billion mentioned earlier, which we took
in connection with ongoing settlement negotiations with authorities in Germany and the U.S. regarding legal
and regulatory matters. The current year also includes an one-time endowment of €390 million related to the
establishment of the Siemens foundation and a goodwill impairment of €70 million related to a building and
infrastructure business at which 50% were divested during scal 2008. A year earlier, other operating expense
included the €440 million in sanctions related to an European antitrust investigation mentioned earlier, €81 mil-
lion primarily to fund job placement companies for former Siemens employees affected by the bankruptcy of
BenQ, and a goodwill impairment of €52 million at a regional payphone unit. Expenses for outside advisors
engaged in connection with investigations into alleged violations of anti-corruption laws and related matters
as well as remediation activities were €430 million in scal 2008, substantially higher than €152 million
a year earlier.
Income from investments accounted for using the equity method, net rose year-over-year to €260 million in
the current period. The change was due primarily to a signicantly reduced equity investment loss related to
NSN, partly offset by an equity investment loss related to FSC, which posted positive equity investment income
in scal 2007.
Financial income (expense), net increased to €122 million, up from a negative €8 million in scal 2007, primar-
ily due to a swing in Interest income (expense), net, to a positive €60 million from a negative €139 million a year
earlier, stemming mainly from a combination of lower indebtedness in Siemens’ operating businesses and lower
interest rates on U.S. dollar denominated debt compared to the prior scal year.
Income from continuing operations before income taxes was €2.874 billion in scal 2008, compared to €5.101
billion a year earlier. The major factors in the change were the SG&A reduction costs and the provision accrued
in connection with the ongoing settlement negotiations, as discussed above, partly offset by an increase in gross
prot which was held back by the substantial project charges and restructuring costs mentioned above. The
effective tax rate on income from continuing operations was 35% in scal 2008. This rate was adversely affected
by the provision of approximately €1 billion mentioned above, a majority of which was not deductible for tax
purposes. A year earlier, the effective tax rate was signicantly lower at 23%, positively inuenced by special
items arising from tax audits in Germany and Austria. As a result, income from continuing operations after
taxes was €1.859 billion in scal 2008, down from €3.909 billion a year earlier.
Year ended
September 30,
% Change(€ in millions) 2008 2007
Income from continuing operations before income taxes 2,874 5,101 (44)%
Income taxes (1,015) (1,192) (15)%
as percentage of income from continuing operations before income taxes 35% 23% –
Income from continuing operations 1,859 3,909 (52)%
Income from discontinued operations, net of income taxes 4,027 129 > 200%
Net income 5,886 4,038 46%
Net income attributable to minority interest 161 232 –
Net income attributable to shareholders of Siemens AG 5,725 3,806 50%