Discontinued operations and other assets classified as held for sale

Discontinued operations included in the Consolidated statements of income and the Consolidated statements of cash flows consists of the Audio, Video, Multimedia and Accessories (AVM&A) business, the Television business and certain divestments formerly reported as discontinued operations.

Discontinued operations: Audio, Video, Multimedia and Accessories business

Following the agreement with Funai Electric Co. Ltd which was announced in Q1 2013, the results of the Audio, Video, Multimedia and Accessories (AVM&A) business are reported as discontinued operations in the Consolidated statements of income and Consolidated statements of cash flows. Assets classified as held for sale and Liabilities directly associated with assets held for sale are reported in the Consolidated balance sheet as of the moment of the announcement. This agreement was terminated on October 25, 2013. Since then, Philips has been actively discussing the sale of the business with various parties. Therefore the AVM&A business continues to be reported as discontinued operations in the Consolidated statements of income and Consolidated statements of cash flows with the related assets and liabilities included as Assets classified as held for sale and Liabilities directly associated with assets held for sale in the Consolidated balance sheet.

The following table summarizes the results of the AVM&A business included in the Consolidated statements of income as discontinued operations.

 
 
2011
2012
2013
 
 
 
 
Sales
1,587
1,331
1,117
Costs and expenses
(1,499)
(1,210)
(1,067)
Disentanglement costs
(44)
Income before taxes
88
121
6
Income taxes
(10)
(40)
(3)
Investments in associates
(3)
Results from discontinued operations
78
78
3

At the moment of divestment the related balance sheet positions will be transferred, the associated currency translation differences, part of Shareholders’ equity, will be recognized in the Consolidated statement of income. At December 31, 2013, the estimated release amounts to a EUR 3 million loss.

The following table presents the assets and liabilities of the AVM&A business, classified as Assets held for sale and Liabilities directly associated with the assets held for sale in the Consolidated balance sheets.

 
 
2013
 
 
Property, plant and equipment
17
Intangible assets including goodwill
32
Inventories
130
Accounts receivable
212
Other assets
9
Assets classified as held for sale
400
 
 
Accounts payable
217
Provisions
33
Other liabilities
98
Liabilities directly associated with assets held for sale
348

Non-transferrable balance sheet positions, such as certain accounts receivable, accounts payable, accrued liabilities and provisions are reported on the respective balance sheet captions.

Discontinued operations: Television business

As announced in Q1 2012, the Television business’s strategic partnership agreement with TPV Technology Limited was signed on April 1, 2012. In 2013, the discontinued Television business reported a net loss of EUR 6 million (2012: a net loss of EUR 31 million; 2011: a net loss of EUR 515 million).

The following table summarizes the results of the Television business included in the Consolidated statements of income as discontinued operations.

 
 
2011
2012
2013
 
 
 
 
Sales
2,702
563
(3)
Costs and expenses
(2,913)
(622)
(3)
loss on sale of discontinued operations
(380)
5
4
Income (loss) before taxes
(591)
(54)
(2)
Income taxes
76
23
(4)
Operational income tax
49
28
(2)
Income tax on loss on sale of discontinued operations
27
(5)
(2)
Results from discontinued operations
(515)
(31)
(6)

In 2011, the loss on the sale of the Television business amounted to approximately EUR 380 million, which mainly comprised of present value of initial contributions made to the TV venture (EUR 183 million), total disentanglement costs (EUR 81 million), contributed assets which were not fully recovered (EUR 66 million) and various smaller other items, offset by the revenue associated with the sale, including the fair value of a contingent consideration and a retained 30% interest in the TV venture.

In addition to the contributions that were agreed and recognized as loss on onerous contract, Philips made commitments to provide further financing to the TV venture for more details see note (25) Contractual obligations and note (36) Subsequent events.

The following table presents the in 2012 divested assets and liabilities of the Television business.

 
 
April 1, 2012
 
 
Property, plant and equipment
91
Intangible assets including goodwill
Write down to fair value less costs to sell
Inventories
124
Other assets
25
Assets classified as held for sale
240
 
 
Provisions
(6)
Liabilities classified as held for sale
(6)

Discontinued operations: Other

Certain results of other divestments formerly reported as discontinued operations are included with a net gain of EUR 5 million in 2013 (2012: a result of EUR nil million; 2011: a net gain of EUR 27 million).

Other assets classified as held for sale

On July 1, 2013, Philips announced to transfer certain assets and cash proceeds from the sale of certain assets to the Dutch pension plan. In total EUR 94 million of related assets are qualified as held for sale as of December 31, 2013. EUR 92 million relates to other non-current financial assets. For more details see note (30) Post-employment benefits.

Assets and liabilities directly associated with assets held for sale relate to property, plant and equipment for an amount of EUR 13 million (December 31, 2012 EUR 1 million) and business divestments of EUR nil million at December 31, 2013 (December 31, 2012 EUR 15 million).

In 2013, the Company divested two Healthcare businesses formerly reported under Assets classified as held for sale. For more details see note (9) Acquisitions and divestments.

On March 29, 2012, Philips announced the completion of the High Tech Campus transaction with proceeds of EUR 425 million, consisting of a EUR 373 million cash transaction and an amount of EUR 52 million to be received after the deal. The gain from the transaction, after deducting expenses related to other real estate efficiency measures which are part of the EUR 800 million cost reduction program announced in 2011, of EUR 65 million, of which EUR 37 million was recognized in the first quarter of 2012 in income from operations while EUR 28 million was deferred to future periods and is recognized periodically starting as of April 2012. The deferral of the gain relates to the finance lease element in the sale and lease-back arrangement part of the deal.

In 2012, Philips divested several industrial sites in sector Lighting, the Speech Processing business in sector Consumer Lifestyle and a minor service activity in sector Healthcare. The transactions of the industrial sites resulted in a loss of EUR 95 million, consisting of contributed assets, which were not fully recovered leading to a EUR 14 million impairment on property, plant and equipment and EUR 81 million loss reported in other business expense as result on disposal of businesses. As part of these divestments onerous supply agreements were signed, which amounted to EUR 60 million at December 31, 2012. The speech Processing business resulted in a gain of EUR 21 million gain reported in other business income as result on disposal of business.

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This is an interactive electronic version of the Philips Annual Report 2013 and also contains certain information in summarized form. The contents of this version are qualified in their entirety by reference to the printed version of the full Philips Annual Report 2013. This printed version is available as a PDF file on this website. Information about: forward-looking statements, third-party market share data, fair value information, IFRS basis of presentation, use of non-GAAP information, statutory financial statements and management report, reclassifications and analysis of 2013 compared to 2012.

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