Annual Report 20132013

AnnualAnnual Report 20132013 Delivering innovation that matters to you Please note: this PDF contains only the pages highlighted in the list of contents below. The contents of this file are qualified in their entirety by reference to the printed version of the Philips Annual Report 2013. The information in this PDF has been derived from the audited financial statements 2013 of Koninklijke Philips Electronics N.V. KPMG has issued unqualified auditors’ reports on these financial statements. This is the analyst selection from the Philips Annual Report 2013 Contents Grey text indicates parts not included in this selection from the 9 Supervisory Board report - Philips Annual Report 2013. 10 Corporate governance - Performance highlights 4 11 Group financial statements 80 Message from the CEO 6 11.1 Management’s report on internal control 81 11.2 Report of the independent auditor 81 1 Accelerate! 9 11.3 Auditor’s report on internal control over financial 81 1.1 Our transformation 10 reporting 1.2 Business impact 11 11.4 Consolidated statements of income 82 1.3 Fast facts 19 11.5 Consolidated statements of comprehensive income 84 1.4 Next phase 20 11.6 Consolidated balance sheets 85 11.7 Consolidated statements of cash flows 88 2 Building a great company 21 11.8 Consolidated statements of changes in equity 90 2.1 Our rich heritage 22 2.2 Our vision 22 2.3 Market opportunities 23 2.4 Our business system 25 2.5 Our people 25 2.6 Global presence 26 3 Delivering innovation that matters to you - 4 Group performance 27 4.1 Financial performance 28 4.2 Social performance 0 4.3 Environmental performance 0 4.4 Proposed distribution to shareholders 41 4.5 Outlook 41 5 Sector performance 42 5.1 Healthcare 44 5.2 Consumer Lifestyle 50 5.3 Lighting 55 5.4 Innovation, Group & Services 61 6 Risk management 65 6.1 Our approach to risk management and business 65 control 6.2 Risk categories and factors 68 6.3 Strategic risks 69 6.4 Operational risks 70 6.5 Compliance risks 72 6.6 Financial risks 74 7 Management 76 8 Supervisory Board 78 2 This is the analyst selection from the Annual Report 2013 11.9 Notes 91 F Long-term debt and short-term debt 171 G Other current liabilities 171 1 Significant accounting policies 91 H Net income 171 2 Information by sector and main country 106 I Employees 171 3 Income from operations 109 J Contractual obligations and contingent 171 4 Financial income and expenses 111 liabilities not appearing in the balance sheet 5 Income taxes 111 K Audit fees 172 6 Interests in entities 115 L Subsequent events 172 7 Discontinued operations and other assets 117 classified as held for sale 12.5 Independent auditor’s report - Company 173 8 Earnings per share 119 9 Acquisitions and divestments 119 13 Sustainability statements - 10 Property, plant and equipment 121 11 Goodwill 122 14 Reconciliation of non-GAAP information - 12 Intangible assets excluding goodwill 124 13 Non-current receivables 125 15 Five-year overview 174 14 Other non-current financial assets 125 15 Other non-current assets 126 16 Investor Relations 177 16 Inventories 126 16.1 Key financials and dividend policy 177 17 Other current assets 126 16.2 Share information 179 18 Current receivables 127 16.3 Philips’ rating 181 19 Equity 127 16.4 Performance in relation to market indices 182 20 Long-term debt and short-term debt 130 16.5 Philips’ acquisitions 185 21 Provisions 131 16.6 Financial calendar 186 22 Other non-current liabilities 134 16.7 Investor contact 186 23 Accrued liabilities 134 24 Other current liabilities 134 17 Definitions and abbreviations 190 25 Contractual obligations 135 26 Contingent assets and liabilities 135 18 Forward-looking statements and other information 193 27 Cash from (used for) derivatives and current 139 financial assets 28 Purchase and proceeds from non-current 139 IFRS basis of presentation financial assets The financial information included in this document is based on IFRS, unless otherwise indicated. 29 Assets in lieu of cash from sale of businesses 139 30 Post-employment benefits 139 Forward-looking statements and other information Please refer to chapter 18, Forward-looking statements and other 31 Share-based compensation 144 information, of this Annual Report for more information about forward-looking 32 Related-party transactions 149 statements, third-party market share data, fair value information, IFRS basis of preparation, use of non-GAAP information, statutory financial statements and 33 Information on remuneration 150 management report, and reclassifications. 34 Fair value of financial assets and liabilities 155 Dutch Financial Markets Supervision Act 35 Details of treasury / other financial risks 157 This document comprises regulated information within the meaning of the 36 Subsequent events 162 Dutch Financial Markets Supervision Act (Wet op het Financieel Toezicht). Statutory financial statements and management report 11.10 Independent auditor’s report - Group 163 The chapters Group financial statements and Company financial statements contain the statutory financial statements of the Company. The introduction to the chapter Group financial statements sets out which parts of this Annual 12 Company financial statements 164 Report form the Management report within the meaning of Section 2:391 of the Dutch Civil Code (and related Decrees). 12.1 Balance sheets before appropriation of results 165 12.2 Statements of income 166 12.3 Statement of changes in equity 166 12.4 Notes 167 A Intangible assets 167 B Financial fixed assets 167 C Other non-current financial assets 168 D Receivables 168 E Shareholders’ equity 168 This is the analyst selection from the Annual Report 2013 3 Performance highlights Equity and Net income per common share in euros Performance ■-shareholders’ equity per common share - basic --Net income attributable to shareholders per common share in euro - diluted 20 0.26 1.36 15.72 15.87 (1.53) (0.04) 1.27 highlights 15 13.31 12.19 12.28 10 Prior-period financial statements and related information have been 5 restated for the treatment of Audio, Video, Multimedia and Accessories as discontinued operations (see note 7, Discontinued operations and other 0 assets classified as held for sale) and the adoption of IAS 19R, which mainly relates to accounting for pensions (see note 30, Post-employment benefits). For a reconciliation to the most directly comparable GAAP (5) measures, see chapter 14, Reconciliation of non-GAAP information, of this 2009 2010 2011 2012 2013 Annual Report. Financial table Operating cash flows all amounts in millions of euros unless otherwise stated in millions of euros ■ 2011 2012 2013 ■-net capital expenditures_■-free cash flows ■-operating cash flows_--free cash flows as a % of sales Sales 20,992 23,457 23,329 3,000 6.0 6.9 1,235 1,627 2,000 EBITA 1,435 1,106 2,451 0.7 2.3 1,931 2,082 as a % of sales 6.8 4.7 10.5 411 172 1,000 985 1,138 760 EBIT (479) 648 1,991 0 (455) as a % of sales (2.3) 2.8 8.5 (574) (696) (857) (966) (1,000) (97) Net income (loss) (1,456) (30) 1,172 (0.5) (2,000) Net income attributable to 2009 2010 2011 2012 2013 shareholders per common share in euro: Net debt (cash) to group equity - basic (1.53) (0.04) 1.28 in billions of euros - diluted (1.53) (0.04) 1.27 ■-net debt (cash)--■-group equity 20 Net operating capital 10,382 9,316 10,238 14.6 15.1 15 12.4 Free cash flows (97) 1,627 172 11.2 11.2 10 Shareholders’ equity 12,328 11,151 11,214 5 1.4 Employees at December 31 125,240 118,087 116,681 0.7 0.7 0 of which discontinued operations 5,645 2,005 1,992 (0.1) (1.2) (5) 1) Mid-term financial targets 2009 2010 2011 2012 2013 2) Including restructuring and acquisitions 3) Excluding Mergers & Acquisitions impact ratio: (1) : 101 (8) : 108 5 : 95 6 : 94 11 : 89 4) Based on the results of 60 “pulse surveys” as there was no full-scope Employee Engagement Survey in 2012 5) For a definition of of mature and growth geographies, see chapter 17, Research and development expenses Definitions and abbreviations, of this Annual Report in millions of euros 6) As measured by Interbrand ■ ■-Green Innovation_■-R&D_--as a % of sales 7.8 2,000 1,831 7.4 7.6 1,733 8.4 7.3 Financial performance 2013 1,605 569 1,526 1,486 509 1) 1,500 479 Target Actual 340 392 CAGR 2012 - 2013 % 4-6% 4.5% 1,262 1,186 1,224 2) 1,126 EBITA as % of sales 10-12% 10.5% 1,000 1,094 ROIC %3) 12-14% 15.3% 500 0 2009 2010 2011 2012 2013 4 This is the analyst selection from the Annual Report 2013 Performance highlights Employee Engagement Index Operational carbon footprint in % in kilotonnes CO2-equivalent ■-favorable--■-neutral--■-unfavorable ■-logistics_■-business travel 100 ■-non-industrial operations_■-manufacturing 14 11 10 9 15 2,500 12 14 16 15 6 75 79 1,930 77 76 75 2,000 1,845 71 1,771 909 1,614 1,654 767 703 1,500 738 50 709 1,000 174 159 155 142 114 220 247 256 25 217 227 500 627 672 657 546 575 0 0 2009 2010 2011 20124) 2013 2009 2010 2011 2012 2013 Performance in millions of euros Group Healthcare Consumer Lifestyle Lighting 2012 2013 2012 2013 2012 2013 2012 2013 Sales 23,457 23,329 1% 9,983 9,575 4% 4,139 4,605 7% 8,442 8,413 0% Green product sales 10,981 11,815 8% 3,610 3,690 2% 1,619 2,270 40% 5,572 5,855 2% Sales in mature geographies5) 15,407 14,825 4% 7,615 7,154 6% 2,365 2,418 2% 5,010 4,758 5% Sales in growth geographies5) 8,050 8,504 6% 2,368 2,421 2% 1,954 2,187 12% 3,432 3,655 6% EBITA 1,106 2,451 122% 1,226 1,512 23% 456 483 6% 128 695 443% Net operating capital 9,316 10,238 10% 7,976 7,437 7% 1,205 1,261 5% 4,635 4,462 4% Total sales by business 2013: Healthcare Total sales by business 2013: Consumer Lifestyle as a % as a % Health & Wellness Customer Services 20 26 Imaging Systems 38 Domestic Appliances 47 Patient Care & Personal Care Clinical Informatics 33 Home Healthcare Solutions 22 14 Total sales by business 2013: Lighting Brand value6) as a % in billions of US dollars Lumileds 9.8 5 10 Automotive 9.0 8.7 8.7 10 8.1 5 Light Sources & Electronics Professional 52 Lighting Solutions 28 0 Consumer Luminaires 2009 2010 2011 2012 2013 5 This is the analyst selection from the Annual Report 2013 5 Message from the CEO Message from the CEO “ Our Accelerate! initiatives helped us to achieve our mid-term 2013 targets.

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