Income from operations

For information related to Sales and tangible and intangible assets on a geographical and sector basis, see note (2) Information by sector and main country.

Philips Group
Sales and costs by nature in millions of EUR
2012 - 2014
 
2012
2013
2014
Sales
22,234
21,990
21,391
Costs of materials used
(7,852)
(7,494)
(7,296)
Employee benefit expenses
(6,361)
(5,814)
(6,080)
Depreciation and amortization
(1,242)
(1,177)
(1,187)
Shipping and handling
(749)
(762)
(741)
Advertising and promotion
(829)
(869)
(913)
Lease expense
(360)
(344)
(318)1)
Other operational costs
(3,923)
(3,734)
(4,156)2)
Impairment of goodwill
(28)
(3)
Other business income (expenses)
(326)
87
(211)
Income from operations
592
1,855
486
1)
Lease expense includes EUR 35 million (2013: EUR 42 million) of other costs, such as fuel and electricity, and taxes to be paid and reimbursed to the lessor
2)
Other operational costs contain items which are dissimilar in nature and individually insignificant in amount to disclose separately. These costs contain among others expenses for outsourcing services, mainly in IT and HR, 3rd party workers, warranty, patents and costs for travelling and external legal services.
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Sales composition

Philips Group
Sales composition in millions of EUR
2012 - 2014
 
2012
2013
2014
Goods
18,715
18,398
17,972
Services
3,121
3,130
2,948
Royalties
398
462
471
Sales
22,234
21,990
21,391

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Philips has no single external customer that represents 10% or more of sales.

Costs of materials used

Cost of materials used represents the inventory recognized in cost of sales.

Employee benefit expenses

Philips Group
Employee benefit expenses in millions of EUR
2012 - 2014
2012
2013
2014
Salaries and wages
5,221
4,722
5,018
Post-employment benefits costs
334
354
326
Other social security and similar charges:
 
 
 
  • Required by law
639
621
623
  • Voluntary
167
117
113
Employee benefit expenses
6,361
5,814
6,080

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The employee benefit expense relate to employees who are working on the payroll of Philips, both with permanent and temporary contracts.

For further information on post-employment benefit costs, see note (20) Post-employment benefits.

For details on the remuneration of the members of the Board of Management and the Supervisory Board, see note (29) Information on remuneration.

Employees

The average number of employees by category is summarized as follows:

Philips Group
Employees in FTEs
2012 - 2014
 
2012
2013
2014
Production
52,055
50,628
48,110
Research and development
12,470
11,757
11,714
Other
32,134
31,673
32,684
Employees
96,659
94,058
92,508
3rd party workers
13,968
12,194
12,562
Continuing operations
110,627
106,252
105,070
Discontinued operations
11,507
10,792
9,222

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Employees consist of those persons working on the payroll of Philips and whose costs are reflected in the Employee benefit expenses table. 3rd party workers consist of personnel hired on a per-period basis, via external companies.

Depreciation and amortization

Depreciation of property, plant and equipment and amortization of intangible assets, including impairments, are as follows:

Philips Group
Depreciation and amortization in millions of EUR
2012 - 2014
 
2012
2013
2014
Depreciation of property, plant and equipment
588
521
592
Amortization of internal-use software
45
39
32
Amortization of other intangible assets
411
393
332
Amortization of development costs
198
224
231
Depreciation and amortization
1,242
1,177
1,187

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Depreciation of property, plant and equipment is primarily included in cost of sales. Amortization of the categories of other intangible assets are reported in selling expenses for brand names and customer relationships and are reported in cost of sales for technology based and other intangible assets. Amortization of development cost is included in research and development expenses.

Shipping and handling

Shipping and handling costs are included in cost of sales and selling expenses.

Advertising and promotion

Advertising and promotion costs are included in selling expenses.

Audit fees

Philips Group
Fees KPMG in millions of EUR
2012 - 2014
 
2012
2013
2014
Audit fees
14.7
15.6
14.9
  • consolidated financial statements
9.7
10.1
9.6
  • statutory financial statements
5.0
5.5
5.3
Audit-related fees 1)
5.6
2.2
3.9
  • acquisitions and divestments
2.9
0.4
2.4
  • sustainability assurance
0.8
0.7
0.6
  • other
1.9
1.1
0.9
Tax fees 2)
1.3
0.8
0.2
  • tax compliance services
1.3
0.8
0.2
Other fees
0.7
1.3
0.0
  • royalty investigation
0.1
0.0
0.0
  • other
0.6
1.3
0.0
Fees KPMG
22.3
19.9
19.0
1)
The percentage of audit-related fees in 2014 is 20.5% of the total fees
2)
The percentage of tax fees in 2014 is 1.1% of the total fees
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This table ’Fees KPMG’ forms an integral part of the Company Financial Statements, please refer to note (B) Audit fees.

Impairment of goodwill

In 2014, goodwill impairment charges amount to EUR 3 million consisting of impairments on divested businesses in Healthcare and Lighting. In 2013, goodwill impairment charges amounted to EUR 28 million, including EUR 26 million as result of reduced growth expectations in Consumer Luminaires, see note (11) Goodwill.

Other business income (expenses)

Other business income (expenses) consists of the following:

Philips Group
Other business income (expenses) in millions of EUR
2012 - 2014
 
2012
2013
2014
Result on disposal of businesses:
 
 
 
  • income
9
50
7
  • expense
(84)
(1)
(2)
Result on disposal of fixed assets:
 
 
 
  • income
222
18
18
  • expense
(7)
(13)
(1)
Result on other remaining businesses:
 
 
 
  • income
41
54
38
  • expense
(507)
(21)
(271)
Other business income (expenses)
(326)
87
(211)
Total other business income
272
122
63
Total other business expense
(598)
(35)
(274)

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In 2014, result on disposal of businesses was mainly due to divestment of non-strategic businesses. For further information, see note (4) Acquisitions and divestments.

In 2014, result on disposal of fixed assets was mainly due to sale of real estate assets.

In 2014, result on other remaining businesses mainly relates to certain parts of the Cathode Ray Tube antitrust litigation as mentioned in note (26) Contingent assets and liabilities for which the Company concluded it was able to make a reliable estimate of the cash outflow or was able to reach a settlement with the relevant plaintiffs.

(0)
(0)

SF6 (Sulfur hexafluoride) is used in the electrical industry as a gaseous dielectric medium.

CO2-equivalent or carbon dioxide equivalent is a quantity that describes, for a given mixture and amount of greenhouse gas, the amount of CO2 that would have the same global warming potential (GWP), when measured over a specified timescale (generally 100 years).