2014 financial performance

Philips Healthcare
Key data in millions of EUR unless otherwise stated
2012 - 2014
 
2012
2013
2014
Sales
9,983
9,575
9,186
Sales growth
 
 
 
% increase (decrease), nominal
13%
(4)%
(4)%
% increase (decrease), comparable1)
6%
1%
(2)%
EBITA 1)
1,226
1,512
616
as a % of sales
12.3%
15.8%
6.7%
EBIT
1,026
1,315
456
as a % of sales
10.3%
13.7%
5.0%
Net operating capital (NOC)1)
7,976
7,437
7,565
Cash flows before financing      activities1)
1,298
1,292
910
Employees (in FTEs)
37,460
37,008
37,065
1)
For a reconciliation to the most directly comparable GAAP measures, see Reconciliation of non-GAAP information
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In 2014, sales amounted to EUR 9,186 million, 4% lower than in 2013 on a nominal basis. Excluding a 2% negative currency effect, comparable sales decreased by 2%. Customer Services achieved mid-single-digit growth and Patient Care & Monitoring Solutions posted low-single-digit growth, while HealthCare Informatics, Services & Solutions sales were in line with 2013. Imaging Systems recorded a double-digit decline. Green Product sales amounted to EUR 3,508 million, or 38% of sector sales.

Geographically, comparable sales in growth geographies showed a low-single-digit decline, with strong growth in Latin America and Middle East & Turkey offset by a double-digit decline in China. In mature geographies, comparable sales also showed a low-single-digit decline. The year-on-year sales decrease was largely attributable to North America and Western Europe, as sales in other mature geographies showed a low-single-digit increase, led mainly by Japan.

EBITA decreased from EUR 1,512 million, or 15.8% of sales, in 2013 to EUR 616 million, or 6.7% of sales, in 2014. Restructuring and acquisition-related charges amounted to EUR 70 million in 2014, while in 2013 they were close to zero.  2014 EBITA included charges of EUR 366 million related to the jury verdict in the Masimo litigation, EUR 49 million of mainly inventory write-downs related to the Cleveland facility, and a EUR 16 million past-service pension cost gain in the Netherlands.

In 2014, the voluntary suspension of production at our Cleveland facility and the jury verdict in the Masimo litigation strongly impacted our 2014 performance.  At our Healthcare facility in Cleveland, Ohio, certain issues in the general area of manufacturing process controls were identified during an ongoing US Food and Drug Administration (FDA) inspection. To address these issues, on January 10, 2014 we started a voluntary, temporary suspension of new production at the facility, primarily to strengthen manufacturing process controls. The suspension negatively impacted Healthcare’s sales and EBITA in 2014.

On October 3, 2014 Philips announced that it would appeal the jury verdict in the patent infringement lawsuit by Masimo Corporation (Masimo), in which Masimo was awarded compensation of USD 467 million (EUR 366 million). The jury verdict is part of extensive litigation, which started in 2009, between Masimo and Philips involving several claims and counterclaims related to a large number of patents.  

EBITA in 2013 also included EUR 61 million from a past-service pension gain and a EUR 21 million gain on the sale of a business excluding these items. The decrease in EBITA was mainly driven by operational losses related to the voluntary suspension of production at the Cleveland facility and negative currency impacts.

EBIT amounted to EUR 456 million, or 5.0% of sales, and included EUR 159 million of charges related to intangible assets.

Net operating capital increased by EUR 128 million to EUR 7,565 million. Higher provisions and lower fixed assets were offset by currency impacts.

Cash flows before financing activities decreased from EUR 1,292 million in 2013 to EUR 910 million in 2014, largely due to lower earnings.

Philips Healthcare
Sales per geographic cluster in millions of EUR
2010 - 2014
2,0313,9019681,7018,601‘101,9483,9531,0461,9058,852‘111,9704,3931,2522,3689,983‘121,9324,0891,1332,4219,575‘131,914Western Europe3,896North America1,080Other mature2,296Growth9,186‘14
Philips Healthcare
Sales and net operating capital1) in billions of EUR
2010 - 2014
8.6‘108.98.9‘118.410.0‘128.09.6‘137.49.2Sales‘147.6Net operating capital
1) For a reconciliation to the most directly comparable GAAP measures, see Reconciliation of non-GAAP information
Philips Healthcare
EBIT and EBITA 1) in millions of EUR
2010 - 2014
2638661,12913.1%‘101,053271,08012.2%‘112001,0261,22612.3%‘121971,3151,51215.8%‘13160Amortization and impairmentin value456EBIT in value616 EBITA in value6.7%‘14EBITA as a % of sales
1) For a reconciliation to the most directly comparable GAAP measures, see Reconciliation of non-GAAP information
(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).

Earnings before interest, tax and amortization (EBITA) represents income from continuing operations excluding results attributable to non-controlling interest holders, results relating to investments in associates, income taxes, financial income and expenses, amortization and impairment on intangible assets (excluding software and capitalized development expenses). Philips believes that EBITA information makes the underlying performance of its businesses more transparent by factoring out the amortization of these intangible assets, which arises when acquisitions are consolidated. In our Annual Report on form 20-F this definition is referred to as Adjusted IFO.

Comparable sales exclude the effect of currency movements and acquisitions and divestments (changes in consolidation). Philips believes that comparable sales information enhances understanding of sales performance.

Growth geographies are the developing geographies comprising of Asia Pacific (excluding Japan, South Korea, Australia and New Zealand), Latin America, Central & Eastern Europe, the Middle East (excluding Israel) and Africa.

Mature geographies are the highly developed markets comprising of Western Europe, North America, Japan, South Korea, Israel, Australia and New Zealand.