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.

Sales and costs by nature
 
2011
2012
2013
 
 
 
 
Sales
20,992
23,457
23,329
 
 
 
 
Costs of materials used
(7,119)
(8,177)
(7,895)
Employee benefit expenses
(5,697)
(6,694)
(6,129)
Depreciation and amortization
(1,400)
(1,398)
(1,349)
Shipping and handling
(776)
(788)
(809)
Advertising and promotion
(865)
(841)
(882)
Lease expense
(314)
(364)
(347)1)
Other operational costs
(3,993)
(4,214)
(3,987)
Impairment of goodwill
(1,355)
(28)
Other business income and expenses
48
(333)
88
Income from operations
(479)
648
1,991
1)
Lease expense includes EUR 42 million of other costs, such as fuel and electricity, and taxes to be paid and reimbursed to the lessor

Sales composition

 
 
2011
2012
2013
 
 
 
 
Goods
17,636
19,918
19,716
Services
2,926
3,130
3,139
Royalties
430
409
474
 
20,992
23,457
23,329

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

Costs of materials used

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

Employee benefit expenses

 
 
2011
2012
2013
 
 
 
 
Salaries and wages
4,668
5,499
4,983
Post-employment benefits costs
272
344
362
Other social security and similar charges:
 
 
 
- Required by law
595
678
658
- Voluntary
162
173
126
 
5,697
6,694
6,129

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

For further information on pension costs, see note (30) Post-employment benefits.

Details on the remuneration of the members of the Board of Management and the Supervisory Board, see note (33) Information on remuneration.

Employees

The average number of employees by category is summarized as follows (in FTEs):

 
 
2011
2012
2013
 
 
 
 
Production
57,011
58,031
58,116
Research and development
12,539
12,974
12,072
Other
31,789
32,730
32,006
Employees
101,339
103,735
102,194
3rd party workers
16,092
15,498
13,171
Continuing operations
117,431
119,233
115,365
Discontinued operations
6,100
2,901
1,997

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 extenal companies.

Depreciation and amortization

Depreciation of property, plant and equipment and amortization of intangibles are as follows:

 
 
2011
2012
2013
 
 
 
 
Depreciation of property, plant and equipment
617
678
632
Amortization of internal-use software
55
45
39
Amortization of other intangible assets
559
458
432
Amortization of development costs
169
217
246
 
1,400
1,398
1,349

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 (including impairment) 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

Fees KPMG
 
2011
2012
2013
 
 
 
 
Audit fees
15.6
14.7
15.6
- consolidated financial statements
10.1
9.7
10.1
- statutory financial statements
5.5
5.0
5.5
 
 
 
 
Audit-related fees 1)
2.4
5.6
2.2
- acquisitions and divestments
0.1
2.9
0.4
- sustainability assurance
0.5
0.8
0.7
- other
1.8
1.9
1.1
 
 
 
 
Tax fees 2)
0.9
1.3
0.8
-tax compliance services
0.9
1.3
0.8
 
 
 
 
Other fees 3)
0.5
0.7
1.3
- royalty investigation
0.4
0.1
0.0
- other
0.1
0.6
1.3
 
 
 
 
Total
19.4
22.3
19.9
1)
The percentage of services provided in 2013 is 11.1% of the total fees
2)
The percentage of services provided in 2013 is 4.0% of the total fees
3)
The percentage of services provided in 2013 is 6.5% of the total fees

This table ’Fees KPMG’ forms an integral part of the Company Financial Statements, please refer to note (K) Audit fees.

Impairment of goodwill

In 2013, goodwill impairment charges amounts to EUR 28 million, including EUR 26 million as result of reduced growth expectations in Consumer Luminaires.

In 2011, goodwill was impaired in the Healthcare sector for an amount of EUR 824 million and in the Lighting sector for an amount of EUR 531 million.

For further information on impairment of goodwill, see note (11) Goodwill.

Other business income (expenses)

Other business income (expenses) consists of the following:

 
 
2011
2012
2013
 
 
 
 
Result on disposal of businesses:
 
 
 
- income
27
9
50
- expense
(26)
(84)
(1)
Result on disposal of fixed assets:
 
 
 
- income
47
224
19
- expense
(11)
(9)
(13)
Result on other remaining businesses:
 
 
 
- income
50
42
54
- expense
(39)
(515)
(21)
 
48
(333)
88
Total other business income
124
275
123
Total other business expense
(76)
(608)
(35)

In 2013, result on disposal of businesses was mainly due to divestment of non-strategic businesses within Healthcare. For further information, see note (9) Acquisitions and divestments

In 2013, result on disposal of fixed assets was mainly due to sale of real estate assets.

In 2013, result on other remaining businesses were mainly due to release of earn out provisions. For further information, see note (21) Provisions.

(0)
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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.