Indicate by check mark whether
the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b)(1):
¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule101(b)(7):
¨
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
M.J. van Ginneken
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, by the
undersigned, thereunto duly authorized at Amsterdam, on the 25
th
of July, 2016.
The Personal Health
businesses grew by 9% on a comparable basis, with the Adjusted EBITA margin improving by 170 basis points. The Diagnosis & Treatment businesses posted comparable sales growth of 1%, and the Adjusted EBITA margin improved by 20 basis points.
In the Connected Care & Health Informatics businesses, comparable sales grew by 6%, while the Adjusted EBITA margin improved by 110 basis points.
On May 27, 2016, Philips Lighting was listed and started trading on Euronext in Amsterdam under the symbol LIGHT. Following the listing of
Philips Lighting, Philips retains a 71.225% stake and continues to consolidate Philips Lighting.
In the second quarter, comparable sales in Philips
Lighting declined by 1%, while Adjusted EBITA improved by 180 basis points to 9.3% of sales. Full details about the financial performance of Philips Lighting in the second quarter were published on July 22, 2016. The related report can be
accessed here.
Costs related to
the separation of Philips Lighting amounted to EUR 45 million in the second quarter of 2016. For the second half of 2016, Philips expects separation costs to be in the range of EUR 6585 million. Another EUR 38 million of costs
related to the listing of Philips Lighting were booked through equity in the second quarter of 2016.
Overhead cost savings amounted to EUR 19 million in the second quarter. The Design for Excellence (DfX) program generated EUR 86 million of
incremental procurement savings in the quarter. The End2End improvement program achieved EUR 45 million in productivity gains.
As of June 30, 2016, Philips had completed 91% of the 3-year EUR 1.5 billion share buy-back program.
Frans van Houten, CEO,
and Abhijit Bhattacharya, CFO, will host a conference call for investors and analysts at 10:00 am CET to discuss the results. A live audio webcast of the conference call will be available on the Philips Investor Relations website and can be accessed
here.
Certain non-GAAP financial measures are presented when discussing the Philips Groups performance. In the following tables, reconciliations to the most
directly comparable IFRS measures are presented.
The Lighting segment results differ from the stand-alone Philips Lighting reporting mainly due to the
exclusion of intercompany sales and the reporting within Legacy Items of Philips Lighting separation costs incurred in the first half of 2016.
Lighting
|
|
|
|
|
|
|
|
|
Key data
in millions of EUR unless otherwise stated
1)
|
|
|
|
January to June
|
|
|
|
2015
|
|
|
2016
|
|
Sales
|
|
|
3,563
|
|
|
|
3,419
|
|
Sales growth
|
|
|
|
|
|
|
|
|
Nominal sales growth
|
|
|
12
|
%
|
|
|
(4
|
)%
|
Comparable sales growth
|
|
|
(3
|
)%
|
|
|
(2
|
)%
|
Income from operations (EBIT)
|
|
|
158
|
|
|
|
184
|
|
as a % of sales
|
|
|
4.4
|
%
|
|
|
5.4
|
%
|
Adjusted EBITA
|
|
|
251
|
|
|
|
282
|
|
as a % of sales
|
|
|
7.0
|
%
|
|
|
8.2
|
%
|
EBITA
|
|
|
212
|
|
|
|
240
|
|
as a % of sales
|
|
|
6.0
|
%
|
|
|
7.0
|
%
|
1)
|
The Lighting segment results differ from the stand-alone Philips Lighting reporting mainly due to the exclusion of intercompany sales and the reporting within Legacy Items of Philips Lighting separation costs incurred
in the first half of 2016.
|
|
|
Comparable sales reflected double-digit growth in LED and Home and low-single-digit growth in Professional, which was more than offset by a double-digit decline in Lamps.
|
|
|
Total LED lighting sales grew 26% year-on-year and now represent 52% of total Lighting sales, compared to 41% in the first half of 2015. Conventional lighting sales declined 20% year-on-year, and now represent 48% of
total Lighting sales, compared to 59% in the first half of 2015.
|
|
|
Adjusted EBITA improved by EUR 31 million, or 1.2% of sales, year-on-year, driven by an increase in gross margin as well as cost productivity.
|
|
|
Restructuring and acquisition-related charges were EUR 42 million, compared to EUR 39 million in the first half of 2015.
|
Legacy Items
|
|
|
|
|
|
|
|
|
Income from operations (EBIT)
in millions of EUR
|
|
|
|
January to June
|
|
|
|
2015
|
|
|
2016
|
|
Separation costs
|
|
|
(38
|
)
|
|
|
(97
|
)
|
Other
|
|
|
(56
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
Income from operations (EBIT)
|
|
|
(94
|
)
|
|
|
(149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations (EBIT) included EUR 97 million of charges related to the separation of the Lighting business, EUR 23 million of charges related to movements in environmental provisions, and EUR
18 million of stranded costs related to the combined Lumileds and Automotive businesses.
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Net income of discontinued operations
in millions of
EUR
|
|
|
|
January to June
|
|
|
|
2015
|
|
|
2016
|
|
The combined Lumileds and Automotive businesses
|
|
|
86
|
|
|
|
92
|
|
Other
|
|
|
(2
|
)
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
Net income of discontinued operations
|
|
|
84
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income of the combined businesses of Lumileds and Automotive increased by EUR 6 million, mainly due to lower income tax, partly offset by lower operational performance.
|
|
|
The increase in other discontinued operations mainly relates to the Funai arbitration award.
|
|
|
|
|
|
Quarterly report Q2 2016 15
|
Risks and uncertainties
The Annual Report 2015 describes certain risk categories and risks (including risk appetite) which could have a material adverse effect on Philips
financial position and results. Those categories and risks remain valid and should be read in conjunction with this semi-annual report.
Looking ahead to
the second half of 2016, financial markets continue to be highly volatile due to political and macroeconomic issues in most major regions such as Europe (including Brexit), United States, China, Russia, Middle East & Turkey and Latin
America. Such conditions in financial markets may adversely affect the timing of and revenues from ongoing divestments such as Philips Lighting and the combined businesses of Lumileds and Automotive.
Also, Philips operates in a highly regulated product safety and quality environment. Philips products and facilities are subject to regulation and ongoing
inspections by various government agencies, including, in particular, the FDA (US) and comparable non-US agencies. As announced in 2014, Philips voluntarily suspended production at the Cleveland, Ohio facility. Since then, remediation actions by
Philips have been taken and production and shipment of CT systems have resumed. However, production will depend on external and internal factors with respect to the remediation efforts, including review by the FDA. Philips is undertaking
considerable efforts to improve quality and management systems in all of its operations. The remediation work in this area will continue to affect the Companys results. In addition, the FDA has inspected certain of Philips other sites.
Philips production and shipments in the future could be affected by an adverse outcome of these or other regulatory inspections and related claims and actions by regulators and others.
Additional risks not known to Philips, or currently believed not to be material, could later turn out to have a material impact on Philips business,
objectives, revenues, income, assets, liquidity or capital resources.
|
|
|
16 Quarterly report Q2 2016
|
|
|
Condensed consolidated statements of income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statements of income
in millions of EUR unless
otherwise stated
|
|
|
|
Q2
|
|
|
January to June
|
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
Sales
|
|
|
5,974
|
|
|
|
5,861
|
|
|
|
11,313
|
|
|
|
11,378
|
|
Cost of sales
|
|
|
(3,479
|
)
|
|
|
(3,323
|
)
|
|
|
(6,702
|
)
|
|
|
(6,574
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
2,495
|
|
|
|
2,538
|
|
|
|
4,611
|
|
|
|
4,804
|
|
Selling expenses
|
|
|
(1,440
|
)
|
|
|
(1,427
|
)
|
|
|
(2,781
|
)
|
|
|
(2,845
|
)
|
General and administrative expenses
|
|
|
(224
|
)
|
|
|
(234
|
)
|
|
|
(438
|
)
|
|
|
(423
|
)
|
Research and development expenses
|
|
|
(483
|
)
|
|
|
(501
|
)
|
|
|
(919
|
)
|
|
|
(971
|
)
|
Impairment of goodwill
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(3
|
)
|
Other business income
|
|
|
26
|
|
|
|
12
|
|
|
|
48
|
|
|
|
33
|
|
Other business expenses
|
|
|
(25
|
)
|
|
|
(11
|
)
|
|
|
(33
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
349
|
|
|
|
376
|
|
|
|
488
|
|
|
|
575
|
|
Financial income
|
|
|
28
|
|
|
|
12
|
|
|
|
59
|
|
|
|
39
|
|
Financial expenses
|
|
|
(102
|
)
|
|
|
(111
|
)
|
|
|
(200
|
)
|
|
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
275
|
|
|
|
277
|
|
|
|
347
|
|
|
|
362
|
|
Income taxes
|
|
|
(48
|
)
|
|
|
(48
|
)
|
|
|
(79
|
)
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income after taxes
|
|
|
227
|
|
|
|
229
|
|
|
|
268
|
|
|
|
239
|
|
Results relating to investments in associates
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
22
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
226
|
|
|
|
232
|
|
|
|
290
|
|
|
|
245
|
|
Discontinued operations - net of income tax
|
|
|
48
|
|
|
|
199
|
|
|
|
84
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
274
|
|
|
|
431
|
|
|
|
374
|
|
|
|
468
|
|
Attribution of net income for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Koninklijke Philips N.V. shareholders
|
|
|
272
|
|
|
|
420
|
|
|
|
371
|
|
|
|
452
|
|
Net income attributable to non-controlling interests
|
|
|
2
|
|
|
|
11
|
|
|
|
3
|
|
|
|
16
|
|
Earnings per common share attributable to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
(after deduction of treasury shares) during the period (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic
|
|
|
909,478
|
|
|
|
910,496
|
|
|
|
910,768
|
|
|
|
912,212
|
|
- diluted
|
|
|
914,726
|
|
|
|
917,744
|
|
|
|
916,373
|
|
|
|
919,086
|
|
Net income attributable to shareholders per common share in EUR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic
|
|
|
0.30
|
|
|
|
0.46
|
|
|
|
0.41
|
|
|
|
0.50
|
|
- diluted
|
|
|
0.30
|
|
|
|
0.46
|
|
|
|
0.40
|
|
|
|
0.49
|
|
|
|
|
|
|
Quarterly report Q2 2016 17
|
Condensed consolidated statements of comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statements of comprehensive income
in millions
of EUR unless otherwise stated
|
|
|
|
Q2
|
|
|
January to June
|
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
Net income for the period
|
|
|
274
|
|
|
|
431
|
|
|
|
374
|
|
|
|
468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions and other post-employment plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurement
|
|
|
2
|
|
|
|
|
|
|
|
(175
|
)
|
|
|
|
|
Income tax effect on remeasurements
|
|
|
(1
|
)
|
|
|
|
|
|
|
41
|
|
|
|
|
|
Revaluation reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Release revaluation reserve
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
Reclassification directly into retained earnings
|
|
|
2
|
|
|
|
0
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of items that will not be reclassified to profit or loss
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(134
|
)
|
|
|
|
|
Currency translation differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period change, before tax
|
|
|
(105
|
)
|
|
|
176
|
|
|
|
599
|
|
|
|
(74
|
)
|
Income tax effect
|
|
|
170
|
|
|
|
7
|
|
|
|
170
|
|
|
|
(6
|
)
|
Reclassification adjustment for gain realized
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period change, before tax
|
|
|
15
|
|
|
|
1
|
|
|
|
22
|
|
|
|
(38
|
)
|
Reclassification adjustment for results realized
|
|
|
|
|
|
|
1
|
|
|
|
(6
|
)
|
|
|
20
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period change, before tax
|
|
|
8
|
|
|
|
(23
|
)
|
|
|
(53
|
)
|
|
|
(24
|
)
|
Income tax effect
|
|
|
(3
|
)
|
|
|
8
|
|
|
|
8
|
|
|
|
3
|
|
Reclassification adjustment for results realized
|
|
|
29
|
|
|
|
(4
|
)
|
|
|
34
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of items that are or may be reclassified to profit or loss
|
|
|
112
|
|
|
|
166
|
|
|
|
772
|
|
|
|
(121
|
)
|
Other comprehensive income (loss) for the period
|
|
|
113
|
|
|
|
164
|
|
|
|
638
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
387
|
|
|
|
595
|
|
|
|
1,012
|
|
|
|
347
|
|
Shareholders
|
|
|
385
|
|
|
|
584
|
|
|
|
1,009
|
|
|
|
331
|
|
Non-controlling interests
|
|
|
2
|
|
|
|
11
|
|
|
|
3
|
|
|
|
16
|
|
|
|
|
18 Quarterly report Q2 2016
|
|
|
Condensed consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated balance sheets
in millions of
EUR
|
|
|
|
June 30, 2015
1)
|
|
|
December 31, 2015
1)
|
|
|
June 30, 2016
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
2,308
|
|
|
|
2,322
|
|
|
|
2,235
|
|
Goodwill
|
|
|
8,428
|
|
|
|
8,523
|
|
|
|
8,462
|
|
Intangible assets excluding goodwill
|
|
|
3,855
|
|
|
|
3,693
|
|
|
|
3,523
|
|
Non-current receivables
|
|
|
193
|
|
|
|
191
|
|
|
|
166
|
|
Investments in associates
|
|
|
182
|
|
|
|
181
|
|
|
|
206
|
|
Other non-current financial assets
|
|
|
510
|
|
|
|
489
|
|
|
|
368
|
|
Non-current derivative financial assets
|
|
|
42
|
|
|
|
58
|
|
|
|
59
|
|
Deferred tax assets
|
|
|
2,838
|
|
|
|
2,758
|
|
|
|
2,728
|
|
Other non-current assets
|
|
|
77
|
|
|
|
68
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
18,433
|
|
|
|
18,283
|
|
|
|
17,818
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
3,973
|
|
|
|
3,463
|
|
|
|
3,688
|
|
Other current financial assets
|
|
|
4
|
|
|
|
12
|
|
|
|
105
|
|
Other current assets
|
|
|
544
|
|
|
|
444
|
|
|
|
631
|
|
Current derivative financial assets
|
|
|
205
|
|
|
|
103
|
|
|
|
86
|
|
Income tax receivable
|
|
|
118
|
|
|
|
114
|
|
|
|
129
|
|
Receivables
|
|
|
4,777
|
|
|
|
4,982
|
|
|
|
4,763
|
|
Assets classified as held for sale
|
|
|
1,698
|
|
|
|
1,809
|
|
|
|
1,939
|
|
Cash and cash equivalents
|
|
|
1,135
|
|
|
|
1,766
|
|
|
|
1,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
12,454
|
|
|
|
12,693
|
|
|
|
13,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
30,887
|
|
|
|
30,976
|
|
|
|
31,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
11,396
|
|
|
|
11,662
|
|
|
|
11,488
|
|
Non-controlling interests
|
|
|
115
|
|
|
|
118
|
|
|
|
853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group equity
|
|
|
11,511
|
|
|
|
11,780
|
|
|
|
12,341
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
4,048
|
|
|
|
4,095
|
|
|
|
5,269
|
|
Non-current derivative financial liabilities
|
|
|
652
|
|
|
|
695
|
|
|
|
501
|
|
Long-term provisions
1)
|
|
|
3,724
|
|
|
|
3,471
|
|
|
|
3,284
|
|
Deferred tax liabilities
|
|
|
173
|
|
|
|
164
|
|
|
|
49
|
|
Other non-current liabilities
1)
|
|
|
873
|
|
|
|
812
|
|
|
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
9,470
|
|
|
|
9,237
|
|
|
|
9,876
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
|
1,632
|
|
|
|
1,665
|
|
|
|
539
|
|
Current derivative financial liabilities
|
|
|
377
|
|
|
|
238
|
|
|
|
329
|
|
Income tax payable
|
|
|
118
|
|
|
|
116
|
|
|
|
126
|
|
Accounts payable
|
|
|
2,580
|
|
|
|
2,673
|
|
|
|
2,568
|
|
Accrued liabilities
1)
|
|
|
2,769
|
|
|
|
2,815
|
|
|
|
2,707
|
|
Short-term provisions
1)
|
|
|
716
|
|
|
|
772
|
|
|
|
654
|
|
Dividends payable
|
|
|
33
|
|
|
|
|
|
|
|
50
|
|
Liabilities directly associated with assets held for sale
|
|
|
367
|
|
|
|
407
|
|
|
|
469
|
|
Other current liabilities
|
|
|
1,314
|
|
|
|
1,273
|
|
|
|
1,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
9,906
|
|
|
|
9,959
|
|
|
|
8,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and group equity
|
|
|
30,887
|
|
|
|
30,976
|
|
|
|
31,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Adjusted to reflect a reclassification of net defined-benefit obligations into Long-term provisions. See note 1, Significant accounting policies.
|
|
|
|
|
|
Quarterly report Q2 2016 19
|
Condensed consolidated statements of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statements of cash flows
in
millions of EUR
|
|
|
|
Q2
|
|
|
January to June
1)
|
|
|
|
2015
1)
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
274
|
|
|
|
431
|
|
|
|
374
|
|
|
|
468
|
|
Results of discontinued operations - net of income tax
|
|
|
(48
|
)
|
|
|
(199
|
)
|
|
|
(84
|
)
|
|
|
(223
|
)
|
Adjustments to reconcile net income to net cash of operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization, and impairments of fixed assets
|
|
|
331
|
|
|
|
301
|
|
|
|
614
|
|
|
|
611
|
|
Impairment of goodwill and other non-current financial assets
|
|
|
4
|
|
|
|
2
|
|
|
|
4
|
|
|
|
25
|
|
Net loss (gain) on sale of assets
|
|
|
(12
|
)
|
|
|
4
|
|
|
|
(46
|
)
|
|
|
|
|
Interest income
|
|
|
(12
|
)
|
|
|
(10
|
)
|
|
|
(26
|
)
|
|
|
(24
|
)
|
Interest expense on debt, borrowings and other liabilities
|
|
|
69
|
|
|
|
77
|
|
|
|
135
|
|
|
|
149
|
|
Income taxes
|
|
|
48
|
|
|
|
48
|
|
|
|
79
|
|
|
|
123
|
|
Results from investments in associates
|
|
|
2
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(6
|
)
|
Decrease (increase) in working
capital:
1)
|
|
|
(315
|
)
|
|
|
(52
|
)
|
|
|
(336
|
)
|
|
|
(82
|
)
|
Decrease (increase) in receivables and other current assets
|
|
|
298
|
|
|
|
(181
|
)
|
|
|
380
|
|
|
|
142
|
|
Decrease (increase) in inventories
|
|
|
(148
|
)
|
|
|
(46
|
)
|
|
|
(391
|
)
|
|
|
(269
|
)
|
Increase (decrease) in accounts payable, accrued and other liabilities
1)
|
|
|
(465
|
)
|
|
|
175
|
|
|
|
(325
|
)
|
|
|
45
|
|
Decrease (increase) in non-current receivables, other assets, other liabilities
1)
|
|
|
(18
|
)
|
|
|
(10
|
)
|
|
|
21
|
|
|
|
(193
|
)
|
Decrease in provisions
1)
|
|
|
(136
|
)
|
|
|
(99
|
)
|
|
|
(292
|
)
|
|
|
(308
|
)
|
Other items
|
|
|
135
|
|
|
|
(23
|
)
|
|
|
(230
|
)
|
|
|
118
|
|
Interest paid
|
|
|
(28
|
)
|
|
|
(32
|
)
|
|
|
(129
|
)
|
|
|
(148
|
)
|
Interest received
|
|
|
13
|
|
|
|
9
|
|
|
|
27
|
|
|
|
23
|
|
Dividends received from investments in associates
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Income taxes paid
|
|
|
(127
|
)
|
|
|
(131
|
)
|
|
|
(187
|
)
|
|
|
(211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
|
186
|
|
|
|
318
|
|
|
|
(70
|
)
|
|
|
328
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net capital expenditures
|
|
|
(216
|
)
|
|
|
(191
|
)
|
|
|
(403
|
)
|
|
|
(378
|
)
|
Purchase of intangible assets
|
|
|
(27
|
)
|
|
|
(10
|
)
|
|
|
(55
|
)
|
|
|
(42
|
)
|
Expenditures on development assets
|
|
|
(83
|
)
|
|
|
(75
|
)
|
|
|
(155
|
)
|
|
|
(149
|
)
|
Capital expenditures on property, plant and equipment
|
|
|
(117
|
)
|
|
|
(109
|
)
|
|
|
(209
|
)
|
|
|
(196
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
11
|
|
|
|
3
|
|
|
|
16
|
|
|
|
9
|
|
Net proceeds from (cash used for) derivatives and current financial assets
|
|
|
(43
|
)
|
|
|
(28
|
)
|
|
|
(80
|
)
|
|
|
(98
|
)
|
Purchase of other non-current financial assets
|
|
|
(2
|
)
|
|
|
(21
|
)
|
|
|
(2
|
)
|
|
|
(22
|
)
|
Proceeds from other non-current financial assets
|
|
|
(2
|
)
|
|
|
|
|
|
|
18
|
|
|
|
5
|
|
Purchase of businesses, net of cash acquired
|
|
|
(1
|
)
|
|
|
(19
|
)
|
|
|
(1,104
|
)
|
|
|
(46
|
)
|
Net proceeds from sale of interests in businesses, net of cash disposed of
|
|
|
27
|
|
|
|
7
|
|
|
|
64
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
|
(237
|
)
|
|
|
(252
|
)
|
|
|
(1,507
|
)
|
|
|
(536
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance (payments) of short-term debt
|
|
|
(2
|
)
|
|
|
(1,207
|
)
|
|
|
1,190
|
|
|
|
(1,143
|
)
|
Principal payments on long-term debt
|
|
|
(19
|
)
|
|
|
(25
|
)
|
|
|
(39
|
)
|
|
|
(33
|
)
|
Proceeds from issuance of long-term debt
|
|
|
25
|
|
|
|
1,208
|
|
|
|
43
|
|
|
|
1,227
|
|
Re-issuance of treasury shares
|
|
|
30
|
|
|
|
13
|
|
|
|
65
|
|
|
|
24
|
|
Purchase of treasury shares
|
|
|
(137
|
)
|
|
|
(198
|
)
|
|
|
(280
|
)
|
|
|
(366
|
)
|
IPO Philips Lighting proceeds
|
|
|
|
|
|
|
863
|
|
|
|
|
|
|
|
863
|
|
IPO Philips Lighting transaction costs paid
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
(19
|
)
|
Dividend paid to shareholders of Koninklijke Philips N.V.
|
|
|
(253
|
)
|
|
|
(280
|
)
|
|
|
(253
|
)
|
|
|
(280
|
)
|
Dividends paid to non-controlling interests
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) financing activities
|
|
|
(356
|
)
|
|
|
345
|
|
|
|
726
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) continuing operations
|
|
|
(407
|
)
|
|
|
411
|
|
|
|
(851
|
)
|
|
|
55
|
|
Cash flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
|
(74
|
)
|
|
|
121
|
|
|
|
(10
|
)
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) discontinued operations
|
|
|
(74
|
)
|
|
|
121
|
|
|
|
(10
|
)
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) continuing and discontinued operations
|
|
|
(481
|
)
|
|
|
532
|
|
|
|
(861
|
)
|
|
|
191
|
|
Effect of change in exchange rates on cash and cash equivalents
|
|
|
(51
|
)
|
|
|
9
|
|
|
|
123
|
|
|
|
(31
|
)
|
Cash and cash equivalents at the beginning of the period
|
|
|
1,667
|
|
|
|
1,385
|
|
|
|
1,873
|
|
|
|
1,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
|
1,135
|
|
|
|
1,926
|
|
|
|
1,135
|
|
|
|
1,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a number of reasons, principally the effects of translation differences, certain items in the statements of cash flows do
not correspond to the differences between the balance sheet amounts for the respective items.
1)
|
Adjusted to reflect a reclassification of net defined-benefit obligations into (Long-term) provisions. See note 1, Significant accounting policies.
|
|
|
|
20 Quarterly report Q2 2016
|
|
|
Condensed consolidated statement of changes in equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of changes in equity
in
millions of EUR
|
|
|
|
common
shares
|
|
|
capital
in
excess
of par
value
|
|
|
retained
earnings
|
|
|
revaluation
reserve
|
|
|
currency
translation
differences
|
|
|
available-
for-sale
financial
assets
|
|
|
cash
flow
hedges
|
|
|
treasury
shares
at cost
|
|
|
total
shareholders
equity
|
|
|
non-controlling
interests
|
|
|
total
equity
|
|
January to June 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
|
186
|
|
|
|
2,669
|
|
|
|
8,040
|
|
|
|
4
|
|
|
|
1,058
|
|
|
|
56
|
|
|
|
12
|
|
|
|
(363
|
)
|
|
|
11,662
|
|
|
|
118
|
|
|
|
11,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
456
|
|
|
|
(4
|
)
|
|
|
(80
|
)
|
|
|
(18
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
331
|
|
|
|
16
|
|
|
|
347
|
|
Dividend distributed
|
|
|
4
|
|
|
|
398
|
|
|
|
(732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330
|
)
|
|
|
|
|
|
|
(330
|
)
|
IPO Philips Lighting
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
716
|
|
|
|
825
|
|
Movement non-controlling interest - other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(356
|
)
|
|
|
(356
|
)
|
|
|
|
|
|
|
(356
|
)
|
Re-issuance of treasury shares
|
|
|
|
|
|
|
(106
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
Share call options
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
Share-based compensation plans
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
56
|
|
Income tax share-based compensation plans
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other equity movements
|
|
|
4
|
|
|
|
347
|
|
|
|
(702
|
)
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
(135
|
)
|
|
|
(505
|
)
|
|
|
719
|
|
|
|
214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2016
|
|
|
190
|
|
|
|
3,016
|
|
|
|
7,794
|
|
|
|
|
|
|
|
959
|
|
|
|
38
|
|
|
|
(11
|
)
|
|
|
(498
|
)
|
|
|
11,488
|
|
|
|
853
|
|
|
|
12,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January to June 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
|
187
|
|
|
|
2,181
|
|
|
|
8,790
|
|
|
|
13
|
|
|
|
229
|
|
|
|
27
|
|
|
|
(13
|
)
|
|
|
(547
|
)
|
|
|
10,867
|
|
|
|
101
|
|
|
|
10,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
241
|
|
|
|
(4
|
)
|
|
|
767
|
|
|
|
16
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
1,009
|
|
|
|
3
|
|
|
|
1,012
|
|
Dividend distributed
|
|
|
3
|
|
|
|
429
|
|
|
|
(730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(298
|
)
|
|
|
|
|
|
|
(298
|
)
|
Movement non-controlling interest - Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(278
|
)
|
|
|
(290
|
)
|
|
|
|
|
|
|
(290
|
)
|
Re-issuance of treasury shares
|
|
|
|
|
|
|
(21
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130
|
|
|
|
65
|
|
|
|
|
|
|
|
65
|
|
Share-based compensation plans
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
44
|
|
Income tax share-based compensation plans
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other equity movements
|
|
|
3
|
|
|
|
451
|
|
|
|
(786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(148
|
)
|
|
|
(480
|
)
|
|
|
11
|
|
|
|
(469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2015
|
|
|
190
|
|
|
|
2,632
|
|
|
|
8,245
|
|
|
|
9
|
|
|
|
996
|
|
|
|
43
|
|
|
|
(24
|
)
|
|
|
(695
|
)
|
|
|
11,396
|
|
|
|
115
|
|
|
|
11,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly report Q2 2016 21
|
Notes overview
Notes to the unaudited semi-annual condensed consolidated financial statements
|
|
|
22 Quarterly report Q2 2016
|
|
|
Notes to the unaudited semi-annual condensed consolidated financial statements
1 Significant accounting policies
The significant accounting policies applied in these semi-annual condensed consolidated financial statements are consistent with those applied in the Annual
Report 2015, except for the accounting policy changes following from the adoption of new Standards and Amendments to Standards which are also expected to be reflected in the Companys consolidated IFRS financial statements as at and for the
year ending December 31, 2016 as disclosed in the Annual Report 2015, and certain other changes mentioned below. The new and amended standards did not have a material impact on the Companys semi-annual condensed consolidated financial
statements.
Other changes
To enhance transparency,
the Company presents all net defined-benefit post-employment plan obligations under Long-term provisions in the balance sheet as from this quarter. Up to Q2 2016, the net defined-benefit post-employment plan obligations were presented under Accrued
liabilities and Other non-current liabilities for funded plans and under Short-term and Long-term provisions for unfunded plans. The retrospective reclassifications from these liability captions to Long-term provisions are as follows:
|
|
|
|
|
|
|
|
|
Reclassification of net
defined-benefit
obligations to Long-term provisions
in
millions of EUR
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December
|
|
|
|
2015
|
|
|
31, 2015
|
|
From
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
(16
|
)
|
|
|
(48
|
)
|
Other non-current liabilities
|
|
|
(1,136
|
)
|
|
|
(970
|
)
|
Short-term provisions
|
|
|
(68
|
)
|
|
|
(61
|
)
|
To
|
|
|
|
|
|
|
|
|
Long-term provisions
|
|
|
1,220
|
|
|
|
1,079
|
|
Corresponding retrospective reclassifications were processed in the Condensed consolidated statements of cash flows.
|
|
|
|
|
Quarterly report Q2 2016 23
|
2 Information by segment and main countries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and income (loss) from operations
in millions of EUR
unless otherwise stated
|
|
|
|
Q2 2015
|
|
|
Q2 2016
|
|
|
|
sales
|
|
|
|
|
|
|
|
|
|
|
|
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
including
|
|
|
|
|
|
|
|
|
|
|
|
including
|
|
|
|
|
|
|
|
|
|
|
|
|
intercompany
|
|
|
sales
|
|
|
income from operations
|
|
|
intercompany
|
|
|
sales
|
|
|
income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
as a % of sales
|
|
|
|
|
|
|
|
|
|
|
|
as a % of sales
|
|
Personal Health
|
|
|
1,606
|
|
|
|
1,603
|
|
|
|
162
|
|
|
|
10.1
|
%
|
|
|
1,663
|
|
|
|
1,661
|
|
|
|
199
|
|
|
|
12.0
|
%
|
Diagnosis & Treatment
|
|
|
1,648
|
|
|
|
1,649
|
|
|
|
93
|
|
|
|
5.6
|
%
|
|
|
1,614
|
|
|
|
1,600
|
|
|
|
111
|
|
|
|
6.9
|
%
|
Connected Care & Health Informatics
|
|
|
759
|
|
|
|
749
|
|
|
|
36
|
|
|
|
4.8
|
%
|
|
|
781
|
|
|
|
767
|
|
|
|
46
|
|
|
|
6.0
|
%
|
HealthTech Other
|
|
|
190
|
|
|
|
117
|
|
|
|
16
|
|
|
|
|
|
|
|
146
|
|
|
|
105
|
|
|
|
(18
|
)
|
|
|
|
|
Lighting
|
|
|
1,851
|
|
|
|
1,841
|
|
|
|
99
|
|
|
|
5.4
|
%
|
|
|
1,733
|
|
|
|
1,728
|
|
|
|
111
|
|
|
|
6.4
|
%
|
Legacy Items
|
|
|
15
|
|
|
|
15
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
|
|
Inter-sector eliminations
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philips
|
|
|
5,974
|
|
|
|
5,974
|
|
|
|
349
|
|
|
|
5.8
|
%
|
|
|
5,861
|
|
|
|
5,861
|
|
|
|
376
|
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and income (loss) from operations
in millions of EUR
unless otherwise stated
|
|
|
|
January to June
|
|
|
|
2015
|
|
|
2016
|
|
|
|
sales
|
|
|
|
|
|
|
|
|
|
|
|
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
including
|
|
|
|
|
|
|
|
|
|
|
|
including
|
|
|
|
|
|
|
|
|
|
|
|
|
intercompany
|
|
|
sales
|
|
|
income from operations
|
|
|
intercompany
|
|
|
sales
|
|
|
income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
as a % of sales
|
|
|
|
|
|
|
|
|
|
|
|
as a % of sales
|
|
Personal Health
|
|
|
3,130
|
|
|
|
3,125
|
|
|
|
319
|
|
|
|
10.2
|
%
|
|
|
3,277
|
|
|
|
3,271
|
|
|
|
389
|
|
|
|
11.9
|
%
|
Diagnosis & Treatment
|
|
|
2,987
|
|
|
|
2,953
|
|
|
|
69
|
|
|
|
2.3
|
%
|
|
|
3,045
|
|
|
|
3,019
|
|
|
|
121
|
|
|
|
4.0
|
%
|
Connected Care & Health
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Informatics
|
|
|
1,398
|
|
|
|
1,374
|
|
|
|
(1
|
)
|
|
|
(0.1
|
)%
|
|
|
1,484
|
|
|
|
1,461
|
|
|
|
57
|
|
|
|
3.9
|
%
|
HealthTech Other
|
|
|
384
|
|
|
|
252
|
|
|
|
37
|
|
|
|
|
|
|
|
276
|
|
|
|
208
|
|
|
|
(27
|
)
|
|
|
|
|
Lighting
|
|
|
3,585
|
|
|
|
3,563
|
|
|
|
158
|
|
|
|
4.4
|
%
|
|
|
3,435
|
|
|
|
3,419
|
|
|
|
184
|
|
|
|
5.4
|
%
|
Legacy Items
|
|
|
46
|
|
|
|
46
|
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(149
|
)
|
|
|
|
|
Inter-sector eliminations
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philips
|
|
|
11,313
|
|
|
|
11,313
|
|
|
|
488
|
|
|
|
4.3
|
%
|
|
|
11,378
|
|
|
|
11,378
|
|
|
|
575
|
|
|
|
5.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and tangible and intangible assets
in millions of
EUR
|
|
|
|
sales
|
|
|
long-lived assets
1)
|
|
|
|
January to June
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
Netherlands
|
|
|
286
|
|
|
|
306
|
|
|
|
961
|
|
|
|
986
|
|
United States
|
|
|
3,510
|
|
|
|
3,645
|
|
|
|
9,346
|
|
|
|
9,026
|
|
China
|
|
|
1,331
|
|
|
|
1,332
|
|
|
|
1,223
|
|
|
|
1,143
|
|
Germany
|
|
|
609
|
|
|
|
608
|
|
|
|
151
|
|
|
|
183
|
|
Japan
|
|
|
484
|
|
|
|
543
|
|
|
|
405
|
|
|
|
533
|
|
France
|
|
|
373
|
|
|
|
393
|
|
|
|
49
|
|
|
|
45
|
|
India
|
|
|
378
|
|
|
|
368
|
|
|
|
139
|
|
|
|
117
|
|
Other countries
|
|
|
4,342
|
|
|
|
4,183
|
|
|
|
2,317
|
|
|
|
2,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philips
|
|
|
11,313
|
|
|
|
11,378
|
|
|
|
14,591
|
|
|
|
14,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Includes property, plant and equipment, intangible assets excluding goodwill, and goodwill
|
3 Estimates
The preparation of the semi-annual condensed consolidated financial statements requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these semi-annual condensed consolidated financial statements, the significant estimates and judgments made by management in applying the
Companys accounting
policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended December 31, 2015.
4 Financial risk management
The
Groups financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended December 31, 2015.
|
|
|
24 Quarterly report Q2 2016
|
|
|
5 Seasonality
Under normal economic conditions, the Groups sales are impacted by seasonal fluctuations, particularly at Personal Health, Diagnosis & Treatment
and Connected Care & Health Informatics, typically resulting in higher revenues and earnings in the second half-year results. At Diagnosis & Treatment and Connected Care & Health Informatics, sales are generally higher in
the second half of the year, largely due to the timing of new product availability and customers attempting to spend their annual budgeted allowances before the end of the year. At Personal Health, sales are generally higher in the second half-year
due to the holiday sales. HealthTech Other businesses are generally not materially affected by seasonality. The conventional lighting industry generally experiences minor seasonal fluctuations in sales during winter months with shorter daylight
periods. However, Lighting sales are more strongly influenced by other trends, including the overall decline in sales of Lamps and overall increase in sales of LED as a result of the transition from conventional to LED lighting technologies, and the
timing of specific projects in Professional.
6 Segment information
In 2016, Philips established two stand-alone companies focused on the HealthTech and Lighting opportunities.
As part of this separation, Philips has changed the way it allocates resources and analyzes its performance based on a new segment structure.
Accordingly, from 2016 the operational segments for the purpose of the disclosures required by IAS 34 Interim Financial Reporting are Personal Health,
Diagnosis & Treatment, Connected Care & Health Informatics, HealthTech Other and Lighting, each being responsible for the management of its business worldwide, and the reportable segment Legacy Items.
Prior-period results have been reclassified according to the new reporting structure.
Segment information can be found in note 2, Information by segment and main countries.
7 Discontinued operations and other assets classified as held for sale
Discontinued operations included in the Condensed consolidated statements of income and cash flows consist of the combined Lumileds and Automotive businesses,
the Audio, Video, Multimedia and Accessories business and certain divestments formerly reported as discontinued operations.
Combined Lumileds and
Automotive businesses
The combined businesses of Lumileds and Automotive were reported as discontinued operations in the Consolidated statements of
income and Consolidated statements of cash flows, with the related assets and liabilities as per the end of November 2014 included as Assets classified as held for sale and Liabilities directly associated with assets held for sale in the
Consolidated balance sheet.
Philips initially announced an agreement to sell a majority interest in Lumileds to a consortium led by GO Scale
Capital. However, in Q4 2015 Philips announced that the Committee on Foreign Investment in the United States (CFIUS) had expressed certain concerns about the GO Scale Capital transaction that Philips had not foreseen. In January 2016,
Philips announced that the transaction had been terminated. Prior to that date, Philips and GO Scale Capital had made extensive efforts to mitigate the concerns of CFIUS.
Philips continues to actively engage with parties that have expressed an interest in the businesses and will continue to report the Lumileds and Automotive
businesses as discontinued operations.
Results of the combined businesses of Lumileds and Automotive included in the Consolidated statements of income as
discontinued operations were in the first half of 2016 EUR 92 million (first half of 2015: EUR 86 million). Assets classified as held for sale as of June 30, 2016 were EUR 1,895 million (June 30, 2015: EUR 1,774 million). Liabilities
directly associated with assets classified as held for sale as of June 30, 2016 were EUR 459 million (June 30, 2015: EUR 401 million).
Upon
disposal, the associated currency translation differences, part of Shareholders equity, will be recognized in the Consolidated statement of income. At June 30, 2016, the estimated release amounted to a EUR 48 million gain.
Audio, Video, Media and Accessories business
The main
result in the first half of the year related to the court decision in favor of Philips in an arbitration case against Funai Electric Co., Ltd. Philips started the arbitration after it terminated the agreement to transfer the Audio, Video, Media and
Accessories business to Funai following a breach of contract by Funai. As a consequence the court ordered Funai to pay EUR 144 million, which includes disbursements and interest, as compensation for damages. The amount was received in Q2 2016.
Other assets classified as held for sale
Assets and
liabilities directly associated with assets held for sale relate to property, plant and equipment for an amount of EUR 2 million and businesses of EUR 32 million at June 30, 2016.
8 Interests in entities
In this
section we discuss the Companys interests in its consolidated entities (wholly owned and not wholly owned) and its investments in associates, and the effects of those interests on the Companys financial position, especially in view of
the Initial Public Offering (IPO) of Philips Lighting N.V.
Interests in subsidiaries
In May and June 2016, the Company sold 28.775% of its interest in Philips Lighting N.V. (a wholly owned subsidiary of Koninklijke Philips N.V.) through an IPO
(involving 28.75% of the shares) and transactions with the CEO and CFO of Philips Lighting N.V. (involving 0,025% of the shares), reducing its remaining interest in Philips Lighting N.V. to 71.225%. This partial divestment
|
|
|
|
|
Quarterly report Q2 2016 25
|
transaction did not impact the profit and loss account of the Company, as Philips Lighting N.V. continues to be
fully consolidated.
The transactions had a positive impact on Shareholders equity of the Company of EUR 109 million. This amount includes
(1) the difference between the proceeds and the carrying value of the 28.775% stake in Philips Lighting N.V. (gain of EUR 166 million), (2) costs related to the IPO which were directly recognized in Shareholders equity (loss of EUR
38 million) and (3) certain reallocations of comprehensive income items to Non-controlling interests (loss of EUR 19 million). As a result of the IPO, Non-controlling interests increased by EUR 716 million. This amount includes (1) the
carrying value of the 28.775% stake in Philips Lighting N.V. (increase of EUR 697 million) and (2) certain reallocations of Other comprehensive income items from Shareholders equity (increase of EUR 19 million). Please refer also to note
13, Equity.
Prior to the IPO, the Company completed an internal legal restructuring whereby all Lighting activities were concentrated in Philips Lighting
N.V. This legal restructuring resulted in an increase of legal entities from 450 as of December 31, 2015 to 465 as of June 30, 2016. Set out below is a list of material subsidiaries representing greater than 5% of either the consolidated
group sales, income from operations or net income (before any intragroup eliminations). All of the entities are fully consolidated in the group accounts of Koninklijke Philips N.V. Entities that are 100% owned by Philips Lighting N.V. are
consequently 71.225% owned by Koninklijke Philips N.V. The remaining entities are 100% owned by Koninklijke Philips N.V. In total, 169 consolidated subsidiaries are not wholly owned by the Company, mainly relating to legal entities owned by Philips
Lighting N.V.
|
|
|
|
|
Legal entity name
|
|
Principal country of business
|
|
Genlyte Thomas Group LLC
1)
|
|
|
United States
|
|
Invivo Corporation
|
|
|
United States
|
|
Lumileds International B.V.
|
|
|
Netherlands
|
|
Philips (China) Investment Company, Ltd.
|
|
|
China
|
|
Philips Consumer Lifestyle B.V.
|
|
|
Netherlands
|
|
Philips Electronics Hong Kong Limited
|
|
|
China
|
|
Philips Electronics Japan, Ltd.
|
|
|
Japan
|
|
Philips Electronics North America Corporation
|
|
|
United States
|
|
Philips France
1)
|
|
|
France
|
|
Philips Innovative Applications
1)
|
|
|
Belgium
|
|
Philips Lighting GmbH
1)
|
|
|
Germany
|
|
Philips Lighting Holding B.V.
1)
|
|
|
Netherlands
|
|
Philips Lighting Hong Kong Limited
1)
|
|
|
China
|
|
Philips Lighting Nort h America Corporation
1)
|
|
|
United States
|
|
Philips Lighting Poland Sp. z o.o.
1)
|
|
|
Poland
|
|
Philips Medizin Systeme Böblingen GmbH
|
|
|
Germany
|
|
Philips Oral Healthcare, LLC
|
|
|
United States
|
|
Philips Respironics GK
|
|
|
Japan
|
|
Philips Ultrasound, Inc.
|
|
|
United States
|
|
Respironics, Inc.
|
|
|
United States
|
|
1)
|
Owned by Philips Lighting N.V.
|
Sales and Income from
operations of Philips Lighting N.V. are reflected in the Lighting segment information included in note 2, Information by segment and main countries. Certain differences exist between the Lighting segment information reported by Royal Philips and
Philips Lightings stand-alone results, which
were published on July 22, 2016. Differences in income from operations mainly relate to separation costs
(EUR 17 million) that Philips Lighting N.V. recognizes in Income from operations, whereas these costs are reflected in the segment Legacy Items by Royal Philips.
Net income attributable to non-controlling interests was EUR 16 million for the six months ended June 30, 2016 and mainly relates to entitlements of
non-controlling interest holders to net income of Philips Lighting N.V. as from the date of completion of the IPO until June 30, 2016, being EUR 10 million.
Investments in associates
Philips has investments in a
number of associates; none of them are regarded as individually material.
On March 14, 2016, Philips acquired a minority equity stake in a company
that specializes in solutions for treatment of cardiac arrhythmias. The investment totaled EUR 27 million; on a fully diluted share basis Philips has a 19.7% ownership. As Philips is able to demonstrate significant influence in the company, the
investment has been classified as an investment in an associate.
9 Property, plant and equipment
The main increase in property, plant and equipment consists of additions of EUR 260 million (six months ended June 30, 2015: EUR 230 million). This
was offset by depreciation and impairment charges of EUR 284 million (six months ended June
30, 2015: EUR 264 million).
10 Goodwill
Goodwill is summarized as follows:
|
|
|
|
|
Goodwill
in millions of EUR
|
|
Balance as of December 31, 2015
|
|
|
|
|
Cost
|
|
|
10,704
|
|
Amortization and impairments
|
|
|
(2,181
|
)
|
|
|
|
|
|
Book value
|
|
|
8,523
|
|
Changes in book value:
|
|
|
|
|
Acquisitions
|
|
|
13
|
|
Divestments / transfers to assets classified as held for sale and other changes
|
|
|
(12
|
)
|
Translation differences
|
|
|
(62
|
)
|
Balance as of June 30, 2016
|
|
|
|
|
Cost
|
|
|
10,622
|
|
Amortization and impairments
|
|
|
(2,160
|
)
|
|
|
|
|
|
Book value
|
|
|
8,462
|
|
|
|
|
|
|
The movement in the first six months of 2016 is mainly due to translation differences which impacted the goodwill denominated
in USD.
For impairment testing, goodwill is allocated to (groups of) cash-generating units (typically one level below operational segment level), which
represent the lowest level at which the goodwill is monitored internally for management purposes.
Goodwill allocated to the cash-generating units
Image-Guided Therapy, Patient Care & Monitoring Solutions, Sleep & Respiratory Care and Professional is considered to be significant
|
|
|
26 Quarterly report Q2 2016
|
|
|
in comparison to the total book value of goodwill for the Group at June 30, 2016. The associated amounts as
of June 30, 2016, are presented below:
|
|
|
|
|
Goodwill allocated to the cash-generating units
in millions
of EUR
|
|
|
|
June 30,
|
|
|
|
2016
|
|
Image-Guided Therapy
|
|
|
1,054
|
|
Patient Care & Monitoring Solutions
|
|
|
1,437
|
|
Sleep & Respiratory Care
|
|
|
1,920
|
|
Professional
|
|
|
1,596
|
|
Others (units carrying a non-significant goodwill balance)
|
|
|
2,455
|
|
|
|
|
|
|
Total book value
|
|
|
8,462
|
|
|
|
|
|
|
The basis of the recoverable amount used in the annual and trigger-based impairment tests for the units disclosed in this note
is the value in use. In the annual impairment test performed in the second quarter, the estimated recoverable amounts of the cash-generating units tested approximated or exceeded the carrying value of the units, therefore no impairment loss was
recognized.
Key assumptions - general
Key
assumptions used in the impairment tests for the units were sales growth rates, income from operations and the rates used for discounting the projected cash flows. These cash flow projections were determined using the Royal Philips and Philips
Lighting managements internal forecasts that cover an initial period from 2016 to 2019 for Royal Philips units and 2016 to 2020 for Philips Lighting units. Projections were extrapolated with stable or declining growth rates for a period of 5
years, after which a terminal value was calculated. For terminal value calculation, growth rates were capped at a historical long-term average growth rate.
The sales growth rates and margins used to estimate cash flows are based on past performance, external market growth assumptions and industry long-term growth
averages. Income from operations in all units mentioned in this note is expected to increase over the projection period as a result of volume growth and cost efficiencies.
Key assumptions and sensitivity analysis relating to cash-generating units to which a significant amount of goodwill is allocated
Cash flow projections of Image-Guided Therapy, Patient Care & Monitoring Solutions, Sleep & Respiratory Care and Professional
are based on the key assumptions included in the table below, which were used in the annual impairment test performed in the second quarter:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key assumptions
in %
|
|
|
|
compound sales
1)
|
|
|
pre-tax
|
|
|
|
|
|
|
|
|
|
used to
|
|
|
|
|
|
|
initial
|
|
|
extra-
|
|
|
calculate
|
|
|
|
|
|
|
forecast
|
|
|
polation
|
|
|
terminal
|
|
|
discount
|
|
|
|
period
|
|
|
period
2)
|
|
|
value
|
|
|
rates
|
|
Image-Guided Therapy
|
|
|
7.2
|
|
|
|
5.6
|
|
|
|
2.7
|
|
|
|
12.0
|
|
Patient Care & Monitoring Solutions
|
|
|
6.0
|
|
|
|
4.6
|
|
|
|
2.7
|
|
|
|
13.1
|
|
Sleep & Respiratory Care
|
|
|
7.3
|
|
|
|
5.2
|
|
|
|
2.7
|
|
|
|
12.6
|
|
Professional
|
|
|
6.6
|
|
|
|
5.1
|
|
|
|
2.7
|
|
|
|
13.9
|
|
1)
|
Compound sales growth rate is the annualized steady growth rate over the forecast period
|
2)
|
Also referred to later in the text as compound long-term sales growth rate
|
Among the units mentioned, Professional has the lowest excess of the recoverable amount over the carrying amount. The headroom of Professional was estimated
at EUR 250 million. The following changes could, individually, cause the value in use to fall to the level of the carrying value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensitivity analysis
in %
|
|
|
|
|
|
|
decrease in
|
|
|
|
|
|
|
increase in pre-
|
|
|
compound long-
|
|
|
decrease in
|
|
|
|
tax discount rate,
|
|
|
term sales growth
|
|
|
terminal value
|
|
|
|
basis points
|
|
|
rate, basis points
|
|
|
amount, %
|
|
Professional
|
|
|
120
|
|
|
|
360
|
|
|
|
18.9
|
|
The results of the annual impairment test of Image-Guided Therapy, Patient Care & Monitoring Solutions and
Sleep & Respiratory Care indicate that a reasonably possible change in key assumptions would not cause the value in use to fall to the level of the carrying value.
Additional information relating to cash-generating units to which a non-significant amount of goodwill is allocated
In addition to the significant goodwill recorded at the units mentioned above, Home and Home Monitoring are sensitive to fluctuations in the assumptions as set
out above. Based on the most recent impairment test, it was noted that the headroom for the cash-generating unit Home was EUR 150 million. An increase of 640 points in the pre-tax discounting rate, a 1,370 basis points decline in the compound
long-term sales growth rate or a 72% decrease in terminal value would, individually, cause its value to fall to the level of its carrying value. The goodwill allocated to Home at June 30, 2016 amounts to EUR 126 million.
Also based on the annual impairment test, it was noted that the headroom for the cash-generating unit Home Monitoring was EUR 50 million. An increase of 230
points in the pre-tax discounting rate, a 610 basis points decline in the compound long-term sales growth rate or a 33% decrease in terminal value would, individually, cause its value to fall to the level of its carrying value. The goodwill
allocated to Home Monitoring at June 30, 2016 amounts to EUR 34 million.
|
|
|
|
|
Quarterly report Q2 2016 27
|
11 Intangible assets excluding goodwill
The changes in intangible assets excluding goodwill in 2016 are summarized as follows:
|
|
|
|
|
Intangible assets excluding goodwill
in millions of EUR
unless otherwise
stated
|
|
Book value as of December 31, 2015
|
|
|
3,693
|
|
Changes in book value:
|
|
|
|
|
Additions
|
|
|
195
|
|
Acquisitions
|
|
|
6
|
|
Amortization
|
|
|
(318
|
)
|
Impairment losses
|
|
|
(9
|
)
|
Divestments and transfers to assets classified as held for sale
|
|
|
(2
|
)
|
Translation differences
|
|
|
(42
|
)
|
|
|
|
|
|
Total changes
|
|
|
(170
|
)
|
|
|
|
|
|
Book value as of June 30, 2016
|
|
|
3,523
|
|
|
|
|
|
|
The additions for 2016 mainly comprise internally generated assets of EUR 149 million for product development costs (six
months ended June 30, 2015: EUR 154 million).
12 Other current and non-current financial assets
Changes in Current and non-current financial assets mainly relate to changes in the asset category Loans and receivables which are included in this caption.
The decrease in Loans and receivables is mainly due to reclassification of loan facilities drawn by TPV Technology Limited to Current financial assets (EUR 89 million).
13 Equity
Shareholders equity
In June 2016, Philips settled a
dividend of EUR 0.80 per common share, representing a total value of EUR 732 million including costs. Shareholders could elect for a cash dividend or a share dividend. Approximately 55% of the shareholders elected for a share dividend,
resulting in the issuance of 17,344,462 new common shares. The settlement of the cash dividend involved an amount of EUR 330 million (including costs).
As of June 30, 2016, the issued and fully-paid share capital consists of 948,474,849 common shares, each share having a par value of EUR 0.20.
During the first six months of 2016, a total of 5,682,691 treasury shares were delivered as a result of restricted and performance share deliveries and stock
option exercises. A total of 4,070,520 were acquired in connection with the LTI coverage program started in January 2016.
Furthermore, a total of
11,117,480 shares were acquired for cancellation purposes in connection with the EUR 1.5 billion share buy-back program started in October 2013.
In
addition, during the first quarter of 2016 Philips bought call options to hedge a part of the commitments under share-based compensation plans. The call option premiums (EUR 64 million for a total of 9,393,779 million options) were
deducted from Retained earnings and were settled in Royal Philips shares held by the Company (representing a historical cost of EUR 77 million based on a FIFO method, involving 2,667,203 shares). The difference between the option premiums and
the historical cost
of Royal Philips shares was recorded in Retained earnings. Subsequently, in the second quarter of 2016, the Company sold 293,668 call options against the same number of Royal Philips shares and
an additional EUR 5 million cash payment to the buyer of the call options.
On June 30, 2016 the total number of treasury shares amounted to
21,158,575, which were purchased at an average price of EUR 23.53 per share.
The Company sold 28.775% of its interest in Philips Lighting N.V.,
reducing its remaining interest in this group company to 71.225%. This partial divestment transaction had a positive impact on Shareholders equity of the Company of EUR 109 million.
Non-controlling interests
As a result of the sale of
28.775% of the shares of Philips Lighting N.V., non-controlling interests increased by EUR 716 million. For further details please refer to note 8, Interests in entities.
As of June 30, 2016, non-controlling interests mainly relate to Philips Lighting N.V. (non-controlling interest 28.775%) and General Lighting Company
(non-controlling interest 49%).
14 Short-term and long-term debt
At the end of Q2 2016, Philips had total debt of EUR 5,808 million, an increase of EUR 48 million compared to December 31, 2015. Long-term debt
was EUR 5,269 million, an increase of EUR 1,174 million, and short-term debt was EUR 539 million, a decrease of EUR 1,126 million compared to December 31, 2015.
The movement of debt was mainly due to the fact that in May 2016, Philips Lighting entered into new 5-year term loan facilities of EUR 740 million and
USD 500 million to replace intragroup financing from Royal Philips, offset by the repayment of a USD 1,300 million bridge loan used for the Volcano acquisition, together with a currency translation effect on USD bonds. The majority of the
long-term debt consisted of USD 4,117 million of public bonds with a weighted average interest rate of 5.59% at the end of Q2 2016.
In addition,
Philips Lighting entered into a 5-year revolving credit facility of EUR 500 million. As of June 30, 2016 Philips Lighting did not have any amounts outstanding under this facility.
Philips Lightings new loan facilities and revolving credit facility include a financial covenant providing that Philips Lighting must maintain a net
leverage ratio not greater than 3:1 for any test period ending on or after December 31, 2016. The facilities are guaranteed by Philips Lighting and certain subsidiaries of Philips Lighting incorporated in the Netherlands, the United States,
Germany, the Peoples Republic of China, Poland and Belgium.
|
|
|
28 Quarterly report Q2 2016
|
|
|
15 Provisions
Provisions are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions
in millions of EUR
|
|
|
|
December 31, 2015
|
|
|
June 30, 2016
|
|
|
|
long
|
|
|
short
|
|
|
long
|
|
|
short
|
|
|
|
term
|
|
|
term
|
|
|
term
|
|
|
term
|
|
Post-employment benefits
|
|
|
2,140
|
|
|
|
|
|
|
|
1,958
|
|
|
|
|
|
Product warranty
|
|
|
67
|
|
|
|
222
|
|
|
|
66
|
|
|
|
196
|
|
Environmental provisions
|
|
|
278
|
|
|
|
57
|
|
|
|
293
|
|
|
|
57
|
|
Restructuring-related provisions
|
|
|
69
|
|
|
|
228
|
|
|
|
42
|
|
|
|
164
|
|
Litigation provisions
|
|
|
518
|
|
|
|
60
|
|
|
|
523
|
|
|
|
53
|
|
Other provisions
|
|
|
399
|
|
|
|
205
|
|
|
|
402
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provisions
|
|
|
3,471
|
|
|
|
772
|
|
|
|
3,284
|
|
|
|
654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in provisions was attributable to:
|
|
the reduction in post-employment benefits provisions is mainly linked to the de-risking contribution to the US pension plan; for more details please refer to note 16, Pensions;
|
|
|
the decrease in the restructuring-related provisions was mainly due to usage and releases, partially offset by additions.
|
16 Pensions
No significant
market fluctuations occurred during the first six months of 2016 which would require re-measurement under IAS 34 Interim Financial Reporting. The Company has recognized a EUR 5 million settlement gain in a US pension plan as well as a EUR
4 million past-service cost gain on a plan amendment in the German pension plan of Philips Lighting.
The earlier-announced 2016 de-risking
contribution to the US pension plan of EUR 172 million (USD 190 million) was paid to the plan in March 2016, leading to a decrease in the net defined-benefit obligation at June 30, 2016.
The Company now presents all net defined-benefit post-employment plan obligations under Long-term provisions. Please refer to note 1, Significant accounting
policies.
17 Contingent assets and liabilities
Contingent liabilities
Guarantees
Philips policy is to provide guarantees and other letters of support only in writing. Philips does not stand by other forms of support. At the end of Q2
2016, there is no fair value recognized on the balance sheet from guarantees (December 31, 2015: nil million). Remaining off-balance-sheet business and credit-related guarantees provided on behalf of third parties and associates increased by EUR
16 million during the first half of 2016 to EUR 53 million.
Legal proceedings
The Company and certain of its group companies and former group companies are involved as a party in legal proceedings, including regulatory and other
governmental proceedings, including discussions on potential remedial actions, relating to such matters as competition issues,
intellectual property, commercial transactions, product liability, participations and environmental pollution. Since the ultimate disposition of asserted claims and proceedings and investigations
cannot be predicted with certainty, an adverse outcome could have a material adverse effect on the Companys consolidated financial position, results of operations and cash flows.
For information regarding legal proceedings in which the Company is involved, please refer to the Annual Report 2015. Significant developments regarding legal
proceedings that have occurred since the publication of the Annual Report 2015 are described below:
Cathode-Ray Tubes (CRT)
In the civil litigation pending before the United States District Court for the Northern District of California the final approval hearing on the indirect
purchaser settlement took place in March 2016 and the court issued its order approving the settlement on July 7, 2016.
In the proposed class
proceeding in Canada, the decision on class certification in the Ontario action which was expected in the first half of 2016, is still pending.
Finally,
the Company became involved in two further civil CRT antitrust cases with previous CRT customers in Germany, one of which was settled shortly after it was filed. In the case pending in the United Kingdom, the Company prevailed on a strike-out
application that was filed, ending the case subject to further appeal by the plaintiff. The previously reported cases in Germany, Denmark, the Netherlands and Israel are still pending.
Masimo
In the ongoing patent and antitrust litigation between
the Company and Masimo Corporation (Masimo), Masimo filed an additional lawsuit alleging that three of its US patents are infringed by certain of the Companys healthcare products incorporating Philips FAST SpO2 pulse oximetry technology or the
combination of certain patient monitors when used together. The lawsuit also includes certain allegations regarding the violation of antitrust laws (unlawful monopolization, unlawful attempted monopolization and unlawful restraints of trade) in
connection with Philips multi-parameter patient monitor (MPPM) business. All three patents in this lawsuit are associated with other patents which have been dismissed or held invalid in the already pending litigation.
18 Share-based compensation
Share-based compensation costs were EUR 56 million and EUR 44 million in the first six months of 2016 and 2015 respectively. This includes the
employee stock purchase plan of 3 million, which is not a share-based compensation that affects equity. Share-based compensation costs exclude the cost for discontinued operations of EUR 3 million.
Performance and restricted shares granted
In addition, during
the first six months of 2016 the Company granted 4,213,752 performance shares and 2,230,149 restricted shares.
|
|
|
|
|
Quarterly report Q2 2016 29
|
Performance and restricted shares issued and options exercised
In the first six months of 2016 a total of 4,268,009 performance and 169,358 restricted shares were delivered to employees, and 814,707 EUR-denominated options
and 259,417 USD-denominated options were exercised at a weighted average exercise price of EUR 17.39 and USD 19.10 respectively.
Accelerate! options
exercised
Under the Accelerate! program, in the first six months of 2016 a total of 141,200 EUR-denominated options and 30,000 USD-denominated options
were exercised at an exercise price of EUR 18.22 and USD 20.02 respectively.
19 Fair value of financial assets and
liabilities
The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate
valuation methods. The estimates presented are
not necessarily indicative of the amounts that will ultimately be realized by the Company upon maturity or disposal. The use of different market assumptions and/or estimation methods may have a
material effect on the estimated fair value amounts.
For cash and cash equivalents, current receivables, accounts payable, interest accrual and
short-term debts, the carrying amounts approximate fair value, because of the short maturity of these instruments.
The table below analyses financial
instruments carried at fair value by different hierarchy levels:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of financial assets and liabilities
in millions
of EUR
|
|
|
|
Balance as of December 31, 2015
|
|
|
Balance as of June 30, 2016
|
|
|
|
carrying amount
|
|
|
estimated fair value
|
|
|
carrying amount
|
|
|
estimated fair value
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carried at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets
|
|
|
199
|
|
|
|
199
|
|
|
|
160
|
|
|
|
160
|
|
Securities classified as assets held for sale
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
1
|
|
Fair value through profit and loss
|
|
|
33
|
|
|
|
33
|
|
|
|
25
|
|
|
|
25
|
|
Derivative financial instruments
|
|
|
161
|
|
|
|
161
|
|
|
|
145
|
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets carried at fair value
|
|
|
392
|
|
|
|
|
|
|
|
331
|
|
|
|
|
|
Carried at (amortized) cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,766
|
|
|
|
|
|
|
|
1,926
|
|
|
|
|
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans - current
|
|
|
12
|
|
|
|
|
|
|
|
105
|
|
|
|
105
|
|
Non-current loans and receivables
|
|
|
88
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
Other non-current loans and receivables
|
|
|
134
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
Loans classified as held for sale
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables - current
|
|
|
4,982
|
|
|
|
|
|
|
|
4,763
|
|
|
|
|
|
Receivables - non-current
|
|
|
191
|
|
|
|
191
|
|
|
|
166
|
|
|
|
166
|
|
Held-to-maturity investments
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Available-for-sale financial assets
|
|
|
33
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets carried at (amortized) costs
|
|
|
7,210
|
|
|
|
|
|
|
|
7,143
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carried at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
|
(933
|
)
|
|
|
(933
|
)
|
|
|
(830
|
)
|
|
|
(830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities carried at fair value
|
|
|
(933
|
)
|
|
|
|
|
|
|
(830
|
)
|
|
|
|
|
Carried at (amortized) cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(2,673
|
)
|
|
|
|
|
|
|
(2,568
|
)
|
|
|
|
|
Interest accrual
|
|
|
(69
|
)
|
|
|
|
|
|
|
(71
|
)
|
|
|
|
|
Debt (Corporate bond and finance lease)
|
|
|
(3,944
|
)
|
|
|
(4,294
|
)
|
|
|
(3,949
|
)
|
|
|
(4,527
|
)
|
Debt (Bank loans, overdrafts etc.)
|
|
|
(1,816
|
)
|
|
|
|
|
|
|
(1,859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities carried at (amortized) costs
|
|
|
(8,502
|
)
|
|
|
|
|
|
|
(8,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 Quarterly report Q2 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hierarchy
in millions of EUR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
level 1
|
|
|
level 2
|
|
|
level 3
|
|
|
total
|
|
Balance as of June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets
|
|
|
43
|
|
|
|
66
|
|
|
|
51
|
|
|
|
160
|
|
Securities classified as assets held for sale
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Financial assets designated at fair value through profit and loss -non-current
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
25
|
|
Derivative financial instruments - assets
|
|
|
|
|
|
|
145
|
|
|
|
|
|
|
|
145
|
|
Loans - current
|
|
|
|
|
|
|
105
|
|
|
|
|
|
|
|
105
|
|
Receivables - non-current
|
|
|
|
|
|
|
166
|
|
|
|
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
|
43
|
|
|
|
508
|
|
|
|
51
|
|
|
|
602
|
|
Derivative financial instruments - liabilities
|
|
|
|
|
|
|
(830
|
)
|
|
|
|
|
|
|
(830
|
)
|
Debt
|
|
|
(4,269
|
)
|
|
|
(258
|
)
|
|
|
|
|
|
|
(4,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities
|
|
|
(4,269
|
)
|
|
|
(1,088
|
)
|
|
|
|
|
|
|
(5,357
|
)
|
Balance as of December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets
|
|
|
76
|
|
|
|
68
|
|
|
|
55
|
|
|
|
199
|
|
Securities classified as assets held for sale
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Financial assets designated at fair value through profit and loss -non-current
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
33
|
|
Derivative financial instruments - assets
|
|
|
|
|
|
|
161
|
|
|
|
|
|
|
|
161
|
|
Non-current loans and receivables
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
88
|
|
Receivables - non-current
|
|
|
|
|
|
|
191
|
|
|
|
|
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
|
75
|
|
|
|
541
|
|
|
|
55
|
|
|
|
671
|
|
Derivative financial instruments - liabilities
|
|
|
|
|
|
|
(933
|
)
|
|
|
|
|
|
|
(933
|
)
|
Debt
|
|
|
(4,084
|
)
|
|
|
(210
|
)
|
|
|
|
|
|
|
(4,294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities
|
|
|
(4,084
|
)
|
|
|
(1,143
|
)
|
|
|
|
|
|
|
(5,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
Instruments included in level 1 are comprised primarily of listed equity investments classified as available-for-sale financial assets, investees and financial
assets designated at fair value through profit and loss.
The fair value of financial instruments traded in active markets is based on quoted market
prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arms length basis.
The fair value of Philips bond is estimated on the basis of the quoted
market prices for certain issues. Accrued interest is not included.
Level 2
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) are determined by using valuation
techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are based on
observable market data, the instrument is included in level 2.
The fair value of derivatives is calculated as the present value of the estimated future cash flows based on
observable interest yield curves and foreign exchange rates.
Level 3
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
The table below shows the reconciliation from the beginning balance to the end balance for fair value measured in level 3 of the fair value hierarchy.
|
|
|
|
|
Reconciliation of the fair value hierarchy
in millions of
EUR
|
|
|
|
Financial assets
|
|
Balance at January 1, 2016
|
|
|
55
|
|
Total gains and losses recognized in:
|
|
|
|
|
- other comprehensive income
|
|
|
(6
|
)
|
Purchase
|
|
|
5
|
|
Sales
|
|
|
(3
|
)
|
|
|
|
|
|
Balance at June 30, 2016
|
|
|
51
|
|
|
|
|
|
|
20 Subsequent events
Acquisition of Wellcentive
On July 20, 2016, Philips
announced that it has signed an agreement to acquire Wellcentive, a leading US-based provider of population health management software solutions. Wellcentive employs approximately 115 employees. Financial details of the transaction were not
disclosed.
|
|
|
|
|
Quarterly report Q2 2016 31
|
http://www.philips.com/investorrelations
© 2016
Koninklijke Philips N.V. All rights reserved.
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