Philips 2008 Annual Report Download - page 250

Reconciliation of
non-US GAAP
information
The Company uses the term EBITA to evaluate the
performance of the Philips Group and its operating
divisions. Referencing EBITA will make the underlying
performance of our businesses more transparent by
factoring out the amortization of intangible assets,
which arises when acquisitions are consolidated.
EBITA represents income from continuing operations
excluding results attributable to minority interest
holders, results relating to equity-accounted investees,
income taxes, financial income and expenses,
amortization and impairment on intangible assets
(excluding software), and write-off of in-process R&D.
The Company believes that an understanding of the
Philips Group’s financial condition is enhanced by the
disclosure of net operating capital (NOC), as this
figure is used by Philips’ management to evaluate the
capital efficiency of the Philips Group and its operating
sectors. NOC is defined as: total assets excluding
assets from discontinued operations less: (a) cash
and cash equivalents, (b) deferred tax assets, (c)
other (non)-current financial assets, (d) investments
in equity-accounted investees, and after deduction
of: (e) provisions excluding deferred tax liabilities, (f)
accounts and notes payable, (g) accrued liabilities,
(h) current/non-current liabilities, and (i)
trading securities.
Net debt is defined as the sum of long- and short-
term debt minus cash and cash equivalents. The net
debt position as a percentage of the sum of total
group equity (stockholders’ equity and minority
interests) and net debt is presented to express the
financial strength of the Company. This measure is
widely used by investment analysts and is therefore
included in the disclosure.
Cash flows before financing activities, being the sum
total of net cash from operating activities and net
cash from investing activities, and free cash flow, being
net cash from operating activities minus net capital
expenditures, are presented separately to facilitate
the reader's understanding of the Company's
funding requirements.
Explanation of Non-US GAAP measures
Koninklijke Philips Electronics N.V. (the 'Company')
believes that an understanding of sales performance
is enhanced when the effects of currency movements
and acquisitions and divestments (changes in
consolidation) are excluded. Accordingly, in addition
to presenting ‘nominal growth’, ‘comparable growth’
is provided.
Comparable sales exclude the effects of currency
movements and changes in consolidation. As indicated
in the Accounting Policies, sales and income are
translated from foreign currencies into the Company's
reporting currency, the euro, at the exchange rate
on transaction dates during the respective years. As
a result of significant currency movements during
the years presented, the effects of translating foreign
currency sales amounts into euros had a material
impact that has been excluded in arriving at the
comparable sales in euros. Currency effects have
been calculated by translating previous years’ foreign
currency sales amounts into euros at the following
year’s exchange rates in comparison with the sales in
euros as historically reported. Years under review
were characterized by a number of acquisitions and
divestments, as a result of which activities were
consolidated or deconsolidated. The effect of
consolidation changes has also been excluded in
arriving at the comparable sales. For the purpose
of calculating comparable sales growth, when a
previously consolidated entity is sold or contributed
to a venture that is not consolidated by the Company,
relevant sales are excluded from impacted prior-year
periods. Similarly, when an entity is acquired, relevant
sales are excluded from impacted periods.
Philips Annual Report 2008250
180
Sustainability performance
192
IFRS financial statements
244
Company financial statements
124
US GAAP financial statements