Philips 2013 Annual Report Download - page 196

12 Company financial statements 12.5 - 12.5
196 Annual Report 2013
Healthcare facility in Cleveland, Ohio
In 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 we started a voluntary, temporary suspension of
new production at the facility, primarily to strengthen manufacturing
process controls. Currently, there is no indication of product safety issues.
This action is estimated to have a negative impact on the sector’s EBITA of
approximately EUR 60 to 70 million in the first half of 2014, of which we
expect to recover a substantial part in the second half of 2014.
Transfer of the remaining 30%-stake in TP Vision Holding to TPV
Technology
On January 20, 2014 Philips announced that it has signed a term sheet to
transfer the remaining 30% stake in the TP Vision venture to TPV
Technology Limited. The signing of definitive agreements is expected to
take place in the first quarter of 2014, with completion expected in the
second half of 2014, subject to certain regulatory and TPV shareholder
approvals. After completion, TPV will fully own TP Vision, which will
enable further integration with TPV’s TV business.
The remaining 30% stake in the TP Vision venture will be transferred for a
deferred purchase price and all outstanding loans and stand-by facilities
between Philips and the TP Vision venture will be transferred to TPV. The
brand license agreement between Philips and the TP Vision venture will
remain in place, with an annual royalty of 2.2% of sales payable by the TP
Vision venture to Philips. The minimum annual royalty has been reduced
from EUR 50 million to EUR 40 million. The agreement includes a EUR 50
million transaction-related payment, which Philips has accounted for in
the fourth quarter of 2013 under Results relating to investments in
associates (see note 6, Interests in entities).
LTI coverage program
To cover Philips’ outstanding obligations resulting from past and present
long-term incentive and employee stock purchase programs dating back
to 2004, Philips will repurchase up to 12 million additional Philips shares
on NYSE Euronext Amsterdam, to be executed during 2014. The shares
repurchased will be held by Philips as treasury shares until they are
distributed to participants.
Philips started this program as of January 28, 2014 and will enter into
subsequent discretionary management agreements with one or more
banks to repurchase Philips shares within the limits of relevant laws and
regulations (in particular EC Regulation 2273/2003) and Philips’ articles of
association. All transactions are published on Philips’ website
(www.philips.com/investor) on a weekly basis.
The LTI coverage program is over and above the existing EUR 1.5 billion
share repurchase program for cancellation purposes which started on
October 21, 2013.
February 25, 2014
The Supervisory Board
The Board of Management
12.5 Independent auditor’s report - Company
Independent auditor’s report
To the Supervisory Board and Shareholders of Koninklijke Philips N.V.:
Report on the Company financial statements
We have audited the accompanying Company financial statements 2013
which are part of the financial statements of Koninklijke Philips N.V.,
Eindhoven, the Netherlands, and comprise the Company balance sheets
as at December 31, 2013, the Company statements of income, and changes
in equity for the year then ended and notes, comprising a summary of the
accounting policies and other explanatory information in section 12 and
12.4.
Management’s responsibility
The Board of Management is responsible for the preparation and fair
presentation of these Company financial statements and the preparation
of the Management report, both in accordance with Part 9 of Book 2 of the
Dutch Civil Code. Furthermore, management is responsible for such
internal control as it determines is necessary to enable the preparation of
the Company financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these Company financial
statements based on our audit. We conducted our audit in accordance
with Dutch law, including the Dutch Standards on Auditing. This requires
that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the Company financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the Company financial statements. The
procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the Company financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the Company financial statements in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
eectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the Company financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Company financial statements give a true and fair view
of the financial position of Koninklijke Philips N.V. as at December 31, 2013
and of its result for the year then ended in accordance with Part 9 of Book 2
of the Dutch Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirements under Section 2:393 sub 5 at e and f of
the Dutch Civil Code, we have no deficiencies to report as a result of our
examination whether the Management report as defined in the
introduction paragraph of section 11 Group financial statements, to the
extent we can assess, has been prepared in accordance with Part 9 of
Book 2 of this Code, and whether the information as required under
Section 2:392 sub 1 at b - h has been annexed. Further, we report that the
Management report, to the extent we can assess, is consistent with the
Company financial statements as required by Section 2:391 sub 4 of the
Dutch Civil Code.
Amsterdam, The Netherlands
February 25, 2014
KPMG Accountants N.V.
J.F.C. van Everdingen RA