Philips 2014 Annual Report Download - page 21
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Group performance 5
Annual Report 2014 21
5Group performance
“ Overall, 2014 was a setback in our performance trajectory.
We have taken clear action to drive stronger operational
performance across our business, and expect sales growth
and EBITA margin improvements in 2015 and beyond.”
Ron Wirahadiraksa, CFO Royal Philips
5.1 Financial performance
Prior-period nancial information has been restated for
the treatment of the combined businesses of Lumileds
and Automotive as discontinued operations (see note 3,
Discontinued operations and other assets classied as
held for sale) and for two voluntary accounting policy
changes (see note 1, Signicant accounting policies).
Management summary
The year 2014
•
In 2014, we continued to improve operational performance
in most businesses, yet saw significant headwinds -
ranging from geo-political crises and exchange rate
fluctuations, to legal matters and the voluntary suspension
of production at the Cleveland facility. 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.
•
Net income for the year amounted to EUR 411 million, as
lower operational earnings were partly offset by lower
income tax expense and higher results from investments
in associates and discontinued operations.
•
Sales amounted to EUR 21,391 million, a 3% nominal
decline for the year. Excluding unfavorable currency
effects, comparable sales were 1% below the level of 2013,