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maps | tra c | navigation
Annual Report 2011

Table of contents

  • Page 1
    Annual Report 2011 maps | tra c | navigation

  • Page 2
    ...of customer spending in major economies, changes in consumer tastes and preferences, changes in law, the performance of the financial markets, the levels of marketing and promotional expenditures by TomTom and its competitors, raw materials and employee costs, changes in exchange and interest rates...

  • Page 3
    ... of Changes in Equity 45 Notes to the Consolidated Financial Statements 73 Company Financial Statements of TomTom NV 73 Company Statement of Income of TomTom NV 74 Company Balance Sheet of TomTom NV 75 Notes to the Company Financial Statements 78 Other Information 80 Shareholder Information 82 Key...

  • Page 4
    ...TomTom has over 3,700 employees and operates from 50 locations in 35 countries. TomTom Markets Consumer Product Units Automotive Licensing Business Solutions Navigation PND Maps Traffic FMS Fitness Mobile Places Speedcams Custom Systems LBS 2 TomTom Annual Report and Accounts 2011

  • Page 5
    ... during the period. We are pleased that car manufacturers Opel and Ford have adopted our navigation solutions. During the year we also launched our first GPS sports watch, saw increased take-up of our LIVE Services, and added our 180,000th WEBFLEET subscriber. We are particularly proud to say that...

  • Page 6
    ... kick-started an entire industry by creating a new product category and democratising navigation. During these years of growth we invested significantly in new businesses and technologies that are currently sources of growth for our company - in-dash navigation, maps, traffic and ï¬,eet management...

  • Page 7
    ... our new Search & Go travel specific real-time services as part of our premium range devices, including Expedia, TripAdvisor and Twitter. We started shipping the Nike+ SportWatch GPS powered by TomTom, a GPS sports watch that we developed in cooperation with Nike, during 2011. The market has...

  • Page 8
    ... the year Business Solutions expanded into Australia and entered into a partnership with Tracker, South Africa's leading vehicle tracking company. We introduced a number of new features during the year, including Active Driver Feedback, WEBFLEET OptiDrive and the vehicle maintenance planning tool in...

  • Page 9
    ...%. Our core PND markets in Europe and North America declined during the year, and destocking by our channel partners further limited our opportunity to sell PNDs. On the positive side, we saw strong growth in in-dash automotive solutions, content licensing and in ï¬,eet management systems, but these...

  • Page 10
    ...the number of WEBFLEET subscribers. Year-on-year, revenue increased by â,¬11 million (20%) to â,¬64 million from â,¬53 million. The number of WEBFLEET subscriptions increased by 34% to 180,000. Content & Services revenue increased from â,¬357 million in 2010 to â,¬407 million in 2011, and currently...

  • Page 11
    ... for which a shorter useful life is expected. Marketing expenses decreased by 27% to â,¬77 million (2010: â,¬105 million). Our major marketing efforts in 2011 included our Break Free campaign, which aimed at increasing public awareness of the LIVE Traffic services offered by our award-winning...

  • Page 12
    ... Operating Depreciation 31 December result1 & 2010 Amortisation Other noncash items Working Interests, Investments Repayment Cash position capital taxes and of 31 December movement other borrowings 2011 Operating result adjusted for impairment charge. 10 TomTom Annual Report and Accounts 2011

  • Page 13
    ... planning and talent development of the people who work for us. We are particularly proud that we have succeeded in filling executive and key managerial roles from within TomTom this year. A number of our employees enjoyed promotion or lateral job moves during 2011 that will help them to build...

  • Page 14
    ... to attract and retain key talent to the company while aligning their interests with those of our shareholders. Until 2010 our main share incentive programme was to offer stock options to selected talents. The stock option programme has since been decreased in volume in order to address the risk of...

  • Page 15
    ... products, including content and services. Our supply chain standards are set by the TomTom Ethical Trading Code of Practice (ETCOP). For PND, in-dash navigation systems and accessories the ETCOP is integrated into our quality system standards and processes. We support the ETCOP by conducting annual...

  • Page 16
    ... coast of the United States of America, employees from the local TomTom office mobilised to support the communities directly affected through donations. TomTom PNDs were used across seven states in the Emergency Response Vehicles of the American Red Cross during the response to the disaster. This...

  • Page 17
    ... importance, vulnerability or materiality. Approach to risk management - Our Executive Committee together agree on the risk management priorities for the group. Lead ownership for each risk is taken on by an executive team member. The Business Assurance department facilitates the annual assessment...

  • Page 18
    ... the replenishment market and the competitive landscape for alternative navigation 16 TomTom Annual Report and Accounts 2011 GPS signals are carried on radio frequency bands. Any reallocation of, or interference with, these bands could impair the use of our products. Alternate systems are all...

  • Page 19
    ... share, or impair our ability to address market demands and customer expectations. Employee motivation, energy and productivity may decline leading to inefficiencies and loss of key personnel. Supply chain We depend on a limited number of third parties and, in certain instances, on sole suppliers...

  • Page 20
    ... Risks | continued Disaster recovery planning Unforeseen business disruptions could severely affect our business activities and the services offered to our customers. We provide ï¬,eet management services, live traffic data and sales via our web store on a 24-hour basis. The permanent or temporary...

  • Page 21
    ... in December 2011. We closely monitor these contractual performance indicators. Based on the group's plan for 2012, management expects to be able to comply with the loan covenants. Foreign currencies We operate internationally and are exposed to foreign exchange risk arising from multiple currencies...

  • Page 22
    ... timeline in 2009 and 2010. To emphasise the long-term retention element of the plan and move this in line with the Code, the vesting timeline of the plan was amended at the Annual General Meeting of Shareholders in 2011. As a result, all options granted in 20 TomTom Annual Report and Accounts 2011

  • Page 23
    2011 under the amended TomTom Management Board Stock Option Plan 2009, vest three years after the date of granting, in line with the requirements of the Code. The number of options that vest is subject to the achievement of predetermined performance criteria. Options vested under this plan can be ...

  • Page 24
    ... more than 50% of the issued share capital. 22 TomTom Annual Report and Accounts 2011 Doug Dunn and Rob van den Bergh were re-appointed as ViceChairman and Member of the Supervisory Board respectively at the Annual General Meeting of Shareholders on 29 April 2011. We currently have a vacancy in the...

  • Page 25
    ... financial year. The discussion of the annual report, the adoption of the annual accounts and the release from liability of the members of the Management Board and Supervisory Board are recurring agenda items. An Extraordinary General Meeting of Shareholders may be convened, whenever the company...

  • Page 26
    ... of the General Meeting of Shareholders or the Management Board Resolutions of the General Meeting of Shareholders are adopted by an absolute majority of votes cast, except where Dutch law or our Articles of Association provide for a special majority. 24 TomTom Annual Report and Accounts 2011

  • Page 27
    ... must be executed for a price of the stock exchange price with a margin of 10%. Stock exchange price means: the average of the closing price of the TomTom share according to the Official Price List of NYSE Euronext Amsterdam on the five consecutive trading days immediately preceding the date of...

  • Page 28
    ... 2012 at the 26 TomTom Annual Report and Accounts 2011 Obligations of shareholders to disclose holdings - Under the Financial Markets Supervision Act any person who, directly or indirectly, acquires or disposes of an interest in the capital and/or the voting rights of a limited liability company...

  • Page 29
    ... the meaning of 2:153 Dutch Civil Code - In 2008, a statement within the meaning of clause 2:153 (1) Dutch Civil Code was filed with the Trade Register which provides that TomTom NV meets the requirements as set out in clause 2:153 (2) Dutch Civil Code. As announced in our 2010 annual report, due...

  • Page 30
    ...the 2011 financial statements do not contain any errors of material importance. With reference to the statement within the meaning of article 5:25C (2) (c), the Financial Markets Supervision Act, the Management Board states that, to the best of its knowledge: - the annual financial statements give...

  • Page 31
    ... integrated into the Dutch Tele Atlas group and as of 1990 Alain headed the Tele Atlas group, successfully introducing the company on the Frankfurt and the Amsterdam Stock Exchanges. In 2008, TomTom acquired Tele Atlas and Alain was appointed as a member of the Management Board in October 2008. 29

  • Page 32
    ... KPN's mobile division, and served on the Supervisory Board of E-Plus Mobilfunk Geschäftsführungs GmbH. From 2006 until August 2008, Guy was Chief Executive Officer of Kroymans Corporation BV, a company active in the automotive industry. In 2009 and 2010, Guy was the Chief Executive Director of...

  • Page 33
    ... to the TomTom Supervisory Board in October 2008. His current term runs until 2012. PETER WAKKIE (63) Peter Wakkie is a Dutch national. With a background in law, Peter was a member of the Executive Board of Royal Ahold NV from 2003 until December 2009. In 2010 he co-founded his own company SPINATH...

  • Page 34
    ..., press releases, operational updates and the R&D programme. In order to facilitate an open and productive discussion, the Supervisory Board is provided before each meeting with comprehensive quarterly reports on the developments, challenges and opportunities in the company. Monthly conference...

  • Page 35
    ...our employee retention policy. The focal point of the October meeting was the cost saving and restructuring programme. Feedback received from the Works Council during these meetings is of great added value to the functioning of the Supervisory Board. 2011 topics At the start of the year, the company...

  • Page 36
    ..., taking into account developments in the pay market and the job size as graded within the company. In 2011 the base salary of the Management Board was benchmarked against a peer group consisting of 70 Dutch companies with a two-tier board structure, the majority of which were AEX and AMX listed...

  • Page 37
    ... date. As in previous years, for 2011 the conditional grant of stock options to the Management Board members was based on a fixed pay versus pay-at-risk ratio. To be consistent with general market practice and the granting policy applicable to the other key company employees, this ratio was set...

  • Page 38
    ...period of 12 months is applicable for all members of the Management Board. In the event 36 TomTom Annual Report and Accounts 2011 Management Board members Marina Wyatt, Alain De Taeye and the VP of Business Assurance attended all meetings either in full or part during the year. The external auditor...

  • Page 39
    ... and ethics, and the approach taken to protecting and securing key company assets. Financial reporting The Supervisory Board and Audit Committee reviewed the quarterly financial results and full year financial statements prior to their release. Attention was paid to critical accounting policies...

  • Page 40
    ... signed the annual Financial Statements pursuant to the statutory obligation under article 2:101 (2) Dutch Civil Code. The Supervisory Board would like to thank the Management Board members and all employees for their dedication and hard work in 2011. Amsterdam, 28 February 2012 Supervisory Board...

  • Page 41
    ... Cash Flows 44 Consolidated Statement of Changes in Equity 45 Notes to the Consolidated Financial Statements Company Financial Statements of TomTom NV 73 Company Statement of Income of TomTom NV 74 Company Balance Sheet of TomTom NV 75 Notes to the Company Financial Statements 78 Other information...

  • Page 42
    ... S HA RE (in â,¬) 12 - 1.97 - 1.97 0.49 0.49 Basic Diluted 1 Operating expenses in 2011 include restructuring expenses of â,¬14.8 million (2010: â,¬3.3 million). The notes on pages 45 to 72 are an integral part of these Consolidated Financial Statements. 40 TomTom Annual Report and Accounts 2011

  • Page 43
    Consolidated Statement of Comprehensive Income for the year ended 31 December (â,¬ in thousands) NE T RES U LT OTH E R CO M P REH EN S I V E I NCOM E: 2011 2010 - 438,951 - 381 2,545 2,164 - 436,787 107,670 2,055 2,411 4,466 112,136 Currency translation differences Cash ï¬,ow hedge OTH E R CO M P...

  • Page 44
    ...2011 2010... T I ES Trade payables Income taxes Other...2012; a forward-start facility, which will replace the existing borrowings as from 31 December 2012, is in place. The notes on pages 45 to 72 are an integral part of these Consolidated Financial Statements. 42 TomTom Annual Report and Accounts 2011

  • Page 45
    ... Statement of Cash Flows for the year ended 31 December (â,¬ in thousands) CAS H F LOW S F RO M O PER ATI NG ACTI VI TI ES Notes 2011 2010 Operating result Financial gains (losses) Amortisation of intangible assets Depreciation of property, plant and equipment Impairment charge Equity-settled stock...

  • Page 46
    ... expense Issue of share capital B A LA N C E AS AT 3 1 DECEM BER 20 11 1 23 22 21 Other reserves include Legal reserves and the Stock compensation reserve. The notes on pages 45 to 72 are an integral part of these Consolidated Financial Statements. 44 TomTom Annual Report and Accounts 2011

  • Page 47
    ... Financial Statements 1. GENERAL TomTom NV (the 'company') has its statutory seat and headquarters in Amsterdam, the Netherlands. The activities of the company include the development and sale of location and navigation solutions. The consolidated financial statements comprise the company...

  • Page 48
    ... interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners. The difference between fair value of any consideration paid and the relevant share acquired or the carrying value of the net assets of the subsidiary is recorded in...

  • Page 49
    ... the customers. Sale of services Services revenue is generated by map update services, content sales and connected navigation services for commercial ï¬,eets. The revenue relating to the service element is recognised over the service period. Multiple element arrangements Bundled sales or multiple...

  • Page 50
    ... to items credited or debited directly to equity. In this case, the tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group's share of...

  • Page 51
    ... useful live of the intangible assets are as follows: Databases and tools Customer relationships Computer software Acquired technology 10-20 years 20-27 years 2-5 years 4-5 years Customer relationships include customers for maps; there is a high cost to changing map providers and historically...

  • Page 52
    ... is determined using the first-in, first-out (FIFO) method, net of reserves for obsolescence and any excess stock. Net realisable value represents the estimated selling price less an estimate of the costs of completion and direct selling costs. 50 TomTom Annual Report and Accounts 2011

  • Page 53
    ...has been approved by the Supervisory Board. The written principles and policies are reviewed periodically to reï¬,ect changes in market conditions and the activities of the business. Capital risk management The group's financing policy aims to maintain a capital structure that enables the group to...

  • Page 54
    ... to the Consolidated Financial Statements | continued 3. FINANCIAL RISK MANAGEMENT (CONTINUED) In order to maintain or adjust the capital structure, the group may issue new shares, adjust its dividend policy, return capital to shareholders or sell assets to reduce debt taking into account relevant...

  • Page 55
    ... from external customers is derived primarily from the sale of portable navigation devices and in-dash navigation systems and related content and services and the royalty income generated from licensing our map database. A breakdown of the external revenue to types of products and services and to...

  • Page 56
    ... with the Code, the remuneration of Supervisory Board members does not depend on the results of the company. The company does not grant either stock options or shares to its Supervisory Board members and the company does not provide loans to them. The on-target bonus percentage is set at 64...

  • Page 57
    ...the Supervisory Board on 1 July 2010. The following tables summarise information about share options and performance shares granted to members of the Management Board. Outstanding 01-01-2011 Granted in 2011 Exercised in 2011 Forfeited in 2011 Outstanding 31-12-2011 Exercise price Expiry date Stock...

  • Page 58
    ... Financial Statements | continued 7. EMPLOYEE BENEFITS (CONTINUED) For a description of the stock option plans reference is made to note 22: Share-based compensation. Outstanding 01-01-2011 Granted in 2011 Exercised in 2011 Forfeited in 2011 Outstanding 31-12-2011 Expiry date Performance share...

  • Page 59
    ...basis of the Dutch tax rate and the effective tax rate is as follows: 2011 D U TCH TA X RAT E 2010 Higher weighted average statutory rate on group activities Income exempted from tax Non tax deductible share options Utilisation of losses not previously capitalised Prior year adjustments1 Other E FF...

  • Page 60
    ... equity-settled share-based plans. For the share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares), based on the monetary value of the subscription rights...

  • Page 61
    ... have finite useful lives. Goodwill has an indefinite useful life. The database as acquired at acquisition date represents all stored routing data used for our digital maps and has a remaining useful life of 15 years and 5 months. The amortisation charges totalling to â,¬98.6 million (2010: â,¬94...

  • Page 62
    ... the sensitivity analysis of Automotive, Licensing and Business Solutions indicated that a reasonably possible change in the above-mentioned key assumptions would not cause their fair value less costs to sell to fall below the level of the carrying value. 60 TomTom Annual Report and Accounts 2011

  • Page 63
    ... Currency translation differences Balance as at 31 December 2011 Investment cost Accumulated depreciation No impairment of property, plant and equipment was identified during the accounting period. The carrying value of fixed assets held under finance leases at 31 December 2011 was nil (2010...

  • Page 64
    ... In our Consumer business, credit risk is to some extent further mitigated by the purchase of insurance, however it is not possible to insure all open credit exposures. Automotive, Licencing and Business Solutions customers are not insured for credit risk. 62 TomTom Annual Report and Accounts 2011

  • Page 65
    ...: Not overdue Overdue < 3 months 3 to 6 months Over 6 months Less provision TR A D E REC EI VA BL ES ( N ET) 2011 2010 168,060 17,617 999 77 - 1,814 184,939 266,775 31,879 2,804 7,723 - 3,360 305,821 Trade accounts receivable include amounts denominated in the following major currencies: (â,¬ in...

  • Page 66
    ... Governance section in the Annual Report. In 2011, 86,927 shares were issued following the exercise of share options by employees (2010: 90,011). Our reserves are freely distributable except for â,¬70.1 million of legal reserves. Note 6 in our company financial statements provides an overview of...

  • Page 67
    ...the Supervisory Board has granted options to members of the Management Board to subscribe for shares. The Management Board has granted options to eligible employees to subscribe for shares. Stock compensation reserve 2011 2010 (â,¬ in thousands) Opening balance Stock compensation expense Release to...

  • Page 68
    ... as the historic volatility of the TomTom NV stock. The group's employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. 66 TomTom Annual Report and Accounts 2011

  • Page 69
    ... basis of discounted cash ï¬,ow analysis using recent market interest rates paid by comparable companies on borrowings with comparable terms. The fair value of the outstanding current borrowings is estimated to approximate its notional amount. On 1 April 2011 TomTom signed a forward-start facility...

  • Page 70
    ...186 - 188,749 11,795 5,174 - 171,780 Deferred tax balances are presented in the balance sheet as follows: (â,¬ in thousands) D E F E R RED TA X 2011 2010 Deferred tax assets Deferred tax liabilities 10,493 - 182,273 - 171,780 22,265 - 211,014 - 188,749 68 TomTom Annual Report and Accounts 2011

  • Page 71
    ... The group generally offers warranties for its portable navigation products. Management estimates the related provision for future warranty claims based on historical warranty claim information, as well as evaluating recent trends that might suggest that past cost information may differ from future...

  • Page 72
    ... legal advice, there were no other contingencies that management expects to have a material adverse effect on the group's financial position as at 31 December 2011. 30. BUSINESS COMBINATIONS No business combination transaction took place in 2011 or 2010. 70 TomTom Annual Report and Accounts 2011

  • Page 73
    ... the normal course of business, the group receives map development and support services from its associate Infotech Enterprises Ltd. Such transactions take place at normal market conditions and the total payments made for these services in 2011 amounted to â,¬12.9 million (2010: â,¬13.6 million) 32...

  • Page 74
    ...) that maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. In accordance with the fair value hierarchy established by IFRS 7, these types of inputs classify as Level 2 inputs. 72 TomTom Annual Report and Accounts 2011

  • Page 75
    Company Statement of Income of TomTom NV for the year ended 31 December (â,¬ in thousands) Result of subsidiaries after taxation Other income and expenses after tax NE T RES U LT Notes 2011 2010 2 3 - 403,665 - 34,179 - 437,844 138,255 - 30,487 107,768 The notes on pages 75 to 77 are an integral...

  • Page 76
    ... DERS ' EQ U I TY Share capital Share premium Other reserves Accumulated deficit Result for the year TOTA L S H A REH ... 209,925 3,231,103 Borrowings Inter-company payable Provisions Deferred tax liability TOTA L N...part of these Company Financial Statements. 74 TomTom Annual Report and Accounts 2011

  • Page 77
    ... the stock compensation expenses and the borrowing cost respectively. The movement of the deferred tax positions during the year were the result of changes/reversals of temporary differences and have been charged/released to the income statement. 5. SHAREHOLDERS' EQUITY For the statement of changes...

  • Page 78
    .... 8. INTERCOMPANY PAYABLE Intercompany payable comprises of loans provided by subsidiaries. The interest rate on the loan during 2011 is based upon LIBOR plus a margin of 0.7%. Although no repayment period has been agreed the loan has a long-term nature. 76 TomTom Annual Report and Accounts 2011

  • Page 79
    ... of its Dutch subsidiaries. Each company within the fiscal unity is jointly and severally liable for the fiscal liability of the fiscal unity. Amsterdam, 28 February 2012 Management Board Harold Goddijn Marina Wyatt Alain De Taeye Amsterdam, 28 February 2012 Supervisory Board Karel Vuursteen...

  • Page 80
    .... STICHTING CONTINUITEIT TOMTOM For a description of the Stichting Continuiteit TomTom (the 'Foundation'), reference is made to the Corporate Governance section in the Annual Report. AUDITOR'S REPORT Reference is made to the auditor's report on page 79. 78 TomTom Annual Report and Accounts 2011

  • Page 81
    ...'s Report To the Shareholders and Supervisory Board of TomTom NV REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements 2011 of TomTom NV, Amsterdam. The financial statements include the consolidated financial statements and the company financial statements...

  • Page 82
    ...traded companies in the Netherlands. Share options of TomTom are traded on the Euronext Amsterdam Derivative Market. Financial calendar 25 April 2012 26 April 2012 24 July 2012 30 October 2012 Shares outstanding Publication Q1 2012 results Annual General Meeting of Shareholders Publication Q2 2012...

  • Page 83
    ...per share Free cash ï¬,ow per share Weighted average number of shares outstanding (in millions) Weighted average number of shares fully diluted (in millions) Information about our current share price is available on our website: (http://corporate.tomtom.com/investor.cfm). Dividend policy 2011 2010...

  • Page 84
    ... D EX P EN S ES 2011 2010 2009 2008 2007 Revenue Gross profit Operating result1 Net result (attributable to equity holders of the parent)2 DATA P ER S HA RE 1,273 640 102 74 1,521 744 190 110 1,480 731 231 94 1,674 781 264 188 1,737 764 428 317 Earnings per share (in â,¬) - diluted3 Adjusted...

  • Page 85
    ... took place 27.04 232 23.97 100 in July 2009. 4 Earnings per share adjusted for acquisition related amortisation, goodwill impairment and restructuring charges on a post tax basis. 5 Calculated based on the sales / cost of sales and the number of days in the last three months of the year. 809...

  • Page 86
    84 TomTom Annual Report and Accounts 2011

  • Page 87

  • Page 88
    TomTom NV Oosterdoksstraat 114 1011 DK Amsterdam The Netherlands Tel: +31 (0)20 757 5000 www.tomtom.com