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Annual Report 2012
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Table of contents

  • Page 1
    Annual Report 2012 maps | tra c | navigation

  • Page 2
    ... panels in combination with management estimates. Where full-year information regarding 2012 is not yet available to TomTom, those statements may also be based on estimates and projections prepared by outside sources or management. Market shares are based on sales in units unless otherwise stated...

  • Page 3
    Contents 2 CEO Letter 4 Profile 5 Management Board Report 5 Financial and Business Review 9 Human Resources 11 Corporate Social Responsibility 12 Business Risks 16 In Control Statement and Responsibility 17 Corporate Governance 23 Profiles of the Management Board 33 Consolidated Financial ...

  • Page 4
    ... build on this positive momentum. Licensing also benefits from our strategy to sell modular components of a content, software and services company. Business Solutions operates an underpenetrated market. With its legacy-free, state of art, online ï¬,eet management platform, its aim is to continue...

  • Page 5
    Looking forward - 2013 will be an exciting year as products based on our new technologies start to reach our customers. An uncertain macroeconomic environment will continue to bring us challenges. We will take further steps this year to develop our componentised technologies. These will provide the...

  • Page 6
    ... employees and operates from 57 locations in 35 countries. TomTom Markets Consumer Product Units Automotive Licensing Business Solutions Maps Traffic Navigation PND Fleet Fitness Mobile Location Based Services Places Speedcams Custom Systems 4 TomTom Annual Report and Accounts 2012

  • Page 7
    ... with Nike grew strongly year-on-year. However, growth in these areas did not compensate for the decline in PND sales. Key figures (in â,¬ millions) 2012 % of revenue 2011 % of revenue 2010 % of revenue Consumer Automotive Licensing Business Solutions Hardware Content & Services TOTA L REV EN...

  • Page 8
    ...sell strongly; there were around half a million downloads during the year. For iPhone, we also introduced a new speed camera app. Our navigation app for Android was introduced after the summer. During the year we also launched the TomTom Hands Free Car Kit for smart phones that enables our customers...

  • Page 9
    ... - a deal with Apple, who will license our maps and related content. Samsung decided to use our maps on its Wave3 smart phone, and RIM selected our real-time traffic service for BlackBerry applications. In the year we won a good number of deals for our real-time and historical traffic information...

  • Page 10
    ... Stock compensation Cash position Operating Depreciation 31 December result & 2011 Amortisation Other noncash items Working capital Interest, Investments Financing Cash position taxes and 31 December other 2012 1 Excluding restructuring and impairment charges. 8 TomTom Annual Report and Accounts...

  • Page 11
    ...PNDs. We expect our core PND markets to decline by 15-20% in volume year over year. Automotive revenue development will largely depend on the new car sales and take rates of our current partners. For Licensing we expect revenue to be broadly stable. Business Solutions is expected to continue to grow...

  • Page 12
    ... processes are managed through a new automated system that makes use of state-of-the-art human resources management software. This year we completed the implementation of our online recruitment portal. This ensures that all employees have access to information about vacancies within the company...

  • Page 13
    ... consumers, business customers and suppliers. This includes setting targets to meet current industry standards for the electronics manufacturing industry. The areas we cover are: supply chain management, labour conditions, human rights, health, safety and environment. - Community giving. We aim to...

  • Page 14
    ...variety of business risks and economic developments. A structured risk management process helps management to better understand how risks might impact the company and to take risks in a controlled manner. We update our business risk profile every year in order to manage our most important risks. We...

  • Page 15
    ... also emerge. We have entered into a number of strategic partnerships and joint ventures to bring competitive product and service offerings to market. If any of our strategic partners fail to perform as planned or if we fail to find suitable partners for our business activities, we may be unable to...

  • Page 16
    ...skilled personnel in all business units and development centres. 14 TomTom Annual Report and Accounts 2012 Performance of real time services As part of our service to our customers, we provide real-time services such as WEBFLEET and HD Traffic. To provide these services to our customers we rely on...

  • Page 17
    ... across different devices (car, smartphone, web) and relevant content and services such as real-time traffic and routing, remote car diagnostics and an application store. If we are unable to develop products that allow us to compete successfully in the emerging world of the 'connected car', our...

  • Page 18
    ... manage cash balances and exposure to currency transaction risks through treasury policies, risk limits and monitoring procedures. - A Code of Ethics is embedded in the TomTom culture and is accessible to all staff via the intranet. 16 TomTom Annual Report and Accounts 2012 The key controls...

  • Page 19
    ..., employees and business partners. We aim to be as transparent and accountable as possible in our way of doing business. For this reason, TomTom has a corporate governance structure in place, which we monitor closely. As a listed company, TomTom is subject to the Dutch Corporate Governance Code...

  • Page 20
    ...ï¬,ict of interests to the Chairman of the Supervisory Board, and provide all relevant information. The Supervisory Board shall decide whether a conï¬,ict of interests exists. The member of the Management Board who has the (potential) conï¬,ict of interests 18 TomTom Annual Report and Accounts 2012

  • Page 21
    ... of the positions to be filled will prevail. The Supervisory Board profile and other rules and regulations covering its decision-making process are posted on TomTom's corporate website. members of the Management Board and prepares the remuneration report that is included in the annual report. The...

  • Page 22
    ... held within six months of the end of each financial year. The compilation of the annual report is a recurring agenda item, as are the adoption of the annual accounts and the release from liability of the members of the Management Board and Supervisory Board. When the company's interests so require...

  • Page 23
    ... ordinary shares for the purpose of executing the TomTom Employee Stock Option Plan and the Management Board Stock Option Plan. The authorisation was subject to the prior approval of the Supervisory Board. It was granted for a period starting from the 2012 Annual General Meeting and ending with the...

  • Page 24
    ... Takeover Directive - The Management Board states that all the information required under Article 10 of the EU Takeover Directive Decree is disclosed in the Corporate Governance section of this annual report to the extent that it is applicable to TomTom. 22 TomTom Annual Report and Accounts 2012

  • Page 25
    ... map databases and routing, while continuing his IT consultancy work. I&M was integrated into the Dutch Tele Atlas group in 1989. From 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...

  • Page 26
    ...ce | AGM 2012 - AGM 2016 Former positions | Member of the Board of Management of Koninklijke KPN NV, Chief Executive Officer of Kroymans Corporation BV and Chief Executive Director of Liquavista BV Current positions | Non-Executive Director of Belgacom NV, member of the Supervisory Board of Apollo...

  • Page 27
    ...BEN VAN DER VEER (61) Nationality | Dutch Date of first appointment | 1 October 2008 Current term of office | AGM 2012 - AGM 2016 Former positions | Member and Chairman of the Board of Management KPMG Current positions | Non-Executive Director of Reed Elsevier Group plc and Reed Elsevier plc and...

  • Page 28
    ... October meeting was the introduction of newly elected Works Council members and progress in realising the company's objectives. Feedback received from the Works Council during these meetings adds significant value to the Supervisory Board's functioning. 26 TomTom Annual Report and Accounts 2012

  • Page 29
    ... importance both for the business units but also for the company as a whole were a number of major new customer wins. The Supervisory Board feels these demonstrate that the company's shift in direction is starting to bear fruit. In the October meeting the company's legal compliance and its corporate...

  • Page 30
    ... of the policy is to align the base salary levels of TomTom Management Board members with median market practice in a measured way. The base salary levels are reviewed annually, taking into account developments in the pay market and the level of position as graded within the company. Using the...

  • Page 31
    ... objectives was appropriate. As in previous years, the conditional grant of stock options to the Management Board members was based on a fixed pay versus pay-at-risk ratio for 2012. To be consistent with general market practice, as well as the granting policy applicable to the other key company...

  • Page 32
    .... A set of KPIs will enable the Supervisory Board to measure the progress made in the execution of the company's strategy to restore revenue growth. This growth should be achieved by greater increase from non-PND product sales while limiting the decline of PND sales. TomTom's position as...

  • Page 33
    ... following areas of the business: - the integrity of the company's quarterly financial results and related press releases - the integrity of the annual report, including the company's accounting and financial reporting policies and processes - the integrity of the company's disclosure controls and...

  • Page 34
    ... and on the company's website. Upon adoption of the Annual Accounts for 2012, and in accordance with article 2:394 of the Dutch Civil Code and article 5:25o of the Financial Supervision Act, the Management Board will file the Annual Accounts for 2012 with the AFM. The members of the Supervisory...

  • Page 35
    ...of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements 69 70 71 74 Company Financial Statements of TomTom NV Company Statement of Income of TomTom NV Company Balance Sheet of TomTom NV Notes to the Company Financial Statements Other Information 33

  • Page 36
    ... 2012 2011 Cost of sales G R OS S RES U LT 5 6 1,057,134 502,398 554,736 1,273,217 633,545 639,672 OP E R AT I N G EX P EN S ES Research and development expenses Amortisation of technology and databases Marketing expenses Selling, general and administrative expenses Impairment charge Stock...

  • Page 37
    Consolidated Statement of Comprehensive Income for the year ended 31 December (â,¬ in thousands) NE T R ES U LT OTH E R CO M P REH EN S I V E I NCOM E: 2012 2011 129,193 - 1,298 - 1,352 0 - 2,650 126,543 - 438,951 - 381 0 2,545 2,164 - 436,787 Currency translation differences Actuarial losses on ...

  • Page 38
    ... revenue is presented under Other long term liabilities. The 2011 comparative figures have been reclassified to conform to the current year's presentation. The notes on pages 39 to 68 are an integral part of these consolidated financial statements. 36 TomTom Annual Report and Accounts 2012

  • Page 39
    ... ES Notes 2012 2011 Operating result Financial (losses) gains Amortisation of intangible assets Depreciation of property, plant and equipment Impairment charge Equity-settled stock compensation expense Change in provisions Changes in working capital: Change in inventories Change in receivables and...

  • Page 40
    ... paid Change in non-controlling interests Stock compensation related charges Issue of share capital B A LA N C E AS AT 3 1 DE CEM BER 2 01 1 CO MP REH EN S I V E I N COM E 23 22 21 Result for the year OTH E R CO M P REH EN S I V E I NCOM E Currency translation differences Transfer to legal...

  • Page 41
    ... the Consolidated 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...

  • Page 42
    ... for products and / or services delivered in the normal course of business. Revenue is reduced for estimated customer returns, rebates and other similar allowances whenever applicable based on historical data and expectations of future sales. For further details, refer to note 4, Critical accounting...

  • Page 43
    ... of a stand-alone selling price the fair value of each element is estimated using other methods allowed under IFRS such as cost plus reasonable margin- or residual method. The amount of revenues allocated to the hardware element is recognised in line with the accounting policy for the sale of goods...

  • Page 44
    ... accumulated impairment losses. Goodwill is allocated to operating segments for the purpose of impairment testing. The allocation is made to those operating segments that are expected to benefit from the business combination in which the goodwill arose. 42 TomTom Annual Report and Accounts 2012

  • Page 45
    ... on research activities are expensed in the income statement as incurred. Internal software costs relating to development of non-core software with an estimated average useful life of less than one year and engineering costs relating to the detailed manufacturing design of new products are expensed...

  • Page 46
    ... within 'cost of sales'. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against 'cost of sales' in the income statement. 44 TomTom Annual Report and Accounts 2012

  • Page 47
    ... risks, and to set appropriate risk limits and controls. Financial risk management is carried out in accordance with the Treasury Policy. The written principles and policies are reviewed periodically to reï¬,ect changes in market conditions, the activities of the business and laws and regulations...

  • Page 48
    ...3 years 75,000 2,900 77,900 75,000 3,190 78,190 100,000 290 100,290 Interest on our variable rate borrowing is estimated assuming that the market interest and the required performance indicators remain constant based on the situation as at 31 December 2012. 46 TomTom Annual Report and Accounts...

  • Page 49
    ... financial impact of these returns. The estimate is based upon historical data on the return rates and information on the inventory levels in the distribution channel. The group reduces revenue for estimates of sales incentives. We offer sales incentives, including channel rebates and end-user...

  • Page 50
    .... The group's internal management reporting is structured based primarily upon the market segments in which the four operating segments - Consumer, Automotive, Business Solutions and Licensing - operate. Consumer generates revenue mainly from the sale of PNDs, maps and related navigation services to...

  • Page 51
    ... restructuring costs which were not allocated to the operating segments. Revenue 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...

  • Page 52
    ...% of the annual base salary. The actual bonus pay-out depends on certain challenging financial targets (revenue, EBIT and cash ï¬,ow). The total direct remuneration to or on behalf of members of the Management Board for the year ended 31 December 2012, amounted to approximately â,¬1.8 million (2011...

  • Page 53
    ... benefits paid to Management Board, they have been included in the table above as the expenses were incurred in relation to the employment of the Management Board. The following tables summarise information about stock options granted to members of the Management Board. Stock option plan Harold...

  • Page 54
    ... or obligation from the group besides withholding and paying the employee contribution. Average number of employees The average number of employees in 2012 was 3,477 (2011: 3,698) spread across the following functional areas: 2012 2011 Research and development Marketing Sales, general and...

  • Page 55
    ... and activity. The applicable statutory tax rates vary between 12.5% and 41.0%. The different tax jurisdictions in which we operate can cause the effective tax rate to differ from the Dutch corporate tax rate. (â,¬ in thousands) Current tax Deferred tax INCO M E TA X EX P EN S E 2012 2011 - 54...

  • Page 56
    ... number is excluded from the calculation of diluted earnings. Adjusted earnings per share Adjusted earnings per share is calculated by dividing the adjusted earnings by the weighted average number of ordinary and diluted shares outstanding during the year. 54 TomTom Annual Report and Accounts 2012

  • Page 57
    ... at acquisition date represents all stored routing data used for our digital maps and has a remaining useful life of 14 years and 5 months. The amortisation charges totalling to â,¬96,0 million (2011: â,¬98.6 million) are included in the following line items in the Income Statement: amortisation...

  • Page 58
    ... testing. A reasonably possible change in any of the above-mentioned key assumptions as well as assumptions in the forecasted period would not cause the fair value less costs to sell of each segment to fall below the level of their respective carrying value. 56 TomTom Annual Report and Accounts...

  • Page 59
    ... (net) Depreciation charges Currency translation differences Balance as at 31 December 2012 Investment cost Accumulated depreciation 1 Other assets as at 31 December 2012 mainly comprises of leasehold improvements with a carrying value of â,¬5.8 million (31 December 2011: â,¬6.0 million). No...

  • Page 60
    ... all receivables within a year. An allowance has been made for estimated unrecoverable amounts from the sale of goods. The carrying amount of trade receivables approximates their fair value. The group does not hold any collateral over these balances. 58 TomTom Annual Report and Accounts 2012

  • Page 61
    ...-off during the year as uncollectible Unused amounts reversed Currency translation differences B A LA N C E AS AT 3 1 DE CEM BER 2012 2011 - 1,814 - 1,856 1,163 635 9 - 1,863 - 3,360 - 2,597 2,166 2,025 - 48 - 1,814 The following table sets out details of the age of trade accounts receivable that...

  • Page 62
    ... legal reserves (2011: â,¬70.1 million) Note 6 in our company financial statements provides an overview of our non-distributable reserves. Protection mechanism The Corporate Governance section of this Annual Report provides a detailed description regarding the use of Stichting Continuiteit TomTom...

  • Page 63
    ...any growth of equity value of the company, subject to terms and conditions of the 2009 Share Option Plans. The 2009 stock option plans qualifies as 'Equity-settled share based payment plans'. The options granted in 2011 and 2012 under the 2009 plans will vest after three years (cliff vesting) while...

  • Page 64
    ..., as well 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 affect the fair value estimate. 62 TomTom Annual Report and Accounts 2012

  • Page 65
    ... were as follows: (â,¬ in thousands) Opening balance at 1 January Non-controlling interest in the net result of subsidiaries Dividends paid Change in share of non-controlling interests Currency translation differences C LOS IN G BA LA N C E AT 31 DECEM BER 2012 2011 2,451 469 - 317 0 39 2,642...

  • Page 66
    ... annual accounts. 26. PROVISIONS (â,¬ in thousands) Non-current Current 2012 2011 48,268 33,192 81,460 50,114 51,213 101,327 The movements in each category of provision are as follows: Claims & litigation (â,¬ in thousands) B A LA N C E AT 1 JA N UA RY 20 11 Warranty Other Total Increases...

  • Page 67
    ... past cost information may differ from future claims. As recent trends show that the average return rate for our automotive products is declining, we have changed the assumption used to estimate the warranty provision. This resulted in a release of â,¬5.7 million. Out of the total warranty provision...

  • Page 68
    ... duration of the contracts that range from 1 to 5 years. The total commitments under these contracts are presented below. (â,¬ in thousands) Commitments less than 1 year Commitments between 1 - 5 years 2012 2011 11,583 12,287 23,870 14,372 19,290 33,662 66 TomTom Annual Report and Accounts 2011

  • Page 69
    ...4 members following our reorganisation announcement in December 2011. Certain key management personnel also hold ownership interests in TomTom NV as disclosed under the Corporate Governance section on page 22. In the normal course of business, the group receives map development and support services...

  • Page 70
    ... at the reporting date, taking into account current observable market inputs such as interest rates, current exchange rates and volatility. In accordance with the fair value hierarchy established by IFRS 7, these types of inputs classify as Level 2 inputs. 68 TomTom Annual Report and Accounts 2012

  • Page 71
    ... 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 2012 2011 2 3 64,444 64,280 128,724 - 403,665 - 34,179 - 437,844 The notes on pages 71 to 73 are an integral part of these Company Financial Statements. 69

  • Page 72
    Company Balance Sheet of TomTom NV as at 31 December (before proposed appropriation of result) (â,¬ in thousands) AS S E T S Notes 2012 2011...year TOTA L S HA REHO L DERS' EQ UI TY 6 Borrowings Inter-company payable...part of these Company Financial Statements. 70 TomTom Annual Report and Accounts 2012

  • Page 73
    ...the stock compensation expenses and the borrowing cost respectively. The movement of the deferred tax positions during the year was the result of changes/reversals of temporary differences and has been charged/released to the income statement. 5. SHAREHOLDERS' EQUITY For the statement of changes in...

  • Page 74
    ... to the Company Financial Statements | continued 6. OTHER RESERVES Cumulative translation adjustment Stock compensation reserve (â,¬ in thousands) B A LA N C E AS AT 3 1 DE CEM BER 2 01 0 Legal reserve participations Total legal reserves Total Currency translation differences Transfer from...

  • Page 75
    ... section 403 of Part 9 of Book 2 of the Netherlands Civil Code. Besides these declarations TomTom NV has given a guarantee as described in article 479C of the UK Companies Act for an UK subsidiary TomTom Software Ltd. Furthermore the company forms part of a fiscal unity for corporate income tax and...

  • Page 76
    ... OF RESULTS According to the company's Articles of Association, the company's result is freely at the disposal of the shareholders, provided that total shareholders' equity exceeds the called-up and paid-up capital of the company, increased by legal and statutory reserves. PROPOSED APPROPRIATION...

  • Page 77
    ... the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of TomTom NV as at 31 December 2012 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...

  • Page 78
    ... company and its management, our strategy, goals and expectations. Investors and analysts are invited to contact us with any information requests they have. We do not hold roadshows, attend conference or meet with investors or analysts shortly before the publication of our quarterly results. Listing...

  • Page 79
    ... 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 2012 2011...

  • Page 80
    ...(DSO) Creditor days S H A R E P RI C E 29 47 54 31 48 56 31 55 72 21 51 64 47 51 49 At end of period Volume (million) NU MBER O F EM P LOYEES 3.80 491 3.05 715 7.89 552 6.25 811 4.30 480 At end of period (FTE) 3,490 3,677 3,487 3,089 3,498 78 TomTom Annual Report and Accounts 2012

  • Page 81
    ... per share adjusted for acquisition related amortisation, goodwill impairment and restructuring charges on a post tax basis, and a â,¬80 million one-off tax gain in 2012. 5 Calculated based on the sales / cost of sales and the number of days in the last three months of the year. 1,337 809 435...

  • Page 82

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