6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

January 26, 2016

 

 

KONINKLIJKE PHILIPS N.V.

(Exact name of registrant as specified in its charter)

Royal Philips

(Translation of registrant’s name into English)

The Netherlands

(Jurisdiction of incorporation or organization)

Breitner Center, Amstelplein 2, 1096 BC Amsterdam, The Netherlands

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  þ            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b)(7):  ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨             No  þ

Name and address of person authorized to receive notices

and communications from the Securities and Exchange Commission:

M.J. van Ginneken

Koninklijke Philips N.V.

Amstelplein 2

1096 BC Amsterdam – The Netherlands


This report comprises a copy of the following press release:

“Philips’ Fourth Quarter and Annual Results 2015”, dated January 26, 2016.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized at Amsterdam, on the 26th of January, 2016.

KONINKLIJKE PHILIPS N.V.

/s/ M.J. van Ginneken

(General Secretary)


LOGO

Philips reports Q4 comparable sales growth of 2% to EUR 7.1 billion and a 13% improvement in Adjusted EBITA to EUR 842 million

Fourth-quarter highlights

 

  Comparable sales up 2%, driven by 4% growth in the HealthTech portfolio

 

  Currency-comparable order intake up 15%, driven by North America, China and Western Europe

 

  Adjusted EBITA1) improved 50 basis points to 11.9% of sales and amounted to EUR 842 million

 

  EBITA amounted to EUR 263 million, or 3.7% of sales

 

  Net loss of EUR 39 million, impacted by one-time charges including previously announced pension de-risking, compared to net income of EUR 134 million in Q4 2014

 

  Free cash flow of EUR 740 million, compared to EUR 559 million in Q4 2014

 

  Philips Lighting separation process on track

Full-year highlights

 

  Comparable sales up 2% to EUR 24.2 billion, driven by above 4% growth in the HealthTech portfolio

 

  Currency-comparable order intake up 5%, driven by North America and Western Europe

 

  Adjusted EBITA improved 20 basis points to 9.2% of sales and amounted to EUR 2.2 billion

 

  EBITA totaled EUR 1.4 billion, or 5.7% of sales, compared to EUR 821 million, or 3.8% of sales, in 2014

 

  Net income amounted to EUR 659 million, compared to EUR 411 million in 2014

 

  Free cash flow of EUR 325 million, compared to EUR 497 million in 2014

 

  Return on invested capital increased to 7.0%, compared to 4.5% in 2014

 

  Proposal to maintain dividend at EUR 0.80 per share

Frans van Houten, CEO:

“The fourth quarter of 2015 was another quarter in which Philips delivered year-on-year operational improvements. We increased Adjusted EBITA across all three sectors and generated close to EUR 1 billion of cash from operations.

In the fourth quarter, we saw continued sales growth and strong 15% currency-comparable order intake growth in Healthcare, with margins also improving year-on-year. Consumer Lifestyle showed continued robust growth across all businesses, most notably Health & Wellness, while productivity and product mix improvements resulted in significantly higher margins. Lighting again delivered year-on-year performance improvements, driven by sustained comparable sales and margin growth in the LED business and our effective management of the market decline in conventional lamps.

Overall, 2015 was a solid year for Philips, as illustrated by consistent performance improvements in the face of ongoing challenging macroeconomic circumstances. Lighting showed another year of operational improvements, and our HealthTech portfolio, which combines the Healthcare and Consumer Lifestyle businesses, delivered promising comparable sales growth of more than 4% overall for the year, demonstrating our progress in capitalizing on opportunities in this large and growing market. Order intake growth of 5% in Healthcare was encouraging.

For 2016, we continue to expect modest comparable sales growth and we will build on our 2015 operational performance improvement. Taking into account ongoing macro-economic headwinds and the phasing of costs and sales, we expect improvements in the year to be back-end loaded.”

 

1)  Adjusted EBITA is defined as Income from operations (EBIT) excluding amortization of acquired intangible assets, impairment of goodwill and other intangible assets, restructuring charges, acquisition-related costs and other significant items. A reconciliation of Adjusted EBITA to EBIT is provided in the section ‘Reconciliation of non-GAAP performance measures’ of this release.


Accelerate! and Separation Update

“Our Accelerate! program continues to drive strong operational improvements across the organization. In Healthcare, for example, we increased sales of ClarityIQ upgrades for interventional X-ray systems by 50% in 2015 compared to 2013, by automating our system upgrade sales process. In Consumer Lifestyle, we virtually doubled sales on ‘Double 11’ day in China compared to 2014, by customizing our propositions and leveraging our digital capabilities. In Lighting, we delivered solid sales growth for Consumer Luminaires in the Benelux and Iberia by adapting the portfolio of this business to locally relevant value propositions.”

Philips’ three cost savings programs all delivered ahead of plan in 2015. The company achieved EUR 290 million of gross savings in overhead costs, EUR 379 million of gross savings in procurement, and EUR 187 million of productivity savings from the End2End process improvement program.

Philips is on schedule to be able to complete the separation of the Lighting business in the first half of this year. As previously stated, Philips is reviewing all strategic options for Philips Lighting, including an initial public offering and a private sale. Costs related to the separation amounted to EUR 183 million in 2015. For 2016, the company continues to expect separation costs to be in the range of EUR 200-300 million.

Q4 2015 Financial and Operational Overview

Healthcare

Healthcare comparable sales grew 3% year-on-year and currency-comparable order intake grew by 15%. The Adjusted EBITA margin increased by 100 basis points to 15.8%, driven by cost productivity improvements and positive currency impacts.

“We are encouraged by 15% order intake growth in Healthcare, which was driven by strong growth in North America, Western Europe and a substantial rebound in China. Our focus on multi-year strategic partnerships continued to pay off, as illustrated by three new partnerships based on a managed services model to optimize the delivery of care: with Mackenzie Health in Canada, Granada’s Clinical Hospital in Spain, and Hospices Civils de Lyon in France.”

Consumer Lifestyle

Consumer Lifestyle comparable sales increased by 6% year-on-year, driven by double-digit growth in Health & Wellness and low-single-digit growth in Personal Care and Domestic Appliances. The Adjusted EBITA margin increased by 180 basis points to 17.8% year-on-year.

“Consumer Lifestyle once again delivered a strong top and bottom-line performance, with double-digit growth in growth geographies. In India, for instance, strong sales of the Philips Airfryer, juicers, soup makers and mixer grinders drove double-digit growth. Oral Healthcare continued its strong trajectory, with a very solid performance in North America, China, and Germany, Austria & Switzerland.”

Lighting

Lighting again improved its operational results, with the Adjusted EBITA margin increasing by 150 basis points to 10.5% year-on-year. LED lighting comparable sales grew 26% and LED margins continued to improve. LED sales now represent 48% of total Lighting sales, compared to 37% in Q4 2014. Conventional lamps sales decreased by 16%, in line with industry trends, resulting in an overall comparable sales decline of 2% year-on-year.

“The sustained strong performance of our LED business was encouraging, with both sales and margin increasing simultaneously despite significant technology-driven price erosion. In the quarter, Lighting showcased its leadership in connected lighting by teaming up with companies including Cisco and SAP to address opportunities in the office and street lighting markets respectively. We aim to further improve Lighting margins by driving growth and margin expansion in LED and maintaining high profitability in the declining conventional lamps market.”

Innovation, Group & Services

Strong comparable sales growth from emerging businesses was more than offset by lower revenue from IP Royalties and as a result of the divestment of the OEM remote controls business in 2014, resulting in an overall IG&S sales decline of EUR 48 million. Adjusted EBITA was a net cost of EUR 183 million, compared to a net cost of EUR 100 million in the fourth quarter of 2014.

“We continued to drive leadership positions in emerging business areas such as digital pathology and handheld diagnostics. For example, Philips and Banyan Biomarkers entered into a joint development agreement to develop and commercialize a new handheld blood test to rapidly detect traumatic brain injury, such as concussion. The partnership will broaden the application of Philips’ handheld diagnostics system and will strengthen its competitive position in point-of-care diagnostics for acute care settings, a new growth market for Philips.”

Conference call and audio webcast

A conference call with Frans van Houten, CEO, and Abhijit Bhattacharya, CFO, to discuss the results will start at 10:00AM CET, January 26, 2016. A live audio webcast of the conference call will be available through the link below.

Philips Q4 2015 Earnings call

Amsterdam, January 26, 2016


Philips Group

Net income

in millions of EUR unless otherwise stated

 

    

Q4

2014

   

Q4

2015

 

Sales

     6,536        7,095   

Adjusted EBITA

     743        842   

as a % of sales

     11.4     11.9

EBITA

     262        263   

as a % of sales

     4.0     3.7

EBIT

     162        162   

as a % of sales

     2.5     2.3

Financial expenses, net

     (78     (128

Income taxes

     (16     (152

Results investments in associates

     (1     6   

Net income (loss) from continuing operations

     67        (112

Discontinued operations

     67        73   

Net income (loss)

     134        (39

Net income (loss) attributable to shareholders per common share (in EUR) - diluted

     0.15        (0.05

 

Net income

 

  Net income was a loss of EUR 39 million, compared to a gain of EUR 134 million in Q4 2014. Net income in Q4 2015 was impacted by pension de-risking settlement costs, and higher financial expenses and income tax charges.

 

  Adjusted EBITA was EUR 842 million, or 11.9% of sales, compared to EUR 743 million, or 11.4% of sales, in Q4 2014. The increase was mainly driven by cost productivity, partly offset by a negative currency effect of -0.5 percentage points of sales.

 

  EBITA amounted to EUR 263 million, or 3.7% of sales, compared to EUR 262 million, or 4.0% of sales, in Q4 2014. Restructuring and acquisition-related charges amounted to EUR 150 million, which included the acquisition of Volcano, compared to EUR 279 million in Q4 2014. EBITA also included charges of EUR 345 million for settlements mainly related to pension de-risking, EUR 86 million relating to the separation of the Lighting business, EUR 35 million related to the devaluation of the Argentine peso, and a EUR 37 million gain on the sale of real estate assets. EBITA in Q4 2014 included charges of EUR 201 million related to the Cathode-Ray Tubes (CRT) antitrust litigation, EUR 68 million of impairment and other charges related to industrial assets at Lighting, and a EUR 67 million past-service pension cost gain.

 

  Net financial expenses were EUR 128 million, compared to EUR 78 million in Q4 2014. The increase was mainly driven by valuation allowances.

 

  Income tax expense amounted to EUR 152 million, compared to EUR 16 million in Q4 2014, largely due to lower non-taxable income and changes in tax rates and assets.
 

 

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Sales by sector

 

in millions of EUR unless otherwise stated

 

  

  

    Q4     Q4     % change  
    2014     2015     nominal     comparable  

Healthcare

    2,849        3,270        15     3

Consumer Lifestyle

    1,528        1,663        9     6

Lighting

    1,975        2,026        3     (2 )% 

Innovation, Group & Services

    184        136        (26 )%      (11 )% 
 

 

 

   

 

 

   

 

 

   

 

 

 

Philips Group

    6,536        7,095        9     2

 

Sales per geographic cluster

 

  

   

in millions of EUR unless otherwise stated

 

  

 
    Q4     Q4     % change  
    2014     2015     nominal     comparable  

Western Europe

    1,776        1,767        (1 )%      (3 )% 

North America

    1,981        2,327        17     2

Other mature geographies

    451        493        9     1
 

 

 

   

 

 

   

 

 

   

 

 

 

Total mature geographies

    4,208        4,587        9     0

Growth geographies

    2,328        2,508        8     6
 

 

 

   

 

 

   

 

 

   

 

 

 

Philips Group

    6,536        7,095        9     2

Sales per sector

 

  Group sales amounted to EUR 7,095 million, an increase of 2% on a comparable basis. Group nominal sales increased by 9%, mainly due to positive currency effects and portfolio changes.

 

  Healthcare comparable sales grew 3% year-on-year. Healthcare Informatics, Solutions & Services achieved double-digit growth, Imaging Systems recorded mid-single-digit growth and Patient Care & Monitoring Solutions posted low-single-digit growth. Customer Services was in line with Q4 2014.

 

  Consumer Lifestyle comparable sales increased by 6%. Health & Wellness achieved double-digit growth while Personal Care and Domestic Appliances recorded low-single-digit growth.

 

  Lighting comparable sales showed a 2% decline year-on-year. Consumer Luminaires recorded mid-single-digit growth, while Professional Lighting Solutions and Light Sources & Electronics posted a low-single-digit decline.

Sales per geographic cluster

 

  Comparable sales in mature geographies were in line with Q4 2014. Western Europe posted a 3% decline, largely driven by the United Kingdom, France and Germany. North America recorded 2% growth and other mature geographies posted 1% growth.

 

  Comparable sales in growth geographies showed 6% growth, largely driven by China, India and Middle East & Turkey.
 

 

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Adjusted EBITA

 

in millions of EUR unless otherwise stated

 

  

  

    Q4 2014     Q4 2015  
    amount     %     amount     %  

Healthcare

    421        14.8     516        15.8

Consumer Lifestyle

    244        16.0     296        17.8

Lighting

    178        9.0     213        10.5

Innovation, Group & Services

    (100     —          (183     —     
 

 

 

   

 

 

   

 

 

   

 

 

 
Philips Group     743        11.4     842        11.9

EBITA

 

in millions of EUR unless otherwise stated

  

  

    Q4 2014     Q4 2015  
    amount     %     amount     %  

Healthcare

    390        13.7     431        13.2

Consumer Lifestyle

    251        16.4     247        14.9

Lighting

    (40     (2.0 )%      152        7.5

Innovation, Group & Services

    (339     —          (567     —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Philips Group

    262        4.0     263        3.7

EBIT

in millions of EUR unless otherwise stated

 

     Q4
2014
    Q4
2015
 

Healthcare

     351        374   

Consumer Lifestyle

     237        235   

Lighting

     (83     125   

Innovation, Group & Services

     (343     (572
  

 

 

   

 

 

 

Philips Group

     162        162   

as a % of sales

     2.5     2.3

Earnings per sector

 

  Healthcare Adjusted EBITA amounted to EUR 516 million, or 15.8% of sales, compared to EUR 421 million, or 14.8% of sales, in Q4 2014. The improvement was mainly driven by cost productivity and positive currency impacts, partly offset by price and product mix.

 

  Consumer Lifestyle Adjusted EBITA was EUR 296 million, or 17.8% of sales, compared to EUR 244 million, or 16.0% of sales, in Q4 2014. The improvement was mainly driven by cost productivity, higher volumes and product mix.

 

  Lighting Adjusted EBITA improved to EUR 213 million, or 10.5% of sales, compared to EUR 178 million, or 9.0% of sales, in Q4 2014. The increase was mainly driven by cost productivity and an improvement in LED and conventional gross margins.

 

  Innovation, Group & Services Adjusted EBITA was a net cost of EUR 183 million, compared to a net cost of EUR 100 million in Q4 2014. The Adjusted EBITA decrease was mainly due to lower revenues from IP Royalties, investments in emerging business areas and an increase in Group and Regional Costs.
 

 

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Cash balance

in millions of EUR

 

     Q4
2014
    Q4
2015
 

Beginning cash balance

     1,716        1,025   

Free cash flow

     559        740   

Net cash flow from operating activities

     841        956   

Net capital expenditures

     (282     (216

Acquisitions and divestments of businesses

     26        (16

Other cash flow from investing activities

     (5     16   

Treasury shares transactions

     (134     (101

Changes in debt

     (366     44   

Effect of change in exchange rates on cash

     39        (9

Net cash flow discontinued operations

     38        67   
  

 

 

   

 

 

 

Ending cash balance

     1,873        1,766   

Cash flows from operating activities

in millions of EUR

 

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Gross capital expenditures1)

in millions of EUR

 

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1) Capital expenditures on property, plant and equipment only

Cash balance

 

  In Q4 2015 the cash balance increased to EUR 1,766 million, with a free cash inflow of EUR 740 million, which included an outflow of EUR 446 million mainly related to pension de-risking settlements in the United States and the United Kingdom. The cash balance was also impacted by the use of EUR 101 million in treasury shares transactions, primarily for the share buy-back program, and by a EUR 67 million inflow related to cash flows from discontinued operations.

 

  The cash balance increased during Q4 2014 to EUR 1,873 million, with a free cash inflow of EUR 559 million, which included an outflow of EUR 49 million in the form of a pension contribution related to the de-risking of the Dutch pension plan. The cash balance was also impacted by the use of EUR 134 million in treasury shares transactions, primarily for the share buy-back program, and EUR 366 million mainly related to debt repayment.

 

  As of December 31, 2015, Philips had completed 74% of the 3-year EUR 1.5 billion share buy-back program.

Cash flows from operating activities

 

  Operating activities resulted in a cash flow of EUR 956 million, compared to EUR 841 million in Q4 2014. An improvement in working capital was partly offset by lower earnings.

Gross capital expenditures

 

  Gross capital expenditures on property, plant and equipment were EUR 25 million above the level of Q4 2014, mainly due to higher investments in real estate refurbishments to increase building capacity and reduce the overall real estate footprint.
 

 

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Inventories

in millions of EUR unless otherwise stated

 

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1)  Sales is calculated over the preceding 12 months
2)  Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations

Net debt and Group equity

in billions of EUR unless otherwise stated

 

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Number of employees

in FTEs

 

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1)  Number of employees excludes discontinued operations. Discontinued operations had 8,755 employees in Q4 2015 (Q3 2015:8,812, Q4 2014: 8,313). The year-on-year increase was mainly due to the transfer of employees to the combined businesses of Lumileds and Automotive as it operates as a stand-alone company.
2)  Number of employees includes 12,189 third-party workers in Q4 2015 (Q3 2015:13,338 , Q4 2014:12,867 ).

Inventories

 

  Inventory value at the end of Q4 2015 was EUR 3.5 billion as reported and amounted to 14.2% of sales.*

 

  Compared to Q4 2014, inventories as a percentage of sales decreased by 1.1 percentage points. The decrease was mainly driven by reductions in all sectors and currency impacts.

 

Net debt and Group equity

 

  At the end of Q4 2015, Philips had a net debt position of EUR 4.0 billion, compared to EUR 2.2 billion at the end of Q4 2014, mainly due to the acquisition of Volcano. During the quarter, the net debt position decreased by EUR 528 million, reflecting a EUR 213 million increase in debt and a EUR 741 million increase in liquidity.

 

  Group equity increased in the quarter to EUR 11.8 billion. The increase was largely a result of currency effects, partly offset by the net loss realized during the period.

Employees

 

  The number of employees decreased by 1,161 year-on-year. Reductions in headcount at Consumer Lifestyle and industrial footprint rationalization at Lighting were partly offset by increases at Healthcare, mainly related to the Volcano acquisition.

 

  The number of employees decreased by 1,364 compared to Q3 2015. Industrial footprint rationalization at Lighting and reductions at Consumer Lifestyle were partly offset by increases at Healthcare.

 

 

* Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations
 

 

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Healthcare

Key data

in millions of EUR unless otherwise stated

 

     Q4
2014
    Q4
2015
 

Sales

     2,849        3,270   

Sales growth

    

% nominal

     1     15

% comparable

     (3 )%      3

Adjusted EBITA

     421        516   

as a % of sales

     14.8     15.8

EBITA

     390        431   

as a % of sales

     13.7     13.2

EBIT

     351        374   

as a % of sales

     12.3     11.4

Net operating capital (NOC)

     7,565        9,212   

Number of employees (FTEs)1)

     37,065        40,099   

 

1)  Number of employees includes 2,642 third-party workers in Q4 2015 (Q4 2014: 2,443).

Sales

in millions of EUR

 

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Adjusted EBITA

in millions of EUR unless otherwise stated

 

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Business highlights

 

  Philips entered into three multi-year strategic partnerships based on a managed services model to optimize the delivery of care: with Mackenzie Health in Canada, Granada’s Clinical Hospital in Spain, and Hospices Civils de Lyon in France.

 

  Philips and UCHealth, an integrated delivery network (IDN) in Colorado, USA, signed a multi-year agreement for the implementation of Philips’ IntelliSpace Picture Archiving and Communications Systems across the IDN to optimize its image sharing workflow, thereby enhancing patient care and driving projected USD 11 million cost savings over five years.

 

  Delivering on its commitment to provide access to high-quality care at affordable cost around the globe, Philips expanded its portfolio to also reach remote areas, with the new range of Efficia patient monitors in Tanzania as well as a new diagnostic device to help improve the diagnosis and treatment of pneumonia.

 

  Reinforcing its innovation strength in image-guided therapy, Philips established a new in-house simulation facility for more efficient design validation and end-user testing of its new propositions. In addition, teams from the University of Texas MD Anderson Cancer Center, Elekta and Philips completed the installation of the first high-field MRI-guided linear accelerator in the US to drive innovation in MRI-guided radiation therapy.

Financial performance

 

  Currency-comparable order intake showed 15% growth year-on-year. Imaging Systems and Healthcare Informatics, Solutions & Services achieved double-digit growth, while Patient Care & Monitoring Solutions was in line with Q4 2014.

 

  Currency-comparable order intake in mature geographies showed double-digit growth, driven by strong growth in North America and Western Europe and low-single-digit growth in other mature geographies. Growth geographies recorded double-digit growth, mainly due to double-digit growth in China.
 

 

8    Press Release Q4 2015    LOGO


EBITA

in millions of EUR unless otherwise stated

 

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  Comparable sales grew 3% year-on-year. Healthcare Informatics, Solutions & Services achieved double-digit growth, Imaging Systems recorded mid-single-digit growth and Patient Care & Monitoring Solutions posted low-single-digit growth. Customer Services remained in line with Q4 2014.

 

  Comparable sales in mature geographies showed low-single-digit growth. North America achieved low-single-digit growth and other mature geographies posted mid-single-digit growth, while Western Europe recorded a low-single-digit decline. Growth geographies achieved double-digit growth, mainly driven by strong growth in China and Middle East & Turkey.

 

  Adjusted EBITA amounted to EUR 516 million, or 15.8% of sales, compared to EUR 421 million, or 14.8% of sales, in Q4 2014. The improvement was mainly driven by cost productivity and positive currency impacts, partly offset by price and product mix.

 

  EBITA amounted to EUR 431 million, or 13.2% of sales, compared to EUR 390 million, or 13.7% of sales, in Q4 2014. EBITA in Q4 2015 included charges of EUR 8 million related to the devaluation of the Argentine peso, as well as restructuring and acquisition-related charges of EUR 77 million, which included the Volcano acquisition. In Q4 2014, EBITA included a EUR 16 million past-service pension cost gain and restructuring and acquisition-related charges of EUR 47 million.

 

  Net operating capital, excluding a currency translation effect of EUR 732 million, increased by EUR 915 million year-on-year. The increase was mainly due to the Volcano acquisition.

 

  Inventories as a percentage of sales* decreased by 1.4 percentage points year-on-year, largely driven by currency impacts.

 

  Compared to Q4 2014, the number of employees increased by 3,034, mainly driven by the Volcano acquisition, increases at Healthcare Informatics, Solutions & Services, and Cleveland production ramp-up at Imaging Systems. Compared to Q3 2015, the number of employees increased by 322, mainly due to increases at Healthcare Informatics, Solutions & Services.

Miscellaneous

 

  Restructuring and acquisition-related charges in Q1 2016 are expected to total approximately EUR 20 million.

 

 

* Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations
 

 

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Consumer Lifestyle

Key data

in millions of EUR unless otherwise stated

 

     Q4
2014
    Q4
2015
 

Sales

     1,528        1,663   

Sales growth

    

% nominal

     7     9

% comparable

     6     6

Adjusted EBITA

     244        296   

as a % of sales

     16.0     17.8

EBITA

     251        247   

as a % of sales

     16.4     14.9

EBIT

     237        235   

as a % of sales

     15.5     14.1

Net operating capital (NOC)

     1,353        1,453   

Number of employees (FTEs)1)

     16,639        16,254   

 

1)  Number of employees includes 3,517 third-party workers in Q4 2015 (Q4 2014: 3,351).

Sales

in millions of EUR

 

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Adjusted EBITA

in millions of EUR unless otherwise stated

 

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Business highlights

 

  Meaningful innovation for the home, coupled with impactful marketing, delivered double-digit growth in India, with strong sales of the Philips Airfryer, juicers, soup makers and mixer grinders. Male Grooming and Beauty also performed very well, with 100,000 groomers sold in the newly launched male body-grooming category.

 

  On China’s biggest day for online shopping, ‘Double 11’, Philips was a leading brand in categories like Male Grooming, Beauty, Garment Care, Kitchen Appliances and Oral Healthcare, with some product ranges selling out within minutes. Male shaving products were particularly popular, with over half a million Philips shavers sold in 24 hours.

 

  European markets continue to perform well, with strong performance in the Benelux and Germany, Austria & Switzerland. In the Benelux, the success of the Philips Airfryer continues with strong advocacy from consumers. In Germany, Austria & Switzerland, additional investments in advertising and promotion drove double-digit growth across almost all categories.

 

  Oral Healthcare experienced double-digit growth, with very strong performance in North America, China and Germany, Austria & Switzerland. The Philips Sonicare 2 electric toothbrush range was cited by US retailer Target as one of the most popular items in their Black Friday pre-sale.

 

  Driven by strong growth especially in North America, China and several European markets, Mother & Child Care achieved double-digit growth globally. This was largely thanks to the continued success of the Philips Avent Natural Infant Feeding and Comfort ranges.

Financial performance

 

  Comparable sales increased by 6% year-on-year. Health & Wellness achieved double-digit growth, while Personal Care and Domestic Appliances recorded low-single-digit growth.

 

  Comparable sales in growth geographies showed double-digit growth, mainly driven by Asia Pacific and Central & Eastern Europe. Mature geographies achieved low-single-digit growth, driven by North America and Western Europe. Other mature geographies were in line with Q4 2014.
 

 

10    Press Release Q4 2015    LOGO


EBITA

in millions of EUR unless otherwise stated

 

LOGO

  Adjusted EBITA was EUR 296 million, or 17.8% of sales, compared to EUR 244 million, or 16.0% of sales, in Q4 2014. The improvement was mainly driven by cost productivity, higher volumes and product mix.

 

  EBITA amounted to EUR 247 million, or 14.9% of sales, compared to EUR 251 million, or 16.4% of sales, in Q4 2014. Restructuring and acquisition-related charges were EUR 36 million in Q4 2015, compared to EUR 4 million in Q4 2014. EBITA in Q4 2015 also included EUR 13 million of charges related to the devaluation of the Argentine peso, while Q4 2014 included a EUR 11 million past-service pension cost gain.

 

  Net operating capital, excluding a currency translation effect of EUR 56 million, increased by EUR 44 million year-on-year.

 

  Inventories as a percentage of sales* were 1.7 percentage points lower than in Q4 2014, mainly driven by reductions in all businesses.

 

  The number of employees decreased by 385 compared to Q4 2014 and 509 compared to Q3 2015, mainly due to reductions in manufacturing in Asia Pacific.

Miscellaneous

 

  Restructuring and acquisition-related charges in Q1 2016 are expected to be nil.

 

 

* Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations
 

 

LOGO   Press Release Q4 2015    11


Lighting

(Excluding the combined businesses of Lumileds and Automotive)

Key data

in millions of EUR unless otherwise stated

 

     Q4
2014
    Q4
2015
 

Sales

     1,975        2,026   

Sales growth

    

% nominal

     3     3

% comparable

     (3 )%      (2 )% 

Adjusted EBITA

     178        213   

as a % of sales

     9.0     10.5

EBITA

     (40     152   

as a % of sales

     (2.0 )%      7.5

EBIT

     (83     125   

as a % of sales

     (4.2 )%      6.2

Net operating capital (NOC)

     3,638        3,813   

Number of employees (FTEs)1)

     37,808        33,618   

 

1)  Number of employees includes 4,052 third-party workers in Q4 2015 (Q4 2014: 5,463)

Sales

in millions of EUR

 

LOGO

Adjusted EBITA

in millions of EUR unless otherwise stated

 

LOGO

Business highlights

 

  Building on the company’s leadership in connected lighting, Philips entered into a global strategic alliance with Cisco to address the growing worldwide office market. Integrating Philips’ connected LED lighting system with Cisco’s IT network will save energy, improve building efficiency, and enhance employee well-being and productivity.

 

  Leveraging the expansion of Philips’ smart street lighting offering, Los Angeles and San Jose are the first cities to benefit from Philips LED street lighting combined with wireless broadband technology from Ericsson. Philips SmartPoles will expand wireless broadband coverage, reduce energy usage by more than 50%, and provide brighter, safer streets at night.

 

  Philips is collaborating with SAP to allow data from Philips CityTouch connected LED street lighting to be integrated with data from sensors in the SAP HANA business platform on one dashboard. City planners can manage data from assets such as street lighting, bus stops and traffic controls, allowing them to better plan and manage cost. The system is being rolled-out in Buenos Aires, integrating data from more than 700,000 assets, including 91,000 updated street lights.

 

  As the pioneer in the shift to connected lighting for the home, Philips teamed up with Xiaomi, a leading Chinese smartphone operator, to launch the Philips EyeCare desk lamp. When connected to an app through the Xiaomi smartphone, the light from the desk lamp adjusts according to the environment, ensuring the right light for the task at hand as well as optimum visual comfort.

 

  Applying its expertise in energy-efficient and colorful, dynamic LED lighting, Philips lit up a range of iconic buildings and landmarks, revitalizing the Cairo Opera House, transforming Europe’s largest butterfly sanctuary in Turkey, enabling night play at a renowned golf course in Antalya, Turkey, and revamping Paris’ City Hall.

Financial performance

 

  Comparable sales showed a 2% decline year-on-year. Professional Lighting Solutions and Light Sources & Electronics posted a low-single-digit decline, while Consumer Luminaires recorded mid-single-digit growth.

 

  Comparable sales in mature geographies showed a low-single-digit decline compared to Q4 2014. Growth geographies recorded a low-single-digit decline, mainly due to Latin America, partly offset by India and Central & Eastern Europe.
 

 

12    Press Release Q4 2015    LOGO


EBITA

in millions of EUR unless otherwise stated

 

LOGO

 

  LED lighting sales grew 26% year-on-year and now represent 48% of total Lighting sales, compared to 37% in Q4 2014. Conventional lighting sales declined 20% year-on-year, in line with the industry trend, mainly due to a 16% decline in lamps sales, and now represent 52% of total Lighting sales, compared to 63% in Q4 2014.

 

  Adjusted EBITA improved to EUR 213 million, or 10.5% of sales, compared to EUR 178 million, or 9.0% of sales, in Q4 2014. The increase was mainly driven by cost productivity and an improvement in LED and conventional gross margins.

 

  EBITA improved to EUR 152 million, or 7.5% of sales, compared to a EUR 40 million loss in Q4 2014. Restructuring and acquisition-related charges amounted to EUR 47 million, compared to EUR 163 million in Q4 2014. EBITA in Q4 2015 also included EUR 14 million of charges related to the devaluation of the Argentine peso, while EBITA in Q4 2014 included a past-service pension cost gain of EUR 13 million and EUR 68 million of impairment and other charges related to industrial assets.

 

  Net operating capital, excluding a currency translation effect of EUR 283 million, decreased by EUR 108 million year-on-year.

 

  Inventories as a percentage of sales* decreased by 0.9 percentage points year-on-year, mainly driven by currency impacts.

 

  Compared to Q4 2014, the number of employees decreased by 4,190, reflecting rationalization of the industrial footprint. Compared to Q3 2015, the number of employees decreased by 1,390.

Miscellaneous

 

  Restructuring and acquisition-related charges in Q1 2016 are expected to total approximately EUR 30 million.

 

 

* Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations
 

 

LOGO   Press Release Q4 2015    13


Additional information on the combined businesses of Lumileds and Automotive

 

The combined businesses of Lumileds and Automotive are reported as discontinued operations in the Consolidated statements of income and cash flows. As a result, Lumileds and Automotive sales and EBITA are no longer included in the Lighting and Group results of continuing operations. The applicable assets and liabilities of the combined businesses are reported under Assets and Liabilities classified as held for sale in the Condensed consolidated balance sheets as per November 2014.

EBITA was EUR 12 million, compared to EUR 44 million in Q4 2014. The decrease in operational performance was mainly due to lower gross margins and higher expenditures for growth initiatives. In Q4 2015, the net income of discontinued operations attributable to the combined businesses of Lumileds and Automotive increased to EUR 74 million from EUR 28 million in Q4 2014, mainly due to lower income tax charges, predominantly relating to higher tax incentives.

The number of employees increased by 442 year-on-year, mainly driven by manufacturing in Asia Pacific and increases in support functions, as the businesses are being set up as a stand-alone company.

Overhead and other indirect costs of Philips that were previously allocated to Lumileds and Automotive and were not affected by the transfer to Discontinued operations have been allocated to Lighting and IG&S (Former net costs allocated to Lighting and IG&S).

As announced on January 22, 2016, Philips and GO Scale Capital have withdrawn their filing with the Committee on Foreign Investment in the United States (CFIUS) and terminated the agreement pursuant to which the consortium led by GO Scale Capital would acquire an 80.1% interest in the combined businesses of Lumileds and Automotive. Despite the parties’ extensive efforts to mitigate CFIUS’ concern, regulatory clearance has not been granted for this particular transaction. Philips is now actively engaging with other parties that have expressed an interest in the businesses and will continue to report the Lumileds and Automotive businesses as discontinued operations.

Results of combined Lumileds and Automotive businesses

in millions of EUR

 

     Q4
2014
    Q4
2015
 

EBITA

     44        12   

Adjustment of amortization and depreciation following assets held for sale reclassification

     16        49   

Disentanglement costs

     (9     (3

Former net costs allocated to Lighting

     —          —     

Former net costs allocated to IG&S

     23        16   

Amortization of other intangibles added back

     (4     —     
  

 

 

   

 

 

 

EBIT of discontinued operations

     70        74   

Financial income and expenses

     —          1   

Income taxes

     (42     (1
  

 

 

   

 

 

 

Net income of discontinued operations

     28        74   

Number of employees (FTEs)

     8,313        8,755   
 

 

14    Press Release Q4 2015    LOGO


Innovation, Group & Services

Key data

in millions of EUR unless otherwise stated

 

     Q4
2014
    Q4
2015
 

Sales

     184        136   

Sales growth

    

% nominal

     (18 )%      (26 )% 

% comparable

     (21 )%      (11 )% 

Adjusted EBITA of:

    

Group Innovation

     (42     (61

IP Royalties

     94        55   

Group and Regional Costs

     (60     (108

Accelerate! investments

     (40     (26

Pensions

     (5     (3

Service Units and Other

     (47     (40
  

 

 

   

 

 

 

Adjusted EBITA

     (100     (183

EBITA

     (339     (567

EBIT

     (343     (572

Net operating capital (NOC)

     (3,718     (3,382

Number of employees (FTEs)1)

     13,853        14,233   

 

1)  Number of employees includes 1,978 third-party workers in Q4 2015 (Q4 2014: 1,610)

Sales

in millions of EUR

 

LOGO

Adjusted EBITA

in millions of EUR

 

LOGO

Business highlights

 

  Philips and Banyan Biomarkers entered into a joint development agreement to develop and commercialize a new handheld blood test to detect concussion. The partnership will broaden the application of Philips’ handheld diagnostics system and will strengthen its competitive position in point-of-care diagnostics for acute care settings, a new growth market for Philips.

 

  Philips welcomed the 600th member to its LED Luminaires and Retrofit Bulbs Licensing Program, which gives licensees access to its wide portfolio of patented LED system technologies and solutions. Philips has fostered the adoption of LED technology and LED industry growth through the licensing program since its inception in 2008.

 

  For the third consecutive time, Philips received the Thomson Reuters 2015 Top 100 Global Innovator Award, highlighting Philips’ achievements in innovation and the creation and protection of intellectual property.

 

  At the 2015 Paris climate conference, Philips committed to becoming carbon-neutral by 2020. In North America, Philips will already use 100% renewable energy for its operations by the end of 2016.

Financial performance

 

  Sales decreased from EUR 184 million in Q4 2014 to EUR 136 million. Higher revenues from Philips’ emerging businesses like Photonics were more than offset by lower revenues from IP Royalties related to Optical and Audio/Video and the divestment of the OEM remote controls business in 2014.

 

  Adjusted EBITA was a net cost of EUR 183 million, compared to a net cost of EUR 100 million in Q4 2014. The Adjusted EBITA decrease was mainly due to lower revenues from IP Royalties, investments in emerging business areas and an increase in Group and Regional Costs.

 

  EBITA amounted to a net cost of EUR 567 million, compared to a net cost of EUR 339 million in Q4 2014. EBITA in Q4 2015 included a EUR 10 million net release of restructuring charges, compared to EUR 65 million of restructuring charges in Q4 2014. In Q4 2015, EBITA also included charges of EUR 86 million related to the separation of the Lighting business, EUR 345 million of settlements mainly related to pension de-risking, and a EUR 37 million gain related to the sale of real estate assets. EBITA in Q4 2014 also included EUR 201 million of charges related to the CRT antitrust litigation and a EUR 27 million past-service pension cost gain.

 

  Net operating capital, excluding a currency translation effect of EUR 179 million, increased by EUR 515 million year-on-year, mainly due to a decrease in provisions.
 

 

LOGO   Press Release Q4 2015    15


EBITA

in millions of EUR

 

LOGO

  Compared to Q4 2014, the number of employees increased by 380, primarily driven by growth at the Philips Innovation Campus in Bangalore. The number of employees increased by 213 compared to Q3 2015.

Miscellaneous

 

  Restructuring and separation charges in Q1 2016 are expected to total approximately EUR 90 million.

 

  In 2016, Philips expects a net reduction in sales of EUR 60 million, mainly reflecting lower royalty income due to the expiration of licenses. Of this amount, EUR 40 million is expected to be recognized in Q1 2016.
 

 

16    Press Release Q4 2015    LOGO


Proposed distribution

 

A proposal will be submitted to the General Meeting of Shareholders to declare a distribution of EUR 0.80 per common share (up to EUR 740 million), in cash or shares at the option of the shareholder, against net income and retained earnings. Further details will be given in the agenda for the General Meeting of Shareholders, to be held on May 12, 2016.

 

 

LOGO   Press Release Q4 2015    17


Full-year highlights

Net income

in millions of EUR unless otherwise stated

 

     January to December  
     2014     2015  

Sales

     21,391        24,244   

Adjusted EBITA

     1,915        2,240   

as a % of sales

     9.0     9.2

EBITA

     821        1,372   

as a % of sales

     3.8     5.7

EBIT

     486        992   

as a % of sales

     2.3     4.1

Financial income and expenses

     (301     (369

Income taxes

     (26     (239

Results investments in associates

     62        30   

Net income from continuing operations

     221        414   

Discontinued operations

     190        245   

Net income

     411        659   

Net income attributable to shareholders per common share (in EUR) - diluted

     0.45        0.70   

Performance of the Group

 

  Group sales amounted to EUR 24.2 billion, EUR 2.9 billion higher than in 2014. Adjusted for currency impacts and consolidation changes, sales were 2% higher year-on-year.

 

  Adjusted EBITA increased by EUR 325 million compared to 2014. The year-on-year increase was mainly driven by improved performance in all operating sectors.

 

  Group EBITA amounted to EUR 1.4 billion, or 5.7% of sales, an increase of EUR 551 million compared to 2014. Restructuring and acquisition-related charges amounted to EUR 283 million, which included the Volcano acquisition, compared to EUR 434 million in 2014. EBITA also included charges of EUR 345 million mainly related to settlements for pension de-risking, EUR 183 million relating to the separation of the Lighting business, EUR 35 million related to the devaluation of the Argentine peso, EUR 31 million relating to legal provisions, EUR 28 million related to the currency revaluation of the provision for the Masimo litigation, and a EUR 37 million gain related to the sale of real estate assets. EBITA in 2014 included charges of EUR 366 million related to the provision for the Masimo litigation, EUR 244 million related to the CRT antitrust litigation, EUR 68 million of impairment and other charges related to industrial assets at Lighting, EUR 49 million of mainly inventory write-downs related to the Cleveland facility, and a EUR 67 million past-service pension cost gain.

 

  Net income of EUR 659 million increased by EUR 248 million year-on-year, driven by higher results from the operating sectors and discontinued operations, partly offset by higher income tax charges and financial expenses. The increase in income tax expense was mainly due to higher taxable profit and the absence of various items that reduced the charge in the prior year, in particular favorable tax regulations relating to R&D investments in 2014.

 

  Cash flow from operating activities was EUR 1,167 million, compared to EUR 1,303 million in 2014. The cash flow in 2015 included a working capital decrease of EUR 67 million, compared to EUR 312 million in 2014.
 

 

18    Press Release Q4 2015    LOGO


Sales by sector

in millions of EUR unless otherwise stated

 

    January to December     % change  
    2014     2015     nominal     comparable  

Healthcare

    9,186        10,912        19     4

Consumer Lifestyle

    4,731        5,347        13     6

Lighting

    6,869        7,411        8     (3 )% 

Innovation, Group & Services

    605        574        (5 )%      5
 

 

 

   

 

 

   

 

 

   

 

 

 

Philips Group

    21,391        24,244        13     2

Adjusted EBITA

 

in millions of EUR unless otherwise stated

 

  

  

    2014     2015  
    amount     %     amount     %  

Healthcare

    1,085        11.8     1,259        11.5

Consumer Lifestyle

    571        12.1     722        13.5

Lighting

    593        8.6     707        9.5

Innovation, Group & Services

    (334     —          (448     —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Philips Group

    1,915        9.0     2,240        9.2

EBITA

 

in millions of EUR unless otherwise stated

 

  

  

    2014     2015  
    amount     %     amount     %  

Healthcare

    616        6.7     1,024        9.4

Consumer Lifestyle

    573        12.1     673        12.6

Lighting

    293        4.3     594        8.0

Innovation, Group & Services

    (661     —          (919     —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Philips Group

    821        3.8     1,372        5.7

Philips sectors

Healthcare

 

  Currency-comparable order intake showed 5% growth year-on-year. Healthcare Informatics, Solutions & Services achieved double-digit growth, Imaging Systems posted mid-single-digit growth and Patient Care & Monitoring Solutions recorded low-single-digit growth. North America equipment order intake showed double-digit growth, Western Europe posted high-single-digit growth, and other mature geographies reported low-single-digit growth. Growth geographies reported a mid-single-digit decline, mainly due to China and Latin America, with China showing some recovery towards the end of 2015.

 

  Sales amounted to EUR 10,912 million. Excluding currency effects and portfolio changes, comparable sales increased by 4% year-on-year. Imaging Systems achieved high-single-digit growth, Healthcare Informatics, Solutions & Services posted mid-single-digit growth, Customer Services reported low-single-digit growth, while Patient Care & Monitoring Solutions was in line with 2014. From a geographical perspective, comparable sales in growth geographies showed high-single-digit growth, and mature geographies recorded low-single-digit growth.

 

  Adjusted EBITA amounted to EUR 1,259 million, or 11.5% of sales, compared to EUR 1,085 million, or 11.8% of sales, in 2014. The increase was largely driven by higher volumes, partly offset by an increase in Quality & Regulatory spend and higher planned expenditure for growth initiatives.

 

  EBITA amounted to EUR 1,024 million, or 9.4% of sales, compared to EUR 616 million, or 6.7% of sales, in 2014. EBITA in 2015 included restructuring and acquisition-related charges of EUR 168 million, which included the Volcano acquisition, compared to EUR 70 million in 2014. 2015 EBITA also included charges of EUR 28 million related to the currency revaluation of the provision for the Masimo litigation, EUR 8 million related to the devaluation of the Argentine peso, and a EUR 31 million legal provision. EBITA in 2014 included charges of EUR 366 million related to the provision for the Masimo litigation, charges of EUR 49 million of mainly inventory write-downs related to Cleveland, and a EUR 16 million past-service pension cost gain.

Consumer Lifestyle

 

  Sales amounted to EUR 5,347 million. Excluding currency effects and portfolio changes, comparable sales increased by 6% year-on-year. Health & Wellness achieved double-digit growth, Personal Care reported high-single-digit growth, while Domestic Appliances was in line with 2014. From a geographical perspective, growth geographies achieved high-single-digit growth and mature geographies registered low-single-digit growth.
 

 

LOGO   Press Release Q4 2015    19


  Adjusted EBITA amounted to EUR 722 million, or 13.5% of sales, compared to EUR 571 million, or 12.1% of sales, in 2014. The year-on-year increase of EUR 151 million was mainly driven by cost productivity, higher volumes and product mix.

 

  EBITA amounted to EUR 673 million, or 12.6% of sales, a year-on-year increase of EUR 100 million. 2015 EBITA included restructuring and acquisition-related charges of EUR 36 million and charges related to the devaluation of the Argentine peso of EUR 13 million. 2014 EBITA included restructuring and acquisition-related charges of EUR 9 million and a EUR 11 million past-service pension cost gain.

Lighting

 

  Sales amounted to EUR 7,411 million, a year-on-year increase of EUR 542 million. Excluding currency effects and portfolio changes, comparable sales decreased 3% year-on-year. LED lighting sales grew 25%, with 30% growth in lamps, while conventional lighting declined 18%, with a 14% decline in lamps. Both Light Sources & Electronics and Consumer Luminaires recorded a mid-single-digit decline, while Professional Lighting Solutions remained flat year-on-year. From a geographical perspective, comparable sales showed a mid-single-digit decline in growth geographies and a low-single-digit decline in mature geographies.

 

  Adjusted EBITA amounted to EUR 707 million, or 9.5% of sales, compared to EUR 593 million, or 8.6% of sales, in 2014. The increase was mainly driven by cost productivity and improved LED gross margins.

 

  EBITA amounted to EUR 594 million, or 8.0% of sales, a year-on-year increase of EUR 301 million. 2015 EBITA included EUR 99 million of restructuring and acquisition-related charges and EUR 14 million of charges related to the devaluation of the Argentine peso. 2014 EBITA included EUR 245 million of restructuring and acquisition-related charges, EUR 68 million of impairment and other charges related to industrial assets, and a EUR 13 million past-service pension cost gain.

Innovation, Group & Services

 

  Adjusted EBITA was a net cost of EUR 448 million, compared to a net cost of EUR 334 million in 2014. The Adjusted EBITA decrease was mainly due to higher Group and Regional Costs, mainly related to information security and Quality & Regulatory spend, investments in emerging business areas, and lower licensing revenue in IP Royalties.

 

  EBITA amounted to a net cost of EUR 919 million, compared to EUR 661 million in 2014. EBITA in 2015 included a EUR 20 million net release of restructuring charges, compared to EUR 110 million restructuring charges in 2014. EBITA in 2015 also included charges
 

 

20    Press Release Q4 2015    LOGO


of EUR 183 million related to the separation of the Lighting business, EUR 345 million mainly related to settlements for pension de-risking, and a EUR 37 million gain related to the sale of real estate assets. EBITA in Q4 2014 also included EUR 244 million of charges related to the CRT antitrust litigation and a EUR 27 million past-service pension cost gain.

 

 

LOGO   Press Release Q4 2015    21


Forward-looking statements

Forward-looking statements

This document and the related oral presentation, including responses to questions following the presentation, contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward-looking statements include statements made about the strategy, estimates of sales growth, future EBITA, future developments in Philips’ organic business the timing of the separation of the Lighting business and related costs and nature of the disposition by Philips of its interest in the Lighting business, developments with respect to the disposition of the Lu mileds and Automotive business, and the completion of acquisitions and divestments. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements.

These factors include but are not limited to domestic and global economic and business conditions, developments within the euro zone, the successful implementation of Philips’ strategy and the ability to realize the benefits of this strategy, the ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, the ability to identify and complete successful acquisitions, and to integrate those acquisitions into the business, the ability to successfully exit certain businesses or restructure the operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition, and the state of international capital markets as they may affect the timing and nature of the dispositions by Philips of its interests in the Lighting business and the Lumileds and Automotive business. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in the Annual Report 2014 and the “Risk and uncertainties” section in the semi-annual financial report for the six months ended June 30, 2015.

Third-party market share data

Statements regarding market share, including those regarding Philips’ competitive position, contained in this document are based on outside sources such as research institutes, industry and dealer panels in

combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated.

Use of non-GAAP information

In presenting and discussing the Philips Group financial position, operating results and cash flows, management uses certain non-GAAP financial measures. These non-GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. Non-GAAP financial measures do not have standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. A reconciliation of these non-GAAP measures to the most directly comparable IFRS measures is contained in this document. Further information on non-GAAP measures can be found in the Annual Report 2014.

Use of fair-value measurements

In presenting the Philips Group financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices or observable market data are not readily available, fair values are estimated using appropriate valuation models and unobservable inputs. Such fair value estimates require management to make significant assumptions with respect to future developments, which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in the Annual Report 2014. Independent valuations may have been obtained to support management’s determination of fair values.

Presentation

All amounts are in millions of euros unless otherwise stated. All reported data is unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2014, unless otherwise stated. The presentation of certain prior-year information has been reclassified to conform to the current-year presentation.

In 2014, we announced plans to establish two stand-alone companies focused on the HealthTech and Lighting opportunities. The proposed separation of the Lighting business impacts all businesses and markets as well as all supporting functions and all assets and

 

 

22    Press Release Q4 2015    LOGO


liabilities of the Group. Philips expects to complete the separation of the Lighting business in the first half of 2016. We expect to continue reporting in the existing structure until the changes in the way we allocate resources and analyze performance in the new structure have been completed.

 

 

LOGO   Press Release Q4 2015    23


Condensed consolidated statements of income

Condensed consolidated statements of income

in millions of EUR unless otherwise stated

 

     Q4     January to December  
     2014     2015     2014     2015  

Sales

     6,536        7,095        21,391        24,244   

Cost of sales

     (4,007     (4,272     (13,185     (14,388
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     2,529        2,823        8,206        9,856   

Selling expenses

     (1,499     (1,644     (5,124     (5,815

General and administrative expenses

     (213     (530     (747     (1,209

Research and development expenses

     (467     (537     (1,635     (1,927

Impairment of goodwill

       1        (3  

Other business income

     23        64        63        137   

Other business expenses

     (211     (15     (274     (50
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     162        162        486        992   

Financial income

     19        27        114        98   

Financial expenses

     (97     (155     (415     (467
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

     84        34        185        623   

Income taxes

     (16     (152     (26     (239
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) after taxes

     68        (118     159        384   

Results relating to investments in associates

     (1     6        62        30   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) from continuing operations

     67        (112)        221        414   

Discontinued operations - net of income tax

     67        73        190        245   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     134        (39     411        659   

Attribution of net income for the period

        

Net income (loss) attributable to Koninklijke Philips N.V. shareholders

     139        (45     415        645   

Net income attributable to non-controlling interests

     (5     6        (4     14   

Earnings per common share attributable to shareholders

        

Weighted average number of common shares outstanding (after deduction of treasury shares) during the period (in thousands):

        

- basic

     916,767        919,297        915,193        916,087   

- diluted

     922,270        926,260        922,714        923,625   

Net income (loss) attributable to shareholders per common share in EUR:

        

- basic

     0.15        (0.05     0.45        0.70   

- diluted

     0.15        (0.05     0.45        0.70   

 

24    Press Release Q4 2015    LOGO


Condensed consolidated balance sheets

Condensed consolidated balance sheets

in millions of EUR

 

    

December 31,

2014

    

December 31,

2015

 

Non-current assets:

     

Property, plant and equipment

     2,095         2,322   

Goodwill

     7,158         8,523   

Intangible assets excluding goodwill

     3,368         3,693   

Non-current receivables

     177         191   

Investments in associates

     157         181   

Other non-current financial assets

     462         489   

Non-current derivative financial assets

     15         58   

Deferred tax assets

     2,460         2,758   

Other non-current assets

     69         68   
  

 

 

    

 

 

 

Total non-current assets

     15,961         18,283   

Current assets:

     

Inventories

     3,314         3,463   

Other current financial assets

     125         12   

Other current assets

     411         444   

Current derivative financial assets

     192         103   

Income tax receivable

     140         114   

Receivables

     4,723         4,982   

Assets classified as held for sale

     1,613         1,809   

Cash and cash equivalents

     1,873         1,766   
  

 

 

    

 

 

 

Total current assets

     12,391         12,693   
  

 

 

    

 

 

 

Total assets

     28,352         30,976   
  

 

 

    

 

 

 

Equity

     

Shareholders’ equity

     10,867         11,662   

Non-controlling interests

     101         118   
  

 

 

    

 

 

 

Group equity

     10,968         11,780   

Non-current liabilities:

     

Long-term debt

     3,712         4,095   

Non-current derivative financial liabilities

     551         695   

Long-term provisions

     2,500         2,392   

Deferred tax liabilities

     107         164   

Other non-current liabilities

     1,838         1,782   
  

 

 

    

 

 

 

Total non-current liabilities

     8,708         9,128   

Current liabilities:

     

Short-term debt

     392         1,665   

Current derivative financial liabilities

     306         238   

Income tax payable

     102         116   

Accounts payable

     2,499         2,673   

Accrued liabilities

     2,692         2,863   

Short-term provisions

     945         833   

Liabilities directly associated with assets held for sale

     349         407   

Other current liabilities

     1,391         1,273   
  

 

 

    

 

 

 

Total current liabilities

     8,676         10,068   
  

 

 

    

 

 

 

Total liabilities and group equity

     28,352         30,976   

 

LOGO   Press Release Q4 2015    25


Condensed consolidated statements of cash flows

Condensed consolidated statements of cash flows

in millions of EUR

 

     Q4     January to December  
     2014     2015     2014     2015  

Cash flows from operating activities

        

Net income (loss)

     134        (39     411        659   

Results of discontinued operations - net of income tax

     (67     (73     (190     (245

Adjustments to reconcile net income (loss) to net cash of operating activities:

        

Depreciation, amortization, and impairments of fixed assets

     393        355        1,187        1,281   

Impairment of goodwill and other non-current financial assets

     3        43        21        48   

Net gain on sale of assets

     (9     (47     (83     (110

Interest income

     (11     (13     (39     (48

Interest expense on debt, borrowings and other liabilities

     63        72        231        278   

Income taxes

     16        152        26        239   

Results from investments in associates

     2        (7     (62     (10

Decrease in working capital:

     221        680        312        67   

Decrease (increase) in receivables and other current assets

     28        (67     (75     161   

Decrease (increase) in inventories

     399        618        (77     22   

Increase (decrease) in accounts payable, accrued and other liabilities

     (206     129        464        (116

Decrease (increase) in non-current receivables, other assets, other liabilities

     14        (80     (412     (135

Increase (decrease) in provisions

     230        32        640        (278

Other items

     (85     (69     (242     (99

Interest paid

     (26     (29     (232     (265

Interest received

     11        12        38        48   

Dividends received from investments in associates

     8        11        41        17   

Income taxes paid

     (56     (44     (344     (280
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     841        956        1,303        1,167   

Cash flows from investing activities

        

Net capital expenditures

     (282     (216     (806     (842

Purchase of intangible assets

     (56     (24     (114     (121

Expenditures on development assets

     (88     (85     (295     (314

Capital expenditures on property, plant and equipment

     (153     (178     (437     (522

Proceeds from sale of property, plant and equipment

     15        71        40        115   

Net proceeds from (used for) derivatives and current financial assets

     (12     6        (7     (72

Purchase of other non-current financial assets

     (7     (5     (81     (21

Proceeds from other non-current financial assets

     14        15        107        53   

Purchase of businesses, net of cash acquired

     (13     (12     (177     (1,116

Net proceeds (used for) from sale of interest in businesses

     39        (4     (20     57   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (261     (216     (984     (1,941

Cash flows from financing activities

        

Proceeds from issuance (payments) of short-term debt

     (371     37        (37     1,241   

Principal payments on long-term debt

     (19     (23     (333     (104

Proceeds from issuance of long-term debt

     24        30        69        94   

Re-issuance of treasury shares

     9        7        117        81   

Purchase of treasury shares

     (143     (108     (713     (506

Dividend paid

         (292     (298
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     (500     (57     (1,189     508   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) continuing operations

     80        683        (870     (266

Cash flows from discontinued operations

        

Net cash provided by operating activities

     49        67        105        79   

Net cash provided (used for) by investing activities

     (11            88          
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by discontinued operations

     38        67        193        79   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) continuing and discontinued operations

     118        750        (677     (187

Effect of change in exchange rates on cash and cash equivalents

     39        (9     85        80   

Cash and cash equivalents at the beginning of the period

     1,716        1,025        2,465        1,873   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

     1,873        1,766        1,873        1,766   

For a number of reasons, principally the effects of translation differences, certain items in the statements of cash flows do not correspond to the differences between the balance sheet amounts for the respective items.

 

26    Press Release Q4 2015    LOGO


Condensed consolidated statement of changes in equity

Condensed consolidated statement of changes in equity

in millions of EUR

 

    common
shares
    capital
in
excess
of par
value
    retained
earnings
    revaluation
reserve
    currency
translation
differences
    available-
for-sale
financial
assets
    cash
flow
hedges
    treasury
shares
at cost
    total
shareholder’s
equity
    non-controlling
interests
    Group
equity
 

January to December 2015

                     

Balance as of December 31, 2014

    187        2,181        8,790        13        229        27        (13     (547     10,867        101        10,968   

Total comprehensive income

        562        (9     829        29        25          1,436        14        1,450   

Dividend distributed

    3        429        (730               (298       (298

Movement non-controlling interest

                    —          3        3   

Purchase of treasury shares

        (12             (495     (507       (507

Re-issuance of treasury shares

      (23     (57             162        82          82   

Cancelation of treasury shares

    (4       (513             517        —            —     

Share-based compensation plans

      101                    101          101   

Income tax share-based compensation plans

      (19                 (19       (19
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other equity movements

    (1     488        (1,312             184        (641     3        (638
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2015

    186        2,669        8,040        4        1,058        56        12        (363     11,662        118        11,780   

 

LOGO   Press Release Q4 2015    27


Pension costs and cash flows

Specification of pension costs

in millions of EUR

 

     Q4 2014     Q4 2015  
     Netherlands     other     total     Netherlands      other     total  

Defined-benefit plans

             

Pensions

             

Current service cost

     44        17        61           12        12   

Past service cost (incl. curtailments)

     (68     (1     (69        16        16 1) 

Settlements

       (1     (1        329        329 1) 

Interest expense

       17        17           19        19   

Interest income

     (3       (3       
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total

     (27     32        5           376        376   

of which discontinued operations

       1        1          

Retiree Medical

             

Current service cost

       1        1           (1     (1

Interest expense

  

 

 

      2        2     

 

 

       4        4   

Total

       3        3           3        3   

Defined-contribution plans

             

Cost

     10        31        41        52         38        90   

of which discontinued operations

       1        1        1           1   

Specification of pension costs

in millions of EUR

 

     January to December  
     2014     2015  
     Netherlands     other     total     Netherlands     other      total  

Defined-benefit plans

             

Pensions

             

Current service cost

     183        71        254        80        66         146   

Past service cost (incl. curtailments)

     (68     (1     (69       14         14 1) 

Settlements

       (1     (1       329         329 1) 

Interest expense

       59        59          61         61   

Interest income

     (11       (11     (1        (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

     104        128        232        79        470         549   

of which discontinued operations

     1        3        4        1        1         2   

Retiree Medical

             

Current service cost

       2        2          

Interest expense

       11        11          12         12   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

       13        13          12         12   

Defined-contribution plans

             

Costs

     16        132        148        140        159         299   

of which discontinued operations

     1        3        4        2        4         6   

Pension cash flows

in millions of EUR

 

     Q4     January to December  
     2014      2015     2014      2015  

Contributions and benefits paid by the Company

     205         564 1)      1,050         1,189   

 

1)  Includes a EUR 305 million cash payment related to the UK plan settlement, recognized as a cost in the lines Past service cost for EUR 31 million and Settlements for EUR 274 million, and a EUR 141 million cash payment related to the realized settlement of a part of the US plan

 

28    Press Release Q4 2015    LOGO


Sectors

Sales and income (loss) from operations

in millions of EUR unless otherwise stated

 

     Q4 2014     Q4 2015  
     sales      income from operations     sales      income from operations  
                  as a % of sales                  as a % of sales  

Healthcare

     2,849         351        12.3     3,270         374        11.4

Consumer Lifestyle

     1,528         237        15.5     1,663         235        14.1

Lighting

     1,975         (83     (4.2 )%      2,026         125        6.2

Innovation, Group & Services

     184         (343     —          136         (572     —     
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Philips Group

     6,536         162        2.5 %      7,095         162        2.3 % 

Sales and income (loss) from operations

in millions of EUR unless otherwise stated

 

     January to December  
            2014                  2015        
     sales      income from operations     sales      income from operations  
                  as a % of sales                  as a % of sales  

Healthcare

     9,186         456        5.0     10,912         819        7.5

Consumer Lifestyle

     4,731         520        11.0     5,347         621        11.6

Lighting

     6,869         185        2.7     7,411         486        6.6

Innovation, Group & Services

     605         (675            574         (934       
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Philips Group

     21,391         486        2.3 %      24,244         992        4.1 % 

 

LOGO   Press Release Q4 2015    29


Sectors and main countries

Sales, total assets and total liabilities excluding debt

in millions of EUR

 

     sales      total assets      total liabilities excluding debt  
     January to December      December 31,      December 31,      December 31,      December 31,  
     2014      2015      2014      2015      2014      2015  

Healthcare

     9,186         10,912         11,274         13,363         3,629         4,095   

Consumer Lifestyle

     4,731         5,347         3,049         3,080         1,696         1,627   

Lighting

     6,869         7,411         5,739         5,875         2,081         2,043   

Innovation, Group & Services

     605         574         6,677         6,849         5,525         5,264   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Sector totals

           26,739         29,167         12,931         13,029   

Assets classified as held for sale

           1,613         1,809         349         407   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Philips Group

     21,391         24,244         28,352         30,976         13,280         13,436   

Sales and tangible and intangible assets

in millions of EUR

 

     sales      tangible and intangible assets1)  
     January to December      December 31,      December 31,  
     2014      2015      2014      2015  

Netherlands

     594         639         937         970   

United States

     6,160         7,522         7,649         9,291   

China

     2,362         2,774         1,135         1,194   

Germany

     1,351         1,357         153         170   

Japan

     908         992         379         455   

India

     684         845         123         134   

France

     839         806         52         48   

Other countries

     8,493         9,309         2,193         2,276   
  

 

 

    

 

 

    

 

 

    

 

 

 

Philips Group

     21,391         24,244         12,621         14,538   

 

1)  Includes property, plant and equipment, intangible assets excluding goodwill, and goodwill

 

30    Press Release Q4 2015    LOGO


Reconciliation of non-GAAP performance measures

Certain non-GAAP financial measures are presented when discussing the Philips Group’s performance. In the following tables, reconciliations to the most directly comparable IFRS measures are presented.

Sales growth composition

in %

 

     Q4     January to December  
     comparable
growth
    currency
effects
    consolidation
changes
    nominal
growth
    comparable
growth
    currency
effects
     consolidation
changes
    nominal
growth
 

2015 versus 2014

                 

Healthcare

     3.4        8.3        3.1        14.8        3.8        11.7         3.3        18.8   

Consumer Lifestyle

     5.5        3.3        0.0        8.8        5.8        7.2         0.0        13.0   

Lighting

     (2.4     5.0        0.0        2.6        (2.8     8.5         2.2        7.9   

IG&S

     (10.6     (0.3     (15.2     (26.1     5.4        1.7         (12.2     (5.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Philips Group

     1.8        6.0        0.8        8.6        2.2        9.4         1.7        13.3   

Adjusted EBITA1)

in millions of EUR

 

     Q4     January to December  
     Philips
Group
    Healthcare     Consumer
Lifestyle
    Lighting     Innovation,
Group &
Services
    Philips
Group
    Healthcare     Consumer
Lifestyle
    Lighting     Innovation,
Group &
Services
 

2015

                    

Adjusted EBITA

     842        516        296        213        (183     2,240        1,259        722        707        (448
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other items

     (429     (8     (13     (14     (394     (585     (67     (13     (14     (491

Restructuring and acquisition-related charges

     (150     (77     (36     (47     10        (283     (168     (36     (99     20   

EBITA (or Adjusted income from operations)

     263        431        247        152        (567     1,372        1,024        673        594        (919
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization of acquired intangibles2)

     (102     (57     (12     (28     (5     (380     (205     (52     (108     (15

Impairment of goodwill

     1            1               
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations (or EBIT)

     162        374        235        125        (572     992        819        621        486        (934

2014

                    

Adjusted EBITA

     743        421        244        178        (100     1,915        1,085        571        593        (334
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other items

     (202     16        11        (55     (174     (660     (399     11        (55     (217

Restructuring and acquisition-related charges

     (279     (47     (4     (163     (65     (434     (70     (9     (245     (110

EBITA (or Adjusted income from operations)

     262        390        251        (40     (339     821        616        573        293        (661
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization of acquired intangibles2)

     (100     (39     (14     (43     (4     (332     (159     (53     (106     (14

Impairment of goodwill

               (3     (1       (2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations (or EBIT)

     162        351        237        (83     (343     486        456        520        185        (675

 

1) Adjusted EBITA is defined as Income from operations (EBIT) excluding amortization of acquired intangible assets, impairment of goodwill and other intangible assets, restructuring charges, acquisition-related costs and other significant items
2)  Excluding amortization of software and product development

 

LOGO   Press Release Q4 2015    31


Reconciliation of non-GAAP performance measures (continued)

 

Net operating capital to total assets

in millions of EUR

 

     Philips Group      Healthcare      Consumer
Lifestyle
     Lighting      IG&S  

December 31, 2015

              

Net operating capital (NOC)

     11,096         9,212         1,453         3,813         (3,382

Exclude liabilities comprised in NOC:

              

- payables/liabilities

     9,640         3,064         1,356         1,510         3,710   

- intercompany accounts

     —           128         36         87         (251

- provisions

     3,225         903         235         446         1,641   

Include assets not comprised in NOC:

              

- investments in associates

     181         56         —           19         106   

- other current financial assets

     12                  12   

- other non-current financial assets

     489                  489   

- deferred tax assets

     2,758                  2,758   

- cash and cash equivalents

     1,766                  1,766   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets excluding assets classified as held for sale

     29,167         13,363         3,080         5,875         6,849   

Assets classified as held for sale

     1,809               
  

 

 

             

Total assets

     30,976               

December 31, 2014

              

Net operating capital (NOC)

     8,838         7,565         1,353         3,638         (3,718

Exclude liabilities comprised in NOC:

              

- payables/liabilities

     9,379         2,711         1,411         1,422         3,835   

- intercompany accounts

     —           125         65         129         (319

- provisions

     3,445         793         220         530         1,902   

Include assets not comprised in NOC:

              

- investments in associates

     157         80         —           20         57   

- other current financial assets

     125                  125   

- other non-current financial assets

     462                  462   

- deferred tax assets

     2,460                  2,460   

- cash and cash equivalents

     1,873                  1,873   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets excluding assets classified as held for sale

     26,739         11,274         3,049         5,739         6,677   

Assets classified as held for sale

     1,613               
  

 

 

             

Total assets

     28,352               

 

32    Press Release Q4 2015    LOGO


Reconciliation of non-GAAP performance measures (continued)

Composition of net debt to group equity

in millions of EUR unless otherwise stated

 

     December 31,
2014
    December 31,
2015
 

Long-term debt

     3,712        4,095   

Short-term debt

     392        1,665   
  

 

 

   

 

 

 

Total debt

     4,104        5,760   

Cash and cash equivalents

     1,873        1,766   
  

 

 

   

 

 

 

Net debt (total debt less cash and cash equivalents)

     2,231        3,994   

Shareholders’ equity

     10,867        11,662   

Non-controlling interests

     101        118   
  

 

 

   

 

 

 

Group equity

     10,968        11,780   

Net debt and group equity

     13,199        15,774   

Net debt divided by net debt and group equity (in %)

     17     25

Group equity divided by net debt and group equity (in %)

     83     75

Composition of cash flows

in millions of EUR

 

     Q4      January to December  
     2014      2015      2014      2015  

Cash flows provided by operating activities

     841         956         1,303         1,167   

Cash flows used for investing activities

     (261      (216      (984      (1,941
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flows before financing activities

     580         740         319         (774

Cash flows provided by operating activities

     841         956         1,303         1,167   

Net capital expenditures:

     (282      (216      (806      (842

Purchase of intangible assets

     (56      (24      (114      (121

Expenditures on development assets

     (88      (85      (295      (314

Capital expenditures on property, plant and equipment

     (153      (178      (437      (522

Proceeds from sale of property, plant and equipment

     15         71         40         115   
  

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flows

     559         740         497         325   

 

LOGO   Press Release Q4 2015    33


Philips statistics

in millions of EUR unless otherwise stated

 

    2014     2015  
    Q1     Q2     Q3     Q4     Q1     Q2     Q3       Q4    

Sales

    4,692        4,969        5,194        6,536        5,339        5,974        5,836        7,095   

comparable sales
growth %

    (1 )%      (1 )%      0     (2 )%      2     3     2     2

Gross margin

    1,900        2,075        1,702        2,529        2,116        2,495        2,422        2,823   

as a % of sales

    40.5     41.8     32.8     38.7     39.6     41.8     41.5     39.8

Selling expenses

    (1,166     (1,214     (1,245     (1,499     (1,341     (1,440     (1,390     (1,644

as a % of sales

    (24.9 )%      (24.4 )%      (24.0 )%      (22.9 )%      (25.1 )%      (24.1 )%      (23.8 )%      (23.2 )% 

G&A expenses

    (167     (176     (191     (213     (214     (224     (241     (530

as a % of sales

    (3.6 )%      (3.5 )%      (3.7 )%      (3.3 )%      (4.0 )%      (3.7 )%      (4.1 )%      (7.5 )% 

R&D expenses

    (396     (400     (372     (467     (436     (483     (471     (537

as a % of sales

    (8.4 )%      (8.0 )%      (7.2 )%      (7.1 )%      (8.2 )%      (8.1 )%      (8.1 )%      (7.6 )% 

EBIT

    172        291        (139     162        139        349        342        162   

as a % of sales

    3.7     5.9     (2.7 )%      2.5     2.6     5.8     5.9     2.3

EBITA

    253        368        (62     262        230        450        429        263   

as a % of sales

    5.4     7.4     (1.2 )%      4.0     4.3     7.5     7.4     3.7

Net income (loss)

    137        243        (103     134        100        274        324        (39

Net income (loss) attributable to shareholders

    138        242        (104     139        99        272        319        (45

Net income (loss) - shareholders per common share in EUR - diluted

    0.15        0.26        (0.11     0.15        0.11        0.30        0.34        (0.05

 

     2014     2015  
     January-
March
    January-
June
    January-
September
    January-
December
    January-
March
    January-
June
    January-
September
    January-
December
 

Sales

     4,692        9,661        14,855        21,391        5,339        11,313        17,149        24,244   

comparable sales
growth %

     (1 )%      (1 )%      (1 )%      (1 )%      2     3     2     2

Gross margin

     1,900        3,975        5,677        8,206        2,116        4,611        7,033        9,856   

as a % of sales

     40.5     41.1     38.2     38.4     39.6     40.8     41.0     40.7

Selling expenses

     (1,166     (2,380     (3,625     (5,124     (1,341     (2,781     (4,171     (5,815

as a % of sales

     (24.9 )%      (24.6 )%      (24.4 )%      (24.0 )%      (25.1 )%      (24.6 )%      (24.3 )%      (24.0 )% 

G&A expenses

     (167     (343     (534     (747     (214     (438     (679     (1,209

as a % of sales

     (3.6 )%      (3.6 )%      (3.6 )%      (3.5 )%      (4.0 )%      (3.9 )%      (4.0 )%      (5.0 )% 

R&D expenses

     (396     (796     (1,168     (1,635     (436     (919     (1,390     (1,927

as a % sales

     (8.4 )%      (8.2 )%      (7.9 )%      (7.6 )%      (8.2 )%      (8.1 )%      (8.1 )%      (7.9 )% 

EBIT

     172        463        324        486        139        488        830        992   

as a % of sales

     3.7     4.8     2.2     2.3     2.6     4.3     4.8     4.1

EBITA

     253        621        559        821        230        680        1,109        1,372   

as a % of sales

     5.4     6.4     3.8     3.8     4.3     6.0     6.5     5.7

Net income

     137        380        277        411        100        374        698        659   

Net income attributable to shareholders

     138        380        276        415        99        371        690        645   

Net income - shareholders per common share in EUR - diluted

     0.15        0.41        0.30        0.45        0.11        0.40        0.75        0.70   

Net income from continuing operations as a % of shareholders’ equity

     4.0     5.7     2.0     2.0     2.4     5.3     6.5     3.6

Number of common shares outstanding (after deduction of treasury shares) at the end of period (in thousands)

     913,485        923,933        919,973        914,389        910,616        925,277        921,181        917,104   

Shareholders’ equity per common share in EUR

     12.06        11.63        11.86        11.88        12.50        12.32        12.43        12.72   

Inventories as a % of sales 1,2)

     14.8     15.9     17.1     15.3     17.3     17.0     16.8     14.2

Net debt : group equity ratio

     15:85        18:82        19:81        17:83        26:74        28:72        28:72        25:75   

Net operating capital

     10,381        10,500        10,841        8,838        10,977        11,397        11,427        11,096   

Total employees

     114,268        112,834        115,261        113,678        115,970        114,606        114,380        112,959   

of which discontinued operations

     9,957        8,256        8,489        8,313        8,334        8,689        8,812        8,755   

 

1) Sales is calculated over the preceding 12 months
2)  Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations

 

34    Press Release Q4 2015    LOGO


LOGO

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