2002 - 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
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FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the period commencing October 16, 2001 through February 7, 2002
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KONINKLIJKE PHILIPS ELECTRONICS N.V.
----------------------------
(Name of registrant)
Breitner Center, Amstelplein 2, 1096 BC Amsterdam, The Netherlands
------------------------------------------------
(Address of principal executive offices)
Name and address of person authorized to receive notices
and communications from the Securities and Exchange Commission:
Andrew D. Soussloff, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
This report comprises a copy of the press release entitled "Report on the
Performance of the Philips Group", dated February 7, 2002.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf, by the
undersigned, thereunto duly authorized at Amsterdam, on the 7th day of February,
2002.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
/s/ G.J. Kleisterlee
G.J. KLEISTERLEE
(President,
Chairman of the Board of Management)
/s/ J.H.M. Hommen
J.H.M. HOMMEN
(Executive Vice-President,
Member of the Board of Management
and Chief Financial Officer)
4TH QUARTERLY REPORT
FEBRUARY 7, 2002
REPORT ON THE PERFORMANCE OF THE PHILIPS GROUP
- all amounts in millions of euros unless otherwise stated
- the quarterly data included in this report are unaudited
- accounting principles applied are unchanged compared to the year 2000
PHILIPS REPORTS LOSS OF EUR 1,141 MILLION IN THE FOURTH QUARTER OF 2001,
INCLUDING SPECIAL ITEMS OF NEGATIVE EUR 959 MILLION - FULL YEAR LOSS EUR 2,604
MILLION, INCLUDING SPECIAL ITEMS OF NEGATIVE EUR 1,696 MILLION.
POSITIVE FOURTH QUARTER INCOME FROM OPERATIONS BEFORE SPECIAL ITEMS AND STRONG
CASH FLOW - INCOME INCLUDED IMPAIRMENT LOSS OF EUR 526 MILLION ON SECURITY
INVESTMENTS
NET INCOME OF ROYAL PHILIPS ELECTRONICS IN THE FOURTH QUARTER AMOUNTED TO A LOSS
OF EUR 1,141 MILLION (A LOSS OF EUR 0.90 PER SHARE) COMPARED TO A PROFIT OF EUR
2,792 MILLION (EUR 2.16 PER SHARE) IN THE CORRESPONDING PERIOD OF 2000. INCOME
WAS NEGATIVELY IMPACTED BY AFTER-TAX SPECIAL ITEMS OF EUR 959 MILLION, WHICH
INCLUDED A NON-CASH IMPAIRMENT CHARGE OF EUR 526 MILLION RELATED TO VIVENDI
UNIVERSAL AND GREAT NORDIC SHARES.
EXCLUDING SPECIAL ITEMS, NET INCOME IN THE FOURTH QUARTER OF 2001 CAME TO A LOSS
OF EUR 182 MILLION (A LOSS OF EUR 0.14 PER SHARE) COMPARED TO A PROFIT OF EUR
664 MILLION (EUR 0.51 PER SHARE) IN THE CORRESPONDING QUARTER OF LAST YEAR.
THE FOURTH QUARTER OF 2000 INCLUDED SPECIAL ITEMS RESULTING IN A GAIN OF EUR
2,128 MILLION, EUR 1,115 MILLION OF WHICH MAINLY CAME FROM THE EXCHANGE OF
SEAGRAM SHARES INTO VIVENDI UNIVERSAL SHARES, AND A ONE-TIME GAIN OF EUR 1,072
MILLION RESULTING FROM THE MERGER OF ORIGIN WITH ATOS.
INCOME FROM OPERATIONS, EXCLUDING SPECIAL ITEMS, WAS A POSITIVE AMOUNT OF EUR 55
MILLION. PHILIPS ACHIEVED A STRONG POSITIVE OPERATING CASH FLOW OF EUR 1,687
MILLION.
AFTER THE RECORD YEAR 2000, THE COMPANY'S PERFORMANCE FOR THE FULL YEAR 2001 WAS
STRONGLY IMPACTED BY THE WORLDWIDE ECONOMIC DOWNTURN IN THE IT AND
TELECOMMUNICATIONS MARKETS, RESULTING IN A NEGATIVE NET INCOME OF 2,604 MILLION
(A LOSS OF EUR 2.04 PER SHARE), COMPARED TO A PROFIT OF EUR 9,602 MILLION (EUR
7.31 PER SHARE) IN 2000. EXCLUDING SPECIAL ITEMS, NET INCOME FOR 2001 WAS A LOSS
OF EUR 908 MILLION, VERSUS A PROFIT OF EUR 2,831 MILLION IN 2000.
"Given the economic downturn, especially in the ICT industries, 2001 was a tough
year for Philips," said Gerard Kleisterlee, Philips' President and CEO. "At the
same time this has helped to create the momentum for far reaching change and
decisive action. PCC was solved, CE in the U.S. has been put on the right track
and Digital Networks has been focused. Capacity in Components and Semiconductors
has been right-sized, as has the company generally, and whilst this has meant
many tough decisions, I am encouraged to see that the results of our cost
reduction efforts and restructuring programs started to bear fruit in the fourth
quarter with the positive IFO, excluding special items, and strong cash
performance. Throughout 2001 we demonstrated good management of working capital,
and have therefore maintained a strong balance sheet. As such, we have laid the
foundation and created the building blocks to refuel growth by focusing Philips'
resources on innovation for the digital connected world."
COMPARISON OUTLOOK AS ANNOUNCED VERSUS ACTUALS
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AMOUNTS IN MILLIONS OF EUROS ANNOUNCED ACTUAL
Q4 Net income (1,141)
Q4 Net income excl. special items (200)-(250) (182)
Q4 IFO excluding special items break-even 55
Q4 Special charges Marconi/Agilent (350) (292)
Q4 Charges for restructurings and
cost reductions (200)-(250) (278)
Q4 Impairment charge securities possible (526)
Q4 Cash flow from operations positive 1,687
Full Year Net income (2,604)
Full Year Net income excl. special items (908)
Full Year Net income before special charges (600)-(650) (597)
Full Year Net capital expenditures (2,100) (2,156)
THE FOURTH QUARTER
SPECIAL ITEMS IN THE QUARTER IMPACTED NET INCOME NEGATIVELY TO AN AMOUNT
OF EUR 959 MILLION
In the fourth quarter, income from operations (negative EUR 442 million)
included special items amounting to a negative EUR 497 million, related to
restructuring and impairment charges, and in-process R&D write-offs and
acquisition related costs at Medical Systems.
The special items are summarized in the table below:
IN MILLIONS OF EUROS SPECIAL ITEMS
Lighting 1
Mainstream CE (7)
Digital Networks (28)
Consumer Communications (4)
DAP (2)
Components 5
Semiconductors (65)
Medical Systems (292)
Miscellaneous (74)
Unallocated (31)
------
Total special items included in income from operations (497)
The positive impact on income tax of the above mentioned charges amounted to EUR
109 million, whilst financial income and expenses were negatively affected by a
non-cash impairment charge of EUR 526 million related to Vivendi Universal and
Great Nordic shares. Additionally, special after-tax charges of EUR 45 million
were included in the results of Unconsolidated companies. As a result, the
after-tax negative impact of these special items in net income amounted to EUR
959 million.
SALES in the fourth quarter came to EUR 9,262 million, a 16% decrease on the
year before. Changes arising from (de)consolidations had a positive effect of
2%, driven by the new consolidations in Medical Systems. Weaker currencies,
particularly in Asia Pacific, had a negative effect of 2%. Price erosion in the
fourth quarter was 8%, compared with 5% in the corresponding quarter of last
year, and 9% in the third quarter of this year. Sales volume declined by 8%.
Sales in Semiconductors, Components and Mainstream Consumer Electronics suffered
from the downturn in their markets. Sales of Lighting and DAP remained virtually
flat, while sales at Medical Systems increased strongly both organically and as
a result of acquisitions.
INCOME FROM OPERATIONS in the fourth quarter was a loss of EUR 442 million (4.8%
of sales) compared with a profit of EUR 1,949 million (17.7% of sales) last
year.
4th quarter
----------------------------
2001 2000
Income from operations excluding special items 55 947
Special (charges)/gains in income from
operations (497) 1,002
------- -------
Income from operations (442) 1,949
Excluding special items, income from operations was positive, mainly driven by
solid performance at DAP, Medical Systems and Lighting, offset by losses at
Components, Semiconductors, Mainstream Consumer Electronics and Miscellaneous.
Last year's fourth quarter included a EUR 1,072 million special gain related to
the merger of Atos Origin, various restructuring charges amounting to EUR 26
million, and a special charge of EUR 44 million for in-process R&D
write-off, resulting from the acquisition of ADAC Laboratories. Special charges
in the fourth quarter 2001 included EUR 55 million for write-off of in-process
R&D related to the acquisition of Marconi's medical business. During the
fourth quarter, a provision of EUR 35 million was made for risk exposure related
to Argentina, spread over a number of divisions.
FINANCIAL INCOME AND EXPENSES in the fourth quarter amounted to a net expense of
EUR 667 million, compared to financial income EUR 902 million last year. The
fourth quarter included the fore mentioned impairment charge of EUR 526 million.
Last year, a special gain of EUR 966 million was included related to the
exchange of Seagram shares into Vivendi Universal. Excluding these special
items, the unfavorable variance is mainly due to higher interest expenses as a
result of higher debt.
Philips' RESULTS RELATING TO UNCONSOLIDATED COMPANIES amounted to a loss of EUR
176 million in the fourth quarter, versus a profit of EUR 94 million last year.
4th quarter
------------------------
2001 2000
Results relating to unconsolidated companies:
o income excluding amortization of goodwill and
other intangibles, and special items (6) 133
o special items (45) 1
o amortization goodwill and other intangibles (125) (40)
------- -------
Total (176) 94
Results relating to unconsolidated companies, excluding amortization and special
items, was a negative EUR 6 million. Operational profits at TSMC and Atos Origin
were offset by losses at LG.Philips LCD Co. and LG.Philips Displays. LG.Philips
Displays had a negative impact of EUR 48 million, largely due to price pressure,
restructuring charges and to a lesser extent by lower volumes. TSMC, and
LG.Philips LCD Co. suffered from the severely depressed IT and
telecommunications markets.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES amounted to EUR 125 million
compared to EUR 40 million in the fourth quarter of 2000. The increase related
to Philips' shareholdings in LG.Philips Displays and Atos Origin.
NET INCOME for the fourth quarter amounted to a loss of EUR 1,141 million (a
loss of EUR 0.90 per share) versus a profit of EUR 2,792 million (EUR 2.16 per
share) in 2000.
SALES AND INCOME FROM OPERATIONS PER SECTOR
Sales in the LIGHTING sector totaled EUR 1,350 million, 4% down on last year.
The decline is mainly caused by the transfer of Batteries to Consumer
Electronics, which had a negative effect of 4%, partly offset by a positive
effect of 2% resulting from consolidation changes. Additionally, weaker
currencies had a negative effect of 2%. Prices declined 3% on average, while
volumes increased by 3%. Sales in Lamps in North and Latin America continued to
suffer from weaker economies in these regions, while sales in Asia Pacific were
strong. Sales in Automotive & Special Lighting continued to perform well.
Income from operations came to EUR 183 million, compared to EUR 176 million last
year. Income in the fourth quarter included a gain of EUR 44 million on the sale
and lease back of properties in the U.S. and the Netherlands. Slower growth in
high-end products, and a stronger Polish currency, has put pressure on margins.
Sales in CONSUMER ELECTRONICS totaled EUR 3,248 million, a decrease of 19% over
the same quarter in the previous year. Currency movements had a negative effect
of 2% on nominal sales. Average prices decreased 12%, while sales volume was 5%
lower. Income from operations totaled a loss of EUR 7 million (a profit of EUR
32 million excluding special items) compared to a profit of EUR 103 million last
year.
Sales at MAINSTREAM CE were 6% lower than in the same quarter of the year
before, predominantly impacted by declines in Latin America (16%), Asia Pacific
(6%) and North America (5%). On the positive side, sales in Europe ended 2%
higher while monitor sales to OEM customers increased by 16%. Price erosion in
Q4 was 10%, down from 12% in the third quarter.
Income from operations of Mainstream CE amounted to a loss of EUR 37 million,
reflecting the economic slowdown, particularly North America, and the affects of
the economic instability in Argentina.
Sales in CONSUMER COMMUNICATIONS ended 58% lower than in the fourth quarter of
2000, as a result of our changed strategy for mobile phones.
Income at CONSUMER COMMUNICATIONS turned from a loss of EUR 33 million in 2000
into a profit of EUR 10 million. Primarily due to the downsizing of the GSM
operations, operational losses were reduced, and were more than offset by an
insurance benefit. Sales of DIGITAL NETWORKS decreased 49%, due to a lower
activity level of set-top boxes as part of the refocus strategy.
Income from operations at Digital Networks ended the quarter at a loss of EUR 46
million, compared to a loss of EUR 31 million last year. Income in 2001 included
special charges of EUR 28 million for restructuring and related inventory
write-downs.
LICENSE income in the fourth quarter amounted to EUR 66 million, EUR 18 million
higher than last year.
Sales in the DAP sector totaled EUR 775 million, virtually unchanged from the
year before. Sales volume increased by 2%, partly offset by 1% price erosion.
Sales in Oral Care increased strongly, while sales in Home Environment Care were
affected by weak demand in Asia and Latin America.
Income from operations increased from EUR 125 million in 2000 to EUR 143 million
this year. The strong performance came from the positive contribution of Oral
Care, ongoing product rationalizations and strict cost control. The successful
integration of Optiva into the Oral Healthcare business has already resulted in
a profitable contribution, even after the deduction of goodwill amortization
charges, and the Sonicare toothbrush is now established as the U.S. market
leader for premium power toothbrushes.
Sales in the COMPONENTS sector totaled EUR 575 million, a decrease of 54% over
the last quarter of 2000. Half of the decrease is attributable to the
deconsolidation of Display Components. In addition, weaker currencies had a
downward effect of 3%. Price erosion (10%) was down from 13% in the third
quarter. Sales volume in the quarter fell 14%. Although Mobile Display Systems
and Optical Storage showed lower sales compared with last year, they both showed
sequential growth, despite the continued difficult IT and telecommunications
markets.
Income from operations came to a loss of EUR 139 million compared to a profit of
EUR 75 million last year. The fourth quarter included restructuring charges of
EUR 22 million, EUR 14 million for charges related to the disentanglement costs
of Display Components and a gain of EUR 41 million for the release of a
provision related to a previous divestment.
Income from operations, excluding special items, amounted to a loss of EUR 144
million, mainly due to the decline in sales, as a result of the market
conditions impacting Optical Storage and Mobile Display Systems.
Sales in the SEMICONDUCTORS sector came to EUR 940 million, a decrease of 44%
over the same period a year earlier, whilst sales grew 5% sequentially, with
improvement particularly in consumer systems and mobile communications. Price
erosion of 12% was down from 14% in the third quarter. Sales volume decreased
32% over the same quarter last year. The sales downturn was in line with the
worldwide fall in semiconductor markets.
Income from operations amounted to a loss of EUR 292 million, compared to a
profit of EUR 408 million last year. Restructuring and related charges for the
intended closure of a fab in France, amounted to EUR 65 million. Income was
strongly influenced by price erosion, and factory utilization considerably below
break-even level.
Sales in the MEDICAL SYSTEMS sector totaled EUR 1,916 million, 86% up from the
year earlier. The main part of the increase (75%) is attributable to the new
acquisitions ADAC, Agilent's Healthcare Solutions Group (HSG) and Marconi's
medical business. Weaker currencies had a negative effect of 2%. Volume growth
was 17%, while prices decreased 4% on average. The increase in sales was
particularly strong in Magnetic Resonance, reflecting the success of a new
product range in a well developing market, and in Customer Support. Order intake
in the fourth quarter was 27% ahead of the year earlier. North America and Asia
Pacific attributed predominantly to the sector's growth.
Income from operations came to a loss of EUR 154 million. Income included
special charges of EUR 292 million, mostly for acquisition-related charges of
Agilent HSG and Marconi's medical business. The special charges related to the
latter included EUR 55 million for the write-off of in-process R&D. Last
year's income included a write-off for in-process R&D of EUR 44 million,
resulting from the acquisition of ADAC Laboratories.
After recent acquisitions, amortization of goodwill and other intangibles
increased to EUR 135 million, compared to EUR 89 million last year. Income from
operations, excluding special charges and amortization of goodwill and other
intangibles, improved with EUR 59 million to EUR 218 million, mainly driven by
the strong performance in Magnetic Resonance and the contribution of the new
acquisitions.
Sales in the MISCELLANEOUS sector totaled EUR 458 million, a decrease of 47%
over the year before, including the significant negative effect of various
deconsolidations (18%). Income came to a loss of EUR 138 million and included
EUR 74 million for special items, mainly related to restructuring at ETG,
Assembleon and Research. Income of last year amounted to a loss of EUR 70
million, including special charges of EUR 23 million.
Income from operations excluding special items was a loss of EUR 64 million,
mainly due to losses at Philips Enabling Technologies Group (ETG) and
Assembleon, as a result of the poor semiconductors equipment market.
Income from operations in UNALLOCATED was a loss of EUR 38 million, compared to
a loss of EUR 10 million last year. Special charges of EUR 31 million for
restructuring and discontinuation of projects caused the variance.
CASH FLOWS AND FINANCING
Philips achieved a strong positive operating cash flow of EUR 1,687 million. Our
cash conversion cycle program, and improved supply chain management led to
significant reductions of inventories. Inventories at the end of 2001 amounted
to 13.3% of sales (12.5% adjusted for new (de)consolidations), compared to 13.9%
a year earlier.
CASH USED FOR INVESTING ACTIVITIES in this quarter was EUR 1,582 million,
compared to EUR 3,281 million last year. The positive deviation was partly due
to lower capital expenditure. Net capital expenditures amounted to EUR 294
million compared with EUR 1,248 million last year. The cash outflow, related to
the acquisition of Marconi's medical business and the final installment for
Agilent's HSG, amounted to EUR 1,319 million. Last year's cash outflow of EUR
1.8 billion included the expenditures for the acquisitions of ADAC, TSMC
preferred shares, LG.Philips LCD preferred shares, and the settlement of hedging
cost related to Seagram.
CASH FLOW FROM FINANCING ACTIVITIES was a positive EUR 83 million in the fourth
quarter, compared with EUR 650 million cash inflow last year. The deviation was
due to the better cash flow before financing, eliminating the need for
additional borrowing.
The NET DEBT TO GROUP EQUITY ratio stood at 27:73 at the end of December,
compared with 26:74 at the end of September.
At the end of December, the NUMBER OF EMPLOYEES was 188,643, a decrease of 2,902
over the position as per the end of September 2001. Changes in consolidations
had an upward effect of 5,557 on balance, and were mainly related to the
acquisition of Marconi's medical business. On a comparable basis headcount was
reduced by 8,459 persons. The reduction was broadly implemented across all
sectors and all regions.
THE FULL YEAR 2001
o Sales in 2001 decreased by 15% to EUR 32,339 million, in line with slowdown
of world economies and downturn in mobile phones and IT related industries.
o Net income was a loss of EUR 2,604 million; excluding special items a loss of
EUR 908 million
o Positive cash flow from operating activities: EUR 1,248 million and a
debt/equity ratio 27:73
o Unconsolidated companies: loss of EUR 754 million, mainly caused by losses in
the LG.Philips LCD and LG.Philips Displays joint ventures and lower income at
TSMC
o Changes in business portfolio: reduced capital exposure to mobile phone, VCR
and display components markets and increased presence in medical systems
market
o Further rationalization of manufacturing and cost base
After the record year 2000, the Company's performance for the full year 2001 was
strongly impacted by the worldwide economic downturn in the IT and
telecommunications markets, resulting in a negative net income of 2,604 million
(a loss of EUR 2.04 per share, compared to a profit of EUR 9,602 million (EUR
7.31 per share) in 2000. Excluding special items, net income for 2001 was a loss
of EUR 908 million, versus a profit of EUR 2,831 million in 2000.
Semiconductors, Consumer Electronics and Components as well as some of our major
unconsolidated companies, including Taiwan Semiconductor Manufacturing Company
(TSMC), LG.Philips LCD and LG.Philips Displays, were severely impacted by the
decline. This had led Philips and LG Electronics to decide in principle to
increase the share capital of LG.Philips Displays by USD 250 million. This is
expected to take place in the first quarter of 2002.
Domestic Appliances and Personal Care (DAP), Lighting, and Medical Systems,
operating in less cyclical markets, continued their solid performances. DAP, and
Medical Systems (before acquisition-related charges), recorded their best ever
year.
Philips managed the downturn by further lowering its cost base and reducing
capacity, and by outsourcing or shifting production to partners. Several
uneconomical semiconductor and component facilities were closed, or are in the
process of being closed, a joint venture was entered into with LG Electronics in
the field of Cathode Ray Tubes (CRTs), and the decision was taken to outsource
the manufacturing and certain development activities of mobile telephones and
video recorders. Digital Networks refocused its strategy and limited its
platform diversity.
Income included special items mainly related to:
o restructuring and asset impairment (EUR 1,093 million)
o acquisition related charges (EUR 437 million)
o gains on sales of participations (EUR 295 million)
o impairment of security investments (EUR 526 million)
Reduction of the Company's overcapacity was the main reason for the
restructuring, while recent acquisitions caused in-process R&D write-offs and
integration costs at Medical Systems.
Staffing levels were reduced by 18,600 in 2001, excluding portfolio changes.
This was mostly related to announced reductions at Components, Semiconductors
and Consumer Electronics, including Consumer Communications, as well as general
costs reduction initiatives across the company.
The market value of our investments in publicly quoted companies exceeded book
value by EUR 8,838 million, as of December 31, 2001.
Despite the losses, Philips was able to generate positive cash flow from
operating activities of EUR 1,248 billion. Net capital expenditures were scaled
back by one third to EUR 2,156 million. The increase in the debt position was
the result of acquisitions by Philips Medical Systems. These acquisitions will
provide Philips with the number 2 position in medical equipment supply, and are
expected to generate significant income and cash flow.
DISTRIBUTION TO SHAREHOLDERS
A proposal will be made to the General Meeting of Shareholders to make a
distribution to shareholders of EUR 0.36 per common share to be charged to the
other reserves (compared with a EUR 0.36 dividend per common share paid in 2001,
reflecting the 2000 profit distribution).
ANNUAL REPORT 2001
More details on the performance of the Philips Group on the year 2001 can be
found in the Annual Report 2001 of Royal Philips Electronics, and at
www.philips.com
OUTLOOK
Economic conditions around the world continue to point to a limited growth
environment. Improvement in results in 2002 will come mainly from cost
reductions, efficiency improvements and restructuring programs, many of which
were already initiated in 2001, as well as ongoing portfolio management.
As a consequence of weakness in the stock markets, we anticipate a significant
reduction of pension credits in our results throughout 2002.
The severe declines of the IT and telecommunication markets, which were so
damaging in 2001, have now stopped, and excess inventories, both at customers
and in the industry, have mostly disappeared. In general, we do not see markets
strengthening, therefore we maintain a cautious stand on costs, capital
spending, working capital and employment in 2002.
The Company has been streamlined and focused during the downturn and is in a
good position to be an early beneficiary of any upturn in its markets.
Amsterdam, February 7, 2002
BOARD OF MANAGEMENT
For further information, please contact:
Ben Geerts, Philips Corporate Communications, tel: +31 20 5977215
Jeremy Cohen, Philips Corporate Communications, tel: +31 20 5977213
Related photos for the media: www.presslink.nl/philips
ROYAL PHILIPS ELECTRONICS OF THE NETHERLANDS IS ONE OF THE WORLD'S BIGGEST
ELECTRONICS COMPANIES AND EUROPE'S LARGEST, WITH SALES OF EUR 32.3 BILLION IN
2001. IT IS A GLOBAL LEADER IN COLOR TELEVISION SETS, LIGHTING, ELECTRIC
SHAVERS, MEDICAL DIAGNOSTIC IMAGING AND PATIENT MONITORING, AND ONE-CHIP TV
PRODUCTS. ITS 189,000 EMPLOYEES IN MORE THAN 60 COUNTRIES ARE ACTIVE IN THE
AREAS OF LIGHTING, CONSUMER ELECTRONICS, DOMESTIC APPLIANCES, COMPONENTS,
SEMICONDUCTORS, AND MEDICAL SYSTEMS. PHILIPS IS QUOTED ON THE NYSE (SYMBOL:
PHG), LONDON, FRANKFURT, AMSTERDAM AND OTHER STOCK EXCHANGES. NEWS FROM PHILIPS
IS LOCATED AT WWW.NEWS.PHILIPS.COM
'SAFE HARBOR' STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 THIS DOCUMENT CONTAINS 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.
BY THEIR NATURE, FORWARD-LOOKING STATEMENTS INVOLVE RISK AND UNCERTAINTY BECAUSE
THEY RELATE TO EVENTS AND DEPEND ON CIRCUMSTANCES THAT WILL OCCUR IN THE FUTURE.
THERE ARE A NUMBER OF FACTORS THAT COULD CAUSE ACTUAL RESULTS AND DEVELOPMENTS
TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING
STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, LEVELS OF CONSUMER
AND BUSINESS SPENDING IN MAJOR ECONOMIES, CHANGES IN CONSUMER TASTES AND
PREFERENCES, THE LEVELS OF MARKETING AND PROMOTIONAL EXPENDITURES BY PHILIPS AND
ITS COMPETITORS, RAW MATERIALS AND EMPLOYEE COSTS, CHANGES IN FUTURE EXCHANGE
AND INTEREST RATES (IN PARTICULAR, CHANGES IN THE EURO AND THE US DOLLAR CAN
MATERIALLY AFFECT RESULTS), CHANGES IN TAX RATES AND FUTURE BUSINESS
COMBINATIONS, ACQUISITIONS OR DISPOSITIONS AND THE RATE OF TECHNICAL CHANGES.
MARKET SHARE ESTIMATES CONTAINED IN THIS REPORT ARE BASED ON OUTSIDE SOURCES
SUCH AS SPECIALIZED RESEARCH INSTITUTES, INDUSTRY AND DEALER PANELS, ETC. IN
COMBINATION WITH MANAGEMENT ESTIMATES.
STATEMENTS OF INCOME
all amounts in millions of euros unless otherwise stated
------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------
4th quarter January to December
------------------- --------------------------
2001 2000 2001 2000
------ ------ --------- ---------
Sales 9,262 11,007 32,339 37,862
Income (loss) from operations, before
amortization goodwill and other intangibles
arising from acquisitions (274) 2,112 (894) 4,623
Amortization goodwill and other intangibles (168) (163) (477) (342)
------ ------ --------- ---------
Income (loss) from operations (442) 1,949 (1,371) 4,281
Financial income and expenses:
-interest (135) (48) (391) (167)
-other (532) 950 (524) 2,155
------ ------ --------- ---------
Income (loss) before taxes (1,109) 2,851 (2,286) 6,269
Income taxes 126 (130) 421 (570)
------ ------ --------- ---------
Income (loss) after taxes (983) 2,721 (1,865) 5,699
Results relating to unconsolidated companies:
-income before amortization goodwill and
other intangibles (51) 134 (387) 4,094
-amortization goodwill and other intangibles (125) (40) (367) (124)
------ ------ --------- ---------
(176) 94 (754) 3,970
Minority interests 18 (23) 15 (67)
----------------------------------------------- ------ ------ --------- ---------
NET INCOME (LOSS) (1,141) 2,792 (2,604) 9,602
INCOME (LOSS) FROM OPERATIONS
as a % of sales (4.8) 17.7 (4.2) 11.3
as a % of net operating capital (RONA) (9.1) 35.7
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (IN THOUSANDS):
(after deduction of treasury stock)
o basic 1,278,077 1,312,859
o diluted 1,286,544 1,326,538
NET EARNINGS PER COMMON SHARE IN EUROS:
o basic (0.90) 2.16 (2.04) 7.31
o diluted (0.90) 2.15 (2.04) 7.24
BALANCE SHEETS AND ADDITIONAL RATIOS
all amounts in millions of euros unless otherwise stated
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
2001 2000
Dec. 31, Dec. 31,
-------- --------
Cash and cash equivalents 890 1,089
Securities 130 111
Receivables 6,154 6,806
Inventories 4,290 5,279
Unconsolidated companies 5,632 5,328
Other non-current financial assets 2,789 3,747
Non-current receivables 3,582 2,713
Property, plant and equipment 7,718 9,041
Intangible assets - net 7,269 4,427
-------------------------------------------- -------- --------
TOTAL ASSETS 38,454 38,541
Accounts payable and other liabilities 8,193 8,818
Debt 7,866 4,027
Provisions 3,740 3,491
Minority interests 202 469
Stockholders' equity 18,453 21,736
-------------------------------------------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 38,454 38,541
RATIOS
Stockholders' equity,
per common share in euros 14.48 16.93
Inventories as a % of sales 13.3 13.9
Outstanding trade receivables, in months' sales 1.5 1.5
Net debt : group equity ratio 27:73 12:88
NUMBER OF COMMON SHARES
OUTSTANDING AT THE END OF PERIOD
o shares in thousands 1,274,172 1,283,895
STATEMENTS OF CASH FLOWS
all amounts in millions of euros unless otherwise stated
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS *
------------------- -------------------
4th quarter January to December
2001 2000 2001 2000
------ ------ ------ ------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) (1,141) 2,792 (2,604) 9,602
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 791 697 2,797 2,320
Net gain on sale of investments (97) (2,095) (378) (6,384)
(Income) loss from unconsolidated
companies (net of dividends
received 100 (16) 676 (1,187)
Minority interests (net of dividends
paid) 2 23 (21) 56
Decrease (increase) in working
capital 1,905 586 1,080 (1,069)
Increase in non-current
receivables (536) (392) (874) (510)
Increase in provisions 327 222 287 386
Other items 336 161 285 (218)
--------------------------------------- ------ ------ ------ ------
Net cash provided by operating
activities 1,687 1,978 1,248 2,996
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net capital expenditures (294) (1,248) (2,156) (3,132)
Proceeds (purchase) from the sale
of securities 1 (424) (1) 848
Proceeds (purchase) other
non-current financial assets 5 (463) 474 (497)
(Purchase of business) proceeds
from sale of business (1,294) (1,146) (2,881) 377
--------------------------------------- ------ ------ ------ ------
Net cash used for investing
activities (1,582) (3,281) (4,564) (2,404)
CASH FLOWS BEFORE FINANCING
ACTIVITIES 105 (1,303) (3,316) 592
* For a number of reasons, principally the effects of translation differences
and consolidation changes, certain items in the statements of cash flows do
not correspond to the differences between the balance sheet amounts for the
respective items.
STATEMENTS OF CASH FLOWS (CONTINUED)
all amounts in millions of euros unless otherwise stated
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)*
--------------- -------------------
4th quarter January to December
2001 2000 2001 2000
------ ------ -------- ------
CASH FLOWS BEFORE FINANCING
ACTIVITIES 105 (1,303) (3,316) 592
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in debt 79 689 3,953 612
Treasury stock transactions 4 (39) (336) (578)
Capital repayment to shareholders -- -- -- (1,673)
Dividends paid -- -- (458) (399)
-------------------------------------- ------ ------ -------- ------
Net cash provided by (used for)
financing activities 83 650 3,159 (2,038)
DECREASE IN CASH AND CASH
EQUIVALENTS
Effect of changes in exchange rates
and consolidations on cash positions 4 (53) (42) 204
Cash and cash equivalents at
beginning of the period 698 1,795 1,089 2,331
-------------------------------------- ------ ------ -------- ------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD 890 1,089 890 1,089
* For a number of reasons, principally the effects of translation differences
and consolidation changes, certain items in the statements of cash flows do
not correspond to the differences between the balance sheet amounts for the
respective items.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
all amounts in millions of euros unless otherwise stated
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
------------------------
January to December
2001 2000
--------- ---------
Balance as of beginning of period 21,736 14,757
Change in accounting policy:
o product/process development costs inventories -- (241)
o derivatives -- 58
Exercise of convertible debentures -- 13
Net income (loss) for the year (2,604) 9,602
Dividend paid (458) (399)
Additional paid-in capital stock options 6 --
Treasury stock transactions (333) (578)
3 % Share reduction -- (1,673)
Translation differences and other changes 106 197
------------------------------------------------- --------- ---------
Balance as of end of period 18,453 21,736
PRODUCT SECTORS
all amounts in millions of euros unless otherwise stated
---------------------------------------------------------------------------------------------------------------------------------
SEGMENT REVENUES AND INCOME FROM OPERATIONS
------------------------------------------------------------------------------------------------------
4th quarter
------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------ ----------------------------------------------
segment income (loss) from operations segment income (loss) from operations
---------------------------------- ----------------------------------
revenues before amort. after amort. revenues before amort. after amort.
goodwill/intang. goodwill/intang. goodwill/intang. goodwill/intang.
Lighting 1,358 185 183 1,413 178 176
Consumer Electronics* 3,268 (6) (7) 4,060 103 103
DAP 782 148 143 784 130 125
Components 650 (139) (139) 1,738 75 75
Semiconductors 1,073 (265) (292) 1,933 436 408
Medical Systems 1,916 (19) (154) 1,045 159 70
Origin -- -- -- -- 1,073 1,072
Miscellaneous 487 (141) (138) 952 (32) (70)
Unallocated (37) (38) (10) (10)
----------- ----------- ----------- ----------- ---------- ----------
Total 9,534 (274) (442) 11,925 2,112 1,949
Intersegment revenues (272) (918)
----------- -----------
SALES 9,262 11,007
INCOME FROM OPERATIONS
AS A % OF SALES (4.8) 17.7
*of which:
Mainstream CE 2,703 (37) (37) 2,897 119 119
Consumer
Communications 283 10 10 674 (33) (33)
Digital Networks 204 (45) (46) 388 (31) (31)
Licenses 78 66 66 101 48 48
----------- ----------- ----------- ----------- ---------- ----------
Consumer Electronics 3,268 (6) (7) 4,060 103 103
PRODUCT SECTORS
all amounts in millions of euros unless otherwise stated
---------------------------------------------------------------------------------------------------------------------------------
SEGMENT REVENUES AND INCOME FROM OPERATIONS
------------------------------------------------------------------------------------------------------
January to December
------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------ ----------------------------------------------
segment income (loss) from operations segment income (loss) from operations
---------------------------------- ----------------------------------
revenues before amort. after amort. revenues before amort. after amort.
goodwill/intang. goodwill/intang. goodwill/intang. goodwill/intang.
Lighting 5,122 631 623 5,097 677 668
Consumer Electronics* 11,233 (648) (649) 13,277 411 410
DAP 2,246 354 334 2,130 292 287
Components 3,705 (666) (667) 6,920 609 608
Semiconductors 4,940 (503) (607) 6,812 1,451 1,346
Medical Systems 4,836 138 (199) 3,047 308 169
Origin -- -- -- 1,164 1,089 1,063
Miscellaneous 2,154 (100) (104) 3,378 (138) (191)
Unallocated (100) (102) (76) (79)
----------- ----------- ----------- ----------- ---------- ----------
Total 34,236 (894) (1,371) 41,825 4,623 4,281
Intersegment revenues (1,897) (3,963)
----------- -----------
SALES 32,339 37,862
INCOME FROM OPERATIONS
AS A % OF SALES (4.2) 11.3
*of which:
Mainstream CE 8,807 (250) (250) 9,425 183 183
Consumer
Communications 1,264 (421) (421) 2,229 2 1
Digital Networks 771 (328) (329) 1,213 (85) (85)
Licenses 391 351 351 410 311 311
----------- ----------- ----------- ----------- ---------- ----------
Consumer Electronics 11,233 (648) (649) 13,277 411 410
PHILIPS QUARTERLY STATISTICS
all amounts in millions of euros unless otherwise stated; percentage increases always in relation to the
corresponding period of previous year
2000 2001
----------------------------------------------- --------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Sales 8,329 9,155 9,371 11,007 8,208 7,682 7,187 9,262
% increase 22 25 21 15 (1) (16) (23) (16)
Income (loss) from operations
before amortization goodwill/
intangibles 716 779 1,016 2,112 412 (668) (364) (274)
as % of sales 8.6 8.5 10.8 19.2 5.0 (8.7) (5.1) (3.0)
% increase 26 98 148 256 (42) -- -- --
Income (loss) from operations 663 724 945 1,949 332 (745) (516) (442)
as % of sales 8.0 7.9 10.1 17.7 4.0 (9.7) (7.2) (4.8)
% increase 21 127 168 267 (50) -- -- --
Net income (loss) 1,140 3,604 2,066 2,792 106 (770) (799) (1,141)
% increase 143 1,230 455 306 (91) -- -- --
per common share in euros 0.86 2.71 1.58 2.16 0.08 (0.60) (0.62) (0.90)
JANUARY- JANUARY- JANUARY- JANUARY- JANUARY- JANUARY- JANUARY- JANUARY-
MARCH JUNE SEPTEMBER DECEMBER MARCH JUNE SEPTEMBER DECEMBER
-------- -------- -------- -------- -------- -------- -------- --------
Sales 8,329 17,484 26,855 37,862 8,208 15,890 23,077 32,339
% increase 22 24 23 20 (1) (9) (14) (15)
Income (loss) from operations
before amortization goodwill/
intangibles 716 1,495 2,511 4,623 412 (256) (620) (894)
as % of sales 8.6 8.6 9.4 12.2 5.0 (1.6) (2.7) (2.8)
% increase 26 55 83 135 (42) -- -- --
Income (loss) from operations 663 1,387 2,332 4,281 332 (413) (929) (1,371)
as % of sales 8.0 7.9 8.7 11.3 4.0 (2.6) (4.0) (4.2)
% increase 21 60 91 144 (50) -- -- --
as a % of net operating
capital (RONA) 25.1 25.3 27.4 35.7 11.5 (6.5) (9.2) (9.1)
Net income (loss) 1,140 4,744 6,810 9,602 106 (664) (1,463) (2,604)
% increase 143 541 512 434 (91) -- -- --
as a % of stockholders'
equity (ROE) 31.2 62.1 56.5 53.5 2.5 (7.4) (10.5) (12.8)
per common share in euros 0.86 3.57 5.15 7.31 0.08 (0.52) (1.14) (2.04)
PERIOD ENDING 2000 PERIOD ENDING 2001
------------------------------------------ ----------------------------------------------
Inventories as % of sales 14.5 14.7 15.8 13.9 15.6 16.0 14.9 13.3
Average collection period
of trade receivables
in months' sales 1.6 1.6 1.6 1.5 1.6 1.7 1.7 1.5
Net debt : group equity ratio 4:96 * 8:92 12:88 17:83 20:80 26:74 27:73
Total employees (in thousands) 229 232 239 219 219 212 192 189
* NOT MEANINGFUL: NET CASH EXCEEDED THE DEBT LEVEL.
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