-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TVj7I4t9vn7rnTbC79zHZ83CO0uIZGF/2tJgHEc2WE1pKffEe7YuZSsroCR7JKU6 53e8Oo2xunCa6INt5jfrcg== 0000950123-99-003612.txt : 19990426 0000950123-99-003612.hdr.sgml : 19990426 ACCESSION NUMBER: 0000950123-99-003612 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990422 FILED AS OF DATE: 19990423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KONINKLIJKE PHILIPS ELECTRONICS NV CENTRAL INDEX KEY: 0000313216 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] STATE OF INCORPORATION: P7 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 001-05146-01 FILM NUMBER: 99599515 BUSINESS ADDRESS: STREET 1: REMBRANDT TOWER AMSTELPLEIN 1 STREET 2: 1096 HA AMSTERDAM CITY: THE NETHERLANDS MAIL ADDRESS: STREET 1: REMBRANDT TOWER AMSTELPLEIN 1 STREET 2: 1096 HA AMSTERDAM CITY: THE NETHERLANDS FORMER COMPANY: FORMER CONFORMED NAME: PHILIPS ELECTRONICS N V DATE OF NAME CHANGE: 19930727 6-K 1 KONINKLIJKE PHILIPS ELECTRONICS N.V. 1 1999-3 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 For the period commencing February 11, 1999 through April 22, 1999 ------- KONINKLIJKE PHILIPS ELECTRONICS N.V. ----------------------------- (Name of registrant) Rembrandt Tower, Amstelplein 1, 1096 HA Amsterdam, The Netherlands ---------------------------------------------- (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F __X__ Form 40-F _______ 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 __X__ If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-__________ . 2 This report comprises a copy of the quarterly report of the Philips Group for the three months ended March 31, 1999, as well as an overview of the divisional structure of the Philips Group, both dated April 22, 1999. 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 22th day of April, 1999. KONINKLIJKE PHILIPS ELECTRONICS N.V. /s/ C. Boonstra C. Boonstra (President and 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) 3 QUARTERLY REPORT March 31, 1999 PHILIPS 4 STATEMENTS OF INCOME AND CASH FLOWS all amounts in millions of euros (EUR) unless otherwise stated The data included in this report are unaudited. The 1998 data have been restated to reflect the sale of PolyGram N.V. and to present the Philips Group accounts on a continuing basis. CONSOLIDATED STATEMENTS OF INCOME
January to March 1999 1998 Sales 6,837 7,057 Income from operations 549 373 Financial income and expenses 21 (63) Income before taxes 570 310 Income taxes (114) (69) Income after taxes 456 241 Results relating to unconsolidated companies 25 31 Share of other group equity in group income (12) 49 Income from continuing operations 469 321 Discontinued operations - 4 Gain on disposal of discontinued operations Extraordinary items - net - 383 NET INCOME 469 708 Basic earnings per common share in EUR: - - income from continuing operations 1.30 0.89 - - net income 1.30 1.98
CONSOLIDATED STATEMENTS OF CASH FLOWS*
January to March 1999 1998 Cash flows from operating activities: Net income 469 708 Income from discontinued operations - (4) Depreciation and amortization 365 372 Net gain on sale of investments (240) (478) Increase in working capital (450) (316) Decrease in provisions 43 60 Other items (116) (39) Net cash generated by operating activities 71 303 Cash required for investments (361) (325) Proceeds from divestments 574 533 CASH FLOWS (BEFORE FINANCING ACTIVITIES) 284 511
* 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. 5 REPORT ON THE PERFORMANCE OF THE PHILIPS GROUP Accounting and presentation issues The consolidated quarterly financial statements for 1998 have been restated to reflect the sale of PolyGram N.V. and to present the Philips Group accounts on a continuing basis for both years presented in this report. With effect from 1999 a number of accounting changes will be made to present the financial statements more in accordance with US GAAP. Results from divestments other than segments of business will be reported in income from operations and no longer as extraordinary items. The use of equalization accounts within the year has been abolished. The costs of IT software for internal Philips use are capitalized and subsequently amortized over three years. The latter two have had a positive effect on operating income in this quarter. All financial data are presented in euros (conversion rate: EUR 1 = NLG 2.20371). Income from continuing operations in the first three months amounted to EUR 469 million (EUR 1.30 per share) as compared to EUR 321 million (EUR 0.89 per share) in the corresponding period of 1998. This improvement was primarily attributable to higher income from operations which included EUR 180 million non-recurring gains on divestments, mainly the sale of the Conventional Passive Components business. Without these gains, income from continuing operations would have been EUR 325 million. In the first quarter of 1998 extraordinary income contributed EUR 383 million to net income relating primarily to the sale of Philips Car Systems. First-quarter net income came to EUR 469 million versus EUR 708 million in the first three months of 1998. Sales in the first quarter of 1999 amounted to EUR 6,837 million, nominally 3 per cent lower than in the same period of 1998. Exchange rate fluctuations had a negative effect of 2 per cent on sales, while consolidation changes had a negative effect of 3 per cent. The most important deconsolidations were the Lucent part of Philips Consumer Communications (PCC) and Conventional Passive Components, partly offset by the new consolidation of ATL Ultrasound. Adjusted for these effects, the comparable sales growth came to 2 per cent compared to 11 per cent growth a year ago. This reflects the economic downturn in large parts of the world which became apparent from the second quarter of 1998 onwards. The main contributors to the 2 per cent comparable growth were Consumer Products, Origin and Components. Price erosion in the first quarter was 8 per cent, unchanged from the corresponding quarter in 1998. Volume growth was 10 per cent compared with 19 per cent a year ago. Income from operations in the reporting period amounted to EUR 549 million (8.0 per cent of sales) against EUR 373 million (5.3 per cent of sales) in 1998. Excluding non-recurring gains from the sale of participations, income from operations was also up on 1998: 5.4 per cent versus 5.3 per cent of sales. Excluding the divestment gains the RONA ratio amounted to 16.2 per cent as compared to 15.1 per cent in the year-earlier period. Positive income developments in Consumer Products, Lighting and Origin more than compensated for the lower results in Components (excluding the non-recurring gains), Semiconductors and Professional. Financial income and expenses came to a positive balance of EUR 21 million compared to last year's negative amount of EUR 63 million, primarily due to increased interest income from the current excess cash position and favorable exchange results. The tax burden has been determined at a tentative rate of 20 per cent compared with 23 per cent in the same period of last year. Philips' results relating to unconsolidated companies fell to EUR 25 million from EUR 31 million a year earlier, primarily due to the lower contributions from Taiwan Semiconductor Manufacturing Co. On the other hand, last year's first quarter included 50 per cent of the losses of Hosiden and Philips Display, which was consolidated from April 1, 1998 onwards when shareholding was increased to 80 per cent. Part of the shortfall was compensated by a non-recurring gain in relation to the transfer of 27 per cent of Philips' shareholding in Navigation Technologies to a Dutch investor group. The share of other group equity in group income swung to a negative amount of EUR 12 million from last year's positive amount of EUR 49 million, the difference primarily reflecting the dissolution of the PCC/Lucent joint venture in September 1998. 6 TREND PER PRODUCT SECTOR Growth is expressed on a comparable basis Sales of the Lighting sector edged up 1 per cent, virtually in line with the market development. Income from operations grew to EUR 178 million from EUR 151 million benefiting from slightly higher margins attributable to a richer product mix in addition to cost savings as a result of operational improvements and purchasing efficiencies. Sales in the Consumer Products sector increased by 7 per cent reflecting an acceleration in sales growth from the two preceding quarters. The larger part of the growth relates to Consumer Electronics, in particular PC Peripherals, Audio and PCC. Sales growth significantly exceeded the market growth in this division. The division Domestic Appliances and Personal Care products recorded lower sales, particularly as a result of weak demand in Brazil and Eastern Europe. Income from operations improved to a profit of EUR 73 million from last year's loss of EUR 43 million, mainly due to a significant reduction in the losses incurred at Philips Consumer Communications, where activities have been more focused following the dissolution of the joint venture with Lucent. Higher license income also contributed positively. The Components sector reported a 3 per cent increase in sales compared to the prior year, mainly attributable to Display Components, where sales in Monitor tubes increased strongly. Also LCD Cells & Modules, part of Flat Display Systems, contributed. Income from operations of EUR 201 million compares to last year's EUR 80 million, but disregarding the EUR 180 million gain mainly from the sale of Conventional Passive Components income from operations was down at EUR 21 million. The reduction is primarily attributable to a decline in Optical Storage income and losses in Flat Display Systems. The Hosiden and Philips Display - HAPD losses in the first quarter of 1998 were reported as results from unconsolidated companies. In the Semiconductors sector sales decreased 6 per cent, approximately in line with the market served by Philips Semiconductors. Income from operations was down to EUR 167 million from EUR 226 million or 17.7 per cent of segment revenues compared with 22.4 per cent in 1998, mainly because of lower demand. Sales of the Professional sector were 3 per cent down on the prior year, fully attributable to lower sales in Business Electronics compared with the very strong first quarter in 1998. Medical Systems sustained last year's double-digit growth level and recorded impressive increases in order intake. Income from operations turned to a loss of EUR 7 million from a profit of EUR 36 million last year. In Medical Systems the 1999 results include charges for a reorganization in Germany while 1998 benefited from one-time gains. Development costs at Business Electronics were relatively high compared with lower sales volumes. Sales growth at Origin came to 15 per cent, particularly realized in Asia and Europe. Income from operations of EUR 25 million was up from last year's EUR 11 million mainly attributable to growth in sales and improved cost efficiency. The Miscellaneous sector saw a 16 per cent decrease in sales. Income from operations was marginally better at a loss of EUR 4 million versus EUR 6 million loss in the year-earlier period. TREND PER GEOGRAPHIC AREA Growth is expressed on a comparable basis Sales in the first quarter showed solid growth of 8 per cent in North America, driven by Consumer Products, and regained strong growth in Asia Pacific (9 per cent increase) driven by Consumer Products and Components. Modest growth of 2 per cent was recorded in Europe, partly due to lower sales in Eastern Europe. In Latin America sales dropped by 30 per cent primarily due to Brazil, where sales declined by 46 per cent. 7 Income from operations in USA and Canada swung to a profit, primarily attributable to the dissolution of the PCC/Lucent joint venture. The positive variance in Europe was due to the gain on the sale of Conventional Passive Components, without which the region was down especially in Semiconductors, Professional and Components in Western Europe. In Latin America, income from operations would have improved due to an effective cost reduction program, if not for a restructuring provision for Lighting. The income in the Asia Pacific region was negatively impacted by Components' Optical Storage business and HAPD, and - to a lesser extent - by lower Semiconductors performance. BALANCE SHEET RATIOS AND CASH FLOWS Inventories at the end of March 1999 came to 15.6 per cent of sales as compared to 16.9 per cent a year earlier. The average collection period of outstanding trade receivables was the equivalent of 1.6 months' sales unchanged from one year ago. Following the sale of PolyGram in December 1998, Philips has been in a net cash position as compared to a net debt position in the first quarter of last year. When compared to the net debt position, group equity now exceeds 100 per cent, while twelve months ago the net debt to group equity ratio stood at 18:82. Cash flow from operations was EUR 71 million versus EUR 303 million last year mainly due to the impact of changes in working capital. Cash required for investing activities of EUR 213 million was in line with 1998. The resulting cash flow surplus was EUR 284 million compared with EUR 511 million in the first quarter of last year. On March 25, the General Meeting of Shareholders adopted the proposed 8 per cent share reduction program. The effects of the implementation of this program will occur after the first quarter. EMPLOYEES The number of people employed at the end of March 1999 was 228,754 which reflects a decrease of 2,821 employees from the comparable position as at January 1, 1999. OUTLOOK We see an improving economic environment in certain countries in Asia, continued strength in the USA and a slightly less buoyant economic environment in Europe. We are encouraged by the results of the first quarter which we see as an important step in securing our goal of double-digit growth in earnings from continuing operations for 1999. Furthermore, we again expect to generate positive cash flow. While it has no impact on earnings for the full year the abolition of the use of equalization accounts will shift earnings from the second half to the first half of the year by about EUR 70 million. SUBSEQUENT EVENT On April 8, Philips signed a confidentiality and standstill agreement with VLSI Technology ending May 9, and extended its USD 17 per share cash tender offer for all of the outstanding shares of VLSI, valuing the total offer at approximately USD 0.9 billion. April 22, 1999 Royal Philips Electronics Board of Management 8 BALANCE SHEETS AND ADDITIONAL RATIOS all amounts in millions of euros unless otherwise stated CONSOLIDATED BALANCE SHEETS
1999 1998 March 31, December 31, Cash and cash equivalents 6,686 6,553 Receivables 5,682 5,442 Inventories 4,725 4,274 Non-current assets 11,630 11,884 TOTAL ASSETS 28,723 28,153 Other current liabilities 6,897 7,139 Debt 3,459 3,587 Provisions 3,229 2,985 GROUP EQUITY 15,138 14,442 Of which stockholders' equity 14,870 14,200 Per common share in EUR 41.15 39.37 End of March NUMBER OF COMMON SHARES OUTSTANDING Shares in thousands 368,564 365,406 NUMBER OF EMPLOYEES Comparable figure on 1.1.1999 : 231,600 228,800 254,700 RATIOS Net debt : group equity ratio * 18:82 Inventories as a % of sales 15.6 16.9 Outstanding trade receivables, in months' sales 1.6 1.6 January to March Income from operations: As a % of sales 8.0 5.3 As a % of net operating capital (RONA) 24.1 15.1 Income from continuing operations as a % of stockholders' equity (ROE) 17.8 16.6
* The current net cash situation renders the net debt to group equity ratio meaningless. 9 PRODUCT SECTORS all amounts in millions of euros unless otherwise stated SALES AND TOTAL ASSETS
sales (to third parties) January to March 1999 total assets % growth 1999 1998 amount nominal comparable * March 31, December 31, Lighting 1,103 (2) 1 2,745 2,607 Consumer Products 2,636 (4) 7 4,161 4,350 Components 854 (6) 3 3,102 3,112 Semiconductors 775 (8) (6) 3,285 3,106 Professional 1,020 5 (3) 3,008 2,810 Origin 275 15 15 520 572 Miscellaneous 174 (26) (16) 965 1,021 Unallocated 10,937 10,575 TOTAL 6,837 (3) 2 28,723 28,153
*Adjusted for the effects of changes in consolidations and exchange rate movements SEGMENT REVENUES AND INCOME FROM OPERATIONS
January to March 1999 1998 income as % of income as % of segment (loss) from segment segment (loss) from segment revenues operations revenues revenues operations revenues Lighting 1,122 178 15.9 1,131 151 13.4 Consumer Products 2,750 73 2.7 2,841 (43) (1.5) Components 1,210 201 16.6 1,243 80 6.4 Semiconductors 946 167 17.7 1,008 226 22.4 Professional 1,107 (7) (0.6) 1,008 36 3.6 Origin 414 25 6.0 355 11 3.1 Miscellaneous 220 (4) (1.8) 285 (6) (2.1) Unallocated (84) (82) Total 7,769 549 7,871 373 Intersegment sales (932) (814) SALES 6,837 7,057 Income from operations as a % of sales 8.0 5.3
10 MAIN COUNTRIES AND GEOGRAPHIC AREAS all amounts in millions of euros unless otherwise stated SALES AND FIXED ASSETS
sales (to third parties) (in)tangible fixed assets January to March 1999 1999 1998 % growth March 31, December 31, amount nominal comparable * Netherlands 407 3 5 1,615 1,633 United States 1,478 (7) 7 1,230 1,167 Germany 661 (2) 1 663 698 France 424 (8) (9) 404 410 United Kingdom 519 26 29 314 298 China (incl. Hong Kong) 482 5 11 610 574 Other countries 2,866 (6) (3) 2,409 2,348 TOTAL 6,837 (3) 2 7,245 7,128
*Adjusted for the effects of changes in consolidations and exchange rate movements SEGMENT REVENUES AND INCOME FROM OPERATIONS
January to March 1999 1998 income as % of income as % of segment (loss) from segment segment (loss) from segment revenues operations revenues revenues operation revenues Europe 6,923 437 6.3 6,617 349 5.3 USA and Canada 1,839 42 2.3 1,891 (94) (5.0) Latin America 291 (29) (10.0) 491 (21) (4.3) Asia Pacific 2,516 99 3.9 2,498 139 5.6 Africa 25 - - 28 - - TOTAL 11,594 549 11,525 373 Interregional sales (4,757) (4,468) SALES 6,837 7,057 Income from operations as a % of sales 8.0 5.3
`SAFE HARBOR' STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF OCTOBER 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, 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. Information also available on Internet, address: http://www.philips.com Printed in the Netherlands 11 DIVISIONAL STRUCTURE The following is an overview of the divisional structure of the Philips Group: LIGHTING Lamps Luminaires Lighting electronics and gear Automotive Batteries CONSUMER ELECTRONICS TV Television, institutional TV, tuners, remote control Videq VCR, TV/VCR, DVD/DVD-Recordable Audio portable audio, audio systems (incl. CD-Recordable), speaker systems, Marantz, blank media & accessories Communications mobile phones, corded/cordless phones, answering machines, faxes (Europe), mobile computing products (e.g., Velo, Nino) PC peripherals monitors, PC add-ons, PC cameras, observation and security systems and modules, LCD projectors Other in-home networking, service, licenses DOMESTIC APPLIANCES AND PERSONAL CARE Male shaving and grooming shavers, trimmers Body beauty and health depilators, hair dryers, suncare, electric toothbrushes, skin care Home environment care vacuum cleaners, air cleaners, steam irons, fans COMPONENTS Display components Advanced ceramics and modules Optical storage Flat display systems General system components SEMICONDUCTORS MultiMarket products Consumer systems Telecom terminals Emerging businesses Discrete semiconductors MEDICAL SYSTEMS X-ray equipment radiography, universal R/F, cardio-vascular, surgery Computed tomography Magnetic resonance Ultrasound Healthcare services integrated clinical solutions, hospital management services, extended technical services BUSINESS ELECTRONICS Digital video systems (incl. Internet TV) Broadband networks Business communication Speech processing Fax Video conference systems Projects Communication and security systems Analytical X-ray systems Electronics manufacturing technology FEI (Electron Optics)* * Nasdaq-listed company 55%-owned by Philips 12 ORIGIN Enterprise solutions integrated total-value-chain solutions, ERP implementation and related services (incl. SAP, Baan, QAD), technical automation Managed services outsourcing, infrastructure solutions, applications management, desktop services Professional services transformation consulting services, electronic commerce, euro and millennium services MISCELLANEOUS Plastics and Metalware Factories Machinefabrieken Hearing Instruments Research Patents and trademarks Centre for Manufacturing Technology Philips Design 13 -----END PRIVACY-ENHANCED MESSAGE-----