2007 — 4

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

KONINKLIJKE PHILIPS ELECTRONICS N.V.

(Exact name of registrant as specified in its charter)

Royal Philips Electronics
(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 o

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

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

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 o No þ

Name and address of person authorized to receive notices
and communications from the Securities and Exchange Commission:

E.P. Coutinho
Koninklijke Philips Electronics N.V.
Amstelplein 2
1096 BC Amsterdam – The Netherlands

 

 

This report comprises a copy of the Quarterly Report of the Philips Group for the three months ended March 31, 2007 and a copy of each of following press releases entitled:

-		“Philips acquires TIR Systems; a Canadian manufacturer of Solid State Lighting modules”, dated March 13, 2007;
-		“Philips elaborates on financial performance during General Meeting of Shareholders”, dated March 29, 2007;
-		“Philips General Meeting of Shareholders approves re-appointment of management, Supervisory Board members and proposal for dividend payment in 2007”, dated March 29, 2007;
-		“Philips announces closing of transfer of Mobile Phone operations to CEC”, dated April 6, 2007;
-		“Philips to acquire personal emergency response company Health Watch Holdings, Inc.”, dated April 10, 2007;
-		“Philips to acquire Digital Lifestyle Outfitters, a leading supplier of accessories for mobile devices”, dated April 13, 2007.

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 16^th day of April 2007.

KONINKLIJKE PHILIPS ELECTRONICS N.V.

/s/ G.J. Kleisterlee
(President,
Chairman of the Board of Management)

/s/ P.J. Sivignon
(Chief Financial Officer,
Member of the Board of Management)

Forward-looking statements

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, in particular the outlook paragraph in this report. 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, changes in law, the performance of the financial markets, pension costs, the levels of marketing and promotional expenditures by Philips and its competitors, raw materials and employee costs, changes in exchange and interest rates, changes in tax rates and future business combinations, acquisitions or dispositions and the rate of technological changes, political and military developments in countries where Philips operates, and industry consolidation. Statements regarding market share, including as to Philips’ competitive position, contained in this document are based on outside sources such as specialized 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-US GAAP information

In presenting and discussing the Philips Group’s financial position, operating results and cash flows, management uses certain non-US GAAP financial measures. These non-US GAAP financial measures should not be viewed in isolation as alternatives to the equivalent US GAAP measure(s) and should be used in conjunction with the most directly comparable US GAAP measure(s). A discussion of the non-US GAAP measures included in this document and a reconciliation of such measures to the most directly comparable US GAAP measure(s) are contained in this document.

Use of fair value measurements

In presenting the Philips Group’s 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 a readily determinable market value does not exist, fair values are estimated using valuation models which we believe are appropriate for their purpose. They require management to make significant assumptions with respect to future developments which are inherently uncertain and may therefore deviate from actual developments. In certain cases, independent valuations are obtained to support management’s determination of fair values.

All amounts in millions of euros unless otherwise stated; data included are unaudited. Financial reporting is in accordance with US GAAP, unless otherwise stated. Figures have been restated for the new reporting structure of the Philips Group and the allocation of certain Corporate/ Regional/ Country and Intellectual Property costs to the operating divisions.

Philips reports 27% growth in Q1 EBITA Net income increases to EUR 875 million

•		EBITA amounted to EUR 353 million, or 5.9% of sales, compared with EUR 279 million, or 4.5% of sales, in Q1 2006.
•		Including a gain on the sale of TSMC shares, net income increased to EUR 875 million from EUR 160 million in Q1 2006.
•		Sales totaled EUR 5,991 million, up 3% on a comparable basis compared to the same period last year, driven by a very strong performance at DAP and Lighting.
•		So far this year, announcement of three strategically aligned acquisitions that will add to growth.

Gerard Kleisterlee,
President and CEO of Royal Philips Electronics:

“Philips had an excellent start to 2007, with our EBITA growing by 27% to EUR 353 million in the first quarter. This significant growth reflects the strong market position of our more sharply focused portfolio of businesses, and validates the strategic choices we have made in the past.

In the first quarter, our businesses showed significant – and in parts of Consumer Retail exceptional – growth driven by innovation and the leveraging of investments we are making to deliver on our “sense and simplicity” brand promise. The integration of recent acquisitions such as Partners in Lighting will further add to this.

It is encouraging to see that the acquisitions we have made are contributing quickly to value creation. At Medical Systems the important integration of Intermagnetics is well on track, once completed, to deliver the expected benefits to our MR business. Our recent announcement on Health Watch

will further strengthen our leadership position in the fast growing market for Emergency Response Services.

Our Lighting division is well positioned to benefit from the increasing awareness of the need for lower energy consumption, and we are already seeing the impact. In the first quarter, the strong top-line growth at Lighting was partly attributable to our eco-friendly, energy-efficient solutions. In the first months of this year, Philips continued efforts to forge alliances with governments, industry partners and other organizations around the world to accelerate the replacement of inefficient lighting with newer, more efficient lighting solutions in the years to come.

We feel confident Philips will continue establishing a track record as a successful acquirer and operator of businesses that create sustainable value and drive increased growth and profitability for the group.”

 2

Highlights in the Quarter

		Net income
•		Including a non-taxable net gain of EUR 697 million resulting from the sale of a further 3.4% stake in TSMC and a fair- value adjustment in the value of the Company’s stake in JDS Uniphase, net income amounted to EUR 875 million, compared to EUR 160 million in Q1 2006. EBITA increased from 4.5% to 5.9% of sales, largely due to improved earnings at DAP and lower costs within Group Management & Services.
•		Income taxes of EUR 83 million have been calculated using an estimated annual effective tax rate of 29% for 2007.
•		Net income from discontinued operations of EUR 28 million reflects the result of a settlement relating to last year’s sale of a majority stake in the Semiconductors division.

		Sales by sector
•		Adjusted for the 5% downward effect of currency movements and 1% downward impact of consolidation changes, sales of EUR 5,991 million represent a comparable increase of 3% compared to Q1 2006.
•		Medical Systems’ sales declined by 1% nominally but grew 3% on a comparable basis compared to Q1 2006, driven mainly by higher sales at Imaging Systems. The 17% comparable sales growth at DAP was driven by higher revenues at Shaving & Beauty, Domestic Appliances and Health & Wellness. Compared to Q1 2006, sales at Consumer Electronics declined due to lower shipments of monitors, CRT televisions and, ahead of the March divestment of the business, mobile phones, partially offset by increased sales of Flat TV. At Lighting, almost all businesses contributed to the division’s 8% comparable sales growth, notably Luminaires.

		Sales by region
•		Higher sales in Europe/Africa were driven primarily by Lighting and Medical Systems. Sales growth in North America was attributable mainly to DAP and Lighting. The lower sales in Latin America were almost exclusively due to a sharp decline of the (CRT) TV market in Brazil. In Asia, the comparable sales growth was driven by Lighting and DAP, while CE declined, largely due to Mobile Phones.

EBITA
in millions of euros unless otherwise stated

		Q1				Q1
		2006				2007
Medical Systems			102				101
DAP			55				107
CE			33				34
Lighting			190				186
Innovation & Emerging Businesses			(19	)			(30	)
Group Management & Services			(82	)			(45	)
Philips Group			279				353
as a % of sales			4.5				5.9

EBIT
in millions of euros unless otherwise stated

		Q1				Q1
		2006				2007
Medical Systems			79				56
DAP			54				104
CE			33				34
Lighting			181				177
Innovation & Emerging Businesses			(19	)			(34	)
Group Management & Services			(82	)			(45	)
Philips Group			246				292
as a % of sales			4.0				4.9

Financial income and expenses
in millions of euros

		Q1				Q1
		2006				2007
Interest expenses, net			(42	)			(11	)
TSMC
- sale of securities			—				733
- fair-value adjustment of securities			—				(5	)
JDS Uniphase impairment			—				(36	)
Other			19				2
Total			(23	)			683

Results relating to equity-accounted investees
in millions of euros

		Results relating to equity-accounted investees
•		Results relating to equity-accounted investees decreased by EUR 31 million, due to lower results at LG.Philips LCD.
•		Q1 2006 results included a EUR 45 million charge related to the voluntary support of a social plan for employees impacted by the bankruptcy of some LG.Philips Displays activities.

Cash balance
in millions of euros

		Q1				Q1
		2006				2007
Beginning balance			5,293				6,023
Net cash from operating activities			(1,003	)			(203	)
Gross capital expenditures			(222	)			(171	)
Acquisitions/divestments			(558	)			(487	)
Other cash from investing activities			34				1,136
Changes in debt/other			(180	)			(318	)
Net cash discontinued operations			25				(74	)
Ending balance			3,389				5,906

Medical Systems

Key data
in millions of euros unless otherwise stated

		Q1				Q1
		2006				2007
Sales			1,469				1,455
Sales growth
% nominal			14				(1	)
% comparable			8				3
EBITA			102				101
as a % of sales			6.9				6.9
EBIT			79				56
as a % of sales			5.4				3.8
Net operating capital (NOC)			3,362				4,188
Number of employees (FTEs)			30,696				32,463

		Business highlights
•		In January, Philips signed a EUR 27 million contract with Ascent Profit, a Chinese medical equipment wholesaler, to deliver 200 high-end radiography systems to China and so tap into the country’s growing demand for medical equipment.
•		MD Buyline, an independent healthcare research company covering more than 3,200 hospitals, named Philips the best defibrillator manufacturer for overall user satisfaction.
•		Philips announced it will team up with AstraZeneca, Merck, BG Medicine and Humana to explore treatments for High-Risk Plaque – the primary cause of heart attacks.
•		For the 2nd year in a row, KLAS – an independent health-care IT research firm – named Philips “Best in KLAS” in cardiology picture archiving and communication systems.

		Financial performance
•		Equipment order intake on a currency-comparable basis showed a minimal decline compared to Q1 2006, mainly due to a softening of the North American market for imaging equipment.
•		Sales showed year-on-year comparable growth of 3%, driven by strong growth at Magnetic Resonance, Customer Services, Cardiac Care and General X-Ray, offset by declines at Computed Tomography and MedQuist.
•		Excluding MedQuist and the Intermagnetics-related charges, EBITA improved compared to Q1 2006, both in absolute amount and relative to sales. MedQuist’s EBITA deteriorated by EUR 12 million compared to Q1 2006 mainly due to several incidental charges during the quarter, including a settlement related to shareholder litigation and recognition of customer accommodation payments.
•		EBIT included EUR 30 million in Intermagnetics-related acquisition and integration charges, EUR 8 million of which also impacted EBITA.
•		Net operating capital and employee numbers increased, mainly due to the consolidation of Intermagnetics and Witt Biomedical.

		Looking ahead
•		Purchase-accounting and integration-related charges for Intermagnetics are expected to be approximately EUR 15 million per quarter (of which EUR 5 million will impact EBITA) for the remainder of the year.

 8

Domestic Appliances and Personal Care

Key data

in millions of euros unless otherwise stated

		Q1				Q1
		2006				2007
Sales			496				608
Sales growth
% nominal			16				23
% comparable			10				17
EBITA			55				107
as a % of sales			11.1				17.6
EBIT			54				104
as a % of sales			10.9				17.1
Net operating capital (NOC)			464				1,240
Number of employees (FTEs)			8,378				10,062

     Business highlights

•

In February, Philips Shavers achieved a 5-year high market share of 55% in the United States.

•

Product sales in various key lines of business, such as Kitchen Appliances and Oral Healthcare, improved on the back of global brand and health-oriented marketing campaigns and strong product portfolios.

•

Philips Floor Care won a Red Dot design award for its Auto Clean bagless vacuum cleaner. Judging criteria include innovation, functionality, ergonomics and durability.

•

Amazon.com recognized Philips DAP as the 2006 Health and Personal Care Vendor of the year. Philips products were described as “both innovative and instantly popular.”

     Financial performance

•

Strong advertising and promotion-driven sell-through at the end of 2006 triggered very strong sales in the early part of the quarter, leading to 17% comparable sales growth compared to Q1 2006. All regions contributed to the strong year-on-year increase, most notably China and the US with growth of 33% and 31% respectively.

•

Strong double-digit sales growth was also visible across all businesses. Domestic Appliances’ sales were boosted by Kitchen Appliances, mainly driven by the healthy living initiative and a strong product portfolio in Garment Care and Floor Care. Shaving & Beauty sales grew primarily in Female Depilation and Grooming, with strong growth in Shaving (mainly in China, Russia and Latin America). The comparable growth at Health & Wellness was largely due to Oral Healthcare.

•

EBITA improved by EUR 52 million, or 6.5% of sales, driven by the strong sales growth and Avent, including the effect of early post-acquisition synergies. Restructuring costs were EUR 10 million lower compared to Q1 2006.

•

The year-on-year increase in NOC and headcount was largely due to the September 2006 acquisition of Avent.

     Looking ahead

•

During Q2, DAP plans several new product launches, supported by additional investments in advertising and promotion, and will continue its focus on emerging markets.

Consumer Electronics

in millions of euros unless otherwise stated

		Q1			Q1
		2006				2007
Sales			2,423				2,208
Sales growth
% nominal			13				(9	)
% comparable			16				(6	)
EBITA			33				34
as a % of sales			1.4				1.5
EBIT			33				34
as a % of sales			1.4				1.5
Net operating capital (NOC)			78				97
Number of employees (FTEs)			14,932				13,947

     Business highlights

•

Strengthening its Peripherals & Accessories business, Philips announced it would buy US-based Digital Lifestyle Outfitters, which designs, markets and distributes accessories for mobile audio-visual devices such as MP3 and video players.

•

Philips signed an exclusive worldwide hardware sponsorship agreement with the upcoming World Cyber Games, the leading international video-game competition, to demonstrate its new range of ambient peripherals (amBX), which revolutionize the way gamers experience games on their PC.

•

Philips announced a partnership with crystal and jewelry company Swarovski to provide fashionable consumer-electronic lifestyle accessories for women. Products, including sound accessories and storage devices, will be available in Europe, North America and Asia from August 2007.

•

Philips closed the sale of its remaining mobile phone activities to China Electronics Corporation (CEC). As part of this transaction, CEC received an exclusive license to market and sell mobile phones under the Philips brand name for the coming five years.

     Financial performance

•

Consumer Electronics sales amounted to EUR 2,208 million, a comparable decline of 6% compared to Q1 2006, a quarter in which sales were buoyed by the high sell-in ahead of soccer’s FIFA World Cup TM. In Q1 2007, higher sales of Flat TV (volume shipments were over 50% higher than in Q1 2006) were more than offset by lower sales of monitors and CRT televisions, both product categories for which the focus was predominantly on margin management. Sales at Mobile Phones, the divestment of which was completed at the end March, declined by EUR 48 million compared to Q1 2006.

•

Despite the lower sales, EBITA increased slightly, both in value and as a percentage of sales. Margin pressure in Displays was offset by higher EBITA at Entertainment Solutions, Home Networks and Peripherals & Accessories.

•

Inventories decreased to 6.4% of sales from 8.4% in Q1 2006, as strict inventory control remained a priority for categories such as Flat TV.

     Looking ahead

•

For Q2, little change is anticipated in the trading conditions in the global consumer electronics marketplace.

Lighting

Key data

in millions of euros unless otherwise stated

		Q1				Q1
		2006				2007
Sales			1,345				1,474
Sales growth
% nominal			19				10
% comparable			8				8
EBITA			190				186
as a % of sales			14.1				12.6
EBIT			181				177
as a % of sales			13.5				12.0
Net operating capital (NOC)			2,665				3,441
Number of employees (FTEs)			46,701				53,308

     Business highlights

•

Philips made an offer to acquire TIR Systems, a Canada-based leading supplier of SSL modules for high-quality white light. TIR Systems holds a patent portfolio that will strengthen Philips’ IP position and give a leadership position in SSL modules in the high- and mid-end segments of this market.

•

Philips, together with a congressional coalition, announced an industry-wide initiative in the United States to accelerate replacement of inefficient lighting with newer, more energy-efficient lighting products in the years to come.

•

Underscoring its technological leadership, Philips Lumileds announced the launch of LUXEON Rebel power LEDs with new packaging technology that will dramatically reduce the size of LEDs (footprint 75% smaller than other surface-mount LEDs) and enable new approaches to solid-state lighting design.

     

     Financial performance

•

Sales increased to EUR 1,474 million, on a comparable basis 8% higher than in Q1 2006, mainly due to strong growth in energy-efficient “Green-Switch” lighting solutions and to higher sales in emerging markets such as Russia, China and Brazil.

•

EBITA included EUR 34 million in restructuring, purchase accounting-related and other incidental charges, slightly higher than in the corresponding period of 2006. Q1 2006 also included a EUR 11 million gain on the sale of real estate.

•

The increase in net operating capital and number of employees is attributable to the consolidation of The Bodine Company and Partners in Lighting International (PLI).

     Looking ahead

•

The drive to launch innovative, energy-efficient products and to focus on emerging markets will remain a priority in 2007.

•

Further optimization of the industrial footprint is expected to result in restructuring charges of approximately EUR 20 million in Q2 2007.

Innovation & Emerging Businesses

Key data
in millions of euros unless otherwise stated

		Q1				Q1
		2006				2007
Sales			395				197
Sales growth
% nominal			(13	)			(50	)
% comparable			(16	)			38
EBITA Technologies / Incubators			(1	)			(30	)
EBITA CHS and others			(18	)			—
EBITA			(19	)			(30	)
EBIT			(19	)			(34	)
Net operating capital (NOC)			960				753
Number of employees (FTEs)			16,707				7,561

     Business highlights

•

In Consumer Healthcare Solutions, Philips announced it will acquire personal emergency response company Health Watch Holdings, building on last year’s Lifeline Systems acquisition.

•

Philips Content Identification announced the introduction of MediaHedge, a content-rights clearing service for content owners and content users. This service helps the entertainment industry as well as the end-user to sell, share and distribute content optimally with respect to copyrights.

•

Philips won 17 awards in six categories in the annual iF product design competition. The acclaimed designs were selected from 2,000 entries across 30 countries in categories such as consumer electronics, lighting and medicine, and for the first time, the Advanced Studies category.

•

In January, Taiwan-based optical disc manufacturer Daxon Technology agreed to join Veeza, Philips’ licensing program for CD-R discs. All major CD-R disc manufacturers have now joined the Veeza program.

     Financial performance Corp. Tech./Incubators

•

The EBITA decline at Corporate Technologies compared to Q1 2006 is related to last year’s EUR 30 million gain on the sale of CryptoTec. Q1 2007 EBIT included a EUR 6 million gain on the sale of TASS, a software application business.

     Financial performance CHS and others

•

Sales at Consumer Healthcare Solutions grew 17% on a comparable basis, driven by the growth of services at Lifeline.

•

A gain on the sale of the Automotive Playback Module (APM) business was offset by results in the remaining businesses to be sold.

•

Compared to Q1 2006, the significant decline in employee numbers is attributable to the divestment of several businesses from the Corporate Investments portfolio, notably Optical Storage and ETG.

     Looking ahead

•

Further investments in technology and business development are expected in Q2.

Group Management & Services

Key data
in millions of euros unless otherwise stated

		Q1				Q1
		2006				2007
Sales			27				49
Sales growth
% nominal			(24	)			81
% comparable			(11	)			96
EBITA Corporate & Regional Costs			(36	)			(33	)
EBITA Brand Campaign			(3	)			(2	)
EBITA Service Units, Pensions and Other			(43	)			(10	)
EBITA			(82	)			(45	)
EBIT			(82	)			(45	)
Net operating capital (NOC)			446				432
Number of employees (FTEs)			6,928				6,956

     Business highlights

•

Philips published its ninth Sustainability Annual Report in February and announced sales of EUR 4 billion in Green Products in 2006.

•

For the third year in a row, Philips ranked among the Global 100 Most Sustainable Corporations. The Global 100, which premiered in 2005, is a listing of the 100 large blue-chip companies around the world that demonstrated the strongest sustainability performance among their peers.

•

At the largest Simplicity Event to date, Philips showcased how its simplicity-led design vision can contribute to a healthy lifestyle and improved quality of life. This event, held in Hong Kong in March, attracted more than 2,000 key stakeholders.

•

Implementation of Philips’ new Global Supplier Rating System (GSRS) is well on track, with 55% of spend on suppliers already included in the system. GSRS enables evaluation and tracking of supply management performance in key areas including quality and cost. This program is being implemented across the Philips divisions.

     Financial performance

•

Corporate & Regional costs, while in absolute spend reflecting the seasonally low first quarter, decreased compared to Q1 2006, confirming progress in the initiative to save EUR 75 million in cost (on a run-rate basis by the end of the year) by becoming a simpler and more market-driven organization.

•

In addition to these cost savings, the improvement in EBIT compared to Q1 2006 was due to lower pension costs and lower costs related to legal claims.

     Looking ahead

•

Pension costs for Group Management & Services are expected to be approximately EUR 25 million in 2007.

•

Full year expenditures on the brand campaign are expected to be slightly lower than 2006, with approximately EUR 40 million planned for Q2 and most of the remainder in Q4.

Outlook

Outlook

We made strong progress in the first quarter of 2007 towards meeting our targets of 5-6% average annual sales growth and EBITA of above 7.5% of sales, with all divisions on track to achieve their objectives. This year will again see the introduction of a stream of innovative, exciting new products across all markets we serve, including the further expansion of our ‘green’ product portfolio. Full-year sales at DAP and Lighting are expected to exceed these divisions’ medium-term growth targets.

With our portfolio now clearly defined, we will move forward with our shareholder-value-driven reallocation of capital. We will continue the responsible sell-down of our financial holdings while looking to make value-creating acquisitions in line with our strategic direction. We intend to complete our already-announced share buy-back programs by the end of the year.

Overall, we remain confident that 2007 will be a year of further growth and increased profitability for Philips.

Amsterdam, April 16, 2007

Board of Management

all amounts in millions of euros unless otherwise stated

						January to March
		2006				2007
Sales			6,155				5,991
Cost of sales			(4,280	)			(3,997	)
Gross margin			1,875				1,994
Selling expenses			(1,067	)			(1,115	)
General and administrative expenses			(222	)			(229	)
Research and development expenses			(415	)			(406	)
Other business income and expenses			75				48
Income from operations			246				292
Financial income and expenses			(23	)			683
Income before taxes			223				975
Income tax expense			(60	)			(83	)
Income after taxes			163				892
Results relating to equity-accounted investees			(17	)			(48	)
Minority interests			(7	)			3
Income from continuing operations			139				847
Discontinued operations			21				28
Net income			160				875
Weighted average number of common shares outstanding (after deduction of treasury stock) during the period (in thousands):
• basic			1,195,716				1,100,107
• diluted			1,204,537				1,111,232
Net income per common share in euros:
• basic			0.13				0.80
• diluted			0.13				0.79
Ratios
Gross margin as a % of sales			30.5				33.3
Selling expenses as a % of sales			(17.3	)			(18.6	)
G&A expenses as a % of sales			(3.6	)			(3.8	)
R&D expenses as a % of sales			(6.7	)			(6.8	)
EBIT or Income from operations			246				292
as a % of sales			4.0				4.9
EBITA			279				353
as a % of sales			4.5				5.9

all amounts in millions of euros unless otherwise stated

		March 31,				December 31,				March 31,
		2006				2006				2007
Current assets:
Cash and cash equivalents			3,389				6,023				5,906
Receivables			4,464				4,773				4,345
Current assets of discontinued operations			1,469				—				—
Inventories			3,159				2,880				3,109
Other current assets			1,196				1,286				1,361
Total current assets			13,677				14,962				14,721
Non-current assets:
Investments in equity-accounted investees			3,388				2,978				2,816
Other non-current financial assets			7,496				8,056				6,745
Non-current receivables			268				214				222
Non-current assets of discontinued operations			2,395				—				—
Other non-current assets			3,797				3,453				3,526
Property, plant and equipment			3,100				3,099				3,158
Intangible assets excluding goodwill			1,409				1,915				2,110
Goodwill			2,851				3,820				4,041
Total assets			38,381				38,497				37,339
Current liabilities:
Accounts and notes payable			3,059				3,450				2,760
Current liabilities of discontinued operations			999				—				—
Accrued liabilities			3,231				3,336				3,395
Short-term provisions			949				876				684
Other current liabilities			708				605				561
Dividend payable			523				—				659
Short-term debt			1,453				863				1,006
Total current liabilities			10,922				9,130				9,065
Non-current liabilities:
Long-term debt			3,239				3,006				2,927
Long-term provisions			1,879				2,449				2,577
Non-current liabilities of discontinued operations			343				—				—
Other non-current liabilities			908				784				666
Total liabilities			17,291				15,369				15,235
Minority interests			159				131				135
Stockholders’ equity			20,931				22,997				21,969
Total liabilities and equity			38,381				38,497				37,339
Number of common shares outstanding (after deduction of treasury stock) at the end of period (in thousands)			1,188,852				1,106,893				1,097,563
Ratios
Stockholders’ equity per common share in euros			17.61				20.78				20.02
Inventories as a % of sales			11.9				10.7				11.6
Net debt (cash): group equity			6:94				(10):110				(10):110
Net operating capital			7,975				8,724				10,151
Employees at end of period of which discontinued operations 37,156 end of March 2006			161,498				121,732				124,298

Consolidated statements of cash flows ^*

all amounts in millions of euros

		January to March
		2006				2007
Cash flows from operating activities:
Net income			160				875
(Income) loss discontinued operations			(21	)			(28	)
Adjustments to reconcile income to net cash provided by (used for) operating activities:
Depreciation and amortization			184				208
Impairment of equity-accounted investees and available-for-sale securities			3				39
Net gain on sale of assets			(70	)			(774	)
(Income) loss from equity-accounted investees (net of dividends received)			(30	)			86
Minority interests (net of dividends paid)			7				(3	)
(Increase) decrease in working capital/other current assets			(622	)			(601	)
(Increase) decrease in non-current receivables/other assets			(633	)			(287	)
Increase (decrease) in provisions			1				79
Proceeds from sales of trading securities			—				182
Other items			18				21
Net cash provided by (used for) operating activities			(1,003	)			(203	)
Cash flows from investing activities:
Purchase of intangible assets			(22	)			(19	)
Capital expenditures on property, plant and equipment			(200	)			(152	)
Proceeds from disposals of property, plant and equipment			26				10
Cash from (to) derivatives			10				(15	)
Proceeds from sale (purchase) of other non-current financial assets			(2	)			1,141
Proceeds from sale (purchase) of businesses			(558	)			(487	)
Net cash provided by (used for) investing activities			(746	)			478
Cash flows from financing activities:
Increase (decrease) in debt			255				2
Treasury stock transactions			(373	)			(306	)
Net cash provided by (used for) financing activities			(118	)			(304	)
Net cash provided by (used for) continuing operations			(1,867	)			(29	)
Cash flows from discontinued operations
Net cash provided by (used for) operating activities			149				(74	)
Net cash provided by (used for) investing activities			(124	)			—
Net cash provided by (used for) financing activities			—				—
Net cash provided by (used for) discontinued operations			25				(74	)
Net cash provided by (used for) continuing and discontinued operations			(1,842	)			(103	)
Effect of change in exchange rates on cash positions			(62	)			(14	)
Cash and cash equivalents at beginning of period			5,293				6,023
Cash and cash equivalents at end of period			3,389				5,906

Ratio
Cash flows before financing activities			(1,749	)			275

all amounts in millions of euros

		January to March 2007
														accumulated other comprehensive income (loss)
						capital												unrealized gain								changes in												total
						in excess								currency				(loss) on								fair value of								treasury				stock
		common				of par				retained				translation				available-for-				pensions				cash flow								shares at				holders’
		stock				value				earnings				differences				sale securities				(FAS 158)				hedges				total				cost				equity
Balance as of December 31, 2006			228				—				22,085				(1,874	)			4,281				(808	)			8				1,607				(923	)			22,997
Net income											875																												875
Net current period change															(129	)			(169	)			17				4				(277	)							(277	)
Reclassifications into income															1				(694	)							(1	)			(694	)							(694	)
Total comprehensive income (loss), net of tax											875				(128	)			(863	)			17				3				(971	)							(96	)
Dividend payable											(659	)																											(659	)
Purchase of treasury stock																																			(350	)			(350	)
Re-issuance of treasury stock							(20	)			(25	)																							102				57
Share-based compensation plans							20																																20
Balance as of March 31, 2007			228				—				22,276				(2,002	)			3,418				(791	)			11				636				(1,171	)			21,969

Sectors

all amounts in millions of euros unless otherwise stated
restated for the new reporting structure of the Philips Group, and the allocation of certain
Corporate/ Regional/ Country and Intellectual Property costs to the operating Divisions

Sales and income from operations

		January-March
		2006												2007
		Sales				Income from operations								Sales				Income from operations
						amount				as a % of								amount				as a % of
										sales												sales
Medical Systems			1,469				79				5.4				1,455				56				3.8
DAP			496				54				10.9				608				104				17.1
Consumer Electronics			2,423				33				1.4				2,208				34				1.5
Lighting			1,345				181				13.5				1,474				177				12.0
Innovation & Emerging Businesses			395				(19	)			(4.8	)			197				(34	)			(17.3	)
Group Management & Services			27				(82	)							49				(45	)
Total			6,155				246				4.0				5,991				292				4.9

Sectors and main countries

all amounts in millions of euros
restated for the new reporting structure of the Philips Group, and the allocation of certain
Corporate/ Regional/ Country and Intellectual Property costs to the operating Divisions

Sales and total assets

		Sales								Total assets
		January to March								March 31,
		2006				2007				2006				2007
Medical Systems			1,469				1,455				5,434				6,256
DAP			496				608				934				1,782
Consumer Electronics			2,423				2,208				2,652				2,223
Lighting			1,345				1,474				3,783				4,696
Innovation & Emerging Businesses			395				197				1,790				1,248
Group Management & Services			27				49				19,924				21,134
Total			6,155				5,991				34,517				37,339
Discontinued operations											3,864				—
Total											38,381				37,339

Sales and long-lived assets

		Sales								Long-lived assets*
		January to March								March 31,
		2006				2007				2006				2007
Netherlands			255				255				1,117				1,171
United States			1,624				1,620				4,626				5,040
Germany			499				441				269				289
France			353				366				124				104
United Kingdom			265				279				20				784
China			445				420				199				165
Other countries			2,714				2,610				1,005				1,756
Total			6,155				5,991				7,360				9,309

Pension costs

all amounts in millions of euros

Net periodic pension costs of defined-benefit plans

		January-March 2007
		Netherlands				Other
Service cost			37				26
Interest cost on the projected benefit obligation			129				102
Expected return on plan assets			(204	)			(98	)
Net actuarial (gain) loss			(1	)			20
Prior service cost			(11	)			4
Settlement loss			—				—
Curtailment loss (gain)			—				—
Other			—				—
Net periodic cost (income)			(50	)			54

The net periodic pension costs in the first quarter of 2007 amounted to EUR 23 million, of which EUR 4 million related to defined-benefit (DB) plans (the Netherlands income of EUR 50 million, other countries cost of EUR 54 million) and EUR 19 million related to defined-contribution (DC) plans (the Netherlands cost of EUR 2 million, other countries cost of EUR 17 million).

Net periodic costs of postretirement benefits other than pensions

		January-March 2007
		Netherlands				Other
Service cost			—				1
Interest cost on the accumulated postretirement benefit obligation			—				6
Transition obligation			—				1
Net actuarial loss			—				1
Net periodic cost (income)			—				9

Consolidated statements of income in accordance with IFRS

all amounts in millions of euros unless otherwise stated

		January to March
		2006				2007
Sales			6,155				5,991
Cost of sales			(4,302	)			(4,008	)
Gross margin			1,853				1,983
Selling expenses			(1,073	)			(1,117	)
General and administrative expenses			(259	)			(289	)
Research and development expenses			(400	)			(402	)
Other business income and expenses			63				17
Income from operations			184				192
Financial income and expenses			(22	)			681
Income before taxes			162				873
Income tax expense			(61	)			(60	)
Income after taxes			101				813
Results relating to equity-accounted investees			(23	)			(45	)
Minority interests			(7	)			3
Income from continuing operations			71				771
Discontinued operations			80				28
Net income			151				799
Weighted average number of common shares outstanding (after deduction of treasury stock) during the period (in thousands)
• basic			1,195,716				1,100,107
• diluted			1,204,537				1,111,459
Net income per common share in euros:
• basic			0.13				0.73
• diluted			0.13				0.72
Ratios
Gross margin as a % of sales			30.1				33.1
Selling expenses as a % of sales			(17.4	)			(18.6	)
G&A expenses as a % of sales			(4.2	)			(4.8	)
R&D expenses as a % of sales			(6.5	)			(6.7	)
EBIT or Income from operations			184				192
as a % of sales			3.0				3.2
EBITA			231				239
as a % of sales			3.8				4.0