Koninklijke Phillips Electronics N.V
) reported a net income of €355 million ($460 million) for the
fourth quarter of 2012, down 35.4% year over year. The
year-over-year decline was primarily due to the European
Commission fine of €509 million ($660 million) related to the
violations of competition rules by Phillips while divesting its
Cathode-Ray Tubes business in 2001.
However, excluding the impact of this fine, net income
amounted to €154 million ($199.7 million) compared with a net
loss of €32 million in the prior-year quarter.
For the fourth quarter of 2012, the company reported revenue
growth of 3% to €7.2 billion ($9.3 billion) from €6.7 billion in
the prior-year quarter. The revenue increase was primarily driven
by 7% growth in group nominal sales, which included a 4% positive
impact from currency.
Earnings before Interest, Tax and Amortization (EBITA),
excluding one-time items, stood at €875 million ($113.4 million).
However, including adjustments related to restructuring and
acquisition related charges of €358 million ($464 million), €313
million ($405 million) related to European Commission fine and
€154 million ($199 million) associated with legal matters and
loss on sale of industrial assets, EBITA came in at €50 million
($34 million), down 90% year over year from €503 million.
sales for the quarter grew 4% year over year to €2.9 billion
($3.76 billion) driven by increases across its businesses,
especially high single-digit growth at the Home Healthcare
Solutions and mid-single-digit growth at Customer Services.
Imaging systems and Patient Care and Clinical Informatics both
reported low single-digit growth.
Geographically, revenue growth in North America declined 4%
year over. However, sales from Europe and emerging markets grew
11% and 7%, respectively, in the reported quarter.
Orders in the Healthcare segment grew 4% year over year in the
reported quarter with mid-single-digit growth in Imaging systems
and low single-digit growth at Patient care and Clinical
segment posted revenue growth of 4% to €1.9 billion ($2.5
billion) during the quarter. On a comparable basis, sales grew 2%
on 10% increase in the combined growth businesses such as
Personal Care, Heath& Wellness and Domestic Appliances. This
was partially offset by a double-digit decline at Lifestyle
On a geographic basis, the segment reported double-digit
growth from the emerging markets while the company witnessed mid
single-digit growth in North America. However, growth in Western
Europe remained flat year over year.
During the fourth quarter, Audio/Video Entertainment business
was transferred to Funai Electric Co. for €150 million ($194
million). In addition, Funai will be paying a brand license fee
associated with a licensing agreement for an initial period of
five and half years, with an option to renew for another five
The deal related to the Audio, Multimedia and Accessories
businesses is expected to close in the second half of 2013.
However, the video business will be transferred in 2017, related
to the existing intellectual property licensing arrangements.
During the reported quarter, the
reported sales growth of 9% year over year. The comparable sales
grew 4%, driven by double-digit growth at Lumileds and mid
single-digit growth at Consumer Luminaires and Automotive. LED
sales grew 43% year over year and now represent 25% of the total
On a geographic basis, mature markets reported flat
year-over-year sales growth as 4% rise in Western Europe was
fully offset by a 4% decline in North America. However,
revenue grew 8% year over year in the growth markets (emerging
During the quarter, under the LED portfolio, Phillips
introduced Hue, which is supposed to be a revolutionary LED
lightning system. This can be controlled through a wirelessly
through a smart device.
Sales in the
Innovation, Group & Services
segment declined to 5% to €123 million ($159 million) from €129
million in the prior-year period.
On a geographical basis, comparable sales in the growth
geographies increased 10% in the fourth quarter. Growth
geographies represented 35% of the total sales in 2012 versus 33%
The company's growth markets include all the markets except
the U.S, Canada, Western Europe, Australia, New Zealand, South
Korea, and Japan.
The above mentioned geographies are classified as mature
markets; revenue growth in the mature markets was 1% year over
year. The marginal growth in the mature markets was due to the
lack of macro-economic developments and the continued weakness in
the Western European markets.
Cash and Balance Sheet
Cash flow from operating activities grew significantly to €1.2
billion ($1.5 billion) compared to €1.1 billion in the comparable
prior-year quarter. The increase was attributable to higher net
earnings and increase in provisions, which was partially offset
by decrease in working capital.
Capital expenditures for the quarter were €310 ($402 million)
versus €223 million, due to higher investments in the Lighting
and Consumer Lifestyle segments.
At the end of the fourth quarter, the company had a debt of
€700 million ($908 million) compared to €713 million in the
prior-year quarter. The decline in debt was attributable to a
free cash inflow of €764 million, which was partially offset by
treasury share transactions and cash outflow for discontinued
Phillips currently has a Zacks Rank #2 (Buy). Its rival
) recently reported modest results for the first quarter of
fiscal 2013 with a net income of $1.57 billion (€1.21 billion) or
$1.84 per share (€1.42) compared to $1.79 billion (€1.38 billion)
or $2.02 per share (€1.56) in the year-earlier quarter. Siemens
carries a Zacks Rank #1 (Strong Buy).
The company's competitors who are yet to report their
financial results include
Esco Technologies Inc
), which carry Zacks Rank # 1 and Zacks Rank #2,
1€= $1.29708 (October 1, 2012 to December 31, 2012)
ESCO TECH INC (ESE): Free Stock Analysis
KONINKLIJKE PHL (PHG): Free Stock Analysis
SIEMENS AG-ADR (SI): Free Stock Analysis
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