<PAGE> 1
1999-3
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 February 11, 1999 through April 22, 1999
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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-__________ .
<PAGE> 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)
<PAGE> 3
QUARTERLY REPORT
March 31, 1999
PHILIPS
<PAGE> 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
<TABLE>
<CAPTION>
January to March
1999 1998
<S> <C> <C>
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
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS*
<TABLE>
<CAPTION>
January to March
1999 1998
<S> <C> <C>
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
</TABLE>
* 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 8
BALANCE SHEETS AND ADDITIONAL RATIOS
all amounts in millions of euros unless otherwise stated
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
March 31, December 31,
<S> <C> <C>
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
</TABLE>
* The current net cash situation renders the net debt to group equity ratio
meaningless.
<PAGE> 9
PRODUCT SECTORS
all amounts in millions of euros unless otherwise stated
SALES AND TOTAL ASSETS
<TABLE>
<CAPTION>
sales (to third parties)
January to March 1999 total assets
% growth 1999 1998
amount nominal comparable * March 31, December 31,
<S> <C> <C> <C> <C> <C>
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
</TABLE>
*Adjusted for the effects of changes in consolidations and
exchange rate movements
SEGMENT REVENUES AND INCOME FROM OPERATIONS
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<PAGE> 10
MAIN COUNTRIES AND GEOGRAPHIC AREAS
all amounts in millions of euros unless otherwise
stated
SALES AND FIXED ASSETS
<TABLE>
<CAPTION>
sales (to third parties) (in)tangible fixed assets
January to March 1999 1999 1998
% growth March 31, December 31,
amount nominal comparable *
<S> <C> <C> <C> <C> <C>
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
</TABLE>
*Adjusted for the effects of changes in consolidations and
exchange rate movements
SEGMENT REVENUES AND INCOME FROM OPERATIONS
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C>
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
</TABLE>
`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
<PAGE> 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
<PAGE> 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
<PAGE> 13
