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Philips Reports Improved Q1 Net Income
Apr 20, 2006
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In the first quarter, Philips recorded net income of 160 million euros (approx. U.S. $197.2 million), compared with net income of 117 million euros (approx. $144.1 million) in the corresponding period of 2005. The increase was primarily attributable to improved performance of the main divisions, particularly Semiconductors and Lighting.

Sales increased strongly to 14 percent above the first quarter of 2005. Adjusted for the effects of currency movements and consolidation changes, comparable sales increased by 10 percent, driven by strong growth in all main divisions.

EBIT amounted to 335 million euros (approx. 412.5 million), compared to 207 million euros (approx. $254.9 million) in the same period of last year. The increase was largely driven by higher sales and improved business performance, particularly in the Semiconductors and Lighting divisions, and a 30 million euros (approx. $36.9 million) gain on the sale of the CryptoTec encryption business reported under Other Activities.

Financial income and expenses resulted in an expense of 23 million euros (approx. $28.3 million), an improvement of 25 million euros (approx. $30.8 million) compared to the first quarter of 2005. This improvement mainly resulted from a 20 million euro (approx. $24.6 million) revaluation of the option on the convertible bond issued by TPV.

Unconsolidated companies recorded a loss of 36 million euros (approx. $44.3 million), compared to a profit of 22 million euros (approx. $27.1 million) in the first quarter of 2005. In the first quarter of 2005, income from TSMC of 71 million euros (approx. $87.4 million) was reported under results relating to unconsolidated companies. From 2006, a change in accounting treatment means that Philips no longer recognizes income from TSMC but rather will recognize a dividend, which will be reported in second quarter of 2006 under financial income and expense.

Cash outflow from operating activities increased to 867 million euros (approx. $1.1 billion), compared to 332 million euros (approx. $408.4 million) in the first quarter of 2005. The increase was entirely due to 582 million euros (approx. $715.9 million) additional funding for the United Kingdom pension fund. Inventories as a percentage of sales amounted to 12.3 percent, marginally higher than in the first quarter of 2005.

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