Press release
April 26, 2018

Philips Lighting reports first quarter sales of EUR 1.5 billion andoperational profitability of 7%First quarter 2018 highlights¹• Sales of EUR 1,501 million, a comparable decrease of 3.5%
• Total LED-based comparable sales growth of 5.6%, representing 68% of total sales (Q1 2017: 61%)
• Adjusted EBITA of EUR 106 million (Q1 2017: EUR 127 million)• Adjusted EBITA margin decreased 50 basis points to 7.0%; improvements in Lamps, LED and Professional offset
by Home• Cost reduction initiatives on track; adjusted indirect costs down 13%• Net income of EUR 20 million (Q1 2017: EUR 61 million) reflecting higher restructuring costs, lower profitability
and a one-off real estate gain in Q1 2017
• Free cash flow of EUR -6 million (Q1 2017: EUR -17 million excluding real estate proceeds)
Eindhoven, the Netherlands – Philips Lighting (Euronext: LIGHT), the world leader in lighting, today announced thecompany’s 2018 first quarter results. “As previously indicated, the first quarter marks a soft start to the year, mainly
due to a weak performance in Home, most notably in the United States. Our other three businesses further
improved their operational profitability, particularly Professional which increased its adjusted EBITA margin by 310
basis points,” said Eric Rondolat, CEO of Philips Lighting. “I am pleased with the progress made on the cost side witha 13% reduction in our indirect cost base, and with our free cash flow performance after a strong fourth quarter. Our
focus remains on implementing our strategy toward the shift to LED, Systems & Services.”

Outlook
We aim to improve our Adjusted EBITA margin from 9.6% to 10.0-10.5%. We will continue to focus on our cost
reduction initiatives, and expect to benefit from higher savings as of the second half of 2018. We also aim to deliver
positive comparable sales growth for the full year on the basis of a strong second half. We expect to generate solid
free cash flow in 2018, which is, however, expected to be somewhat lower than the level in 2017 due to higher
restructuring payments.

¹This press release contains certain non-IFRS financial measures and ratios, such as comparable sales growth, EBITA, adjusted EBITA and free cash
flow, and related ratios, which are not recognized measures of financial performance or liquidity under IFRS. For a reconciliation of these non-IFRS
financial measures to the most directly comparable IFRS financial measures, see appendix B, Reconciliation of non-IFRS financial measures, of thispress release.

Page: 2

Changes to financial reporting
As of the first quarter of 2018, Philips Lighting reports and discusses its financial performance based on the recently
announced portfolio changes to further align the organizational structure with the strategy. In March 2018, thecompany provided an update to show the effect of changes to the business portfolio as well as changes to theallocation methods of centrally-managed costs and to the threshold for other incidental items as adjusting items whenpresenting certain non-IFRS measures such as Adjusted EBITA.

Financial review
in € million, except percentages

2017First quarter
2018

changeComparable sales growth
Effects of currency movements
Consolidation and other changes
Sales
Adjusted gross margin
Adj. gross margin (as % of sales)

1,690
670
39.7%

1,501
580
38.6%

Adj. SG&A expenses
Adj. R&D expenses
Adj. indirect costs
Adj. indirect costs (as % of sales)

-483
-88
-570
33.8%

-417
-81
-498
33.2%

Adjusted EBITA
Adjusted EBITA margin (%)
Adjusted items
EBITA

127
7.5%
-4
122

106
7.0%
-43
62

-16.8%

Income from operations (EBIT)Net financial income/expense
Income tax expense
Net income

94
-11
-23
61

39
-9
-10
20

-58.2%

2
0.43
34,379-6
0.15
31,615

Free cash flow
Basic EPS (€)
Employees (FTE)

-3.5%
-7.1%
-0.6%
-11.2%-13.5%

12.8%-48.9%-67.0%First quarter
Sales amounted to EUR 1,501 million. Adjusted for -7.1% currency effects and -0.6% consolidation impact, comparable
sales decreased by 3.5%. LED and Professional delivered positive comparable sales growth, which was more than offset
by Lamps and Home. Total comparable LED-based sales grew by 5.6% and now represent 68% of total sales comparedwith 61% in the same quarter last year. The adjusted gross margin declined by 110 basis points to 38.6%, largely due
to lower sales levels. Price erosion slowed down, and the impact was partly offset by ongoing procurement savings.
Adjusted indirect costs decreased by EUR 72 million, or 60 basis points as a percentage of sales, as a result of rigorous
implementation of cost reduction initiatives. Adjusted EBITA amounted to EUR 106 million, an Adjusted EBITA marginof 7.0% compared with 7.5% last year. Restructuring and incidental items amounted to EUR 43 million. Restructuringcosts were EUR 39 million and incidental items were EUR 4 million. Net income was EUR 20 million compared with EUR
61 million last year, mainly due to lower operational profitability (EUR -21 million), higher restructuring costs (EUR -29
million) and a real estate gain in Q1 2017 (EUR 15 million). Free cash flow amounted to EUR -6 million compared with
EUR 2 million in the same period last year. In 2017, free cash flow was positively impacted by the proceeds from thesale of real estate of EUR 19 million.

Page: 3

Business highlights for the first quarter
•
•

•

•

•

•

•

•

Philips Lighting announced its intention to change its company name to Signify. The company will continue to use
the Philips brand for its products under the existing licensing agreement with Royal Philips.
Philips Lighting was included in Euronext’s AEX Index on March 19, 2018. The AEX Index is a free-float adjusted
market capitalization index that reflects the performance of the 25 largest shares listed on Euronext Amsterdam
and is the most important indicator of the Dutch stock market.
LED: Philips Lighting introduced the Philips Trueforce LED Road and the Philips CorePro LEDtube Universal T8,
supporting our continuous innovation in LED products. The Trueforce LED Road is the first of its kind to fit into thestandard E27 fixture and reduces the time needed to maintain, replace and fit each street light. With the additionof the CorePro LEDtube Universal T8 for trade customers, Philips Lighting offers the broadest range of LED tubes
for different applications in the industry.
Professional: Continuing our leadership in Systems and Services, we launched Interact, our new Internet of Things
platform. Interact is designed to collect, process and analyze large volumes of data from the growing number ofconnected light points, sensors, devices and systems. The IoT platform can create data-enabled services forcustomers that deliver benefits beyond illumination. Philips Lighting also introduced connected lighting systems
under the Interact name. These systems can generate and upload data to the Interact IoT platform.
Professional: Exemplifying the company’s innovation leadership, Philips Lighting is the first major global lighting
company to LiFi-enable luminaires from its existing office lighting portfolio. LiFi is a two-way, high-speed wirelesstechnology similar to WiFi, but uses light waves instead of radio waves to transmit data in a highly secure way. Thismeans LiFi can be used in places where radio frequencies may interfere with equipment, such as in hospitals.
Professional: Philips Lighting launched a new range of solar-powered products and systems, including the Philips
LifeLight solar lantern, which comes with a replaceable battery that extends the product’s life far beyond its two
years warranty, and the Philips SunStay, an innovative all-in-one solar street light that is compact and easy to installand maintain.
Professional: Together with American Tower Corporation, we announced that we will provide the City of
Huntington Beach, CA with our newly developed Smart Fusion Pole. These poles provide the city infrastructure withwireless broadband connectivity in an aesthetically designed, energy-efficient street light pole.
Home: Philips Hue further strengthened its leadership position by announcing the launch of a Hue product line foroutdoor in Europe and the United States this summer. The company also announced new ‘Friends of Hue’ luminaire
partners in the United States and Europe, with the latter offering consumers Hue-compatible wall switches in avariety of designs, turning traditional light switches into smart controls. Finally, a fully redesigned app for Hue (app3.0), will launch in Spring 2018.

Page: 4

Operational performance by business groupLamps
in € million, unless otherwise indicated2017

First quarter
2018

Comparable sales growth (%)
Sales
Adjusted EBITA
Adjusted EBITA margin (%)
EBITA
Income from operations (EBIT)

490
100
20.4%
108
108

370
78
21.2%
62
62

change-17.6%-24.4%-21.4%First quarter
Sales amounted to EUR 370 million, a comparable decline of 17.6% which is estimated to be lower than the market
decline, resulting in continued market share gains. Ongoing procurement savings, productivity and lower indirect costs
further improved the Adjusted EBITA margin by 80 basis points to 21.2%. Adjusted EBITA amounted to EUR 78 million.

LEDin € million, unless otherwise indicated2017

First quarter
2018

Comparable sales growth (%)
Sales
Adjusted EBITA
Adjusted EBITA margin (%)
EBITA
Income from operations (EBIT)

468
40
8.5%
43
42

444
43
9.6%
42
41

change
3.6%
-5.1%
6.8%

First quarter
Sales amounted to EUR 444 million, a comparable increase of 3.6% on the back of a high comparison base. Growth in
LED lamps remained robust, with volume gradually converging to market growth while price erosion is reducing. LED
electronics sales were flat due to lower demand by OEMs, particularly from Tier 1 customers. Adjusted EBITA increased
to EUR 43 million. The Adjusted EBITA margin improved by 110 basis points to 9.6% due to lower price erosion, mix
improvement and lower indirect costs.

Professionalin € million, unless otherwise indicated2017

First quarter
2018

Comparable sales growth (%)
Sales
Adjusted EBITA
Adjusted EBITA margin (%)
EBITA
Income from operations (EBIT)

621
13
2.1%
11
-15

593
31
5.2%
28
7

change3.2%-4.5%
141.8%

Page: 5

First quarter
Sales amounted to EUR 593 million, an increase of 3.2% on a comparable basis. The performance in Europe and theRest of the World continued to be solid. The market for small- to medium-sized projects remained difficult in the UnitedStates. Market conditions in Saudi Arabia continued to be challenging, negatively impacting comparable sales growthby 220 basis points. Adjusted EBITA more than doubled and amounted to EUR 31 million. This resulted in an
improvement of the Adjusted EBITA margin of 310 basis points to 5.2%, mainly driven by operational leverage,
manufacturing footprint rationalization and lower indirect costs.

Homein € million, unless otherwise indicated2017

First quarter
2018

Comparable sales growth (%)
Sales
Adjusted EBITA

106
1

92
-21

Adjusted EBITA margin (%)

0.5%-23.1%

EBITA

-1

-22

Income from operations (EBIT)

-2

-22

change-6.4%-13.3%First quarter
Sales amounted to EUR 92 million, a decrease of 6.4% on a comparable basis due to lower than expected sales at ourtrade partners in the fourth quarter, most notably in the United States. This resulted in lower sales in the first quarter
to allow for inventory reductions at our trade partners. Adjusted EBITA amounted to EUR -21 million. The Adjusted
EBITA margin of -23.1% was mainly the result of lower fixed cost absorption and investments in growth since the firstquarter of 2017. As a consequence, we are undertaking a set of actions to improve performance over the coming
quarters.

Other
First quarter
Adjusted EBITA amounted to EUR -25 million in the quarter (Q1 2017: EUR -26 million). It represents amounts notallocated to the operating segments and includes certain costs related to central R&D activities to drive innovation as
well as group enabling functions. EBITA amounted to EUR -47 million (Q1 2017: EUR -37 million), including
restructuring costs of EUR 18 million (Q1 2017: EUR 1 million). Other incidental items not part of the Adjusted EBITA
included EUR 4 million of costs related to the separation and the company name change (Q1 2017: EUR 9 million).

Page: 6

Sales by marketin € million, except percentages

2017First quarter
2018
changeCSG*

Europe**AmericasRest of the World
Global businesses
Total

564
534
490
103
1,690

557
417
433
95
1,501

-0.6%
-9.8%
-0.7%
-1.6%
-3.5%

-1.3%
-22.0%-11.5%-7.8%-11.2%* CSG: Comparable Sales Growth**

Russia & Central Asia is now included in Market Group Europe (was previously part of Rest of the World)First quarter
Comparable sales in Europe decreased by 0.6% with a solid performance in the Benelux, Eastern Europe and theNordics offset by a weak performance in the UK & Ireland. In the Americas, comparable sales declined by 9.8%, mainly
due to the continued decline in Lamps and weak sell-in levels in Home. Comparable sales for the Rest of the World
decreased by 0.7%, with a solid performance in markets like India and Greater China, offset by continued challenging
market conditions in Saudi Arabia.

Financial condition
Working capital
31 Mar '17

31 Dec '17

31 Mar '18

Inventories
Receivables
Accounts and notes payable
Accrued liabilities
Other*

982
1,472-1,034
-450
-253

924
1,373
-1,001
-475
-224

957
1,235
-949
-413
-218

Working capital
As % of LTM** sales

717
10.1%

597
8.6%

612
9.0%

in € million, unless otherwise indicated*Working capital definition has been updated and no longer includes income tax receivable and income tax payable** LTM: Last Twelve Months

First quarter
Working capital improved year-on-year by EUR 105 million to EUR 612 million. Working capital represents 9.0% ofsales, compared with 10.1% at the end of March 2017, mainly driven by lower receivables and inventory levels.

Cash flow analysis
in € million

Income from operations (EBIT)
Depreciation and amortization
Additions to (releases of) provisions
Utilizations of provisions
Change in working capitalInterest paid
Income taxes paid
Net capex
Other
Free cash flow

First quarter
2017
94
66
31
-66
-49
-3
-28
-1
-43
2

2018
39
58
54
-59
-41
-5
-35
-21
3
-6

Page: 7

First quarter
Free cash flow amounted to EUR -6 million compared with EUR 2 million in the same period last year. Excluding theproceeds of a real estate sale of EUR 19 million in Q1 2017, free cash flow improved compared with the same period
last year. Free cash flow in Q1 2018 included a restructuring pay-out of EUR 31 million (Q1 2017: EUR 29 million) anda charge of EUR 4 million related to separation and company name change costs (Q1 2017: EUR 6 million).

Net debt
in € million

Short-term debt
Long-term debt
Gross debt
Short-term loans receivable from Royal Philips
Cash and cash equivalents
Net debt
Total equity

31 Mar '17

31 Dec '17

31 Mar '18

146
1,214
1,360
9
935
416
2,746

140
1,170
1,309
942
367
2,321

111
1,157
1,267
833
435
2,202

First quarter
Net debt amounted to EUR 435 million, an increase of EUR 68 million compared with the end of 2017. Total equity
reduced to EUR 2,202 million at the end of the first quarter (YE 2017: EUR 2,321 million), primarily due to currencytranslation results and the share repurchase in February, partly offset by net income.

Page: 8

Other information
Appendix A – Financial Statement Information
Appendix B – Reconciliation of non-IFRS Financial Measures
Appendix C – Financial Glossary***
Financial calendar 2018
May 15, 2018
July 27, 2018
October 26, 2018

Annual General Meeting of Shareholders
Half year results 2018
Third quarter results 2018

Conference call and audio webcast
Eric Rondolat (CEO) and Stéphane Rougeot (CFO) will host a conference call for analysts and institutional investors at
09:00 a.m. CET to discuss first quarter results. A live audio webcast of the conference call will be available via thePhilips Lighting Investor Relations website.

For further information, please contact:
Philips Lighting Investor Relations
Robin Jansen
Tel: +31 6 1594 4569
E-mail: robin.j.jansen@philips.com
Philips Lighting Communications
Elco van GroningenTel: +31 6 1086 5519
E-mail: elco.van.groningen@philips.com

About Philips Lighting
Philips Lighting (Euronext: LIGHT), the world leader in lighting products, systems and services, delivers innovations that
unlock business value, providing rich user experiences that help improve lives. Serving professional and consumer
markets, we lead the industry in leveraging the Internet of Things to transform homes, buildings and urban
spaces. With 2017 sales of EUR 7.0 billion, we have approximately 32,000 employees in over 70 countries. News from
Philips Lighting is located at the Newsroom, Twitter and LinkedIn. Information for investors can be found on theInvestor Relations page.

Page: 9

Important Information
Forward-Looking Statements and Risks & Uncertainties

This document and the related oral presentation contain, and responses to questions following the presentation may contain,
forward-looking statements that reflect the intentions, beliefs or current expectations and projections of Philips Lighting N.V. (the“Company”, and together with its subsidiaries, the “Group”), including statements regarding strategy, estimates of sales growthand future operational results.
By their nature, these statements involve risks and uncertainties facing the Company and its Group Companies and a number ofimportant factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement
as a result of risks and uncertainties. Such risks, uncertainties and other important factors include but are not limited to: adverse
economic and political developments, the impacts of rapid technological change, competition in the general lighting market,
development of lighting systems and services, successful implementation of business transformation programs, impact ofacquisitions and other transactions, impact of the Group’s operation as a separate publicly listed company, pension liabilities andcosts, establishment of corporate and brand identity, adverse tax consequences from the separation from Royal Philips andexposure to international tax laws. Please see “Risk Factors and Risk Management” in Chapter 12 of the Annual Report 2017 fordiscussion of material risks, uncertainties and other important factors which may have a material adverse effect on the business,
results of operations, financial condition and prospects of the Group. Such risks, uncertainties and other important factors should
be read in conjunction with the information included in the Company’s Annual Report 2017.
Risks currently not known to the Group or that the Group has not considered material as of the date of this document could also
prove to be important and may have a material adverse effect on the business, results of operations, financial condition andprospects of the Group or could cause the forward-looking events discussed in this document not to occur. The Group undertakes
no duty to and will not necessarily update any of the forward-looking statements in light of new information or future events, except
to the extent required by applicable law.

Market and Industry Information

All references to market share, market data, industry statistics and industry forecasts in this document consist of estimates compiled
by industry professionals, competitors, organizations or analysts, of publicly available information or of the Group’s own assessmentof its sales and markets. Rankings are based on sales unless otherwise stated.

Non-IFRS Financial Measures

Certain parts of this document contain non-IFRS financial measures and ratios, such as comparable sales growth, adjusted grossmargin, EBITA, adjusted EBITA, and free cash flow, and other related ratios, which are not recognized measures of financial
performance or liquidity under IFRS. The non-IFRS financial measures presented are measures used by management to monitor theunderlying performance of the Group’s business and operations and, accordingly, they have not been audited or reviewed. Not allcompanies calculate non-IFRS financial measures in the same manner or on a consistent basis and these measures and ratios may
not be comparable to measures used by other companies under the same or similar names. A reconciliation of these non-IFRS
financial measures to the most directly comparable IFRS financial measures is contained in this document. For further information
on non-IFRS financial measures, see “Chapter 18 Reconciliation of non-IFRS measures” in the Annual Report 2017.

Presentation

All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up to totals provided. All
reported data are unaudited. Unless otherwise indicated, financial information has been prepared in accordance with theaccounting policies as stated in the Annual Report 2017.

Changes to financial reporting following organizational changes to further align the organizational
structure with the strategy

As the market trend of both professionals and consumers switching from buying lamps and luminaires to integrated LED luminaires
is accelerating, the company has decided to modify the current portfolios of its business groups. As of January 1, 2018, Philips
Lighting has implemented the following changes to the following portfolios:• Consumer and professional trade downlights, the recessed spots portfolio and the LED Light strips moved from Home andProfessional to LED;
• Consumer LED functional ceiling products moved from Home to LED;
• LED battens moved from Home to Professional; and• Consumer and professional trade LED panels moved from Home and LED to Professional.

Page: 10•

Next to this, the financial performance of the Ventures activities is reported in Other instead of in Professional and in Home, as
these activities are managed outside of the aforementioned business groups. In addition, the switches business within Lamps has
been moved to LED.

Therefore, with effect from the first quarter of 2018, Philips Lighting reports and discusses its financial performance based on theabove portfolio changes. In March 2018, the company provided an update to show the effect of changes to the business portfolio as
well as changes to the allocation methods of centrally-managed costs and expenses and threshold for other incidental items as
adjusting items when presenting certain non-IFRS measures such as Adjusted EBITA.
In addition, the cash flow presentation has been amended to better correspond to the balance sheet and to further improvetransparency on cash flow movements. As of the first quarter of 2018, Philips Lighting will provide cash flow statements per quarter.

Market Abuse Regulation

This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

Page: 11

Appendix A – Financial statement information
A. CONDENSED CONSOLIDATED STATEMENTS OF INCOME

In millions of EUR
Q1
Sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Financial income
Financial expenses
Results relating to investments in associates
Income before taxes
Income tax expense
Net income
Attribution of net income for the period:
Net income (loss) attributable to shareholders of Philips Lighting N.V.
Net income (loss) attributable to non-controlling interests
Amounts may not add up due to rounding

2017

2018

1,690
(1,023)
667
(497)
(89)
16
(3)
94
2
(13)
1
84
(23)
61

1,501
(936)
565
(430)
(95)
2
(2)
39
4
(13)
30
(10)
20

64
(3)

21
(1)

Page: 12

B. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
in millions of EUR
Q1
Net income for the period

2017
61

2018
20

1
1

(3)
(3)

Pensions and other post-employment plans:Remeasurements
Income tax effect on remeasurements
Total of items that will not be reclassified to profit or loss
Currency translation differences:
Net current period change, before tax
Income tax effectCash flow hedges:
Net current period change, before tax
Income tax effectTotal of items that are or may be reclassified to profit or loss

(37)
-

(64)
-

(7)
(44)

10
(2)
(56)

Other comprehensive income (loss)
Total comprehensive income (loss)

(43)
18

(59)
(39)

Total comprehensive income (loss) attributable to:Shareholders of Philips Lighting N.V.
Non-controlling interests

23
(5)

(36)
(3)

Amounts may not add up due to rounding

Page: 13

C. CONDENSED CONSOLIDATED BALANCE SHEETSIn millions of EUR

December 31, 2017

March 31, 2018

Non-current assets
Property, plant and equipment
Goodwill
Intangible assets, excluding goodwill
Non-current receivables
Investments in associates
Other non-current financial assets
Deferred tax assets
Other non-current assets
Total non-current assets

492
1,694
562
49
21
12
440
35
3,306

470
1,649
527
48
21
14
454
34
3,218

Current assets
Inventories
Other current assets
Derivative financial assets
Income tax receivable
Receivables
Assets classified as held for sale
Cash and cash equivalents
Total current assets
Total assets

924
77
16
39
1,373
1
942
3,372
6,678

957
106
17
36
1,235
3
833
3,187
6,405

EquityShareholders’ equity
Non-controlling interests
Total equity

2,242
79
2,321

2,129
73
2,202

Non-current liabilities
Long-term debt
Long-term provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities

1,170
777
27
167
2,140

1,157
773
22
170
2,122

140
8
79
1,001
475
204
-

111
8
71
949
413
195
-

309
2,216
6,678

334
2,081
6,405

Current liabilities
Short-term debt
Derivative financial liabilities
Income tax payable
Account and notes payable
Accrued liabilities
Short-term provisions
Liabilities directly associated with assets classified held for
sale
Other current liabilities
Total current liabilities
Total liabilities and total equity
Amounts may not add up due to rounding

Page: 14

D. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSIn millions of EUR

January to March
2017

2018

61
101
66

20
132
58

(2)
(15)
(2)
5
23
31
(5)
(49)
126
(101)
18
(92)
(14)
(66)
(3)
(28)
3

(1)
(3)
8
10
54
5
(41)
98
(54)
(37)
(48)
3
(59)
(5)
(35)
16

Cash flows from investing activities
Net capital expenditures:• Additions of intangible assets• Capital expenditures on property, plant and equipment• Proceeds from disposal of property, plant and equipment
Net proceeds from (cash used for) derivatives and current financial assets
Proceeds from other non-current financial assets
Purchases of other non-current financial assets
Purchases of businesses, net of cash acquired
Proceeds from sale of interests in businesses, net of cash disposed of
Net cash used for investing activities

(1)
(5)
(15)
19
2
(1)
(2)
(3)

(21)
(7)
(15)
15
1
(3)
(9)

Cash flows from financing activities
Funding by (distribution to) Royal Philips
Dividends paid
Proceeds from issuance (payments) of debt
Purchases of treasury shares
Net cash provided by (used for) financing activities
Net cash provided by (used for) operations

(12)
(8)
(82)
(101)
(101)

(17)
(71)
(88)
(81)

Effect of changes in exchange rates on cash & cash eq. and bank overdrafts
Cash and cash equivalents and bank overdrafts at the beginning of the period 1)
Cash and cash equivalents and bank overdrafts at the end of the period 1)

(4)
1,040
935

(20)
925
825

Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:• Depreciation, amortization and impairment of non-financial assets• Impairment (reversal) of goodwill, other non-current financial assets andinvestments in associates• Net gain on sale of assets• Interest income• Interest expense on debt, borrowings and other liabilities• Income tax expense• Additions to (releases of) provisions• Other items
Decrease (increase) in working capital:• Decrease (increase) in receivables• Decrease (increase) in inventories• Increase (decrease) in accounts payable• Increase (decrease) in other current assets, accrued and other current liabilities
Increase (decrease) in non-current receivables, other assets and other liabilities
Utilization of provisions
Interest paid
Income taxes paid
Net cash provided by (used for) operating activities

1) For the first quarter of 2018, this included EUR 833 million and EUR 942 million of cash and cash equivalents, and EUR -8 million and EUR -17 million ofbank overdrafts, at the end and the beginning of the period, respectively. For the first quarter of 2017, there were no bank overdrafts.

Amounts may not add up due to rounding

Page: 15

Appendix B – Reconciliation of non-IFRS Financial Measures
Sales growth composition
comparable
growth2018 vs 2017
Lamps
LED
Professional
Home
Other
Total

-17.6
3.6
3.2
-6.4
-71.5
-3.5

comparable
growth2018 vs 2017
EuropeAmericasRest of the World
Global businesses
Total
Amounts may not add up due to rounding

-0.6
-9.8
-0.7
-1.6
-3.5

First quarter
currency
consolidation
effects
and otherchanges
-6.5
-8.1
-7.1
-4.6
-1.8
-7.1

nominalgrowth

-0.3
-0.6
-0.6
-2.2
-0.6

-24.4
-5.1
-4.5
-13.3
-73.3
-11.2

First quarter
currency
consolidation
effects
and otherchangesnominalgrowth

-0.6
-11.8
-9.5
-4.0
-7.1

-0.3
-1.3
-2.2
-0.6

-1.3
-22.0
-11.5
-7.8
-11.2

Page: 16

Adjusted EBITA to Income from operations (or EBIT) in millions of EUR

January to March 2018
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization
Income from operations (or EBIT)
January to March 2017
Adjusted EBITA
Restructuring
Acquisition-related charges
Incidental items
EBITA
Amortization
Income from operations (or EBIT)
Amounts may not add up due to rounding

Philips
Lighting

Lamps

LED

Professional

Home

Other

106
(39)
(4)
62
(23)
39

78
(17)
62
62

43
(1)
42
(1)
41

31
(3)
28
(21)
7

(21)
(1)
(22)
(22)

(25)
(18)
(4)
(47)
(47)

127
(10)
6
122
(28)
94

100
(3)
10
108
108

40
3
43
(1)
42

13
(4)
2
11
(26)
(15)

1
(2)
(1)
(1)
(2)

(26)
(1)
(10)
(37)
(1)
(38)

Page: 17

Income from operations to Adjusted EBITA in millions of EUR
In millions of EUR

January to March 2018
Sales
Cost of sales
Gross margin
Selling, general and administrative
expenses
Research and development expenses
Indirect costs
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Amortization
Income from operations excluding
amortization (EBITA)
January to March 2017
Sales
Cost of sales
Gross margin
Selling, general and administrative
expenses
Research and development expenses
Indirect costs
Impairment of goodwill
Other business income
Other business expenses
Income from operations
Amortization
Income from operations excluding
amortization (EBITA)
Amounts may not add up due to rounding

Reported

Restructuring

Acquisition
relatedcharges

1,501
(936)
565

-

-

-

15
15

-

-

1,501
(921)
580

(430)

10

-

4

(417)

(95)
(526)

15
24

-

4

(81)
(498)

2
(2)
39
(23)

39
-

-

4
-

2
(2)
82
(23)

62

39

-

4

106

1,690
(1,023)
667

3
3

-

-

1,690
(1,019)
670

(497)

6

-

9

(483)

(89)
(586)

1
7

-

9

(88)
(570)

16
(3)
94
(28)

10
-

-

(14)
(6)
-

2
(3)
99
(28)

122

10

-

(6)

127

Incidental
items

Adjusted

Page: 18

Appendix C – Financial glossary
Acquisition-related charges

Adjusted EBITA
Adjusted EBITA margin (%)
Adjusted gross margin
Adjusted indirect costs
Adjusted R&D expenses

Adjusted SG&A expenses

Comparable sales growth
EBIT

Costs that are directly triggered by theacquisition of a company, such as transaction costs,
purchase accounting related costs and integrationrelated expenses
EBITA excluding restructuring costs, acquisitionrelated charges and other incidental charges
Adjusted EBITA divided by Sales to third parties(excluding intersegment)
Gross margin, excluding restructuring costs,
acquisition-related charges and other incidental
items attributable to cost of sales
Indirect costs, excluding restructuring costs,
acquisition-related charges and other incidental
items attributable to indirect costs
Research and development expenses, excluding
restructuring costs, acquisition-related charges andother incidental items attributable to research anddevelopment expenses
Selling, general and administrative expenses,
excluding restructuring costs, acquisition-related
charges and other incidental items attributable toselling, general and administrative expenses
The period-on-period growth in sales excluding theeffects of currency movements and changes in
consolidation and other changes
Income from operations

EBITA

Income from operations excluding amortization andimpairment of acquisition related intangible assets
and goodwill
EBITDA
Income from operations excluding depreciation,amortization and impairment of non-financial assets
Effects of changes in consolidation and other In the event a business is acquired (or divested), thechanges
impact of the consolidation (or de-consolidation) on
the Group’s figures are included (or excluded) in thecomparable figures. Other changes include
regulatory changes and changes originating fromnew accounting standards
Effects of currency movements
Calculated by translating previous periods’ foreign
currency amounts into euro at the following periods’
exchange rates in comparison to the euro as
historically reported
Employees
Employees of Philips Lighting at period end
expressed on a full-time equivalent (FTE) basis
Free cash flow
Net cash provided by operations minus net capital
expenditures. Free cash flow includes interest paid
and income taxes paid
Gross margin
Sales minus cost of sales
Indirect costs
Net capital expenditures

The sum of Selling, General and administrative
expenses and R&D expenses
Additions of intangible assets, capital expenditureson property, plant and equipment and proceedsfrom disposal of property, plant and equipment, andintangible assets

Page: 19

Incidental charges

Net debt
R&D expenses
Restructuring costs

SG&A expenses
Working capital

Any item with an income statement impact (loss orgain) that is deemed to be both significant and notpart of normal business activity. Other incidental
items may extend over several quarters within thesame financial year
Short-term debt, long-term debt minus cash andcash equivalents
Research and development expenses
The estimated costs of initiated reorganizations, themost significant of which have been approved by theGroup, and which generally involve the realignmentof certain parts of the industrial and commercialorganization
Selling, General and Administrative expenses
The sum of Inventories, Receivables, Other current
assets, Derivative financial assets, minus the sum of
Accounts and notes payable, Accrued liabilities,
Derivative financial liabilities, and Other current
liabilities.