Koninklijke Philips Electronics N.V.'s (Philips; A-/Negative/A-2) fourth-quarter 2001 earnings were broadly in line with Standard&Poor's expectations. While the company's operating margins and sales remain very weak, the figures include significant one-time restructuring items (€959 million, primarily impairment charges and acquisition-related costs), and, on a sequential basis, Philips' EBITDA margin--excluding restructuring charges--has improved, thanks mainly to steady performance in its domestic-appliances, medical-systems and lighting businesses. Cash flow generation also improved materially (to €1.7 billion, versus €160 million in third-quarter 2001), resulting in net debt (€7 billion) that was lower than Standard&Poor's initial expectations. For 2002, Standard&Poor's expects Philips to increase its cash flow generation significantly, thanks to the integration of newly acquired businesses, a turnaround
