On Jan. 22, global consumer electronics giant Koninklijke Philips (NYSE:PHG) released fourth-quarter 2006 earnings for the period ending Dec. 31, 2006.

  • The abrupt margin jump between the operational and net lines is a tax effect -- a couple of tax effects, really. The year-ago period included a $309 million tax on internal ownership changes in shares of Taiwan Semiconductor (NYSE:TSM), and this year's results include a reduced Dutch corporate tax rate.
  • If you use operational income rather than the bottom line, you get a significantly worse return on equity -- 11.7% versus last year's 19.5%.
  • Did you know that Philips is a five-star stock, according to our CAPS investor community? Weigh in with your own research and opinions right here. It's fun, free, and financially fruitful.

(Figures in millions of dollars at historical average Euro exchange rates, except per-share data)

Income Statement Highlights

Q4 2006

Q4 2005

Change

Sales

$9,676

$10,555

(8.3%)

Net Profit

$810

$428

89.2%

EPS

$0.65

$0.37

75.2%

Diluted Shares

1,227.3

1,144.6

7.2%


Get back to basics with a look at the income statement.

Margin Checkup

Q4 2006

Q4 2005

Change*

Gross Margin

33.1%

30.2%

3.0

Operating Margin

8.2%

9.7%

(1.5)

Net Margin

8.4%

4.1%

4.3
*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

Q4 2006

Q4 2005

Change*

Return On Average Assets

7.1%

4.0%

3.1

Return On Average Equity

12.0%

8.2%

3.8
*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets

Q4 2006

Q4 2005

Change

Cash + ST Invest.

$7,399

$6,821

8.5%

Accounts Rec.

$5,682

$5,977

(4.9%)

Inventory

$3.429

$3,604

(4.9%)


Liabilities

Q4 2006

Q4 2005

Change

Accounts Payable

$4,107

$4,455

(7.8%)

Long-Term Debt

$3,579

$4,278

(16.4%)


Learn the ways of the balance sheet.

Cash Flow Highlights

Q4 2006

Q4 2005

Change

Cash From Ops.

$881

$1,881

(53.2%)

Capital Expenditures

$88

$57

55.4%

Free Cash Flow

$793

$1,825

(56.5%)

Owner Earnings

$865

$617

40.2%


Find out why Fools always follow the money.

Cash Conversion Checkup

Q4 2006

Q4 2005

Change

Days in Inventory

52.3

53.6

(1.4)

Days in Receivables

52.6

55.3

(2.6)

Days Payables Outstanding

56.0

55.5

0.5

Cash Conversion Cycle

48.9

53.4

(4.5)


Read up on cash conversion metrics.

Related Companies:

  • Universal Display (NASDAQ:PANL)
  • SonoSite (NASDAQ:SONO)
  • General Electric (NYSE:GE)
  • IBM (NYSE:IBM)

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

Universal Display and SonoSite are both Motley Fool Rule Breakers recommendations. What makes them so special? Find out with a free 30-day trial to our ultimate growth-stock service.

At the time of publication, Anders Bylund was a shareholder in Universal Display and Taiwan Semiconductor, but held no other position in any company mentioned. Fool rules are here.