Philips Reaches $1.1B Settlement On US Sleep Apnea Devices' Claims, Backs Annual Guidance

Monday, Koninklijke Philips N.V. PHG said it reached a $1.1 billion settlement in the U.S. related to the recall of its Respironics ventilators.

Philips and the plaintiffs’ leadership, through a Court-appointed mediator, have reached an agreement to resolve the personal injury litigation and the medical monitoring class action in the U.S.

The settlement addresses ~58,000 individuals who filed a claim or entered the census registry.

Philips and Philips Respironics do not admit fault, liability, or any injuries caused by the devices.

Philips Respironics has agreed to pay the capped total of $1.1 billion (covering all costs); the related payments are expected in 2025 and will be funded from the company’s cash flow generation.

Consequently, a 982 million euro provision was recognized in the first quarter.

Philips also agreed with insurers to pay Philips 540 million euros to cover Respironics recall-related product liability claims. This income is expected to be recognized in the second quarter of 2024, and payment is expected in 2024.

Recently, Philips Respironics signed a consent decree and obtained the final court approval for the previously announced economic loss settlement in the U.S.

Philips reported first-quarter sales of $4.49 billion, beating the consensus of $4.46 billion.

Comparable sales increased 2.4%, driven by growth in the Diagnosis & Treatment and Personal Health segments, partly offset by a decline in Connected Care.

The company reported adjusted EPS of $0.28, which is in line with the consensus of $0.28.

Adjusted EBITA improved to 388 million euros and the margin increased to 9.4%, driven by productivity and pricing actions.

Comparable order intake fell due to slower sales in China and was 3.8% lower during the quarter.

Guidance: For 2024, Philips reiterates its comparable sales growth of 3%-5%, with an adjusted EBITA margin of 11%-11.5%.

The expected free cash flow is now increased to 0.9-1.1 billion euros in 2024, including the receipt from insurers for the Respironics product liability claims and the remaining payment related to the economic loss settlement. 

The personal injury and medical monitoring litigation settlement payment is expected in 2025.

Price Action: PHG shares are up 36.7% at $28.80 during the premarket session at the last check Monday.

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