Philips Sets Aside €288 Million to Settle US Investigations Into Respiratory Device Recall
Key Facts
Philips announced on November 3 that its Respironics unit had reached a preliminary agreement with the US Justice Department to settle previously disclosed criminal and civil investigations related to the unit’s product recall. The company recorded a €288 million provision in the third quarter of 2026 to cover the proposed settlement. In its earnings statement, Philips said the amount would be paid in the first quarter of 2027, subject to completion of the relevant documentation. The proposed agreement sets a framework for resolving the investigations covered by the earlier disclosure, but does not mean the related legal proceedings are complete. The company said the agreement remains at an early stage and requires final documentation.
The provision weighed on third-quarter results, with Philips’ net income falling to €28 million from €187 million in the same period a year earlier. Investing.com attributed the decline to the €288 million settlement provision. Meanwhile, the adjusted earnings before interest, taxes, depreciation and amortization margin rose to 13.0%, up 70 basis points. Philips said the improvement was mainly driven by higher sales, gross margin and productivity measures. These factors were partly offset by cost inflation, according to the company’s statement.
The case dates back to June 14, 2021, when Philips said it had begun a voluntary notification of a recall of certain sleep and respiratory products. The company linked the action to potential health risks involving sound-abatement foam made from PE-PUR material. The concerns it announced included the possible release of particles as the foam degraded, as well as certain volatile organic compounds. As part of the recall response, the US Food and Drug Administration said the consent decree requires Respironics to implement a remediation plan. The plan includes providing affected patients with a new or reworked device, or offering partial refunds for some devices.
The preliminary agreement remains separate from other proceedings related to the Respironics recall. In the third quarter of 2026, the Enterprise Chamber of the Amsterdam Court of Appeal rejected applications by some investors seeking an inquiry into Philips’ affairs over the recall. The company’s 2026 outlook also excludes investigations by other US state authorities, according to the disclosure in its results. The Justice Department agreement therefore does not resolve every track related to the case, even if the parties complete the final documentation for the proposed settlement. Philips has set the first quarter of 2027 as the expected payment date, not a date for closing the other proceedings.
Philips had scheduled an earnings call with Chief Executive Roy Jakobs and Chief Financial Officer Charlotte Hanneman for 10:00 a.m. Central European Time on November 3, 2026. The company said the call would cover its third-quarter results. This follows the announcement of the preliminary agreement and the related provision in its quarterly results. Payment of the proposed amount remains subject to completion of the relevant documentation, according to the company’s statement. Philips said it expects to make the payment in the first quarter of 2027.