Philips 2004 Annual Report Download - page 152

parties in state and federal proceedings for the clean-up of various sites, including Superfund
sites. The Company applies the provisions of SOP 96-1, ‘Environmental Liabilities’, and SFAS
No. 5, ‘Accounting for Contingencies’, and accrues for losses associated with environmental
obligations when such losses are probable and reasonably estimatable.
Generally, the costs of future expenditures for environmental remediation obligations are not
discounted to their present value since the amounts and the timing of related cash payments are
not reliably determinable. Potential insurance recoveries are recognized when recoveries are
deemed probable.
Litigation
Royal Philips Electronics and certain of its Group companies are involved as plaintiff or
defendant in litigation relating to such matters as competition issues, commercial transactions,
product liability, participations and environmental pollution. Although the ultimate disposition
of asserted claims and proceedings cannot be predicted with certainty, it is the opinion of the
Company’s management that the outcome of any such claims, either individually or on a
combined basis, will not have a material adverse effect on the Company’s consolidated financial
position, but could be material to the consolidated results of operations of the Company for a
particular period.
Volumetrics
In 2004, Philips reached a settlement with Volumetrics Medical Imaging, Inc. regarding a pending
dispute with Volumetrics relating to the decision of a Philips Ultrasound business not to
collaborate with or acquire Volumetrics, a decision that occurred after the announcement of
Philips Medical Systems’ acquisition of Agilent Technologies, Inc.’s Healthcare Solutions Group.
The settlement amounts to EUR 133 million, net of an insurance recovery, and contains no
admission of wrongdoing by Philips or its subsidiaries. Given the financial risks associated with
prolonging this dispute, Philips took the opportunity to resolve this matter.
MedQuist
MedQuist, Inc., in which Philips holds approximately 70.9% of the common stock is the subject
of an ongoing investigation by the U.S. Securities and Exchange Commission relating to the
company’s billing practices and related matters. In addition thereto, various plaintiffs, including
current and former customers, shareholders and transcriptionists, filed four putative class
action lawsuits arising from allegations of, among other things, inappropriate billing by MedQuist
for its transcription services. These matters are in their initial stages and, on the basis of current
knowledge, the Company’s management cannot establish whether a loss is probable with
respect to these actions.
Asbestos
Judicial proceedings have been brought in the United States, relating primarily to the activities of
subsidiaries prior to 1981, involving allegations of personal injury from alleged asbestos
exposure. The claims generally relate to asbestos used in the manufacture of unrelated
companies’ products in the United States and frequently involve claims for substantial general
and punitive damages.
At December 31, 2004, there were 2,909 cases pending, representing 6,028 claimants
(compared to 1,081 cases, representing 2,753 claimants pending at December 31, 2003, and 499
cases, representing 558 claimants pending at December 31, 2002). Most of the claims are in
151Philips Annual Report 2004