Philips 2004 Annual Report Download - page 76

The Company has a number of commercial agreements such as
supply agreements. Such agreements provide that certain penalties
may be charged to the Company if the Company does not fulfil its
commitments.
Additionally, the Company has an agreement with Jabil Circuit Inc.,
under which it is required to make minimum product purchases in
accordance with the following schedule:
2005 EUR 900 million
2006 EUR 900 million
Philips is of the opinion that it has adequate financial resources to
finance working capital needs. Furthermore, the Company has no
material commitments for capital expenditures.
The Company sponsors pension plans in many countries in
accordance with legal requirements, customs and the local
situation in the countries involved. The majority of employees in
Europe and North America are covered by defined-benefit plans.
Contributions are made by the Company, as necessary, to provide
assets sufficient to meet future benefits payable to plan
participants.
The Company expects considerable cash outflows in relation to
employee benefits, which are estimated to amount to EUR 445
million in 2005 (2004: EUR 465 million) and comprise of EUR 311
million employer contributions to defined-benefit pension plans,
EUR 56 million employer contributions to defined-contribution
plans and EUR 78 million expected cash outflows in relation to
unfunded pension plans. The expected amounts of cash outflows in
2005 and in subsequent years are uncertain and may change
substantially as a consequence of changes in actual versus currently
assumed discount rates
(for the Netherlands: 4.5%; for other countries: 5.4%),
estimations of compensation increases (for the Netherlands
until 2008: 2%, from 2008 onwards: 1%; for other countries: 3.5%)
and returns on pension plan assets (for the Netherlands: 6.0%;
for other countries: 6.5%).
75Philips Annual Report 2004