Philips 2005 Annual Report Download - page 163

Philips Annual Report 2005 163
Secured liabilities
Certain portions of long-term and short-term debt have been secured
by collateral as follows:
amount of
the debt collateral
property,
plant and
equipment
other
assets
Institutionalnancing 152 425 190
Other debts 3 3 −
155 428 190
Previous year 242 518 93
Philips currently has a USD 400 million syndicated credit facility in
Singapore, comprising a USD 200 million term loan, of which USD 170
million (EUR 143 million) was outstanding as at 31 December 2005, and
a USD 200 million revolving credit facility which was undrawn as at
31 December 2005. For this facility, EUR 425 million of property, plant
and equipment and EUR 154 million of other assets have been provided
as security.
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Other non-current liabilities
Other non-current liabilities are summarized as follows:
2004 2005
Accrued pension costs 451 665
Sale-and-leaseback deferred income 79 68
Income tax payable 74 59
Asset retirement obligations 28 22
Liabilities arising from guarantees 4 47
Liabilities for restructuring costs −16
Liabilities for employee stock options of subsidiaries −87
Other liabilities 100 148
736 1,112
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Leases
Capital leases
Property, plant and equipment includes EUR 103 million (2004: EUR 83
million)forcapitalleasesandotherbenecialrightsofuse,suchas
buildingsrightsandhirepurchaseagreements.Thenancialobligations
arisingfromthesecontractualagreementsarereectedinlong-termdebt.
Operating leases
Long-term operating lease commitments totaled EUR 957 million at the
end of 2005 (2004: EUR 754 million). These leases expire at various
dates during the next 20 years. The future payments that fall due in
connection with these obligations are as follows:
2006 171
2007 147
2008 128
2009 107
2010 89
Later 315
The long-term operating leases are mainly related to the rental of
buildings. A number of these leases originate from sale-and-leaseback
arrangements. In 2005, two sale-and-operational-leaseback arrangements
in the Netherlands were concluded, in which buildings were sold for an
aggregate amount of EUR 20 million, with leaseback rental periods of
10 and 4 years. In 2004, no sale-and-operational-lease-back arrangements
were concluded. In 2003 there was one sale-and-operational-leaseback
arrangement in Belgium in which a building was sold for an amount of
EUR 14 million. The leaseback rental period is 9 years for the 2003
arrangement. The Company has the option of extending each of the
leasebackterms.Therentalpaymentsarexed.Therentalpaymentsfor
2005 totaled EUR 23 million (2004: EUR 24 million, 2003: EUR 24 million).
The remaining minimum payments are as follows:
2006 20
2007 15
2008 13
2009 13
2010 9
Later 40
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Other commitments and contingent liabilities
The Company has a product supply agreement with Jabil Circuit. Under
the agreement, Jabil will provide design and engineering services, new
product introduction, prototype and test services, procurement, printed
circuitboardassembly,andnalassemblyandintegration.Underthe
agreement, the Company is required to make minimum product
purchases of EUR 900 million in 2006.
The agreement provides that certain penalties may be charged to the
Company if the Company fails to satisfy the volume commitments.
Guarantees
In the normal course of business, the Company issues certain
guarantees.GuaranteesissuedormodiedafterDecember31,2002,
havingcharacteristicsdenedinFIN45,aremeasuredatfairvalueand
recognized on the balance sheet. At the end of 2005 the total fair value
of guarantees recognized by the Company was EUR 50 million.
In connection with Philips’ decision not to inject further capital in
LG.Philips Displays, guarantees of USD 50 million (EUR 42 million)
related to the debt obligations of LG.Philips Displays have now been
fully provided for by the Company on the balance sheet.
GuaranteesissuedbeforeDecember31,2002andnotmodied
afterward, and certain guarantees issued after December 31, 2002, which
donothavecharacteristicsas dened in FIN45, remain off-balance sheet.    
The following table outlines the total outstanding off-balance sheet
credit-related guarantees and other letters of support provided by the
Company as support for non-consolidated companies, and the total
amount of off-balance sheet business-related guarantees provided by
the Company as at December 31, 2005. Philips’ policy is to provide only
written letters of support. The Company does not stand by other
forms of support.
expiration per period
total amounts
committed
less than 1
year 2-5 years after 5 years
2005 569 161 89 319
2004 422 189 92 141
Total outstanding guarantees have risen mainly as a consequence of
Philips Medical Systems conducting business in the Private Financing
Initiative (PFI) market segment. Business in this segment is characterized
by long-term performance-related contracts.
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