Philips 2006 Annual Report Download - page 210

Philips Annual Report 2006210
The weighted average assumptions used to calculate the postretirement
benefi t obligations other than pensions as of December 31 were as follows:
2005 2006
Netherlands other Netherlands other
Discount rate − 6.9% − 7.2%
Compensation
increase (where
applicable) − 5.6% − 5.6%
The weighted average assumptions used to calculate the net cost for
years ended December 31:
2005 2006
Netherlands other Netherlands other
Discount rate 4.5% 6.6% − 6.9%
Compensation
increase (where
applicable) − 5.3% − 5.6%
Assumed healthcare cost trend rates at December 31:
2005 2006
Netherlands other Netherlands other
Healthcare cost
trend rate
assumed for
next year − 9.0% − 8.0%
Rate that the
cost trend rate
will gradually
reach − 5.0% − 5.0%
Year of reaching
the rate at
which it is
assumed to
remain − 2013 − 2014
Sensitivity analysis
Assumed healthcare trend rates have a signifi cant effect on the amounts
reported for the healthcare plans. A one percentage-point change in
assumed healthcare cost trend rates would have the following effects
as at December 31, 2006:
increase
with 1%
decrease
by 1%
Effect on total of service and interest cost 3 (3 )
Effect on postretirement benefi t obligation 31 (26 )
Historical data
2006
Present value of defi ne-benefi t obligation 373
Fair value of plan assets −
(Defi cit) or surplus (373 )
Experience adjustments in % on
- defi ned-benefi t obligations gain (loss) (1.6% )
- fair value of plan assets n.a.
53
Short-term debt
2005 2006
Short-term bank borrowings 541 622
Other short-term loans 49 34
Current portion of long-term debt 578 215
1,168 871
During 2006 the weighted average interest rate on the bank borrowings
was 6.3% (2005: 4.6%).
In the Netherlands, the Company issues personnel debentures with
a 5-year right of conversion into common shares of Royal Philips
Electronics. Convertible personnel debentures may not be converted
within a period of 3 years after the date of issue. These convertible
personnel debentures are available to most employees in the
Netherlands and are purchased by them with their own funds and are
redeemable on demand. The convertible personnel debentures become
non-convertible debentures at the end of the conversion period.
Although convertible debentures have the character of long-term
fi nancing, the total outstanding amounts are classifi ed as current portion
of long-term debt. At December 31, 2006 an amount of EUR 136
million (2005: EUR 155 million) of convertible personnel debentures
was outstanding, with an average conversion price of EUR 21.93. The
conversion price varies between EUR 16.81 and EUR 33.19 with
various conversion periods ending between January 1, 2007 and
December 31, 2011.
The Company has access to a USD 2.5 billion commercial paper
program which was established at the beginning of 2001. The Company
also has available a seven year revolving credit facility for USD 2.5
billion, established in December 2004, that could act as back-up for
the commercial paper program and can also be used for general
corporate purposes. Philips did not use the commercial paper
program or the revolving credit facility during 2006.
112 Group fi nancial statements 172 IFRS information
Notes to the IFRS fi nancial statements
218 Company fi nancial statements