Philips 2010 Annual Report Download - page 182

25 26 27 28 13 Group financial statements 13.11 - 13.11
182 Annual Report 2010
and indirect purchaser actions in the federal class actions pending in the
Northern District of California. These cases have now proceeded to
discovery. The Court has not set a trial date and there is no timetable
for the resolution of these cases. Philips intends to continue to
vigorously defend these lawsuits.
Certain Philips group companies have also been named as defendants, in
proposed class proceedings in Ontario, Quebec and British Columbia,
Canada and in proceedings in the UK Court, along with numerous other
participants in the industry. Philips intends to vigorously oppose these
claims, and the proceedings remain at a preliminary stage. In Canada,
the plaintiffs have reached a settlement with the Chunghwa defendants,
and the settlement is awaiting final court approval. At this time, no class
proceeding has been certified as against the Philips defendants and no
statement of defense has been filed.
Due to the considerable uncertainty associated with these matters, on
the basis of current knowledge, the Company has concluded that
potential losses cannot be reliably estimated with respect to these
matters. An adverse final resolution of these investigations and litigation
could have a materially adverse effect on the Company’s consolidated
financial position, results of operations and cash flows.
Optical Disc Drive (ODD)
On October 27, 2009, the Antitrust Division of the United States
Department of Justice confirmed that it had initiated an investigation
into possible anticompetitive practices in the Optical Disc Drive (ODD)
industry. Philips Lite-On Digital Solutions Corp. (PLDS), a joint venture
owned by the Company and Lite-On IT Corporation, as an ODD
market participant, is included in this investigation. PLDS is also subject
to similar investigations outside the US relating to the ODD market.
PLDS and Philips intend to cooperate with the authorities in these
investigations.
Subsequent to the public announcement of these investigations in 2009,
the Company, PLDS and Philips & Lite-On Digital Solutions USA, Inc.,
were named as defendants in eight class action antitrust complaints filed
in various federal district courts in the United States. These actions
allege anticompetitive conduct by manufacturers of ODDs and seek
treble damages on behalf of direct and indirect purchasers of ODDs and
products incorporating ODDs. These complaints assert claims under
federal antitrust law, as well as various state antitrust and unfair
competition laws and may involve joint and several liability among the
named defendants. These actions have been consolidated by the Judicial
Panel for Multidistrict Litigation for pre-trial proceedings in the United
States District Court for the Northern District of California.
Consolidated amended complaints were filed on August 26, 2010.
Motions to dismiss these complaints have been filed by various other
defendants and a hearing has been set. The motions seek to dismiss all
claims against these defendants on various grounds. The Company,
PLDS and Philips & Lite-On Digital Solutions USA, Inc. have not yet been
required to move to dismiss or otherwise respond to the consolidated
amended complaints. Discovery is being permitted to move forward,
but is in preliminary stages. Philips intends to vigorously defend these
actions.
The Company and certain Philips group companies have also been
named as defendants, in proposed class proceedings in Ontario,
Quebec and British Columbia, Canada along with numerous other
participants in the industry. These complaints assert claims against
various ODD manufacturers under federal competition laws as well as
tort laws and may involve joint and several liability among the named
defendants. Philips intends to vigorously defend these lawsuits.
These matters are in their initial stages and due to the considerable
uncertainty associated with these matters, on the basis of current
knowledge, the Company has concluded that potential losses cannot be
reliably estimated with respect to these matters. An adverse final
resolution of these investigations and litigation could have a materially
adverse effect on the Company’s consolidated financial position, results
of operations and cash flows.
Philips Polska
In connection with an indictment issued by authorities in Poland in
December 2009 against numerous individuals, including three former
employees of Philips Polska sp. z.o.o., involved in the sale of medical
equipment to hospitals in Poland, Philips has been conducting a review
of certain activities related to sales of medical equipment for potential
violations of the U.S. Foreign Corrupt Practices Act (FCPA). Philips has
reported the review to the U.S. Department of Justice and the U.S.
Securities and Exchange Commission and is cooperating with these
authorities in connection with the review. Potential penalties for
violations of the FCPA and related statutes and regulations include
monetary penalties and criminal sanctions. The Company cannot at this
time quantify meaningfully the possible loss or range of loss to which
this matter may give rise.
25 Cash from (used for) derivatives and securities
A total of EUR 25 million cash was paid with respect to foreign exchange
derivative contracts related to financing activities (2009: EUR 35 million
inflow; 2008: EUR 337 million inflow).
Cash flow from interest-related derivatives is part of cash flow from
operating activities. During 2010, there was no cash flow in relation to
these derivatives (2009: EUR nil million; 2008: EUR 28 million cash
outflow).
26 Proceeds from non-current financial assets
In 2010, the redemption of TPV and CBAY convertible bonds generated
cash totaling EUR 239 million.
In 2009, the sale of Philips’ interests in LG Display and Pace Micro
Technology generated cash totaling EUR 704 million.
In 2008, the sale of TSMC shares, LG Display shares, D&M and Pace
Micro Technology shares generated cash totaling EUR 2,553 million.
27 Assets in lieu of cash from sale of businesses
In August 2010, the Company acquired a 49.9% interest in Shapeways
Inc. in exchange for the transfer of certain Consumer Lifestyle
incubator activities, which represented a value of EUR 3 million at the
date of the closing of that transaction.
In 2009, the Company received only cash as consideration in
connection with the sale of businesses.
In April 2008, the Company acquired 64.5 million shares in Pace Micro
Technology in exchange for the transfer of the Company’s Set-Top
Boxes and Connectivity Solutions activities, which represented a value
of EUR 74 million at the date of the closing of that transaction. The Pace
shares were sold on April 17, 2009.
In August 2008, Philips transferred its 69.5% ownership in MedQuist to
CBAY. A part of the consideration was settled through the issuance of a
convertible bond by CBAY which represented a fair value of EUR 53
million at the date of the closing of the transaction. The convertible
bond, included in Other non-current financial assets, was redeemed on
October 15, 2010.
In September 2008, Philips acquired a 33.5% interest in Prime
Technology Ventures III in exchange for the transfer of seven incubator
activities which represented a value of EUR 21 million at the date of the
closing of that transaction.
28 Pensions and other postretirement benefits
Defined-benefit plans: pensions
Employee pension plans have been established in many countries in
accordance with the legal requirements, customs and the local situation
in the countries involved. The Company also sponsors a number of
defined-benefit pension plans. The benefits provided by these plans are
based on employees’ years of service and compensation levels. The
measurement date for all defined-benefit plans is December 31.
The Company’s contributions to the funding of defined-benefit pension
plans are determined based upon various factors, including minimum
contribution requirements, as established by local government, legal
and tax considerations as well as local customs.
Funding of the UK Pension plan
In 2010, the employer contributions contain a cash neutral EUR 361
million contribution being the value of the Company’s full NXP stake
sold in September to the Philips UK Pension Fund as part of a recovery
plan. The purchase agreement includes an arrangement which is further
described in note 11.