Philips 2011 Annual Report Download - page 153

12 Group financial statements 12.11 - 12.11 20
Annual Report 2011 153
Secured liabilities
In 2011, none of the long-term and short-term debt was secured by
collateral of manufacturing assets (2010: EUR 3.7 million of long-term
and short-term debt was secured by collateral of EUR 3.8 million
manufacturing assets).
Short-term debt
2010 2011
Short-term bank borrowings 670 422
Other short-term loans 16 21
Current portion of long-term debt 1,154 139
1,840 582
During 2011, the weighted average interest rate on the bank
borrowings was 10.5% (2010: 8.5%).
In the Netherlands, the Company issued 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 were available to most employees in the
Netherlands and were purchased by them with their own funds and
were 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
financing, the total outstanding amounts are classified as current
portion of long-term debt. At December 31, 2011, an amount of EUR
23 million (2010: EUR 38 million) of convertible personnel debentures
was outstanding, with an average conversion price of EUR 22.02. The
conversion price varies between EUR 14.19 and EUR 31.59 with various
conversion periods ending between January 1, 2012 and December 31,
2013. As of January 1, 2009, Philips no longer issues these debentures.
Furthermore, Philips has a USD 2.5 billion Commercial Paper Program,
a EUR 1.8 billion revolving credit facility that can be used for general
corporate purpose, a bilateral credit facility of EUR 900 million and a
EUR 500 million bilateral credit facility. As of December 31, 2011 Philips
did not have any loans outstanding under any of these facilities.
20 Provisions
2010 2011
long-
term
short-
term
long-
term
short-
term
Provisions for defined-benefit
plans (see note 29) 719 52 760 55
Other postretirement
benefits (see note 29) 297 21 264 22
Postemployment benefits and
obligatory severance payments 95 21 79 25
Product warranty 94 254 65 258
Loss contingencies
(environmental remediation and
product liability) 222 28 268 37
Restructuring-related provisions 49 177 51 118
Onerous contract provision 84 164
Other provisions 240 70 309 80
1,716 623 1,880 759
Postemployment benefits and obligatory severance payments
The provision for postemployment benefits covers benefits provided
to former or inactive employees after employment but before
retirement, including salary continuation, supplemental unemployment
benefits and disability-related benefits.
2009 2010 2011
Balance as of January 1 89 135 116
Changes:
Additions 38 20 29
Utilizations (2) (33) (41)
Translation differences (1) (7) −
Changes in consolidation 11 1 −
Balance as of December 31 135 116 104
The provision for obligatory severance payments covers the Group’s
commitment to pay employees a lump sum upon the employee’s
dismissal or resignation. In the event that a former employee has passed
away, the Group may have a commitment to pay a lump sum to the
deceased employee’s relatives.
Product warranty
The provision for product warranty reflects the estimated costs of
replacement and free-of-charge services that will be incurred by the
Group with respect to products sold. The Group expects the provision
will be utilized mostly within the next year. The changes in the provision
for product warranty are as follows:
2009 2010 2011
Balance as of January 1 310 335 348
Changes:
Additions 333 309 388
Utilizations (324) (312) (415)
Translation differences 3 16 3
Changes in consolidation 13 − (1)
Balance as of December 31 335 348 323
Product warranty reimbursement recognized as receivable totalling
EUR 34 million.
Loss contingencies (environmental remediation and product
liability)
This provision primarily includes accrued losses recorded with respect
to environmental remediation and asbestos product liability. The
asbestos liability was settled in 2009. At December 31, 2010, the
provision relates to environmental remediation. Approximately half of
this provision is expected to be utilized within the next 5 years. The
remaining portion relates to longer-term remediation activities.
The changes in this provision are as follows:
2009 2010 2011
Balance as of January 1 812 200 250
Changes:
Additions 34 55 48
Utilizations (603) (17) (15)
Releases − (3) (15)
Changes in discount rate 7 3 25
Accretion 4 3 6
Translation differences (54) 9 6
Balance as of December 31 200 250 305
Restructuring-related provisions
The most significant projects in 2011
In 2011, the most significant restructuring projects related to Lighting
and Group Management & Services and were driven by our change
program Accelerate!.