Philips 2011 Annual Report Download - page 156

25 12 Group financial statements 12.11 - 12.11
156 Annual Report 2011
Philips made various commitments upon signing the agreement with
TPV Technology Limited to provide further funding to the venture and
TPV, as follows:
• A subordinated shareholder loan of EUR 51 million to the venture
based on Philips’ share of 30% of the venture
• A nine-month EUR 100 million senior bridge loan to the venture,
depending on funding needs
• A subordinated loan of EUR 100 million to TPV
• Payment of EUR 185 million non-refundable one-off advertising and
promotion support for the venture in two installments of EUR 135
million and EUR 50 million respectively in the first two years
In addition, depending on the funding needs of the venture, Philips has
committed to provide 30% of additional financing of EUR 200 million.
This additional funding is considered to have only a remote possibility
of occurring.
See also note 5, Discontinued operations and other assets classified as
held for sale for further details on the total loss related to the
discontinued operation.
25 Contingent liabilities
Guarantees
Philips’ policy is to provide guarantees and other letters of support only
in writing. Philips does not stand by other forms of support. At the end
of 2011, the total fair value of guarantees recognized by Philips in other
non-current liabilities was EUR 9 million. The following table outlines
the total outstanding off-balance sheet credit-related guarantees and
business-related guarantees provided by Philips for the benefit of
unconsolidated companies and third parties as at December 31, 2011.
Expiration per period
in millions of euros
business-
related
guarantees
credit-related
guarantees total
2011
Total amounts committed 297 39 336
Less than one year 99 22 121
Between one and five years 126 − 126
After five years 72 17 89
2010
Total amounts committed 302 49 351
Less than one year 100 22 122
Between one and five years 133 8 141
After five years 69 19 88
Environmental remediation
The Company and its subsidiaries are subject to environmental laws
and regulations. Under these laws, the Company and/or its subsidiaries
may be required to remediate the effects of the release or disposal of
certain chemicals on the environment. The Company accrues for losses
associated with environmental obligations when such losses are
probable and reliably estimable. Such amounts are recognized on a
discounted basis since they reflect the present value of estimated future
cash flows.
Provisions for environmental remediation can change significantly due
to the emergence of additional information regarding the extent or
nature of the contamination, the need to utilize alternative
technologies, actions by regulatory authorities and changes in
judgments, assumptions, and discount rates.
The Company and/or its subsidiaries have recognized environmental
remediation provisions for sites in various countries. In the United
States, subsidiaries of the Company have been named as potentially
responsible parties in state and federal proceedings for the clean-up of
certain sites.
Legal proceedings
The Company and certain of its group companies and former group
companies are involved as a party in legal proceedings, including
regulatory and other governmental proceedings, including discussions
on potential remedial actions, relating to such matters as competition
issues, commercial transactions, product liability, participations and
environmental pollution. In respect of antitrust laws, the Company and
certain of its (former) group companies are involved in investigations
by competition law authorities in several jurisdictions and are engaged
in litigation in this respect. Since the ultimate disposition of asserted
claims and proceedings and investigations cannot be predicted with
certainty, an adverse outcome could have a material adverse effect on
the Company’s consolidated financial position, results of operations and
cash flows.
Provided below are disclosures of the more significant cases:
LCD
On December 11, 2006, LG Display Co. Ltd (formerly LG Philips LCD
Co. Ltd.), a company in which the Company then held a minority
common stock interest, announced that officials from the Korean Fair
Trade Commission had visited the offices of LG Display and that it had
received a subpoena from the United States Department of Justice
(DOJ) and a similar notice from the Japanese Fair Trade Commission
in connection with inquiries by those regulators into possible
anticompetitive conduct in the LCD industry. The Company sold its
remaining shareholding in LG Display on March 11, 2009 and
subsequently no longer holds shares in LG Display.
On March 6, 2009, the Washington State Attorney General’s Office
(the ‘Washington AG’) issued a Civil Investigative Demand (CID) to
Philips Electronics North America Corporation (PENAC) pursuant to
which PENAC was requested, among other things, to produce
documents and to provide answers to interrogatories concerning the
sale of thin-film transistor liquid crystal display panels (TFT-LCD panels)
and the sale of TFT-LCD products. PENAC was also requested to
provide to the Washington AG any documents previously produced to
the DOJ as part of the DOJ’s ongoing investigation into the TFT-LCD
industry. After discussions with the Washington AG, the Washington
AG agreed to allow PENAC, instead of responding to the CID, to
provide the limited amount of aggregate sales data and component data
that was previously provided to the plaintiffs in the direct purchaser
plaintiff’s class action. On March 27, 2009, PENAC produced that
information to the Washington AG. Thereafter, PENAC provided the
same information to the Missouri Attorney General’s Office and the
Illinois Attorney General’s Office in response to a CID and subpoena
issued, respectively, on March 18, 2009 and April 2, 2009 to PENAC.
The Company is also subject to investigations by other competition
authorities into the LCD industry.
Subsequent to the public announcement of these inquiries, certain
Philips group companies were named as defendants in a number of class
action antitrust complaints filed in the United States courts, seeking,
among other things, damages on behalf of purchasers of products
incorporating TFT-LCD panels, based on alleged anticompetitive
conduct by manufacturers of such panels. Those lawsuits were
consolidated in two master actions in the United States District Court
for the Northern District of California: one, asserting a claim under
federal antitrust law, on behalf of direct purchasers of TFT-LCD panels
and products containing such panels, and another, asserting claims
under federal antitrust law, as well as various state antitrust and unfair
competition laws, on behalf of indirect purchasers of such panels and
products. On November 5, 2007 and September 10, 2008, the
Company and certain other companies within the Philips group
companies that were named as defendants in various of the original
complaints entered into agreements with the indirect purchaser
plaintiffs and the direct purchaser plaintiffs, respectively, that generally
toll the statutes of limitations applicable to plaintiffs’ claims, following
which the plaintiffs agreed to dismiss without prejudice the claims
against the Philips defendants. On December 5, 2008, following the
partial grant of motions to dismiss consolidated class action complaints
in the master actions, the plaintiffs filed amended consolidated class
action complaints, asserting essentially the same legal claims as those
alleged in the prior complaints. On December 2, 2009, the direct
purchaser plaintiffs filed a third consolidated class action complaint
under seal. None of the companies within the Philips group of
companies currently is named as a defendant in the pending amended
complaints, although the Company and PENAC are named as
coconspirators with named defendants in the indirect purchaser case,
but the litigation is continuing.