Philips 2011 Annual Report Download - page 158

26 27 28 29 12 Group financial statements 12.11 - 12.11
158 Annual Report 2011
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 US authorities, including the US Securities and
Exchange Commission, and is cooperating with US authorities in
connection with the review. Potential penalties for violations of the
FCPA and related statutes and regulations include monetary penalties.
The Company cannot at this time quantify meaningfully the possible loss
or range of loss to which this matter may give rise.
26 Cash from (used for) derivatives and securities
A total of EUR 26 million cash was received with respect to foreign
exchange derivative contracts related to financing activities (2010: EUR
25 million outflow; 2009: EUR 38 million outflow).
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 (2010: EUR nil million; 2009: EUR nil million).
27 Proceeds from non-current financial assets
In 2011, the sale of Philips’ interest in TCL Corporation (TCL) and
Digimarc generated cash totaling EUR 79 million.
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.
28 Assets in lieu of cash from sale of businesses
In 2011, the Company entered into four transactions with different
venture capital partners where certain incubator activities were
transferred in exchange for shares in separately established investment
entities. The investment entities represented a value of EUR 18 million
at the date that these transactions were closed.
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.
29 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.
Summary of pre-tax costs for pensions and other
postretirement benefits
2009 2010 2011
Defined-benefit plans − (105) 18
Defined-contribution plans including multi-
employer plans 103 114 120
Retiree medical plans (100) 11 16
3 20 154
The 2011 costs were impacted by the recognition of EUR 18 million
curtailment gains mainly resulting from one of our defined-benefit plans
in which all remaining accrual of benefits was stopped and participants
were transferred to a defined-contribution plan. In the same plan a large
number of retirees opted for a higher yet non-indexed pension. The
resulting prior-service cost gain forms the larger part of the EUR 20
million prior-service cost gains recognized in 2011.
The 2010 costs were impacted by the recognition of EUR 119 million
of negative prior service costs. These resulted from a reduction of
pension benefits expected to be paid in the future, in part due to a
change in indexation. In 2010, a curtailment gain of EUR 9 million in one
of our retiree medical plans was recognized due to the partial closure
of a US site.
In 2009, curtailment gains totaling EUR 134 million, relating to changes
in retiree medical plans, positively impacted the result. These
curtailment gains are the result of changes in the benefit level and the
scope of eligible participants of a retiree medical plan, which became
effective and irreversible in 2009.
The table below provides a summary of the changes in the defined-
benefit obligations for defined-benefit pension plans and the fair value
of their plan assets for 2011 and 2010. It also provides a reconciliation of
the funded status of these plans to the amounts recognized in the
Consolidated balance sheets.