Provisions

Philips Group
Provisions in millions of EUR
2013 - 2014
 
2013
2014
 
long-term
short-term
long-term
short-term
Provisions for defined-benefit plans
754
51
881
52
Other postretirement benefits
200
14
226
16
Product warranty
59
207
77
225
Environmental provisions
249
62
301
59
Restructuring-related provisions
75
128
150
230
Litigation provisions
232
4
480
173
Other provisions
334
185
385
190
Provisions
1,903
651
2,500
945

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Product warranty

The provision for product warranty reflects the estimated costs of replacement and free-of-charge services that will be incurred by the Company with respect to products sold. The Company expects the provision will be utilized mainly within the next year.

Philips Group
Provision for product warranty in millions of EUR
2012 - 2014
 
2012
2013
2014
Balance as of January 1
378
319
266
Changes:
 
 
 
Additions
370
350
332
Utilizations
(427)
(363)
(316)
Transfer to assets classified as held for sale
(24)
(3)
Translation differences
(4)
(16)
23
Changes in consolidation
2
Balance as of December 31
319
266
302

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Environmental provisions

The environmental provisions include accrued losses recorded with respect to environmental remediation 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.

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 as well as changes in judgments and discount rates.

Approximately half of this provision is expected to be utilized within the next five years. The remaining portion relates to longer-term remediation activities.

Philips Group
Environmental provisions in millions of EUR
2012 - 2014
 
2012
2013
2014
Balance as of January 1
305
375
311
Changes:
 
 
 
Additions
48
30
29
Utilizations
(22)
(21)
(23)
Releases
(1)
(16)
(15)
Changes in discount rate
18
(40)
30
Accretion
6
6
8
Translation differences
(4)
(8)
16
Purchase price allocation adjustment
(15)
Changes in consolidation
25
4
Balance as of December 31
375
311
360

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The increase of provision due to changes in discount rate in 2014 relates to an overall decrease of the market rates used in discounting.

For more details on the environmental remediation reference is made to note (26) Contingent assets and liabilities.

Restructuring-related provisions

The most significant projects in 2014

In 2014, the most significant restructuring projects related to Lighting and IG&S and were driven by industrial footprint rationalization and the Accelerate! transformation program.

Restructuring projects at Lighting centered on Light Sources & Electronics and Professional Lighting Solutions, the largest of which took place in Belgium, the Netherlands and France.

Innovation, Group & Services restructuring projects mainly were related to IT and group and country overheads and centered primarily in the Netherlands, US and Belgium.

Restructuring projects at Healthcare mainly took place in the US and Netherlands.

Consumer Lifestyle restructuring projects were mainly in the Netherlands.

The Company expects the provision will be utilized mainly within the next year. The movements in the provisions and liabilities for restructuring in 2014 are presented by sector as follows:

Philips Group
Restructuring-related provisions in millions of EUR
2014
 
Jan. 1, 2014
additions
utilizations
releases
other changes 1)
Dec. 31, 2014
Healthcare
17
67
(27)
(9)
48
Consumer
Lifestyle
21
7
(10)
(7)
1
12
Lighting
130
180
(90)
(16)
(9)
195
Innovation, Group and Services
35
110
(15)
(5)
125
Philips Group
203
364
(142)
(37)
(8)
380
1)
Other changes primarily relate to translation differences and assets classified as held for sale reclassifications
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The most significant projects in 2013

In 2013, the most significant restructuring projects related to Lighting and were driven by the industrial footprint rationalization.

In Healthcare, the largest projects were undertaken in Customer Services, Home Healthcare Solutions and Imaging Systems in the United States, Italy and the Netherlands to reduce the operating costs and simplify the organization.

Consumer Lifestyle restructuring charges were mainly related to Personal Care (primarily in the Netherlands and Austria) and Coffee (mainly Italy).

Restructuring projects at Lighting centered on Luminaires businesses and Light Sources & Electronics, the largest of which took place in the United States, France and Belgium.

Innovation, Group & Services restructuring projects mainly focused on the Financial Operations Service Unit, primarily in Italy, France and the United States.

The movements in the provisions and liabilities for restructuring in 2013 are presented by sector as follows:

Philips Group
Restructuring-related provisions in millions of EUR
2013
 
Jan. 1, 2013
additions
utilizations
releases
other changes1)
Dec 31, 2013
Healthcare
77
14
(50)
(23)
(1)
17
Consumer
Lifestyle
48
11
(27)
(10)
(1)
21
Lighting
198
64
(110)
(19)
(3)
130
Innovation, Group and Services
62
16
(30)
(15)
2
35
Philips Group
385
105
(217)
(67)
(3)
203
1)
Other changes primarily relate to translation differences and transfers between sectors
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The most significant projects in 2012

In 2012, the most significant restructuring projects related to Lighting and Healthcare and were driven by our change program Accelerate!.

In Healthcare, the largest projects were undertaken in Imaging Systems and Patient Care & Clinical Informatics in various locations in the United States, the Netherlands and Germany to reduce the operating costs and simplify the organization.

Consumer Lifestyle restructuring charges were mainly related to Lifestyle Entertainment (primarily in Hong Kong and the United States) and Coffee (mainly Italy).

Restructuring projects at Lighting centered on Luminaires businesses and Light Sources & Electronics, the largest of which took place in the Netherlands, Belgium and in various locations in the US.

Innovation, Group & Services restructuring projects focused on the IT and Financial Operations Service Units (primarily in the Netherlands), Group & Regional Overheads (mainly in the Netherlands and Italy) and Philips Innovation Services (in the Netherlands and Belgium).

The movements in the provisions and liabilities for restructuring in 2012 are presented by sector as follows:

Philips Group
Restructuring-related provisions in millions of EUR
2012
 
Jan.1, 2012
additions
utilizations
releases
other changes1)
Dec.31, 2012
Healthcare
18
100
(29)
(7)
(5)
77
Consumer
Lifestyle
39
58
(41)
(8)
48
Lighting
52
225
(61)
(16)
(2)
198
Innovation, Group and Services
60
67
(47)
(10)
(8)
62
Philips Group
169
450
(178)
(41)
(15)
385
1)
Other changes primarily relate to translation differences and transfers between sectors
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Litigation provisions

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.

Philips Group
Litigation provisions in millions of EUR
2012 - 2014
 
2012
2013
2014
Balance as of January 1
101
238
236
Changes:
 
 
 
Additions
234
48
563
Utilizations
(85)
(17)
(170)
Releases
(7)
(15)
(23)
Accretion
6
Translation differences
(5)
(18)
41
Balance as of December 31
238
236
653

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The additions in 2014 include the patent infringement lawsuit by Masimo Corporation in the Unites States District Court for the District of Delaware against Philips in which Masimo was awarded a compensation of USD 467 million (EUR 366 million).

The majority of the remaining 2014 additions and of the utilization of the provisions, as well as of the remaining ending balance as of December 31, 2014 relates to certain parts of the Cathode Ray Tube antitrust litigation as mentioned in note (26) Contingent assets and liabilities for which the Company concluded it was able to make a reliable estimate of the cash outflow or was able to reach a settlement.

The Company expects to use the provisions within the next five years. For more details reference is made to note (26) Contingent assets and liabilities.

Other provisions

The main elements of other provisions are: provision for post-employment benefits and obligatory severance payments of EUR 50 million (2013: 66 million), onerous contract provisions for unfavorable supply contracts as part of divestment transactions, onerous (sub)lease contracts and expected losses on existing projects /orders totaling EUR 103 million (2013: 93 million), provision for employee jubilee funds EUR 74 million (2013: EUR 76 million), self-insurance liabilities of EUR 65 million (2013: EUR 56 million), provisions for rights of return of EUR 52 million (2013: EUR 45 million), provision for possible taxes/social security of EUR 97 million (2013: EUR 65 million) and provision for decommissioning costs of EUR 36 million (2013: EUR 33 million).

Less than half of the provision for employee jubilee funds, provision for possible taxes/social security and provision for decommissioning costs is expected to be utilized within next five years. The provision for self-insurance liabilities is expected to be used within the next five years. All other provisions are expected to be utilized mainly within the next three years, except for provision for rights of return, which the Company expects to use within the next year.

Philips Group
Other provisions in millions of EUR
2012 - 2014
 
2012
2013
2014
Balance as of January 1
640
529
519
Changes:
 
 
 
Additions
322
198
213
Utilizations
(489)
(224)
(153)
Releases
(28)
(48)
(37)
Reclassification
84
80
17
Liabilities directly associated with assets held for sale
(3)
(13)
Accretion
1
6
Translation differences
(1)
(13)
23
Balance as of December 31
529
519
575

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CO2-equivalent or carbon dioxide equivalent is a quantity that describes, for a given mixture and amount of greenhouse gas, the amount of CO2 that would have the same global warming potential (GWP), when measured over a specified timescale (generally 100 years).

SF6 (Sulfur hexafluoride) is used in the electrical industry as a gaseous dielectric medium.