Philips 2007 Annual Report Download - page 230

Philips Annual Report 2007236
During 2007, MedQuist continued its previously announced program
of offering accommodations to customers potentially affected by the
billing issues under review. MedQuist’s board authorized the company
to make accommodation offers to certain customers in an aggregate
amount of USD 65 million to resolve any issues concerning prior billing
by MedQuist to those customers. This amount was subsequently
adjusted to USD 66.6 million. As of December 31, 2007, MedQuist has
entered into settlement agreements with certain customers to resolve
concerns over certain billing related issues, and paid or credited to
their account an aggregate amount of USD 54 million. MedQuist has
made additional offers to certain other customers in the aggregate
amount of USD 1.2 million. MedQuist has also established a program for
certain other customers that involves the issuance of accommodation
credits that can be used as an offset against the future purchase of
goods and services from MedQuist. MedQuist’s board authorized the
company to make accommodation credit offers up to an additional
USD 9.2 million beyond the original cash payment program of USD
65.4 million. As of December 31, 2007, MedQuist has entered into
agreements with certain customers who have accepted the settlement
credit offers with a total credit value of USD 4.4 million and have
extended additional credit offers with the credit value of USD 0.4 million.
As of December 31, 2007, the Company has a total accrual of EUR 9
million with respect to the billing-related issues at MedQuist. It is not
possible to estimate the level and timing of the other costs and
expenses related to these matters.
On November 2, 2007, the Company announced its intention to sell
its
approximate 70% interest in MedQuist. The nancial results attributable
to the Company’s interest in MedQuist have been presented as discontinued
operations. See note 38 for further information on MedQuist.
LG.Philips LCD
On December 11, 2006, LG.Philips LCD, an equity-accounted investee
in which Philips holds 19.9% of the common stock, announced that
ofcials from the Korean Fair Trade Commission visited the ofces of
LG.Philips LCD and that it had received a subpoena from the United
States Department of Justice and similar notice from the Japanese Fair
Trade Commission in connection with inquiries by those regulators
into possible anticompetitive conduct in the LCD industry.
Subsequent to the public announcement of these inquiries, certain
Philips group companies were named as defendants in several class
action antitrust complaints led in the United States courts, seeking
damages on behalf of purchasers of products incorporating thin-lm
transistor liquid crystal display panels, based on alleged anticompetitive
conduct by manufacturers of such panels. The complaints assert claims
under federal antitrust law, as well as various state antitrust and unfair
competition laws. In addition, in February 2007, certain plaintiffs led
purported class actions in a United States court against LG.Philips LCD
and certain current and former employees and directors of LG.Philips
LCD damages based on alleged violations of U.S. federal securities
laws. No Philips group company is named as a defendant in these actions.
These matters remain in their initial stages and, on the basis of current
knowledge, the Company cannot determine whether a loss is probable
with respect to these actions.
CRT Investigations
On November 21, 2007, the Company, announced that competition
law authorities in several jurisdictions have commenced investigations
into possible anticompetitive activities in the Cathode-Ray Tubes, or
CRT industry. As one of the companies that formerly was active in
the CRT business, Philips is subject to a number of these ongoing
investigations. The Company intends to assist the regulatory
authorities in these investigations.
Subsequent to the public announcement of these investigations, certain
Philips group companies were named as defendants in several class action
antitrust complaints led in the United States federal courts. These
actions allege anticompetitive conduct by manufacturers of CRTs and seek
treble damages on behalf of direct and indirect purchasers of CRTs and
products incorporating CRTs. The 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 defendants.
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 nal
resolution of these investigations and litigation could have a materially
adverse effect on the Company’s consolidated nancial position
and results of operations.
63
Stockholders’ equity
Common shares
As of December 31, 2007, the issued share capital, consists of
1,142,826,763 common shares, each share having a par value
of EUR 0.20, which shares have been paid-in in full.
Preference shares
The ‘Stichting Preferente Aandelen Philips’ has been granted the right
to acquire preference shares in the Company. Such right has not been
exercised. As a means to protect the Company and its stakeholders
against an unsolicited attempt to acquire (de facto) control of the
Company, the General Meeting of Shareholders in 1989 adopted
amendments to the Company’s articles of association that allow the
Board of Management and the Supervisory Board to issue (rights to
acquire) preference shares to a third party. As of December 31, 2007,
no preference shares have been issued.
Option rights/restricted shares
The Company has granted stock options on its common shares
and rights to receive common shares in future (see note 33).
Treasury shares
In connection with the Company’s share repurchase programs, shares
which have been repurchased and are held in treasury for (i) delivery
upon exercise of options and convertible personnel debentures and
under restricted share programs and employee share purchase programs,
and (ii) capital reduction purposes, are accounted for as a reduction of
stockholders’ equity. Treasury shares are recorded at cost, representing
the market price on the acquisition date. When issued, shares are
removed from treasury stock on a FIFO basis.
Any difference between the cost and the cash received at the time
treasury shares are issued, is recorded in capital in excess of par value,
except in the situation in which the cash received is lower than cost
and capital in excess of par has been depleted.
In order to reduce potential dilution effects, the following transactions
took place:
2006 2007
Shares acquired 4,385,298 27,326,969
Average market price EUR 27.16 EUR 29.65
Amount paid EUR 119 million EUR 810 million
Shares delivered 11,484,092 11,140,884
Average market price EUR 27.04 30.46
Amount received EUR 171 million EUR 199 million
Total shares in treasury 35,933,526 52,119,611
Total cost EUR 923 million EUR 1,393 million
In order to reduce share capital, the following transactions took
place in 2007:
Shares acquired 25,813,898
Average market price EUR 31.78
Amount paid EUR 823 million
Total shares in treasury 25,813,898
Total cost EUR 823 million
Net income and dividend
A dividend of EUR 0.70 per common share will be proposed to
the 2008 Annual General Meeting of Shareholders. An amount of
EUR 3,940 million is expected to be added to retained earnings.
128 Group nancial statements 188 IFRS information
Notes to the IFRS nancial statements
240 Company nancial statements