Philips 2008 Annual Report Download - page 170

Certain Philips group companies have also been named as defendants,
in a proposed class proceeding in Ontario, Canada along with numerous
other participants in the industry. Philips intends to vigorously oppose
the claim, and the proceedings remain at a preliminary stage. At this
time, no class proceeding has been certified and no statement of
defence has been filed.
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 cashflows.
28
Stockholders’ equity
Common shares
In 2008, the Company’s issued share capital was reduced by 170,414,994
shares, which were acquired pursuant to the EUR 5 billion share
repurchase program. As of December 31, 2008, the issued share
capital consists of 972,411,769 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, 2008,
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:
2007 2008
Shares acquired 27,326,969 273
Average market
price EUR 29.65 EUR 24.61
Amount paid EUR 810 million −
Shares delivered 11,140,884 4,541,969
Average market
price EUR 30.46 EUR 23.44
Amount received EUR 199 million EUR 52 million
Total shares in
treasury at end of
year 52,119,611 47,577,915
Total cost EUR 1,393 million EUR 1,263 million
In order to reduce capital stock, the following transactions took place
in 2007 and 2008:
2007 2008
Shares acquired 25,813,898 146,453,094
Average market
price EUR 31.87 EUR 22.52
Amount paid EUR 823 million EUR 3,298 million
Reduction of capital
stock −170,414,994
Total shares in
treasury at year-end 25,813,898 1,851,998
Total cost EUR 823 million EUR 25 million
Net income (loss) and proposed distribution to shareholders
The net loss of 2008 will be accounted for in retained earnings.
A distribution from retained earnings of EUR 0.70 per common
share will be proposed to the 2009 Annual General Meeting of
Shareholders.
Limitations on the distribution of stockholders’ equity
Pursuant to Dutch law certain limitations exist relating to the
distribution of stockholders’ equity amounting to EUR 1,296 million
(2007: EUR 2,915 million).
29
Cash from derivatives
The Company has no trading derivatives. A total of EUR 337 million
cash was received with respect to foreign exchange derivative contracts
related to financing of subsidiaries (2007: EUR 385 million; 2006: EUR
62 million). Cash flow from interest-related derivatives is part of cash
flow from operating activities. During 2008, there was a cash inflow in
relation to these derivatives of EUR 28 million (2007: EUR 2 million
cash outflow; 2006: EUR 1 million cash outflow).
30
Proceeds from other non-current financial assets
In 2008, the sale of TSMC shares, LG Display shares, D&M and Pace
shares generated cash totaling EUR 2,553 million.
In 2007, the sale of TSMC shares, Nuance Communications shares
and JDS Uniphase shares generated cash totaling EUR 4,002 million.
In 2006, there were no material proceeds from the sale of other
non-current financial assets.
31
Assets received in lieu of cash from the sale
of businesses
In April 2008, the Company acquired 64.5 million shares in Pace Micro
Technology in exchange for the transfer of the Company’s Set-Top
Boxes and Connectivity Solutions activities which represented a value
of EUR 74 million at the date of the closing of that transaction.
In August 2008, Philips transferred its 69.5% ownership in Medquist
to CBAY. A part of the consideration was settled through the
issuance of a convertible bond by CBAY which represented a fair
value of EUR 53 million at the date of the closing of the transaction.
In September 2008, Philips acquired a 33.5% interest in Prime
Technology Ventures III in exchange for the transfer of seven
incubator activities which represented a value of EUR 21 million
at the date of the closing of that transaction.
In 2007, the Company only received cash as consideration in
connection with the sale of businesses.
During 2006, several ownership interests were received in connection
with certain sale and transfer transactions.
At the beginning of July 2006, Philips transferred its Optical Pick Up
activities to Arima Devices in exchange for a 12% interest in Arima
Devices valued at EUR 8 million.
Philips Annual Report 2008170
180
Sustainability performance
192
IFRS financial statements
244
Company financial statements
124
US GAAP financial statements
Notes to the US GAAP
financial statements