Philips 2008 Annual Report Download - page 240

available limits of the policies, amounts payable to PENAC and THAN,
and terms under which future settlements and related defense costs
are reimbursable. In conjunction with these settlements, insurance
recoveries of EUR 89 million were recognized in 2008 (EUR 16 million
was recognized in 2007 and EUR 70 million was recognized in 2006).
Insurers paid EUR 113 million in 2008 (EUR 27 million was paid in
2007 and EUR 34 million was paid in 2006) for asbestos-related
defense and indemnity costs. At December 31, 2008, EUR 121 million
was jointly held by PENAC and THAN in an insurance settlement
proceeds trust for future contribution to the Trust if the Plan of
Reorganization is approved by the Courts. Additionally, at December
31, 2008, the recorded receivable from insurance carriers, for which
settlement agreements have been reached amounted to EUR 34 million
(EUR 56 million at December 31, 2007) for the reimbursement
of incurred defense and indemnity costs as well as for probable
recoveries of accrued projected settlement costs with respect to
pending and future claims, which is reflected in the Company’s
consolidated balance sheet. Insurance receivables have not been
recorded from non-settling insurance carriers. Litigation against
non-settling insurance carriers continues to be pursued. Additionally,
settlement discussions are also being held with certain carriers.
MedQuist
On January 22, 2008, Philips and four employees of Philips’ affiliates
that once served on the board of directors of MedQuist, Inc. were
named as defendants in a lawsuit filed in New Jersey state court
challenging MedQuist’s exploration of strategic alternatives, as well
as Philips ultimate sale of its MedQuist stake to an unaffiliated third
party in August 2008. On July 10, 2008, the defendants moved to
dismiss the complaint and, on November 24, 2008, the court dismissed
the action in its entirety and with prejudice. In December 2008 the
plaintiff filed a notice of appeal.
LG Display
On December 11, 2006, LG Display Co. Ltd (formerly LG.Philips LCD
Co. Ltd.), a company in which the Company holds 13% of the common
stock, announced that officials from the Korean Fair Trade Commission
visited the offices of LG Display 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 a number of
class action antitrust complaints filed in the United States courts,
seeking damages on behalf of purchasers of products incorporating
thin-film transistor liquid crystal display panels (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 December 5, 2008,
following the partial grant of motions to dismiss consolidated class
action complaints in those master actions, the plaintiffs filed amended
consolidated class action complaints, asserting essentially the same
legal claims as those alleged in the prior complaints. The Company
and certain other companies within the Philips group companies that
were named as defendants in various of the original complaints have
entered into agreements with the plaintiffs 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. None of the companies within the Philips
group of companies currently is named as a defendant in the pending
amended complaints, but the litigation is continuing. In addition, in
February 2007, certain plaintiffs filed purported class actions in a
United States court against LG Display and certain current and
former employees and directors of LG Display for damages based
on alleged violations of U.S. federal securities laws. No Philips group
company is named as a defendant in these actions.
Beginning in November 2008, several manufacturers of TFT-LCD
panels, including LG Display, and certain executives of two of those
companies entered into plea agreements with the United States
Department of Justice (DOJ), pursuant to which those companies and
individuals agreed to plead guilty to participating in a conspiracy to fix
the prices of TFT-LCD panels. On December 15, 2008, LG Display and
its wholly owned subsidiary, LG Display America Inc., pleaded guilty
to participating in a conspiracy from September 2001 to June 2006 to
fix the price of TFT-LCD panels sold worldwide. Pursuant to that
plea, LG Display was sentenced to pay in five annual installments a
total of USD 400 million in criminal fines. The DOJ has announced
that its investigation is continuing. 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 has assisted the regulatory authorities
in these investigations. In the U.S., Philips has been informed that the
Department of Justice has deferred Philips’ obligation to respond to
the grand jury subpoena Philips received in November of 2007.
Subsequent to the public announcement of these investigations, certain
Philips group companies were named as defendants in over 50 class
action antitrust complaints filed in various federal district courts in
the United States. 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.
These 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 named defendants. These actions
have been consolidated by the Judicial Panel for Multidistrict Litigation
for pre-trial proceedings in the United States District Court for the
Northern District of California. Pursuant to a Stipulation and Order
issued by the District Court on September 12, 2008, a broad stay of
merits discovery has been imposed and the Court has set a deadline
of March 9, 2009 for the filing of separate consolidated amended
complaints by the direct and indirect purchasers. Philips intends to
move to dismiss such consolidated amended complaints once they
are filed and otherwise will vigorously defend these lawsuits.
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 cash flows.
63
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.
Philips Annual Report 2008240
180
Sustainability performance
244
Company financial statements
124
US GAAP financial statements
192
IFRS financial statements
Notes to the IFRS financial
statements