Note 7
Stockholders’ equity

 

 

Legal reserves

Free reserves

 

 

(CHF in thousands)

Share capital

from capital contribution

from retained earnings

Other reserves

from retained earnings

Net income

Own
shares

Total

Opening balance as of January 1, 2016

1,990,679

30,430

1,000,000

540,072

5,647,858

2,973,717

(2,495,448)

9,687,308

Allocation to retained earnings

 

 

 

 

2,973,717

(2,973,717)

 

Cancellation of shares

(86,000)

 

 

(598,421)

(1,293,703)

 

1,978,124

Par value reduction

(1,638,910)

 

 

58,349

 

 

 

(1,580,561)

Purchases of own shares

 

 

 

 

 

 

(1,254,379)

(1,254,379)

Delivery of own shares

 

 

 

 

 

 

251,809

251,809

Net income for the year

 

 

 

 

 

1,924,811

 

1,924,811

Closing balance as of December 31, 2016

265,769

30,430

1,000,000

7,327,872

1,924,811

(1,519,894)

9,028,988

As a result of the Swiss corporate tax reform II that became effective on January 1, 2011, qualifying contributions from the shareholders exceeding the nominal share capital can be distributed without deduction of Swiss withholding tax. Accordingly, such contributions have been recorded in a specific account (legal reserves from capital contribution) within the legal reserves in order to benefit from the favorable tax treatment.

Share capital as of December 31, 2016

Number of
registered shares

Par value
(CHF)

Total
(CHF in thousands)

Issued shares

2,214,743,264

0.12

265,769

Contingent shares

304,038,800

0.12

36,485

Authorized shares

200,000,000

0.12

24,000

 

 

 

 

Share capital as of December 31, 2015

Number of
registered shares

Par value
(CHF)

Total
(CHF in thousands)

Issued shares

2,314,743,264

0.86

1,990,679

Contingent shares

304,038,800

0.86

261,473

Authorized shares

200,000,000

0.86

172,000

The own shares are valued at acquisition cost. During 2016, a loss from the delivery of own shares of CHF 38,990 thousand was recorded in the income statement under finance expense. During 2015, a loss from the delivery of own shares of CHF 11,087 thousand was recorded, in contrast to 2016, in other reserves.

During 2016, a bank holding call options related to ABB Group’s management incentive plan (MIP) exercised a portion of these options. Such options had been issued in 2012 by the Group company that facilitates the MIP at fair value and had a strike price of CHF 15.75. At issuance, the Group company had entered into an intercompany option agreement with the Company, having the same terms and conditions to enable it to meet its future obligations. As a result of the exercise by the bank, the Company issued 8,892,770 shares at CHF 15.75 out of own shares.

During 2015, a bank holding call options related to ABB Group’s management incentive plan (MIP) exercised a portion of these options. Such options had been issued in 2009 and 2012 by the Group company that facilitates the MIP at fair value and had a strike price of CHF 19.00 and CHF 15.75, respectively. At issuance, the Group company had entered into an intercompany option agreement with the Company, having the same terms and conditions to enable it to meet its future obligations. As a result of the exercise by the bank, the Company issued 4,569,100 and 714,450 shares at CHF 19.00 and CHF 15.75, respectively, out of own shares.

The ABB Group has an annual employee share acquisition plan (ESAP) which provides share options to employees globally. To enable the Group company that facilitates the ESAP to deliver shares to employees who have exercised their stock options, the Group company entered into an agreement with the Company to acquire the required number of shares at their then market value from the Company. Consequently in November 2016 and 2015, respectively, the Company issued, out of own shares, to the Group company, 2,647,151 and 30,003 shares at CHF 21.01 and CHF 20.76, respectively.

In 2016 and 2015, the Company transferred 851,773 and 706,963 own shares at an average acquisition price per share of CHF 20.36 and CHF 20.77, respectively, to fulfill its obligations under other share-based arrangements.

Between September 2014 and September 2016, the Company executed a share buyback program for the purchase of up to USD 4 billion of its own shares and on September 30, 2016, announced that it had completed this program. Over the period of the share buyback, the Company purchased a total of 146.6 million shares (for approximately CHF 2.9 billion) for cancellation and 24.7 million shares (for approximately CHF 0.5 billion) to support its employee share programs.

At the AGM in April 2016, shareholders approved the proposal of the Board of Directors to reduce the share capital of the Company by cancelling 100 million treasury shares which were acquired under the share buyback program. This cancellation was completed in July 2016, resulting in a decrease in Treasury stock (own shares ) of CHF 1,978 million and a corresponding combined decrease in share capital, other reserves and retained earnings.

In October 2016, the Company announced a new share buyback program for the purchase of up to USD 3 billion of its own shares from 2017 to 2019.

The movement in the number of own shares during the year was as follows:

 

2016

2015

 

Number of shares

Average acquisition price per share CHF

Number of shares

Average acquisition price per share CHF

Opening balance as of January 1

123,118,123

20.27

55,843,639

21.12

Purchases for employee share programs

4,940,000

18.77

13,050,000

19.78

Purchases for cancellation

60,370,000

19.24

60,245,000

19.64

Cancellation

(100,000,000)

19.78

 

 

Delivery

(12,391,694)

20.32

(6,020,516)

20.80

Closing balance as of December 31

76,036,429

19.99

123,118,123

20.27

Thereof pledged for MIP

11,033,117

 

10,726,465