Annual Report 2008 - Securitas

After the services had been substantially completed, the TSA indicated
that it wished to renegotiate the pricing under the contract and stopped
making payments under the contract. Following unsuccessful negotiations
attempting to resolve the amounts in dispute, Globe commenced formal legal
proceedings during 2004 to recover the amounts due under the contract.
A trial in this matter was scheduled for February 2007. As of December
31, 2006 a bad debt provision was recognized in the amount of the net
account receivable which remained uncollected at that time. This dispute
was subsequently settled in the first quarter 2007, and impacted items
affecting comparability in 2007 by MSEK 50 (–69).
Germany – Heros
The German cash Handling operations were divested in November 2005 to
the German Heros Group. In February 2006, the Heros Group of companies
filed for insolvency under German law. In connection with the foregoing, the
Insolvency Trustee has been examining all relevant prior transactions of the
insolvent companies, including the German cash handling companies, which
Securitas sold to the Heros Group. Following his investigation, the Trustee
has raised questions relating to pre-acquisition transactions in the divested
companies, alleging possible material future claims.
On April 7, 2008 the Insolvency Trustee advised Securitas in a letter that
according to the Trustee, the Heros companies (in bankruptcy) may have
substantial monetary claims on Securitas Germany and that in the absence
of a mutual understanding and agreement on the questioned transactions,
Heros will commence legal action against Securitas Germany.
The claims of the Heros companies (in bankruptcy) are based on the
Trustees current understanding of the subject transactions, resulting in the
allegation that certain inter-company transactions (set-offs) performed by
Securitas Germany prior to the sale of the companies were not in compliance
with German law. Heros’ aggregated claims on Securitas Germany amounts
to approximately MEUr 108. Heros is in addition requesting Securitas
Germany to re-assign a claim against the insurance company IF which was
kept by Securitas in the divestiture. Based on local legal expertise and a
legal opinion from a renown law professor, Securitas will object to the claims
raised by the Trustee.
As of December 31, 2006 a minor provision was recognised to cover the
known exposure in the Heros claim at that time. This provision remains unchanged.
No additional provision has been established for the recent claim.
Spain – Esabe
In January 1992, Securitas acquired Esabe, Spain’s then second-largest
company in the guard services and cash-in-transit segments. Shortly following
such acquisition, the seller in such transaction filed for bankruptcy
under Spanish law. As a consequence of such bankruptcy filing, Securitas
has been involved in multiple litigations with the bankruptcy estate in respect
of claims by the estate relating to the validity of the acquisition transaction
and certain accounts claimed to be due to the estate. During 2006,
final rulings in these litigations were made by the Spanish Supreme Court.
Following these final rulings, Securitas entered into settlement negotiations
with representatives of the estate and a final settlement was agreed with
the estate resolving all of the outstanding claims. A provision in the amount
of the payment to be made to the estate under the settlement agreement
was recognized as of December 31, 2006. The final settlement has been
signed by all parties and submitted to the relevant Spanish court for its
approval. The court has finally approved the settlement agreement between
the bankruptcy estate of Esabe and Securitas. The settlement amount has
been paid and the agreement will be implemented according to its terms.
Spain – Overtime compensation
All major security companies in Spain have been compensating their employees
in respect of overtime work in accordance with a labor agreement
covering the period 2005 to 2008. In February 2007, the Spanish Supreme
court ruled that the overtime compensation under the existing labor agreement
was not in compliance with Spanish law.
The potential exposure in respect of overtime compensation payable to
employees of the security services and guarding companies in Spain has
increased due to the failure of the major security companies and the local
unions to negotiate a settlement agreement on the overtime compensation.
A petition has been lodged with the lower court in Spain seeking specific
guidance as to how overtime compensation shall be calculated. A judgment
was rendered in January 2008 giving guidelines on calculation of overtime
pay, which substantially accepted the views of the employers. The judgment
has been appealed by the local unions. Securitas will vigorously defend
its position in the appeal. A decision in the matter is not expected until mid-
2009.
In the absence of final guidance on overtime compensation, Securitas
has chosen to apply the guidelines given by the court for salary payments to
be paid in 2008. For historic overtime compensation, the company will
await the outcome of the appeal. Securitas will have to prepare for several
suits from employees and former employees in respect of historic overtime
compensation.
Simultaneously, one industry association commenced legal proceedings
in an attempt to invalidate the current collective bargaining agreement due
to an alleged imbalance created by the earlier decision on overtime pay by
the Supreme court. In a judgment rendered in January 2008 the court
ruled – on procedural grounds – against the industry association. It has now
appealed the court decision. Judgment in the appeal is not expected until
mid-2009.
Securitas Spain is already the target of several labor claims and the
number of claims is increasing. Based on this fact the management estimates
the additional compensation for the historic overtime claims to amount
to MSEK 128 and a provision of this amount was recognized as
of December 31, 2007.
Information regarding items affecting comparability per function/line in the
consolidated statement of income, per segment as well as the cash flow
impact is provided in Note 11.
Note 5. Events after the balance sheet date
Approval of the Annual Report and
Consolidated Financial Statements for 2008
This Annual report including the consolidated Financial Statements was
signed by the Board of Directors of Securitas AB on March 10, 2009.
Acquisitions
The following acquisitions have been completed after the balance sheet
date but before the approval of the Annual Report:
• Akal Security, Hawaii, Security Services North America
• Moore Security, USA, Security Services North America
Other signficant events after the balance sheet date
Annual report
Notes and comments to the consolidated financial statements
On February 5, 2009 Securitas issued a further MEUr 45 Floating rate
Notes under its MEUr 1,500 Euro Medium Term Note Programme.
The notes have a five-year bullet maturity on February 5, 2014.
Securitas Annual report 2008
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