Review of 2010 – USD version - Skanska

Note
26 Continued
Actuarial gains and losses on pensions
During 2010, equity was affected by actuarial gains and losses on defined-benefit
plans in the amount of USD 90.2 M (71.7) after taking into account social insurance
contributions and taxes. The actuarial gain/loss on pension obligations was USD 50.9 M
(–12.3) and was due to the net amount of changed assumptions and experience-based
changes. The actuarial gain/loss on plan assets amounted to USD 54.5 M (102.4). The
actuarial gain during 2010 occurred because actual return on plan assets exceeded
expected return in all three countries where Skanska has defined-benefit plans. See also
Note 28, “Pensions.”
2010 2009
Actuarial gains and losses on pension obligations 50.9 –12.3
Difference between expected and actual return on
plan assets 54.5 102.4
Social insurance contributions 17.9 9.7
Taxes –33.2 –28.1
IFRS 2, “Share-based Payment”
90.2 71.7
The share incentive programs introduced in 2005 and 2008, respectively, are recognized
as share-based payment, which is settled with an equity instrument in compliance with
IFRS 2. This implies that fair value is calculated on the basis of estimated fulfillment of
established financial targets during a measurement period. After the close of the measurement
period, fair value is established.
This value is allocated over the four- and three-year vesting period, respectively.
There is no reappraisal after fair value is established during the remainder of the vesting
period, aside from changes in the number of shares because the condition of continued
employment during the vesting period is no longer met.
Dividend
After the closing day, the Board of Directors proposed a regular dividend of SEK 5.75
(5.25) per share (corresponding to USD 0.85 [0.73]), and an extra dividend of SEK 6.25
(1.00) per share (corresponding to USD 0.92 [0.14]) for the 2010 financial year, totaling
SEK 12.00 (6.25) per share (corresponding to USD 1.77 [0.87]). The extra dividend is conditional
upon the sale of the concession for the Autopista Central highway having been
completed and the full sale price having been paid. The proposed dividend for 2010
totals an estimated USD 725.3 M (358.2).
No dividend is paid for the Parent Company’s holding of its own Series B shares.
The total dividend amount may change by the record date, depending on repurchases
of shares and transfers of Series B shares to participants in Skanska’s long-term Share
Award Program. The dividend is subject to the approval of the Annual Shareholders’
Meeting on April 5, 2011.
Total dividend
USD M 2010 1 2009
Regular dividend 347.5 300.9
Extra dividend 377.8 2 57.3
Total dividend 725.3 358.2
1 In 2010, refers to proposed dividend.
2 Conditional upon the sale of the Autopista Central.
Shares
Information on the number of shares as well as earnings and equity per share can be
seen in the table below.
2010 2009
Number of shares, December 31 423,053,072 423,053,072
of which Series A shares 20,032,231 20,100,265
of which Series B shares 399,380,841 399,012,807
of which Series D shares (not entitled to
dividends, in Skanska's own custody) 3,640,000 3,940,000
Number of Series D shares converted to
Series B shares 860,000 560,000
Average price, repurchased, shares, SEK 105.40 100.69
Corresponding Average price, repurchased
shares, USD 14.62 13.16
Number of Series B shares repurchased 8,324,000 6,214,000
of which repurchased during the year 2,110,000 3,419,000
Number of Series B shares in Skanska's own
custody, December 31 8,253,247 6,331,190
Number of shares outstanding, December 31
After repurchases and conversion 411,159,825 412,781,882
Average number of shares outstanding
After repurchases and conversion 412,229,351 415,059,131
After repurchases, conversion and dilution 416,448,523 416,743,454
Average dilution, percent 1.01 0.40
Earnings per share
After repurchases and conversion, USD 1.35 1.33
After repurchases, conversion and dilution, USD 1.34 1.32
Equity per share, USD 7.39 6.74
Number of shares after repurchases and conversion,
December 31 2010 2009
Number on January 1 412,781,882 415,759,910
Number of Series B shares repurchased –2,110,000 –3,419,000
Number of shares transferred 487,943 440,972
Number on December 31 411,159,825 412,781,882
During 2010, 68,034 (2,363,398) Series A shares were redeemed for a corresponding
number of Series B shares. Each Series A share carries 10 votes and each Series B and
Series D share carries one vote. Series D shares do not entitle the holder to a dividend
from earnings. Series B shares are listed on the NASDAQ OMX Stockholm.
Dilution effect
In the share incentive programs introduced in 2005 and 2008, respectively, the number
of potential ordinary shares is calculated during the measurement period based on the
estimated number of shares that will be issued due to the fulfillment of the established
targets. The number of potential ordinary shares thus calculated is then reduced by the
difference between the payment Skanska is expected to receive and the average share
price during the period.
The cost of both share incentive programs is estimated at a total of about
USD 112.0 M, allocated over three years, corresponding to 8,064,412 shares. The
maximum dilution at the close of the vesting period is estimated at 1.93 percent. During
2010, the cost of both programs amounted to USD 27.5 M equivalent to 2,092,928
shares. The dilution effect up to and including 2010 totaled 1.20 percent.
Capital management
Capital requirement vary between business streams. Skanska’s construction projects are
mainly based on customer funding. As a result, in its Construction business stream, the
Company can operate with negative working capital. However, the equity requirement
for a construction company is substantial and is related to large business volume and to
the risks inherent in the various types of construction assignments carried out. Skanska
must also take into account the financing of goodwill and the performance guarantees
required in publicly procured projects in the U.S. market.
In the Board’s judgment, the Group’s equity totals a reasonable amount in view of the
requirements posed by Skanska’s financial position and market circumstances. The ambition
is to use the net cash surplus to expand investments in the Group’s development
business streams − Residential, Commercial Property and Infrastructure Development.
132 Notes, including accounting and valuation principles Skanska Review of 2010 – USD version