Review of 2010 – USD version - Skanska

Note
Business unit
Infrastructure
Development
Group 6
37 Continued
Measure of earnings
Starting
point 1
Outperform
1
Outcome
Operating income, SEK M 6 100 200 250
Corresponding to USD M 13.9 27.7 34.7
Project points, number 7 20 80 93
Income after financial items,
SEK M 8 3,119 4,619 5,419
Corresponding to USD M 8 432.7 640.8 751.8
Return on equity 13.0% 16.0% 20.9%
1 Targets are translated to 2010 exchange rates.
2 The results include residential development and commercial property development operations
carried out within Construction operations in the Nordic countries (according to IFRSs).
3 Skanska Value Added is equivalent to operating income after subtracting the cost of capital
employed.
4 Operating income according to segment reporting excluding residential development
operations carried out within Construction operations in the Nordic countries.
5 Operating income according to segment reporting excluding commercial property development
operations carried out within Construction operations in the Nordic countries.
6 Excluding shares of income in the Autopista Central, Chile.
7 A point system in which points are received for higher status in project development and project
divestments, according to a defined scale.
8 The Outperform target at Group level is 95 percent of the total Outperform targets of the
business streams. The results include residential development and commercial property
development operations carried out within Construction operations in the Nordic countries
(according to IFRSs) but exclude eliminations at the Group level.
Share Incentive Program – Skanska Employee Ownership Program, SEOP 2 (2011–2013)
In 2010, the Annual Shareholders’ Meeting approved the introduction of the SEOP2
long-term share ownership program for employees of the Skanska Group, which is
essentially an extension of the earlier SEOP1 share ownership program. In the same
way as in the earlier program (SEOP1), the program means offering employees the
opportunity to receive Series B Skanska shares from Skanska free of charge, provided
they have made an investment of their own during a given financial year. The purchase
period covered the years 2011–2013 and the vesting period runs for three years from the
month the employee invests in shares. The terms and conditions coincide in all essential
respects with those of the earlier SEOP1 program.
Like SEOP1, the program has two cost ceilings as well as a limit on how many shares
may be repurchased as part of the program, which coincide with those of the earlier
program. In SEOP2 the cost ceiling based on the extent to which financial “SEOPspecific
Outperform targets” are met, which limits Skanska’s total cost per year to
Operating income USD 29–92 M, shall be adjusted in accordance with the Consumer
Price Index with 2010 as the base year.
Previous share incentive programs
The previous share incentive program, the Skanska Share Award Plan, was applicable
during the years 2005–2007. The Plan covered about 300 senior executives.
The Plan meant that employees were offered the opportunity to be granted “share
awards” entitling the holder to receive Series B shares in the Company free of charge,
provided that certain targets were met. The maximum yearly allocation for each participant
per year was equivalent to 30 percent of the value of the participant’s annual salary
in Series B shares. Each participant’s allocation of share awards was dependent upon the
fulfillment of a number of established earnings- and performance-related conditions,
which were based on the “Outperform” targets approved by the Board of Directors. In
order to receive the shares, three years of employment are required after the end of the
measurement period.
The cost of the Plan, excluding social insurance contributions, is estimated at about
USD 17.3 M, allocated over four years. In 2010, the cost of the Plan totaled USD 1.0 M
excluding social insurance contributions. No further costs for the program then remain.
The dilution effect through 2010 is estimated at 1,245,779 shares or 0.3 percent of
the number of shares outstanding. The maximum dilution in the Plan is the same, since
the Plan ended in 2010.
Early in 2010, share awards related to 2006 were distributed to those individuals in
the Plan who have remained employees in the Group, a total of 352,202 Series B shares
in Skanska. Early in 2011, share awards related to 2007 will be distributed to those individuals
in the Plan who have remained employees in the Group, about 490,000 Series B
shares in Skanska.
Note
Note
Note
37 Continued
Local incentive programs
Salaries and other remuneration are adopted with reference to prevailing conditions in
the rest of the construction industry and customary practices in each local market. The
Skanska Group applies a remuneration model for the affected executives and managers
that consists of a fixed annual salary plus variable remuneration which is based on
financial targets achieved.
38
Fees and other remuneration to auditors
KPMG
Audit assignments 7.6 7.1
Tax advisory services 1.7 1.3
Other services 1.5 0.7
Total 10.8 9.0
“Audit assignments” refers to legally mandated auditing of the annual accounts and
accounting documents as well as the administration by the Board of Directors and the
President and CEO, along with auditing and other review work conducted according
to agreement or contract. This includes other tasks that are incumbent upon the Company’s
auditors to perform as well as advisory services or other assistance as a result of
observations during such review work or the completion of such other tasks.
“Other services” refers to advisory services related to accounting issues, advisory
services concerning the divestment and acquisition of businesses and advisory services
concerning processes and internal controls.
39 Related party disclosures 2010 2009
Through its ownership and percentage of voting power, AB Industrivärden has a significant
influence, as defined in compliance with IAS 24, “Related Party Disclosures.”
All transactions have occurred on market terms.
Skanska sells administrative services to pension funds that manage assets intended to
cover the Group’s pension obligations.
Associated companies and joint ventures are companies related to Skanska. Information
on transactions with these is presented in the following tables.
Information on remuneration and transactions with senior executives is found in
Note 36, “Personnel,” and Note 37, “Remuneration to senior executives and Board
members.”
Transactions with joint ventures 2010 2009
Sales to joint ventures 1,114.6 799.0
Purchases from joint ventures 16.0 13.1
Dividends from joint ventures 22.5 32.0
Receivables from joint ventures 248.1 68.6
Liabilities to joint ventures 9.6 3.3
Contingent liabilities for joint ventures 54.5 48.4
Transactions with associated companies 2010 2009
Purchases from associated companies 1.5 2.0
Skanska’s pension fund directly owns 650,000 (640,000) Series B shares in Skanska.
There is also an insignificant holding of indirectly owned shares via investments in various
mutual funds.
During 2010 Skanska sold its 50 percent shareholding in the Orkdalsvegen E39
highway in Norway, which was operated by Infrastructure Development, for a sale
price of about USD 23.6 M. The purchasers were Skanska Norway’s pension trust and
the pension foundation Skanska Trean Allmän Pensionsstiftelse in Sweden, which each
provided half of the investment.
Skanska Review of 2010 – USD version Notes, including accounting and valuation principles 149