Volvo 1997 Annual Report Download - page 45

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Definition of keys ratios
Operating margin
Operating income divided by net sales.
Return on operating capital
Operating income divided by average operating capital. Operating
capital consists of operating assets (tangible and intangible assets,
receivables and inventories) reduced by noninterest-bearing current
liabilities. This ratio is used only for Volvo’s business areas, not for the
Group as a whole.
Return on shareholders’ equity
Net income divided by average shareholders’ equity.
Interest coverage
Income divided by interest expense and similar charges. Income
includes operating income, income from investments in associated
companies, income from other investments and interest income and
similar credits.
Self-financing ratio
Cash flow from year’s operations (see Cash flow analyses) divided by
capital expenditures for property, plant and equipment and invest-
ments in assets under operating leases.
Net financial assets (net debt)
Cash and bank accounts, marketable securities and interest-bearing
long-term receivables reduced by short- and long-term interest-bea-
ring liabilities. Net debt in Volvo’s sales-financing companies is not in-
cluded since the interest expense on these liabilities is charged
against operating income and does not affect consolidated net inter-
est expense.
Income per share
Net income divided by the weighted average number of shares out-
standing during the period.
Average number of shares
The weighted average number of shares for a given year is calculat-
ed as follows: the eight opening and closing figures for the four
quarters of the year are totaled and then divided by eight.
■
2Acquisitions and divestments
of shares in subsidiaries
Parent Company shareholdings in subsidiaries at December 31,
1997 are shown on page 65. Significant acquisitions, formations and
divestments of companies are shown below.
Volvo Trucks North Am erica, Inc
(formerly Volvo GM Heavy Truck Corporation)
In July 1997, Volvo Trucks took over the remaining 13% of the com-
mon shares in its North American truck company from General
Motors Corporation and changed the name of the company to Volvo
Trucks North America, Inc. The reason for the change is to gain full
control of the company. General Motors received preferred shares in
exchange for its common stock.
Transbanco Banco de Investim ento SA
In December 1997 Volvo do Brasil acquired the remaining outstand-
ing 50% of the shares of the Brazilian sales-financing company,
Transbanco Banco de Investimento SA. As of December 31, 1997,
the company’s balance sheet was consolidated in the Volvo Group.
The holding was reported earlier in accordance with the equity method.
Cham pion Road Machinery Limited
In March 1997 Volvo Construction Equipment Corporation acquired
all the shares of the Canadian company, Champion Road Machinery
Limited, for CAD 173 M. The company is a large manufacturer of
graders and other machines used in road construction and mainte-
nance. Champion was consolidated as of January 1, 1997. Goodwill
of SEK 0.7 billion that arose in connection with the acquisition is
being amortized over 20 years.
Volvo Penta Benelux BV
During 1997 AB Volvo Penta acquired Nebim Handelsmaatschappij
BV, an independent importer in the Netherlands. The name of the
company was then changed to Volvo Penta Benelux BV. The acquir-
ed company is responsible for the marketing, sales and service of
industrial and marine engines in Belgium, the Netherlands and
Luxembourg.
The AGES Group, ALP
In 1996 Volvo Aero increased its holding in The AGES Group, ALP
(Air Ground Equipment Sales) from 5% to 25%. Early 1997 the
holding was increased to 60% and AGES thereafter became a sub-
sidiary of Volvo. Goodwill of SEK 0.2 billion that arose in connection
with the acquisition is being amortized over 20 years.
Volvo Car Finance Holding AB
At year-end 1995 Volvo Car Corporation established a wholly owned
subsidiary, Volvo Car Finance Holding AB, to coordinate the sales-
financing operations in Volvo Car Corporation.
The company is the parent company of Volvo Rahoitus Suomi Oy,
Volvo Auto Leasing Deutschland GmbH, Modular Finance BV, Volvo
Car Finance UK Ltd., Volvo Car Finance Australia Ltd., Volvo Car
Renting España SA and Amazon Insurance NV. Amazon Insurance is
an insurance company, while the other subsidiaries conduct sales-
financing operations for Volvo's customers in their respective countries:
Finland, Germany, Belgium, Great Britain, Australia and Spain.
Volvo Rahoitus Suomi Oy (formerly Devoco Oy)
In 1996 Volvo Cars acquired 50% of the share capital in Volvo
Rahoitus Oy, following which Volvo Cars’ holding amounts to 75%.
The remaining 25% interest is held by Volvo Truck Finance Holding.
The company finances transactions involving both cars and trucks for
customers and dealers in Finland.
Volvo India PVT Ltd.
Volvo India PVT Ltd. was formed in 1996. The company, which is
owned 100% by Volvo Truck Corporation, will produce trucks begin-
ning in 1998.
Volvo Truck Latvia S/ A
Volvo Truck Latvia S/ A was formed in 1996. The company, which is
owned 100% by Volvo Truck Corporation, markets trucks in Latvia.
Volvo Pakistan Ltd.
Volvo Pakistan Ltd., in which Volvo Truck Corporation has a 51%
interest, was formed in 1996. The company manufactures trucks and
is responsible for sales in Pakistan.
Volvo Austria GmbH
In November 1996 Volvo Bus Corporation acquired the remaining
25% shareholding in Steyr Bus GmbH from Steyr-Daimler-Puch Ag.
The company, whose name was changed to Volvo Austria GmbH on
January 1, 1997, is owned 100% by Volvo Bus Corporation. Effective
January 1, 1997, the new distribution structure in Austria was
coordinated in Volvo Austria. In the new structure, Volvo has taken
over Denzel’s importer operations and integrated them in Volvo’s
European marketing and distribution network for cars, trucks and
buses.