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Annual Report 1999
Volvo Annual Report 1999 www volvo com

Table of contents

  • Page 1
    Annual Report 1999

  • Page 2
    ... l vo sh ar e 4 9 B o ar d o f Di r ect o r s an d M an ag em en t 5 0 B o ar d o f Di r ect o r s an d A u d i t o r s 5 2 Gr o u p M an ag em en t 5 4 Co n so l i d at ed i n co m e st at em en t s 5 5 Co n so l i d at ed b al an ce sh eet s 5 6 Cash f l o w st at em en t s 5 7 No t es t o co n so...

  • Page 3
    ... our business concept: our purpose, our offerings, and our identity. The Volvo Group's mission statement By creating value for our customers we create value for our shareholders. We use our expertise to create transport-related ...hard and soft products...Combined, our products and services...

  • Page 4
    ... ern Eu rop e, h ave been st rong. In cont rast , t h e growt h m arket s - East ern Eu rop e, Asia and Sou t h Am erica - cont inu ed t o be weak, alt h ou gh t h ere were som e signs of recovery. Under t h ese condit ions, sales increased on a level wit h ou r growt h p lans. Vo l vo acq u i r ed...

  • Page 5
    ...N ort h Am erican version, Volvo VN, h as set a new st andard and received very h igh m arks from ou r cu st om ers. Based on t h is su ccess, Volvo Tru cks h as increased it s op erat ions in N ort h Am erica. Produ ct ion cap acit y was raised du ring t h e year and service was m ade m ore readily...

  • Page 6
    ... st rial engines are develop ing rap idly in Asia. A new p lant was inau gu rat ed in C h ina, p rim arily wit h an eye on t h e C h inese m arket , bu t also for exp ort s t o ot h er cou nt ries in East Asia. Vo l vo A er o st r o n g er i n en g i n e co m p o n en t s Volvo Aero's sales, wh ich...

  • Page 7
    ... Way is largely being condu ct ed by grou p s working wit h wh at we call "op erat ional develop m ent ", a m et h od of im p roving cu rrent op erat ions t h at h as h ad a m ajor im p act . Vo l vo Car s i n g o o d h an d s Th e develop m ent of Volvo C ar C orp orat ion is also im p ort ant for...

  • Page 8
    ... ions t o joint ly develop a m ediu m -h eavy t ru ck are well advanced. Market ing coop erat ion h as also been est ablish ed t h rou gh t h e sale of Mit su bish i's ligh t "C ant er" t ru ck via Volvo's dist ribu t ion net work. Mit su bish i, a st rong brand, is one of Asia's forem ost p rodu...

  • Page 9
    ... ance. We are increasing G rou p efficiency t h rou gh increased coordinat ion wit h in research and develop m ent , p u rch asing, logist ics, t h e aft er-sale m arket , financial services and e-com m erce. Powert rain, t h e new driveline u nit , is p rodu cing diesel engines and gearboxes for...

  • Page 10
    ... nam e to a m ultiple-brand focus Ever since AB Volvo was fou nded, "Volvo" h as been t h e key nam e in bu ilding relat ionsh ip s wit h t h e ou t side world. Produ ct s and services h ave been develop ed wit h su ch dist inct ive cu st om er benefit s t h at t h is nam e h as long been associat...

  • Page 11
    ..., there is an opportunity to increase value for the shareholders. Greg M elich M organ Stanley Dean Witter London, Great Britain Shared ow nership of the Volvo brand nam e In connect ion wit h AB Volvo's sale of Volvo C ars t o Ford Mot or C om p any, Volvo Tradem ark H olding AB was form ed, wh...

  • Page 12
    ... year for Volvo's em ployees. The sale of Volvo's passenger car business to Ford Motor C om pany was com pleted in March. The concentration on com m ercial vehicles and equipm ent involve great changes for the em ployees. N ew opportunities are opening up for personal developm ent and the exchange...

  • Page 13
    ... in the C om pany's business; they should have both responsibility and the courage to exercise influence and be influenced. Learning and developm ent are an im portant part of daily work. Knowledge of the outside world and of the C om pany increases the possibilities to develop ways and m ethods of...

  • Page 14
    Products and services 12

  • Page 15
    ...wit h Mit su bish i. Volvo Trucks' line of soft products is growing rapidly. It consist s p rim arily of su ch financing services as inst allm ent Vo l vo FH1 2 cont ract s, financial leasing, op erat ional leasing and dealer financing. In addit ion, insu rance, service and m aint enance cont ract...

  • Page 16
    ... from diesel engines, u sing new t ech nology. In N ort h Am erica, via it s su bsidiary, N ova BUS, Volvo is p art icip at ing in t h e develop m ent of bu ses p owered by fu el cells. In Eu rop e, Volvo is a leading m anu fact u rer of bu ses p owered by nat u ral gas. Volvo Buses' soft products...

  • Page 17
    ... ot or graders and wh eel-loaders, as well as a new series of Volvo excavat ors t h at are p rodu ced in t h e p lant in Sou t h Korea. Financing and service agreements are increasing in importance in t h e soft p rodu ct segm ent . In t h e service sect or, becau se it is difficu lt t o t ransp ort...

  • Page 18
    ...craft. Engines in the Marine Commercial business segment have power outputs ranging from 100 hp to 700 hp and complete drive systems for use in fishing vessels, ferries, tugboats and integrated water-jet systems. Volvo Penta's engines are used on large ships as sources of power for the generation of...

  • Page 19
    ... types of financing and sales of new and used spare parts for aircraft constitute a growing business within Aero . More and m ore aviat ion com p anies are also elect ing t o h ave an "ou t side" p art y assu m e fu ll resp onsibilit y for t h e engines, for t h e overh au l of aircraft and for...

  • Page 20
    ... reflect s p rim arily t h e u nexp ect edly st rong econom y in t h e Unit ed St at es, a downt u rn in Jap an t h at was m ilder t h an h ad been feared, an im p rovem ent in Korea, and som ewh at bet t er growt h in t h e Eu rop ean Union. Th e Am erican econom y cont inu ed t o develop st rongly...

  • Page 21
    ... that the Group is now based on a core of heavy m achinery and the future feels exciting. A lthough I think it's sad that w e left Cars. Ulla-Greta Fundberg M aterials Control, Volvo CE, Esk ilstuna, Sweden Argentina, Brazil, Paraguay and Uruguay Integration of Volvo's acquired units From h aving...

  • Page 22
    ...t h e financial crisis in Sou t h Korea and t h e rest of Asia t h at resu lt ed in low sales in t h e region. A p rogram is u nder way in t h e m arket ing sect or t o consolidat e Sam su ng's form er dealer net work wit h Volvo's, and effort s are being m ade t o increase t h e p ercent age of exp...

  • Page 23
    ... generat ion of m ediu m -h eavy engines wit h D eu t z. M y vi ew o f Vo l vo Volvo's brand stands for products of the highest quality, but also production of the highest class. In our w ork , that m eans clean plants, w ith everything in its place and easy access to the tools we need for the job...

  • Page 24
    ... . In April Volvo Aero concluded an agreement with B oeing, the aircraft manufacturer, whereby Volvo Aero's subsidiary, The AG ES Group, acquired exclusive rights to market and sell B oeing's surplus new spare parts for B oeing and McDonnell Douglas commercial aircraft, initially for use in types of...

  • Page 25
    ... in the area of components for heavy trucks. In addition, the companies intend to conduct regional cooperation in Asia, South America, Australia and New Zealand. The cooperation also covers increased sales exposure for Mitsubishi Canter trucks in Volvo's dealer network in Europe, in Germany as one...

  • Page 26
    ... 1998 Cars Increased volumes Change in product and market mix, etc. Higher research and development expenses Decrease in provisions in sales-financing operations Capital gains on sale of companies within Construction Equipment Change in Group structure Expenses incurred for a damage suit, 1998...

  • Page 27
    ... to previous year Net sales Cost of sales Research and development expenses Selling and administrative expenses Other operating income and expenses Total effect of changes in exchange rates on operating income excluding Cars 480 Group sales are reported at average spot prices and the effects...

  • Page 28
    ...453 103,798 (5,040) (5,716) - - Volvo Group 183,625 212,936 125,019 - 1 Percentage change pertains to 1999/ 1998. 2 Excluding divested and acquired units the change was + 8%. Operating incom e by business area 1997 Trucks Buses Construction Equipment Aero Other and eliminations 1, 812 550 1,444...

  • Page 29
    ... Marketable securities Cash and bank Volvo Group excl. sales financing 1 1997 1998 Sales financing 1997 1998 Total Volvo Group 1999 1997 1998 1999 1999 3.3 30.7 1.4 8.1 0.2 2.2 6.7 27.8 0.0 2.4 19.5 11.0 8.8 5.7 36.0 1.8 9.7 0.1 3.3 7.5 31.9 0.1 1.4 24.4 6.9 11.9 Total assets Shareholders...

  • Page 30
    ... Net investments in fixed assets and leasing assets Operating cash flow, excluding sales financing Divestment of Volvo Cars Acquisition of shares in Scania Acquistition of shares in Mitsubishi Motors Other acquired subsidiaries and shares 1 Dividend to AB Volvo's shareholders Other 1.9 46.0 (23...

  • Page 31
    ... Financial items and income taxes Volvo Group excl. sales financing 1997 1998 Sales financing 1997 1998 Total Volvo Group 1999 1997 1998 1999 1999 8.2 5.1 0.2 3.6 (0.3) 6.2 6.4 (0.6) 1.0 (2.1) Cash flow from operating activities Investments in fixed assets Investments in leasing assets...

  • Page 32
    ...North America South America Asia Other markets 31,040 3,430 20,900 6,970 4,710 1,930 1998 37,810 4,540 29,310 6,020 3,760 1,840 Trucks 1999 39,630 2,900 34,300 3,900 2,720 1,640 85,090 Total 68,980 83,280 Largest m ark ets Volvo heavy trucks registrations 1998 United States Great Britain France...

  • Page 33
    ... financing and service cont ract s. Produ ct renewal is cont inu ing, wit h em p h asis on t h e m ediu m -h eavy class of t ru cks in Eu rop e, and on civil engineering t ransp ort s in N ort h Am erica. Num ber of truck s produced 1997 1998 Trucks 1999 30,610 30,540 9,350 8,780 5,490 Volvo...

  • Page 34
    ... impact on volume resulting from acquisitions of companies in North America amounts to 1,000 delivered buses. Largest m ark ets Volvo buses registrations 1998 United States 1, 2 Mexico Great Britain Brazil 1 Sweden 1,630 1,370 1,510 1,090 350 Buses Market share, % 1998 n.a 23.4 53.6 9.0 44.2 1999...

  • Page 35
    ...) M operating income amounted to SEK 639 M and operating margin was 3.3%. Net sales/ m ark et SEK M Western Europe Eastern Europe North America South America Asia Other markets Construction Equipment 1997 7,836 263 5,785 991 1,036 847 1998 9,557 336 6,645 957 1,092 882 1999 10,032 193 5,982 507...

  • Page 36
    ... wit h t h e develop m ent of new p rodu ct s. D u ring t h e year 2000 m ajor em p h asis is also being p laced on fu rt h er develop ing Volvo C E's "soft " p rodu ct s su ch as leasing, financing and service cont ract s, and on sales of p re-owned equ ip m ent . M arine and Industrial Engines To...

  • Page 37
    ... t h e lau nch of new, com p et it ive p rodu ct s each year. Go al s f o r t h e y ear 2 0 0 0 Th e year 2000 began wit h t h e inau gu rat ion by Volvo Pent a and it s joint -vent u re com p any, Wu xi D iesel Engine Works, of an assem bly p lant for diesel engines and generat or set s in Wu xi...

  • Page 38
    ... throughout the entire year at the plants in Trollhättan, Sweden and in Kongsberg, N orway. The strain on production capacity is expected to persist for som e tim e in 2000. Net sales/ m ark et SEK M Western Europe Eastern Europe North America South America Asia Other markets 1997 3,682 6 3,066...

  • Page 39
    ... order received in South Africa, this ensures planned production up to the year 2011. Aero's Aerospace C om ponents division received two strategically im portant contracts in 1999. O ne involves design studies for turbines for Vinci, Europe's latest rocket engine, which is to be used in the upper...

  • Page 40
    ... s as Volvo's int ernal bank. Tr en d o f i n co m e Distribution of credit portfolio, net 1997 1 % 1999 25 29 29 16 1 1998 26 31 26 16 1 Commercial products Operational leasing Financial leasing Installment contracts Dealer financing Other customer credits 25 30 26 16 3 1) Excluding Cars in...

  • Page 41
    ...an d pro du ct s. Provisio n s ar e al so m ad e i n r esi d u al -val u e r eser ves f o r an y d i f f er en ces b et w een an t icipat ed an d act u al residu al valu es. New business unit for Volvo's financing operations Financing op erat ions are increasingly im p ort ant for t h e Volvo G rou...

  • Page 42
    .... Th ese dem ands are h ast ening t h e develop m ent of new m at erials and fu els, as well as m ore efficient engines, elect ronic syst em s and inform at ion t ech nology. Th ese areas are t h erefore t h e nat u ral fou ndat ion for Volvo's research and develop m ent . IT-b ased sy st em...

  • Page 43
    ... t h e p rosp ect s for develop ing a com bu st ion syst em offering lower fu el consu m p t ion and redu ced em issions. Volvo's research in t h e area of diesel em issions resu lt ed in cont inu ed advances du ring 1999 t h at will reach cu st om ers in a few years. Th e generat ion of em issions...

  • Page 44
    ... inclu de im p rovem ent s in t h e engine's p ower efficiency and redu ced t ransm ission losses, as well as im p roved aerodynam ic ch aract erist ics. Volvo is also working wit h variou s alt ernat ives t o diesel fu el. As one exam p le, Volvo h as develop ed t h e world's first p rot ot yp e bu...

  • Page 45
    ... ed on p age 106, wh ich also inclu des em ission valu es for Volvo's int ernal t ransp ort s. Environmental management system implemented Some units certified Work commenced Work not commenced VTC = Trucks VBC = Buses VCE = Constructions Equipment VP = Marine and Industrial engines VAC = Aero 43

  • Page 46
    ... all of Volvo's target groups: custom ers, shareholders/ capital m arket, m edia, em ployees, suppliers, students, job applicants, politicians and the general public. After launching the new volvo.com , the next step is to redesign each of the business areas' sections. Thereafter, work will begin...

  • Page 47
    .... Th e EMU h as also cont ribu t ed t o t h at Volvo h as been able t o cent ralize Eu rop ean financing op erat ions. Volvo issu ed su bst ant ial bond loans in eu ro on favorable t erm s in 1999. D u ring t h e first h alf of 2000 Volvo is working t o int rodu ce a cent ral accou nt for t ransact...

  • Page 48
    The Volvo share The effective return on Volvo shares - the dividend plus the increase in value of the shares - The Volvo share in 1999 The stock m ark et in 1999 Stocks showed strong price increases on both the Swedish and leading international exchanges during 1999. The uncertainty at m id-year ...

  • Page 49
    ... do so if int erest from sh areh olders and invest ors increases. Also financial rep ort ing will be considered wh en t h ere is a dem and. Trend of price, Volvo B Trend of price of Volvo Series B shares on the OM Stockholm Exchange (highest and lowerst price per month) SEK 450 400 350 300 Beta...

  • Page 50
    ... (or minus financial net assets and minority share), divided by operating income, before items affecting comparability. 6 Dividend divided by income per share. 7 Shareholders' equity divided by number of shares outstanding at year-end. 8 Plus one share of Swedish Match per Volvo share, price of SEK...

  • Page 51
    ...wh en t h e sale of Volvo C ars t o Ford was finalized on March 31, 1999. HÃ¥kan Frisinger resigned as Chairman of AB Volvo in April, 1999. Report on Board activities during 1999 In 1999, Volvo's Board of D irectors consisted of seven m em bers elected by shareholders at the Annual G eneral Meeting...

  • Page 52
    ... Sciences and the Royal Swedish Academy of Engineering Sciences. Member of Volvo Board since 1998. Holdings: 1,000 Volvo Series A shares. SÃ- REN PER-O LO F ERIKSSO N Born 1938, Master of Engineering, Hon. Dr. of Technology. Board Chairman: Svenska Kraftnät, Thermia AB and Odlander, Fredriksson...

  • Page 53
    ... for plant trade union organizations (LO). With Volvo since 1975. Deputy member of Volvo Board since 1999. Deputy member of Volvo Wheel Loaders and Board member of Volvo Construction Equipment Customer Support AB. Holdings: 50 Volvo Series B shares. H ERO LF Authorized Public Accountant...

  • Page 54
    .... With Volvo since 1997. Board Chairman: SAPA AB. Board member: Bristol-Myers Squibb Company, Federation of Swedish Industries and Swedish Metal Trades Employers' Association. Member of the Royal Swedish Academy of Engineering Sciences. Member of Volvo Board since 1997. Holdings: 30,300 Volvo shares...

  • Page 55
    Leif Johansson Arne Wittlöv Karl-Erling Trogen Lennart Jeansson Eva Persson Tryggve Sthen Lars Anell Per Löjdquist Fred Bodin Stefan Johnsson Jan Engström Staffan Jufors 53

  • Page 56
    ... SEK M 1997 Note 3 1998 1999 Net sales Cost of sales 183,625 (138,990) 44,635 (8,659) (17,160) (7,018) 212,936 (163,876) 49,060 (10,104) (19,042) (8,091) (2,813) (2,331) 6,679 444 4,526 1,502 (1,375) (157) 11,619 (3,140) (42) 8,437 Gross income Research and development expenses Selling expenses...

  • Page 57
    C onsolidated balance sheets SEK M December 31, 1997 December 31, 1998 December 31, 1999 Assets Non-current assets Intangible assets Tangible assets Property, plant and equipment Assets under operating leases Financial fixed assets Shares and participations Long-term sales-financing receivables ...

  • Page 58
    ...) Cash flow after net investments Financing activities Increase in bond loans and other loans Funds transferred to independent pension foundations New issue of shares Dividend to AB Volvo shareholders Redemption of shares Increase (decrease) in minority interests Dividends to minority shareholders...

  • Page 59
    ... Volvo Group's operations during 1999 were organized in five product-related business areas: Trucks, Buses, Construction Equipment, Marine and Industrial Engines, and Aero. In addition to the five business areas, there are certain operations consisting mainly of service companies that are designed...

  • Page 60
    ...are credited to, or charged against, income before taxes and minority interests in the year they arise. The more important exchange rates employed are shown above. Other financial instruments Interest and currency rate swaps are used to change the underlying financial assets and debts structure and...

  • Page 61
    ... to Volvo Construction Equipment, Champion Road Machinery, The AGES Group, Prévost, Nova BUS, Mexicana de Autobuses, Volvo Construction Equipment Korea and Volvo Aero Norge are being amortized over 20 years due to the holdings' long-term and strategic importance. Research and development expenses...

  • Page 62
    ... for NOK 240 M. In conjunction with the acquisition, the name of the company, which is mainly involved in production of commercial aircraft components, was changed to Volvo Aero In October 1998, AB Volvo acquired all of the shares of Mexicana de Autobuses (MASA). MASA is Mexico's second-largest...

  • Page 63
    ... AGES Group In 1997, Volvo Aero increased its ownership in The AGES Group from 25% to 60% and thereafter the company was consolidated as a subsidiary of Volvo. AGES, headquartered in Florida, trades in used aircraft material, mainly aircraft engines and spare parts for engines and aircraft. In 1998...

  • Page 64
    ... on the Volvo Group's balance sheet and cash flow statement in connection with the The effects during 1999 on the Volvo Group's balance sheet and cash flow statement in connection with the acquisition of subsidiaries and other business units are specified in the following table: Intangible assets...

  • Page 65
    ... Volvo's share of income in associated companies before taxes, is shown below: Note 7 Income (loss) 1997 1998 1999 1997 Dividends received 1998 1999 Scania AB Bilia AB AB Volvofinans Aviation Lease Finance Xian Silver Bus Corp AVC Intressenter AB Omninova Technology AB Turbec Arrow Truck Sales...

  • Page 66
    ...preliminary decision of the Tax Board that AB Volvo's sale of Volvo Cars did not result in a taxable capital gain. Deferred taxes relate to estimated tax on the change in tax loss carryforwards and temporary differences. (2,583) (3,140) (2,270) Deferred tax assets are reported to the extent that...

  • Page 67
    ... Hitachi Construction Machinery Company's participation in Euclid-Hitachi Heavy Equipment Inc (40%), and up to and including June 1997, General Motors' holding in Volvo Trucks North America Inc (13%). Intangible and tangible assets Value in balance sheet 1997 Value in balance sheet 1998 Note...

  • Page 68
    ... coaches. Scania's industrial and marine engines are used, among other applications, as power sources in generator sets, earth-moving and agricultural machinery as well as aboard ships and pleasure craft. An increasing proportion of Scania's sales are attributable to various types of service market...

  • Page 69
    service to Volvo's truck customers along the interstate network in the U.S., offering preventative maintenance, spare parts sales, emergency road service and minor repairs. Deutz AG In October 1998, a cooperation agreement was signed between Volvo and the German diesel engine manufacturer Deutz AG....

  • Page 70
    ... 1999, excluding Cars, was 4,158. The increase was mainly attributable to the North American operations. Other long-term receivables 1997 1998 Note 15 1999 Receivable from Ford Motor Company Convertible debenture loan in Henlys Other loans to external parties Deferred tax assets Other receivables...

  • Page 71
    ...Commercial paper Real estate financial institutions Securities issued by associated companies Shares Other Total 7,350 272 - 1,051 251 625 1,413 2,902 240 - 1,851 1,368 783 24 1,848 5,419 8,559 3,411 725 833 161 10,962 7,168 20,956 Cash and bank accounts 1997 1998 Note 20 1999 Cash in banks...

  • Page 72
    ... 1998 Note 22 1999 Provisions for pensions Provisions for other post employment benefits Total The amounts shown for Provisions for postemployment benefits correspond to the actuarially calculated value of obligations not insured with a third party or secured through transfers of funds to pension...

  • Page 73
    ...reported in Volvo's balance sheet. Other provisions 1997 1998 Note 23 1999 Warranties Provisions in insurance operations Provisions attributable to participations in associated companies Restructuring measures Provison for residual value risks in sales-financing operations 1 Provision for service...

  • Page 74
    ... for which the above assets were pledged amounted at year-end to 9,417 (10,752; 9,924). Contingent liabilities 1997 1998 Note 27 1999 Discounted bills Guarantees: Bank loans and trade bills - associated companies Bank loans - customers and others Recourse obligations Tax claims Other contingent...

  • Page 75
    .... During 1997, SEK 10.9 billion was added to liquid funds through the sale of shares, mainly in Renault SA and Pripps Ringnes AB, while investments in shares resulted in a negative cash flow of SEK 0.2 billion. Net investments during the year in loans to external parties amounted to SEK 3.2 billion...

  • Page 76
    ... of financial goals. The options are financed by the company. Profit sharing to employees for 1999, 1998 and 1997 amounted to 185, 160 and 231, respectively. 1998 Number of employees of whom, women, % Number of employees 1999 of whom, women, % Average number of employees AB Volvo Sweden Number of...

  • Page 77
    ... changes in contracted and projected flows of payments (commercial exposure), to payment flows related to loans and investments (financial exposure), and to the translation of assets and liabilities in foreign subsidiaries (equity exposure). The objective of Volvo's foreign exchange risk management...

  • Page 78
    ...p Commercial exposure Volvo uses forward exchange contracts and currency options to hedge the value of future payment flows. Contracts related to hedging of anticipated sales and purchases of foreign currency normally do not exceed 36 months. In accordance with the Group's currency policy, between...

  • Page 79
    ... of sales in liquid assets. A proper balance between short- and longterm borrowing, as well as the ability to borrow in the form of credit facilities, are designed to ensure longerterm financing. Volvo Group outstanding interest related contracts December 31, 1997 Notional amount Book value...

  • Page 80
    ... customer or counterparty. Calculation of fair value of financial instruments Volvo has used generally accepted methods to calculate the market value of the Group's financial instruments as of December 31, 1997, 1998 and 1999. In the case of instruments with maturities shorter than three months...

  • Page 81
    ... in accordance with Swedish accounting principles Items increasing (decreasing) reported shareholders' equity Foreign currency translation (A) Income taxes (B) Business combinations (C) Shares and participations (D) Interest costs (E) Leasing (F) Investments in debt and equity securities (G) Items...

  • Page 82
    ... of goodwill. In 1995, AB Volvo acquired the outstanding 50% of the shares in Volvo Construction Equipment Corporation (formerly VME) from Clark Equipment Company, in the U.S. In conjunction with the acquisition, goodwill of SEK 2.8 billion was reported. The shareholding was written down by SEK...

  • Page 83
    ... are defined benefit plans; that is, the employee is entitled to receive a certain level of pension benefits, usually related to the employee's final salary. In these cases the annual pension cost is calculated based on the current value of future pension payments. In Volvo's consolidated accounts...

  • Page 84
    ... companies sponsor unfunded benefit plans, mainly in the U.S., to provide health care and other benefits for retired employees who meet minimum age and service requirements. The plans are generally contributory, with retiree contributions being adjusted periodically, and contain other cost-sharing...

  • Page 85
    ... show an annual increase of 8% in the weighted average per capita costs of covered health-care benefits; it is assumed that the percentage will decline gradually to 5% in 2010 and then remain at that level. 42 97 (4) 1 46 77 12 - 35 60 (5) - 136 135 90 The discount rate used in determining...

  • Page 86
    ... A B Volvo Corporate registration number 556012-5790. Board of Directors' report Income from investments in Group companies include capital gains of 17,784 from the sale of shares in Volvo Personvagnar Holding AB to the Ford Motor Company. Income from investments also include group contributions...

  • Page 87
    Balance sheets Dec 31, 1997 Dec 31, 1998 SEK M Dec 31, 1999 Assets Non-current assets Rights Total intangible assets Property, plant and equipment Total tangible assets Shares and participations in Group companies Long-term receivables with Group companies Other shares and participations Other ...

  • Page 88
    ...pensions and similar commitments Increase in shareholders' equity in connection with conversions and new share issue Dividend to AB Volvo's shareholders Redemption of shares in AB Volvo Change in liquid funds Liquid funds at January 1 Liquid funds at December 31 Notes to cash flow statements Shares...

  • Page 89
    ...,784 in Volvo Personvagnar Holding AB to Ford Motor Company. Group-internal transfers resulted in a net loss of 558, which primarily is attributable to capital loss on sale of shares in Försäkringsaktiebolaget Volvia 596, and gain Note 3 on the sale of Volvo Penta Italia SpA, 35. Income in 1998...

  • Page 90
    ...in Other operating income and expenses. Other financial income and expenses also include guarantee commissions from subsidiaries and costs of having Volvo shares registered on various stock exchanges as well as costs for confirmed credit facilities. A llocations 1997 1998 Note 8 1999 Provision to...

  • Page 91
    ...Ford Motor Company. In connection with the sale, Volvo Car Finance UK Ltd., 431 and Volvo Car UK Ltd., 265 were sold to Volvo Personvagnar AB. Volvo Construction Equipment North America Inc was acquired from Volvo Construction Equipment NV for 412, after which the holdings were used as a shareholder...

  • Page 92
    ...share of the year's income. Share capital was increased by 5 in the newly formed company Volvo Trademark Holding AB. Holdings in NLK Näringslivskredit AB were divested. 1998: Shares in Henlys Group Plc were acquired for 376 and in Deutz AG for 670. Participations in Blue Chip Jet H B were purchased...

  • Page 93
    ...in part through funds in pension foundations. Assets in the Pension Foundation, marked to market, accruing AB Volvo exceeded pension obligations by 59. During 1999, AB Volvo was notified that its share of the alloted company specific surplus pension funds held by SPP (Swedish insurance company) were...

  • Page 94
    Par en t Co m p an y A B Vo l vo Other current liabilities 1997 1998 Note 18 1999 Tax liabilities Wages, salaries and withholding taxes Other liabilities Accrued expenses and prepaid income Total No collateral is provided for current liabilities. - 34 30 58 803 29 29 53 - 37 86 72 ...

  • Page 95
    ... Finance, United States Arbustum Invest AB, Sweden AVC Intressenter AB, Sweden Turbec AB, Sweden Merkavim Metal Works Ltd, Israel Harvest Technology Partners, LP, United States Arabian Vehicle Truck Industry Ltd, Saudi Arabia Expar Incorporated, United States Transport Financial Services, Canada...

  • Page 96
    ...évost Car Inc, Canada Volvo Bus Asia Pacific (Pte) Ltd, Singapore Volvo Construction Equipment NV, Beesd, The Netherlands Volvo Wheel Loaders AB, Sweden Volvo Construction Equipment Components AB, Sweden Volvo Articulated Haulers AB, Sweden Volvo Construction Equipment Customer Support AB, Sweden...

  • Page 97
    ...Volvo Aero AB, Sweden Volvo Aero Engine Services AB, Sweden Volvo Aero Turbines AB, Sweden Volvo Aero Norge AS, Norway VNA Holding Inc, United States Volvo Trucks North America, Inc, United States Volvo Construction Equipment North America Inc, United States Volvo Penta of The Americas, Inc, United...

  • Page 98
    Proposed disposition of unappropriated earnings Group As sh own in t h e consolidat ed balance sh eet at D ecem ber 31, 1999, u nrest rict ed equ it y am ou nt ed t o SEK 82,490 M (48,307). N o ap p rop riat ion t o rest rict ed equ it y is est im at ed t o be m ade. AB Volvo Ret ained earnings...

  • Page 99
    A uditors' report for A B Volvo We h ave au dit ed t h e annu al accou nt s and t h e consolidat ed accou nt s on p ages 18-96 and t h e accou nt ing records and t h e adm inist rat ion of t h e Board of D irect ors and t h e President of AB Volvo for t h e year 1999. Th ese accou nt s and t h e adm...

  • Page 100
    ...262 12,477 10,481 8,437 32,222 Consolidated balance sheets 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 SEK M 1999 Intangible assets Property, plant and equipment Assets in operational leasing Shares and participations Inventories Receivables in salesfinancing operations Interest bearing...

  • Page 101
    ... the shares in Swedish Match 1996 have been excluded from other changes in the balance sheet. Furthermore the effects of changes in exchange rates at translation of foreign subsidiaries have been excluded, since these effects do not effect cash flow. 1 1999, excluding gain on sale of Volvo Cars of...

  • Page 102
    ...cash Change in working capital Financial items and income taxes 10.2 4.8 (3.5) 3.6 4.5 (1.4) 8.2 5.1 0.2 3.6 (0.3) 6.2 6.4 (0.6) 1.0 (2.1) 6.0 3.1 0.2 (1.2) (1.7) Cash flow from operating activities Investments in fixed assets Investments in leasing assets Disposals of fixed assets and leasing...

  • Page 103
    ... per share is calculated as net income divided by average number of shares. B U S I N ES S A R EA S TA TI S TI CS Num ber of em ployees at year-end 1989 1990 1991 1992 1993 1994 1995 1996 1997 Number 1998 1999 Trucks Buses Construction Equipment Marine and industrial engines Aero Other 22...

  • Page 104
    ... sales for the Construction Equipment business area in the years 1991 through 1995, calculated using the average exchange rate for the US dollar in each year, amounted to SEK 8,273 M, SEK 7,890 M, SEK 9,665 M, SEK12,084 M and SEK 13,684 M. Effective in 1997, the Volvo Group's accounting per market...

  • Page 105
    ... for Volvo Construction Equipment in the years 1991 to 1995, calculated using the average rate for the US dollar for each year, amounted to SEK (193) M, SEK (436) M, SEK 502 M, SEK 1,621 M och SEK 1,679 M. Operating m argin 1989 1990 1991 1992 1993 1994 1995 1996 1997 Percent 1998 1999 Trucks...

  • Page 106
    ... As of 1997, return on operating capital for Aero is excluding The AGES Group. Depreciation and am ortization 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 SEK M 1999 Trucks Buses Construction Equipment Marine and industrial engines Aero Other 509 72 - 63 240 226 523 78 - 58 178 245 532 95...

  • Page 107
    ... ISO standard. The accounting for the years 1991-1996 has been adjusted to conform with the new principle. Capital ex penditures 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 SEK M 1999 Sweden Europe, excluding Sweden North America South America Asia Other markets 1,403 533 207 577 693 191...

  • Page 108
    El even -y ear su m m ar y Em ployees 1989 1990 1991 1992 1993 1994 1995 1996 1997 Number 1998 1999 Sweden Europe, excluding Sweden North America South America Asia Other markets 54,740 14,180 6,040 2,010 1,030 690 47,260 12,180 5,720 1,940 1,270 430 42,960 11,630 5,320 1,730 1,460 480 39,...

  • Page 109
    ... â- Volvo Construction Equipment Changwon * * * Europe â- Volvo Trucks UmeÃ¥ Köping Skövde Göteborg Ghent Wroclaw Irvine â- Volvo Buses Casablanca Gaborone Kairo â- Volvo Penta Wuxi â- Volvo Penta Lexington * â- Volvo Aero Boca-Raton Seattle â- Volvo Penta Vara Skövde Australia...

  • Page 110
    [email protected] Historical and current time series reflecting the Volvo Group's financial development, market information and share data are published regularly on the Internet. www.volvo.com AB Volvo, Investor Relations, 635-2404 AB Volvo (publ) SE-405 08 Göteborg, Sweden Telephone + 46...