Volvo 2005 Annual Report Download - page 51

Volvo Group 2005 47
Sale of properties resulted in gain
of SEK 188 M
In February, Danafjord AB (the Volvo Group’s
real estate company) sold some of its non-
strategic properties in Torslanda and Kalmar
which were valued at approximately SEK
515 M. The sale resulted in a capital gain of
SEK 188 M for Volvo Financial Services, which
manages Danafjord.
Tax rulings yielded Volvo SEK 300 M
The Swedish Administrative Court of Appeal
delivered rulings in several tax cases affecting
various companies in the Volvo Group. In all,
16 different rulings were delivered covering
the tax-assessment years 1991–1999. All of
the cases involved appeals of County
Administrative Court rulings. To a large extent,
the Court of Appeal’s verdicts followed previ-
ous rulings by the lower courts. The Court of
Appeal did, however, overturn a lower court
ruling and granted AB Volvo a tax deduction
of SEK 1.5 billion on the sale of shares in Volvo
Trucks North America to an American sub-
sidiary in 1996. To a large extent, the Volvo
Group had already made provisions for tax
expenses based on the original rulings of the
lower courts. Accordingly, the rulings of the
Court of Appeal had a positive effect of nearly
SEK 300 M on AB Volvo, including SEK 70 M
in interest.
US Supreme Court supported
Volvo Trucks in antitrust case
In January 2006, the US Supreme Court
issued a ruling in favor of Volvo Trucks in a
dispute with one of its dealers regarding com-
petitive pricing practices. The US Supreme
Court found that Volvo Trucks North America
did not violate applicable federal antitrust laws
by granting different levels of discounts in
unrelated transactions. Volvo’s position in the
case, which has broad implications beyond the
heavy-truck industry, was supported by the US
Department of Justice.
Share buyback completed
March 1, 2005 marked the completion of the
share repurchase program, authorization for
which the Board received at the Annual
General Meeting on April 16, 2004. The goal
of the repurchase program was to optimize AB
Volvo’s capital structure. A total of 300,000
Series A shares and 14,475,000 Series B
shares were repurchased, corresponding to
SEK 4,295 M. Following the repurchase, AB
Volvo hel d a t ot al of 7, 230 ,246 S er ies A shares
and 29,890,797 Series B shares, correspond-
ing to approximately 8.4% of the total number
of shares in the company. Following the below
described cancellation AB Volvo owns 5% of
its own shares.
New share-based incentive program
During the Annual General Meeting it was
decided to implement a new, share-based
incentive program during the second quarter
of 2005 for senior executives at the Volvo
Group. The program stipulated that a max-
imum of 185,000 Series B shares in the
Company could be allotted to a maximum of
165 senior executives (including members of
Group Management), during the first six
months of 2006. For further information, refer
to Note 34 on page 117.
Cancellation of shares and new
repurchase mandate
The Annual General Meeting resolved that the
Company’s share capital be reduced by SEK
95,021,046 through cancellation without
repayment of 3,084,619 Series A shares and
12,752,222 Series B shares that the company
repurchased. The cancellation was imple-
mented during the second quarter of 2005.
After the cancellation, AB Volvo owns 5% of
its own shares. The Annual General Meeting
also resolved to authorize the Board of
Directors of AB Volvo to decide on the pur-
chase and transfer of the company’s own
shares. Following the decision no further pur-
chases of own shares were made during the
remainder of 2005.
Allotment of shares in
incentive program
By the end of April, senior executives in the
Volvo Group were allotted 63,667 Series B
Volvo shares under the framework of the
incentive program approved by the 2004
Annual General Meeting. Shares were allot-
ted based on the degree of fulfillment of cer-
tain financial goals for fiscal year 2004, as
established by the Board.