Volvo 2006 Annual Report Download - page 133

Financial information 2006 129
Change in number of options per program Program
Number of options 2000 2002
Dec 31, 2003 96,245 1,050,000
Alloted – –
Cancelled – (105,000)
Exercised (96,245) –
Dec 31, 2004 – 945,000
Alloted –
Cancelled (6,250)
Exercised –
Dec 31, 2005 938,750
Alloted –
Cancelled (5,000)
Exercised (669,000)
Dec 31, 2006 264,750
2003/2008 employee
Financial instruments and shares stock options number Shares
1
Board Chairman – –
CEO 50,000 8,000
Other members of GEC 55,000 60,667
Other senior executives 159,750 415,333
Total 264,750 484,000
1 The table shows payments in cash with the corresponding value in shares. Of the total 484,000 shares, 267,667 shares and a cash-settlement corresponding to
216,333 shares will be granted.
Total number of
outstanding options
Summary of Dec 31, Dec 31, Dec 31 Excercise Excercise Value/ Vesting,
option programs Alloment date 2004 2005 2006 price period options years
Apr 28, 2000–
1998, call options
1 April 28, 2000 101,830 – – 302.12 Apr 27, 2005 55.75 n/a
May 2, 2006–
2002, employee stock options
2 May 2, 2003 945,000 938,750 264,750 156.19 May 1, 2008 32.00 3
1 The options gives the holder the right to acquire one Series B Volvo share
for each option held from a third party. The price of the options is based on
market valuation by UBS Warburg. The options were fi n anced 50% by the
company and 50% from the option holder’s variable salary.
2 In January 2000, a decision was made to implement a new incentive pro-
gram for senior executives within the Volvo Group in the form of so-called
employee stock options. The decision covers allotment of options for 2000,
2001 and 2002. The executives have not made any payment for the options.
The employee stock options gives the holders the right to exercise their
options or alternatively receive the difference between the actual price at
that time and the exercise price determined at allotment. The theoretical
value of the options at allotment was set using the Black & Scholes pricing
model for options. For the options allotted in 2003, the Annual General
Meeting has decided that Volvo’s own shares may be used for the program.
Recalculation has taken place of the exercise price and the number of
shares each options entitles the option holder to acquire. The exercise price
was previously SEK 163 per share and each option entitled the option
holder to acquire one share. According to the terms and conditions of the
option program, recalculation shall take place under certain circumstances
such as extra dividends, issues of new shares and dividend of shares. At the
AB Volvo Annual General Meeting in 2004, a decision was taken to distrib-
ute shares in Ainax AB to Volvo’s shareholders. As a consequence hereof, a
recalculation of the exercise price and the number of shares each option
entitles the option holder to acquire has taken place. The new exercise price
is SEK 156.19 per share and each option entitles the option holder to
acquire 1.04363 Volvo B shares.
Cost for incentive programs
Change in obligations related to the employee stock option pro-
grams is recorded in the income statement. The cost for the
employee stock option program amounted to SEK 58 M. The cost for
the share-based incentive program 2005/2006 was SEK 21 M and
for the share-based incentive program 2006/2007 SEK 166 M.
Total cost for the three programs was SEK 245 M for 2006 (192,
66). The cost for the incentive program includes both cash payments
and costs for remuneration in shares, including social costs. At
December 31, 2006, provision related to the employee stock
option program and share-based incentive program amounted to
SEK 219 M (277, 128).