Saab 2015 Annual Report Download - page 85

FINANCIAL INFORMATION – FINANCIAL STATEMENTS
SHARE-BASED PAYMENT
ACCOUNTING PRINCIPLES
Share-based payment refers solely to remuneration to employees, including
senior executives. Share-based payment settled with the company’s shares or
other equity instruments is comprised of the difference between the fair value at
the time these plans were issued and the consideration received. This remunera-
tion is recognised as staff costs during the vesting period. To the extent the
vesting conditions in the plan are tied to market factors (such as the price of the
company’s shares), they are taken into consideration in determining the fair value
of the plan. Other conditions (such as earnings per share) affect staff costs during
the vesting period by changing the number of shares or share-related instru-
ments that are expected to be paid.
Saab has a Global Share Matching Plan where all permanent employees are
entitled to participate. The payroll expenses for matching shares in the plan are
recognised during the vesting period based on the fair value of the shares. The
employees pay a price for the share that corresponds to the share price on the
investment date. Three years after the investment date, employees are allotted
as many shares as they purchased three years earlier provided that they are still
employees of the Saab Group and that the shares have not been sold.
In certain countries, social security expenses are paid on the value of the
employee’s benefit when matching takes place. During the vesting period,
provisions are allocated for these estimated social security expenses. Share
repurchases to fulfil the commitments of Saab’s Share Matching Plans are
recognised in equity.
In addition, a performance-based Share Matching Plan for senior executives
entitles them to 2–7 performance shares, depending on the employee category
to which they belong. The 2011-2013 plans pay out 1–4 performance shares.
Long-term incentive programme
The Annual General Meeting of Saab has resolved for a number of years to offer a
long-term incentive programme consisting of two parts: a Share Matching Plan and a
Performance Share Plan. The reason is that the Board considers it important that
Saab’s employees share a long-term interest in a good value development of the
company’s shares. The long-term incentive programme comprises not more than
1,340,000 Series B shares in Saab per year.
Since 2007, Saab offers permanent employees the opportunity to participate in
the Share Matching Plan. Employees can withhold up to 5 per cent of their gross
base salary to purchase Series B shares on Nasdaq Stockholm during a twelve-
month period. Provided that a participant retains the purchased shares for three
years after the investment date and is still employed by the Saab Group, the partici-
pant will be allotted a corresponding number of Series B shares free of charge.
Currently, Share Matching Plans 2012–2015 are in place.
Since 2008, Saab also has a Performance Share Plan for senior Executives and
key employees. In the Performance Share Plans for 2011–2013, up to 286 key
employees (in each plan), including the President, are able to allocate a maximum
of 7.5 per cent of their gross fixed salary to purchase Saab Series B
shares during a 12-month period. Investments made under this plan also count as
a basis for participation in the Share Matching Plan, up to a maximum of 5 per cent
of base salary. In addition to the requirement that the employee remain employed
by Saab after three years, earnings per share must grow by an annual average of
5 to 15 per cent during the three-year period to qualify for matching performance
shares. The Performance Share Plans 2011–2013 entitle participants to 1–4 per-
formance shares, depending on employee category. The Board may reduce the
number of performance shares if the Board considers it reasonable given the
company’s financial results and position, conditions on the stock market and other
circumstances.
In April 2014, Saab’s Annual General Meeting resolved to modify the Perfor-
mance Share Plan to increase interest among the target group. The Performance
Share Plan now covers a maximum of 175 key employees, including the President.
Participants can also save up to 7.5 per cent of their base salary in this plan to
purchase Series B shares during a twelve-month period, while participating in the
Share Matching Plan as well. Depending on which category they belong to, partici-
pants are entitled to 2–7 performance shares for each purchased share.
Participants are entitled to performance shares, free of consideration, provided
that the performance targets are achieved and the participants have retained the
purchased shares for three years after the investment date and remain employed
by the Saab Group.
The number of performance shares is linked to the performance targets establis-
hed by the Board of Directors. The terms for the performance matching are based
on three independent targets for a one-year performance period: organic sales
growth1), EBIT margin2) and free cash flow3). The relative apportionment between
the targets is as follows: 30 per cent of the allotment is attributable to organic sales
growth, 40 per cent to EBIT margin and 30 per cent to free cash flow. The perfor-
mance targets are established by the Board of Directors with a minimum and maxi-
mum level for each target. The Board of Directors decides on the performance
matching after the end of the one-year performance period. If the maximum levels
for the performance targets are reached or exceeded, the performance matching
will amount to (and not exceed) the maximum of 440,000 shares. If the perfor-
mance outcome falls short of the maximum level but exceeds the minimum level,
a linear proportionate performance matching will occur. No performance matching
will occur if the performance outcome is equal to or below the minimum level.
Before the performance matching is ultimately determined, the Board of Directors
will assess whether it is reasonable in relation to the company’s financial results and
position, conditions in the stock market and other circumstances. If it determines
that this is not the case, the Board of Directors will reduce the number of perfor-
mance shares that will be matched to the lower number of shares it considers
appropriate.
Performance shares are allotted three years after the investment. Currently,
Performance Share Plans 2012–2015 are in place.
1) Adjusted for acquisitions and divestments as well as exchange rate differences.
2) Adjusted for acquisitions and divestments as well as non-recurring items.
3) Adjusted for acquisitions and divestments as well as non-recurring items.
Events 2015
2011 Share Matching Plan and Performance Share Plan
In Share Matching Plan 2011, matching took place on three occasions in 2015 and
once in January 2016 with a total of 422,955 shares. Consequently, the plan is
closed. Following the close of the measurement period for Performance Share Plan
2011, on 31 December 2014, it was determined that the requirement of annual
average earnings per share growth of 5 to 15 per cent during the three-year period
had not been met, due to which no performance shares were allocated in 2015.
The plan is closed.
2012 Share Matching Plan and Performance Share Plan
Matching in Share Matching Plan will take place on three occasions in 2016
and once in January 2017. Following the close of the measurement period for
Per formance Share Plan 2012, on 31 December 2015, it was determined that
the requirement of annual average earnings per share growth of 5 to 15 per cent
during the three-year period had not been met, due to which no performance
shares will be allocated in 2016.
2014 Performance Share Plan
After the end of the one-year performance period in Performance Share Plan 2014,
on 31 December 2015, it was determined that the annual target had been partly
achieved and the Board of Directors approved performance matching as follows.
Performance matching will take place on three occasions in 2018 and one occa-
sion in February 2019.
Performance
Share Plan 2014
Reported
outcome
Outcome
performance
targets, % Weighted,% Allotment, %
Organic sales growth 11% 73 30 22
EBIT margin1) 6,7% 60 40 24
Free cash flow 2) MSEK -807 - 30 -
Total allotment 46
1) Adjusted for acquisitions and divestments as well as non-recurring items, including restructur-
ing costs related to the reorganisation of the former business area Security and Defence
Solutions for the full year 2015.
2) Previously named operating cash flow. Adjusted for acquisitions and divestments of operations,
group and associated companies.
2015 Share Matching Plan and Performance Share Plan
In April 2015, Saab’s Annual General Meeting resolved, similar to previous years, to
offer employees the opportunity to participate in a long-term incentive programme,
consisting of a Share Matching Plan and a Performance Share Plan with terms
comparable to the 2014 plans. The Performance Share Plan covers senior executives
and key employees and entitles them to 2–7 performance shares, depending on
the employee category to which they belong. The plans started in January 2016
and continue to February 2020. The performance period for Performance Share
Plan 2015 extends through the calendar year 2016. The two plans comprise a
maximum of 1,340,000 shares.
Note 10, cont.
SAAB ANNUAL REPORT 2015– 81