Board proposes performance-based long-term incentive program,
repurchase and transfer of own shares
(ELUX) The Board of Directors of AB Electrolux has decided to propose
that the Annual General Meeting on April 21, 2004, approve replacing the
Group’s current stock option programs with a performance-based long-term
share program from 2004. The program covers less than 200 senior
managers and key employees.
The proposed program is based on value-creation targets for the Group
that are established by the Board of Directors, and involves an
allocation of shares if these targets have been reached or exceeded
after a three-year period. The program comprises B-shares.
Participants are permitted to sell allocated shares to cover personal
income tax, but the remaining shares must be held for two years. The
cost of the program is comparable to the cost of previous stock-option
The program is in line with Electrolux principles for remuneration based
on performance, and is an integral part of the total compensation for
the Group’s senior managers and key employees. The Board of Directors
considers that the program will benefit the company’s shareholders and
also facilitate recruitment and retention of competent employees.
Conditions for allocation of shares
Allocation of shares under the program is determined on the basis of
three levels of value creation, calculated according to the Group’s
previously adopted definition of this concept. The three levels are
“entry”, “target” and “stretch”. “Entry” is the minimum level that must
be reached to enable allocation. “Stretch” is the maximum level for
allocation and may not be exceeded regardless of the value created
during the period. The number of shares allocated at “stretch” will be
50% greater than at “target”. The shares will be allocated after the
three-year period and will be free of charge.
Participants in the program comprise five groups – the President, other
members of Group management, and three groups of other senior managers
and key employees.
The Board of Directors will determine a target value in SEK for each
group, with reference to position and remuneration level. For the. President, the target value is SEK 2,400,000, for other members of Group
management SEK 1,200,000, and for other senior officers and key
employees SEK 900,000, 600,000 and 450,000 respectively. The sum of the
target values for all participants will not exceed SEK 120m.
Each target value will subsequently be converted into a number of
shares. The number of shares will be based on the average closing price
of the Electrolux B-share on the Stockholm Exchange during a period of
ten trading days before the day participants are invited to the program, reduced by the present value of estimated dividend payments for the
period until shares are allotted. It is intended that participants will
be invited to take part in the program during the month of May 2004.
Cost and dilution
If value created is at the “target” level, the cost of the program is
estimated at approximately SEK 150m, including employer contributions
and the financing cost for repurchase of own shares. If value created
equals or exceeds the “stretch” level, the cost is estimated at a maximum of SEK 240m.
The share program is expected to result in a maximum dilution of
approximately 0.55%, calculated as the maximum increase in the number of
shares. The total dilution effect of the proposed share program together
with the Electrolux employee stock-option programs for 1999-2003 will
not exceed approximately 3.88%. No employee stock options will be
allocated in 2004.
Proposal for resolution on repurchase and transfer of own shares
The Board of Directors has decided to propose that the Annual General
Meeting on April 21, 2004, as in previous years, approve a new program
for repurchase of A- and/or B-shares during the period prior to the
Annual General Meeting in 2005.
The purpose of the repurchase program is to continuously enable
adaptation of the Group’s capital structure, thus contributing to
increased shareholder value. Electrolux should also be able to use
repurchased shares in connection with financing of potential
acquisitions and the option programs for 1999-2003, as well as the new
share program for 2004.
The company may repurchase shares in an amount such that, following each
repurchase, the company holds a maximum of 10% of the total number of
shares in the company. Purchases may be made only through transactions
on the Stockholm Stock Exchange and/or the London Stock Exchange at a price per share within the prevailing registered price interval.
As of March 15, 2004, Electrolux held 17,489,400 B-shares, corresponding
to 5.4% of the total number of outstanding shares. With reference to the
current holding of own shares, a maximum of 14,920,600 shares may be
repurchased. On the basis of the Group’s financial statements for 2003
and the closing price for B-shares on March 12, 2004, repurchase of this
number of shares would result in an increase in net income per share
from SEK 15.25 to SEK 15.75, and an increase in return on equity from
17.3% to 18.6%.
Transfer of own shares
The Board of Directors has also decided to propose that the Annual
General Meeting, as in previous years, authorize the Board to transfer
own A- and B-shares in connection with company acquisitions, during the
period up until the Annual General Meeting in 2005. Transfers may be
implemented with deviation from the shareholders’ preferential rights.
In addition, transfers shall be made at a minimum price per share that
corresponds to an amount in close connection with the price of A- or B-
shares on the Stockholm Exchange at the time of the decision on the
transfer. Payment for transferred shares may be made in cash, by
contributions in kind, or by offsetting company debt.
The Board of Directors will also propose that the Annual General Meeting
authorize transfers of repurchased own B-shares. The purpose is to
implement the proposed share program 2004 in a cost-efficient and
flexible manner, to fulfill the obligation to deliver shares under the
program, as well as to cover costs that may arise as a result of the
previous employee stock-option programs for 1999-2003.
A maximum of 1,500,000 B-shares may be transferred free of charge to the
participants in the proposed share program. During the period prior to
the next Annual General Meeting, a maximum of 1,313,010 B-shares may be
transferred on the Stockholm Exchange at current market price in order
to cover future costs of the employee stock-option programs for 1999-
2003. These costs refer primarily to employer contributions.
The Electrolux Group is the world’s largest producer of powered
appliances for kitchen, cleaning and outdoor use, such as refrigerators, washing machines, cookers, vacuum cleaners, chainsaws, lawn mowers, and
garden tractors. Every year, customers in more than 150 countries buy
more than 55 million Electrolux Group products for both consumer and
professional use sold under famous brands such as AEG, Electrolux, Zanussi, Frigidaire, Eureka and Husqvarna. In 2003, Electrolux had sales
of SEK 124.1 billion and 77,100 employees.
For further information, please contact Investor Relations at +46 8 738
60 03. Electrolux Press Hotline is available at +46 8 657 65 07.