Annual Report 2008

Transcription

Annual Report 2008

Head office Husqvarna AB (publ) • Mailing address: Box 30224, SE-104 25 Stockholm
Visiting address: Lindhagensgatan 126 • Telephone: +46 36 14 65 00 • www.husqvarna.com
Registered office Husqvarna AB (publ) Jönköping • Mailing address: SE-561 82 Huskvarna
Visiting address: Drottninggatan 2 • Telephone: +46 36 14 65 00 • Telefax: +46 36 14 68 10
HUSQVARNA ANNUAL REPORT 2008
SUH
ANRAVQ
NA
LAUN
PER
TRO
8002
HUS
QVARNA
AN
NUAL
REP
ORT
2008
Annual Report 2008
Contents 2008
Highlights of the year
1
Parent Company
Report by the President 2
Income statement
42
Strategy
4
Balance sheet
43
Strong brands 6
Cash flow statement
44
Powerful global distribution network
7
Change in equity
Broad product offering
8
Definitions
Efficient supply chain
45
46
12
Notes
46 – 83
Financial goals
13
Proposed Distribution of Earnings Business areas
14–25
Auditor’s Report
85
84
Consumer Products
14
Five-year review
86
Professional Products
20
Quarterly data
88
Report by the Board of Directors
26–37
Risk management
34
Financial Statements
38–45
Group
Corporate Governance Report 2008
Board of Directors and Auditors
90
100
Group Management
102
Sustainable development
104
Income statement
38
The Husqvarna share
110
Balance sheet
39
Annual General Meeting 2009
112
Cash flow statement
40
History
113
Statement of shareholders´ equity
41
Financial information 2009
23 April
Annual General Meeting
8 May
Interim report January–March
17 July Interim report January–June
23 October Interim report January–September
Contacts
Åsa Stenqvist
Head of Group Staff Communications and
Investor Relations
ir @husqvarna.se, +46 8 738 64 94
The Annual Report is distributed to all new
shareholders for the year and to those who have
explicitly requested one. The Annual Report
and other financial reports are also available at
www.husqvarna.com/ir. Printed copies can be
ordered from the web site.
Tobias Norrby
Investor Relations Manager
[email protected], +46 8 738 83 35
Press Hotline
SUH
ANRAVQ
NA
LAUN
PER
TRO
8002
HUS
QVARNA
AN
NUAL
REP
ORT
2008
Annual Report 2008
Contents 2008
1
Parent Company
Income statement
42
Strategy
4
Balance sheet
43
Strong brands 6
Cash flow statement
44
7
Change in equity
8
Definitions
45
46
12
Notes
46 – 83
Financial goals
13
14–25
Auditor’s Report
85
84
Consumer Products
14
Five-year review
86
20
Quarterly data
88
26–37
Risk management
34
38–45
Group
90
100
Group Management
102
104
Income statement
38
The Husqvarna share
110
Balance sheet
39
112
Cash flow statement
40
History
113
41
23 April
8 May
Contacts
Åsa Stenqvist
Investor Relations
ir @husqvarna.se, +46 8 738 64 94
Tobias Norrby
Press Hotline
husqvarna in brief
Husqvarna
iN BRIEF
10
9
north america
rest of the
world
4
Net sales 2008, SEKbn
forestry
1
2
The modern logotype reflects the past, but also signals that
Husqvarna still aims for the future.
Production facilities
Subsidiaries or distributors
Husqvarna’s products are sold
through 25,000 dealers world wide.
market position
29%*
Lawn mowers, garden tractors, trimmers, chainsaws, leaf blowers, hedge trimmers and snow
throwers.
World’s largest producer of lawn mowers and
chainsaws, as well as handheld petrol-powered garden equipment such as trimmers and leaf blowers.
One of the two largest in garden tractors. Gardena
is the market leader in Europe for irrigation products and garden tools.
32%*
throwers. Products for irrigation and ponds as well
as garden tools.
the acquisition of Gardena the product range was
2007 Through
extended to include equipment and garden tools.
brands
2006
Husqvarna once again becomes an independent
stock listed company.
1995
Launch of Automower® the world’s first solar powered robotic
lawn mower.
1986
Production start for the first riding lawn mower developed in-house.
acquires Husqvarna, start of the expansion within
1978 Electrolux
outdoor products.
starts production of chainsaws and engine-driven
1959 Husqvarna
lawn mowers.
professional products
l awn and
garden
Rest of the World
Consumer Products
product offering
Consumer products
construction
6
North America
H usqvarna is the worl d’ s largest m anufac turer o f law n m ow ers
an d cha insaw s as w ell as han d hel d, petrol- P OW ER ED gar d en pro d u c ts su ch as tr immers an d blow ers. the group is also the glo bal
lea d er in cuttin g equipment an d d i a m on d tools f or the constru c ti on an d stone in d ustr ies.
The pro d u c t ran ge in clu d es pro d u c ts for both consu mers an d
pro fessional users. The Group ’ s pro d u c ts are sol d in m ore than 10 0
countr ies worl d w id e.
net sales in 20 0 8 a m ounted to SEK 32. 3 BIL L IO N an d the average
nu mber o f employ ees was approx im ately 15,70 0.
* The graphs show share of total Group sales.
history
300 years
of INNOVATION
Europe
17%*
12%*
10%*
Premium chainsaws, clearing saws and accessories
such as chains, blades, protective clothing and
tools.
Riders and walk-behind lawn mowers, zero-turn
mowers, specialty turf-care equipment, trimmers,
hedge trimmers and leaf blowers.
Floor saws, wall and wire saws, tile and masonry
saws, drill motors, machines for surface prepar
ation, power cutters and diamond tools, diamond
tools for the stone industry.
Husqvarna and Jonsered are two of the top three
leading brands for professional chainsaws in the
global market, with a combined market share of
approximately 40%.
One of the world’s largest manufacturer of handheld products.
World leader in diamond tools and cutting equipment for the construction and stone industries.
range is extended to include motor bikes,
1903 Product
which were manufactured until 1987.
1896
Production of bicycles starts, continues until 1962.
1689
1872
Husqvarna starts production of sewing machines and
kitchen equipment in cast-iron.
1689
Husqvarna is founded as a weapons foundry for
the Swedish armed forces.
The oldest version of Husqvarna’s logotype symbolizes the
sight and the barrel on the musket.
husqvarna in brief
Husqvarna
iN BRIEF
10
9
north america
rest of the
world
4
forestry
1
2
market position
29%*
throwers.
32%*
as garden tools.
2007 Through
brands
2006
1995
lawn mower.
1986
1978 Electrolux
outdoor products.
1959 Husqvarna
lawn mowers.
l awn and
garden
Rest of the World
Consumer Products
product offering
Consumer products
construction
6
North America
history
300 years
of INNOVATION
Europe
17%*
12%*
10%*
tools.
approximately 40%.
1903 Product
1896
1689
1872
1689
highlights
of the year
• Lower demand in both North America and Europe,
particularly in the second half of the year.
• Net sales declined by 3% to SEK 32,342m (33,284) and
operating income by 34% to SEK 2,361m (3,564).
• The decline in operating income referred mainly to
Consumer Products, and to the Construction product
area within Professional Products.
• Continued high growth for Husqvarna-branded consumer products in the servicing dealer channel.
• Products launched in 2008 included a new version of the
robotic lawn mower, Automower ® powered by battery
and solar cells, new chainsaws with improved environmental performance, and a demolition robot for the
construction industry.
• Group’s presence and production capacity in Asia
strengthened by acquisition of outdoor-products operation
in Jenn Feng.
•M
agnus Yngen took office as new President and CEO
as of 1 October 2008.
Return on capital employed, %
10.7
17.6
23.8
24.1
31.1
Return on equity, %
15.8
28.6
32.5
40.1
41.9
H USQVA R N A A NN UA L REP O R T 2 0 0 8
1.5
1.8
2.4
2.6
2.9
1
• Forestry continued to perform well, due mainly to good
growth for premium chainsaws in North America.
Key data*
2008
2007
2006
2005
2004
Net sales, SEKm
32,342
33,284
29,402
28,768
27,202
Gross margin, %
29.0
29.4
27.0
26.6
26.9
2,361
3,564
3,121
2,927
2,983
7.3
10.7
10.6
10.2
11.0
1,288
2,036
1,862
1,641
2,323
Earnings per share, SEK**
3.34
5.29
4.83
4.26
7.78
Dividend per share, SEK**
0.00
2.25
1.73
—
—
Operating income, SEKm
Operating margin, %
Income for the period, SEKm
Capital turn-over rate, times
Operating cash flow, SEKm
Average number of employees
2,013
1,843
535
949
2,073
15,720
16,093
11,412
11,681
11,657
* For defintions, see page 46. Key data for 2004 are combined financial statements, 2005 is pro forma.
** 2006 are restated for bonus issue. The Board proposes no dividend for 2008.
Net sales by business area
Operating income by business area
Consumer Products,
SEK 19,849m
Consumer Products,
SEK 963m
Professional Products,
SEK 12,493m
Professional Products,
SEK 1,587m
Net sales by geographical area
Employees by geographical area
Rest of the World, 10%
North America, 40%
North America, 40%
Europe, 50%
Europe, 45%
report by
the president
“
“I
2
to o k ov er a s ceo
o n 1 o c to ber 20 0 8.
In Nov ember w e s ta r ted
wo r k o n fu r ther d e v el
o pment o f the Gro u p ’ s
s tr ategic pl a n. This
in vo lv e s m a k ing pro per
use o f the p otenti a l o f
o u r br a n ds, sim u lta n
eo usly m a k ing the su pply
ch a in m o r e effi cient.
A ltho u gh 20 0 9 w il l be a
d iffi cu lt y e a r in ter ms o f
m a r k e t co n d itio ns, I a m
co n v inced th at ther e
a r e v er y go o d o pp o r t u n
itie s fo r H usqva r n a to
s tr en gthen its
m a r k e t p ositi o ns.”
report by t h e pre si d ent
Decision on cost-cutting measures
With reference to the weak market conditions, we implemented substantial reductions in capacity in order to
reduce costs within the Group. This affects 960 of the company’s approximately 15,700 employees. The total cost for
these adjustments amounts to SEK 316m, which was
charged against income for 2008. Estimated annual savings
amount to approximately SEK 350m, and are expected to
take full effect as of the third quarter of 2009.
Integration of acquisitions
Work on integrating acquired operations continued during
the year.
The Gardena sales organization is now fully integrated in
the Group’s organization for the mass market in Europe. The
ongoing coordination of logistics will enable a reduction in
the number of warehouses. The Gardena product offering
for 2009 has been expanded with electrically powered lawn
mowers and new trimmers, developed by our joint product
development resources, and based on models in the Group’s
product range. These products have been received very well
and have expanded Gardena’s presence with retailers.
In the Zenoah operation, work is continuing on develop
ing common platforms for such products as chainsaws and
leaf blowers, and several new products were launched dur-
Strategic review
In November we started work on further development of
the Group’s strategic plan.
Although Husqvarna has a strong position, we must set
priorities for both the short and the long term. This involves
making proper use of the potential of our brands, simultan
eously making the supply chain more efficient by consolidating production, and utilizing opportunities in low-cost
countries. We have to maintain a high rate of product
development in prioritized areas. This is especially import
ant with reference to the demands for greater energy efficiency and reduced emissions which our petrol-powered
products will have to satisfy. Husqvarna aims to be the
leader also in this respect. We must also continue to
expand our distribution network.
Outlook for 2009
Market conditions will remain weak in 2009, with lower
demand in both Europe and the US. We will maintain a high
level of flexibility and be prepared to make rapid adjustments if market conditions deteriorate further.
We will focus on maintaining costs and inventory at low
levels and prioritizing cash flow. With regard to costs, the
implemented cutbacks will generate effects during the second half of 2009. Integration of acquisitions will also make a
positive contribution, as we are increasing our efforts to
realize potential synergies.
As retailers have been cautious in terms of inventory
build-ups for the coming season, production will be ramped
up later. We expect a significantly weaker start of the season
in 2009 in comparison with the very strong start in 2008.
Although 2009 will be a difficult year in terms of market
conditions, I am convinced that there are very good opportunities for Husqvarna to strengthen its market positions
both this year and in the years to come.
Magnus Yngen
President and CEO
Continued growth in core areas
Despite difficult market conditions, there were positive
trends during the year in several product areas. Sales of professional chainsaws increased, particularly in the US. Total
sales and operating income for forestry products were
unchanged. This was enabled mainly by launches of new
products with both improved performance and lower production costs, and by rationalization of production.
Other products showing positive performance included
Riders, the robotic lawn mower Automower ®, and premium
Husqvarna-branded products for consumers.
ing the year. Integration of this operation has also generated opportunities for increasing efficiency in product
development and production.
In December the Group completed the acquisition of
Jenn Feng in China, which has annual sales of approximately SEK 800m. The company focuses on chainsaws and
other outdoor products for the lower price segments,
which are produced at a plant in China. In the long term
there is a substantial potential for creating growth for several of our tactical brands in both Asia and in our traditional
markets, on the basis of Jenn Feng’s product range and its
cost-efficient production.
3
Husqvarna has a history of stable growth and high profitability over many years. The Group’s performance in 2008
was weak however, as a result of the sharp deterioration in
market conditions during the year.
Group sales in 2008 declined by 3%. Excluding costs for
personnel cutbacks of SEK 316m, operating income declined
by 25% and margin was 8.3% in comparison with 10.7% in 2007.
The decline in operating income was due mainly to
lower sales volumes for consumer products, particularly in
the US, and for professional products for the construction
industry, as well as higher material costs. In light of the
weaker demand, we implemented substantial production
cutbacks in order to reduce inventories, which had a considerably adverse effect on income, due to lower cost
absorption at our plants.
Leading Global market positions
No. 1
Chainsaws
No. 1Other handheld petrol-powered
products, e.g. clearing saws and trimmers
No. 1Lawn mowers
No. 1–2Garden tractors
No. 1Cutting equipment and diamond tools
for the construction and stone industries
4
No. 1
Consumer products for irrigation
in Europe
strategY
Strong points
Husqvarna has a portfolio of strong brands, a broad global distribution network,
and a competitive product offering based on advanced technical competence.
The Group has a cost-efficient production system based on large volumes.
The highly flexible supply chain enables the Group to manage seasonal and
weather-related variations in demand.
Acquisitions reinforce market positions
Subsequent to the stock-exchange listing in June 2006, Husqvarna has acquired
ten operations with combined sales of approximately SEK 7,000m. These acquisitions have strengthened the Group additionally by providing strong brands
and complementary products, as well as by expanding the production base and
the number of suppliers in Asia.
Acquisitions
2006–2008
Sales, Year
Company
ProductsSEKm*
Powerful global
distribution
network
Broad product
offering
Efficient supply
chain
Reason for
acquisitionSynergies**
Consumer
2007Gardena, GermanyIrrigation systems 3,800
New, complementarySales, product
Products
and garden product range,
development,
equipment
brand, distribution
purchasing,
administration,
production
2008
Jenn Feng, China
Chainsaws, lawn mowers
800
Production in China,
generators, etc.
lowspec. products,
McCulloch brand
Components,
production,
purchasing,
M&S, distribution
Professional 2006Dixon, USA
Zero-turn lawn mowers
400
Product range,
Products
distribution
Product
development,
production
2006
Jikai, ChinaDiamond tools
160
Production in China
Production, purchasing
2007
Komatsu Zenoah, Chainsaws,
1,200
Product range,
Japan
trimmers, leaf blowers
distribution in Japan
Product development,
product exchanges,
purchasing,
production, M&S
2007Soff-Cut, USA
Equipment for
240
Product range
early sawing in concrete Product exchanges,
distribution
2007
Klippo, Sweden
Lawn mowers
150
Product range
Purchasing, production, distribution
2007
Product exchanges,
distribution
King Concepts, Grinding and
30
Product range
Australia
polishing equipment
2008Sandvik Nora, SwedenDiamond tools 65
Product rangeDistribution,
administration
2008
Meco, USAFloor saws
54
Product range
* Annualized as of acquisition date. ** M&S = Marketing and Sales.
Product exchanges, distribution
Husqvarna’s market positions have been built over a long period through both
organic growth and acquisitions, while good profitability has been maintained.
Strong brands
5
H usqva r n a is the wo r l d’ s l a rge s t pro d u cer o f o u t d o o r
p ow er pro d u c t s. The Gro u p h a s l e a din g p ositi o ns in the
glo ba l m a r k e t f o r pro d u c t c atego r ie s w hi ch acco u nt
fo r a pprox im ately 85% o f s a l e s.
S T R AT EGY
Strong
brands
Husqvarna is the major brand, accounting for more
than 40% of total Group sales as well as the majority
of sales for Professional Products. Husqvarna has
been a strong global brand for many years, particularly for chainsaws and other handheld products.
The brand stands for technical leadership, high performance and quality. Husqvarna-branded products
are sold in the premium segment.
The range of products under the Husqvarna brand
has been steadily expanded, and also includes highperformance consumer products. These products are
sold mainly through servicing dealers. They have
shown average annual growth of approximately 10%
over the past five years and now account for a substantial share of sales by Consumer Products.
Investment in marketing increased by approximately SEK 100m in 2008, primarily in North America,
which contributed to higher sales in this market. The
Group will continue to invest in brand-building.
Gardena is the leading brand for irrigation and garden equipment in the European consumer market.
The brand has a very strong position in the premium
segment, and accounts for approximately 10% of
Group sales. Market research has consistently shown
that awareness of the brand is very high among consumers. Good opportunities exist for increasing sales
under the Gardena brand by expanding the product
offering as well as the brand’s geographical presence
in new markets, including Eastern Europe.
Other brands
The Group has a number of brands with strong pos
itions in local or regional markets and within specific
product categories. These brands are important but
will not be expanded at the global level. The largest
of them in terms of sales are:
Poulan and WeedEater, well-known brands for chainsaws and garden products in the North American
mass market.
Partner, which has a corresponding position in
Europe and is particularly strong in Scandinavia.
Jonsered, a leading brand for high-performance forestry and land maintenance products, with a similar
position to Husqvarna’s in certain markets.
Zenoah, with a similar position to Jonsered in the
Japanese market.
Flymo, a market leader in electrical garden products
for the consumer market in the United Kingdom, with
a strong position in Scandinavia.
6
The Group has a portfolio of strong brands which
addresses specific customer segments and corres
ponding sales channels.
Higher sales under premium brands
Premium
62%
44%
2003
The share of sales under brands that are positioned
in the premium segment rose from 44% of sales to
62 % in 2003–2008.
2008
Production for other companie’s brands Other premium brands*
Husqvarna
Tactical brands
Gardena
*Other premium brands include Jonsered, Zenoah, Klippo and Diamant Boart.
S T R AT EGY
In terms of consumer products, Husqvarna has
maintained strong positions for many years with the
leading chains in both Europe and the US. The Group
has steadily reinforced these positions through investments in product renewal and greater efficiency in the
supply chain.
The Group’s American operation has been the
main supplier of Craftsman-branded products to
Sears since the 1980’s. Sears is the world’s largest
retailer of outdoor products, with a market share of
approximately 25% in the US.
Gardena has leading positions for its product cat
egories at 8 of the 10 major retailers in Europe. The
acquisition of Gardena gives the Group a broader
product offering and a greater presence among retailers in Europe, which creates new growth opportunities.
7
Husqvarna has a powerful global distribution network,
with strong positions at both major retailers and servicing dealers. Husqvarna-branded products for both
professionals and consumers are sold through approximately 25,000 servicing dealers world-wide. Sales and
support for these dealers are provided by the Group’s
own global sales organization, which operates com
panies in more than 40 countries.
The comprehensive distribution network has been
built over a long period of time and is a significant
competitive advantage. The sales organization is committed to continuously improving support and service
to dealers, as well as to increasing the total number of
dealers and strengthening the Group’s positions with
existing customers.
Powerful global
distribution network
Distribution channels, share of sales
Major retailers
Sales by distribution channel
Servicing
dealers
Construction
contractors 1)
Consumer Products
Servicing dealers, 48%
North America
83%
Sears, Lowe’s,
Walmart etc.
17%
—
69%
B&Q, Leroy
Merlin, OBI,
Bauhaus etc.
31%
—
87%
9%
Rest of the World
Professional
Products
4%
1) Refers to the Construction product area.
Major retailers, 48%
Construction contractors, 4%
S T R AT EGY
Broad
product OFFERING
8
Husqvarna has a broad, competitive product offering. The
Group has particularly strong positions for handheld products such as chainsaws, clearing saws and trimmers, as well
as for wheeled products such as tractors and lawn mowers.
The Group’s goal is to be the leader in the most import
ant categories. In order to ensure strong partnership with
customers, the Group must provide a complete product
offering that includes competitive products even in cat
egories where it does not aim to be the leader.
Advanced technical expertise
Husqvarna has extensive resources and advanced competence for product development. Expertise in engine technology for two-stroke engines for handheld petrol-powered
products has been decisive for achieving a leading position
in the global market. The Group has succeeded in combining
high performance with such vital features as low weight,
improved ergonomics, simplified service, reduced exhaust
emissions and lower energy consumption. The Group’s
expertise and patents in engine technologies, particularly
for handheld products, represent a substantial competitive
advantage.
Faster rate of product launches
In recent years the Group has been able to launch new
products at a faster rate without incurring higher development costs. Coordination with acquired companies can
contribute to even greater efficiency.
Coordination involves establishing a Group-wide process
for product development that covers all phases, from identification of business opportunities based on customer
benefits to the launch of a new product. The process is
being introduced gradually throughout the Group’s oper
ations, and will also be aligned with Group-wide processes
for purchasing and quality assurance.
Reduced environmental impact
Husqvarna is the leader in several areas in terms of products with reduced environmental impact. The Group’s new
engines comply with the strictest exhaust-emission criteria
in the US and Europe and are also considered to be in compliance with all currently known future regulations.
Husqvarna launched environmentally adapted fuels and
lubricants at an early stage.
The Group uses a mix of technological solutions, including catalysts, in order to reduce exhaust emissions and
achieve optimal performance. Chainsaws with the new
patented X-TORQ® engine feature reductions of up to 60%
in exhaust emissions and up to 20% in fuel consumption.
Automower ® Solar Hybrid, the latest version of the
Group’s robotic lawn mower, is powered by batteries and
solar cells and is unique in the market.
Over the next few years the Group will increase investments in development and marketing of products with
improved environmental performance.
A revolution in lawn care
Automower ®, the world’s first robotic lawn mower, was developed
by Husqvarna. Automower ® is silent and emission-free, and features low energy consumption. It mows the lawn automatically and
returns to the docking station when battery power drops to a predefined level. Automower ® is available in several versions, tailored
for lawn surfaces of up to 3,000 m2.
In 2008 Husqvarna launched the Automower ® Solar Hybrid ,
which is driven by both solar cells and a battery. The solar cells
enable reduced energy consumption and longer battery life.
S T R AT EGY
X-TORQ®
Improved handle design
The asymmetric rear handle features a soft inlay for
a more stable grip, which
means less fatigue.
AutoTune
AutoTune technology uses a
computer chip to control the
flow of fuel to the engine.
This enables automatic optimization of performance as
well as reduced emissions.
9
Husqvarna’s new patented X-TORQ technology enables reducing fuel
consumption by up to
20% and emissions by up
to 60%.
Chainsaws for optimal productivity
Husqvarna chainsaws are built to meet strict demands for performance,
ergonomics and safety. Unique technology in X-TORQ and E-TECH engines
enable maximum power and torque combined with lower emissions and
fuel consumption.
The new 576 XP® AutoTune chainsaw will be launched in 2009, and represents a technological and environmental breakthrough for professional
chainsaws. AutoTune technology uses a computer chip to control the flow of
fuel to the engine. This enables automatic optimization of chainsaw performance, which in turn reduces fuel consumption and emissions.
Automower ® 260 ACX for large surfaces
In 2009 Husqvarna will launch the Automower ® 260 ACX,
designed for lawn surfaces of up to 6,000 m2, and ideal for professional users as well as homeowners with large lawns. If mowing is
interrupted, the mower sends a text message to the cell phone.
S T R AT EGY
Broad product OFFERING
10
Riders for demanding users
Husqvarna Riders meet advanced criteria for both consumers and
professional users. The unique rear-wheel steering gives the Riders
superior maneuverability, and at full steering lock, the uncut circle
is only about 20 cm in diameter. The front-mounted cutting deck
enables easy mowing under bushes or close to fences and walls.
The 15V2sAWD Rider offers features such as power steering,
front lighting and a comfort seat. The Combi cutting deck enables
BioClip® as well as rear discharge. All-Wheel-Drive (AWD) ensures
maximum traction on wet grass, clay or snow. The 15V2sAWD can
be fitted with attachments for year-round use.
Automatic irrigation system
In 2008 Gardena launched the AquaContur Automatic irrigation system, which
ensures perfectly uniform watering of
entire lawns of up to 380 m2. The irrigation
unit is either mobile or a permanently
installed pop-up. A range of 50 adjustable
settings enables the sprinkler to match the
contours of the garden.
More efficient hose-trolley from Gardena
The new Gardena hose-trolley features a folding crank handle, so there’s no need to bend
down in order to unwind the hose. It also features a control that enables the hose to be
unwinded without tangling. Broad, large-diameter wheels make it easier to pull the trolley
through tall grass or on uneven terrain. A height-adjustable holder can store a nozzle, a spray
gun or a spray lance.
S T R AT EGY
Husqvarna Panthera Leo
The Panthera Leo is a Husqvarna concept
product. This silent, battery-driven and environment-friendly ride-on lawn mower, could
become a reality within five years.
Panthera Leo is a hybrid of a Rider and a
Zero-turn mower, made of recycled plastic and
aluminum.
Cutting height and width are controlled by
regulators on the steering wheel. An LCDscreen displays information such as speed,
cutting height, cutting width, remaining battery time and service requirements, as well as
warning messages, e.g. if there is a risk of collision. Sensors enable the Panthera Leo to suggest appropriate speed and cutting height, to
ensure perfect mowing.
11
Innovative diamond wire
Husqvarna’s new C 1200 “Cobra wire” has been developed for difficult sawing of concrete or stone, without the
need for water as a lubricant. The “Cobra wire” can thus
be used for demolition of nuclear power plants, which
involves major environmental problems. Since the wire
requires no water, sawing does not generate secondary
radioactive water, which is expensive to purify. “Cobra”
can also cut through large and complex metal structures,
which provides new opportunities for recycling of
materials.
In 2008 the “Cobra wire” received Husqvarna Group’s
internal award as the Best Green Innovation.
New demolition robot
The new radio-controlled DXR 310 demolition robot is the
latest addition to Husqvarna’s product offering for the
construction industry. The robot is Husqvarna’s first,
designed for light demolition both indoors and outdoors
as well as in sensitive environments such as processing plants.
The robot is controlled by a userfriendly Bluetooth-assisted remote
control that fits into a
shoulder strap.
S T R AT EGY
Husqvarna has a well-developed production system
with high flexibility in order to handle seasonal and
weather-related variations in demand. The Group
operates 22 large facilities and the greater share of
production is located at four major specialized plants
in the US. Fixed costs comprise approximately 22% of
the Group’s total costs.
The Group’s American plants are very competitive,
on the basis of cost-efficiency and proximity to customers in the US, which is the largest market for garden
products. Husqvarna is a net exporter from the USA.
The short season for garden products and the
dependence on weather conditions can involve rapid
fluctuations in demand. This requires locating part of
production close to the major markets in order to
ensure prompt deliveries and quality customer service.
Increased production and purchasing in
low-cost countries
Acquisitions have given the Group new plants in
China and the Czech Republic, and have also provided access to a network of local suppliers. In 2009
the Group will open a new plant in China with production that includes chainsaws for the consumer
market and an annual capacity of approximately
1 million units.
The share of production in low-cost countries will
gradually increase in terms of components and products for lower price segments. There will also be an
increase in purchases of components from low-cost
countries, which amounted to more than 20% in 2008.
Major plants and product flows
Sweden
• Premium chainsaws
• Clearing saws
• Riders
• Power cutters
12
Efficient
supply chain
China
• Low-end chainsaws,
trimmers, and lawn mowers
• Construction products
• Sourcing of low-end handheld
electrical products and
components
USA
• Tractors
• Lawn mowers
• Trimmers
• Chainsaws
Major plants before acquisitions
Acquired plants
Acquisitions in low-cost countries
Product flows
Financial
goals
Sales growth and operating margins have historically been
in line with the Group’s stated goals. Husqvarna’s weaker
performance in 2008 is was due primarily to the sharp,
rapid downturn in demand during the year.
Ongoing cost reductions
In light of the deterioration in market conditions, it was
decided that personnel cutbacks would be implemented in
order to reduce the Group’s costs. These cutbacks affect
960 of the Group’s approximately 15,700 employees. The
cost of the cutbacks is SEK 316m, which was charged
against income for 2008. Annual savings are estimated at
approximately SEK 350m and will take full effect as of the
third quarter of 2009.
Long-term financial goals
To be achieved by
Net sales
• Annual organic growth of approximately 5% over the
course of a business cycle.
• Additional growth through complementary acquisitions.
Organic growth
• Faster rate of new product launches.
• Utilize potential of brands, particularly Husqvarna
and Gardena.
• Reinforce and expand distribution network.
Profitability
• Operating margin of more than 10% over the course of a
business cycle.
The Gro u p h a s a lo n g his to r y o f s ta bl e
grow th a n d go o d pro fita bil it y. The
lo n g-ter m fin a nci a l goa l s th at w er e
e s ta bl ished in co nnec tio n w ith the
s to ck- e xch a n ge l is tin g in 20 0 6 a r e
u n ch a n ged.
Complementary acquisitions
• Synergies in e.g. distribution, brands or technologies.
• Rapid and successful integration in Group operations.
Capital structure
• C apital structure should meet criteria for long-term credit
rating corresponding to at least BBB. This is considered
to require that seasonally adjusted net debt in relation to
EBITDA should not exceed a multiple of 2.5 in the long
term.
13
Maintain high operating margin
• Focus on growing most profitable product categories.
• Greater cost-efficiency, e.g. through relocation of production and increased purchasing from low-cost countries.
Dividend
• In the long term the dividend should correspond to
25–50% of income for the period.
Organic net sales growth
Operating margin
%
%
16
15
12
10
8
>10
>5
4
–4
–8
04 05 06 07 08
Net sales growth, organic, %
Dividend
times
5
50
4
40
%
3
<2,5
5
0
Capital structure
0
04 05 06 07 08
Operating margin, %
30
2
20
1
10
0
06 07 08
50
0
Net debt/EBITDA, times
25
06 07 08*
Share of net income, %
*T he Board proposes no dividend for 2008.
%
50
50
40
30
25
Consumer
PRODUcts
14
Gardena is the European leader in irrigation systems.
Key data*
2008
2007
2006
2005
2004
19,849
20,621
18,335
18,360
17,579
Share of Group sales, %
61.4
62.0
62.4
63.8
64.6
963
1,638
1,415
1,332
1,607
4.9
7.9
7.7
7.3
9.1
15,778
13,640
6,034
5,719
4,646
Net sales, SEKm
Operating margin, %
Net assets, SEKm
Capital expenditure, SEKm
686
514
524
859
587
8,655
8,851
5,751
6,054
6,041
*2004 according to Electrolux reporting for the Outdoor Products segment. For definitions, see page 46.
Husqvarna is the world’s largest producer of lawn mowers,
trimmers, leaf blowers and chainsaws, and is one of the two
largest producers of garden tractors. The Group’s global
market shares in the major product categories are estimated at 20–40%.
Gardena is the European market leader in irrigation systems and garden tools.
Operations in Consumer Products comprise two geographical areas – North America and Rest of the World, and
the latter accounts for a somewhat greater share of sales.
The market
The global market for the type of equipment produced by
the Group is estimated at approximately SEK 80 billion, of
which North America accounts for approximately twothirds. Historically, annual growth in volume has been
approximately 2–3%, Considerable variations can occur
year-on-year as well as between markets, as a result of
weather conditions.
Demand in 2008 was lower than in the previous year in
both Europe and North America. The North American market has shown continuously declining demand over the past
four years particularly within wheeled products.
Share of Group net sales
North America, 29%
The market features intense competition and downward pressure on prices, particulary for low-end products.
Historically, prices for identical products have been declining by an average of approximately 1–2% annually. High
cost-efficiency and continuous product development are
essential for profitability. Strong brands that are created by
successful product development, high quality and sustained marketing normally enable higher profit margins.
Such brands include Husqvarna, Flymo and Gardena.
Demand is driven by the general business cycle as well
as trends for private consumption of household capital
goods. A substantial share of demand refers to replacement of used equipment. However, weather conditions and
the length of the growing season are also important factors.
Market trends
Increasing interest in garden care has stimulated demand
for garden equipment in recent years.
The long-term market trend shows a polarization to either
simple or more advanced high-performance products.
Competitors
Most of Husqvarna’s competitors sell products for both
consumers and professional users. The most important
competitors are the American companies John Deere,
Modern Tool and Die Company (MTD) and Toro, and the
European companies Global Garden Products (GGP) and
Stihl.
Net sales and operating margin
Distribution of net sales
by quarter
SEKm
%
%
21,000
14
40
18,000
12
15,000
10
12,000
8
9,000
6
6,000
4
3,000
2
0
04 05 06 07 08
Net sales, SEKm
Operating margin, %
0
30
20
10
0
Q1 Q2 Q3 Q4
Net sales, %
4 year average
15
H usqva r n a h a s the m a r k e t’ s m os t co m
pr ehensi v e pro d u c t o ffer ing, a s w el l a s
l e a din g p ositio ns in both Eu ro pe a n d
No r th A mer ic a . Pr emiu m Husqva r n a -
br a n ded pro d u c t s a r e show ing s tro n g
grow th.
Consumer Pro d uct s
John Deere and Toro are the only competitors who are
listed companies.
Husqvarna competes with John Deere and MTD primarily within lawn mowers and garden tractors. Toro is also a
competitor in the US, within lawn mowers and trimmers for
the consumer market.
GGP has a leading position within lawn mowers and riders in the European consumer market under brands such as
Stiga. The German company Bosch is mainly a competitor
within electrically and battery-powered products while the
British company Hozelock has a strong position within garden irrigation and garden ponds, primarily in the UK.
Stihl is a competitor within several product categories,
but particularly within petrol-powered handheld products
such as chainsaws and trimmers in the high-end segment.
Consumer Products North America
In 2008, the North American operation accounted for
somewhat less than half of sales within Consumer Products.
In North America, the greater share of sales are through
mass-market channels under the Poulan and WeedEater
brands, as well as to Sears under its Craftsman brand.
High-end products under the Husqvarna brand account for
a growing share of sales.
Market position
The Group has strong market positions, particularly for
lawn mowers, garden tractors, trimmers and chainsaws.
Considerable seasonal variations
Operations show considerable seasonal variations, with the
majority of sales during the first half of the year (see graph
on page 15).
The season for garden equipment peaks during the second quarter and is essentially over by the end of the third
quarter. The season for irrigation products is normally
shorter and usually ends after the second quarter. Production and inventory-buildups for the coming season normally
start in the fourth quarter.
Customers and distribution
Consumer products for the mass market are sold mainly
through major retail chains and DIY outlets. The US market
is highly consolidated, with the four largest chains – Sears,
Lowe’s, Wal-Mart and Home Depot – accounting for
approximately 70% of the market.
Sears has been Husqvarna’s largest customer since the
1980’s. Sears is the world’s largest retailer of outdoor products, under the Craftsman brand, and has a market share of
approximately 25% in the US.
Husqvarna-branded products are sold mainly through
servicing dealers, i.e. smaller independent retailers who
also offer technical service.
Highlights of 2008
Product offering
16
• Lower sales, particularly in North America.
• Substantial decline in operating income as a result of
lower sales, a less favorable product mix and higher
costs for materials.
• Petrol-powered wheeled products such as lawn mowers,
garden tractors and snow throwers.
• Petrol-powered handheld products such as chainsaws
and trimmers.
• Operating income was also adversely affected by production cutbacks, which involved lower cost absorption.
• Electrically powered handheld products such as hedge
trimmers and leaf blowers.
• Continued good growth for Husqvarna-branded products in the servicing dealer channel.
• Electrically powered lawn mowers.
For additional information on 2008, see page 30 in the
Report by the Board of Directors.
• Electrically powered robotic lawn mowers, Automower ®.
• Products for irrigation and garden ponds, as well as
gardening equipment such as pruning shears, rakes
and shovels.
17
Husqvarna’s Riders are available in a range of versions for both consumers and professional users.
Brands, production and competitors
North America
Major brands
Husqvarna® , Poulan®, WeedEater ®
Major production locations
USA
Major competitors
John Deere, MTD, Stihl, Toro
Rest of the World
Husqvarna® , Gardena®, Flymo®, Partner ®, McCulloch®
Germany, Czech Republic,
Great Britain
Bosch, GGP, Hozelock,
Stihl, TTI
18
The Group has strong positions with the leading retailers, which have been steadily reinforced through investments in product renewal and greater efficiency in the supply chain.
Consumer Products, Rest of the World
In 2008, Rest of the World accounted for somewhat more
than half of sales of consumer products. The greater share
of sales refers to Western Europe.
Operations in Rest of the World are divided into two
sectors, one covering major retailers, i.e. mass-market
channels, and the other focused on servicing dealers.
Sales through mass-market channels are mainly under
the Gardena, Flymo, Partner and McCulloch brands. The
Husqvarna brand represent premium products and are sold
through servicing dealers.
Market position
The Group has strong market positions within chainsaws for
the consumer market under the Husqvarna, Partner and
McCulloch brands, as well as for garden tractors and riders
under the Husqvarna brand. The Group is also a market
leader in electrically-powered products in the UK under the
Flymo brand, which also has a strong position in Scandi
navia. Gardena is the leader in the consumer market in
Europe for irrigation products, and also has leading pos
itions in garden tools, garden ponds and pumps. Sales of
premium products under the Husqvarna brand have shown
strong growth in recent years.
In comparison with North America, the European market is
more fragmented in terms of distribution channels, and
features a number of national and international retail chains
and DIY outlets such as B&Q, Leroy Merlin, OBI, Bauhaus
and K-Rauta.
Husqvarna-branded products are sold through servicing
dealers, who have a strong position within high-end products.
Production
Most of the Group’s products for the consumer markets are
produced at four plants in the US. The plants are specialized and are highly flexible in order to enable response to
seasonal and weather-related variations in demand. The
Group is a net exporter from the US.
Electric lawn mowers and the robotic lawn mower
Automower® are manufactured at a plant in the UK, while
other handheld electrical products are sourced from Asia.
Petrol-powered lawnmowers, chainsaws and trimmers are
produced at a small plant in Italy. The Gardena products
are manufactured at three plants in Germany and three in
the Czech Republic.
Following the acquisition of Jeng Feng in December
2008 the Group now operates a plant for consumer products in China.
19
A total of 11 lawn mowers in a new series will be launched by Husqvarna in 2009 and 2010.
professional
PRODUcts
20
Husqvarna is the world’s largest producer of chainsaws.
Key data*
Net sales, SEKm
Operating margin, %
Net assets, SEKm
Capital expenditure, SEKm
2008
2007
2006
2005
2004
12,493
12,663
11,067
10,408
9,623
38.6
38.0
37.6
36.2
35.4
1,587
2,123
1,875
1,739
1,521
12.7
16.8
16.9
16.7
15.8
7,875
6,790
4,714
4,626
3,905
475
343
366
400
453
7,040
7,242
5,661
5,627
5,616
*2004 according to Electrolux reporting for the Outdoor Products segment. For definitions, see page 46.
pro fe s si onal pro d uct s
The market
The total market for the Group’s range of professional
products is estimated at approximately SEK 60 billion, half
of which refers to equipment for the construction and stone
industries.
Demand is driven by general business conditions as well
as by activities in forestry and the construction industry.
Substantial variations in demand can arise for Lawn and
Share of Group sales
Market trends
For many years there has been a trend in the forest industry
toward increased use of machines instead of manual felling.
This resulted in a substantial decline in the market for
chainsaws until the early 1990’s. Since then the market has
been growing on the basis of increasing demand in markets
such as Russia, Eastern Europe and Latin America. In add
ition, consumer demand for premium chainsaws has been
increasing steadily.
One trend for professional gardening equipment, par
ticularly in the USA, has shown that corporations, municipalities and private individuals have increasingly outsourced landscape maintenance to companies that
specialize in such services. These contractors have thus
comprised a growing customer segment over several years.
Stricter criteria for reduction of exhaust emissions from
petrol-powered garden equipment and chainsaws were
introduced in the US in 1997 and 2002. The regulatory cri
teria from the latter year are being phased in through 2010.
Similar criteria are being phased in within the European
market over the period 2007–2012. Other countries, such as
Japan, are also expected to introduce such criteria. The
Group’s new engines comply with the most stringent
demands regarding exhaust emissions in the US and
Europe, and are also considered to be in compliance with
currently anticipated future requirements.
Forestry, 17%
Lawn and garden, 12%
Construction, 10%
Distribution of net sales
by quarter
SEKm
%
%
15,000
20
30
12,000
16
9,000
12
6,000
8
3,000
4
0
04 05 06 07 08
Net sales, SEKm
Operating margin, %
0
20
10
0
Q1 Q2 Q3 Q4
Net sales, %
4 year average
Husqvarna and Jonsered have been two of the three leading chainsaw brands in the global market for many years,
with a combined market share of approximately 40% in the
professional segment. The Group is also the world leader in
cutting equipment and diamond tools for the construction
and stone industries.
The greater share of sales in this business area refers to
Husqvarna-branded products.
The Professional Products business area comprises
three product areas - Forestry, Lawn and garden, and Construction. Forestry equipment accounted for approximately
45% of the business area’s sales in 2008, while Lawn and
garden accounted for approximately 30% and Construction
accounted for approximately 25%.
garden equipment from year to year and within markets,
depending on weather conditions. Demand for chainsaws
is favorably affected by storms and fallen trees.
21
THE GROUP HAS BEEN A GLOBAL LEADER FOR
MANY YEARS IN TERMS OF CHA INSAWS AND
OTHER HANDHELD PRODUCTS FOR PROFES
SIONAL USERS. HUSQVARNA PRODUCTS ARE
SOLD WORLD-W IDE THROU GH APPROX IMATELY
25, 0 0 0 DEALERS.
Competitors
Husqvarna’s most important competitors in the professional market segment are the German company Stihl and
the American companies John Deere and Toro. Stihl competes primarily within petrol-powered handheld products
such as chainsaws and trimmers, while John Deere and
Toro compete mainly within professional equipment for
lawn and garden.
The most important competitors within equipment for
the construction industry are Hilti, which is based in Liechtenstein, Tyrolit in Austria, Saint Gobain and Wheelabrator
in France, and Stihl in Germany for power cutters.
John Deere, Toro and Saint Gobain are listed companies.
Seasonal patterns
Sales of lawn and garden equipment refer mainly to the first
half of the year, while most chainsaws are sold during the
second half. Sales of equipment and diamond tools for the
construction industry are spread more evenly over the year
(see graph on page 21).
chainsaws for various geographical areas and climates. The
product range also includes clearing saws and accessories
such as chains, blades, protective clothing and tools.
These products are developed for users who demand
high levels of performance, durability and ergonomics. The
product range satisfies most needs for forest management
and tree care.
Brands and market position
Professional forestry products are mainly sold under the
Husqvarna, Jonsered and Zenoah brands, with Husqvarna
accounting for a dominant share of sales. The Husqvarna
brand has had a strong global position for many years, particularly for chainsaws and other handheld products. Jonsered has a similar position, and complements Husqvarna
in specific markets. Zenoah has a strong market position for
chainsaws in Japan as well as for other handheld products
such as clearing saws, trimmers and leaf blowers. Zenoah
products are also sold in the US under the RedMax brand.
Forestry
In 2008, the Forestry product area accounted for approximately 45% of the Group’s total sales of professional products.
Husqvarna manufactures a wide range of premium
The majority of sales are to servicing dealers through the
Group’s own sales companies. In smaller markets, products
are sold through distributors. The Group is represented in over
100 countries through a total of more than 25,000 dealers.
Highlights of 2008
Product offering
22
• Lower sales and operating income, particularly for the
Construction product area.
• High-performance chainsaws, clearing saws and brushcutters.
• Decline in sales and operating income for Lawn and
garden.
• Riders, walk-behind lawn mowers, zero-turn mowers,
specialty turf-care equipment, trimmers, hedge trimmers
and leaf blowers.
• Sales and operating income for Forestry were in line
with 2007.
For additional information on 2008, see page 30 in the
• Accessories such as chains, blades, tools and protective
clothing.
• Floor saws, tile and masonry saws, wall and wire saws,
concrete saws, drill motors and stands, polishing and
grinding machines, power cutters and related diamond
tools, and diamond tools for the stone industry.
23
Husqvarna’s Riders feature unique rear-wheel steering for greater maneuverability and a minimum turning radius.
Brands, production and competitors
Forestry
Lawn and garden
Construction
Major brands
Husqvarna , Jonsered ,
Husqvarna , Jonsered , Zenoah®
Klippo® , Dixon®, RedMax®
Major production locations
Sweden, USA,
Sweden, USA Japan
Major competitors
Stihl
John Deere,
Stihl, Toro
®
®
®
®
Husqvarna® , Diamant Boart ®
Sweden, USA, China, Belgium
Hilti, Saint Gobain,
Tyrolit, Wheelabrator
24
Lawn and garden
The Lawn and garden product area accounted for approximately 30% of the Group’s sales of professional products in
2008.
The product offering includes riders, walk-behind lawn
mowers and zero-turn mowers, as well as special products
for turf care. The range also includes handheld equipment
such as trimmers, hedge trimmers and leaf blowers.
Products within Lawn and garden must meet demands
for performance, durability and comfort. An effective organ
ization for technical support and service is also essential for
success in this area, where larger riders are priced at more
than SEK 100,000.
The Husqvarna brand accounts for the greater share of
sales. The Dixon, Bluebird and Yazoo/Kees brands are used
for a limited range of products in the US. The Klippo brand
has a strong position in the Scandinavian market for professional walk-behind lawn mowers.
Products are distributed to servicing dealers through
Husqvarna’s sales companies, as well as through independent distributors.
The primary end-users are professional landscape contractors as well as municipalities and institutional users.
Construction
In 2008 this product area accounted for approximately
25% of the Group’s total sales of professional products.
Husqvarna’s product offering includes machines and diamond tools for the construction and stone industries.
The machines for the construction industry include
power cutters, floor saws, wall and wire saws, tile and
masonry saws, drill motors with drill stands, and machines
for surface preparation and demolition.
Diamond tools, which are consumables are cutting tools
that are mounted on the machines. Customers who buy the
above machines also buy the Group’s diamond tools to a
large extent. Husqvarna’s range of diamond tools for the
stone industry includes saw blades, diamond wires, drills,
and tools for calibration, grinding and profiling.
Products for the construction industry are used exclusively by professionals, and satisfying their demands for
performance, reliability and a high level of technical service
is essential for success.
Products for the construction industry are sold under the
Husqvarna brand. Diamant Boart is the leading brand in the
global market for diamond tools used by the stone industry.
Diamond tools and equipment for the construction industry are sold mainly through rental companies and specialized dealers, but also directly to large contractors.
Diamond tools for the stone industry are sold almost
exclusively directly to companies that quarry and/or process stone.
Production
The Group’s professional products are manufactured primarily in Sweden, the US and Japan. Chainsaws, clearing
saws and riders are manufactured at the plant in Huskvarna,
Sweden. Chainsaws are also manufactured in the US, Japan
and Brazil.
Products for the construction and stone industries are
manufactured mainly in Sweden, the US, China and Belgium.
In addition, Husqvarna operates small servicing units in a
number of countries.
25
The new generation of Husqvarna power cutters features a reduction of up to 70% in emission as well as a better fuel economy.
Report by the
Board of Directors
• Lower demand in both North America and
Europe, particularly in the second half of the year.
• Net sales declined by 3% to SEK 32,342m (33,284),
and by 6% adjusted for acquisitions and in comparable exchange rates.
• Income was charged with costs for personnel cutbacks in the amount of SEK 316m. Operating margin was 8.3% exclusive of these costs.
• Earnings for the year amounted to SEK 1,288m
(2,036), corresponding to SEK 3.34 (5.29) per
share.
• Operating cash flow rose to SEK 2,013m (1,843).
• The Board of Directors proposes that no dividend
be paid for 2008.
• In February 2009 the Board of Directors decided
on a rights issue of approximately SEK 3 billion,
subject to approval by a General Meeting of Shareholders.
• Apart from costs for personnel cutbacks, the
decline in income was due primarily to lower
sales, lower production levels and higher costs
for materials.
26
• Operating income declined by 34% to SEK 2,361m
(3,564), and operating margin was 7.3% (10.7).
• Operating income for Consumer Products
declined by 50%, and for Professional Products by
19%, adjusted for costs for personnel cutbacks,
acquisitions and in comparable exchange rates.
Key data
SEKm
Net sales
EBITDA
EBITDA margin, %
Operating income
Operating margin, %
Income after financial items
Margin, %
Income for the period
Earnings per share after dilution, SEK
Return on equity, %
Net debt/equity ratio, times
Capital expenditure
2008
2007
Change, %
Change adjusted for
currency and acquisitions1), %
32,342
3,524
10.9
2,361
7.3
1,767
5.5
1,288
3.34
10.7
15.8
1.54
1,163
15,720
33,284
4,645
14.0
3,564
10.7
2,889
8.7
2,036
5.29
17.6
28.6
1.63
857
16,093
–3
–24
—
–34
—
–39
—
–37
–37
—
—
—
36
–2
–6
–26
—
–34
—
—
—
—
—
—
—
—
—
—
1) Excluding costs for personnel cutbacks, acquisitions and adjusted for currency transaction and translation effects.
R eport by t h e Boar d o f D i rector s
Ne t sa l e s a n d o per ating in co me
Net sales
Change in operating income
Net sales in 2008 declined by 3% to SEK 32,342m (33,284),
and by 6% after adjustment for acquisitions and in compar
able exchange rates. The decline refers mainly to Consumer
Products, particularly in North America, and to the Construction product area within Professional Products.
The comparative figures for 2007 do not include the
major acquisitions, i.e. Gardena and Zenoah, for the full year.
Net sales decreased by 6% for both Consumer Products
and Professional Products, after adjustment for acquisitions
and in comparable exchange rates.
Operating income 2007
Acquisitions
Price
Volume and mix
Cost of materials
Cost of personnel cutbacks
Changes in exchange rates
Operating income 2008
Income after financial items declined by 39% to SEK 1,767m
(2,889), and the margin was 5.5% (8.7).
Taxes
Taxes amounted to SEK –479m (–853), corresponding to
27.1% (29.5) of income after financial items. The decrease
in taxes was due to changes in the Group’s structure and
to lower profits in countries with high tax rates.
Earnings per share
Income for the year declined by 37% to SEK 1,288m
(2,036), which corresponds to SEK 3.34 (5.29) per share
after dilution.
Earnings per share and
return on equity
SEKm
35,000
%
14
30,000
12
25,000
10
20,000
8
15,000
6
10,000
4
5,000
2
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Net sales, SEKm
Operating margin, %
*1989–2004 according to Electrolux reporting for the Outdoor Product segment i.e.
excluding corporate costs. For comparison, corporate costs have not been included 2005–2008.
0
%
SEK
10
50
8
40
6
30
4
20
2
10
0
04 05 06 07 08
Net financial income
Net financial income amounted to SEK –594m (–675). The
improvement is due mainly to lower interest rates. As of
year-end the average interest rate for total borrowings was
4.3% (5.2).
0
3,564
208
179
–1,110
–348
–316
184
2,361
27
Operating income
Operating income decreased by 34% to SEK 2,361m (3,564)
corresponding to a margin of 7.3% (10.7). Operating income
includes a charge of SEK 316m for costs related to personnel
cutbacks implemented in light of the weak market conditions. Operating margin was 8.3% excluding these costs.
Apart from the costs for personnel cutbacks, the decline in
operating income is due mainly to lower sales and higher
costs for materials. Income was also adversely affected by
lower production levels in order to reduce inventories, which
involved lower absorption of costs.
In terms of business areas, the decline refers to Consumer Products in both North America and Rest of the
World, and to Construction products within Professional
Products.
Changes in exchange rates, including both translation
and transaction effects and net of currency-hedging contracts, had a total positive effect on operating income in the
amount of SEK 184m (–21). Currency-hedging contracts had
an adverse effect of SEK –89m (–148).
SEKm
0
Earnings per share, SEK
Return on equity, %
Group net sales by country
28
USA
France
Germany
Canada
Russia
UK
Sweden
Australia
Japan
Poland
35.6
7.1
7.0
4.6
4.4
3.7
3.4
2.3
2.2
2.1
Cost-cutting measures
In light of the weak market conditions, cost-cutting measures
were implemented in order to reduce the Group’s fixed
costs, which involved a cutback of approximately 960
employees. The total cost of these measures was SEK 316m,
of which SEK 15m was charged against income in the third
quarter and SEK 301m in the fourth quarter.
The measures will be fully implemented during the first
half of 2009. Savings are estimated at approximately SEK 350m
annually, will be achieved gradually during 2009, and will
take full effect as of the third quarter.
Cash flow
Operating cash flow
The operating cash flow increased to SEK 2,013m (1,843).
Cash flow from operations, excluding changes in operating
assets and liabilities, due mainly to the decline in income.
Changes in working capital had a positive effect. This was
accomplished primarily by lower production in the fourth
quarter and lower inventory build-up at year-end compared
with the previous year.
Cash flow
SEKm
2008
2007
Cash flow from operations,
excluding changes in operating
assets and liabilities
Changes in operating assets
and liabilities
2,703
3,232
441
–576
Cash flow from operations
Cash flow from investments
3,144
–1,131
2,656
–813
Operating cash flow
Acquisitions of operations
Total cash flow from
operations and investments
2,013
–845
1,843
–8,876
1,168
–7,033
Value created
Value created is an indicator for evaluating financial perform
ance, and is the basis for variable remuneration to senior
managers in the Group. The model links operating income
and asset efficiency with the cost of capital employed in
operations. Value created is measured by total Group, business area, sector, product category and regions.
Total value created in 2008 amounted to SEK 168m
(1,687). The decline is due mainly to lower income. The WACC
rate for 2008 was 10% (10).
For more information on value created as a basis for
remuneration, see Note 24.
Capital expenditure
Capital expenditure in 2008 amounted to SEK 1,163m (857),
corresponding to 3.6% (2.6) of net sales. The increase from
the previous year refers mainly to a new factory in China and
to production equipment in North America.
Approximately 51% of capital expenditure in 2008 referred
to new products, approximately 19% to rationalization and
replacement of equipment in production, approximately
14% to expansion of capacity, and approximately 3% to ITsystems.
Investments related to new products include new models
of chainsaws for both professional users and consumers, as
well as new models of garden tractors, lawn mowers, electric
al trimmers for consumers and a demolition robot for professional users.
Net sales by quarter
Operating income by quarter
SEKm
15,000
SEKm
2,000
12,000
1,500
9,000
1,000
6,000
500
3,000
0
06 07 08
06 07 08
06 07 08
06 07 08
Q1
Q2
Q3
Q4
0
–500
06 07 08
06 07 08
06 07 08
Q1
Q2
Q3
06 07
Q4 08
Financial position
Operating working capital
Operating working capital at year-end increased to
SEK 9,460m (8,939). Inventory amounted to SEK 8,556m
(7,758), trade receivables to SEK 4,184m (3,912) and trade
payables to SEK 3,280m (2,731). The increases are related
mainly to changes in exchange rates, as both USD and EUR
appreciated substantially against SEK during the year.
Change in operating working capital
SEKm
31 December 2007
Acquisitions
Changes in exchange rates
Other changes
31 December 2008
8,939
200
1,057
–736
9,460
Equity
Group equity as of 31 December 2008, excluding minority
interests, amounted to SEK 8,772m (7,349) corresponding to
SEK 22.91 (19.11) per share.
The net debt/equity ratio was 1.54 (1.63) and the equity/
assets ratio was 25.7% (25.7).
Net debt
SEKm
Interest-bearing liabilities
Liquid funds
Net debt
Equity/assets ratio, %
%
10
SEKm
1,500
10
1,600
8
1,200
8
1,200
6
900
6
800
4
600
4
400
2
300
2
0
0
04 05 06 07
08
Operating cash flow, SEKm
Operating cash flow/net sales, %
16,287
2,735
13,552
1.54
25.7
13,318
1,306
12,012
1.63
25.7
29
Capital expenditure
SEKm
2,000
0
2007
Seasonality in sales and income
Demand for the Group’s products is dependent on weather
conditions. Dry weather tends to reduce demand for such
products as lawn mowers and tractors, but to increase
demand for irrigation products. Demand for chainsaws normally increases after storms.
Husqvarna’s sales and income are subject to marked seasonal variations, with significantly higher sales during the
first half of the year, the second quarter normally being the
strongest. This refers particularly to Consumer Products but
also to Lawn and garden within Professional Products.
Irrigation products have a larger share of sales and operating income in the first half of the year than the rest of the
Group’s consumer products. The acquisition of Gardena has
thus increased the seasonality of the Group and the import
ance of the second quarter.
Chainsaws show stronger demand and somewhat higher
sales during the second half of the year. Equipment for the
construction industry normally shows a more even distribution of sales throughout the year.
Net debt
The Group’s net debt as of 31 December 2008 increased to
SEK 13,552m (12,012). The increase is mainly an effect of
changes in exchange rates that increased net debt by
approximately SEK 1,500m.
Liquid funds amounted to SEK 2,735m (1,306). During the
fourth quarter, approximately SEK 1,500m of the Group’s
committed revolving credit facility was utilized to finance the
seasonal build-up of working capital during the first quarter.
At year-end the Group had unutilized committed credit
facilities of SEK 6,500m.
For more information about the Group’s funding, see
Note 2.
Operating cash flow
2008
Research and development
Total research and development correspond to SEK 588m
(480), of which SEK 254m (159) was capitalized. R&D
expenses thus corresponded to 1.8% (1.4) of net sales.
Major R&D projects during the year referred mainly to the
products mentioned above.
%
04 05 06 07 08
Capex, SEKm
Capex/net sales, %
0
Per fo r m a nce by busine ss a r e a
Operations in Husqvarna comprise two business areas –
Consumer Products and Professional Products.
Consumer Products is divided into two geographical
areas, i.e. North America and Rest of the world. Professional
Products comprises three areas, i.e. Forestry, Lawn and garden, and Construction.
Consumer Products
• Lower sales, particularly in North America.
• Substantial decline in operating income as a result of lower
sales, a less favorable product mix and higher costs for
materials.
• Operating income was also adversely affected by production cutbacks, which involved lower cost absorption.
• Continued good growth for Husqvarna-branded products
in the servicing dealer channel.
30
Consumer Products
2008
SEKm
Net sales
Operating
income
Operating
margin, %
2007 Change, %
Adjusted
change, % 1)
19,849
20,621
–4
–6
963
1,638
–41
–50
4.9
7.9
—
—
product mix in both North America and Europe as well as
higher costs for materials particularly in the US. Operating
income was also adversely affected by substantial cutbacks
in production in both North America and Europe in order to
reduce inventories, which means lower cost absorption.
• Lower sales and operating income, particularly for the
Construction product area
• Decline in sales and operating income for Lawn and
garden
• Sales and operating income for Forestry were in line
with 2007
2008
SEKm
Net sales
Operating
income
Operating
margin, %
2007 Change, %
Adjusted
change, %1)
12,493
12,663
–1
–6
1,587
2,123
–25
–19
12.7
16.8
—
—
1) E
xcluding costs for personnel cutbacks, acquisitions and adjusted for currency transaction and translation effects.
Sales for the Consumer Products business area were lower
than in 2007. The decrease is due mainly to North America,
where industry shipments and consumer demand showed a
substantial decline in most product categories with the
exception of chainsaws. Group deliveries decreased in line
with the downturn in industry shipments.
Lower sales were also reported for the operation outside
North America, for irrigation equipment as well as several
other product categories. Husqvarna-branded products
sold to servicing dealers showed continued good growth,
primarily for handheld equipment.
Operating income and margin for this business area
declined sharply in comparison with the previous year. The
decrease is due to lower sales volumes and a less favorable
The decline in sales for Professional Products refers mainly
to the Construction product area, in which demand was substantially lower in both Europe and North America. Lower sales
were also reported for Lawn and garden, particularly in the US.
On the other hand, sales for Forestry were in line with the
previous year, due mainly to good growth for premium chainsaws in North America. The favorable trend for forestry products is due mainly to product launches, increased investment
in marketing in the US, and rationalization of production.
Operating income for this business area was substantially
lower than in 2007, and margin decreased. The decline resulted
mainly from the sharp drop in sales of Construction products.
Operating income for Forestry was largely unchanged in
comparison with the previous year, and margin remained at
a high level.
Operating income for the business area as a whole was
adversely affected by substantial cutbacks in production in
most operations.
Net debt/equity and equity/asset ratios
Maturity profile of loans
1) E xcluding costs for personnel cutbacks, acquisitions and adjusted for currency transaction and translation effects.
Times
2.0
%
40
SEKm
6,000
1.6
32
5,000
1.2
24
0.8
16
0.4
8
1,000
0
0
0
04 05
06 07 08
4,000
3,000
2,000
Husqvarna has a committed
revolving credit facility of
SEK 8,000m that expires in
2012/13.
09 10 11 12 13 14–
Bond loans
Bank and other loans
Utilized part of committed revolving credit facility
Other acquisitions
In April the Group acquired Sandvik Nora AB’s assets and
operation related to products for the construction industry.
This operation has annual sales of approximately SEK 65m.
Sales subsequent to the acquisition amounted to approximately SEK 28m.
In April the Group also acquired the US company Meco
(Masterpiece Engineering Company), a leading producer of
floor saws for concrete and asphalt, primarily for construction
and repair of roads. Meco has annual sales of approximately
SEK 54m. Sales subsequent to the acquisition are included in the
2008 Group accounts in the amount of approximately SEK 23m.
The Husqvarna share
At year-end the share capital in Husqvarna amounted to
SEK 770m, comprising 98,380,020 A-shares and 286,756,875
B-shares. Each A-share carries one vote, and each B-share
1/10 of a vote. All shares entitle equal rights in terms of the
company’s assets and earnings.
There are no restrictions on transfer of shares, voting
rights or the right to participate in the AGM. Nor is the company party to any significant agreements which might be
affected, changed or terminated if control of the company
were to change as a result of a public bid for acquisition of
shares in the company.
The company is not aware of any agreements between
shareholders which might limit the right to transfer shares. In
addition, there are no stipulations in the Articles of Associ
ation regarding appointment or dismissal of Board members
or agreements between the company and Board members
or employees which require remuneration if such persons
leave their posts, or if employment is terminated as a result
of a public bid to acquire shares in the company, except as
outlined in Note 24.
As of 31 December 2008 the largest shareholders were
Investor AB with 28.7% of the votes and LE Lundbergföretagen with 13.1% of the votes. For more information on major
shareholders, see pages 110–111.
Changes in Group management
Magnus Yngen was appointed new President and CEO for
Husqvarna as of 1 October 2008. He succeeded Bengt
Andersson. Magnus Yngen was previously Executive VicePresident of Electrolux and Head of the Major Appliances
Europe business sector, which has annual sales of approximately SEK 45 billion. He has held a number of leading pos
itions in Electrolux since 1995 and has been member of Electrolux Group Management since 2002.
As of 1 July 2008, Roger Leon was appointed as new head of
Consumer Products in North America and joined Husqvarna
Group Management. He succeeded Robert E. Cook, who
Repurchase of own shares
The Annual General Meeting 2008 authorized the Board to
acquire B-shares totalling up to 3% of the total number of
shares, and to pay for the shares in cash.
The shares may be purchased on the NASDAQ OMX
Stockholm in order to hedge the company’s obligations,
including employer contributions, pursuant to the long-term
incentive programs for 2006, 2007 and 2008.
The company has the right to adjust on an ongoing basis
the number of shares that it holds as a hedge of the company’s
obligations pursuant to the implemented incentive programs.
The participants in the incentive programs shall be entitled to
receive a maximum number of shares in accordance with the
conditions of the programs, and transfers of shares under the
programs will be made without consideration.
Consumer Products
SEKm
25,000
SEKm
2,500
SEKm
25,000
SEKm
2,500
20,000
2,000
20,000
2,000
15,000
1,500
15,000
1,500
10,000
1,000
10,000
1,000
5,000
500
5,000
500
0
05 06 07 08
Net sales, SEKm
0
05 06 07 08
0
05 06 07 08
Net sales, SEKm
0
05 06 07 08
31
The acquisition of the Jenn Feng operation in outdoor products was completed in December. Jenn Feng is a leading
producer of chainsaws and trimmers for the consumer market. The product range also includes lawn mowers, highpressure cleaners, and generators.
Production is located in China. The acquisition expands
the Group’s presence and production base in Asia. It also
gives Husqvarna access to the McCulloch brand in North
America. Husqvarna already owns the rights to this brand in
the rest of the world.
The acquired operation has been consolidated in the
accounts for 2008 with sales of SEK 89m, half of which
referred to chainsaws. The number of employees, which
were included as of 1 January 2009, was approximately
1,250.
retired. Roger Leon was previously Chief Operating Officer
for Husqvarna Consumer Products in North America.
Other info r m atio n
Acquisitions
Jenn Feng
32
In the third quarter of 2008 Husqvarna repurchased
950,000 own shares for a total of SEK 48m. The average purchase price was SEK 50.30. As of 31 December 2008,
Husqvarna owned 2,919,000 re-purchased B-shares corresponding to 0.76% of the total number of outstanding shares.
Of the total average number of employees in 2008, 9,999
(10,193) were men and 5,721 (5,900) were women.
Salaries and remuneration in 2008 amounted to SEK 4,037m
(3,973), of which SEK 838m (874) refers to Sweden.
For more information, see also Note 19.
Long term incentive program for 2008
The Annual General Meeting 2008 adopted a new perform
ance-based long-term incentive program based on similar
parameters as the program for 2007.
The program comprises approximately 40 senior man
agers. The conditions involved investment by the participants in Husqvarna B-shares at market price. For each
B-share which the employee purchased within the framework
of the program, the company will grant one share award, and
performance based stock options if the lowest target level is
achieved. Each share award entitles the employee to one
B-share free of charge, three years after grant.
Each stock option entitles the holder to purchase one
B-share at a purchase price of SEK 72. The stock options may
be exercised in four years at the earliest and at the latest
eight years from the day of the grant. The number of stock
options that may be granted depends on the number of
B-shares that the employee has purchased, as well as the
development of the company’s earnings per share during
the period 2008–2010.
The program comprise a maximum of 1,745,000* B-shares.
If all share awards and a maximum of granted stock options
are fully exercised, it is estimated that the 2008 program will
comprise no more than 0.45*% of the share capital.
Pro p os a l s to the a nn ua l gener a l
mee tin g in 20 0 9
* T he number of shares and stock options may be recalculated
following the decision regarding the rights issue.
Legal matters
Husqvarna is involved in disputes in its ordinary course of
business. On the basis of currently known circumstances,
Husqvarna estimates that none of the disputes in which
the Group is presently involved or which have been settled
recently have had, or may have, a material effect on
Husqvarna’s financial situation or profitability. A description
of current legal matters is given in Note 22.
Environmental activities
Husqvarna operates 22 major plants, of which ten are located
in Europe, six in the US, one in Brazil, four in China and one
in Japan. All plants have the environmental permits required
for current operations.
In accordance with Swedish environmental legislation,
permits are required for four plants in Sweden. Of these, the
facility in Huskvarna is the largest and has the greatest en
vironmental impact. The foundry in this plant generates
emissions of particles, and surface treatment of components
generates emissions of metals. Product testing generates
emissions of several types of substances. This plant also handles a relatively large volume of chemicals and waste.
Employees
The average number of employees in 2008 was 15,720
(16,093), of whom 2,075 (2,178) were in Sweden. At year-end,
the total number of employees was 16,284 (17,362).
The full proposal to the AGM 2009 will be announced no
later than the date of notification of the AGM, which is
expected to be published on 23 March 2009.
Dividend for 2008
The Board of Directors proposes that no dividend be paid
for 2008.
Guidelines for remuneration of senior management
The Board of Directors proposes that the Annual General
Meeting 2009 approve current principles for remuneration
and other conditions of employment for Husqvarna Group
Management to apply also for 2009. These principles shall
apply to remuneration and other conditions of employment
for the President and CEO as well as other members of
Group Management.
The principles shall apply to contracts of employment
entered into after the Annual General Meeting and also to
subsequent amendments to contracts of employment which
are in force. Remuneration to Group Management is determined by the Board of Directors on the basis of proposals
from the Board of Director’s Remuneration Committee.
Overall principles
The overall principles for remuneration to Group Management shall be based on position, individual performance,
and the Group’s income for the period, and remuneration
shall be competitive in the country of employment. Total
remuneration to a member of Group Management shall consist of a fixed salary, variable salary in the form of short-term
incentives based on yearly performance targets, long-term
incentives, pensions, and other benefits. In addition, conditions apply to notice of termination and severance pay.
Husqvarna shall aim to offer competitive total remuneration
with a primary focus on ”performance-related payment”.
This means that variable remuneration can constitute a
substantial component of total remuneration.
Fixed salary
Fixed salary shall comprise the basis for total remuneration.
The salary shall be related to the relevant market and shall
reflect the degree of responsibility involved in the position.
Salary levels shall be reviewed regularly (usually through an
annual salary review) in order to ensure continued competitiveness and to correctly reward performance.
Variable salary (Short-term incentive ”STI”)
Members of Group Management shall receive STI in addition to the fixed salary. The emphasis in STI shall be on the
financial results for the Group or for the sector or function
for which the member is responsible. In addition, perform
ance indicators can be used in order to focus on questions
of special interest to the company.
Pensions and insurance
Pension and health benefits shall be designed to reflect regu
lations and practice in the country of employment, and the
value of the benefits shall match normally accepted levels
within the country. If possible, pension plans shall be defined
contribution plans in accordance with the Group’s pension
policy.
Other benefits
Other benefits can be provided in accordance with normal
practice in the country where the member of Group Management is employed. However, these benefits shall not
constitute a significant part of total remuneration.
Notice of termination and severance pay
Members of Group Management shall be offered periods of
notice and levels of severance pay which are in line with
accepted practice in the country where the member is
employed. Members of Group Management shall be obliged
not to compete with the company during the notice period.
Based on the circumstances in each case, a non-compete
obligation with continued payment may also apply after the
end of the notice period. Such non-compete obligations
shall not apply for more than 24 months from the end of the
notice period.
Previously determined remuneration which has not
become payable
The principal conditions for remuneration to the Group Management in current contracts of employment are given in
Note 24, with references.
Authority for the Board to deviate from the guidelines
If special circumstances exist, the Board of Directors may
deviate from these guidelines. In the event of such a devi
ation, the next Annual General Meeting shall be informed of
the reasons.
Long-term incentive program 2009
Meeting adopt a new performance-based incentive program
Meeting authorize the Board to acquire B-shares totaling up
to 3% of the total number of shares, and to pay for the shares
in cash.
The shares may be purchased only on the NASDAQ OMX
Stockholm, in order to hedge the company’s obligations,
including employer contributions, pursuant to the com
pany’s long-term incentive programs.
The number of shares that may be transferred in connection with the programs will be subject to recalculation in
case the company implements a bonus issue, a split, a rights
issue or similar, all in accordance with the conditions of the
programs.
e v ents a f ter 31 D ecember, 20 0 8
Proposal for rights issue
The Board of Directors has resolved on a rights issue with
the intention of raising SEK 3 billion. The objective of the
rights issue is to strengthen the Group’s balance sheet.
The rights issue is subject to approval by an Extra
ordinary Shareholders’ Meeting to be held on 9 March 2009.
Shareholders will have primary preferential rights to subscribe for shares in proportion to their existing holdings, i.e.
A-shares will be issued to holders of A-shares and B-shares
to holders of B-shares. Subscription may also be submitted
without preferential rights.
Six major shareholders in Husqvarna, including Investor
AB, LE Lundbergföretagen AB, Alecta, AFA Insurance, Investment AB Öresund and the Fourth Swedish National Pension
Fund (AP4) have entered into agreements which include an
undertaking to subscribe for their respective pro rata shares
in the rights issue, corresponding to approximately 35.6% of
the rights issue. In addition, Investor AB, LE Lundbergföretagen AB, Alecta, Investment AB Öresund and the Fourth
Swedish National Pension Fund (AP4) have entered into
underwriting agreements which include an undertaking to,
subject to certain conditions, subscribe for additional shares,
bringing the total guaranteed amount to approximately 74.4%
of the rights issue. The remainder of the rights issue is, subject to certain conditions, underwritten by SEB, Handelsbanken Capital Markets and Nordea. Consequently, 100% of the
rights issue is committed and underwritten.
The record date at the Swedish Securities register Center,
Euroclear Sweden AB, for participation in the rights issue will
be 12 March 2009. The subscription period is 16 March to 30
March, 2009, or such later period as decided by the Board of
Directors. The subscription price and offer ratio will be
announced on 5 March 2009. For further details, see the separate press release.
Long-term incentives
The Board of Directors shall evaluate on a yearly basis whether
a long-term incentive program (e.g. share or share-price based)
shall be proposed to the Annual General Meeting.
for a maximum of 50 senior managers. The program is based
on similar principles as the program for 2008 (LTI 2008) which
is described in Note 19.
33
Clearly defined objectives for ”target” and ”stretch”
levels of performance shall be stated at the start of each
year and shall reflect the plans approved by the Board.
STI shall be dependent on the position and may amount
to a maximum of 50% of the salary on attainment of the target level and a maximum of 100% of the salary on attainment of the stretch level, which also is the cap for the STI.
In the US, the STI component is normally higher and may
amount to a maximum of 100% on attainment of the target
level and a maximum of 150% of the salary on attainment of
the stretch level.
The Board of Directors shall decide if the full 50/100/
150% shall apply, or if a lower percentage is appropriate.
R EP O R T BY T H E BOA R D O F D I R EC TO R S
RISK MANAGEMENT
34
A L L BUSINE SS O PER ATIO NS IN VO LV E R ISK S.
CR E ATING AWA R ENE SS O F SU CH R ISK S
EN A BL E S THEM TO BE L IMITED, CO NTRO L L ED
A N D M A N AGED, W HIL E BUSINE SS O PP O R T U N ITIE S C A N BE U TIL IZED IN THE INTER E S T O F
IN CR E A SING INCO ME A N D PRO FITA BIL IT Y.
Risks associated with Husqvarna’s operations can be classed
for the most part as operational risks related to business
operation, and financial risks related to financing operations,
most of which are conducted outside Sweden. External risks
which could affect the Group include changes in legislation
and other regulations.
The President and CEO is responsible for ongoing risk
management in accordance with the Board of Directors’
guidelines and instructions. Sector heads are responsible for
operational risk management. Group Staff Legal affairs
includes a central risk-management function which coordinates risks that are subject to insurance. Management of
financial risks is essentially centralized to the Group Treasury.
The Internal Audit function is tasked with ensuring the
quality over financial reporting and is also responsible for
performing an annual assessment of the Group’s commercial, operational and financial risks. Identification and evaluation of risks in this assessment provide support for management’s strategic decision-making. The assessment also
aims at generating enhanced awareness of risks in various
parts of the organization, including everyone from operational decision-makers to the Audit Committee and the
Board of Directors.
Highlights of risk management in 2008
• Identification of business risks related to markets, customers, competitors and products
• Identification of mainly operational risks within specific
business areas
• Comprehensive audit of property and the working environment, focused on e.g. damage from fire, water, explosions
and machinery
• Identification and evaluation of risks related to financial
reporting
Operational risks
Husqvarna’s long-term profitability depends on the company’s ability to successfully develop, launch and market new
products. Other vital factors for profitability include flexible,
cost-efficient production and rational management of fluctuations in the prices of raw materials and components.
Product life-cycles are becoming shorter, which makes
product development increasingly more important. Many of
the Group’s products require a good deal of time to develop
from concept to final product, which means that it is essential to understand the actual needs of the end-users in order
to ensure that the product will be in demand. In order to
maintain competitiveness in existing markets and to expand
into new markets, as well as into new product areas, the
Group’s new products must satisfy or preferably surpass the
expectations of consumers and professional users. The
Group must also be a leader in terms of more efficient and
environmentally adapted products, in order to differentiate
the Group’s offering from those of its competitors.
Weather conditions
Demand for the Group’s products is also dependent on the
weather. Unexpected or unusual weather conditions in specific areas or regions can affect sales either adversely or
positively.
Dry weather can reduce demand for products such as
lawn mowers and tractors, but can stimulate demand for irrigation systems. Demand for chainsaws normally increases
after storms, and during cold winters.
Markets and competition
Husqvarna operates in competitive markets, most of which
are relatively mature, so that means that underlying demand
is relatively stable under normal economic conditions. Price
competition is intense, particularly for low-end consumer
products for the mass market. Husqvarna’s strategy is based
SENSITIVITY ANALYSIS
• A change of 1% in the costs for wages, salaries and remuneration would affect operating income by approximately
SEK 40m (40).
• A decline of 10 percentage points in the value of the Swedish
krona against the US dollar would have an adverse effect on
operating income of approximately SEK –153m*, of which
SEK –217m would refer to negative effects of transactions
and SEK 64m to positive translation differentials.
krona against the euro would have a positive effect on operating income of approximately SEK 315m*, of which SEK 260m
would refer to effects of transactions and SEK 55m to translation differentials.
* Excluding hedging effects.
krona against all currencies, including USD and EUR, would have
a positive adverse effect on operating income of approximately
SEK 656m*, of which SEK 453m would refer to effects of transactions and SEK 203m to translation differentials.
• A change of 1 percentage point in the interest rate on loans
would affect net income of approximately SEK 80m (106), on
the basis of outstanding loans at year-end 2008.
• An increase or decrease of 10 percentage points in the price of
steel would affect operating income by –/+ SEK 208m.
aluminum would affect operating income by –/+ SEK 74m.
plastics would affect operating income by –/+ SEK 92m.
Production
Husqvarna’s production consists mainly of assembly of purchased components, and is sufficiently flexible to meet fluctuations in demand resulting from seasonal variations and
Cost structure, Group
Risks related to prices for raw materials,
other materials and components
The Group’s operations and its performance are affected by
fluctuations in the prices of raw materials, mainly steel, aluminum and various types of plastics. These prices can fluctuate considerably in the course of a year, as a result of
changes in world prices for raw materials or the ability of
suppliers to deliver them. Husqvarna’s total consumption is
obviously linked to production volume and comprises
approximately 200,000 tons of steel, 43,000 tons of aluminum and 60,000 tons of plastics.
In 2008 Husqvarna purchased materials and components
for approximately SEK 18,300m, of which approximately
SEK 4,090m referred to raw materials. Purchases of steel
accounted for SEK 2,082m, aluminum for SEK 735m, and
plastics for SEK 924m.
Husqvarna does not use financial instruments to hedge
prices of raw materials at the time of purchase.
A major share of Husqvarna’s material requirements is met
by single suppliers who individually cover the Group’s shortterm needs. The effects of interrupted deliveries vary depending on the specific materials and components. A shortfall in
deliveries by a supplier could have negative consequences for
production and for deliveries of finished products.
Husqvarna’s purchasing organization works closely with
suppliers in order to manage deliveries, and monitors the
suppliers’ financial stability, quality-assurance systems and
flexibility of production.
Transaction exposure by currency, forecast commercial flows 2009
SEKm
Fixed costs, 22%
Variable costs, 78%
EUR
CAD
RUB
PLN
GBP
Other currencies
USD
SEK
Net flow
Hedge amount
Transaction
exposure net
2,597
1,043
542
459
410
1,652
–2,174
–4,529
–2,370
–771
–362
–345
–335
–628
1,802
3,009
227
272
180
114
75
1,024
372
1,520
For more information, see Note 2 on page 57.
Customers
Consumer products for the mass market are sold mainly
through large retail chains. This market is highly consolidated in North America, while in Europe consolidation is
under way. This implies that customers for consumer products are larger and fewer in number, which gives them
greater bargaining power. However, this situation also provides Husqvarna with an opportunity to generate higher
growth by displaying the Group’s products in a large number of retail outlets in a wider geographical market. Consolidation has involved a greater degree of dependence on
individual customers, which has resulted in higher levels of
trade receivables and credit risks.
Professional products are sold mainly through local servicing dealers or directly to end-users, which means that
these customers purchase smaller volumes and are not individually significant for the Group. Husqvarna’s strategy
involves increasing the number of dealers who sell Husqvarnabranded products, on the basis of a more active approach.
Unit costs for sales to servicing dealers are higher than for
e.g. retail chains but the level of risk related to receivables
and credit is lower.
weather conditions. However, handheld products such as
chainsaws and clearing saws, for which the Group also manufactures engines, feature a greater proportion of com
ponents that are produced in-house.
Approximately 22% of the Group’s total costs consist of
fixed costs. The largest single cost refers to purchases of
materials and components. In light of the seasonal variations in
the Group’s operations, the number of temporary employees
increases during the peak production season.
35
on product innovation and utilization of the Group’s strong
brands, which reduces risks related to price competition.
Seasonal variations and dependence on weather conditions can lead to short-term changes in demand and price
competition, as supply may be greater or less than demand.
If supply is greater than demand, competition may lead to
lower prices. In order to minimize the risk of over-production, Husqvarna has established a flexible production structure with relatively low fixed costs, which can be adjusted at
short notice to meet actual demand.
Acquisitions
Husqvarna has made several acquisitions in the past few
years. Although the Group has historically shown an ability
to successfully integrate acquisitions, such integration
always involves risks. Sales may be adversely affected, the
costs of integration may be higher than anticipated, and synergy effects may be lower than expected.
36
Financial risks
Husqvarna’s financial risks are managed on the basis of the
Group’s financial and credit policies, which are annually
updated and authorized by the Board of Directors. Management of such risks is based largely on the use of financial
instruments and is mainly centralized in Group Treasury,
which operates in accordance with specified risk mandates
and limits. For more information on risk management, risk
exposure and accounting principles, see Notes 1 and 2.
Currency exposure
The goal of Husqvarna’s currency management is to minim
ize the short-term adverse effects of exchange-rate fluctuations on the Group’s earnings and financial position. As
Husqvarna sells its products in approximately 100 countries,
the Group is exposed to currency fluctuations. These affect
the Group’s earnings in terms of translation of income statements in foreign subsidiaries, i.e. translation exposure, as
well as the sale of products on the export market, i.e. transaction exposure.
Translation exposure is related primarily to earnings in
USD, EUR, CAD, RUB and GBP. In addition, changes in
exchange rates can affect the prices of materials purchased
in foreign currencies. The Group’s globally widespread production and sales enable exchange-rate effects to be offset
to some extent.
Changes in exchange rates also affect Group equity. The
difference between the assets and liabilities of foreign subsidiaries in foreign currencies is affected by these changes,
which generate translation differences that impact equity. At
year-end 2008, most foreign net assets were in USD and EUR.
For more information on risks related to currency exposure,
see Note 2.
Hedging of exchange rates
Husqvarna uses currency derivatives to hedge estimated
transaction exposure on a horizon of 0–12 months. Normally,
75–100% of the invoiced and estimated currency flow for the
next 6 months is hedged, and 50–75% for the next 6–12
months. Neither currency exposure nor translation of financial statements in foreign subsidiaries is hedged. At yearend 2008 the market value of the Group’s hedges referring
to transaction exposure amounted to SEK –35m.
In accordance with the Group’s financial policy, certain foreign net assets are hedged through loans in the respective
country’s currency, as well as through currency derivatives.
Currency gains and losses on net assets and hedges are
booked directly under equity. Income and costs related to
hedging are reported under net financial items. Income for
hedging of foreign net assets in 2008 amounted to SEK 21m.
Interest-rate risks
At year-end 2008, the average interest rate on external borrowings was 4.3% (5.2), and the average interest fixing period
was 5 months. On the basis of the volume of borrowings and
the fixed-interest period at year-end, a change of one percentage point in the interest rate would affect Group income
in the amount of –/+ SEK 80m. For more information on
interest-rate risks, see Note 2.
Financing risks
Financing risks refer to possible delays or increased costs
related to financing of Husqvarna’s capital requirements and
refinancing of outstanding loans.
Financing risks can be reduced by maintaining an evenly
distributed maturity profile for loans and by ensuring that
short-term borrowings do not exceed current liquidity. The
Group’s financial policy stipulates that net debt should be
long-term, without reference to seasonal variations. The
Group’s goal is for the average maturity period of long-term
loans to be not less than two years and to show an evenly
distributed maturity profile. Loans with maturity periods of
less than 12 months are normally maximized to SEK 3,000m.
Evaluation of financial risks involves adjustment of the
maturity profile for available but unutilized credit facilities.
Translation exposure and exchange rates
Net sales, SEKm
2008
USD
EUR
CAD
GBP
YEN
11,423
8,386
1,488
1,268
842
Average exchange rate, SEK
Year-end exchange rate, SEK
2008
2007
2008
2007
6.59
9.67
6.21
12.11
0.06
6.74
9.25
6.30
13.48
0.06
7.70
10.94
6.25
11.20
0.09
6.43
9.45
6.57
12.86
0.06
Pension commitments
At year-end 2008, Husqvarna’s commitment for pensions
and other remuneration following terminated employment
amounted to SEK 2,855m. The Group manages pension
funds amounting to SEK 1,383m. At year-end 2008, 41% of
these funds were placed in shares, 53% in bonds and 6% in
liquid assets or other investments.
Annual changes in the value of assets and liabilities
depend primarily on trends for share prices and interest
rates. Pension commitments are affected e.g. by changes in
assumptions regarding average life expectancy and expected
salary increases. The income statement for 2008 includes
costs for pensions and remuneration as referred to above,
amounting to SEK 210m. During 2008, SEK 88m was paid
into the Group’s pension funds.
In the interest of effective control and cost-efficient management of the Group’s pension commitments, management is centralized in Group Treasury and is conducted in
Raw material spending
SEKm
Steel
Plastics
Aluminium
Other raw materials
Total
Changes in legislation
Husqvarna products are subject to national and international
regulations regarding environmental impact and other issues
arising from use of the products as well as recycling of them,
such as exhaust emissions, noise and safety. Husqvarna’s
products have improved steadily in this respect. The Group
is the market leader in terms of e.g. development of 2-stroke
engines, and is estimated to have sufficient resources for
product development to comply with stricter criteria in the
future. The criteria which will be introduced over the next
few years are currently known, and as long as they are not
subject to drastic changes it is estimated that they can be
met by the Group’s existing products, as well as those currently under development.
Product liability
In many countries, legislation may require Husqvarna to
recall products in certain, specific circumstances. New and
stricter regulations in this respect may be introduced in the
future.
Husqvarna is also exposed to product liability in the
event that products are claimed to have caused damage to
persons or property. Husqvarna is insured against such
claims, partly through insurance in own captive subsidiaries,
and partly through external insurers. However, there is no
guarantee that such insurance cover is valid or sufficient in a
specific case, or that claims regarding product liability may
not have a clearly adverse effect on the Group’s earnings
and financial position.
The Group’s Product Safety Committee includes representatives from operational units, as well as Group Staff
Legal Affairs, including Risk Management. The tasks of the
Committee include ensuring that product safety is integrated into the design, production and distribution of all
Group products.
Cost structure
2008
2,082
924
735
351
4,092
Cost of goods sold:
Components
Raw materials
Factory OH, R&D, tools
Direct wages
Other
Gross margin
Selling expense
Adminstrative expense
Other
Operating margin
2008
% of sales
SEKm
43.9
12.7
9.6
4.0
0.8
29.0
17.0
4.6
0.1
7.3
14,210
4,092
3,109
1,280
274
9,377
5,496
1,474
46
2,361
Credit risks
The Group’s credit risks are managed on the basis of standardized credit ratings, active monitoring of credits, and
routines for follow-up of trade receivable. The need for
reserves for uncertain trade receivables is monitored con
tinuously. Major credits are approved annually by the Board
of Directors.
To some extent, the Group utilizes credit insurances to
reduce credit risk in a minor share of trade receivables in
Europe. The Group’s financial assets are used primarily for
repayment of loans. Liquid funds are placed in highly liquid
interest-bearing instruments issued by institutions with a
credit rating of at least A-, according to Standard & Poor’s or
similar agencies. For more information on credit risks, see
Note 2.
accordance with the pension policy adopted by the Board of
Directors. For more information on pension, see Note 19.
37
In addition, seasonal variations in cash flow comprise an
important component for evaluation of financial risks. Future
seasonal variations are therefore continuously taken into
account in liquidity planning. The average maturity period
for Husqvarna’s loans was 3.4 years (3.5) at year-end 2008.
For more information on financing risks, see Note 2.
FI N A N C I A L S TAT EM EN T S
Group income statement
SEKm
Note
2008
2007
Net sales
Cost of goods sold
Gross operating income
3, 4
32,342
–22,965
9,377
33,284
–23,509
9,775
–5,496
–1,474
4
–48
–2
2,361
–4,927
–1,303
21
–5
3
3,564
38
Selling expenses
Administrative expenses
Other operating income
Other operating expenses
Shares of income in associated companies
Operating income
5
6
Financial income
Financial expenses
Financial items, net
8
8
122
–716
–594
1,767
44
–719
–675
2,889
Taxes
9
–479
1,288
–853
2,036
1,278
10
1,288
2,029
7
2,036
3.34
3.34
5.29
5.29
383.0
383.2
384.6
384.6
Income for the period attributable to:
Equity holders of the Parent Company
Minority interest in income for the period
Earnings per share
Before dilution, SEK
After dilution, SEK
Average number of shares
Before dilution, million
After dilution, million
17
Assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in associates
Deferred tax assets
Financial assets
Total non-current assets
Current assets
Inventories
Trade receivables
Derivatives
Tax receivables
Other current assets
Cash and cash equivalents
Total current assets
Total assets
Pledged assets
Equity and liabilities
Equity attributable to equity holders in the Parent Company
Share capital
Other reserves
Retained earnings
31 Dec
2008
31 Dec
2007
7, 11
10
10
26
9
12
5,035
6,788
4,789
7
928
187
17,734
4,312
5,461
4,031
12
898
207
14,921
13
2
2
8,556
4,184
907
577
551
1,828
16,603
34,337
7,758
3,912
90
256
650
1,216
13,882
28,803
15
49
44
17
16
770
1,062
6,940
8,772
43
8,815
770
9
6,570
7,349
40
7,389
2
9
19
20
10,694
1,829
1,170
686
14,379
2,911
1,666
1,059
570
6,206
21
2
2
20
3,280
367
1,474
3,159
2,434
429
11,143
34,337
2,731
342
1,520
10,130
277
208
15,208
28,803
22
24
20
Note
14
2
Minority interest
Total equity
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Provisions for pensions and other post-employment benefits
Other provisions
Total non-current liabilities
Current liabilities
Trade payables
Tax liabilities
Other liabilities
Short-term borrowings
Derivatives
Other provisions
Total current liabilities
Total equity and liabilities
Contingent liabilities
39
SEKm
Group balance sheet
Group cash flow statement
40
SEKm
Operations
Depreciation and amortization
Restructuring provision
Capital loss/Impairment
Change in accrued and prepaid interest
Taxes paid
Cash flow from operations, excluding change
in operating assets and liabilities
Change in operating assets and liabilities
Change in inventories
Change in trade receivables
Change in trade payables
Change in other operating assets/liabilities
Cash flow from operating assets and liabilities
Investments
Sale of fixed assets
Capital expenditure in property, plant and equipment
Capitalization of product development and software
Other
Total cash flow from operations and investments
Financing
Change in short-term investments
Change in short-term loans
Amortizations of long-term loans
New long-term loans
Dividend paid to shareholders
Repurchase of shares
Dividend paid to minority holders
Cash flow from financing
Total cash flow
Cash and cash equivalents at beginning of year
Exchange rate differences referring to
cash and cash equivalents
Cash and cash equivalents at year-end
Note
23
11
10
2008
2007
1,767
1,163
264
40
12
–543
2,889
1,081
0
0
29
–767
2,703
3,232
260
196
114
–129
441
3,144
–1,468
992
–15
–85
–576
2,656
–845
30
–909
–254
2
–1,976
–8,876
0
–698
–159
44
–9,689
1,168
–7,033
0
–7,608
—
7,783
–862
–48
–11
–746
0
10,157
–4,546
2,778
–667
–166
0
7,556
422
1,216
523
698
190
1,828
–5
1,216
Group Statement of shareholders’ equity
Opening balance 1 Jan 2007
Available for sale instruments
Gain/loss taken to equity
Cash flow hedges
Transferred to income statement
Exchange differences on
translation of foreign operations
Translation differences
Equity hedge
Share-based payment
recognized directly in equity
Total recognized income
and expense for the period
Bonus issue
Dividend SEK 2.25 per share
Total transactions with equity holders
Acquisition of minority
Closing balance 31 Dec 2007
Transfer to income statement
Cash flow hedges
Transferred to income statement
Exchange differences on translation of
foreign operations
Equity hedge
Share-based payment
recognized directly in equity
Total recognized income
and expense for the period
Dividend SEK 2.25 per share
Total transactions with equity holders
Dividend to minority holders
Closing balance 31 Dec 2008
Other
paid-in
capital
Other
reserves
Retained
earnings
Total
Minority
interest
Total
equity
593
0
114
5,545
6,252
12
6,264
–3
–3
–3
–47
–3
–47
–3
–47
–3
0
–52
6
0
–52
6
0
–52
6
0
0
–105
6
2,029
–99
2,029
0
7
–99
2,036
0
177
0
–105
0
0
1,930
0
–166
–667
–833
7
177
2,035
–177
–166
–667
–1,010
770
0
9
6,570
7,349
1,937
0
–166
–667
–833
21
7,389
0
21
40
3
3
3
–31
47
–31
47
–31
47
1,497
–463
2
1,497
–463
2
0
1,501
–463
2
4
0
0
1,053
2
1,278
1,055
1,278
4
10
1,059
1,288
0
0
1,053
0
0
2,333
–48
–862
–910
14
0
1,280
–48
–862
–910
770
0
1,062
6,940
8,772
2,347
–48
–862
–910
–11
8,815
0
–11
43
41
SEKm
Share
capital
Attributable to equity holders of the company
Parent Company
42
The operations of the Parent Company Husqvarna AB
(Corporate Identity Number 556000-5331) include the development, manufacture, marketing and sales of motor-driven
products for forestry and garden care as well as the functions of the Group’s head office including Finance, Legal,
Human Resources and Communications. Net sales for the
Parent Company in 2008 amounted to SEK 10,011m (10,156),
of which SEK 7,569m (7,750) related to sales to Group com
panies and SEK 2,442m (2,406) to external customers.
Income after financial items in 2008 amounted to SEK 6,312m
(2,208). The improvement refers mainly to capital gains
related to changes in the Group structure. After appropriations of SEK 61m (–302) and taxes of SEK –290m (–358), net
income for the year was SEK 6,083 m (1,548). Investments in
tangible and intangible fixed assets during the year were
SEK 596m (230). Short-term investments at the end of the year
amounted to SEK 0m (199) and cash and bank balances
amounted to SEK 682m (158).
Unrestricted equity in the Parent Company at year-end
amounted to SEK 12,042m (7,738).
Group contributions in 2008 amounted to SEK –1,174m
(–356) and are reported in non-restricted reserves.
For information on employees, salaries and remuner
ation, see Note 19.
For information on shareholdings and participations, see
Note 26.
Parent Company Income statement
SEKm
Net sales
Cost of goods sold
Selling expenses
Administrative expenses
Other operating income
Other operating expenses
Operating income
Note
3
5
6
2008
2007
10,011
–7,281
2,730
10,156
–7,389
2,767
–861
–336
5,025
–19
6,539
–902
–376
0
–2
1,487
Financial income
Financial expenses
8
8
1,283
–1,510
6,312
1,448
–727
2,208
Appropriations
Income before taxes
18
61
6,373
–302
1,906
Taxes
9
–290
6,083
–358
1,548
Assets
Non-current assets
Intangible assets
Tangible assets
Financial assets
Total non-current assets
Current assets
Inventories
31 Dec
2008
31 Dec
2007
10
11
12
591
502
29,731
30,824
223
524
4,308
5,055
13
1,299
1,326
2,392
347
86
173
948
83
27
4,056
20,931
365
32
1
131
88
30
21,578
0
682
6,037
36,861
199
158
23,261
28,316
15
—
—
17
770
18
4
770
18
4
–88
6,047
6,083
12,834
–63
6,253
1,548
8,530
Note
Receivables
Receivables from Group companies
Trade receivables
Deferred tax assets
Tax-refund claim
Derivative instruments
Other receivables
Prepaid expenses and accrued income
Short-term investments
Total current assets
Total assets
Pledged assets
Equity
Restricted equity
Share capital
Statutory reserves
Revaluation reserve
Non-restricted equity:
Fair value reserve
Profit or loss brought forward
Total equity
Untaxed reserves
18
902
963
Provisions
Provisions for pensions and similar commitments
Other provisions
Total provisions
19
20
34
74
108
32
30
62
Liabilities to Group companies
4,665
3,971
Long-term loans
Short-term loans
Total interest-bearing liabilities
10,287
2,599
17,551
2,548
9,826
16,345
Current liabilities
Liabilities to Group companies
Trade payables
Tax liabilities
Other liabilities
Derivative instruments
Total current liabilities
Total equity and liabilities
21
1,810
532
0
378
2,746
5,466
36,861
1,100
547
65
411
293
2,416
28,316
22
160
71
43
SEKm
Parent Company Balance sheet
Parent Company Cash flow statement
SEKm
Operations
Depreciation according to plan charged against above
Adjustment for non-cash items
Capital gain/loss included in operating income
44
Taxes paid
Cash flow from operations, excluding change in operating assets and liabilities
Change in operating assets and liabilities
Change in inventories
Change in trade receivables
Change in inter-company claims
Change in other current assets
Change in current liabilities and provisions
2008
2007
6,312
245
–28
–5,003
1,526
2,208
241
–61
2
2,390
–254
1,272
–280
2,110
27
19
18,631
–809
2,451
21,591
–359
–52
–7,112
60
207
–5,146
–19,919
–137
–457
–20,513
1,078
–899
–143
–87
–1,129
–6,275
–7,226
7,739
199
–48
–862
–356
–554
9,771
–1,989
–199
–166
–667
–349
6,401
524
158
682
126
32
158
Investments
Change in shares and participations
Capital expenditure in property, plant and equipment
Intangible assets
Financing
Change in short-term loans
Change in long-term loans
Change in short-term investments
Group contribution paid
Cash flow from financing
Total cash flow
Cash and cash equivalents at beginning of year
Cash and cash equivalents at year-end
Opening balance, 1 Jan 2007
Transfer between non-restricted
and restricted equity
Bonus issue
Group contributions
Tax effect of Group contributions
Valuation of available for sale investments
Change in hedge reserve
Share-based payments
Closing balance, 31 Dec 2007
Group contributions
Tax effect of Group contributions
Valuation of available for sale investments
Change in hedge reserve
Share-based payments
Share capital
Fair value
reserve
Profit or loss
brought
forward
Total
593
21
1
7,516
8,131
–1
–177
–356
100
–667
–166
1
177
4
0
0
–356
100
–667
–166
–3
–61
4
1,548
7,801
1,548
8,530
–1,174
329
–862
–48
–1,174
329
–862
–48
3
–28
1
6,083
12,834
–3
–61
770
22
–63
3
–28
770
22
–88
1
6,083
12,130
45
SEKm
Restricted
reserves
Parent Company Change in equity
N OT E S
DEFINITIONS
Capital indicators
Net assets – Total assets exclusive of liquid funds and interestbearing financial receivables less operating liabilities, noninterest-bearing provisions and deferred tax liabilities.
Operating working capital – Inventories and trade receivables
less trade payables.
Working capital – Current assets exclusive of liquid funds and
interest-bearing financial receivables less operating liabilities
and non-interest-bearing provisions.
Net debt – Total interest-bearing liabilities less liquid funds.
Liquid funds – Cash and cash equivalents, short term investments and fair value derivative assets.
46
Net debt/equity ratio – Net debt in relation to total adjusted
equity.
contents notes
Note
1 Accounting and valuation principles
47
2 Financial risk management and
financial instruments
54
3 Segment information
60
4 Net sales and operating income
62
5 Other operating income
62
6 Other operating expenses
62
7 Leasing
62
8 Financial income and expense
63
9 Taxes
63
10 Intangible assets
65
11 Property, plant and equipment
66
12 Financial assets
67
13 Inventories
67
14 Other current assets
68
15 A ssets pledged for liabilities to
credit institutions
68
16 Other reserves in equity
68
17 Share capital and number of shares
69
18 Untaxed reserves, Parent Company
69
19 Employees and employee benefits
69
20 Other provisions
76
Net sales growth – Net sales as a percentage of the preceding
period.
21 Other liabilities
76
22 Contingent liabilities
76
Gross margin – Gross operating income as a percentage of
net sales.
23 Business Combinations
77
24 Remuneration to the Board of Directors,
the President and other members of
Group Management
80
Equity/assets ratio – Equity as a percentage of total assets.
Capital employed – Total liabilities and equity less non-interestbearing debt including deferred tax liabilities.
Other key ratios
Earnings per share – Income for the period divided by the number of shares.
Operating margin – Operating income as a percentage of
net sales.
Return on equity – Income for the period as a percentage of
average equity.
Return on capital employed – Operating income plus financial
income as a percentage of average capital employed.
Operating cash flow – Total cash flow from operations and investments, excluding acquisitions and divestment of operations.
Capital expenditure – Property, plant and equipment and
c apitalization of product development and software.
EBITDA – Earnings before interests, taxes, depreciation
and amortization.
Value creation – Operating income less the weighted average
cost of capital (WACC) on average net assets: (Net sales – operating costs = operating income) – (WACC x average net assets).
Excluding acquisitions – Figures excluding acquisitions are
reported in order to make the current period comparable with
the corresponding period in the previous year. Adjustment is
made for acquisitions with annual sales of SEK 100m or more.
Interest coverage ratio – Income after financial items plus
financial costs divided with financial costs.
Some of the historical key figures for 2004–2006 are calculated pro forma
or based on combined financial statements. For more information, see the
Five-year review on page 86–87.
25 Fees to auditors
82
26 Shares and participations
83
N OT E S
Amounts in SEKm unless otherwise stated.
ACCOUNTING AND VALUATION PRINCIPLES
Principles applied for consolidation
Husqvarna applies the purchase method to account for
acquisitions of subsidiaries not under common control,
whereby the assets, liabilities and contingent liabilities in a
subsidiary on the date of acquisition are valued at fair value
to determine the acquisition value to the Group. If the cost
of the business combination exceeds the fair value of the
identifiable assets, liabilities and contingent liabilities, the
difference is recognized as goodwill. If the fair value of the
acquired net assets exceeds the cost of the business com
bination, Husqvarna reassesses the identification and meas
urement of the acquired assets. Any excess remaining after
that reassessment is recognized immediately in the income
statement. The consolidated income for the Group includes
the income statements for the Parent Company and its
directly and indirectly owned subsidiaries after:
• elimination of intra-group transactions and unrealized
intra-group profits in stock, and
• depreciation and amortization of acquired surplus values.
Definition of Group companies
The financial statements include Husqvarna AB and all companies in which the Parent Company has the power to govern the financial and operating policies, generally accom
panied by a shareholding of more than 50% of the voting
rights referring to all shares and participations.
The following applies to acquisitions of companies not
under common control and to divestments:
• Companies acquired are included in the consolidated
income statement as of the date on which Husqvarna gains
control.
• Companies divested are included in the consolidated
income statement up to and including the date on which
Husqvarna loses control.
No companies have been divested during the year.
Transactions with minority interests are treated as transactions with external parties to the Group. Disposals to
minority interests result in gains and losses recorded in the
income statement. Acquisitions from minority interests
result in goodwill, corresponding to the difference between
the consideration paid and the acquired portion of the carrying value of the net assets in the subsidiary.
At year-end 2008, the Group comprised 152 operating
units, and 118 companies.
Associated companies
Associates are companies over which Husqvarna has significant influence but not control, generally accompanied by a
shareholding of between 20% and 50% of the voting rights.
Investments in associated companies have been reported
according to the equity method. Husqvarna’s share of income
after tax in an associated company is reported in the income
statement. Husqvarna’s investments in associates are of
operational nature which is the reason the result is reported
as part of the operating income. Investments in an associated company are initially reported at cost, increased or
decreased to recognize Husqvarna’s share of the profit or
loss of that associated company after the date of acquisition.
When Husqvarna’s share of losses in an associate equals or
exceeds the value of its interest in that associate, Husqvarna
does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Gains
or losses on transactions with associated companies, if any,
have been recognized in relation to the Group’s participating interest in the associate.
Related party transactions
All transactions with related parties are carried out on an
arm’s length basis.
Foreign currency translations
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions.
The financial statements are presented in SEK, which is
the Parent Company’s functional currency and the presentation currency of the Husqvarna Group.
The balance sheets of foreign subsidiaries have been
translated into SEK at year-end rates. Income statements
have been translated at average rates for the year. On consolidation, exchange differences arising from the translation
of net investments in foreign operations, and of borrowings
and other currency instruments designated as hedges of
such investments, are taken to shareholders’ equity. When a
foreign operation is sold, exchange differences that were
recorded in equity are recognized in the income statement
as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing rate.
Segment reporting
Husqvarna’s primary segments (business areas) are based on
the different business models for end-customers, consumers
Basis of preparation
The consolidated financial statements of Husqvarna AB
(publ.) are prepared in accordance with the International
Financial Reporting Standards (IFRS) as adopted by the
European Union. As required by IAS 1, entities within
Husqvarna apply uniform IFRS rules as defined in the
Husqvarna Accounting Manual. The policies set out below
have been consistently applied to all years presented. Additional information is disclosed on the basis of the standard
RFR 1.1 of the Swedish Financial Reporting Board.
The Parent Company’s financial statements have been
prepared in accordance with the Swedish Annual Accounts
Act and the Swedish Financial Reporting Board’s standard
RFR 2.1.
47
NOTE 1
N OT E S
48
and professional users, which form the basis for identifying
the predominant source and nature of risks and the differing
rates of return facing the Group. The secondary segments
are based on Husqvarna’s sales per geographical market.
The segments are responsible for the operating result and
the net assets used in their operations, whereas net financial
income/expense and taxes as well as net debt and equity are
not reported per segment. The operating results and net
assets of the segments are consolidated using the same principles as for the total Group. The segments consist of separ
ate legal units as well as divisions in multi-segment legal units
where a certain amount of allocation of costs and net assets
is carried out. Operating costs not included in the segments
are shown under Husqvarna’s common costs, which mainly
include costs for Husqvarna’s corporate functions.
Transactions between segments are carried out on
strictly commercial terms, applying arm’s length principles.
ACCOUNT IN G AND VALUAT I ON PR INCIPLES
Revenue recognition
Sales are recorded net of VAT (Value-Added Tax), specific
sales taxes, returns and trade discounts. Revenues arise
almost exclusively from sales of finished products. Sales are
recognized when the significant risks and rewards associated
with ownership of the goods have been transferred to the
buyer and the Group retains neither a continuing right to
dispose of the goods, nor effective control of those goods
and when the amount of revenue can be measured reliably.
This means that sales are recorded when the goods have
been placed at the disposal of the customers in accordance
with agreed terms of delivery. Revenues from services are
recorded when the service, such as product repairs, has
been performed.
Interest income is recognized on a time-proportion basis
using the effective interest method. Dividend income is recognized when the right to receive payment is established.
Government grants
Government grants relate to financial grants from governments, public authorities and similar local, national, or international bodies. These are recognized when there is a reasonable assurance that Husqvarna will comply with the
conditions attaching to them and that the grants will be
received. Government grants relating to assets are included
in the balance sheet as deferred income and recognized as
income over the useful life of the assets. Government grants
relating to expenses are recognized in the income statement
as a deduction of such related expenses.
Borrowing costs
Borrowing costs are recognized as an expense in the period
in which they are incurred.
Taxes
Taxes include current and deferred taxes with application of
the liability method, meaning that deferred tax assets and
liabilities are accounted for on all differences between the
carrying amount of assets and liabilities in the balance sheet
and the tax base. Deferred taxes are calculated using enacted
or substantially enacted tax rates. Taxes incurred by Husqvarna
are affected by appropriations and other taxable (or taxrelated) transactions in the individual Group companies.
They are also affected by the utilization of tax losses carried
forward referring to previous years or to acquired com
panies. This applies to both Swedish and foreign Group
companies. Deferred tax assets on tax losses and temporary
differences are recognized to the extent it is probable that
they will be utilized in future periods. Deferred tax is not provided for on temporary differences arising on investments in
subsidiaries and associates where the timing of the reversal
of the temporary difference is controlled by the Group and it
is probable that the temporary difference will not be reversed
in the foreseeable future. Deferred tax assets and deferred
tax liabilities are shown net when they refer to the same taxation authority and when a company or a group of companies,
through tax consolidation schemes, etc., has a legally
enforceable right to set off tax assets against tax liabilities.
Monetary assets and liabilities in foreign currency
Monetary assets and liabilities denominated in foreign
currency are valued at year-end exchange rates and the
exchange-rate differences are included in the income statement, except when deferred in equity for the effective portion of qualifying net-investment hedges.
Intangible fixed assets
Goodwill
Goodwill is reported as an indefinite life intangible asset
with an unlimited useful life at cost less accumulated impairment losses.
The value of goodwill is continuously monitored, and is
tested annually for impairment or more regularly if there is an
indication that the asset might be impaired. Goodwill is allocated to the cash generating units that are expected to bene
fit from the business combination.
Trademarks
Trademarks are reported at cost after any accumulated
amortization and accumulated impairment. All trademarks
with limited useful lives are amortized on a straight-line basis
during the useful life, estimated at 10 years. The trademark
GARDENA is reported as an intangible asset with unlimited
useful life. No other trademarks are identified as having
unlimited useful lives.
Product development expenses
Husqvarna capitalizes certain development expenses for
new products provided that the level of certainty as to their
future economic benefits and useful lives is high. An intan
gible asset is only recognized to the degree that the product
is sellable on existing markets and that resources exist to
complete the development. Only expenditure, which is
directly attributable to the new product’s development, is
recognized. Capitalized development costs are amortized
N OT E S
Property, plant and equipment
Property, plant, and equipment are reported at historical
cost less accumulated depreciation, adjusted for any impairment charges. Historical cost includes expenditure that is
directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying amount only
when it is probable that future economic benefits associated
with the item will be captured by the Group and are of mater
ial value. All other repairs and maintenance costs are charged
to the income statement during the period in which they are
incurred. Land is not depreciated as it is considered to have
an unlimited useful life. Depreciation is based on the following estimated useful lives:
Buildings and land improvements 10–40 years
Plant and machinery 3–15 years
Other equipment 3–10 years
The Group assesses the estimated useful lives at each
balance sheet date as well as whether there is any indication
that any of the company’s fixed assets are impaired.
Impairment of long-lived assets
If there is an indication of impairment the Group estimates
the recoverable amount of the asset. The recoverable
amount is the higher of an asset’s fair value less cost to sell
and value in use. An impairment loss is recognized by the
amount by which the carrying amount of an asset exceeds its
recoverable amount. The discount rates used reflect the cost
of capital and other financial parameters in the country or
region in which the asset is in use. For the purposes of
assessing impairment, assets are grouped in cash-generating units, which are the smallest identifiable group of assets
generating cash inflows that are substantially independent
of the cash inflows from other assets or group of assets. The
Group’s cash generating units are Consumer North America,
Consumer Rest of the world – Dealers, Consumer Rest of the
world – Masstrade, Commercial Lawn and Garden, Forestry
and Construction.
Classification of financial assets
Husqvarna classifies its financial assets according to the following categories: financial assets at fair value through profit
or loss; loans and receivables; and available-for-sale financial
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held
for trading, and those designated at fair value through profit
or loss at inception. A financial asset is classified in this cat
egory if acquired principally for the purpose of selling the asset
in the short-term or if the asset is designated as belonging to
this category by management. Derivatives are categorized as
held for trading and presented under derivatives in the balance sheet, unless they are designated as hedges. Assets in
this category are classified as current assets if they are either
held for trading or are expected to be realized within 12
months of the balance sheet date.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in
an active market. They are included in current assets with
the exception of maturities greater than 12 months after the
balance sheet date. These are classified as non-current
assets. Loans and receivables are included in trade receivables in the balance sheet.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that
are either designated in this category or not classified in any
of the other categories. They are included in non-current assets
as financial assets unless management intends to dispose of
the investment within 12 months of the balance sheet date.
Recognition and measurement of financial assets
Regular purchases and sales of investments (financial assets)
are recognized on trade-date, the date on which the Group
commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all
financial assets not carried at fair value through profit or loss.
Investments are derecognized when the right to receive cash
flows from the investments have expired or have been transferred and when the Group has transferred substantially all
of the risks and rewards of ownership. Available-for-sale
financial assets and financial assets recognized at fair value
through profit or loss are subsequently carried at fair value.
Loans and receivables are carried at amortized cost using
the effective interest method less provision for impairment.
Realized and unrealized gains and losses arising from changes
in the fair value of the category “Financial assets at fair value
through profit or loss” are included in the income statement
in the period in which they arise and are reported as part of
the operating result. Unrealized gains and losses arising
from changes in the fair value of non-monetary securities
classified as available-for-sale are recognized in equity.
When securities classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments are
Other intangible assets include patents, licenses, computer
software, customer relations and other rights. These assets
are recognized at acquisition cost and are amortized on a
straight-line basis over their estimated useful lives. The estimated useful life recognized for computer software is 3 years.
Patents, mainly recognized in connection with acquisitions,
have an estimated useful life in the range of 10 to 13 years.
Husqvarna has recognized customer relations with an estimated useful life between 5–12 years.
assets. The classification depends on the purpose for which
the investment was acquired. Management determines the
classification of investments at initial recognition and reviews
this designation at each reporting date.
49
over their useful lives, ranging between 3 to 5 years. The
assets are tested for impairment annually or whenever there
is an indication that the intangible asset may be impaired.
N OT E S
50
included in the income statement as gains and losses from
investment securities and reported as operating income.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active,
the Group establishes fair value by utilizing different valuation
techniques. These include the use of recent arm’s length
transactions, reference to other instruments that are of substantially the same type and nature, discounted cash flow
analysis, and option-pricing models refined to reflect the
issuer’s specific circumstances.
At each balance sheet date the Group assesses whether
there is objective evidence that a financial asset or a group
of financial assets is impaired. If any such evidence exists for
available-for-sale financial assets, the cumulative loss is
removed from equity and recognized in the income statement. Impairment losses recognized in the income statement are not reversed through the income statement.
Trade receivables
Trade receivables are initially recognized at fair value and
subsequently measured at amortized cost using the effect
ive interest method, less provision for impairment. A provision for impairment of trade receivables is established when
there is objective evidence that Husqvarna will not be able
to collect all amounts due according to the original terms of
the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the
effective interest rate. The change in the amount of the provision is recognized in selling expense.
Leasing
A finance lease is a lease that transfers substantially all of the
risks and rewards associated with ownership of an asset.
Title may or may not be eventually transferred. Assets under
finance leases in which the Group is a lessee are recognized
in the balance sheet and the future leasing payments are
recognized as loan. Expenses for the period correspond to
the depreciation of the leased asset and interest cost of the
loan. Finance leases are capitalized at the inception of the
lease at the lower amount of either the fair value of the
leased property or the present value of the minimum lease
payments. The leased assets are depreciated over their estimated useful lives. If no reasonable certainty exists that the
lessee will obtain ownership by the end of the lease term,
the assets are fully depreciated over the shorter period of
either the lease term or the useful life of the assets.
Apart from finance leases all other leases are categorized
as operating leases. The payments made under operating
leases are recognized in the income statement on a straightline basis over the leasing period.
The Group rents certain production facilities, warehouses
and office premises as well as certain office equipment
under leasing agreements. Most leasing agreements in the
Group are operating leases.
Provisions
Provisions are recognized when the Group has a present
obligation as a result of a past event, it is probable that an
outflow of resources will be required to settle the obligation,
and a reliable estimate can be made of the amount of the
obligation. The amount recognized as a provision is the best
estimate of the expenditure required to settle the present
obligation at the balance sheet date. Where the effect of the
time value of money is material, the amount recognized is
the present value of the estimated expenditures.
Provisions for warranties are recognized at the date of
sale of the products covered by the warranty and are calculated on the basis of historical data for similar products.
Restructuring provisions are recognized when the Group
has adopted a detailed formal plan for the restructuring and
has either started the implementation of the plan or communicated its main features to those affected by the restructuring.
Inventories
Inventories and work in progress are valued at the lower
amount of cost and the net realizable value. Net realizable
value is defined as the estimated selling price in the ordinary
course of business less the estimated costs of completion
and the estimated costs necessary to execute the sale at
market value. The value of inventories is determined by using
the weighted average cost formula. Gains and losses previously deferred in equity on hedged forecast transactions are
also included in the initial measurement cost of the inventory.
Appropriate provisions have been made for obsolescence.
Cash and cash equivalents consist of cash on hand, bank
deposits and other short-term highly liquid investments with
maturities of three months or less.
Pensions and other post-employment benefits
Pensions and other post-employment benefit plans are classified as either defined contribution plans or defined benefit
plans.
Under a defined contribution plan, the Company pays
fixed contributions into a separate entity and will have no
legal obligation to pay further contributions if the fund does
not hold sufficient assets to pay all employee benefits. Contributions are expensed when they are due.
All other pensions and other post-employment benefit
plans are defined benefit plans. The Projected Unit Credit
Method is used to measure the present value of the obligations and costs. The calculations are made annually using
actuarial assumptions determined close to the balance sheet
date. Changes in the present value of obligations due to
revised actuarial assumptions and differences between the
expected and actual return on plan assets are treated as
actuarial gains or losses. Actuarial gains or losses are amort
ized over the employees’ expected average remaining working lifetime in accordance with the corridor approach.
N OT E S
Accounting of derivative financial instruments
and hedging activities
Derivatives are initially recognized at fair value on the date
on which the derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and if so,
the nature of the item being hedged. The Group designates
certain derivatives as either hedges of highly probable forecast transactions (cash-flow hedges), or hedges of net investments in foreign operations.
When hedges are entered into the Group documents at
the inception of the transaction, the relationship between
hedging instruments and hedged items, as well as the
Group’s risk-management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at the hedging inception and on
an ongoing basis, of whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes
in fair values or cash flows of hedged items.
Fair-value hedge
Changes in the fair value of derivatives that are designated
and which qualify as fair-value hedges are recorded as financial items in the income statement, along with any changes
in the fair value of the hedged asset or liability that are
attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item
for which the effective interest method is used, is amortized
to profit or loss over the period of maturity. Currently there
are no fair-value hedges in the Group.
Cash-flow hedge
The effective portion of change in the fair value of derivatives that are designated and qualify as cash-flow hedges
are recognized in equity. The gain or loss relating to the
ineffective portion is recognized immediately in the income
statement as financial items.
Amounts accumulated in equity are reversed and recognized in the income statement in the periods in which the
hedged item will affect profit or loss (for instance when the
Net investment hedge
Hedges of net investments in foreign operations are treated
similarly to cash-flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge
is recognized in equity; the gain or loss relating to the ineffective portion is recognized immediately in the income
statement as financial items.
Gains and losses accumulated in equity are included in
the income statement when the foreign operation is disposed of, or in the event of a partial disposal.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge
accounting. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are
recognized immediately in the income statement as financial
items.
Share-based compensation
IFRS 2 is applied for the share-based compensation programs granted in 2006, 2007 and 2008. The instruments
granted are shares and options. Husqvarna classifies its
share-based compensation programs as equity-settled programs, which means that the cost of the granted instruments’
fair value at grant date is recognized over the vesting period.
The fair value of the instruments is the market value at grant
date, adjusted for the discounted value of future dividends
which employees will not receive. At each balance sheet
date, the Group revises the estimates of the number of
instruments that are expected to vest. Husqvarna recognizes
the impact of the revision to original estimates, if any, in the
income statement, with a corresponding adjustment to equity.
In addition, the Group provides for employer contributions expected to be paid in connection with the sharebased compensation programs. The costs are charged to
the income statement over the vesting period. The provision
is periodically revalued on the basis of the fair value of the
instruments at each closing date.
Cash flow
The cash-flow statement has been prepared according to
the indirect method.
PARENT COMPANY ’ S ACCOUNT IN G AND
VALUAT I ON PR INCIPLES
The accounting principles described above are applied by
the Parent Company Husqvarna AB with only a few exceptions and additions. Husqvarna Group applies IAS 19
Employee Benefits while the Parent Company applies the
principles of FAR’s recommendation No 4 “Accounting of
Borrowings
Borrowings are initially recognized at fair value net of transaction costs incurred. After initial recognition, borrowings
are valued at amortized cost using the effective interest
method. Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the balance sheet date.
forecast sale which is hedged takes place). However, when
the forecast transaction that is hedged results in the recognition of a non-financial item (for example, inventory), the
gains and losses previously deferred in equity are transferred from equity and included in the initial measurement
of the cost of the asset or liability.
51
Net provisions for post-employment benefits in the balance sheet represent the present value of the Group’s obligations at year-end less the market value of plan assets,
unrecognized actuarial gains and losses and unrecognized
past-service costs.
N OT E S
52
pension liabilities and pension costs”. The differences are
described in Note 19 Employees and employee benefits.
In addition to the depreciation described above in Property, Plant and Equipment, the Parent Company reports
additional fiscal depreciation, permitted by Swedish tax law,
as appropriations in the income statement. In the balance
sheet, these are included in untaxed reserves.
Investments in associated companies are reported at historical cost.
Group contributions are reported in accordance with UFR
1 (Swedish Financial Reporting Board). Group contributions
paid or received to reduce the Group’s tax burden are
reported directly against retained earnings, after adjustment
for the current tax.
IFRS 2 (Amendment). “Share-based payment” effective
from 1 January 2009. The amended standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions
only. Other features of a share-based payment are not vesting conditions. These features would need to be included in
the grant date fair value for transactions with employees and
others providing similar services; they would not impact the
number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations whether by the
entity or by other parties, should receive the same accounting treatment. The Group will apply IFRS2 (Amendment)
from 1 January 2009. It is not expected to have a material
impact on the Group’s accounts.
NEW ACCOUNT IN G PR INCIPLES AS FROM 20 0 8
The IASB has issued interpretations and amendments to
standards applicable for Husqvarna as from 2008.
IAS 23, Borrowing costs (Revised). The main change from
the previous version is the removal of the option of immediately recognizing as an expense borrowing costs that relate
to assets that take a substantial period of time to prepare for
use or sale. As mentioned above, Husqvarna currently
expenses borrowing costs for such assets as they arise.
Husqvarna will therefore change accounting policy and cap
italize borrowing costs as part of the cost of such assets. The
standard is effective for financial years beginning on or after
1 January 2009.
IFRIC 11, “IFRS 2 – Group and treasury share transactions”,
provides guidance on whether share-based transactions
involving treasury shares or involving Group entities (for
example options over a parent’s share) should be accounted
for as equity-settled or cash-settled share-based payment
transactions in the stand-alone accounts of the parent and
Group companies. This interpretation does not have an
impact on the Group’s financial statements.
NEW ACCOUNT IN G PR INCIPLES FROM 20 0 9 AND
ONWARDS
The following standards, amendments and interpretations
have not yet come into effect. The Group has or is in the process of evaluating the complete effect of the implementation of these standards.
IAS 1 Presentation of Financial Statements (Revised). The
revised standard will prohibit the presentation of items of
income and expenses (that is, “non-owner changes in
equity”) in the statement of changes in equity, requiring
“non-owner changes in equity” to be presented separately
from owner changes in equity. All non-owner changes in
equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive
income) or two statements (the income statement and statement of comprehensive income). Husqvarna will apply IAS 1
(Revised) from 1 January 2009. Husqvarna has decided to
present the income statement and the statement of comprehensive income separately.
IFRS 8, Operating segments. The interpretation is effective
for financial years, beginning on or after 1 January 2009. The
standard addresses the division of the Company’s operations
into different segments. According to the standard, the Company is to base this division on its internal reporting structure
and is to determine the reportable segments on the basis of
this structure. Husqvarna has evaluated this standard and it
will have no impact on the Group’s reportable segments.
IFRIC 14, IAS 19: The Limit on a Defined Benefit Asset, Min
imum Funding Requirements and their interaction. IFRIC 14
addresses three issues: how entities should determine the
limit placed by IAS 19, Employee Benefits, on the amount of
a surplus in a pension plan they can recognize as an asset:
how a minimum funding requirement affects that limit; when
a minimum funding requirement creates an onerous obligation that should be recognized as a liability in addition to
that otherwise recognized under IAS 19.
IAS 27 (Revised). “Consolidated and separate financial
statements”, (effective from 1 July 2009). The revised stand
ard requires the effects of all transactions with noncontrolling interests to be recorded in equity if there is no change
in control and these transactions will no longer result in
goodwill or gains and losses. The standard also specifies the
accounting when control is lost. Any remaining interest in
the entity is re-measured to fair value and a gain or loss is
recognised in profit or loss. The Group will apply IAS 27
(Revised) prospectively to transactions with non-controlling
interests from 1 January 2010.
IFRS 3 (Revised). “Business combinations” (effective from 1
July 2009). The revised standard continues to apply the
acquisition method to business combinations, with some
significant changes. For example, all payments to purchase a
business are to be recorded at fair value at the acquisition
date, with contingent payments classified as debt subsequently re-measured through the income statement. There
is a choice on an acquisition-by-acquisition basis to measure
N OT E S
Asset impairment
All assets with long useful lives, including goodwill, are evalu
ated for impairment yearly or whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. An impaired asset is written down to
its recoverable amount on the basis of the best information
available. Different methods have been used for this evaluation, depending on the availability of information. When
available, market value has been used and impairment
charges have been recorded when this information has indicated that the carrying amount of an asset is not recoverable.
If market value has not been available fair value has been
estimated by using the discounted cash flow method based
on expected future results. Differences in the estimation of
expected future results and the discount rates used may
result in different asset valuations.
Deferred taxes
In the preparation of the financial statements, Husqvarna
estimates income tax for each of the taxing jurisdictions in
which Husqvarna operates as well as any deferred taxes
based on temporary differences. Deferred tax assets, which
primarily relate to tax loss carry-forwards and temporary differences, are recognized in those cases in which future taxable income is expected to allow for the recovery of those
tax assets. Changes in assumptions in the projection of
future taxable income as well as changes in tax rates, may
result in significant differences in the valuation of deferred
taxes. As of 31 December 2008, Husqvarna recognized a net
amount of SEK 901m as deferred tax liabilities. Tax loss
carry-forwards and other deductible temporary differences
of SEK 2,039m have not been included in computation of
deferred tax assets.
Trade receivables
Trade receivables are reported net of allowance for doubtful
receivables. The net value represents the amount expected
to be received. These expectations are based on circumstances known at balance sheet date. Despite the present
financial situation, Husqvarna has not seen any significant
increase in customer defaults. However, the Group’s credit
rating model shows somewhat lower credit rating of the
Groups’s customers. An increase in defaults or changes in
financial situation of a significant customer could lead to different valuations. The total provision for doubtful accounts
at year end was SEK 137m and the trade receivables, net of
provision amounted to SEK 4,184m.
The Group sponsors defined benefit pension plans for certain of its employees in certain countries. Pension calculations are based on assumptions concerning expected return
SI GNIFI CANT ACCOUNT IN G POL I CIES AND
UNCERTA INTY FACTORS IN EST IMATED VALUE
Use of estimates
Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities in order to
prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates.
The discussion and analysis of Husqvarna’s results of
operations and financial position are based on Husqvarna’s
financial statements, which have been prepared in accord
ance with International Financial Reporting Standards (IFRS),
as adopted by the European Union. The preparation of these
financial statements requires management to apply certain
accounting methods and policies that may be based on difficult, complex or subjective judgments. Management applies
estimates on the basis of experience and assumptions determined to be reasonable and realistic based on the related circumstances. The application of these estimates and assumptions affects the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at balance sheet date and also affects the reported amounts of net
sales and expenses during the reporting period. Actual
results may differ from these estimates under different
assumptions or conditions. Summarized below are those
accounting policies that require more subjective judgment
from management in making assumptions or estimates
regarding the effects of matters that are inherently uncertain.
Long-lived assets, excluding goodwill and other intan
gible assets with indefinite lives, are depreciated on a
straight-line basis over their estimated useful lives. Useful
lives for property, plant, and equipment are estimated
between 10–40 years for buildings, 3–15 years for plant and
machinery and technical installations and 3–10 years for
other equipment. The carrying amount for property plant,
and equipment within the Group amounted to SEK 5,035m.
The carrying amount for goodwill and other intangible
assets at year-end amounted to SEK 11,577m. Under the current business environment management do not believe that
any reasonable changes in the key assumptions on which the
cash-generating units recoverable amounts are based upon
would result in the carrying amounts exceeding the recoverable amounts. However a future market decline could pos
sibly lead to an impairment situation.
53
the non-controlling interest in the acquiree either at fair
value or at the non-controlling interest’s proportionate share
of the acquiree’s net assets. All acquisition-related costs
should be expensed. The Group will apply IFRS 3 (Revised)
prospectively to all business combinations from 1 January
2010.
N OT E S
54
on assets, discount rates, inflation, mortality, future salary
increases etc. Changes in assumptions directly affect the
service costs, interest costs and expected return on asset
components of the expense. Gains and losses arising when
actual returns on assets differ from expected returns, and
when actuarial liabilities are adjusted due to changes in
assumptions, are allocated over the expected average
remaining working life of the employees using the corridor
approach. The average expected return on assets used in
2008 was 6,3%, which is based on historical results. During
2008 the actual return on assets was SEK –103m. In 2009 this
will lead to an increase in the Group’s pension costs of
approximately SEK 11m. The average discount rate used to
estimate liabilities at the end of 2007 and the calculation of
expenses during 2008 was 5,1%. A decrease of 0,5% in this
rate would have increased the service cost component of the
expense by approximately SEK 7m.
Restructuring
During 2008 Husqvarna announced a restructuring program.
The total charge against operating income was SEK 316m of
which SEK 52m were paid in 2008. The charges are calculated on the basis of detailed plans for activities that are
aimed at reducing the Group’s fixed cost structure.
property damage, business interruption and product liability
claims. Claims reserves in the captives, mainly for product
liability claims, are calculated on the basis of a combination
of case reserves and reserves for claims incurred but not
reported. Actuarial calculations are undertaken to assess the
adequacy of the reserves based on historical loss development experience, benchmark reporting and payment patterns. These actuarial calculations are based on several
assumptions and changes in these assumptions may result in
significant differences in the valuation of the reserves.
The Group is involved in various disputes arising from time
to time in its ordinary course of business. Husqvarna estimates that none of the disputes in which Husqvarna is presently involved in or that have been settled recently have had,
or may have, a material effect on Husqvarna’s financial pos
ition or profitability. However the outcome of complicated
disputes is also difficult to foresee, and it cannot be ruled
out that the disadvantageous outcome of a dispute may
result in a significantly adverse impact on the Group’s results
of operations and financial position.
Claims reserves
Husqvarna maintains third-party insurance coverage and is
insured through wholly-owned insurance subsidiaries (captives) as regards a variety of exposures and risks, such as
NOTE 2
FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Financial instruments are defined in accordance with IAS 32,
• Financing risks in relation to the Group’s capital requirements.
Financial Instruments: Presentation and presented in accord
ance with IFRS 7 Financial Instruments: Disclosure. Additional
and complementary information disclosing the accounting and
valuation policies adopted is presented in the Note 1,
Accounting and valuation principles.
• Interest rate risks on liquid funds and borrowings.
Financial risk management
Financial risk management for Husqvarna entities has been
undertaken in accordance with the Group Financial Policy.
Described below are the principles of financial risk management applicable to Husqvarna.
Husqvarna is exposed to a number of risks relating to
financial instruments including, for example, liquid funds,
trade receivables, trade payables, borrowings, and derivative instruments. The primary risks associated with these
instruments are:
• Credit risks relating to financial and commercial activities.
• Foreign exchange risks on export and import flows plus
earnings and net investments in foreign subsidiaries.
• Commodity price risks affecting expenditure on raw ma
terials and components for goods produced.
The Board of Directors of Husqvarna has adopted a
Group financial policy, as well as a Group credit policy, to
regulate the management and control of these risks. These
risks are to be managed according to the limitations stated
in the Financial Policy. The Financial Policy also describes the
management of risks relating to pension fund assets. The
purpose of the policy is to have enough funding available to
minimize the Group’s cost of capital and to achieve an effect
ive management of the Group’s financial risks.
N OT E S
undertaken locally, mostly in countries in which there are
legal restrictions preventing financing through the Parent
Company. The bulk of the Group’s financing is currently conducted through bilateral loan agreements and through a
Swedish Medium Term Note program. In addition, the
Group has a SEK 8,000m guaranteed syndicated credit facility, of which SEK 1,500m was utilized as of December 31,
2008. The major part of this facility matures in 2013. Due to
the nature of its business, the Group has major seasonal variations in its funding needs. These variations have during
2008 been managed primarily by the use of the Group’s
commercial paper program and, to a smaller extent, by utilizing the revolving credit facility.
Capital structure
Husqvarna’s target is for the capital structure of Husqvarna
to correspond to a long-term creditworthiness at least
equivalent to BBB rating, according to the principles for
credit assessment of Standard & Poor’s or a similar agency’s.
Currently, this is interpreted to imply that seasonally
adjusted net debt, in proportion to the earnings before
interest, tax, depreciations and amortizations (EBITDA)
should not be higher than 2.5 in the long-term. This target
for financial indebtedness may be adjusted in the event of
changes to the macroeconomic situation, or allowed to deviate for a shorter period of time due to acquisitions.
Husqvarna defines its equity as the sum of share capital,
other reserves and retained profits less minority interests.
Adjusted financial debt, when assessing the capital structure, is defined as net debt adjusted for pension liabilities.
Given the seasonality of the business, this key ratio varies
substantially during the year. Husqvarna has not breached
any external capital requirements during the year.
Financing risk
Financing risk refers to the risk that the financing of the
Group’s capital requirements and the refinancing of existing
loans could become more difficult or more costly. This risk
can be decreased by ensuring that maturity dates are evenly
distributed over time, and that total short-term borrowings
do not exceed available liquidity. Disregarding seasonal variations, net debt shall be long-term, according to the Financial Policy. The Group’s goals for long-term borrowings
include an average time to maturity of at least two years, and
an even spread of maturities. A maximum of SEK 3,000m in
borrowings is normally allowed to mature in the next 12-month
period. When Husqvarna assesses its refinancing risk, the
maturity profile is adjusted for available unutilized committed credit facilities.
In addition, seasonality in the cash flows is an important
factor in the assessment of the financing risk. Consequently,
Husqvarna always takes into account the fact that financial
planning must include future seasonal fluctuations.
The average adjusted time to maturity for the Group’s
financing was 3.4 years (3.5) at the end of 2008, taking the
unutilized part of the committed credit facility into account.
Less: liquid funds
Net debt
Total equity excl. minorities
Total assets
Net pension liabilities
Adjusted financial debt*
EBITDA (12m)*
Adjusted financial
debt/EBITDA*
Adjusted equity/assets ratio
31 Dec 2008
31 Dec 2007
16,287
–2,735
13,552
8,772
34,337
13,318
–1,306
12,012
7,349
28,803
1,034
14,586
3,524
897
12,909
4,645
4.14
25.5%
2.78
25.5%
* Adjusted financial debt and EBITDA have in the table above not been
adjusted for acquisitions and extraordinary items.
Borrowings and financing risk
Borrowings
The debt financing of Husqvarna is managed centrally by
Group Treasury in order to ensure efficiency and risk control.
Debt is primarily raised at Parent Company level and transferred to subsidiaries as internal loans or capital injections.
In this process, various derivatives are used to convert the
funds to the required currency. Short-term financing is also
At year-end 2008, the Group’s total interest-bearing liabilities
amounted to SEK 16,287m (13,318), of which SEK 10,694m
(2,911) referred to long-term loans. The major portion of the
long-term borrowings pertains to bilateral loan agreements
and Medium Term Notes issued in the domestic market. The
short-term portion of previously long-term loans was
SEK 1,099m, which is lower than last year. During 2008, the
remaining portion, SEK 6,000m, of the original credit facility
of SEK 8,000m, raised in connection with the acquisition of
Gardena and Zenoah, has been fully amortized and replaced
by bilateral loan agreements.
Husqvarna has, as mentioned, substantial seasonal vari
ation in its borrowings. The seasonal peak of the indebtedness normally implies additional borrowings of SEK 4,000–
6,000m in excess of year-end borrowings, taking the yearly
dividend into account.
The table below sets out the amount of the Group’s borrowings, allocated by different funding sources.
55
The management of financial risks has largely been centralized to Husqvarna Group Treasury. The measurement and
control of financial risks within Group Treasury is performed
on a daily basis by a separate risk control function. Furthermore, the Husqvarna Group’s policies include guidelines for
managing operating risk relating to financial instruments, e.g.
through the clear assignment of responsibilities and the allocation of powers of attorney. Proprietary trading in currencies
and interest-bearing instruments is permitted with tight limits
set within the framework of the Financial Policy. The primary
aims of such trading are to maintain a flow of high quality
information and market knowledge, as well as to contribute
to the proactive management of the Group’s financial risks.
N OT E S
Maturity profile of loans and other financial instruments as of 31 December 20081)
2009
2010
2011
2012
2013
2014
Total
Financial leases
Bond loans
Utilized part of Committed revolving
70
1,220
62
511
55
64
53
566
53
52
273
1,331
566
3,744
credit facility
Bank and other loans
Derivative liabilities, balance sheet t2)
Total
1,511
552
2,434
5,787
5,038
2,150
1,000
573
5,157
2,769
1,105
1,604
1,511
8,740
2,434
16,995
Committed revolving credit facilities
covering short-term financing
Adjusted maturity profile
Liquid funds
Trade receivables
Trade payables
Net
–8,000
–2,213
–2,735
–4,184
3,280
–5,852
573
5,157
810
3,579
7,190
8,295
1,604
573
5,157
3,579
8,295
1,604
16,995
–2,735
–4,184
3,280
13,356
56
1) Please note that the table includes the forecast future nominal interest payment and, thus, does not correspond to the carrying amounts in the balance sheet.
2) For more detailed information on derivative contracts, see table under “Credit risk in financial activities” in Note 2 on page 59.
Market programs
Husqvarna has established a Medium Term Note program
(MTN), denominated in SEK, to issue long-term debt in the
capital markets. A number of transactions, with a total
aggregated nominal value of EUR 60m were executed during the year. The total amount of the program is SEK 5,000m.
In addition, Husqvarna has a Swedish Commercial Paper
program (CP). The total amount of the program is SEK
7,000m, which is an increase of SEK 2,000m compared with
last year. The table below shows outstanding amounts under
these two programs.
Borrowings
Total borrowings
2008
Facility amount
2008
Total borrowings
2007
Facility amount
2007
Medium Term Note Program
Other bond loans
Revolving credit facility
Long-term bank loans
Financial leases
Commercial papers
Other short-term loans
Fair value derivative liabilities
Total
3,205
63
1,500
8,184
386
0
515
2,434
16,287
5,000
2,548
64
0
0
315
3,757
6,357
277
13,318
5,000
Issued – Maturity
Program
Nominal
amount
Currency
Coupon
CP
MTN
MTN
MTN
MTN
MTN
MTN
MTN
MTN
0
550
550
100
350
250
250
500
60
SEK
SEK
SEK
SEK
SEK
SEK
SEK
SEK
EUR
STIBOR +0.25%
4.30%
STIBOR +0.28%
STIBOR +0.29%
STIBOR +0.39%
4.875%
STIBOR +0.46%
EURIBOR +0.82%
2007–2009
2007–2009
2007–2010
2007–2010
2007–2012
2007–2012
2007–2015
2008–2016
8,000
7,000
8,000
5,000
N OT E S
31 Dec 2008
SEK
EUR
USD
JPY
AUD
CAD
RUB
BRL
CHF
Other
Total
31 Dec 2007
Net debt
excl.
currency
swaps
Net debt
incl.
currency
swaps
Net debt
excl.
currency
swaps
Net debt
incl.
currency
swaps
7,670
6,080
–255
–89
–14
–25
–9
174
–7
27
13,552
–563
6,792
4,628
1,004
397
236
153
174
145
586
13,552
6,147
4,785
389
602
–25
–49
–29
38
–7
161
12,012
–264
6,017
4,307
643
311
272
38
183
18
487
12,012
Liquid funds
Liquid funds consist of cash and cash equivalent and other
short-term deposits including derivative assets at fair market
value. Husqvarna’s goal is for the level of liquid funds,
including unutilized committed credit facilities, to corres
pond to at least, 2.5% of rolling 12-month sales. At year-end,
this ratio was 28.6% (27.7%). In addition to this liquidity, the
Group shall have sufficient liquid resources to finance the
expected seasonal build-up in working capital during the
next 12 months. Investments in liquid funds are mainly made
in interest-bearing instruments with high liquidity and
involve issuers with a long-term rating of at least A–, as
defined by Standard & Poor’s or similar institutions. The
average time to maturity for the liquid funds was 29 days (17)
at the end of 2008.
Interest rate risks on liquid funds and borrowings
Interest rate risk refers to the adverse effects of changes in
market interest rates on the Group’s net income. The main
factor determining this risk is the interest-fixing period.
Interest rate risk in liquid funds
Group Treasury manages the interest rate risk of the investments in relation to a benchmark position defined as a oneday holding period. Any deviation from the benchmark is
limited by a risk mandate.
Derivative financial instruments, such as futures and forward rate agreements, are used to manage the interest rate
risk. The holding periods of investments are mainly shortterm. The majority of investments are undertaken with
maturities of between 0 and 3 months. The interest-fixing
period for these current investments was 7 days (13) at the
Interest-rate risk in borrowings
The Financial Policy states that the benchmark for the longterm loan portfolio is an average interest-fixing period of 6
months. Group Treasury can choose to deviate from this
benchmark on the basis of a risk mandate established by the
Board of Directors. However, the maximum average fixedrate period is 3 years. Derivatives, such as interest swap
agreements, are used to manage the interest rate risk by
changing the interest from fixed to floating or vice-versa.
The average interest fixing period for the non-seasonal debt
was 0.4 (0.3) years at the end of the year. On the basis of volumes and interest fixings at the end of 2008, a one-percentage point shift in interest rates would impact the Group’s
interest expenses by approximately SEK +/–80m (+/–106).
Husqvarna acknowledges that the interest rates on different
maturities and different currencies may not change uniformly. This calculation is based on a parallel shift of all yield
curves simultaneously by one percentage point. The Group
has seasonal debt for which the interest risk is not calculated
due to its short-term nature.
As per 31 December 2008, the average interest rate in
the total loan portfolio was 4.3% (5.2). At year-end, Husqvarna
did not have any outstanding interest rate derivatives
hedging the financial indebtedness.
Foreign exchange risk
Foreign exchange risk refers to the adverse effects of
changes in foreign exchange rates on Husqvarna’s income
and equity. In order to manage such effects, the Group
covers these risks within the framework of the Financial Policy.
The Group’s overall currency exposure is managed centrally.
The major currencies to which Husqvarna is exposed are
USD, EUR, CAD, RUB, GBP and SEK against a range of currencies.
Transaction exposure from commercial flows
The Financial Policy stipulates hedging of forecasted sales
and purchases in foreign currencies taken into consideration
the price fixing periods and the competitive environment.
Normally, 75–100% of the invoiced and forecast flows are
hedged up to 6 months, while forecast flows for 6–12 months
are hedged between 50% and 75%. Group subsidiaries primarily cover their risks in commercial currency flows through
Group Treasury. Group Treasury assumes the currency risks
and covers such risks externally by utilizing currency derivatives, for which hedge accounting is applied.
The table on page 58 shows the forecasted transaction
flows (imports and exports) for the 12-month period of 2009
and hedges at year-end 2008.
Net debt
end of 2008. A downward shift in the yield curve of one percentage point would reduce the Group’s interest income
by approximately SEK 18m (12) and the Group’s equity by
SEK 13m (8).
57
Currency composition
The currency composition of Husqvarna’s borrowings is
dependent upon the currency distribution of the Group’s
assets. Currency derivatives are used to obtain the preferred
currency distribution.
N OT E S
Commercial flows
Currency
EUR
CAD
RUB
PLN
GBP
Other
USD
SEK
31 Dec 2008
2009 Total hedge
Forecast
amount
flow SEKm
SEKm
2,597
1,043
542
459
410
1,652
–2,174
–4,529
–2,370
–771
–362
–345
–335
–628
1,802
3,009
2008
Forecast
flow SEKm
31 Dec 2007
Total hedge
amount
SEKm
2,460
1,064
307
476
546
1,193
–1,867
–4,178
–1,914
–677
–188
–332
–339
–622
1,358
2,715
58
The effect of hedging on operating income amounted to
SEK –89m (–152) during 2008. At year-end 2008, the unrealized exchange rate result on forward contracts amounted to
SEK –23m (–86), all of which will mature in 2009.
Translation exposure on consolidation
of entities outside Sweden
Changes in exchange rates also affect the Group’s income
on translation of income statements of foreign subsidiaries
into SEK. Husqvarna does not hedge such exposures. The
translation exposure arising from income statements of foreign subsidiaries is included in the sensitivity analysis below.
Foreign exchange sensitivity from transaction
and translation exposure
Husqvarna is particularly exposed to changes in the
exchange rates of SEK and EUR. Furthermore, the Group has
significant exposures to USD, CAD, GBP and a number of
other currencies. A 10% increase or decrease in the value of
USD, EUR and CAD against SEK, disregarding any effects
from hedges, would affect the Group’s income before financial items and tax by approximately SEK +/– 276m (287) for
one year, using a static calculation. This assumes the same
distribution of earnings and costs as in 2008 and does not
include any dynamic effects, such as changes in competitiveness or consumer behavior arising from such changes in
exchange rates. It is also worth noting that, due to the seasonality in Husqvarna’s sales, these flows and results are not
distributed evenly throughout the calendar year.
Exposure from net investments (balance sheet exposure)
The net assets and liabilities in foreign subsidiaries constitute a net investment in foreign currency, which generates a
translation difference in connection with consolidation. In
order to limit negative effects on Group equity resulting
from translation differences, hedging is conducted based on
borrowings and foreign exchange derivative contracts. This
means that the decline in value of a net investment, resulting
from a rise in the exchange rate of SEK, is offset by the
exchange gain on the Parent Company’s borrowings and foreign exchange derivative contracts, and vice versa. The
Financial Policy stipulates the extent to which the net investments can be hedged and also sets the benchmark for risk
measurement. Group Treasury is allowed to deviate from the
benchmark under a given risk mandate. The effect of the
hedging is included in the analysis of the currency compos
ition of the Group’s net debt, as shown on page 57.
Hedge accounting of currency risk
Husqvarna applies hedge accounting for its commercial
flows and for the hedging of net investments in foreign currency. The total unrealized result for hedges of commercial
flows amounted to SEK –35m as of December 31 2008, of
which SEK –42m is reported in the hedge reserve. Assuming
an unchanged exchange rate, the effects on profit and loss
for 2009 would be SEK 7m for Q1, SEK 11m for Q2 , SEK –49m
for Q3 and SEK –11m for Q4 2009. During the year, no ineffectiveness has occurred in relation to the hedging of commercial flows while a minor degree of ineffectiveness has
occurred in the hedging of net investments in foreign oper
ations. A total amount of SEK 0.9m (–0.3) has negatively
affected profit and loss. See Note 16 for the effect on equity
of hedge accounting.
Commodity price risks
Commodity price risk is the risk that the cost of direct and
indirect materials could increase as underlying commodity
prices rise on the global markets. Husqvarna is exposed to
fluctuations in commodity prices through agreements with
suppliers, whereby the price is linked to the raw material
price on the world market. This exposure can be divided into
direct commodity exposures, which refer to pure commodity
exposures, and indirect commodity exposures, which are
defined as exposures arising from only a portion of a component. Commodity price risk is managed through contracts
with the suppliers rather than through the use of derivatives.
A ten per cent rise or fall in the price of steel used in
Husqvarna’s products will affect the Group’s results before
financial items and tax by approximately –/+SEK 208m,
everything else being equal. The same effect on the price of
aluminum would impact the results by –/+SEK 74m and a
10% change in the price of plastics would give an effect on
results of SEK –/+92m.
Credit risk
Credit risk in trade receivables
Husqvarna sells to a substantial number of customers including large retailers, buying groups, independent stores and
professional users. Sales are made on the basis of normal
delivery and payment terms. Customer financing solutions
are also normally arranged by third parties. The Credit Policy
of the Group ensures that the management process for customer credits includes customer rating, credit limits, decision levels and management of bad debts. The Board of
Directors decides on customer credit limits exceeding
SEK 100m.
Husqvarna uses an internal classification of the credit
worthiness of its customers. The classification has different
levels, from Low Risk to High Risk. In the table below, trade
receivables have been divided into three different intervals.
N OT E S
2007
4,184
2,294
1,491
402
3,912
2,918
620
374
Due to the general economic climate, our credit rating
model shows a decrease in the credit rating of our customers in 2008.
As of 31 December 2008, net trade receivables, after provisions for doubtful accounts, amounted to SEK 4,184m
(3,912), which consequently equals the maximum exposure
to losses in trade receivables. Hence, the book value equals
the fair market value of the receivables. The size of the credit
portfolio is, however, directly dependent upon the seasonal
pattern of Husqvarna’s sales. This means that credit expos
ure is significantly higher during the first six to nine months
of each calendar year. Provisions for doubtful trade receivables at the end of the financial year amounted to SEK 137m
(112).
Overdue trade receivables
A provision for impairment of trade receivables is established when there is objective evidence that Husqvarna will
not be able to collect all amounts due according to the ori
ginal terms of the receivables. The amount of the provision is
the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at
the effective interest rate. Trade receivables that were due
but not yet written down amounted to SEK 782m (694) as of
31 December 2008.
Ageing analyses for overdue trade receivables
Due but not written down
Up to 1 month
1 to 3 months
>3 months
2008
2007
Due for
payment
311
271
200
782
Due for
payment
327
172
195
694
The situation regarding overdue receivables has not
changed significantly since previous year-end taking the
total volume of outstanding trade receivables into account.
The fair value of collateral held for trade receivables due for
payment was SEK 66m (225).
A plan for repayment is normally first designed for customers with overdue receivables at the same time as the
account is placed under special surveillance. At a later stage,
unpaid products may be repossessed or other security be
enforced.
Concentration of credit risk in trade receivables
As of 31 Dec 2008
Concentration
of credit risk
As of 31 Dec 2007
Number of
customers
Percent
of total
portfolio
Number of
customers
Percent
of total
portfolio
N/A
75%
N/A
73%
17
12%
16
13%
2
13%
3
14%
Exposure
<SEK 15m
Exposure
SEK 15–100m
Exposure
>SEK 100m
Husqvarna has substantial exposure towards a smaller number of large customers, primarily in the US. Through the
acquisition of Gardena in 2007, the concentration of credit
risk in Europe increased somewhat.
Credit risk in financial activities
Exposure to credit risk arises from the investment of liquid
funds and through counterparty risks related to derivatives. In
order to limit exposure to credit risk, a counterparty list has
been created specifying the maximum permissible exposure
for each counterparty. Normally, transactions are executed only
with counterparties having a long-term credit rating of at least
A–. A substantial part of the exposure arises from derivatives
transactions. The table below shows the gross volume of outstanding derivative transactions.
31 Dec 2008
Maturity
Amount sold
Amount purchased
Net settled
derivatives (NDF)
Net
31 Dec 2007
2009
2010–
2008
2009–
–43,062
41,511
—
—
–16,570
16,408
—
—
–18
–1,569
—
—
26
–136
—
—
Fair value of financial instruments
The carrying amount of interest-bearing assets and liabilities
in the balance sheet can deviate from the fair value, e.g. as a
result of changes in market interest rates. To determine the
fair value of financial assets and liabilities, market quotations
have been used for those assets and liabilities for which
there is an active market. When reliable market quotations
are not available, fair value has been determined by discounting future payment flows using current market interest
rates and currency rates for similar instruments. Changes in
credit spreads have been disregarded when determining fair
value of financial leases. For financial instruments such as
trade receivables, trade payables and other non-interest
bearing assets and liabilities, booked at accrued acquisition
value less any depreciation, the fair value is determined as
corresponding to the carrying amount.
Total
Low to Moderate Risk
Medium Risk to Elevated
High Risk
2008
59
Credit portfolio
N OT E S
2008
Financial assets
Financial assets held for trading valued at fair value
– of which currency derivatives where hedge accounting
is not applied
for cash flow hedges is applied
for net investment in foreign currency is applied
Financial assets available for sale
Equity instruments
60
Loan and trade receivables
Trade receivables
Other receivables
Cash and bank
Total financial assets
Financial liabilities
Financial liabilities that are held for trading at fair value
– of which derivatives where hedge
accounting is not applied
for cash flow hedges is applied
– of which currency derivatives related to net investments
in foreign currency where hedge accounting is applied
Other financial liabilities
Trade payables
Other liabilities
Financial leases
Loans
Total financial iabilities
Parent Company
As previously mentioned, Husqvarna Group Treasury performs practically all financial risk management within the Parent Company. The description of the financial risks and pos
NOTE 3
Carrying
amount
2007
Fair value
Carrying
amount
Fair value
376
376
67
67
260
260
22
22
271
271
1
1
0
0
12
12
4,184
364
1,828
7,283
4,184
364
1,828
7,283
3,912
406
1,216
5,636
3,912
406
1,216
5,636
1,736
1,736
90
90
302
302
123
123
396
396
64
64
3,280
200
386
13,467
19,767
3,280
200
483
13,052
19,449
2,731
211
315
12,726
16,260
2,731
211
385
12,735
16,339
itions is, consequently, also relevant for the Parent Company.
The main difference concerns all Group internal transactions
that are eliminated on the Group level.
SEGMENT INFORMATION
Segment reporting is classified into primary and secondary
segments, in which the business areas serve as primary segments and the geographical areas as secondary segments.
Financial information for the Parent Company is classified into
geographical segments as IAS 14 does not apply.
Primary reporting format – Business areas
The operations are classified in two segments: Consumer
Products and Professional Products. Consumer Products
comprises garden equipment and light-duty chainsaws. Professional Products comprises high performance chainsaws,
brush cutters and professional lawn and garden equipment,
as well as power cutters, diamond tools and related equip-
ment for cutting material such as concrete and stone.
Financial information related to the above segments is
reported below:
Net sales
2008
Operating income
2007
2008
2007
Consumer Products
Total
19,849 20,621
12,493 12,663
32,342 33,284
963
1,587
2,550
1,638
2,123
3,761
Group common costs
Total
32,342 33,284
–189
2,361
–197
3,564
N OT E S
Assets
Consumer Products
Total
Other2)
Liquid funds
Interest-bearing receivables
Total equity
Acquisitions
Financial items
Taxes paid
Total
Cash flow1)
Liabilities
2008
2007
2008
2007
2008
2007
19,895
10,648
30,543
1,059
31,602
2,735
—
—
—
—
—
—
34,337
17,027
9,346
26,373
1,124
27,497
1,306
—
—
—
—
—
—
28,803
4,117
2,773
6,890
2,345
9,235
—
—
16,287
8,815
—
—
—
34,337
3,388
2,556
5,944
2,152
8,096
—
—
13,318
7,389
—
—
—
28,803
1,520
1,536
3,056
82
3,138
—
—
—
—
–845
–582
–543
1,168
1,547
1,802
3,349
–93
3,256
—
—
—
—
–8,876
–646
–767
–7,033
1) Cash flow from operations and investments.
2) Includes deferred taxes and common Group services such as Holding, Treasury and Risk Management.
Capital expenditure
Intangible assets
Depreciation/
amortization
2008
2007
2008
2007
2008
2007
563
346
—
909
433
265
—
698
123
129
2
254
81
78
—
159
690
471
2
1,163
664
417
—
1,081
61
Management of the operational assets is carried out on a
segment basis and the performance of the respective segments is measured according to the same criteria, while the
financing of the operations is managed by Husqvarna Group
Treasury at Group or country level. Consequently, liquid
funds, interest-bearing receivables, interest-bearing liabil
ities and equity are not allocated to the business segments.
Secondary reporting format – Geographical areas
Husqvarna’s business segments operate in three geograph
ical areas; Europe, North America and the Rest of the World.
Sales by market are presented below and show Husqvarna’s
sales per geographical market, regardless of where the
goods were produced.
Parent company information
External sales, per geographical market
Europe
North America
Rest of the World
Total
2008
2007
16,114
13,079
3,149
32,342
15,456
15,106
2,722
33,284
Net sales
Europe
North America
Rest of the World
Total
2008
2007
8,274
814
923
10,011
8,232
1,049
875
10,156
Assets and capital expenditure, per geographical area
Capital expenditure
Tangible assets
Assets
Europe
North America
Rest of the World
Total
Consumer Products
Other
Total
Capital expenditure
Tangible assets
Capital expenditure
Intangible assets
2008
2007
2008
2007
2008
2007
20,802
10,035
3,500
34,337
17,356
9,075
2,372
28,803
422
365
122
909
362
290
46
698
191
35
28
254
119
40
—
159
N OT E S
NOTE 4
NET SALES AND
OPERATING INCOME
NOTE 7
NOTE 5
OTHER OPERATING INCOME
Group
Gain on sale of
Property, plant
and equipment
Operations
and shares
Other operating
income
Total
Parent Company
2008
2007
2008
2007
4
21
0
0
—
—
5,0221)
—
4
—
21
3
5,025
—
0
0
1) T he sale of the shares in Husqvarna Consumer Outdoor Products N.A.Inc.,
in connection to the restructuring of Husqvarna's US operations, generated
a surplus of SEK 4,975m. Furthermore, the liquidation of Husqvarna Holding
Norway AS generated a surplus of SEK 47m.
62
Net sales for the Group amounted to SEK 32,342m (33,284).
The Group’s reported net sales mainly refer to revenues from
sales of finished products. Net sales in Sweden amounted to
SEK 1,073m (1,167). Exports from Sweden during the year
amounted to SEK 9,310m (9,675), of which SEK 7,522m (7,907)
refers to entities within the Group. Operating income for the
Group amounted to SEK 2,361m (3,564). Operating income
includes net exchange-rate differences which amounted to
SEK –57m (84). Costs for research and development for the
Group amounted to SEK 332m (322) and are included in Cost
of goods sold. Depreciation and amortizations for the year
amounted to SEK 1,163m (1,081). Salaries, remuneration and
employer contributions amounted to SEK 4,949m (4,858) and
expenses for pensions and other post-employment benefits
amounted to SEK 210m (143).
NOTE 6
OTHER OPERATING EXPENSE
Group
Loss on sale of
Property, plant
and equipment
Impairment, shares
Total
Parent Company
2008
2007
–35
–13
–48
–5
—
–5
2008
–4
–151)
–19
2007
–2
—
–2
1) From write-down in Khimki A/O of SEK 2m and write-down in Firefly Energy
Inc of SEK 13m.
LEASING
Operating leases
There are no material contingent expenses or restrictions
among Husqvarna’s operating leases.
Expenses for rental payments (minimum leasing fees)
amounted to SEK 334m (280) in 2008.
The future amount of minimum payments for operating
leases are distributed in time as follows:
2009
2010–2013
2014–
Total
324
767
119
1,210
Financial leases
Within Husqvarna no financial non-cancellable contracts are
sub-contracted. Neither are there any contingent expenses
in the period’s results, nor any restrictions in the contracts
related to the leasing of facilities. The minimum lease fee
comprises a capital portion and an interest portion. The
interest portion is variable and follows the market interest
rates applicable in each country.
The present value of the future lease payments is SEK 386m.
At 31 December 2008, Husqvarna’s financial leases, recognized as non-current assets, consisted of:
2008
2007
Acquisition costs
Buildings
Machinery and other equipment
Closing balance, 31 Dec
436
83
519
370
11
381
Accumulated depreciation
Buildings
221
179
Machinery and other equipment
Closing balance, 31 Dec
48
269
4
183
Carrying amount, 31 Dec
250
198
Liabilities referring to financial leasing
– minimum lease fees
Within 1 year
After 1 year
Future financial costs for financial leasing
Present value of future minimum lease fees
Present value of financial leasing liabilities
Short-term liabilities
Long-term liabilities
69
496
565
–179
386
45
341
386
N OT E S
Group
Financial income
Interest income
from subsidiaries
from others
E xchange-rate
differences
whereof
on loans
on hedging of foreign
net investments
on cashflow hedges
on derivatives
held for trading
Dividends
from subsidiaries
from others
Other financial income
Total financial income
Parent Company
2008
2007
2008
2007
—
37
—
39
869
2
793
12
85
—
—
—
1,017
—
—
—
—
–3
—
—
—
—
—
—
–929
—
—
—
—
—
—
122
—
—
5
44
412
—
—
1,283
643
—
—
1,448
—
–693
—
–667
–211
–624
–51
–606
–628
–597
–769
–536
–114
–12
–114
–12
49
–58
48
–58
—
–27
–660
–51
—
–237
1,159
–237
—
—
—
–6
–687
–1
–72
–6
—
216
–1,131
264
–23
–25
–15
–19
–716
–719
–1,510
–727
–594
–675
–227
721
Financial expenses
Interest expense
to subsidiaries
to others
whereof
on loans
net investments
on derivatives
held for trading
Exchange-rate
differences
whereof
on loans
net investments
on cashflow hedges
on derivatives held
for trading
Other financial
expenses
Total financial
expenses
Financial income and
expenses, net
NOTE 9
TAXES
Group
Current taxes
Deferred taxes
Total
Parent Company
2008
2007
2008
2007
–276
–203
–479
–667
–186
–853
–336
46
–290
–365
7
–358
Calculated taxes on Group Contributions for 2008 are
included with SEK –329m (–100) in the Parent Company. The
deferred tax assets in the Parent Company totaled SEK 86m
(32) and refer mainly to recognized tax losses and external
hedges.
The Group accounts include deferred tax liabilities of
SEK –237m (–270) referring to untaxed reserves in the Parent
Company.
Theoretical and actual tax rates
Group
%
Theoretical tax rate
Losses for which deductions
have not been made
Non-taxable/non-deductible
income statement items, net
Changes in estimates relating to
deferred tax
Utilized tax loss carry-forwards
Effect of tax rate change
Withholding tax
Other
Actual tax rate
2008
2007
31.4
33.0
7.3
2.0
–8.6
–0.9
–1.7
–3.5
–0.3
1.3
1.2
27.1
–0.4
–0.5
–0.7
0.1
–3.1
29.5
The theoretical tax rate for the Group is calculated on the
basis of the weighted total Group’s net sales per country,
multiplied by the local statutory tax rates. The theoretical
tax rate was reduced in 2008 mainly due to reduction of the
statutory tax rates in Germany and the UK.
Tax loss carry-forwards
As of 31 December 2008, the Group reported tax loss carryforwards and other deductible temporary differences of
SEK 2,039m (1,324), which have not been included in computation of deferred tax assets. The tax loss carry-forwards will
expire as follows:
2009
2010
2011
2012
2013
Subsequent years
Without time limit
Total
2008
2007
—
—
—
—
92
347
1,600
2,039
—
—
—
63
—
74
1,184
1,324
The change from the previous year as regards deductible
temporary differences was SEK –161m (110), excluding
unused tax losses not recognized in the balance sheet.
As of 31 December 2008, the Group had deferred taxes
recognized in equity totalling SEK 170m (38). Deferred taxes
recognized in the income statement amounted to SEK –203m
(–186). Exchange-rate differences amounted to SEK –100m
(7). Acquired companies during 2008 have increased
deferred tax liabilities by SEK 0m.
FINANCIAL INCOME
AND EXPENSE
63
NOTE 8
N OT E S
64
Changes in deferred taxes
2008
2007
Net deferred taxes
and liabilities, 1 Jan
–768
61
Recognized in equity
Hedge accounting
Other
170
175
–5
38
43
–5
Recognized in the income statement
Non-current assets
Inventories
Current receivables
Provision for pensions and similar commitments
Other provisions
Financial and operating liabilities
Other items
Recognized unused tax losses
–203
115
–90
5
–186
–77
13
–9
Exchange-rate differences
Non-current assets
Inventories
Current receivables
Provision for pensions and
similar commitments
Other provisions
Other items
–100
–145
–11
3
7
16
3
1
17
9
22
5
–4
–2
–4
–3
Acquired companies
Non-current assets
Inventories
Current receivables
Provision for pensions and
similar commitments
Other provisions
Net deferred tax assets and
liabilities, 31 Dec
0
—
—
—
–688
–940
–6
25
—
—
—
—
44
10
72
107
–901
–768
–74
2
–66
–1381)
43
Deferred tax assets amounted to SEK 928m, whereof
SEK 119m will be utilized within 12 months. Deferred tax li
abilities amounted to SEK 1,829m, whereof SEK 0m will be
utilized within 12 months.
The above items mainly reflect the deferred tax effects of
excessive depreciation, intangible assets, tax allocation
reserve, fair value gains, provisions for pensions, provisions
for restructuring, obsolescence allowance and tax losses.
–20
13
–13
–931)
—
1) O ther items include tax allocation reserves of SEK –153m (–163m) referring to
the Parent Company and its subsidiaries in Sweden.
Deferred tax assets and liabilities
Group
Assets
Non-current assets
Inventories
Current receivables
Provisions for pensions and similar commitments
Other provisions
Other items
Deferred tax assets and liabilities
Set-off of tax
Net deferred tax assets and liabilities
Liabilities
2008
2007
451
98
56
82
76
96
35
167
1,061
–133
928
Net
2008
2007
2008
2007
501
119
70
138
77
140
24
107
1,176
1,565
180
7
44
11
2
1531)
—
1,962
1,585
100
29
42
23
2
1631)
—
1,944
–1,114
–82
49
38
65
94
–118
167
–901
–1,084
19
41
96
54
138
–139
107
–768
–278
898
–133
1,829
–278
1,666
—
–901
—
–768
1) Other items include tax allocation reserves of SEK –153m ( –163m) referring to the Parent Company and its subsidiaries in Sweden.
N OT E S
NOTE 10 INTANGIBLE ASSETS
Group
Parent
Company
Other
Total
Product
development
and other
Goodwill
Trademark
Product
development
Acquired during the year
1,780
—
213
—
522
—
116
26
2,631
26
534
—
Product development
Acquired companies
Fully amortized
—
3,779
—
–98
5,461
—
3,050
—
37
3,300
159
195
–4
–13
859
—
488
–87
–8
535
159
7,512
–91
–82
10,155
87
—
—
—
621
Product development
Acquired companies
Fully amortized
—
—
346
—
981
6,788
—
—
64
—
516
3,880
—
242
—
–50
84
1,135
12
—
64
–31
107
687
12
242
475
–81
1,687
12,490
7
127
324
—
—
1,079
Accumulated amortization1)
Amortization for the year
Acquired companies
Fully amortized
Impairment
—
—
—
—
—
—
—
74
25
—
—
—
3
102
207
129
77
–4
4
–5
408
59
51
127
–87
—
3
153
340
205
204
–91
4
1
663
304
94
—
—
—
—
398
—
—
—
—
—
—
5,461
6,788
26
—
—
—
19
147
3,198
3,733
141
—
–50
—
41
540
451
595
70
—
–31
2
32
226
382
461
237
—
–81
2
92
913
9,492
11,577
90
—
—
—
—
488
223
591
1) In the income statement amortization is primarily accounted for within Cost of goods sold.
Intangible assets with indefinite useful lives
Goodwill as per 31 December 2008 amounts to SEK 6,788m,
whereof SEK 4,915m relates to Consumer Products and
SEK 1,873m to Professional Products. Husqvarna has
assigned the Gardena trademark indefinite life, with a total
carrying amount of SEK 3,523m. All intangible assets with
indefinite useful lives are tested for impairment at least once
a year and individual assets can be tested more regularly in
cases in which there are indications of impairment. The
recoverable amounts of the operations have been determined based on value in use calculations. Value in use is
estimated using the discounted cash-flow model on the stra-
tegic plans that are established for each cash-generating
unit covering the coming three years, i.e. 2009 to 2011. These
plans are used for the impairment tests made in the fall of
2008. The cash flow of the third year is normally used for the
fourth year and onwards with an estimated growth rate of
2% included. The pre-tax discount rate used in 2008 was
10%. Under the current business environment, management
do not believe that any reasonable changes in the key
assumptions on which the cash-generating unit's recoverable amounts are based upon would result in the carrying
amounts exceeding the recovorable amounts. However a
future market decline could possibly lead to an impairment
65
Amortization for the year
Acquired companies
Fully amortized
Impairment
Carrying amount, 31 Dec 2007
Acquisition costs
N OT E S
NOTE 11
PROPERTY, PLANT AND EQUIPMENT
Group
66
Acquisition costs
Acquired companies
Transfer of work in progress
and advances
Sales, scrap, etc.
Land and land
improvements
Buildings
Machinery
and technical
installations
Construction
Other
in progress
equipment and advances
153
53
3
1,810
674
33
6,603
1,850
386
315
507
90
283
16
186
9,164
3,100
698
38
–3
0
244
–12
–2
–33
2,470
184
–897
–253
7,873
23
–85
13
863
–233
0
–19
233
0
–987
–292
11,683
Group
Total
Acquired companies
and advances
Sales, scrap, etc.
35
1
75
44
56
341
9
89
0
434
175
909
0
–7
28
301
16
–76
334
2,863
357
–1,566
1,110
8,171
7
–25
125
1,068
–380
–4
104
387
0
–1,678
1,701
12,790
Accumulated depreciation1)
Acquired companies
Depreciation for the year
Sales, scrap, etc.
23
10
3
–1
2
37
762
307
97
–1
–21
1,144
4,572
1,378
705
–888
–187
5,580
232
374
71
–77
10
610
—
—
—
—
—
—
5,589
2,069
876
–967
–196
7,371
0
1
0
2
40
207
261
0
102
–40
157
1,363
1,326
1,500
0
721
–1,533
819
5,587
2,293
2,584
4
101
–44
94
765
253
303
—
—
—
—
—
233
387
4
925
–1,617
1,072
7,755
4,312
5,035
Acquired companies
Sales, scrap, etc.
1) In the income statement depreciation is primarily accounted for within Cost of goods sold.
The carrying amount for land is SEK 219m (170).
The tax assessment value of the Swedish Group com
panies was SEK 283m (271) for buildings, and SEK 53m (49)
for land. The corresponding carrying amounts for buildings
were SEK 137m (133), and SEK 14m (14) for land.
Accumulated impairments at year-end on buildings and
land were SEK 8m (8) and SEK 0m (0) on machinery and other
equipment.
N OT E S
Buildings
Machinery
and technical
installations
15
3
257
3
991
103
52
4
17
31
1,332
144
—
—
18
—
—
260
39
–85
1,048
—
–1
55
–39
—
9
0
–86
1,390
Acquisition costs
and advances
Sales, scrap, etc.
Construction
Other
in progress
equipment and advances
Total
and advances
Sales, scrap, etc.
1
5
107
3
22
138
—
—
19
—
—
265
22
–153
1,024
—
–4
54
–22
—
9
0
–157
1,371
Accumulated depreciation
Sales, scrap, etc.
5
—
—
5
139
6
—
145
626
136
–82
680
33
4
–1
36
—
—
—
—
803
146
–83
866
Sales, scrap, etc.
1
—
6
13
13
6
—
151
115
114
145
–149
676
368
348
3
–3
36
19
18
—
—
—
9
9
155
–152
869
524
502
67
The tax assessment value of the Parent Company was
SEK 238m (238) for buildings, and SEK 44m (44) for land.
The corresponding book values were SEK 114m (115) for
buildings, and SEK 7m (7) for land.
Parent Company
Land and land
improvements
NOTE 12
FINANCIAL ASSETS
NOTE 13
Group
Shares in subsidiaries1)
Long-term holdings
in securities2)
Receivables Group
Other long-term
receivables
Pension assets3)
Total
INVENTORIES
Group
Parent Company
2008
2007
2008
2007
—
—
29,219
4,290
2
—
12
—
1
495
12
0
49
136
187
33
162
207
—
16
29,731
—
6
4,308
1) T he change in value of the parent company's shares in subsidiaries is primarily explained by shareholder's contributions totalling SEK 19,837m to
three newly established finance entities in Belgium. Furthermore, the
restructuring of Husqvarna's US operations resulted in a value adjustment
of SEK 4,963m.
2) Available for sale financial assets are included in an amount of SEK 0m (12).
3) Pension assets refer to USA, Sweden and Switzerland. See Note 19.
A specification of shares and participations is provided in
Note 26.
Raw materials
Products in progress
Finished products
Advances to suppliers
Total
Parent Company
2008
2007
2008
2007
2,072
339
6,134
11
8,556
1,693
325
5,737
3
7,758
283
4
1,011
1
1,299
286
15
1,022
3
1,326
The cost of inventories recognized as expense and included
in cost of goods sold amounted to SEK 22,372m (23,072).
Provisions for obsolescence are included in the value of the
inventory.
Write-downs totaled SEK 91m (62) and previous writedowns have been reversed by a total of SEK 31m (27).
Inventories valued to net realizable value amounted to
SEK 234m (190).
N OT E S
NOTE 14
OTHER CURRENT ASSETS
NOTE 15
ASSETS PLEDGED FOR LIABILITIES TO
CREDIT INSTITUTIONS
Group
Value added tax
Miscellaneous short-term receivables
Provision for doubtful accounts
Prepaid rents and leases
Prepaid insurance premiums
Other prepaid expenses
Total
NOTE 16
2008
2007
182
169
–19
20
15
184
551
230
193
–17
17
21
206
650
Group
2007
2008
2007
39
10
49
34
10
44
—
—
—
—
—
—
Real-estate mortgages
Other
Total
The real estate mortgages refer to a bond issue financed by
the local US Industrial Development Authority.
OTHER RESERVES IN EQUITY
Opening balance 1 Jan 2007
68
Parent Company
2008
Gains/losses recognized in equity
Cash flow hedges
Tax on hedge
Transferred to profit and loss on sale
Exchange rate differences on translation of foreign operations
Translation difference
Equity hedges
Tax on hedges
Transactions recognized directly in equity
Closing Balance, 31 Dec 2007
Transferred to profit and loss
Cash flow hedges
Tax on hedge
Transferred to profit and loss on sale
Exchange rate differences on translation of foreign operations
Equity hedge
Tax on hedge
Transactions recognized directly in equity
Closing Balance, 31 Dec 2008
Available
for sale
instruments
Hedging
reserve
Currency
translation
reserve
Total
Other
reserves
0
3
111
114
–3
—
—
–3
—
—
—
–65
18
–3
—
—
—
–65
18
–3
—
—
—
–3
–3
—
—
—
–50
–47
0
–72
20
–52
59
0
–72
20
–105
9
3
—
—
3
—
—
—
–42
11
47
—
—
—
–42
11
47
—
—
—
3
0
—
—
—
16
–31
1,497
–627
164
1,034
1,093
1,497
–627
164
1,053
1,062
N OT E S
NOTE 17
SHARE CAPITAL AND
NUMBER OF SHARES
Share capital
SEKm
On 31 December 2008, the share capital comprised:
98,380,020 Class A-shares, par value SEK 2
286,756,875 Class B-shares, par value SEK 2
Total
196
574
770
Owned by other shareholders
Total
—
1, 969,000
98,380,020
284,787,875
98,380,020
286,756,875
—
950,000
—
–950,000
—
—
—
2 ,919,000
98,380,020
283,837,875
98,380,020
286,756,875
The share capital in Husqvarna AB consists of class A-shares
and class B-shares. A class A-share entitles the holder to one
vote and a class B-share to one-tenth of a vote. All shares
NOT 18
Untaxed reserves,
Parent Company
31 Dec
2008
Accumulated depreciation in excess of plan on
Brands etc
Machinery and
equipment
Buildings
Tax allocation reserve
Other financial reserves
Total
entitle the holder to the same proportion of assets and earnings, and carry equal rights in terms of dividends.
NOT 19
Appro
priations
31 Dec
2007
11
–23
34
246
26
582
37
902
–32
—
—
–6
–61
278
26
582
43
963
Other financial reserves include fiscally permissible appropriations referring to receivables in companies in politically
and economically unstable countries.
Employees and employee benefits
Number of
employees
Average number
of employees
Men
Women
2008
Parent Company
Group Companies
Total Group
1,780
13,940
15,720
1,376
8,623
9,999
404
5,317
5,721
2007
Parent Company
Group Companies
Total Group
1,879
14,214
16,093
1,465
8,728
10,193
414
5,486
5,900
A detailed specification of the average number of employees by country and gender has been submitted to the Swedish Companies Registration Office and is available on
request from Husqvarna AB, Investor Relations.
69
Owned by Husqvarna
Shares, 31 Dec 2007
Class A-shares
Class B-shares
Repurchased shares
Class A-shares
Class B-shares
Shares, 31 Dec 2008
Class A-shares
Class B-shares
Number of shares
N OT E S
Average number of employees by geographical area
Geographical area
Europe
North America
Rest of the World
Total Group
2008
2007
7,151
6,285
2,284
15,720
7,057
6,948
2,088
16,093
Of the Board members and other senior management in the
Group, 88 (86) were men and 13 (12) women, of whom 13 (13)
men and 5 (5) women were employed in the Parent Company.
Salaries, other remuneration and employer
contributions to Board, President and other
senior management
2008
70
Parent Company
Salaries and other remuneration
(of which variable salaries)
Pension costs
Group Companies
Salaries and other remuneration
(of which variable salaries)
Pension costs
2007
32
(0)
20
68
(12)
7
42
(17)
20
68
(13)
5
Salaries and other remuneration for the total Group
amounted to SEK 4,037m (3,973). This amount includes sal
aries and remuneration to the Board, the President, former
President and other senior management of 100m (110).
Employer contributions excluding pension costs for the
Group amounted to SEK 912m (886). The Group’s total pension costs according to IAS 19 amounted to 210m (143).
Salaries and other remuneration in the Parent Company
amounted to SEK 748m (782). This includes salaries and
remuneration to the Board, President, former President and
other senior management of 32m (42). Employer contributions excluding pension costs in the Parent Company
amounted to SEK 252m (255). Pension costs in the Parent
Company amounted, according to Swedish GAAP, to
SEK 58m (79).
For more information concerning fixed and variable sal
aries, remuneration and pension costs for Board of Directors,
President and other members of Group Management, see
Note 24. For a presentation and description of the compos
ition of the Board and members of Group Management, see
pages 100–103.
In accordance with the regulations in the Swedish Annual
Accounts Act absence due to illness for employees in the
Parent Company and its subsidiaries in Sweden is reported in
the table below. The Parent Company comprises the Group’s
head office as well as a number of units and plants, and
employs the majority of the Group’s personnel in Sweden.
Employee absence due to illness
2008
Total absence due to illness, as a percentage of total
normal working hours
Of which 60 days or more
Absence due to illness, by category1)
Women
Men
29 years or younger
30–49 years
50 years or older
2007
Employees
in the Parent
Company
All
employees
in Sweden
Employees
in the Parent
Company
All
employees
in Sweden
4.5
38.3
4.6
40.7
4.4
47.6
4.7
48.8
5.7
4.1
3.8
4.0
6.0
5.9
4.2
4.1
4.2
5.9
6.5
3.8
2.9
4.6
5.9
6.9
4.1
3.1
4.8
6.1
1) % of total normal working hours within each category, respectively.
Husqvarna provides pension plans in many of the countries
in which the Group has operations. The various pension
plans are classified as either defined contribution plans or
defined benefit plans.
The Group’s most comprehensive defined benefit pension plans are in the UK, Germany, Sweden, the US, Norway
and Japan. The pension plans in these countries are funded
except for the plans in Germany where the main plan is
unfunded. Funded plans imply that there are assets in legal
entities that exist solely to finance employee benefits.
In the UK the employees are covered by either a final salary plan, which has been closed since 2003 for new employees, or the career-average salary plan which applies for
employees hired after 2003.
The main pension plan for the Group’s employees in Germany, the Gardena Rente Plus plan, is an unfunded cash balance plan.
White collar employees in Sweden, born 1978 or earlier,
are covered by a final salary collectively bargained defined
benefit plan (ITP 2). The retirement provision of the defined
benefit plan is financed through a pension fund. In two sub-
N OT E S
Country
Present value
of defined
benefit obligation
Fair value
of plan assets
754
526
291
838
198
117
2,724
95%
587
328
188
45
93
79
1,320
95%
UK
Sweden
US
Germany
Japan
Norway
Total
Share of total
Set forth below are schedules showing the obligations of the
plans in Husqvarna, the assumptions used to determine
these obligations and the assets relating to the benefit
plans, as well as the amounts recognized in the income
statement and balance sheet. The schedules include reconciliations of the opening and closing balances of the present
value of the defined benefit obligation, as well as opening
and closing balances of the fair value of plan assets and of
the changes in net provisions during the year. Husqvarna’s
policy for recognizing actuarial gains and losses is to recognize in the income statement that portion of the cumulative
unrecognized gains or losses in each plan exceeding 10% of
the greater of the defined benefit obligation and the plan
assets. This portion of gains or losses in each plan is recognized over the expected average remaining working lifetime
of the employees participating in the plans.
In a few countries, Husqvarna provides mandatory lump
sum payments, in accordance with law or collective agreements, in conjunction with retirement. These obligations are
shown below as Other post-employment benefits.
Specification of net provisions for pensions and other post-employment benefits recognized in the balance sheet.
2008
Present value of obligations for
unfunded plans
Present value of obligations for
funded plans
Fair value of plan assets
Unrecognized actuarial gains/losses
Unrecognized past-service cost
Net provisions for pensions and
other post-employment benefits
Whereof reported as prepaid
pension cost
Provisions for pensions and other
post-employment benefits
2007
Pensions,
defined
benefit plans
Other postemployment
benefits
822
Total
Pensions
defined
benefit plans
benefits
Total
32
854
840
27
867
2,001
–1,383
–430
–3
—
—
–5
—
2,001
–1,383
–435
–3
1,723
–1,447
–239
–5
—
—
–2
—
1,723
–1,447
–241
–5
1,007
27
1,034
872
25
897
136
—
136
162
—
162
1,143
27
1,170
1,034
25
1,059
The table below shows the present value of obligations
as well as the fair market value of plan assets for the Group’s
most comprehensive defined benefit plans described above.
71
sidiaries, with small numbers of employees, the ITP plan is
completely insured with an insurance company. The insurance company does not separate the pension assets for
each member company, i.e. does not provide the information needed for the accounting of the plan as a defined
benefit plan and therefore this plan has been treated as a
defined contribution plan.
The Group’s defined benefit pension plan in the US has
been closed for employees hired after 2003. In 2007, pension
benefits were frozen for approximately 50 highly compensated employees. At the end of 2008 the remaining active
plan members’ pension benefits were frozen, i.e. they will
not accrue further pension benefits in the plan after 2008. As
from 2009 the plan members in the defined benefit plan are
covered by a new defined contribution plan.
There are four defined benefit plans within the Group in
Japan. The largest plan covering all full-time regular employees is a funded cash balance plan (CBP plan). The other plan
(RAP plan) covering all employees is unfunded and is based
on career-average salary or similar. There is also an early
retirement plan and a plan for directors, both unfunded. The
Group’s employees in Japan before the acquisition of
Zenoah in 2007, were covered by a defined benefit plan. This
plan ceased to exist in 2008, the obligation has been transferred to the Zenoah CBP plan and the plan members have
been transferred to the Zenoah CBP and RAP plans.
In Norway the employees are covered by a final salary
plan, which is insured with an insurance company. Husqvarna
also provides an early retirement plan, called the AFP-plan,
which is an unfunded plan.
N OT E S
Expenses for pensions and other post-employment
benefits recognized in the income statement.
Current service costs
Interest expenses
Expected return on plan assets
Amortization of actuarial losses / gains
Amortization of past service cost
Effect of any curtailments and settlements
Expenses for defined benefit plans and
other post-employment benefits
Expenses for defined contribution plans
Total expenses for pensions and other
post-employment benefits
2008
2007
69
131
–80
15
9
–15
74
108
–85
15
1
–38
129
75
81
68
210
143
For Husqvarna, total expenses for pensions and other postemployment benefits have been recognized as operating
expenses and have been classified as manufacturing, selling
or administrative expense depending on the function of the
employee in question.
Change in the present value of the defined benefit obligation
72
2008
Opening balance
Acquisitions
Current service cost
Interest expenses
Plan amendments
Curtailments
Settlements
Exchange rate differences on
foreign plans
Benefits paid
Employee contributions
Actuarial losses (gains)
Closing balance
2007
Pension
benefits
benefit
Total
2,563
—
69
129
7
–18
–5
27
—
—
2
—
—
—
123
–93
9
38
2,822
4
–3
—
3
33
Change in the fair value of plan assets
Opening balance
Acquisitions
Expected return
Employer contributions
Employee contributions
Exchange differences on
foreign plans
Benefits paid
Actuarial gains and (losses)
Closing balance
2008
Pension,
benefits
2007
Pension,
benefits
1,447
—
80
88
9
1,342
93
85
62
8
–14
–44
–183
1,383
–44
–78
–21
1,447
Pension,
benefit
benefits
Total
2,590
—
69
131
7
–18
–5
1,701
819
73
106
1
–17
—
45
—
1
2
5
–23
—
1,746
819
74
108
6
–40
—
127
–96
9
41
2,855
–47
–72
8
–9
2,563
1
–5
—
1
27
–46
–77
8
–8
2,590
The major categories of plan assets as a percentage of the
total fair value of plan assets are:
%
Defined benefit pension plans
Equity instruments
Debt instruments
Property
Other
40.9
52.6
1.2
5.3
Actual return on plan assets was SEK –103m (64).
Historical information
2008
2007
2006
2005
Present value of defined
benefit obligations
Funded status
2,855
1,383
1,472
2,590
1,447
1,143
1,746
1,342
404
1,864
1,296
568
32
35
–3
–8
–183
–21
–26
59
Experience adjustment
on plan liabilities
Experience adjustment
on plan assets
N OT E S
31 Dec 2007
Discount rate
Europe
North America
Rest of the World
5.1
6.1
1.4
5.2
5.9
1.6
Expected long-term return
on assets
Europe
North America
Rest of the World
5.7
6.0
2.5
6.5
6.3
3.8
Expected salary increases
Europe
North America
Rest of the World
3.1
4.0
3.5
3.3
4.0
3.5
In determining the discount rate, AA-rated corporate bonds
indexes matching the duration of the pension obligations
are applied. If no suitable corporate bonds are available
government bonds are used to determine the discount rate.
To determine the expected return, return on equity and
equity related instruments the historical risk premium for
equities and current bond yields are applied. The return on
fixed income and fixed income related investments is based
on current bond yields. The weighting of asset classes is
determined by using the respective scheme’s benchmark
asset allocation, which for all major schemes is set out in the
Group’s financial policy. The actual return on the Group's
pension assets has been significantly lower than expected.
This has increased actuarial losses with SEK 183m. An
increase or decrease of one percentage point in the
assumed medical cost trend rate would have no material
impact on the Group’s current service cost or post-employment benefit obligations.
The company expects to make contributions of approximately SEK 62m to the plans during 2009.
Reconciliation of changes in net provisions for pensions
and other post-employment benefits
Pensions,
defined
benefit
plans
Net provisions for pensions and other postemployment benefits,
31 Dec 2007
Acquisitions
Pension expenses
and benefits paid directly
by the Company
Exchange rate differences
Net provision for pensions and other postemployment benefits,
31 Dec 2008
Other
postemployment
benefits
• The discount rate used in the Swedish calculations is established by the Swedish Financial Supervisory Authority.
• Changes in the discount rate and other actuarial assumptions are recognized immediately in the income statement
and the balance sheet.
• Any deficit must be either immediately settled in cash or
recognized as a liability in the balance sheet.
• Any surplus cannot be recognized as an asset but may, in
some cases, be refunded to the company to offset pension
costs.
Specification of the net provision for pensions
recognized in the balance sheet
Present value of the funded
pension obligations
Surplus of the pension fund
Present value of unfunded pension
obligations
Surplus of the pension fund,
not recognized
Total amount of obligations
recognized in access of the
present value of the obligation
Net provision recognized in
the balance sheet
2008
2007
293
–311
–18
260
–293
–33
34
32
18
33
0
0
34
32
Specification of the change in the net provision for
pensions recognized in the balance sheet
Total
872
—
128
25
—
1
897
—
129
–142
149
–3
4
–145
153
1,007
27
1,034
Opening balance 1 Jan
Costs for pensions recognized in
the income statement
Benefits paid
Provision to pension fund
Payment to pension fund
Provision for settled pension
obligations
Reimbursement from pension fund
Other
Closing balance 31 Dec
2008
2007
32
34
5
–3
0
0
34
–2
–24
–10
—
—
—
34
—
—
—
32
Of total net provisions SEK 34m (32) is within the scope of
the Swedish Safe-guarding of Pension Commitments Act.
31 Dec 2008
%
Parent Company
According to Swedish accounting principles adopted by the
Parent Company, defined benefit liabilities are calculated on
the basis of officially provided assumptions, differing from
the assumptions used in the Group under IFRS. The pension
benefits are secured by insurance policies, contributions to a
separate fund or are recorded as a liability in the balance
sheet. The accounting principles used in the Parent Com
pany’s separate financial statements differ from the IAS/IFRS
principles, primarily as regards the following areas:
• The pension liability calculated according to the Swedish
accounting principles does not take into account future
salary increases.
73
Principal actuarial assumptions at the balance sheet
date (expressed as a weighted average)
N OT E S
Pension costs recognized in the Income statement
Own pensions
Current service costs
Interest expenses
Benefits paid
Pension costs
Insured pensions
Insurance premiums
Total net expenses for pensions
2008
2007
0
2
3
5
31
1
2
34
53
58
45
79
Of total net expenses of SEK 58m (79), SEK 2m (1) is recognized in the financial net and the remaining portion is rec
ognized in the operating results. The expected pension
payments for 2009 total SEK 9m.
Principal actuarial assumptions at balance sheet date
%
31 Dec 2008
31 Dec 2007
3.7
4.4
74
Discount rate
The major categories of plan assets as a percentage of
total plan assets and the return on these categories
%
Equity
Debt
Other
Total
31 Dec
2008
Return
31 Dec
2007
Return
35
64
1
100
–25
19
—
–1
46
52
2
100
5
0
—
3
Long-term incentive programs (LTI)
The purpose of the long-term incentive programs is to create possibilities to retain and recruit competent employees
to the Group, provide competitive remuneration and align
shareholder's and management's interests.
Long term incentive programs that entitle rights for the
employees to purchase shares are subject to approval by the
General Meeting of shareholders. At present there are three
programs in force – the Performance Share Program (PSP)
2006, LTI 2007 and LTI 2008. The PSP is a performance based
share program with a three-year performance period which
ended December 31, 2008. The other two programs, LTI
2007 and LTI 2008, are matching share awards and perform
ance stock option programs.
Long-term incentive program 2007 and
2008 (LTI 2007 and LTI 2008)
LTI 2007 and LTI 2008 were authorized by the Annual General Meeting 2007 and 2008 respectively. Each program
includes approximately 40 senior managers.
In order to participate in the programs, the employees
were required to purchase Husqvarna Class B-shares corres
ponding to a value of a minimum of 5% and a maximum of
10% of their annual target income (fixed salary plus variable
salary on target level). The participants have invested in
Husqvarna Class B-shares, at market price, which will be
matched at a later date (1:1.5 in LTI 2007 and 1:1 in LTI 2008)
by the company free of charge through allocation of shares.
If the employee holds the purchased shares and maintains his or her employment within the Group three years
after the date of grant, the company will allocate the matching shares to the employee.
The employee could also receive performance stock
options. The options are granted free of charge and each
stock option entitles the holder to purchase one Husqvarna
Class B-share. The purchase price for shares when exercising
a stock option amounts to SEK 112 (LTI 2007) / SEK 72 (LTI
2008) per share which corresponds to 110% of the average
volume weighted closing price of Husqvarna Class B-share
at the OMX Nordic Exchange Stockholm, during a period of
10 trading days prior to the date on which the options were
granted. The options may be exercised at the earliest four
years and, at the latest, eight years from the date of grant.
The right to exercise the options requires that the holder
continues to be employed by the Husqvarna Group and has
maintained the personal investment for three years from the
date of grant. The options carry no right to compensation
for dividends on the underlying shares.
The number of stock options that may be exercised
depends on the number of Class B-shares that the employee
has purchased within the framework of LTI 2007 / LTI 2008,
as well as the company’s earnings per share, during 2007–
2009 (LTI 2007) / 2008–2010 (LTI 2008), reaching specific
levels determined by the Board of Directors. These determined levels are; “entry”, “target” and “stretch”, with a linear progression between each performance level. Entry constitutes a minimum level which must be exceeded in order to
enable exercise the stock options. The levels correspond to
the following numbers of stock options:
• Entry: 3 (LTI 2007) / 5 (LTI 2008) options per purchased
Class B-share plus 2,000 options.
• Target: 7 (LTI 2007) / 10 (LTI 2008) options per purchased
• Stretch: 12 LTI 2007) / 15 (LTI 2008) options per purchased
Consequently, the total number of stock options per participant that may be exercised is limited to 12 (LTI 2007) / 15 (LTI
2008) options per purchased Class B-share plus an add
itional 8,000 options.
N OT E S
In accordance with the above, LTI 2007 and LTI 2008 comprise the following number of Class B-shares and stock options for
the various categories of participants if the target level is reached:
LTI 20081)
LTI 20071)
Participants
Matching shares,
number of Class
B-shares
Number of
stock options
Target Value2),
SEKt
Matching shares,
number of Class
B-shares
Number of
stock options
Target Value2),
SEKt
5,052
25,798
1,088
5,076
55,760
1,156
33,864
43,044
81,960
198,032
287,956
511,786
7,884
10,876
19,847
34,295
57,154
96,525
382,950
691,540
1,130,250
7,905
13,996
23,057
Former President
Other members of
Group Management
Other participants
Total
Maximum number of
class B-shares
945,000 (LTI 2007)
1,745,000 (LTI 2008)
Position/Category
President and CEO
Other members of Group
Management
Other senior managers,
category A
Other senior managers,
category B
Total number of shares for
all participants
Number of
Class B-shares
at stretch
Number of
Class B-shares
allocated1)
42,900
17,646
23,400
9,625
15,600
6,417
11,700
4,813
478,400
188,766
1) 41.1% of the number of shares at stretch level.
Accounting principles
The programs described above are accounted for in accord
ance with IFRS 2 Share-based Payment. The Group provides
for the social security contributions that are expected to be
paid when the shares are distributed and when the options
are exercised. The provision for social security contributions
is periodically revalued on the basis of the share market
price at each balance sheet date. The total cost charged to
the income statement for 2008 amounted to SEK 1m (12)
whereof SEK –1m (2) refers to social security contribution.
The total provision for share-based compensation amounted
to SEK 1m (4).
Repurchased shares for the LTI programs
During 2008 and 2007 Husqvarna repurchased Husqvarna
Class B-shares to meet the company’s long term incentive
obligation within the above mentioned programs. These
shares will be distributed or sold to the participants of the
programs. Husqvarna intend to sell additional shares on the
market in conjunction with the exercise of options or the distribution of shares in order to cover payment of social secur
ity contributions.
75
Long-term incentive program 2006
(Performance Share Program, PSP)
The PSP includes approximately 40 senior managers and
is based on value creation targets for Husqvarna established
by the Board. Allocation of shares under the program is
determined on the basis of three levels of value creation,
”entry”, ”target” and ”stretch”.
The shares will be allocated to the participants free of
charge after the three-year performance period, 2006–2008,
in the beginning of 2009. The number of Husqvarna B-shares
to be delivered equals 41,1% of the number of shares at
stretch level.
Participants in the program are divided into four categor
ies; the former President, other members of Group Management, and two categories of other senior managers and key
employees. For each of the four categories of employees a
target value is set into a number of shares. The stretch value
and the number of shares allocated are shown in the table
below.
1) T he number of shares and stock options may be recalculated following the decision regarding the rights issue.
2) T
he target value of the program is calculated on the fair value on grant date. The value of the share at grant date was SEK 94.85 (LTI 2007) / SEK 58.55 (LTI 2008)
and the fair value of the option SEK 23.59 (LTI 2007) / SEK 15.40 (LTI 2008). The binomial options pricing model has been used to calculate the fair value of the
options. The values have been adjusted for the discounted value of future dividends.
N OT E S
NOTE 20 OTHER PROVISIONS
Parent Company
Warranty
commitments
Claims
Other
Provisions made
Acquired companies
Provisions used
Unused amounts reversed
Current provisions
Non-current provisions
—
4
—
–2
—
—
2
2
—
134
218
30
–184
–6
–2
190
70
120
307
39
—
–2
—
–18
326
—
326
92
156
140
–118
–11
1
260
136
124
Provisions made
Acquired companies
Provisions used
Unused amounts reversed
Exchange rate differences
2
316
—
–54
—
0
264
190
182
—
–164
–7
31
232
326
3
—
—
—
60
389
Current provisions
Non-current provisions
264
—
77
155
—
389
Provisions for restructuring represent the expected payments to be incurred in the coming year as a consequence
of Husqvarna operations’ decision to reduce personnel. The
amounts are based on the Husqvarna management’s best
estimates and are adjusted when changes to these estimates
are known. Provisions for warranty commitments are recognized as a consequence of Husqvarna’s policy of covering
Total
Provisions for
restructuring
Warranty
commitments
Other
Total
533
417
170
–306
–17
–19
778
208
570
—
—
—
—
—
—
—
—
—
11
11
—
–11
—
—
11
11
—
18
16
—
–15
—
—
19
16
3
29
27
—
–26
—
—
30
27
3
260
118
—
–182
–3
37
230
778
619
—
–400
–10
128
1,115
—
56
—
—
—
—
56
11
10
—
–11
—
—
10
19
5
—
–13
–3
—
8
30
71
—
–24
–3
—
74
88
142
429
686
56
—
10
—
8
—
74
—
the cost of repairing defective products. A warranty is normally granted for 1 to 2 years after the sale.
Provisions for claims refer to the Group’s captive insurance companies and consist of reserves for specific insurance claims as well as IBNR (Incurred But Not Reported)
reserves. Other provisions include mainly payroll related
provisions.
76
Group
Provisions for
restructuring
NOTE 21 OTHER LIABILITIES
NOTE 22 CONTINGENT LIABILITIES
Group
Accrued holiday pay
Other accrued
payroll expenses
Other accrued
expenses
Value added tax
Personnel taxes and
other taxes
Other operating
liabilities
Total
Parent Company
2008
2007
2008
2007
175
176
73
84
383
481
114
158
716
20
620
14
168
—
150
—
67
88
23
19
113
1,474
141
1,520
—
378
—
411
Group
Guarantees and
other commitments
On behalf of internal
counterparties
On behalf of external
counterparties
Total
Parent Company
2008
2007
2008
2007
—
—
153
65
24
24
20
20
7
160
6
71
In addition to the above contingent liabilities, guarantees for
fulfillment of contractual undertakings are provided as part
of Husqvarna’s normal course of business. There was no indication at year-end that any payment will be required in connection with any contractual guarantees. Furthermore, there
is an obligation, in the event of dealer’s bankruptcy, to buy
back repossessed Husqvarna products from certain dealers
financing their floor planning with an external finance company. During 2008 goods for a value of SEK 13m (15) were
bought back in connection with floor planning activities.
N OT E S
Gas explosion in Belgium
A gas explosion occurred in 2004 on Husqvarna’s property in
Ghislenghien, Belgium, and resulted in the loss of 24 lives,
more than 100 personal injuries and substantial property
damage. The accident was caused by the bursting of a subsurface industrial gas pipe.
Husqvarna Belgium has, together with at least 10 other
companies, authorities and private persons, received notifications of potentially having contributed to the accident. Several
parties have initiated claims for damages against, among
others, Husqvarna. Husqvarna has denied all responsibility
and has itself also initiated claims for damages against other
involved parties. The legal investigation is now concluded and
Husqvarna expects the legal proceedings to commence during 2009 before the local court of first instance, as the prelim
inary procedural investigations were concluded by early 2009.
Based on the facts available and the substance of the
claims, Husqvarna estimates that any liabilities arising for
Husqvarna due to the accident will largely be covered by relevant insurance policies.
Alleged inaccurate specification of engine capacity
in lawn mowers
Husqvarna was named as a defendant in a lawsuit pending in
Federal District Court in Illinois, USA, entitled Phillips v. Sears,
Roebuck & Company, et al. In addition, Husqvarna has been
named as a defendant in approximately 40 similar or parallel
lawsuits in various states, implying that the issues raised in
these lawsuits have assumed nation-wide importance. These
lawsuits were brought against numerous manufacturers or sellers of lawnmowers and/or lawnmower engines, including, Electrolux Home Products, Inc., Husqvarna Outdoor Products, Inc.,
Sears, Roebuck & Co., Deere & Company, Tecumseh Products
Company, Briggs & Stratton Corporation, Kawasaki Motors
Corp. USA, MTD Products, Inc., The Toro Company, American
Honda Motor Company, Inc., The Kohler Company, and Platinum Equity, LLC. The lawsuits allege that Husqvarna and the
other defendants misrepresented and overstated the horsepower produced by the lawnmowers and lawnmower engines
they sold and/or manufactured. Plaintiffs (consumers who purchased a lawn mower containing an engine manufactured or
sold by one of the defendants) contend that the defendants
falsely advertised the horsepower of their products and that
they concealed or failed to disclose the products’ true lower
horsepower. The lawsuits further allege that Husqvarna and the
other defendants conspired among themselves to misrepresent and conceal material facts concerning the horsepower of
their own and each others’ lawnmowers and lawnmower
engines. Based upon these allegations, the plaintiffs assert
claims for consumer fraud, civil conspiracy and unjust enrichment. Husqvarna and other defendants oppose class action
certification of these allegations and have petitioned the Federal Multidistrict Judicial Panel for a determination of whether
all cases could be grouped together for Multidistrict Litigation
of the issue. Management is unable at this time to assess the
outcome of these lawsuits, although it cannot be ruled out that
an unfavorable outcome might be material to the company's
results for a particular period.
NOTE 23 BUSINESS COMBINATION
The below table summarizes the acquisitions made during 2008 and 2007.
Date of acquisition
Company1)
Business Area
30 April 2008
Meco
Sandvik Nora
30 April 2008
24 December 2008
Other minor
acquisitions
Total 2008
AB
Jenn Feng
Consumer Products
Consumer Products/Professional Products
1 June 2007
2 April 2007
20 March 2007
28 February 2007
1 February 2007
Total 2007
Soff-Cut
Zenoah
Gardena AG
King Concepts
Klippo AB
Consumer Products
Consideration
paid2), SEKm
Acquired
Net Debt
Enterprise
value2), SEKm
Annual Net
sales3), SEKm
48
0
48
54
26
684
0
0
26
684
65
800
87
845
0
0
87
845
30
949
302
1,026
2,949
126
222
4,625
234
73
3,938
2
5
4,252
536
1,099
6,887
128
227
8,877
240
1,200
3,800
30
150
5,420
1) A ll acquisitions above were made either through purchasing 100% of the shares and voting rights or by acquiring the assets and liabilities in the companies.
2) Including acquisition costs.
3) T he latest Annual Net sales at the time of acquisition.
77
Husqvarna is involved in commercial, product liability and
other disputes in the ordinary course of business. Such disputes involve claims for compensatory damages, property
damage or personal injury compensation and occasionally
also punitive damages. Although the company is self-insured
to a certain extent, it is also insured against excessive liability losses. Husqvarna continuously monitors and evaluates
pending claims and disputes, and take action when deemed
necessary. The company believes that these activities help
to minimize the risks. It is difficult to predict the outcome
of each dispute, but based on its present knowledge,
Husqvarna estimates that none of the disputes, in which it is
currently involved, will have a material adverse effect on the
consolidated financial position or result.
The following significant matters are still unresolved.
N OT E S
78
Acquisitions made in 2008
Meco
In April Husqvarna acquired Meco, Masterpiece Engineering
Company, based in Prescott, Arizona, USA. Meco is a leading producer of floor saws for cutting concrete and asphalt,
primarily for highway construction and repair. The consideration paid amounted to SEK 48m and goodwill amounted to
SEK 34m. The goodwill refers to synergies that will be achieved
with existing operation in terms of production and distribution. In addition the acquisition complements Husqvarna's
product range for the construction industry and reinforces
the Group's leading position in floor saws.
Sandvik Nora AB
In April 2008 Husqvarna acquired the assets and operation
relating to products for the construction industry within
Sandvik Nora AB (previously Hagby Asahi AB), a company
within Sandvik's Mining and Construction business area. The
acquired operations comprise the production and sale of
diamond tools and related machines for sawing, drilling and
grinding. The operation is based in Nora, Sweden and Vantaa, Finland. The acquisition complements Husqvarna's
product range for the construction industry and reinforces
the Group's leading position in the Nordic region. The consideration paid amounted to SEK 26m and goodwill
amounted to SEK 8m. The goodwill refers to synergies
achieved within Husqvarna’s existing operation in terms of
production and distribution. In addition, Hagby’s floorgrinding machines complement Husqvarna’s existing international product offering.
Jenn Feng
In March 2008 Husqvarna signed an agreement with Jenn
Feng Co., Ltd. for the acquisition of the company's operation
in outdoor products. Jenn Feng, a listed Taiwanese company, is a leading producer of chainsaws and trimmers for
the consumer market. The product offering also comprises
lawn mowers, high-pressure washers and generators. The
acquisition was completed in several steps. The operations
in North America and Australia were consolidated as of
30 May 2008 and the Chinese operations were consolidated
31 December 2008. The total consideration paid for the
acquired operating assets and liabilities amounted to
SEK 684m (including costs directly attributable to the acquisition in an amount of SEK 8m). Husqvarna has goodwill in
the amount of SEK 304m. The goodwill refers to synergies
arising from the fact that Jenn Feng’s products complement
Husqvarna’s range of handheld products for the consumer
market. In addition Jenn Feng products will be sold through
Husqvarna's global sales organization. Husqvarna has recognized intangible assets of SEK 64m, mainly referring to the
McCulloch brand and the right to use the brand in North
America. The purchase price allocation is preliminary.
Fair value of the acquired assets and liabilities
SEKm
Goodwill
Property, plant and
equipment
Inventories
Trade receivables
Trade payables
Other operating
liabilities
Net debt
Net identifiable assets
Goodwill
Consideration paid
Cash and cash
equivalents acquired
Net cash paid
Carrying
amount
Fair value
adjustment
Fair value
acquisition
balance
0
0
0
64
0
64
165
113
50
–2
0
0
0
0
165
113
50
–2
–10
0
316
0
0
64
–10
0
380
304
684
0
684
Total fair value of assets and liabilities for all acquisitions made in 2008
SEKm
Goodwill
Property, plant and
equipment
Other non-current assets
Inventories
Trade receivables
Trade payables
Other operating
liabilities
Net debt
Goodwill
Consideration paid
Cash and cash
Net cash paid
Carrying
amount
Fair value
adjustment
Fair value
acquisition
balance
0
0
0
128
0
128
165
6
162
52
–4
0
0
0
0
0
165
6
162
52
–4
–11
0
370
0
0
128
–11
0
498
347
845
0
845
Acquisitions for 2008 have contributed in total to the
Group’s net sales in an amount of SEK 140m and with operating income of SEK –17m.
Acquisitions made in 2007
Gardena AG
The acquisition of the German company Gardena AG was
completed at the end of March 2007. Gardena is the leader
in the European consumer market for irrigation products,
and has a leading position in garden tools, garden ponds
and pumps, as well as electric garden products.
The consideration paid totalled SEK 2,949m (including
costs directly attributed to the acquisition of SEK 22m) and
N OT E S
Goodwill
Property, plant and
equipment
Inventories
Trade receivables
Other operating assets
Trade payables
Other operating
liabilities
Net debt
Goodwill
Consideration paid
Cash and cash
Net cash paid
Fair value
adjustment
Fair value
acquisition
balance
1,774
159
–1,774
3,009
0
3,168
888
161
845
1,188
151
–311
0
–15
53
0
0
0
888
146
898
1,188
151
–311
–1,255
–3,938
–338
–937
0
336
–2,192
–3,938
–2
2,951
2,949
–102
2,847
Komatsu Zenoah’s outdoor products operation
The acquisition of the outdoor products operation within
Komatsu Zenoah Co was completed at the beginning of
April 2007. Komatsu Zenoah is a leading producer of port
able outdoor power products, and is the market leader in
Japan. The product range comprises mainly brush cutters,
chainsaws, trimmers and blowers. The goodwill refers mainly
to expected synergies from an expanded product offering
within Forestry and Commercial Lawn and Garden products
as well as from synergies in technology, production and distribution.
Goodwill
Property, plant and
equipment
Inventories
Trade receivables
Trade payables
Other operating
liabilities
Net debt
Goodwill
Consideration paid
Cash and cash
Net cash paid
Fair value
adjustment
Fair value
acquisition
balance
0
20
0
59
0
79
111
16
212
540
34
–235
0
178
9
0
0
0
111
194
221
540
34
–235
–122
–73
503
–35
0
211
–157
–73
714
312
1,026
–39
987
Soff-Cut
At the beginning of June 2007, the acquisition of the American company Soff-Cut was completed. Soff-Cut is the leading producer of concrete saws for early entry concrete sawing. The consideration paid totalled SEK 302m. In addition to
goodwill amounting to SEK 338m, other intangibles totaling
SEK 166m have been recognized consisting of patents and
customer relations. Goodwill refers mainly to anticipated
synergies from an expanded product offering within the
Construction business as well as within technology and distribution.
King Concepts
King Concepts in Australia was acquired at the end of February 2007. King Concepts manufactures equipment and consumables for the Floor Preparation and Concrete Polishing
market. The consideration paid totalled SEK 126m. In add
ition to goodwill amounting to SEK 71m, other intangibles
totaling SEK 66m have been recognized consisting mainly of
patents. Goodwill refers mainly to anticipated synergies
from an expanded product offering within the construction
business as well as in distribution.
Klippo AB
In February 2007, Husqvarna acquired Klippo AB, the largest
producer of petrol-driven walk-behind lawn mowers for the
Swedish market. The consideration paid totalled SEK 222m.
Goodwill amounts to SEK 160m and other intangible assets,
mainly trademarks, have been recognized in the amount of
SEK 41m. Goodwill refers mainly to anticipated synergies
from an expanded product offering within the Commercial
Lawn and Garden business and within distribution.
SEKm
Carrying
amount
SEKm
Carrying
amount
79
goodwill amounted to SEK 2,951m. The goodwill primarily
refers to the anticipated synergies from an expanded product offering within irrigation and electrical products. Synergies are also expected to derive from combining Husqvarna
and Gardena’s sales, marketing, distribution and technology.
In addition, intangible assets of SEK 3,009m were recognized referring to the trademark Gardena. The Gardena
trademark has a very high recognition among customers and
Husqvarna intends to maintain and further develop the brand
in the foreseeable future. The Gardena trademark has been
recognized as an intangible asset with indefinite useful life.
N OT E S
Total fair value of assets and liabilities for acquisitions
80
SEKm
Goodwill
Property, plant and
equipment
Inventories
Trade receivables
Trade payables
Other operating
liabilities
Net debt
Goodwill
Consideration paid1)
Cash and cash
Net cash paid
Carrying
amount
Fair value
adjustment
Fair value
acquisition
balance
1,957
181
–1,957
3,341
0
3,522
1,012
188
1,152
1,787
197
–598
4
196
62
0
0
0
1,016
384
1,214
1,787
197
–598
–1,408
–4,252
216
–1,069
0
577
–2,477
–4,252
793
3,832
4,625
–148
4,477
1) Includes costs directly attributed to the acquisitions of SEK 42m.
The 2007 acquisitions contributed in total to the Group’s net
sales 2007 with SEK 4,075m and to operating income with
SEK 328m. If all acquisitions had been included in the Group
as of 1 January, the Group Net Sales in 2007 would have
been impacted by SEK 5,742m and operating income by
SEK 515m.
REMUNERATION TO THE BOARD OF
NOTE 24 DIRECTORS, THE PRESIDENT AND OTHER
MEMBERS OF GROUP MANAGEMENT
The Annual General Meeting 2008 authorized fees to Board
members, totalling SEK 5,345,000, of which 4,820,000 (to the
Chairman SEK 1,600,000 and to each of the seven board members not employed by the Company SEK 460,000) to be paid in
cash and syntethic shares, plus an additional total of
SEK 525,000 to be paid in cash as fees for Board Committee
work.
The Board members have the option to choose to receive
25% or 50% of the fees before tax, excl fees for Board committee work, in the form of synthetic shares. Board members
being non-Swedish tax subjects have, for administrative purposes, the option to receive 100% of the fees in cash. The
number of synthetic shares received is based on a volume
weighted average of the quoted price of the Husqvarna B
share during the five bank days immediately following the
first quarterly report 2008.
After five years, i e in 2013, the synthetic shares give a right
to receive an amount in cash per synthetic share. Dividends
due to Husqvarna B shares until payment will be granted to
the Board member in the form of additional synthetic shares.
There is no requirement that a Board member remains on the
Board to be entitled to accrued synthetic shares and thus a
Board member is entitled to be paid even if the assignment
ends. Furthermore a Board member may, at termination of
the Board assignment, request payment for the synthetic
shares at 12 months after the end of the assignment.
There are no agreements in place governing severance
pay to Board members.
Fees to the Board of Directors authorized by the Annual General Meeting 2008
Fees excluding fees for committee work
SEKt
Lars Westerberg
Bengt Andersson
Peggy Bruzelius
Robert F. Connolly
Börje Ekholm
Tom Johnstone
Ulf Lundahl
Anders Moberg
Gun Nilsson
Annika Ögren
Malin Björnberg
Total
Cash payment
Value of synthetic
shares at date of
grant
Number of synthetic shares at
date of grant*
800
—
345
345
230
230
230
460
345
—
—
2,985
800
—
115
115
230
230
230
—
115
—
—
1,835
12,866
—
1,849
1,849
3,699
3,699
3,699
—
1,849
—
—
29,510
Total value of fees Total value of fees
incl. Synthetic
incl. Synthetic
Fees for commitshares at date of
shares at end of
tee work
grant
year**
50
—
75
—
175
100
—
50
75
—
—
525
1,650
—
535
460
635
560
460
510
535
—
—
5,345
1,381
—
496
421
558
483
383
510
496
—
—
4,729
* Based on volume weighted average of the quoted price of the Husqvarna B share during five bank days immediately following the first quarterly report 2008
(24 to 30 April): SEK 62.18
** Based on the quoted closing rate of the Husqvarna B share in 2008 (30 December): SEK 41.30.
N OT E S
Terms of employment for the President
Magnus Yngen took up the position as President and Chief
Executive Officer 1 October 2008. The remuneration package for the President comprises fixed salary, variable salary
based on annual targets and pension benefits. The remuneration is reviewed annually per 1 January. The President is
entitled to participate in any long-term incentive programs
that the Board decides to introduce in 2009 and the Annual
General Meeting authorizes.
The fixed annual salary to the President is SEK 5,750,000.
The variable salary for 2009 is based on an annual target for
value created within the Group. The variable salary is 50% of
the fixed salary at target level and is capped at 100% at
stretch level. For 2008 the variable salary is replaced by a
fixed amount of SEK 718,750 based on the period of employment with Husqvarna (October 1 to December 31). In October 2008 the President received a cash payment of
SEK 2,000,000 as compensation for the loss of right to allocation from long-term incentive programs with the former
employer.
The notice period for termination is 12 months on the
part of the Company and 6 months on the part of the President. The President is eligible for severance pay corresponding to 12 monthly salaries, with deduction for any other
income, in the event of notice of termination from the
employer. In the event of a change of control of the Company, the President has the right to cease the employment
with immediate effect without consideration of notice
period and receive severance pay corresponding to 24
monthly salaries. The President is not entitled to fringe
benefits such as a company car or housing.
Terms of employment for other members
of Group Management
As with the President, other members of Group Management receive a remuneration package comprised of fixed
salary, variable salary based on annual targets, long-term
incentive programs and pension benefits. Remuneration is
revised annually per 1 January.
For the Group’s staff heads, variable salary is based on
value creation for the Group and for the sector heads the
variable salary is based on value creation for the appropriate
sector. The variable salary is 40–50% of the fixed salary at
target level and is capped at 80–100% at stretch level.
Members of Group Management participate in the
Group’s long-term incentive programs which consist of the
Performance Share Program for 2006 and the restricted
share and performance based stock option programs for
2007 and 2008 (LTI 2007 and LTI 2008). For more information
on these programs, see Note 19.
The notice period for termination is 12 months on behalf
of the Company and 6 months on the part of the employee.
There is no agreement covering severance pay.
Pension terms for other members of Group Management
The members of Group Management employed in Sweden
(7 out of 9) are covered by the collectively agreed ITP plan.
One member of Group Management is covered by the principal rule of the ITP plan and the alternative rule of the plan
is applied to the other members of Group management.
These individuals are also covered by the Husqvarna Executive Pension Plan, which is a defined contribution plan. The
employer contribution to the plan is equivalent to 35% of
pensionable salary which also includes cost for the ITP plan,
alternative ITP and any supplementary disability and sur
vivor’s pension. The pensionable salary is calculated on the
basis of current fixed salary plus last year’s variable salary.
The retirement age is 62 for those members of Group Management who are employed in Sweden. In addition to the
pension terms described above, there is a commitment to
pay a single premium at retirement age for pension benefits
corresponding to 22.68 monthly salaries in the event that the
member of Group Management remains in service until the
retirement age. The members of Group Management that
are not employed in Sweden are covered by the Group’s
company pension plans in the respective country of employment (Germany and the US). Retirement age is 63 or 65.
General principles for remuneration
to Group Management
The overall principles for remuneration to senior managers
are that remuneration should be based on the position held,
on individual and team performance and on a competitive
basis in the country of employment. The overall remuner
ation package for senior managers comprises fixed salary,
variable salary in the form of short-term incentives based on
annual performance targets, long-term incentives and benefits such as pension and insurance benefits.
Husqvarna aims to offer competitive and performancebased remuneration. Variable remuneration may constitute a
significant proportion of total remuneration, but could also
be zero if the target level “entry” is not achieved or capped
if the maximum level “stretch” is attained.
Variable salary to the President and Group Management
is based on the Group’s value creation.
Pension terms for the President
The retirement age for the President is 60. The President is
covered by the collectively agreed ITP plan, the alternative
rule of the plan, and the Husqvarna Executive Pension Plan.
The Husqvarna Executive Pension Plan is a defined contribution plan. The employer contribution to the plan for the Presi
dent is equivalent to 40% of the pensionable salary which
also includes the cost for the benefits of the ITP-plan, alternative ITP and any supplementary disability and survivor’s
pension. The pensionable salary is calculated on the basis of
current fixed salary plus variable salary fixed at target level.
81
Remuneration Committee
The task of the Remuneration Committee is to provide the
Board of Directors with proposals for remuneration to members of Group Management regarding targets and criteria
for variable remuneration, the relationship between fixed
and variable salary, changes in fixed or variable salary, longterm incentives, pension terms and other benefits.
The Committee consists of three Board members: Tom
Johnstone (Chairman), Anders Moberg and Lars Westerberg.
N OT E S
Terms of employment for the former President
The former President and CEO, Bengt Andersson, retired
1 October 2008, but his employment remains until 30 June
2009 when he attains the regular retirement age 65. The
remuneration for the former President comprises fixed salary, variable salary based on annual targets, long-term
incentive programs, pension and insurance benefits.
The fixed annual salary to the former President is
SEK 5,253,125 as of 1 January 2008. The variable salary is
based on an annual target for value created within the
Group. The variable salary is 50% of the fixed salary at target
level and is capped at 100% at stretch level. The former President participates in the Group's long-term incentive programs which consist of the Performance Share Program for
2006 and the restricted share and performance based stock
option programs for 2007 and 2008 (LTI 2007 and LTI 2008).
For more information on these programs, see Note 19. Variable salary and the long-term incentive programs have been
accrued until the former President retired 1 October 2008.
The President is not entitled to fringe benefits such as a
company car or housing.
Pension terms for the former President
The retirement age for the former President is 65. The former President is covered by the collectively agreed ITP plan
and a supplementary individual pension plan. The supplementary pension benefit is based on an annual employer's
contribution of 105% of fixed salary. Actuarial bases for calculation are used to transform the contribution at year end
into a pension benefit.
82
Remuneration to Group Management 2008
SEKt
Fixed salary
Variable
salary
4,156
7,880
26,505
38,541
President
1)
Former President 2)
Other members of Group Management3)
Total
Pensioncost
Long-term
incentive
0
860
0
5,016
0
0
0
9,109
11,534
21,503
0
441
441
16,989
38,480
60,485
Total
1) Fixed salary includes fixed salary for the period October to December (SEK 1,437,500), fixed amount instead of variable salary (SEK 718,750) and compensation for
the loss of right to allocation from long-term incentive programs with the former employer (SEK 2,000,000).
2) T he former President Bengt Andersson retired 1 October 2008, but his employment remains until 30 June 2009 when he attains the retirement age 65. The cost
for his remuneration during 2009 has been taken in 2008.
3) O ther members of Group Management comprise nine individuals. One individual has been added and one has left Group Management during 2008. The remuneration shown above refers to the part of the year during which the individual in question was part of Group Management.
Remuneration to Group Management 2007
SEKt
President
Other members of Group Management3)
Total
Fixed salary
Variable
salary1)
Pensioncost
Long-term
incentive2)
Incentive
Compensation1)
Total
5,125
25,177
30,302
2,563
8,238
10,801
5,988
16,355
22,343
1,011
3,979
4,990
920
3,932
4,852
15,607
57,681
73,288
1) The actual variable salary for 2007 and incentive compensation are paid 2008 and may slightly deviate from the amounts indicated.
2) Award per year at target level.
3) Other members of Group Management comprise nine persons.
NOTE 25 FEES TO AUDITORS
PricewaterhouseCoopers (PwC) has been appointed auditor
for the period until the 2010 Annual General Meeting.
Fees to PwC
Group
SEKm
PwC
Audit fees1)
Other fees2)
Total fees to PwC
Audit fees to
other Auditors3)
Parent Company
2008
2007
2008
2007
21
2
23
17
6
23
5
1
6
4
4
8
1
7
0
0
1) A
udit fees consist of fees billed for the annual audit engagement and other
audit services, which are those services that only the external auditor reasonably
can provide, and include the Company audit; statutory audits and comfort
letters and consents.
2) O ther fees consist of fees billed for assurance and related services, for due
diligence in connection with acquisitions as well as fees billed for tax services.
3) Refers mainly to Gardena companies audited by Ernst & Young in 2007.
N OT E S
NOTE 26 SHARES AND PARTICIPATIONS
Participation in associated companies
2008
2007
12
–2
0
1
–4
—
7
6
3
0
0
—
3
12
Opening balance
Operating result
Dividend
Exchange difference
Consolidation Gardena Turkey
Other
Closing balance
In participations in associated companies at 31 December
2008, goodwill is included in the amount of SEK 2m (4).
Gardena Turkey (Gardena Dost Dis Ticaret Mümmesilik
A.S.) has been consolidated during 2008. The Group’s share
of the associated companies, which all are unlisted, was as
follows:
Associated companies 2008
Diamant Boart, Argentina
A/O Khimki, Russia
Diamant Boart, Philippines
Total
Receivables
Liabil
ities
46.7
50.0
20.0
6
0
1
7
1
0
0
1
—
0
0
0
Participation, %
Book
value
Receivables
Liabil
ities
Sales
Purchases
46.7
50.0
20.0
51.0
6
1
1
4
12
1
0
0
8
9
—
1
0
—
1
1
0
—
3
4
—
5
0
—
5
Income Statement
Sales
Purchases
Income
Net
result
1
—
—
1
—
—
0
0
20
—
2
22
1
–1
0
0
Balance sheet
Total
Total
assets liabilities
12
0
7
19
4
0
3
7
1) Viewed from Husqvarna’s perspective.
Associated companies 2007
Relation to Husqvarna Group1)
SEKm
Diamant Boart, Argentina
A/O Khimki, Russia
Diamant Boart, Philippines
Gardena, Turkey
Total
1) Viewed from Husqvarna’s perspective.
Other companies
Firefly Energy Inc., USA
Holding, %
Book/Fair
value, SEKm
7.0
0
Major Group Companies
Subsidiaries
Canada
Finland
France
Germany
Germany
Germany
Japan
Sweden
United
Kingdom
US
US
US
Holding, %
Husqvarna Canada Corp.
Oy Husqvarna Ab
Husqvarna France SAS
Husqvarna Deutschland GmbH
Gardena GmbH
Gardena Manufacturing GmbH
Husqvarna Zenoah Co, Ltd.
Husqvarna Holding AB
100
100
100
100
100
100
100
100
Husqvarna UK Ltd.
Husqvarna Professional
Products Inc.
Husqvarna Forestry
Products NA Inc.
Husqvarna Consumer Outdoor
Products NA Inc.
100
100
100
100
A detailed specification of Group companies is available on
request from Husqvarna AB, Investor Relations.
P&L
Balance sheet
Total net
Income
result
Total
Total
assets liabilities
20
5
3
25
53
1
1
0
2
4
12
2
7
24
45
4
0
4
20
28
SEKm
Book
value
83
Relation to Husqvarna Group1)
Participation, %
Proposed D is tr i b ut i on o f E arn i n gs
Proposed Distribution of Earnings
Thousands of SEK
84
Retained earnings
Net income for 2008
Total
5,958,080
6,083,410
12,041,490
Meeting 2009 resolves that no dividend will be paid and the
above sum to be carried forward.
The Board’s opinion is that it is justifiable not to pay any
dividend with regard to the demands on the Company and
Group equity imposed by the type, scope and risks of the
business and with regard to the Company’s and the Group’s
financial strength, liquidity and overall position. The Com
pany’s equity would have been SEK 7,052 thousand higher if
the assets and liabilities had not been valued at fair value in
accordance with the Swedish Annual Accounts Act (SFS
1995:1554), 4:14a.
The Board of Directors and the President and CEO
declare that the consolidated financial statements have been
prepared in accordance with IFRS as adopted by the EU, and
give a true and fair view of the Group’s financial position and
results of operations. The financial statements of the Parent
Company have been prepared in accordance with generally
accepted accounting principles in Sweden and give a true
and fair view of the Parent Company’s financial position and
results of operations.
The statutory Administration Report of the Group and
the Parent Company provides a fair review of the development of the Group’s and the Parent Company’s operations,
financial position and results of operations and describes
material risks and uncertainties facing the Parent Company
and the companies included in the Group.
Stockholm 19 February 2009
Peggy Bruzelius Lars Westerberg
Chairman of the Board
Robert F. Connolly Börje Ekholm Tom Johnstone Anders Moberg
Malin Björnberg
Annika Ögren
Board memberBoard memberBoard memberBoard memberBoard member
Gun Nilsson Ulf LundahlBengt Andersson
Board memberBoard memberBoard member
Employee representative
Board memberBoard member
Magnus Yngen
President and CEO
Our audit report was issued on 19 February 2009
PricewaterhouseCoopers AB
Anders LundinChristine Rankin Johansson
Authorized Public AccountantAuthorized Public Accountant
Auditor in charge
Au d i tor s’ R eport
We have audited the annual accounts, the consolidated
accounts, the accounting records and the administration
of the board of directors and the managing director of
Husqvarna AB for 2008. The company’s annual accounts and
the consolidated accounts are included in the printed version
on pages 26–84. The board of directors and the managing
director are responsible for these accounts and the consolidated accounts and the administration of the company as
well as for the application of the Annual Accounts Act when
preparing the annual accounts and the application of international financial reporting standards IFRSs as adopted by
the EU and the Annual Accounts Act when preparing the
consolidated accounts. Our responsibility is to express an
opinion on the annual accounts, the consolidated accounts
and the administration based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards in Sweden. Those standards
require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the accounts. An audit also
includes assessing the accounting principles used and their
application by the board of directors and the Managing
Director and significant estimates made by the board of
directors and the Managing Director when preparing the
annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual
accounts and the consolidated accounts. As a basis for our
opinion concerning discharge from liability, we examined
significant decisions, actions taken and circumstances of the
company in order to be able to determine the liability, if any,
to the company of any board member or the Managing
Director. We also examined whether any Board member or
the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or
the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.
The annual accounts have been prepared in accordance
with the Annual Accounts Act and give a true and fair view of
the company’s financial position and results of operations in
accordance with generally accepted accounting principles in
Sweden. The consolidated accounts have been prepared in
accordance with international financial reporting standards
IFRSs as adopted by the EU and the Annual Accounts Act
and give a true and fair view of the group’s financial position
and results of operations. The statutory administration
report is consistent with the other parts of the annual
accounts and the consolidated accounts.
We recommend to the annual meeting of shareholders
that the income statements and balance sheets of the Parent
Company and the group be adopted, that the profit of the
Parent Company be dealt with in accordance with the proposal in the administration report and that the members of
the board of directors and the Managing Directors be discharged from liability for the financial year.
Stockholm 19 February 2009
Anders LundinChristine Rankin Johansson
Authorized Public AccountantAuthorized Public Accountant
Auditor in charge
85
To the Annual Meeting of the shareholders of
Husqvarna AB (publ)
Corporate identity number 556000-5331
Auditors’ Report
FIVE-YEAR REVIEW
86
Income, SEKm
2008
2007
Net sales
Consumer Products
32,342
19,849
12,493
33,284
20,621
12,663
29,402
18,335
11,067
28,768
18,360
10,408
27,202
17,579
9,623
Cost of goods sold
–22,965
9,377
–23,509
9,775
–21,477
7,925
–21,109
7,659
–19,886
7,316
Marketing and Administration costs
Operating income*
Consumer Products
–7,016
2,361
963
1,587
–6,211
3,564
1,638
2,123
–4,804
3,121
1,415
1,875
–4,732
2,927
1,332
1,739
–4,333
2,983
1,607
1,521
Financial items, net
–594
1,767
–675
2,889
–4293)
2,6923)
–479
2,448
–105
2,878
Taxes
–479
1,288
–853
2,036
–830 3)
1,8623)
–807
1,641
–555
2,323
* of which depreciation and amortization
1,163
1,081
836
827
718
Financial Position, SEKm
2008
2007
2006
20052)
34,337
22,367
15,778
7,875
8,556
4,184
3,280
6,462
8,815
16,287
10,694
3,159
13,552
28,803
19,401
13,640
6,790
7,758
3,912
2,731
6,146
7,389
13,318
2,911
10,130
12,012
16,355
10,514
6,034
4,714
5,165
3,106
2,209
4,335
6,264
5,090
4,683
303
4,250
18,248
10,017
5,719
4,626
6,264
3,325
4,222
3,562
4,755
6,366
6,220
0
5,262
14,298
8,007
4,646
3,905
5,506
2,858
3,371
3,170
4,736
3,380
3,365
15
3,271
2008
2007
20062)
20052)
20041) 2)
Cash flow from operations, excluding change in operating
assets and liabilities
Cash flow from operating assets and liabilities
2,703
441
3,144
3,232
–576
2,656
2,626 3)
–1,1943)
1,4323)
2,468
–177
2,291
3,003
112
3,115
Operating cash flow
–1,131
2,013
–813
1,843
–897
535
–1,342
949
–1,042
2,073
–845
–8 876
–558
—
—
1,168
–7 033
–23
949
2,073
Total assets
Net assets
Consumer Products
Professional products
Inventories
Trade receivables
Trade payables
Working capital
Total equity
Long-term borrowings
Short-term borrowings
Net debt
Cash flow, SEKm
20062)
20052)
20041) 2)
20041) 2)
FI V E-Y E A R R E V I E W
2008
2007
20062)
32,342
–3
29.0
3,524
10.9
2,361
7.3
4.9
12.7
1,767
1,288
33,284
13
29.4
4,645
14.0
3,564
10.7
7.9
16.8
2,889
2,036
29,402
2
27.0
3,957
13.5
3,121
10.6
7.7
16.9
2,692 3)
1,862 3)
28,768
6
26.6
3,754
13.0
2,927
10.2
7.3
16.7
2,448
1,641
27,202
1
26.9
3,701
13.6
2,983
11.0
9.1
15.8
2,878
2,323
Capital expenditure
Consumer Products
Operating cash flow
Cash flow per share
1,163
686
475
2,013
5.25
857
514
343
1,843
4.79
890
524
366
535 3)
1.393)
1,259
859
400
949
2.46
1,040
587
453
2,073
6.95
Earnings per share, diluted, SEK
Equity per share, SEK
Average number of shares, millions
Dividend per share, SEK
Dividend pay-out ratio, %
3.34
22.9
383.2
0
—
5.29
21.1
384.6
2.25
42
4.83 3)
16.1
385.14)
2.25 6)
35 3)
4.26
12.3
385.14)
—
—
7.78
15.9
298.6
—
—
Capital employed
Return on equity, %
Capital turn-over rate, times
Net debt/equity ratio
Interest coverage ratio, times
25,102
10.7
15.8
1.5
1.54
3.5
25.7
20,707
17.6
28.6
1.8
1.63
5.3
25.7
11,354
23.8 3)
32.5 3)
2.4
0.68
7.6 3)
38.3
11,121
24.1
40.1
2.6
1.11
—
26.1
8,116
31.1
41.9
2.9
0.69
—
33.1
Salaries and remunerations
Consumer Products
4,037
15,720
8,655
7,040
3,973
16,093
8,851
7,242
3,033
11,412
5,751
5,661
3,047
11,681
6,054
5,627
3,053
11,657
6,041
5,616
20041) 2)
1) Restated to comply with IFRS, except for IAS 39. If IAS 39 had been applied in 2004, the volatility in net income, net debt and equity would
most probably have been higher.
2) T he Husqvarna Group was established as of 31 May 2006, and listed on the NASDAQ OMX Stockholm as of 13 June 2006. The Husqvarna
operations previously comprised the Outdoor Product segment within Electrolux Group. Figures presented above for 2004 is based on
Husqvarna’s combined financial statements. The information in these statements is based on the actual reporting for the operations within
the Outdoor Product segment within Electrolux. The results and net assets, as well as equity and provisions are aggregated. To better
reflect the Husqvarna Group and its operations pro forma financial information was prepared for 2005 and 2006. Figures for 2005 and 2006
presented above is based on the pro forma figures. As the establishment of the Group was finalized by 31 May 2006 the Income statement,
Balance sheet, Equity and Cash flow statements represent the consolidated values of the Group. For information about the differences
beween combined financial statements and pro forma financial information please see Husqvarna’s Annual Reports for 2006 and 2007.
3) Pro forma.
4) Number of shares have been adjusted for the for the bonus issue of 88,9 million shares made in May 2007.
5) According to combined financial statements.
6) Before bonus issue.
Net sales
Net sales growth, %
Gross margin, %
EBITDA
EBITDA margin, %
Operating income
Operating margin, %
Consumer Products
20052)
87
Key data, SEKm
Quarterly DATA
Income, SEKm
Net sales
EBITDA
EBITDA margin, %
Operating income
88
Operating margin, %
Margin, %
Q1
Equity
Net debt
Working capital
Q3
Q4
Full year
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
10,043
9,214
9,338
1,488
1,211
1,166
14.8
13.1
12.5
1,202
984
929
12.0
10.7
9.9
1,060
876
7921)
10.6
9.5
10,343
12,048
10,133
1,595
2,049
1,491
15.4
17.0
14.4
1,321
1,758
1,275
12.8
14.6
12.6
1,141
1,528
1,1541)
11.0
12.7
6,830
6,826
5,392
593
836
802
8.7
12.2
14.9
310
553
571
4.5
8.1
10.6
178
391
467
2.6
5.7
5,126
5,196
4,539
–152
549
498
–3.0
10.6
11.0
–472
269
346
–9.2
5.2
7.6
–612
94
279
–11.9
1.8
32,342
33,284
29,402
3,524
4,645
3,957
10.9
14.0
13.5
2,361
3,564
3,121
7.3
10.7
10.6
1,767
2,889
2,6921)
5.5
8.7
2006
2008
2007
2006
2008
2007
2006
8.51)
753
613
5461)
1.97
1.59
1.421)2)
11.41)
810
1 070
7971)
2.09
2.77
2.071) 2)
8.7
143
273
322
0.37
0.70
0.84
6.1
–418
80
197
–1.09
0.21
0.51
9.21)
1,288
2,036
1,8621)
3.34
5.29
4.831) 2)
Q2
Q3
Q4
Full year
6,642
6,157
4,762
7,939
7,334
5,892
14,901
15,239
8,155
13,387
13,377
6,772
8,101
7,159
6,408
6,361
5,965
4,428
8,614
7,284
6,279
13,168
13,262
5,452
12,014
11,540
4,679
6,381
5,592
4,494
8,556
7,758
5,165
8,815
7,389
6,264
16,287
13,318
5,090
13,552
12,012
4,250
6,462
6,146
4,335
8,556
7,758
5,165
8,815
7,389
6,264
16,287
13,318
5,090
13,552
12,012
4,250
6,462
6,146
4,335
Financial position, SEKm
Inventories
Q2
Q1
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
7,723
6,578
6,240
7,903
6,986
5,2641)
16,245
15,645
10,9831)
14,734
14,535
9,9261)
9,784
8,664
8,5581)
1) Pro forma.
2) Number of shares have been adjusted for the for the bonus issue of 88.9 million shares made in May 2007.
Consumer Products
Total
2008
2007
2006
2008
2007
2006
2008
2007
2006
Operating income by business area, SEKm
Consumer Products
Group common costs etc.
Total
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
Operating margin by business area, %
Consumer Products
Total
2008
2007
2006
2008
2007
2006
2008
2007
2006
Q1
Q2
Q3
Q4
Full year
6,830
6,207
6,540
3,213
3,007
2,798
10,043
9,214
9,338
6,773
8,418
6,993
3,570
3,630
3,140
10,343
12,048
10,133
3,764
3,668
2,774
3,066
3,158
2,618
6,830
6,826
5,392
2,482
2,328
2,028
2,644
2,868
2,511
5,126
5,196
4,539
19,849
20,621
18,335
12,493
12,663
11,067
32,342
33,284
29,402
Q1
Q2
Q3
Q4
Full year
727
521
503
522
510
455
–47
–47
–29
1,202
984
929
745
1,164
734
623
642
576
–47
–48
–35
1,321
1,758
1,275
–71
66
164
436
529
447
–55
–42
–40
310
553
571
–438
–113
14
6
442
397
–40
–60
–65
–472
269
346
963
1,638
1,415
1,587
2,123
1,875
–189
–197
–169
2,361
3,564
3,121
Q1
Q2
Q3
Q4
Full year
10.6
8.4
7.7
16.2
17.0
16.3
12.0
10.7
9.9
11.0
13.8
10.5
17.5
17.7
18.3
12.8
14.6
12.6
–1.9
1.8
5.9
14.2
16.8
17.1
4.5
8.1
10.6
–17.7
–4.9
0.7
0.2
15.4
15.8
–9.2
5.2
7.6
4.9
7.9
7.7
12.7
16.8
16.9
7.3
10.7
10.6
89
Net sales by business area, SEKm
Q UA R T ER LY DATA
Corporate
Governance Report
2008
90
H usqva r n a’ s ov er a l l o b jec ti v e is to cr e
ate lo n g-ter m va lu e fo r its sh a r eho l d ers
a n d other s ta k eho l ders. This r equ ir e s
effec ti v e co r p o r ate gov er n a nce w ith a n
a ppro pr i ate o rga niz ati o n a l s tru c t u r e,
s ys tems fo r inter n a l co ntro l a n d r isk
m a n agement, a n d tr a nspa r en c y.
Husqvarna is a Swedish public limited liability company that was
listed on NASDAQ OMX Stockholm in June 2006. The Group
comprises 118 companies and a total of 152 operative entities in
more than 40 countries. The Group is governed on the basis of
internal and external regulations that include the Articles of
Association of Husqvarna AB, the Swedish Companies Act, the
NASDAQ OMX Stockholm’s Rule book for issuers, including the
Swedish Code of Corporate Governance, and other relevant
Swedish and foreign laws and regulations as well as internal
codes, policies and guidelines.
Husqvarna applies the Swedish Code of Corporate
Governance. No deviations from the code were reported in
2008.
This report has not been reviewed by the Group’s auditors.
Ownership structure
The number of shareholders as of 31 December 2008 was
64,555, of which 61,904 in Sweden. About 75% of the total share
capital was owned by Swedish institutions and mutual funds,
about 12% by foreign investors, and about 13% by private
Swedish investors.
Investor AB has been the largest single shareholder since
2006, holding 15.4% of the capital and 28.7% of the voting
rights, as of year-end 2008.
Information on shareholders and the ownership structure is
updated quarterly on the Group’s web site.
Share capital and voting rights
The share capital in Husqvarna at year-end 2008 amounted to
SEK 770m, comprising 98,380,020 A-shares and 286,756,875
B-shares. Each A-share carries one vote, and each B-share 1/10
of a vote. All shares entitle equal rights in terms of the com
pany’s assets and earnings, and carry equal rights in terms of
dividends.
The Board of Directors has decided to implement a rights
issue of SEK 3 billion, subject to approval by a General Meeting
of Shareholders. For more information see page 33 in the
General Meeting of Shareholders
The decision-making rights of shareholders in Husqvarna are
exercised at general meetings of shareholders.
Participation in decision-making requires the shareholder’s
presence at the meeting, either in person or through a proxy.
In addition, the shareholder must be registered in the share
register as of the record date, i.e. five days prior to the meeting,
and must provide notice of participation in accordance with the
notice of the meeting.
Decisions at the meeting are normally made by simple
majority. However, for some issues the Swedish Companies Act
stipulates that a proposal must be approved by a higher proportion of the shares and votes represented at the meeting.
Individual shareholders who wish to have a specific issue in
cluded in the agenda of a shareholders’ meeting can request the
Board to do so by sending an e-mail to [email protected].
This address is also posted at the Group’s web site.
According to the Swedish Companies Act, the Annual
General Meeting must be held within six months after the end
of the accounting year. The AGM decides on such issues as
adoption of the annual accounts, dividends, election of Board
members and of auditors when required, fees to Board members and auditors, principles for remuneration to management,
and other important matters.
An Extraordinary General Meeting may be convened at the
discretion of the Board of Directors or if requested by the au
ditors or by shareholders owning at least 10% of the shares.
Shareholders may communicate in writing with the Board
regarding matters that pertain to the general meeting by sending an e-mail to [email protected].
In 2008 the AGM was held on 23 April in Jönköping. It was
attended by approximately 400 shareholders, either personally
or by proxy. They represented 52.9% of the shares and 61.9% of
the votes. All Board members elected by the previous AGM
were present, as were Group management, and the auditor in
charge. The President and CEO reported on the main aspects
of the Group’s operations during the preceding accounting year.
Decisions by the AGM included the following:
• The annual accounts for 2007 was adopted, and the Board
and the President were discharged of liability for 2007.
• A dividend of SEK 2.25 per share for 2007.
• Re-elected Board members: Bengt Andersson, Peggy
Bruzelius, Robert F. Connolly, Börje Ekholm, Tom Johnstone,
Anders Moberg, Gun Nilsson and Lars Westerberg.
Ulf Lundahl was elected as new Board member.
Lars Westerberg was re-elected as Chairman of the Board.
• Fees for Board members totalling SEK 5,345,000 were author
ized, of which SEK 1,600,000 for the Chairman and
SEK 460,000 for each of the other members who are not
employed by the Group. Fees for members of the Audit
Committee was set at SEK 175,000 for the committee chairman and SEK 75,000 for the members, and for the
Rumeneration Committee at SEK 100,000 for the chairman
and SEK 50,000 for each of the other members. In addition,
CO R P O R AT E Governance R eport 2 0 0 8
Governance structure
Shareholders
Nomination Committee
Board of Directors
External Audit
Audit
Committee
Internal Audit
Remuneration
Committee
President and CEO
Internal Boards
Group Management, others
External regulations
• Swedish Companies act (2005:559)
Internal regulations
• Articles of Association
• NASDAQ OMX Stockholm’s Rule of book for issuers
• Swedish Code of Corporate Governance
• Board of Director’s rules of procedure, incl. instruction for the President and CEO
• Swedish Accounting Act
• Policies for Communication, Finance and Credit etc.
91
• Global Purchasing Council
• Group Staff Council
• Finance Board
• International Financial Reporting Standards, IFRS
• Processes for internal control and risk management
• Legislation of other relevant countries
• Husqvarna’s Code of Conduct
Group Staffs
Consumer Products
Sector Management
Sector Management
Forestry
North America Rest of the World Rest of the World
Massmarket
Dealers
Lawn and garden
Construction
Major regulations affecting the governance of Husqvarna
• Manuals incl. accounting
The 10 largest shareholders
Ownership structure
%
100
80
60
40
20
0
10
25
Capital, %
100
200
Votes, %
Source: SIS Ägarservice as of 31 December 2008.
Share of
votes, %
Investor AB
15.4
28.7
Alecta Mutual Pension Insurance
8.4
6.2
Swedbank Robur Investment Funds
6.8
2.1
AFA Insurance
4.6
3.4
SEB Investment Funds & SEB Trygg Liv
4.6
2.1
LE Lundbergföretagen
4.3
13.1
AMF Insurance & Pension Investment Funds
4.1
3.2
Fourth Swedish National Pension Fund
2.2
1.3
Second Swedish National Pension Fund
2.0
0.6
SHB Investment Funds & Life Insurance
The largest
owners
Share of
capital, %
1.7
1.3
Total, 10 largest shareholders
54.1
62.0
Total, Board of Directors and
Group Management
<0,2
<0,1
Source: SIS Ägarservice as of 31 December 2008. Most of the shares owned by foreign investors are registered through trustees, which mean that owner identity is
not obtainable from Euroclear Sweden AB ( formerly VPC). Accordingly, the major
foreign owners are not shown in the table above.
payment of a portion of the fee in the form of synthetic shares
was authorized in accordance with the proposal by the
Nomination Committee.
• Fees to auditors were authorized in accordance with the proposal submitted.
• Petra Hedengran, Investor AB, Chairman of the Nomination
Committee
• The principles for remuneration and employment of the
President and CEO, and other members of senior management were approved.
• Claes Boustedt, LE Lundbergföretagen AB
• Ramsay J. Brufer, Alecta Mutual Pension Insurance
• A performance-based incentive program (LTI 2008) for senior
managers was adopted.
• L ars Westerberg, Chairman of the Husqvarna board
• Rules for the Nomination Committee’s composition and work
were approved.
• Buy-back and transfer of own shares in accordance with commitments in Husqvarna’s incentive programs.
• The Board was authorized to issue new shares to a maximum
of 38.5 million A- or B-shares during the period prior to the
AGM 2009, in order to facilitate acquisitions.
The minutes of the AGM 2008 are available at
www.husqvarna.com.
92
Nomination Committee for the AGM 2009
The Nomination Committee for the AGM 2009 consists of the
following members:
AGM 2009
The Husqvarna Annual General Meeting for 2009 will be held
on 23 April 2009 at the Elmia Congress Centre in Jönköping,
Sweden. Shareholders wishing to have an issue dealt with by
the AGM should submit a proposal by e-mail to
[email protected].
Nomination Committee
In accordance with a decision by the AGM 2008, Husqvarna has
a Nomination Committee that consists of one representative of
each of the four largest holders of voting rights together with
the Chairman of the Board. The names of these representatives
and the shareholders that they represent shall be announced
publicly at least six months prior to the AGM.
Selection of the four shareholders is based on known holdings of voting rights as of 31 August 2008. In case of changes in
major shareholders in the course of the nomination process,
the composition of the Nomination Committee may be
changed accordingly.
The Nomination Committee’s tasks include preparing a proposal for the AGM regarding the following:
• Chairman of the AGM
• Board members
• Chairman of the Board
• Fees to the Board, including the Chairman, and fees for members of committees
• Fees to auditors
• Composition of the Nomination Committee and its tasks for
the coming year.
The Nomination Committee should also submit proposals for
the election of auditors when this is to be decided by the AGM.
The Nomination Committee is then assisted by the Audit
Committee which, among other things, informs the Nomination
Committee of the results of the evaluation of the audit work.
Shareholders wishing to submit proposals to the
Nomination Committee may do so by e-mail to nominationcommittee @husqvarna.se. The committee’s proposal shall be
announced publicly in connection with or prior to the notice of
the AGM.
• Anders Elsell, Investment AB Öresund
The names of the shareholders’ representatives were
announced in a press release on 8 October 2008.
The Nomination Committee’s proposal to the AGM in 2009
includes the following:
• Unchanged number of Board members to be elected by the
AGM (9 members).
• Re-election of Lars Westerberg, Peggy Bruzelius, Börje
Ekholm, Tom Johnstone, Ulf Lundahl, Anders Moberg, Gun
Nilsson and Robert F. Connolly. Bengt Andersson declines
re-election. Election of Magnus Yngen, President and CEO of
Husqvarna, as new Board member.
• Re-election of Lars Westerberg as Chairman of the Board,
and proposed Chairman of the AGM.
• Unchanged Board fees totalling SEK 5,345,000, of which
SEK 1,600,000 for the Chairman and SEK 460,000 for other
members not employed by Husqvarna.
• Portion of fees to be paid in synthetic shares.
• Unchanged Committee fees, with SEK 100,000 for the
Chairman in the Remuneration Committee and SEK 50,000
for each of the other members. SEK 175,000 for the Chairman
in the Audit Committee and SEK 75,000 each for the other
members.
• Unchanged principles for appointment of Nomination
Committee for AGM 2010.
The full proposal as well as a report on how the Committee has
conducted its work will be publicly announced no later than the
date of notification of the AGM, as well as at Husqvarna’s web site.
The Nomination Committee’s work during the year
The committee held three meetings and the members maintained contact between meetings. The meetings dealt with the
Board’s activities as well as its competence, composition and
indepedence. The Chairman of the Board presented the results
of the Board’s evaluation of its own work. The committee members did not receive remuneration for their work on the
committee.
The Board of Directors
The overall duty of the Husqvarna Board of Directors is to manage the Group’s affairs so as to satisfy the owners’ interests in
terms of a good long-term return on capital to the greatest
possible extent. The Board’s work is governed by rules and
regulations including the Swedish Companies Act, the Articles
of Association, the Swedish Code of Corporate Governance
and the rules of procedure established by the Board.
The Board decides on issues related to the Group’s main
goals, strategic orientation and major policies, and on other
important issues related to financing, investments, acquisitions
and divestments. The Board monitors and deals with, inter alia,
Board of Directors
Attendance 2008
Lars Westerberg
Bengt Andersson3)
Peggy Bruzelius
Robert F. Connolly
Börje Ekholm
Tom Johnstone4)
Ulf Lundahl5)
Anders Moberg
Gun Nilsson
Malin Björnberg
Annika Ögren
Carita Spångberg 6)
Fredrik Währborg 6)
Total
Board Chairman
Committee member
Committee member
Committee Chairman
Committee Chairman
Committee member
Committee member
SE
Yes/Yes
11/11
SE
SE
US
US/SE
UK
SE
SE
SE
SE
SE
SE
SE
No/Yes
Yes/Yes
Yes/Yes
Yes/No
Yes/Yes
Yes/No
Yes/Yes
Yes/Yes
—
—
—
—
11/11
10/11
11/11
11/11
9/11
8/8
10/11
11/11
11/11
11/11
10/11
10/11
11
3/3
5/5
5/5
1/1
3/3
5/5
5
3
Authorized Holdings, Holdings,
fees, total number of number of
in SEK 2)
A-shares
B-shares
1,650,000
—
156,000
—
535,000
460,000
635,000
560,000
460,000
510,000
535,000
—
—
—
—
5,345,000
12,000
1,950
300
8,400
660
750
2,760
1,560
30
—
—
—
28,410
91,484
6,500
1,000
28,000
3,200
2,500
16,200
5,800
100
—
—
300
311,084
1) Refers to independence in relation to the the company and management, and independence in relation to major shareholders.
2) In accordance with the resolution by the AGM 2008, 25% or 50% of the Board fee shall be received in synthetic shares, see further under the heading Fees to
Board members on page 94. The composition of authorized fees in terms of cash payment and synthetic shares, see Note 24.
3) President and CEO until 1 October 2008.
4) Elected to the Remuneration Committee at the AGM 2008.
5) Elected at the AGM 2008.
6) Deputy.
follow-up and control of Group operations, and Group communication and organization, including evaluation of the Group’s
operative management. The Board also has the overall responsibility for establishing an effective system for internal control
and risk management
Rules of procedure and meetings
The Board has determined rules of procedure that are
reviewed annually and when necessary. These procedures
include allocation of tasks to Board members, including the
Chairman. The Chairman shall organize and delegate the
Board’s work, and also ensure effective implementation of the
Board’s decisions as well as annual evaluation of the Board’s
performance. The rules of procedure also identify the areas of
responsibility for the committees appointed by the Board.
In addition, the rules of procedure include detailed instructions to the President and various corporate functions regarding issues that require the Board’s approval, as well as the
financial reports and other information that is to be submitted
to the Board. Among other things, these instructions specify
the maximum amounts that various decision-making functions
within the Group are authorized to approve regarding credit
limits, investments and other outlays.
The rules of procedure stipulate that the constituant meeting of the Board shall be held directly after the AGM. Decisions
at this meeting include authorization to sign for the Company.
The Board normally convenes on five to six other occasions
during the year. Four of these meetings are held in connection
with publication of the Group’s annual and interim reports.
One or two meetings are held in connection with visits to subsidiaries. At one of the meetings the Board evaluates the performance of the President and CEO without the presence of
any member of Group Management. Additional meetings,
including telephone conferences, are held when necessary.
Husqvarna’s General Counsel is the secretary at the Board.
Ensuring quality in financial reporting
The rules of procedure include detailed instructions regarding
the type of financial and other reports that shall be submitted
to the Board. In addition to interim reports and the annual
accounts, the Board reviews and evaluates comprehensive
financial information.
The Board also reviews, primarily through the Group’s Audit
Committee, the most important accounting principles applied
by the Group in financial reporting, as well as major changes to
these principles. The tasks of the Audit Committee also include
reviewing reports regarding the Group’s internal control over
financial reporting, as well as audit reports submitted by the
Internal Audit function.
The Group’s external auditors report to the Board as necessary, but at least once a year. At least one of these meetings is
held without the presence of the President and CEO or any
other member of Group Management.
Evaluation of the Board’s performance
The Board evaluates its activities annually with regard to the
rules of procedure, the working climate, the alignment of the
Board’s work, and access to and need for special competence.
The focus of the evaluation is on Husqvarna-specific items. The
evaluation is then followed up by personal feedback meetings
with the Chairman. The results of the evaluation are reported
to the Nomination Committee and comprise input for the nomination procedure, in which the Nomination Committee evaluates the composition of the Board and the fees to members.
The work of the Board Chairman is also evaluated separately
under the management of the Chairman of the Remuneration
Committee.
Name
Indepen
Board
dence1) meetings
Remuner
ation
Commit
tee
93
Nationalit y
Audit
Commit
tee
94
Composition of the Board
The Husqvarna Board of Directors shall consist of not less than
five and not more than ten members with not more than three
deputies, all of whom are elected by the AGM for a period of
one year. The Husqvarna Board currently comprises nine members elected by the AGM. Two additional members, with dep
uties, are appointed by the Swedish employee organizations, in
accordance with Swedish labor laws.
The members of the Board of Husqvarna have a mix of competence and experience in terms of e.g. management of international industrial companies, financial expertise, sale and
marketing of consumer goods, and knowledge of retailing
business.
With the exception of Bengt Andersson, who was President
and CEO until 1 October 2008, none of the Board members is
part of Group management.
Two of the members elected by the General Meeting of
shareholders are not Swedish citizens, and two are women.
For additional information regarding Board members, see
page 100.
Independence of Board members
The composition of the Board is considered to be in compliance with the requirements for independence stipulated by
NASDAQ OMX Stockholm. None of the Board members is
employed by the Group, with the exception of Bengt
Andersson.
The Nomination Committee’s assessment of whether each
of the proposed Board members is in compliance with these
independence requirements shall be published together with
the Nomination Committee’s proposal.
Fees to Board members
Fees to the Board members are determined by the AGM. In
accordance with the proposal by the Nomination Committee,
the AGM 2008 approved total fees to the Board in the amount
of SEK 5,345,000. The AGM also authorized payment of a portion of the fees in the form of synthetic shares.
Authorized fees to individual Board members are reported
in the table below.
Fees to the Board 2006–20081)
SEK
2008
Chairman
Board member
Chairman
Audit Committee
Member
Audit Committee
Chairman
Remuneration
Committee
Member
Remuneration
Committee
Authorized fees, total
2007
2006
1,600,000
460,000
1,500,000
437,500
1,500,000
437,500
175,000
175,000
175,000
75,000
75,000
75,000
100,000
100,000
100,000
50,000
5,345,000
50,000
5,087,500
50,000
5,087,500
1) R
efers to fees prior to the AGMs in 2009, 2008 and 2007 respect
ively. For information about the composition of the 2008 fees in
terms of cash payment and synthetic shares, see Note 24.
Synthetic shares
Synthetic shares are not financial instruments in the legal sense.
They are a cash payment based on the trend for the trading
price of the Husqvarna B-share. Fees to the Board are thus
linked to the long-term development of the company.
Board members may opt to be paid in synthetic shares corresponding to either 25% or 50% of the Board fee before taxes,
excluding fee for committee work. For administrative reasons,
Board members who are resident outside Sweden and not subject to Sweden and not subject to Swedish tax may opt to
receive the entire fee as a cash payment.
After five years, i.e. in 2013, a holder of synthetic shares is
entitled to receive a cash payment per share that corresponds
to the average trading price of the B-share at the time of
payment.
The Board’s activities in 2008
In the course of the year the Board held seven scheduled meetings and four extraordinary meetings. Three of the scheduled
meetings were held in Stockholm, two in Huskvarna, one in
Jonsered, in connection with a visit to the Husqvarna
Construction operation, and one by telephone. All the extraordinary meetings were held by telephone.
The Board deals on a continuous basis with strategic questions that include Husqvarna’s operations and orientation,
acquisitions and monitoring of them, all investments greater
than SEK 50m, and changes in the credit limits for major customers. The financial statements and the annual report are
dealt with at the beginning of the year, as are the matters to be
presented at the AGM. The budget for the following year and
the Group’s long-term plan are dealt with at the end of the
year. A report on committee activities between meetings is
presented at each scheduled meeting. Current litigation if any
is reviewed quarterly.
In addition to the standard activities, in 2008 the Board also
dealt with the following issues:
• A ppointment of Magnus Yngen as new President and CEO,
succeeding Bengt Andersson. Following determination of criteria and a comprehensive recruiting process, Magnus Yngen
was appointed President as of 1 October 2008. Magnus
Yngen was chosen on the basis of his previous experience of
managing a global operation that included responsibility for
product development, production, marketing, brand-building and sales.
• Adjustment of operations in view of the decline in market
conditions resulting from the financial crisis and the global
downturn in the business cycle. In September the Board
authorized personnel cutbacks totalling approximately 900.
• Acquisition of the outdoor operation of the Taiwanese company Jenn Feng and two smaller companies that supply products to the construction industry.
All Board meetings followed an agenda, which together with
documentation for each item was sent to all Board members
approximately one week prior to each meeting.
Each scheduled Board meeting begins with a review by the
President of the Group’s results and the current business situ
ation, including important external factors that could affect the
Group’s development. Husqvarna’s CFO then reports on the
The Annual Report for 2008 was approved at the ordinary
Board meeting on 19 February 2009.
Remuneration Committee
The overall duty of the Remuneration Committee is to propose
principles for remuneration to members of Group Management. The Remuneration Committee presents proposals to the
Board of Directors regarding targets and criteria for variable
remuneration, the relationship between fixed and variable salary, changes in fixed or variable salary, long-term incentives,
pension terms and other benefits.
The Committee comprised three Board members: Peder
Ramel, Chairman until the AGM 2008, and Anders Moberg and
Lars Westerberg as members. Peder Ramel was succeeded by
Tom Johnstone as Chairman as of the AGM 2008. The Director
of Human Resources, serves as the committee’s secretary. At
least two meetings shall be held annually. In 2008, the committee held three meetings that included discussions of the issues
below:
17 January in Stockholm
• Remuneration to the President and CEO, and other members of Group Management.
8 February in Stockholm
• Long-term incentive program for 2008.
2 December in Stockholm
• Remuneration to the President and CEO, and other members of Group Management.
• Long-term incentive program for 2009.
Audit Committee
The overall duty of the Audit Committee is to support the
Board in monitoring the accounting and financial reporting
processes, including the adequacy and the effectiveness of
internal controls, as well as the effectiveness of disclosure controls and procedures for external reporting.
The Audit Committee also assists the Board of Directors in
monitoring the audit of the financial statements, including
related disclosures. This includes reviewing the objectivity and
independence of the external auditors, monitoring their work,
evaluating their performance, and if necessary recommending
their replacement. In addition, the Audit Committee is tasked
with supporting the Nomination Committee in preparing proposals for election of external auditors and for auditor’s fees.
The Audit Committee also reviews the Group’s Internal
Audit function regarding organization, staffing, budget, plans,
results and reports.
Overview of issues dealt with at Board meetings in 2008:
14 February, ordinary meeting in Stockholm
• Financial statements and Consolidated Report for 2007
• Information and report from auditors
• Proposals for the AGM
• Acquisition of Jenn Feng’s operation in outdoor products
• Resolution of acquisition of the US company Meco’s oper
ation in concrete saws
6 March extraordinary meeting, by telephone
• A pproval of Annual Report for 2007
23 April, ordinary meeting in Huskvarna and constituent
meeting of Board following AGM
• Interim report for January–March 2008
• A pproval of revised Code of Conduct
• Resolution of acquisition of Sandvik Nora AB’s operation in
diamond tools
23 May, extraordinary meeting, by telephone
• A ppointment of new President and CEO Magnus Yngen
3 June, ordinary meeting in Jonsered
• Board’s rules of procedure
• A pproval of strategic business plans for Group and sectors
17 July, ordinary meeting, by telephone
• Interim report for first half of 2008
16 September, extraordinary meeting, by telephone
• Decision on profit-warning for Q3 and announcement of
cost-reduction measures
22 October, ordinary meeting in Stockholm
• Interim report for first nine months 2008
• Board’s evaluation of own performance, repurchase of
shares
3 December, ordinary meeting in Stockholm
• Renewal and update of Board’s rules of procedure and
guidelines
• A pproval of credit limits for major customers
22 December, extraordinary meeting, by telephone
• A pproval of budget and long-term plan
• Decision on profit-warning for Q4
Committees
The Board has appointed a Remuneration Committee and an
Audit Committee, whose activities are mainly preparatory and
advisory. The Board may also delegate decision-making
authority to a committee for specific issues.
95
Group’s financial position, including cash flow and capital
structure, and when appropriate presents economic analysis
and overviews. Members of Group management and Board
committees report on open issues from previous meetings, if
necessary.
In addition to the information provided during the meetings, the President and CEO sends a monthly report to all
Board members and maintains continuous contact with the
Chairman of the Board.
The Audit Committee comprises three Board members:
Börje Ekholm (Chairman), Peggy Bruzelius and Gun Nilsson as
members. The committee’s meetings are attended by the
Chief Financial Officer, the General Counsel and the head of
Internal audit, who is also the committee’s secretary. At least
three meetings shall be held annually.
After each meeting the Audit Committee reports to the
Board as a whole. Minutes are taken of all meetings and are
available to Board members and auditors.
In 2008 the committee held five meetings that included discussions of the issues below:
96
7 February in Stockholm
• Auditors reported results of audit of accounts for 2007
• Internal auditors reported on internal audits in the US,
Brazil and Huskvarna, Sweden
• The Board’s dividend proposal to the AGM
• Long-term financing
• The draft of the Annual Report for 2007, and the
Consolidated Report for 2007.
16 April in Stockholm
• Draft of the interim report for January–March 2008
• P wC’s audit plan for 2008
• Monitoring of the acquisitions of Klippo and Jikai
• Draft of revised Code of Conduct.
15 July by telephone
• Draft of the interim report for January–June 2008
20 October in Stockholm
• Draft of interim report for first nine months, and the external
auditors report on the review of the interim report
• Loan facilities, evaluation of financial activities
• Reports on internal audits in China, Canada, the Czech
Republic, France and Japan.
• Report on audit of IT activities.
26 November in Stockholm
• The external auditors reported on results of the hard-close
procedures.
• Reports on risk analysis
• Timetable and audit process for 2008, effect of IFRS 2009 on
financial reporting, updating of financial policy.
External auditors
At an Extraordinary General Meeting on 27 January 2006
PricewaterhouseCoopers AB (PwC) was appointed as the
Company’s external auditor, with Anders Lundin (auditor-in-
charge) and Christine Rankin Johansson, for the period until
the AGM in 2010.
PwC provides an audit opinion on the financial statements
and the annual report for Husqvarna AB, the consolidated
financial statements for the Husqvarna Group, the administration of Husqvarna AB, and the financial statements of
Husqvarna’s subsidiaries. The audit is conducted in accordance
with the Swedish Companies Act and generally accepted
Swedish auditing standards issued by FAR SRS, which are
based on Generally Accounting Auditing Standards issued by
the International Federation of Accountants (IFAC GAAS).
Audits of local statutory financial statements for legal entities outside of Sweden are performed in accordance with laws
or other applicable regulations in the respective countries, and
in accordance with IFAC GAAS, including issuance of audit
opinions for the various legal entities when required.
The auditors attend the meetings of the Audit Committee
and report to the Board of Directors when appropriate, but at
least once annually.
In addition to the annual audit of the financial statements, in
2008 the auditors reviewed selected items in the balance
sheets and income statements of major Group units as of 30
September 2008, known as hard-close audit procedures, in
order to identify possible auditing issues in good time prior to
the closing of accounts. The results of their review have been
discussed with Group management and reported to the Audit
Committee. The interim report for January-September 2008
has been reviewed by the external auditors.
Prior to the AGM 2008 the auditors reviewed the Board’s
proposal for remuneration and other terms of employment for
Group Management in Husqvarna.
Fees to auditors
SEKm
Audit fees, PwC
Non-audit fees, PwC
Audit fees, other
auditors
Total
2008
2007
2006
21
2
17
6
15
1
1
24
7
30
0
16
Fees to PwC for non-audit assignments refers to fees for confirmatory
and similar services, due diligence in connection with acquisitions, and
tax consultancy.
For further information on fees paid to the auditors, see Note
25 on page 82. For information on the auditors and their other
audit assignments, see page 101.
President and CEO
Magnus Yngen
Legal Affairs
CFO
Olle Wallén
Bernt Ingman
Human Resources
Communications & Investor Relations
Lars Worsøe-Petersen
Åsa Stenqvist
Consumer Products
North America Rest of the World Rest of the World
Massmarket
Dealers
Roger Leon Martin Bertinchamp Hans Linnarson
Lawn and
Construction
garden
Bo Andreasson Hans Linnarson Anders Ströby
Forestry
Magnus Yngen took on the position
as President and CEO on 1 October
2008. He succeeded Bengt
Andersson. On 1 July Roger Leon
was appointed Head of Consumer
Products North America, succeeding
Robert E. Cook.
For information on members of
Group Management, see page 102.
The President and Group Management
In addition to the President and CEO, Group Management
includes five sector heads and four Group staff heads.
The President is appointed by the Board and is responsible
for ongoing management of the company in accordance with
the Board’s guidelines and instructions. These instructions
include responsibility for financial reporting, preparation of
information and input for decisions, and ensuring that commitments, agreements and other legal documents do not conflict
with Swedish or foreign laws and regulations, including those
related to competition. The President shall also ensure compliance with goals, policies and strategic plans, as well as updating of these when necessary.
The President appoints all members of Group Management.
The sector heads are responsible for the results and balance
sheets of their respective sectors. Overall management of the
sectors is implemented through operative meetings, which are
held quarterly. These meetings are chaired by the President,
and are attended by the heads of the sectors.
The Group staffs are responsible for coordinating Groupwide issues, developing policies and guidelines, and using
these to support the business sectors. The Group staffs are
also responsible for consolidation and reporting on financial
results, financing, risk management and legal issues, as well as
contacts with various stakeholders, including employees and
the media, and the capital market.
Internal boards
As support for the President and Group management,
Husqvarna has established internal boards in the following
areas:
The Global Purchasing Council (GPC) is a decision-making
forum that coordinates the Group’s purchasing globally and
across business sectors. The GPC ensures transparency in the
purchasing process as well as uniformity in terms of working
methods, purchasing tools, contracts and processes throughout the organization.
The Group Staff Council comprises the staff heads who
meet regularly and decide primarily on administrative policy
and personel issues as well as pensions.
The Finance Board is an internal board which ensures that
the financial policy authorized by the Board of Directors is communicated and complied with throughout the Group. This policy includes guidelines for organization and management of
the Group’s financial operations, permissible risk exposure,
levels of risk, and how they are to be reported. The Finance
Board comprises the President, the Chief Financial Officer and
the Head of Group Treasury.
Principles for remuneration to senior managers
The general principles for remuneration to Group Management
are based on the position held, individual performance, Group
income for the period, and maintaining competitive remuner
ation in the country of employment.
The overall remuneration package for senior managers
comprises fixed salary, variable salary in the form of short-term
incentives based on annual performance targets, long-term
incentives, pensions and other benefits.
Husqvarna aims at offering a competitive total remuner
ation with a focus on “pay for performance”. This means that
variable remuneration represents a significant proportion of
total remuneration.
The variable salary for the President is based on an annual
target for value created within the Group. For the Group’s sector heads, variable remuneration is based on value created in
each sector. For Group staff heads, the variable salary is based
on value created for the Group. For more information on remuneration, see Note 24.
Remuneration to Group Management
SEKt
President and CEO1)
President and CEO, former2)
Group Management, other
Total
Fixed
salary
Variable
salary
Pension
costs
Long-term
incentive
Total
2008
Total
2007
4,156
7,880
26,505
38,541
—
—
—
—
860
9,109
11,534
21,503
—
—
441
441
5,016
16,989
38,480
60,485
—
15,607
57,681
73,288
1) F ixed salary includes fixed salary for the period October to December (SEK 1,437,500), fixed amount instead of variable salary (SEK 718,750) and
compensation for the loss of right to allocation from long-term incentive programs with the former employer (SEK 2,000,000).
2) T he former President Bengt Andersson retired 1 October 2008, but his employment continues until 30 June 2009, when he attains the retirement
age of 65. The cost of his remuneration in 2009 has been taken in 2008.
For more information on remuneration to senior management, see Note 24.
Management and corporate structure
Husqvarna’s operations comprise two business areas,
Consumer Products and Professional Products, and six business sectors. In addition, the organization comprises four
Group staffs.
The structure of the Group is decentralized. Overall management of operations is conducted largely through quarterly
operational reviews within sectors.
The corporate culture is non-bureaucratic in order to enable
rapid decision-making, and features cost-efficiency as well as a
focus on products and customers.
Operations shall be conducted with due responsibility for
the environment, society in general, and ethical principles.
Group Management holds monthly meetings to review the previous month’s results, update forecasts and plans, and discuss strategic issues. In addition, weekly meetings are held by telephone.
97
Internal auditors
Husqvarna maintains a function for internal audit that reports
directly to the Audit Committee and the Chief Financial Officer.
For more information on internal audit activities, see page 99.
Value creation
Value creation is the basis for variable remuneration to the
President and Group Management. Value created links operating income and asset efficiency with the cost of the capital
employed in operations, and is measured as operating income
less the weighted average cost of capital (WACC) on average
net assets. Value created is measured by total Group, business
area, sector, product category and region.
Financial reporting and disclosure
Husqvarna provides the market with information about the
development of the Group and its financial position on an ongoing basis.
The Board has adopted an Information Policy that complies
with the requirements for an information policy in the NASDAQ
OMX Stockholm’s Rule book for issuers. The policy applies to
the Board and Group management, and covers both written
and oral information.
Financial information is issued regularly in the form of:
• Interim reports, published as press releases.
• The Husqvarna Annual Report.
98
• Press releases on news and important issues.
• Presentations and telephone conferences for analysts, investors and media representatives on the day of publication
of the quarterly and full-year results, and in connection with
release of important news.
• Presentations for financial analysts and investors in connection with Capital Market days, Road Shows, etc.
All reports, presentations and press releases are published
simultaneously at http://corporate.husqvarna.com
INTERNAL CONTROL OVER FINANCI AL
REPORTIN G
Husqvarna’s process for internal control is designed to manage
and minimize the risk of inaccuracy in financial reporting.
Description and evaluation of the Group’s internal control
activities is based on the framework developed by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The framework comprises five areas, i.e.
the control environment, risk assessment, control activities,
information and communication, and monitoring.
The organization of internal control is described below. The
description is limited to internal control over financial
reporting.
Control environment
Internal control over financial reporting is based on the overall
control environment. This involves clear definitions of organizational structure, decision-making paths and authority, which
are communicated in the form of internal control documents
such as policies, guidelines, manuals and codes. The control
environment also includes laws and external regulations.
The Board of Directors is ultimately responsible for internal
control over financial reporting. Efficient performance by the
Board is thus the basis for satisfactory internal control. The
Husqvarna Board has established rules of procedure and clear
instructions for its work, which also include the activities of the
Audit and Remuneration Committees.
The overall duty of the Audit Committee is to support the
Board’s supervision of the auditing and reporting processes,
and to ensure the quality of such reports and processes. The
activities of the Audit Committee during the year are described
in greater detail on page 95.
Responsibility for maintaining an effective control environment as well as the ongoing work on risk management and
internal control over financial reporting is delegated to the
President. This responsibility is in turn delegated to managers
within their specific areas at various levels in the company.
Husqvarna’s internal audit function reports directly to the Audit
Committee and to the Group’s Chief Financial Officer.
Responsibility and authority are defined inter alia in instructions to the President, instructions regarding the right to sign
for the company, manuals, various policies, routines and codes.
The Board defines the Group’s major policies for communication, customer credits, financing and risk management, as well
as the Code of Conduct.
Group management defines other policies and instructions,
and the relevant Group staffs issue guidelines and also monitor
implementation of all policies and instructions.
Group rules for auditing and reporting are stipulated in an
accounting manual that is available for all personnel in economy and finance. These internal control documents are
reviewed and updated regularly with reference to e.g. changes
in legislation, auditing standards and listing requirements.
Risk assessment
Items in the balance sheet and the income statement that are
based on estimates or generated by complex processes are
relatively more exposed to the risk of error than are other
items. Major items in this respect include goodwill and other
immaterial assets as well as provisions in captive insurance
companies and allocations to pension funds. The Group’s internal audit function performs an annual risk analysis to identify
such items and quantify risks. The results of risk analysis and
evaluation are reported to the Audit Committee and are subsequently taken into account in the annual internal audit plans.
Control activities
Control activities are designed to prevent, identify and correct
errors and deviations. Husqvarna has defined internal control
standards, i.e. specifications of the control activities that must
be included in each business process in order to ensure and
maintain a uniform level of internal control over financial
reporting within the Group. Control activities are integrated in
Husqvarna’s processes for accounting and financial reporting,
and include routines for authorization and signing for the company, reconciliation of bank balances and accounts, analysis of
results, segregation of duties, automatic controls integrated in
IT-systems, and control of the basic IT environment.
Husqvarna maintains the following control processes for
financial reporting:
Controlling
Each operative unit has a controller whose responsibilities
include ensuring that the unit’s internal controls comply with
Group standards, as well as compliance with Group guidelines
and principles as stated in Husqvarna’s Accounting Manual.
The controller is also responsible for ensuring that financial
information is correct and complete and is delivered on time. In
addition, controllers at sector and Group level have corres
ponding responsibilities.
Group management
The monthly meetings of Group management include a review
of the monthly results for the Group and for operative units, as
well as updated forecasts, plans and strategic issues.
Self-assessment
Each reporting operative unit submits an annual Control SelfAssessment regarding the status of its area of responsibility
that is subject to internal control. The self-assessment report is
signed by the controller. The assessment is based on a comprehensive questionnaire designed to measure the extent of
compliance with defined requirements. The unit measures its
own compliance. The results of self-assessment are collated at
Group level for evaluation of control routines, and are submitted to the Audit Committee.
Routines related to acquisitions
Husqvarna has established guidelines and routines designed
to ensure that acquisitions of operations are accurately analyzed in terms of financial, operational and environmental
consequences.
Acquisitions are evaluated at 12- and 24-month intervals following the transaction. Evaluations are reported to the Audit
Committee and the Board.
Financial reporting
Detailed financial data are reported every month by approximately 150 reporting units, in accordance with the standardized routines for reporting that are stipulated in Husqvarna’s
accounting manual. These reports are the basis for the Group’s
consolidated financial reporting. Consolidation is performed
from both legal and operative perspectives, which generates
quarterly legal reports and monthly operative reports. All consolidation is centralized. All financial reports are stored in a
central database from which data are retrieved for analysis and
monitoring at Group, business-area and sector level. Interim
reports are posted on the Husqvarna web site.
Internal audit
The internal audit function is tasked with developing and
improving internal controls over financial reporting. The work
of the auditors conforms with the annual plan by the Audit
Committee, which includes both scheduled and unscheduled
audits. The function reports to the Audit Committee and the
Group’s Chief Financial Officer.
The Group’s function for internal audit performs independent and objective reviews in order to evaluate and enhance
the efficiency of internal controls. This function also completed
special assignments in 2008. The internal auditors report to the
Audit Committee regarding their observations and recommendations for improvement of internal control over financial
reporting.
Information and communication
Husqvarna maintains information and communication systems
to ensure that financial reporting is correct and complete.
Accounting manual and other instructions for reporting are
updated when necessary and are reviewed quarterly. In add
ition to other policies that are relevant to internal control over
financial reporting, such as investment routines and credit policy, can be accessed on the Group’s intranet by all relevant personnel. Changes in accounting are communicated and
explained in quarterly newsletters from the Group accounting
function.
Whistle Blower line
For several years the Group’s operation in the US has maintained an Alert Line, also known as a Whistle Blower line, that
enables employees to contact an independent third party and
report actions or events that involve violations or suspected
violations of e.g. laws or guidelines. In the autumn of 2008 a
global Alert Line was established in several languages for the
entire Group.
Information available at www.husqvarna.com includes
• The company’s Articles of Association
• The Husqvarna Code of Conduct
• Information from previous AGMs, e.g. notices, minutes
• Corporate Governance reports from previous years
• Annual reports, Interim reports
• Presentations
Letter of representation
Since 2007 Husqvarna has a system for confirmation of the final
accounts, according to which each company head and the controllers for various reporting units sign a letter of representation confirming that the financial report package presents a
true and accurate picture of the Group’s financial position and
has been prepared in accordance with the Group’s accounting
standards.
Monitoring
Husqvarna maintains a comprehensive financial reporting system for monitoring of operations, which enables identification
of possible deviations in financial reporting at an early stage.
Husqvarna applies IFRS. This is defined in the Husqvarna
Accounting Manual, which includes rules for accounting and
evaluation principles that are mandatory for all Husqvarna
companies, as well as instructions for reporting. The manual is
reviewed and updated quarterly. Compliance with the
Accounting Manual is monitored continuously at Group and
sector level. In 2008, letters of representation confirming compliance with the manual and other policies and instructions
were received from all subsidiaries.
99
Country Officers
A Country Officer is appointed by Husqvarna in each country
where the Group operates subsidiaries. The officer’s duties
include safeguarding the interests of the Group’s owners as
well as identifying and reporting risks in such areas as fiscal
regulations and other legislation.
10 0
BOA R D O F DI R EC TO R S A N D AU DI TO RS
Top, from left:
Lars Westerberg, Peggy Bruzelius
and Bengt Andersson.
Gun Nilsson, Börje Ekholm
and Robert F. Connolly.
Fredrik Währborg
and Annika Ögren.
Anders Moberg
and Malin Björnberg.
Tom Johnstone, Carita Spångberg
and Ulf Lundahl.
Bengt Andersson
Born 1944. Mech. Eng., Elected 1991.
Other major assignments: Board member of
KABE AB. Chairman of Jönköping University
Foundation, Sweden.
Previous positions: President and CEO of
Husqvarna AB 2006 –1 October 2008. Senior
management positions within AB Electrolux;
Head of Consumer and Professional Outdoor
Products and Senior Executive VicePresident 2002–2006. Head of Professional
Outdoor Products and Executive VicePresident 1997. Product-line Manager for
Forestry and Garden Products 1991, and
Flymo 1996. Product-line Manager for
Outdoor Products North America 1987.
Holdings in Husqvarna: 12,000 A-shares,
91,484 B-shares.
Peggy Bruzelius
Born 1949. M. Econ., Hon. Doc. in B.A.,
Stockholm School of Economics, Sweden.
Elected 2006. Member of the Audit
Committee.
Other major assignments: Board Chairman of
Lancelot Asset Management AB and Swedish
National Agency for Higher Education.
Deputy Chairman of AB Electrolux. Board
member of Akzo Nobel n.v., Axfood AB,
Industry and Commerce Stock Exchange
Committee, Axel Johnson AB, Scania AB,
Syngenta AG and the Association of the
Stockholm School of Economics.
Previous positions: Executive Vice-President
of SEB, Skandinaviska Enskilda Banken AB
1997–1998. President and CEO of ABB
Financial Services AB 1991–1997.
6,500 B-shares.
Robert F. Connolly
Born 1943. B.A., Rochester Institute of
Business, New York, USA. Elected 2006.
Other major assignments: Previous positions: Executive Vice-President
and Chief Marketing Officer Wal-Mart Stores
Inc. 2001–2006. Positions in merchandising
and marketing 1996–2006 and 1989–1993,
Wal-Mart Stores Inc. Executive VicePresident as well as positions in merchandising, Montgomery Ward & Company Inc.,
1994–1995 and 1987–1989.
Holdings in Husqvarna: 300 A-shares,
1,000 B-shares.
Börje Ekholm
Born 1963. MBA, INSEAD, France and M. Sc.
Eng., Royal Institute of Technology,
Stockholm, Sweden. Elected 2006. Chairman
of the Audit Committee. President and CEO
and Board member of Investor AB.
AB Chalmersinvest, EQT Partners AB, KTH
Holding AB, Lindorff Group AB, Scania AB,
Telefonaktiebolaget LM Ericsson and
University Board of KTH.
Previous positions: Senior management pos
itions in the Investor Group since 1995.
President of Investor Growth Capital Inc.
1998–2005. Responsible for New Investments
1999 and Executive Vice-President of Investor
AB 1997.
28,000 B-shares.
Tom Johnstone
Born 1955. M.A., University of Glasgow, Hon.
Doc. in B.A., University of South Carolina,
USA. Elected 2006. Chairman of the Remu
neration Committee. President and CEO and
Board member of AB SKF.
the Association of Swedish Engineering
Industries.
Previous positions: Senior management pos
itions within AB SKF since 1987. Executive
Vice-President of AB SKF 1999–2003.
President Automotive Division 1995–2003.
3,200 B-shares.
Anders Moberg
Born 1950. Elected 2006. Member of the
Remuneration Committee.
Clas Ohlson AB. Board member of DFDS A/S,
Denmark and Byggmax AB.
Previous positions: CEO of Majid Al Futtaim
Group, 2007–2008. President and CEO of
Royal Ahold 2002–2007. Division President
International of Home Depot, USA, 1999–
2002. President and CEO of IKEA Group
1986–1999.
16,200 B-shares.
Gun Nilsson
Born 1955. M. Econ., Stockholm School of
Economics, Sweden. Elected 2006. Member
of the Audit Committee. CFO of Nobia AB.
Hexagon AB.
Previous positions: President of Gambro
Holding AB 2007–August 2008. Senior management positions within Duni AB 1993–2007.
Executive Vice President, deputy CEO and
Head of Corporate Development 2002–2007.
CFO 1993 and responsible for Corporate
Communications 1999–2001. Finance
Director of Bonnier Affärsinformation
1987–1993.
5,800 B-shares.
Ulf Lundahl
Born 1952. M. of Laws and MBA, Lund
University, Sweden. Elected 2008. Executive
Vice President and deputy President of L E
Lundbergföretagen AB.
Enskilda Gymnasiet. Board member of
Holmen AB, Cardo AB, Indutrade AB,
Ramirent Oy, Stockholm City Fire Insurance
Office and Handelsbanken, Regional Bank
Stockholm.
Previous positions: Senior adviser of L E
Lundbergföretagen AB 2003–2004, President
of Danske Securities 2001–2003, President of
Östgöta Enskilda Bank / Danske Bank Sverige
1992–2001, President of Nokia Data Sverige
1989–1992, Executive Vice President of
Götabanken / GOTA Bank 1983–1989,
Strategy consultant SIAR 1976–1983.
2,500 B-shares.
Employee representatives
Members
Malin Björnberg
Born 1959. Representative of the Federation
of Salaried Employees in Industry and
Services.
100 B-shares.
Annika Ögren
Born 1965. Representative of the Swedish
Confederation of Trade Unions.
Holdings in Husqvarna: 0 shares.
Deputy members
C arita Spångberg
Born 1968. Representative of the Swedish
Confederation of Trade Unions.
Fredrik Währborg
Born 1974. Representative of the Federation of
Salaried Employees in Industry and Services.
Holdings in Husqvarna: 300 B-shares.
Auditors
PricewaterhouseCoopers AB is appointed
auditors for a four-year period until the
Annual General Meeting 2010.
Anders Lundin
Born 1956. Authorized Public Accountant,
Auditor in charge
Other audit assignments include:
AarhusKarlshamn, Industrivärlden, Loomis,
Melker Schörling AB and SCA.
Christine Rankin Johansson
Born 1964. Authorized Public Accountant.
Other audit assignments include: Aditro
Group, Deputy auditor Haldex AB.
Holdings as of 31 December 2008.
101
Lars Westerberg
Chairman
Born 1948. M. Sc. Eng., Royal Institute of
Technology, Stockholm, Sweden, MBA.,
Stockholm University, Sweden. Elected 2006.
Member of the Remuneration Committee.
Autoliv Inc. and Vattenfall AB. Board member
of AB Volvo and SSAB.
Previous positions: President and CEO and
Board Member of Autoliv Inc. 1999–2007.
President and CEO of Gränges AB 1994–1999.
President and CEO of Esab AB 1991–1994.
Holdings in Husqvarna: 156,000 B-shares.
Board of Directors
and Auditors
Group Management
102
Magnus Yngen
President and CEO.
Born 1958. M. Eng. Lic.Tech., Royal Institute
of Technology, Stockholm, Sweden.
Employed 1 October 2008.
Previous positions: Head of Major
Appliances Europe, Electrolux,
2006–September 2008, Executive VicePresident and member of Electrolux Group
Management 2002–2008. Head of the
Electrolux Floor-care and Small Appliances
business sector 2002. Head of this sectors
European operation 2001, Head of Floor
Care International operations, 1999.
Technical Director in the Electrolux direct
sales operation LUX, 1995.
Other major assignments: Board member
of Duni AB.
Bo Andreasson
Head of Forestry.
Born 1951. M. Sc. Eng., Chalmers University
of Technology, Gothenburg, Sweden.
Employed 1982. Member of Group
Management since 2006.
Previous positions: Head of Forestry,
Electrolux, 2002. Head of Accessory
Operations 2001. Various management pos
itions in research, development and product
planning, Electrolux Outdoor Products,
1984–2001. Combustion Engine Engineer in
Electrolux Professional Outdoor Products
1982.
9,614 B-shares.
Martin Bertinchamp
Head of Consumer Products Rest of the
World, Massmarket.
Born 1958. MBA, University of Saarbrücken,
Germany. Employed 2004. Member of
Group Management since 2007.
Previous positions: President and CEO of
Gardena AG 2004. President and CEO of
Metabo AG 1996. Managing Director of
Entrelec SA 1995. Managing Director of
Schiele Industriewerke GmbH 1992. Director
Administration of Schiele Industriewerke
GmbH 1988. Director Controlling of EADS
1986. Controlling, Südzucker AG 1983.
Other major assignments: Board Chairman
of HUBER Packaging Group GmbH + Co. KG
and BEURER GmbH. Board Member of
Rothenberger AG, PAUL BAUDER GmbH &
Co. and WIHA Werkzeuge GmbH.
Roger Leon
Head of Consumer Products North America.
Born 1954. Graduate of law, Illinois Institute
of Technology, Chicago-Kent College of
Law, USA. Employed 1989. Member of
Previous positions: Various management
positions within finance, manufacturing and
supply-chain management in White Goods
and Outdoor Products North America,
Electrolux 1989–2006. Chief Operating
Officer of Electrolux Consumer Products
North America 2007.
Hans Linnarson
Head of Consumer Products Rest of the
World, Dealer channel and Commercial
Lawn and garden.
Born 1952. B.A, Lund University, Sweden,
Electr.Eng., Teknikum, Växjö, Sweden.
Employed 1994.
Member of Group Management since 2006.
Previous positions: Head of Consumer
Products Rest of the world, Electrolux 2004.
Various management positions in product
development, marketing and production
within Electrolux Major Appliances, Europe
1996–2003. Head of Electrolux Materials
Handling product line 1994.
Beijer Electronics AB and Nibe AB.
Anders Ströby
Head of Construction.
Born 1953. M. Sc. Eng., Royal Institute of
Technology, Stockholm, Sweden. Employed
1980. Member of Group Management since
2006.
Previous positions: Head of Garden
Equipment and Construction Products,
Electrolux 1996–2002. Head of Sales and
Marketing for the Husqvarna and Jonsered
brands, Electrolux Outdoor Products 1993.
Head of Jonsered and Partner Industrial
Products 1987. Head of Product Planning in
Electrolux Professional Garden Equipment
1985.
27,025 B-shares.
Related parties: 2,520 A-shares,
16,400 B-shares.
Changes in Group Management
Magnus Yngen took on the position as President and CEO on 1 October 2008. He succeeded Bengt Andersson. Bengt Andersson continues as Board member of Husqvarna
AB until the AGM 2009. On 1 July 2008 Roger Leon was appointed Head of Consumer
Products North America, succeeding Robert E. Cook who retired with a pension.
Bernt Ingman
Chief Financial Officer.
Born 1954. M. Econ., Uppsala University,
Sweden. Employed and member of Group
Previous positions: Executive Vice-President
and CFO of Munters AB 1997–2005.
Executive Vice-President of Inter Scan
Group 1994. Finance Director and Executive
Vice-President of Metric Group 1990.
Administrative Director of Calor Vanadis AB
1988. CFO of Celpap International 1986.
CFO of National Elektro Svenska AB 1985.
G & L Beijer AB.
25,348 B-shares.
Åsa Stenqvist
Investor Relations.
Born 1947. B.A., and Degree in
Communications, Stockholm University,
Sweden. Employed 1982. Member of Group
Previous positions: Head of Investor
Relations and Financial Information in Group
Staff Communications and Branding,
Electrolux 1999–2005. Head of Group Staff
Investor Relations, Electrolux 1993. Head of
Investor Relations and Financial Information
in Group Staff Mergers & Acquisitions,
Electrolux 1988.
8,737 B-shares.
Related parties: 288 A-shares, 966 B-shares.
Olle Wallén
Head of Group Staff Legal Affairs,
Husqvarna Board Secretary.
Born 1953. M. of Law., Stockholm University,
Sweden. Employed 1993. Member of Group
Previous positions: General Counsel of
Electrolux Europe 2002–2005. General
Counsel of Electrolux North America
2000–2001.
17,235 B-shares.
Lars Worsøe-Petersen
Head of Group Staff Human Resources.
Born 1958. M. Econ., Aalborg University,
Denmark. Employed 1994. Member of
Previous positions: Head of Human Resources
for Electrolux Major Appliances in North
America 2002–2005. Head of Electrolux
Holding A/S, Denmark 2000. Head of Human
Resources for Electrolux Major Appliances in
Europe 1999. Head of Human Resources for
Electrolux operations in Denmark 1994.
14,027 B-shares.
Holdings as of 31 December 2008.
Olle Wallén, Åsa Stenqvist and Martin Bertinchamp.
Bo Andreasson.
Lars Worsøe-Petersen, Roger Leon and Bernt Ingman.
103
Top, from left:
Magnus Yngen, Anders Ströby and Hans Linnarson.
GR O U P M A N AGEM EN T
Sustainable
Development
10 4
H usqva r n a is co mmit ted to o per ating in
a r e sp o nsibl e m a nner in o r der to achie v e
d e v elo pment th at is eco no mic a l ly,
so ci a l ly a n d eco lo gi c a l ly sus ta in a bl e.
This r e sp o nsibil it y inclu de s a l l o f the
Gro u p ’ s ac ti v itie s a n d pro ce sse s, a n d is
a imed at cr e at in g lo n g-ter m va lu e fo r
sh a r eho l ders, employ ee s a n d other
s ta k eho l ders w ho a ffec t o r a r e a ffec ted
by H usqva r n a’ s o per ati o ns.
Revised Code of Conduct
Husqvarna’s revised Code of Conduct was adopted by the
Board of Directors in 2008. The code underscores the values
and principles by which the Group conducts its relations with
employees, business partners and other stakeholders. The
code applies to all employees irrespective of position or country. Husqvarna also encourages suppliers and other business
partners to comply with the code.
The Code of Conduct is based on the ILO’s Declaration on
Fundamental Principles and Rights at Work, the OECD’s guidelines for multinational companies, and the UN Universal
Declaration on Human Rights.
Implementation of the revised code in the organization
began at the end of 2008. The code is supplied to external suppliers, retailers and other business partners.
The code is available in several languages and can be downloaded from www.husqvarna.com.
Bribes and corruption
The code of conduct makes it clear that bribes and corruption
are not permissible. Employees may not accept gifts, services
or other forms of remuneration, which may influence or which
could be considered to influence the employee’s objectivity
Customers
Suppliers
ECONOMI C RESPONSIBIL ITY
Husqvarna’s goal is to create value for stakeholders and simultaneously achieve sustainable, profitable growth.
Most of the economic value that is generated by sales of
Group products and services is divided among various stakeholders. Part of this value remains in the Group for investment,
product development, marketing and other purposes. The
total value added by the Group in 2008 amounted to
SEK 8,682m (9,647).
ENV IRONMENTAL RESPONSIBIL ITY
Husqvarna’s environmental responsibility is anchored in all
operations and covers everything from choice of materials,
production processes, consumption of materials and energy
and product features such as exhaust emissions, noise levels
and packaging, to the recyclability of products.
The product range is dominated by engine-powered products. The majority of them are petrol-powered, while the others
are powered by electricity and/or batteries.
Husqvarna products are subject to criteria for environmental impact and other effects arising from use and recycling.
These criteria often consist of specified thresholds, and take
the form of international, national and regional legislation,
regulations and directives.
Husqvarna performs analyses in order to evaluate the
potential environmental impact of products and services.
These analyses indicate that the total environmental impact
generated by the Group derives mainly from energy consumption and exhaust emissions when the products are used.
Accordingly, a central part of Husqvarna’s environmental work
is focused on reducing these effects.
Distribution of Group sales
Value added
Stakeholder
and commercial judgement. Furthermore, Husqvarna shall not
offer remuneration or other benefits to any business partner or
stakeholder, which contravene or which could be considered to
contravene any law or customary business practice.
SEKm
Group sales
Cost of materials
and services
Value added
Distributed to stakeholders
Employees
Salaries
State and
municipality
Taxes
Credit
institutions
Interest
Shareholders
Dividends
Total
2008
2007
32,342
33,284
–23,660 –23,637
8,682
9,647
4,037
1,122
3,973
1,029
479
853
594
862
7,094
675
667
7,197
Dividends, 3%
Employer
contributions, 3%
Interest, 2%
Taxes, 1%
Investment, R&D,
marketing, etc., 5%
Salaries, 13%
Cost of materials
and services, 73%
SUS TA I N A BL E D E V ELO PM EN T
Environmental aspects regarding acquisitions
In connection with agreements for acquisition of companies or
operations with production facilities, Husqvarna performs an
environmental-risk audit. The audit includes permits for oper
ations, risk of soil contamination and interviews with management. When necessary, inspections are performed by qualified
experts.
Product development
Husqvarna’s investments in product development are focused
on creating products that combine high performance with
improvements in energy consumption, exhaust emissions,
safety, noise levels, ergonomics, user-friendliness, simplicity of
service and recyclability.
Husqvarna has been a leader in terms of development of
more efficient two-stroke engines, and was one of the first to
launch products with catalysts.
Fuel consumption
Husqvarna has long experience of development of two-stroke
engines, and is making intensive efforts to reduce fuel consumption on the basis of new engine technologies. For the
newly developed two-stroke engines, which are increasingly
being used for chainsaws, clearing saws, leaf blowers and trimmers, a reduction in fuel consumption of approximately 15%
was achieved in 2004–2008. Products such as lawn mowers are
fitted with four-stroke engines, which normally consume less
fuel than two-stroke engines.
Exhaust emissions
Since the mid-1990s, regulations regarding emissions from petrol-powered equipment have successively become more rigorous, and this trend is expected to continue. The Group has
developed new engines for handheld petrol-powered products that fully comply with these regulations and simultan
eously offer enhanced performance.
Husqvarna uses a mix of technological solutions, including
catalysts, to reduce exhaust emissions in order to achieve optimal performance.
Many of the Group’s handheld products are fitted with
E-TECH and X-TORQ engines that meet the strictest exhaust
emission criteria in the US and Europe. Several models are also
equipped with catalysts, where the E-TECH technology generates lower exhaust temperatures compared to other catalyst
technologies. This increases the product life-span and
enhances product safety.
Exhaust emissions from the Group’s handheld products,
particularly hydrocarbons, have been reduced by approximately 40% on average since 2001. The Group has a number of
important patents in this field and is well-prepared to meet
future emission standards. Husqvarna participates actively in
discussions with authorities regarding these standards.
Ergonomics and Safety
Husqvarna’s investments in product development are also
aimed at improving both ergonomics and product safety. The
Group works continuously to improve information regarding
the correct use of its products.
Noise levels
Husqvarna works actively to reduce the noise emitted by its
products. Within four to five years, considerably more of the
Group’s product categories are expected to be subject to
stricter thresholds for ambient noise. The Group monitors this
area continuously, and product development includes assumptions that these thresholds will become more restrictive.
Husqvarna will launch the world’s first battery-driven cultivator in 2009.
Environmental declarations
Many customers require declarations of the materials that a
product comprises as well as the production methods used.
Since 2000, Husqvarna has prepared environmental declar
ations for several products. In addition to materials, these dec
larations specify fuel consumption, type of fuel, lubricants,
emissions, vibrations, noise levels, packaging and recyclability.
They also include information on product compliance with
international standards.
According to Husqvarna’s quality policy, customer expect
ations regarding the Group’s products and services shall
always be met or surpassed. The strategy involves developing
technology and products which surpass legislated minimum
standards.
10 5
Environmental policy
Work on producing a common Group environmental policy will
be completed in 2009. The policy describes Husqvarna´s efforts
to continuously minimize environmental impact, to prevent
environmental pollution and to comply with legal and other
requirements in the environmental area. The policy will be
based on a life-cycle approach.
Composition of materials
Husqvarna aims to select materials with the least possible
environmental impact. The Group continuously replaces
previously used materials with new, more environmentally
adapted alternatives as the latter become available.
Husqvarna’s Restricted Materials List (RML) is updated
continuously and is communicated internally as well as
externally to suppliers and to secondary suppliers.
The European Union’s RoHS directive went into effect on
1 July 2006. Well in advance of that date, Husqvarna modified
its electrically powered products in cooperation with suppliers
in order to phase out prohibited substances.
REACH is the new chemicals legislation which went into
effect on 1 June 2007 in the EU. The Group has appointed a
working group in order to ensure that internal processes at
Husqvarna comply with the REACH requirements.
10 6
Technologies and products
The examples below illustrate technologies and products
developed by Husqvarna in recent years with particular focus
on engine technology and environmental compatibility. They
meet stricter criteria than the prescribed minimum standards.
Automower®
Husqvarna has developed Automower ®, the market’s first
robotic lawn mower. Automower ® is silent, efficient, generates
no emissions and features low energy consumption. It mows
the lawn automatically and returns to the docking station when
battery power drops to a predefined level. A larger model of
the robotic lawn mower for professional use will be launched in
the spring of 2009. See also page 9.
Hybrid technology
Early in 2008 the Group launched the new Automower ® Solar
Hybrid, which is driven by both solar cells and a battery. The
solar panel reduces energy consumption and results in longer
battery life. See also page 9.
X-TORQ®
Husqvarna has created X-TORQ technology for two-stroke
engines in order to reduce exhaust emissions and fuel consumption, simultaneously maintaining high quality and performance.
X-TORQ offers up to 20% lower fuel consumption and 60%
lower exhaust-emission levels, which means better fuel economy, lower carbon dioxide emissions and a better working
environment. See also page 9.
Environmental fuels and lubricants
Husqvarna launched environmentally adapted fuels and lubricants at an early stage. The Group currently sells engine fuels
based on alkylate, which in comparison with conventional petrol enables substantial reductions in benzene and ethers. The
Group has also developed Vegoil, an optimal chain lubricant
based on vegetable oil, which provides longer chain life and
reduced environmental impact.
Producer responsibility and recycling
The Group manages recycling of electrical products in accord
ance with the EU’s directive WEEE (Waste Electrical and
Electronic Equipment) as well as national legislation in specific
countries. Husqvarna also maintains a system for reporting to
regulatory authorities in accordance with relevant
requirements.
Husqvarna has been participating actively in the development of the ISO standard for recycling of manually portable
forestry machinery that went into effect in the spring of 2008.
Production
Husqvarna operates 22 major plants, of which ten are located
in Europe, six in the US, one in Brazil, four in China and one in
Japan.
By year-end 2008, 61% (63) of the Group’s production area
was certified to ISO 9001, the international standard for qualitymanagement systems, and the equivalent of 84% (92) was certified to ISO 14001, the international standard for environmental
management systems. In comparison with 2007 the total certified area under both standards has decreased somewhat, primarily as a result of acquisions in Asia.
Key environmental indicators for production
Environmental work includes periodic measurements by the
Group of several key environmental indicators at production
units.
All Group plants are included in the data shown in the
graphs on the next page.
Since the extent of environmental impact depends on production volume, specific key indicators are calculated in relation to added value, which is defined as the difference between
total production cost and the cost of materials used as production inputs.
Husqvarna’s new two-stroke engines
Husqvarna's
E-TECH I
Index
100
Husqvarna's
E-TECH II
Husqvarna's
X-TORQ
80
60
Exhaust emissions from the Group´s handheld products, particulary
in form of hydrocarbons, have been reduced by approximately 40%
on average since 2001. For the newly developed two-stroke
engines, which are increasingly being used for chainsaws, clearing
saws, leaf blowers and trimmers, a reduction in fuel consumption of
approximately 15% was achieved in 2004–2008.
40
20
0
1994
1996
1998
2000
2002
2004
Fuel consumption
Emissions of hydrocarbons and nitrogen oxids
2006
2008
Responsible purchasing – supplier cooperation
The cost of purchasing raw materials and components corres
ponds to approximately 55% of the Group’s net sales. The efficiency of purchasing activities is therefore decisive. The Group
has a process and an organization for purchasing which combines overall Group requirements and opportunities with
knowledgeable local buyers. The Husqvarna Global Purchasing
Council (GPC) enables purchasing to be coordinated globally
and across business sectors. The GPC ensures transparency in
the purchasing process as well as uniform working methods,
purchasing tools, contracts and processes throughout the
organization.
Steel, plastics, metal powder, aluminum and magnesium are
the most important raw materials purchased by Husqvarna.
Petrol-powered engines account for the largest share of
components.
The share of purchases from low-cost countries as defined
by the World Bank is currently approximately 20%.
Direct material balance
%
2008
2007
2006
2005
2004
Finished products, incl. packaging
External recycling (material and energy)
Waste of landfill (non-hazardous)
Hazardous waste
Emissions to air
Emissions to water
Total direct material
85.45
12.94
1.41
0.17
0.03
0.00
100
86.74
11.67
1.43
0.14
0.03
0.00
100
86.96
10.88
2.00
0.14
0.03
0.00
100
84.82
14.29
0.70
0.16
0.03
0.00
100
85.87
13.32
0.65
0.12
0.03
0.00
100
Environmental issue
Exhaust emissions1)
Safety
Noise levels
Producer responsibility
Material composition of
products
Directive/legislation
Product area
California: California Code of Regulations
Rest of US and Canada: EPA 40 CFR Part 90
EU-Directive 202/88/EC
EU-Directive 2001/95/EC (GPSD)
EU-Directive 2000/14/EC (ambient noise)
EU-Directive 2003/10/EC (physical agents)
EU-Directive 2002/96/EC (WEEE)
Internal combustion engine
powered products under 19 kW
EU-Directive 2002/95/EC (RoHS)
EU-Directive 1907/2006/EC (REACH)
All products and services
All Husqvarna products, in principle
Products at workplaces
Electrical and electronic products
California Code of Regulations, Proposition 65
Electrical and electronic products
Import and production of chemicals
List of chemicals, use either limited or
prohibited
EU-Directive 89/336/EEC
All products
Electro magnetic
compability2)
1) A ll regulations in the table above relating to exhaust emissions are based on the American EPA (US Environmental Protection Agency) regulations stage 2. In general,
the regulations require 55–80% reductions in emissions of hydrocarbons, depending on engine category, as compared to previous criteria for non-exhaust controlled
portable engines. Most of the requirements were scheduled for full implementation in 2007, but in certain cases transitional provisions apply until 2010. Application of
similar requirements with the same threshold values as EPA is in progress in the EU.
2) Radio interference.
Husqvarna’s products are covered by regulations concerning environmental impact and other effects arising from use and recycling. These regulations often define
minimum levels of undesirable effects, and are included in international, national and regional laws, regulations and directives.
CO2 in relation to added value
Volume of water treated in
relation to added value
Energy consumption in
relation to added value
Energy consumption in
relation to production area
kg/SEKt
m 3/SEKt
Kwh/SEKt
kWh/SEKt
40
0.30
100
750
32
0.24
80
600
24
0.18
60
450
16
0.12
40
300
8
0.06
20
150
0
02 03 04 05 06 07 08
0.00
02 03 04 05 06 07 08
0
02 03 04 05 06 07 08
0
02 03 04 05 06 07 08
Since the extent of environmental impact depends on production volume, specific key indicators are calculated in relation to added value, which is defined as the
difference between total production cost and the cost of materials used as production inputs.
107
Major directives and legislation impacting the Group’s products
The table shows utilization of material in the Group’s manufacturing units.
All suppliers are carefully evaluated before they are
approved. The criteria which they must fulfill include:
• Compliance with the Husqvarna Code of Conduct.
• A documented quality-assurance process.
• Compliance with Husqvarna’s requirements for materials in
accordance with the Group’s Restricted materials List (RML).
The Group’s Restricted Materials List (RML) has been sent to
all suppliers with a request for modifications in accordance with
the list. Approximately 70% of the suppliers have confirmed
compliance with the RML.
The Husqvarna Code of Conduct is attached as an appendix to all new contracts with suppliers, who are expected to
adopt and comply with its principles.
In 2008, fifteen Active Supplier Quality Assessments were
conducted at short notice. In addition, 125 supplier evaluations
were carried out in Asia, primarily in China, half of which were
conducted in connection with the acquisition of the Jenn Feng
outdoor products operation.
10 8
SOCI AL RESPONSIBIL ITY
Husqvarna’s social responsibility includes development of
employees, the working environment and conditions of work as
well as fundamental respect for human rights and a constructive social commitment.
The workplace
A long-term and conscious investment in development of the
skills of Husqvarna’s leaders is an important prerequisite for
achieving the Group’s goals. Promoting respect and tolerance
in the workplace and offering employees fair working conditions, a safe workplace and opportunities to develop are also
central for creating motivation and commitment at all levels in
the Group.
Husqvarna has established fundamental Group-wide principles
regarding relationships with Group employees – Husqvarna’s
People Process. The process supports managers with regard to
recruitment and selection, evaluation of work, career development, and remuneration. The process is also aimed at ensuring
that people who contact the company are treated fairly. The
Husqvarna’s People Process, the Code of Conduct and various
policies and guidelines form the basis for this work. The information is available to all employees on the Group’s intranet.
Employees
Husqvarna has employees in more than 40 countries, approximately 85% of whom work outside Sweden. The average number of employees amounted to 15,720 (16,093) in 2008. The
number of temporary employees varies during the year as a
result of seasonal variations in Group sales. The number of
temporary employees normally peaks during the first quarter
and the start of the second quarter, in which the majority of
garden products are manufactured. Temporary employees
normally account for more than 20% of all employees. The figure for 2008 was approximately 18%. A large share of tempor
ary employees leads to comparatively high employee turnover
and also requires that some personnel are given on-the-job
training at the start of the season.
All employees have the right to free association and
Husqvarna considers that it has a good relationship with its
employees as well as the trade unions they belong to.
Talent management
Husqvarna has a well-developed process for Talent Management,
in order to assess, develop and secure access to future leaders
through succession and mobility planning. The process starts
with the annual appraisal-talk in which goal fulfilment and performance are evaluated and goals are set for the next period.
To strengthen the leadership work, the Group introduced a
tool in 2008 for a 360-degrees evaluation. The tool is used
selectively to provide managers and key specialists with feedback on their leadership from employees, colleagues and their
immediate manager.
Since Husqvarna attches great importance to the ability to
function and work in teams, an annual appraisal of the team is
conducted (see employee surveys below). Based on both team
evaluation and individual appraisal, development of employees
is conducted primarily through on-the-job-training but also
through various activities such as different training programs,
coaching and feedback, job-rotation and promotion to new
positions within the Group.
The process is managed by Group Staff Human Resources
in close cooperation with local personnel managers and line
managers who are actively involved in the work.
Number of employees and sales by employee
Number
20,000
SEKm
4
15,000
3
10,000
2
5,000
1
0
04
05
06
07
08
0
Avarage number of employees
Sales by employee, SEKm
Approximately two-thirds of Husqvarna’s personnel are employed in
manufacturing at Group plants throughout the world.
OLM – open labor market
Husqvarna favors increasing internal recruitment and job rotation. Vacant managerial roles and specialist positions are
posted on the Group’s internal open labor market, OLM, on the
intranet and at www.husqvarna.com.
Employee surveys
Husqvarna conducts annual employee and team surveys aimed
primarily at enhancing and developing the team’s effectiveness
as well as the individual’s working conditions. In 2008, approximately 450 teams totaling 2,900 people were invited to participate in the team survey. The response rate was slightly more
than 70% which was higher than in the previous year. The result
of the survey showed that 73% had had appraisal talks with
their immediate manager during the past year. Furthermore,
employees perceived an open business climate and felt motiv
ated and customer-focused. Some areas for improvement that
were identified, referred to internal information and feedback
on individual targets.
Health and safety
All employees shall be offered a safe and healthy working environment, and shall receive the necessary information and
training in terms of security and the working environment.
Use of drugs and alcohol at work is not tolerated.
Employees by geographical area
North America, 40%
Europe, 45%
Support of UNICEF
Husqvarna, through its subsidiary Gardena, supports the
UNICEF (United Nations’ Children’s Fund) project for supplying
clean water in the Sudan, one of the poorest countries in Africa.
In 2008 one euro was donated to the project for every
Gardena pump sold in Germany, Austria, France, Italy, Spain
and Hungary in order to create new sources of water. Gardena’s
total donation was EUR 191,700 (175,000), which helps to ensure
access to clean drinking water and generates opportunities for
improved hygiene for thousands of people.
FTSE4Good
Since 2007 Husqvarna has been listed in the FTSE4Good Index
Series. FTSE4Good is an equity index series that is designed to
facilitate investment in companies that meet globally recognized corporate responsibility standards. For more information,
visit www.ftse.com.
Säker Skog
Husqvarna plays an active role in the Swedish Säker Skog (Safe
Forests) project, which is led by LRF (Federation of Swedish
Farmers). The goal is to contribute to greater safety and a better working environment within forestry operations. For more
information on the project, visit www.sakerskog.se.
Product safety
Husqvarna attaches great importance to offering products and
services with high quality and safety. These aspects are always
considered in the development of products and processes,
from the product idea to a finished product, including manufacturing, use, maintenance and recycling.
North America
Europe
Rest of the World
Total
of whom women, %
of whom men, %
of whom white-collar, %
of whom blue-collar, %
2008
2007
6,285
7,151
2,284
15,720
36
64
36
64
6,948
7,057
2,088
16,093
37
63
34
66
Training in the new Code of Conduct
In December 2008, training in the new Code of Conduct was
started for the 700 most senior managers.
No work-related deaths occurred in 2008. The most common causes of accidents were injuries from machines or other
equipment.
10 9
Training program
Husqvarna offers three different annual Group-wide programs
within management training. The Husqvarna Next Level Leader
training program is aimed at a managerial level directly under
the Group Management. Since it was started in 2007 it has
been held once a year for a total of 24 employees. The
Husqvarna Leader Program is intended for lower levels in the
organization and 129 managers have participated in the program since it began in 2006. Husqvarna Project Leader is a customized training program, which aims to develop project
management and project leadership skills. Since it started at
the end of 2007, 82 people have participated in the program.
THE HUSQVARNA
share
110
Listing and trading volume
The Husqvarna shares were listed on NASDAQ OMX
Stockholm on 13 June 2006.
The total volume of Husqvarna shares traded in 2008 was
484 million, with a total value of SEK 27.8 billion, corresponding to
an average daily trading volume of 1.9 million shares or SEK 110m.
The trading volume in Husqvarna’s shares corresponded to
0.6% of the total volume of shares traded on NASDAQ OMX
Stockholm in 2008.
Share-price trend in 2008
During 2008 Husqvarna’s A-share declined by 51% and the
B-share by 46%. NASDAQ OMX Stockholm’s All-Share index
fell by 42% and OMX Stockholm Consumer Discretionary
index, in which Husqvarna is included, fell by 35%. The yearend closing price was SEK 37.9 for the A-share and SEK 41.3
for the B-share. The market capitalization at year-end was
SEK 15.6 billion.
ADR Program
An ADR program for Husqvarna B-shares facilitates trading in
Husqvarna shares for American investors. The ADRs are traded
on the American over-the-counter (OTC) market. The Bank of
New York Mellon is Husqvarna’s ADR Depositary Bank. One
ADR is equivalent to two ordinary B-shares. For more information, visit www.adrbnymellon.com.
Share capital and voting rights
The share capital as of 31 December 2008 was distributed
between 98,380,020 A-shares and 286,756,875 B-shares, totalling 385,136,895 shares. The share capital amounted to
SEK 770,273,790. A-shares carry one vote and B-shares onetenth of a vote. For more information, see Note 17.
Dividend and dividend policy
The Board of Directors has proposed that no dividend be paid
for 2008. The dividend for 2007 was 2.25 SEK per share, corres
ponding to 42% of net income 2007. The long-term goal is for
the dividend to correspond to 25–50% of net income for the
year.
The Annual General Meeting 2008 authorized the Board of
Directors to repurchase not more than 3% of the total number
of outstanding B-shares. The repurchase of shares is intended
to ensure Husqvarna’s commitment with regard to existing
long-term incentive programs.
950,000 B-shares were repurchased during the year. At yearend, the total number of repurchased shares amounted to
2,919,000 B-shares, corresponding to 0.76% of the total number
of outstanding shares. For more information about repurchased
shares see page 31 and the proposal for repurchase of shares
on page 33.
Ownership structure
The number of shareholders at year-end amounted to 64,555
(67,945). Approximately 74.6% (69.5) of the share capital was
owned by Swedish institutions and mutual funds, approximately 12.0% (16.4) by foreign investors and approximately
13.4% (14.2) by private Swedish investors.
Incentive program
Husqvarna has share-related long-term incentive programs for
2006, 2007 and 2008. The Board of Directors proposes that the
AGM 2009 adopt a long-term incentive program for 2009. For
more information about the incentive programs, see Note 19.
Share price development 2008
Share price development since IPO, June 2006,
until year-end 2008
SEK
80
SEK
110
100
90
80
70
60
70
60
50
50
40
30
40
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Husqvarna B-share
OMX Stockholm_PI
SX25 Consumer Discretionary_PI
30
2006
2007
Husqvarna B-share
OMX Stockholm_PI
SX25 Consumer Discretionary_PI
2008
T H E H US QVA R N A SH A R E
Share capital and number of shares
Share capital,
SEK
Quotient value,
SEK
Number of
A-shares
Husqvarna before listing 2006
2006: stock-split and bonus issue
2007: bonus issue
2008: no transactions
495,000,000
592,518,306
770,273 790
770,273,790
100
2
2
2
9,502,275
98,380,020
98,380,020
Capital, %
Votes, %
15.4
8.4
6.8
4.6
4.6
4.3
4.1
2.2
2.0
1.7
54.1
28.7
6.2
2.1
3.4
2.1
13.1
3.2
1.3
0.6
1.3
62.0
Largest shareholders in Husqvarna AB
Investor AB
Alecta Mutual Pension Insurance
Swedbank Robur Investment Funds
AFA Insurance
SEB Investment Funds & SEB Trygg Liv
LE Lundbergföretagen
AMF Insurance & Pension Investment Funds
4 th Swedish National Pension Fund
2nd Swedish National Pension Fund
Handelsbanken/SPP Investment Funds
Total for the 10 largest shareholders
Number of Total number of
B-shares
shares
286,756,878
286,756,875
286,756,875
4,950,000
296,259,153
385,136,895
385,136,895
Change during the year
1.3
1.8
3.0
0.2
–0.5
0.3
0.8
–0.6
0.7
0.5
7.5
1.3
0.0
0.6
0.0
–0.2
1.7
0.2
–0.1
0.1
–0.1
3.5
2008
2007
2006
Earnings per share after
dilution, SEK
Cash flow per share, operating,
SEK
Cash flow per share, operating,
after dilution, SEK
P/E-ratio
Enterprise value (EV), SEKm
EV/EBIT
EV/sales
Dividend per share, SEK
Yield2), %
Dividend payout ratio, %
Year-end price, A-share, SEK
Highest price, A-share, SEK
Lowest price, A-share, SEK
Year-end price, B-share, SEK
Highest price, B-share, SEK
Lowest price, B-share, SEK
Equity per share, SEK
Number of shareholders
Market capitalization, SEKm
3.34
5.29
4.83
3.34
5.29
4.83
5.22
4.79
1.39
5.22
12
29,124
12.3
0.90
0.001)
—
—
38
77
38
41
77
39
22.91
64,555
15,572
4.79
15
41,571
11.7
1.25
2.25
2.9
42
77
119
65
77
110
65
19.11
67,945
29,559
1.39
22
36,352
11.6
1.24
1.731)
2.1
35
89
92
62
82
82
58
16.23
66,289
31,701
1) 2008 as proposed by the Board. 2006 adjusted for bonus issue.
2) Dividend/year-end share price.
Shareholding, by size in Husqvarna AB
Size of holding
% votes
No. of
shareholders
% of no. of
shareholders
3.4
6.0
1.3
89.3
100
52,494
10,962
477
622
64,555
81.3
17.0
0.7
1.0
100
1–1000
1,001–10000
10,001–20,000
20,101–
Total
Sell-side analysts covering Husqvarna
ABG
Christer Fredriksson
Carnegie
Björn Enarson
Cheuvreux
Johan Eliason
Citi
Natalia Mamaeva
Danske Bank
Carl Holmquist
Deutsche Bank
Stefan Lycke
Evli Bank
Michael Andersson
Execution Ltd
Nicola Reason
Goldman Sachs
Fitzhugh Peters
Handelsbanken
Rasmus Engberg
HQ Bank
Patric Lindqvist
JP Morgan
Andreas Willi
Erik Penser
Kenneth Toll Johansson
Nordea
Johan Trocmé and
Ann-Sofie Nordh
S & P Equity Research
Jawahar Hingorani
SEB Enskilda
Anders Trapp and
Stefan Cederberg
Swedbank
Johan Dahl
Öhman
Fredrik Nilhov
Key facts
Listing: NASDAQ OMX Stockholm
Number of shares: 385,136,895
Shareholders by country
Market capitalization at year-end: SEK 15.6 billion
Sweden, 86.1 % (81.7)
Norway, 1.8 % (1.7)
Great Britain, 2.8 % (3.5)
Other countries, 6.3% (7.8)
USA, 3.0 % (5.3)
Ticker codes: Bloomberg HUSQA SS, HUSQB SS,
Reuters HUSQa.ST, HUSQb.ST, NASDAQ OMX
Stockholm HUSQ A, HUSQ B
ISIN code: A-share SE0001662222, B-share
SE0001662230
Read more on www.husqvarna.com/ir
111
Share data
Source: SIS Ägarsservice as of 31 December 2008.
Annual General
Meeting 2009
Participation
Shareholders who intend to participate in the Annual General
Meeting must
• be registered in the share register kept by Euroclear Sweden
AB on Friday 17 April 2009.
• give notice of intent to participate, thereby stating the number of assistants attending, to Husqvarna no later than on
Friday 17 April 2009.
Notice of participation
Notice of intent to participate can be given
• by mail to Husqvarna AB, EM-LA, Box 30224, SE-104 25
Stockholm, Sweden
Notice should include the shareholder’s name, registration
number, if any, address and telephone number. Information
provided together with the notice will be made subject to data
processing and will be used solely for the Annual General
Meeting 2009. Shareholders may vote by proxy, in which case a
power of attorney should be submitted to Husqvarna prior to
the Annual General Meeting.
Shares registered by nominees
Shareholders, whose shares are registered in the names of
nominees, must have their shares temporarily registered in
their own name on Friday 17 April 2009, in order to participate
in the Annual General Meeting.
Dividend
The Board of Directors has proposed that no dividend be paid
for 2008.
• by telephone at +46 8 738 70 10 between 9–12 am and
1–4 pm weekdays
• at www.husqvarna.com/agm
112
The Annual General Meeting of Husqvarna AB will be held at
4 pm on Thursday 23 April 2009, at the Elmia Congress Centre,
the Hammarskjöld Hall, Elmiavägen, Jönköping, Sweden.
Factors affecting forward-looking statements
This report contains forward-looking statements in the sense
referred to in the American Private Securities Litigation Reform Act
of 1995. Such statements comprice, among other things, financial
goals, goals of future business and financial plans. These statements are based on present expectations and are subject to risks
and uncertainties that may give rise to major deviations of the
result due to several aspects. These aspects include, among other
things: consumer demand and market conditions in the geographical areas and lines of business in which Husqvarna operates, the
effects of currency fluctuations, downward pressure on prices due
to competition, a material reduction of sales by important distributors, any success in developing new products and in marketing,
outcome of any product responsibility litigation, progress when it
comes to reach the goals set for productivity and efficient use of
capital, successful identification of growth opportunities and
acquistion objects, and to integrate these into the existing business and successful achievement of goals to make the supply chain
more efficient.
Production: Husqvarna AB and Solberg. Print: Göteborgstryckeriet.
Copyright © 2009 Husqvarna AB (publ). All rights reserved. Husqvarna, Jonsered, Klippo, Zenoah, RedMax, Diamant Boart, Dixon, Gardena, Flymo,
Partner, McCulloch, Poulan, WeedEater, Soff-Cut, Bluebird, Yazoo/Kees, Automower® and other product and feature marks are trademarks of the
Husqvarna Group.
husqvarna in brief
Husqvarna
iN BRIEF
10
9
north america
rest of the
world
4
forestry
1
2
market position
29%*
throwers.
32%*
as garden tools.
2007 Through
brands
2006
1995
lawn mower.
1986
1978 Electrolux
outdoor products.
1959 Husqvarna
lawn mowers.
l awn and
garden
Rest of the World
Consumer Products
product offering
Consumer products
construction
6
North America
history
300 years
of INNOVATION
Europe
17%*
12%*
10%*
tools.
approximately 40%.
1903 Product
1896
1689
1872
1689
SUH
ANRAVQ
NA
LAUN
PER
TRO
8002
HUS
QVARNA
AN
NUAL
REP
ORT
2008
Annual Report 2008
Contents 2008
1
Parent Company
Income statement
42
Strategy
4
Balance sheet
43
Strong brands 6
Cash flow statement
44
7
Change in equity
8
Definitions
45
46
12
Notes
46 – 83
Financial goals
13
14–25
Auditor’s Report
85
84
Consumer Products
14
Five-year review
86
20
Quarterly data
88
26–37
Risk management
34
38–45
Group
90
100
Group Management
102
104
Income statement
38
The Husqvarna share
110
Balance sheet
39
112
Cash flow statement
40
History
113
41
23 April
8 May
Contacts
Åsa Stenqvist
Investor Relations
ir @husqvarna.se, +46 8 738 64 94
Tobias Norrby
Press Hotline

Annual Report 2008

Transcription

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