Options
In 1999, the Board of Directors adopted a stock option programme in Swedish Match. The purpose of the option programme was to further increase the involvement of employees in the Company and their ownership of it, to attract and motivate employees within the Company, and to generate incentives for employees that coincide with the interests of the shareholders. The stock option program was discontinued after the 2009 reporting period.
The Group had in 2009 an option program that could result in an allotment of call options on shares in Swedish Match AB. The allotment was subject to the fulfillment of the result of two mutually independent criteria: the improvement of the rolling three year average in the Group’s earning per share and the result of the return after tax on operating adjusted capital compared to the previous three years average. In addition, the participants needed to retain as an employee at the end of 2009. The options were granted at the beginning of 2010 and vested immediately. In countries, such as Sweden, where the call options are taxed as income at allotment the participant received options to the value of the net allotment and the amount of the income tax was paid in cash to the participant. Other participants received options to the value of the gross allotment.
In 2010, 713,670 options were allotted. These can be exercised between March 1, 2013 and February 28, 2015. Each option entitles the holder to purchase one share in Swedish Match AB at a price of 197.45 SEK per share. The options are valued by an external institution in accordance with the Black & Scholes model. The value at the time of distribution was 26.04 SEK per option, corresponding to a total of 18 MSEK. The valuation was based on the following conditions: the average share price ten trading days starting with the day the annual results 2009 was published which was 164.55 SEK, expected volatility was 30.7 percent and the risk-free interest rate was 2.55 percent. The expected volatility is mainly based on historic volatility of the Swedish Match AB share. An assumption about dividend growth is also made to compute the value of the options. The options alloted for the 2009 program were based on an outcome of 67 percent fulfillment of the two mutually independent criteria.
During 2009, the Group’s consolidated income statement was charged with 30 MSEK, excluding social charges, and the Parent Company’s income statement was charged with 11 MSEK, excluding social charges, pertaining to options vested during the year. For program participants in Sweden, the allotment of options constitutes a taxable income.
Page updated Apr 4, 2011