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Saab Annual Report 2011

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Saab Annual Report 2011

Saab Annual Report 2011

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  • 1. ANNUAL REPORT 2011ANTICIPATE TOMORROW75 YEARS OF INNOVATION FORA SAFER SOCIETY
  • 2. CONTENTSSaab in brief Innovative technology and cost Pages efficiency for 75 yearsSaab 2011 1 4–5Events by quarter 2011 2–3 Saab has been supplying innovative, cost-effective and competitive productsSaab 75 years 4–5 and systems to customers around the 6–7 world for 75 years. The key to success isChairman’s statement to focus on partnerships, alliances andCEO comment 8–9 information sharing.Market and driving forces 10–11Saab’s core competence 14–15 2011 – An important year for GripenStrategic goals 16–17 Pages 12–13 Gripen’s success in 2011 demonstrates– Profitable growth 18–21 the system’s world-leading– Performance 22–23 capabilities to meet the tough demands of the international market in terms of– Portfolio 24–27 function, quality and cost.– People 28–29Market segments 32–33Markets by region 34–35 Sensis – Bridgehead to a globalSaab’s responsibilities – Pages 20–21Sustainability 36–37 marketSaab’s responsibilities – The acquisition of Sensis of the U.S. isBusiness ethics 38 fully in line with Saab’s strategic prioritiesSaab’s responsibilities – to create profitable growth, increase itsEmployees 39–41 geographical presence and continuously adapt to portfolio.Saab’s responsibilities – Society 42–43Saab’s responsibilities –Environment 44–47Financial review 2011 48–49 Local presence around the world Pages 30–31Business areas 50–61 A local presence is vital to success. In 2011, we therefore established aRisks and risk management 62–65 stronger presence in a number ofOther information 66–68 countries, e.g., through new research and development centres in India, theFinancial statements 69–81 UK and Brazil.Notes 82–130Dividend motivation 131Proposed disposition of earnings 132Audit report 133Corporate governance report 134–144Shareholder information 145–151Financial information2012 and contact details 152Glossary 153While every care has been taken in the transla-tion of this annual report, readers are remindedthat the original annual report, signed by theBoard of Directors, is in Swedish.
  • 3. SAAB IN BRIEFOUR COMPETENCE MAKES SOCIETY SSaab offers world-leading solutions, products and services for military de- 100 countries. Our most important markefence and civil security. We develop, adapt and improve new technology to Australia and North America. We have aromeet our customers’ changing needs. We are represented in around 30 sales amount to around SEK 23 billion, ofcountries, while our solutions, products and services are sold to more than to research and development. BUSINESS AREASOur operations are conducted in six business areas that work together to utilise the Group’scompetencies as effectively as possible.Aeronautics Security and Defence SolutionsOffers a product portfolio Offers a product portfoliocomprising the Gripen comprising C4ISR sys-fighter and Unmanned tems, airborne early war-Aerial Systems (UAS). ning systems, trainingAeronautics also manu- and simulation, air trafficfactures components for management, maritimeSaab’s own aircraft and safety, security andfor passenger aircraft manufactured by others. monitoring systems, and solutions for safe, robustExamples of products: Gripen and Skeldar. communication. Examples of products: 9LV (combat management system), remotely operated towersDynamics (RT) and tactical systems for communicationOffers a product portfolio integration.with ground combatweapons, missile sys- Support and Servicestems, torpedoes and sig- Offers mainly supportnature management sys- solutions, technicaltems for armed forces. maintenance and logis-The business area also tics, as well as products,offers military and civil niche products from spinoffs solutions and services forsuch as rremotely operated vehicles for the offshore military and civil missionsindustry and mapping solutions for the defence mar- in locations with limitedket. Examples of products: Carl-Gustaf, RBS 70 and infrastructure.Rapid 3D Mapping. CombitechElectronic Defence Systems Combitech is an inde-Offers a product portfo- pendent, wholly ownedlio comprising airborne, subsidiary that offersland-based and naval technical and operationalsystems in radar, signals consulting services withintelligence and self- an emphasis on techncalprotection. The busi- systems. Combitech combines technology withness area also supplies environmental and safety thinking.civil and military customers with avionics to increaseflight mission efficiency and flight safety. Examples ofproducts: Giraffe AMB, Erieye and Arthur. For more information see pages 50–61.SALES DISTRIBUTION 2011BUSINESS AREAS MARKET SEGMENT GEOGRAPHICAL MARKETS 4% 3% 5% 6% 8% 14% 6% 25% 9% 37% 45% 22% 22% 17% 31% 8% 18% 19% 1% Aeronautics Security and Air Civil security Sweden Asia Defence Solutions Dynamics Land Commercial EU excl. Sweden Africa Support and aeronautics Electronics Services Naval Rest of Europe Australia Defence Systems Other Combitech North and South America
  • 4. SAFER GEOGRAPHICAL MARKETS The defence market is expected to decline in the West in the coming years as a result of the sovereign debt crisis and changing defence priorities. At the same time, the global market for civilets are Europe, South Africa, Asia, security and commercial aeronautics is expected to grow.ound 13,000 employees. Annual Sweden and rest of Nordic region Central and South Americaf which about 22 per cent is related The Nordic region accounts for about one per cent of The South American defence market is relatively mo- global defence spending, a figure that is expected to dest in size. Brazil, one of the strongest economies in rise slightly in the years ahead. Sweden is the single the region, represents the largest market. We have largest market for Saab, and it is where the majority of been established in the region for many years. In our research and development is conducted. 2011, we strengthened our presence by opening a new research centre in Brazil. Rest of Europe After the U.S., Europe is the largest defence market in Asia, Middle East and Australia the world, representing about 23 per cent of global The region has maintained its strong economic spending. Economic uncertainty and the sovereign growth. Military spending is expected to continue to debt crisis have led to delays in many defence pro- increase in the years ahead. The civil security market jects, due to which the market is expected to shrink in is relatively immature and strong growth is expected, the coming years. France, Germany and the UK are driven in part by increasing infrastructure needs. A expected to account for the largest relative cutbacks. growing share of our sales is in the region, and in The civil security market is anticipating growth. A 2011 we strengthened our presence in India. large share of our sales is to the rest of Europe, and in 2011 it strengthened our position in the UK through Africa our new office in London. The African continent has experienced positive eco- nomic growth in recent years. Several countries face North America political turbulence and tough economic situations, The U.S. is the world’s largest defence market, ac- however. Spending on defence and civil security is counting for about 43 per cent of global spending. expected to increase in coming years. Since the ac- The market is expected to shrink due to the sovereign quisition of Grintek in 2005, Saab has a strong posi- debt crisis and changing defence priorities. The U.S. tion in South Africa. civil security market is also the largest in the world For more information see pages 34–35. and is expected to continue to grow. We strengthe- ned our U.S. position in 2011 through the acquisition of Sensis. MARKET SEGMENTS Saab’s market segments differ in terms of drivers and needs. Our offerings are partly based on the same basic technologies. Thanks to our expertise in system integration, we can offer our customers entire systems comprised of various products and solutions that cover the needs of every market segment. Air by sea, the need to protect these trade flows is gro- Driven by alliances wing. Technological advances are also driving deve- and political deci- lopment, including ships with smaller crews and more sions. Purchasing sensors, which are used, e.g., to monitor and record decisions are made at traffic along coasts and in harbours. the highest national Civil security level, where custo- Investments in civil se- mers demand fighter curity are made to aircraft that offer high- protect citizens, criti- performance, flexibi- cal facilities and trans- lity, economic efficiency and upgradability. ports of goods and Land people. The market is Complex conflicts, in- driven by the growing cluding in urban envi- awareness of ronments, are driving society’s vulnerability, tighter regulations and a reali- demand for new ma- sation that disruptions to society’s flows are costly. teriel systems and This places demands on sustainability, flow efficiency technology. The gro- and interoperability. wing number of multi- Commercial aeronautics national missions and The market fluctua- alliances between national forces and different types tes in pace with the of forces are placing high demands on system inte- economy and is cha- gration, interoperability and command and control racterised by long capabilities. development cycles. Naval High fuel prices and The trend toward new environmental broader industrial alli- requirements are ances is making inte- creating greater de- gration and lifecycle mand for fuel-efficient aircraft models. The market commitments more has few dominant players, which are now being chal- important. Since over lenged by companies from China and elsewhere. 90 per cent of global For more information see pages 32–33. trade is transported
  • 5. SAAB 2011SAAB 2011 Key financial ratios (MSEK) 2011 2010 Sales 23,498 24,434 EBITDA 4,088 2,187 EBITDA margin, % 17.4 9.0 Operating income (EBIT) 2,941 975 Operating margin (EBIT margin), % 12.5 4.0 - Income after financial items 2,783 776 Net income 2,217 454 Operating cash flow 2,477 4,349 Earnings per share, SEK (after dilution) 20.38 3.97 Operating cash flow per share, SEK 22.69 39.84 Dividend per share, SEK 4.501) 3.50 Return on equity, % 18.1 4.1 Equity/assets ratio, % 41.1 39.1 Order bookings 18,907 26,278 Order backlog at year-end 37,172 41,459 Total research and development (R&D) expenditures 5,116 5,008OUTLOOK FOR 2012: Internally financed R&D 1,355 1,203 No. of employees at year-end 13,068 12,536 Share of women, % 22.0 22.0 Academic degree, % 54.1 51.4LONG-TERM FINANCIAL GOALS AND RESULTSSALES GROWTH OPERATING MARGIN EQUITY/ASSETS RATIOLong-term goal: Our organic sales growth Long-term goal: Our margin goal is formulated Long-term goal: Our goal is an equity/will average five per cent over a business as an average over a business cycle. The operat- assets ratio exceeding 30 per cent.cycle. ing margin after depreciation/amortisation (EBIT) At year-end 2011, the equity/assets ratio will be at least 10 per cent.In 2011, organic growth was -4 per cent (-1). was 41.1 per cent (39.1). In 2011, the operating margin after depreciation/ amortisation (EBIT) was 12.5 per cent (4.0). % %MSEK 15 5025,00020,000 12 4015,000 9 3010,000 6 20 5,000 3 10 0 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2 Trend line Goal Goal SAAB ANNUAL REPORT 2011 1
  • 6. EVENTS BY QUARTER 2011EVENTS IN 2011 JAN-MARCH APRIL-JUNE - - - - - -2 SAAB ANNUAL REPORT 2011
  • 7. EVENTS BY QUARTER 2011 JULY-SEP OCT-DEC - - - - SAAB ANNUAL REPORT 2011 3
  • 8. SAAB 75 YEARSINNOVATIVE TECHNOLOGYAND COST EFFICIENCY –75 YEARS OF SAABThis year marks the 75th anniversary of Saab’s founding An important factor for Saab has been its ability to cooperate with thein 1937 through a resolution by the Swedish Parliament. Swedish armed forces and to constantly deliver cost-efficient, com- petitive products and services. Doing more with less has been Saab’sWhen it created Saab, the Parliament was of the opinion that Sweden motto for years. It has shaped Saab and the way we work.should have its own capability to design fighter aircraft, since defence The Gripen fighter aircraft system is an example of this: efficientmateriel were difficult to obtain from other countries at the time. internal processes, close cooperations with partners and a limited Saab’s creation was a milestone for Sweden’s non-aligned status and number of carefully selected suppliers. Together with the Swedishfor the Swedish defence industry. armed forces and the FMV, we have succeeded in improving per-Market development MARKET DEVELOPMENTThe concept of security policy has been broadened and today in-cludes dimensions other than defence. Military attacks are certainlystill relevant from a long-term perspective, and localised militaryincidents and operations in the near term cannot be ruled outeither. International crises and conflicts will also continue to call for MILITARY OFFENSES INTERNATIONAL ACTIONSboth civil and military responses. But society’s basic functions arebecoming more complex, which is accelerating questions of vulner-ability. Saab has therefore continuously broadened its operations toinclude civil applications to address this expanded threat scenario,which today also includes impacts on our environment.HISTORIC MILESTONES FOR SAAB1941 1979 1990 1992 1993First B17 delivered First order – RBS 15 First laser simulator BT 46 ANZAC combat management First Gripen delivered system for Australia’s frigates First order from U.S. from BOL 1937 1990 2000 Saab is founded Saab Automobile – independent Saab acquires Celsius company 1646 1894 1948 1998 Bofors is founded Alfred Nobel acquires Bofors First order for StriC in operation Carl Gustaf4 SAAB ANNUAL REPORT 2011
  • 9. SAAB 75 YEARS formance at the same time that operating expenses are significantly The key to success is an approach that focuses on partnership, col- lower than similar systems. laboration and information sharing. This is because it is not about Today this capability extends beyond Gripen to include our the number of technologies and systems; it is about having the right entire portfolio of products and solutions for a range of situations technology and systems for each customer’s specific needs – the from military attacks and multinational missions to civil security right capabilities at the right price delivered in time. and environmental and climate threats. Our systems can help coun- This is our history and our future. tries to better meet security threats today and in the future, while promoting peace, democracy and development. THREATS AND RISKS IN SOCIETY CLIMATE AND ENVIRONMENTAL THREATS2002 2004 2005 2006 2008 2011First contract – NLAW Installation of RAKEL Contract for NEURON Saab 2000™ AEW&C First flight for Gripen Demo RBS 70 NG – launch communication system 2005 2006 2011 Saab acquires Grintek Saab acquires Ericsson Saab acquires Sensis Microwave Systems (EMW) Corporation 1950- 1970- 1980- 1990- Development of radar for Development of Giraffe AMB Development of Arthur Sea Giraffe AMB is Gripen launched SAAB ANNUAL REPORT 2011 5
  • 10. CHAIRMAN’S STATEMENTA COMPLEX WORLD WITHCHALLENGES AND OPPORTUNITIESThe sovereign debt crisis, which has been a problem for the West, through acquisitions andespecially Europe, for some time, further intensified in 2011. The expansion in accordanceglobal economy recovered after the financial crisis in 2008-2009, with our strategic goals. Thisbut reversed course in 2011 driven by the growing crisis in the euro includes the acquisition ofzone. Fiscal constraints have contributed for several years to shrink- the U.S. company Sensis,ing defence budgets, a trend which was exacerbated last year. which strengthens our exist- At the same time, global security conditions have become more ing product portfolio andcomplex, causing major transformations, especially in North Africa improves our market pres-and the Middle East, which are not only important to the world’s ence globally and in the US.energy supplies but also to global trade. This has also affected Swe- Saab is an open and trans-den, in part because it decided to participate in the NATO opera- parent company that activelytion in Libya with aerial surveillance and related support resources. takes part in establishingThe mission was carried out with five Gripen aircraft. global guidelines and rules 2011 was a breakthrough year for the Gripen system by the fact on business ethics. Our codethat the Swiss Armed Forces announced its selection of Gripen in a of conduct is an importantmajor international procurement. The main reason mentioned was part of how we work and wasthe one generally cited as Saab’s biggest competitive advantage: its developed based on the OECD’s guidelines for multinationals. Wesolutions provide better value for the money. As part of the offer, also abide by the UN’s Global Compact and its principles on humanSweden is also able to offer extensive industrial collaborations with rights, labour conditions, the environment and anti-corruption.Swiss companies, so-called offsets, which will create value for bothSwiss and Swedish businesses. We have to maintain our financial strength Our long-term financial goals remain firm, and our strong financialInnovative capabilities are crucial to our competitiveness position is an important asset in the current market climate. SaabSweden has historically had an innovative business sector, where will continue to focus on strengthening profitability and generatingSaab is one of a number of key players. Saab has long been one of strong operating cash flow, which will be needed in the future to in-the country’s most engineering focused and innovation focused vest in research and development. This is critical if we are going tocompanies, where around 20 per cent of sales is reinvested in maintain a high technological level, further improve our competi-research and development. This has not only led to major export tive advantages and create long-term value for our shareholders.successes and new jobs in our operations but also created a number I am convinced that Saab has major opportunities goingof new operating areas and spinoffs, where technologies that origi- forward. Saab’s strength is being able to deliver high-quality solu-nated in defence solutions have found broad civil application, e.g., tions that are cost-efficient to buy, operate and maintain, makingin road tolls and web-based mapping solutions. In this way, Saab them competitive in a world where fiscal and economic conditionshas served as an incubator for Swedish high-tech innovation. It is remain uncertain.important that we remain one. Staying innovative in a changing financial, geopolitical and Stockholm, February 2012market landscape is a challenge for both Sweden and Saab. It is inno small measure a question of access to capital for the necessaryinvestments in R&D and development work. Faced with shrinkingdefence budgets, we must increasingly finance this work ourselves.This and the large customer projects we are working on are two Marcus Wallenbergbig reasons why Saab has built up a strong balance sheet and cash Chairman of the Boardreserves. Continued success also requires that we can build on themany international alliances and relationships we have established,especially in 2011, when Saab’s internationalisation was advanced6 SAAB ANNUAL REPORT 2011
  • 11. CHAIRMAN’S STATEMENT “Sweden has historically had an innovative business sector where Saab is one of a number of key players. Saab has long been one of the country’s most engineering focused and innovation focused companies, where around 20 per cent of sales is reinvested in research and development.” SAAB ANNUAL REPORT 2011 7
  • 12. CEO COMMENTWITH A STRONG BALANCE SHEET WECAN IMPLEMENT OUR STRATEGY - -Profitable organic growth - - - -On site around the world Active portfolio management - - -8 SAAB ANNUAL REPORT 2011
  • 13. CEO COMMENT - In 2012 we celebrate Saab’s 75th anniversary - - -Cost efficiency is one of our biggest competitive advantages - - -Talent management cannot become a problem SAAB ANNUAL REPORT 2011 9
  • 14. MARKET AND DRIVING FORCESA CHANGING MARKET IS DRIVINGSAAB’S BUSINESSCompetition for resources and living standards is a strong Competition for raw materials, resources and living standards is adriver of social development and is clearly impacting de- strong driver of social development. As society develops, competi-fence and security companies like Saab. Essentially, it is a tion increases for resources such as capital and people, which are critical to drive innovation and growth.question of which products and services we will offer the The competitive picture has become more complex of late. Themarket and how we do it. old world order, where the North and West had the upper hand over the South and East, no longer applies. While Western EuropeAccording to the UN’s World Population Clock, the global popula- and North America are struggling with tough challenges and slowtion passed 7 billion on 31 October 2011. In recent years, Africa, economic growth, Africa, Latin America and Asia also face chal-Asia and Latin America have seen the largest population gains and lenges, but are experiencing higher growth. When this competitiveeconomic growth, in contrast to the U.S. and Europe, where the dynamic changes, conflict patterns change as well.population growth and economic growth has been lower. Economic In addition, new economic centres are being created around thegrowth is important to social development, and economic stability world such as China, India and Brazil, which are growing in promi-and social stability are closely interlinked. nence through a combination of population density, education and vigorous growth, and are leading the way to a multipolar world.The primary drivers in Saab’s markets are The first dimension is dominated by nationalthreat scenarios and security needs. This governments and military organisations, whileapplies to the defence sector and civil so- the second is dominated by cities, compa-ciety as well as the grey zone in between. nies, organisations and individuals. UrbanUnderstanding the development of, and security, efficiencies and sustainability areoverlap between, the two main dimen- essential to a well-functioning society.sions of security policy is critical to alsounderstanding the opportunities, breadth The three areas of training, command andand potential in Saab’s market. control, and maintenance are “links” as well as the lowest common denominator be-One dimension of Saab’s markets focuses tween these two security dimensions. Foron traditional security policy, the purpose Saab, these areas originate in a traditionalof which is to maintain national sover- border-protecting military context, but areeignty by defending borders. Another just as relevant and possible to implementdimension stresses the vulnerability of civil in an urban-centred, flow-protectingsociety, where supply chains and infra- environment.structure must be protected to safeguardsociety’s essential functions.10 SAAB ANNUAL REPORT 2011
  • 15. MARKET AND DRIVING FORCESNew security and functionality needs and bilateral agreements. Moreover, large defence orders almostSociety today contains global flows of capital, goods and people always include extensive offsets through industrial partnerships.(flow society), which are strongly interdependent. As a result, major Large development projects are increasingly part of public-privatecrises can quickly spread through the system. This is exemplified partnerships.by the sovereign debt crisis, which is now threatening the financialsystem and global growth. New conditions for R&D The trend toward a global flow economy has increased security International cooperation and system partnerships require openneeds in the civil sector, creating greater demand for systems to systems that can be coordinated and integrated operationally. Thismonitor and protect critical flows and hubs such as airports, ports, is why a growing share of development work is being done collabo-railways, highways, and information and energy systems. As ICT, ratively. As a result, the defence industry can expect less financinginformation and communication technology, has become more im- through national defence budgets, alongside the fact that shrinkingportant to society’s infrastructure, our vulnerability has increased. government budgets no longer allow for research and developmentICT is also an important driver behind the integration of military to the same extent as before. To a growing extent, defence authori-and commercial technology, where there is a growing overlap, espe- ties around the world want access to the best the market has to offercially in surveillance and control. regardless of country of origin, and they want it delivered on short In times of limited resources, the focus is not only on security notice. A larger share of research and development (R&D) thereforebut functionality and efficiency. Customers in both military and has to be financed by the industry itself. On the other hand, gov-civil markets increasingly want broad-based, integrated solutions ernments around the world are devoting more research resourcesthat include more services: education, training, support and main- to civil security, energy, the environment and sustainable urbantenance. Solutions are evaluated based on not only performance development. Access to energy is a critical factor in the develop-but also in terms of cost of ownership and operation. The trend is ment of living standards and energy security and hence is central toshifting toward full operational and functional commitments cover- both military and civil strategies. Developing new sources of energying the entire lifecycle. Outsourcing of activities that had previously is now a high priority in both old and new economies. The aim isbeen performed internally is becoming more common, including in to become less dependent on undesirable and politically sensitivethe military field. sources, capitalise on the economic benefits of new technology and reduce global environmental risks. Development and security goReduced defence budgets and shift toward emerging countries hand in hand in this area as well.The deficits and sovereign debts in many major Western economiesrequire comprehensive austerity programs, which are triggering Local presence is decisivedefence cuts. The U.S. and Canada accounted for the largest share Despite the trend toward international alliances, the need for aof global defence spending in 2010, approximately 43 per cent, strong local presence is critical to success in both the military andaccording to the Stockholm International Peace Research Institute civil markets. Customers want integrated solutions from compa-(SIPRI). The U.S. is expected to reduce its spending in the coming nies that understand local conditions and can adapt their solutionsyears. The biggest increases in defence spending are in China and accordingly. This makes it important to be established locally, buildother countries in Asia, and the trend going forward is expected local competence and understand local conditions if you hope to beto favour emerging markets over traditional markets. Purchasing successful. It significantly increases your chances of being selectedhabits have also changed. Demand is increasing for proven systems as a supplier or subcontractor and to have a portion of your devel-that offer “more bang for the buck” and work in combination with opment financed through government appropriations.other systems.New cooperation and alliances with a regional focusInternational cooperation is important to ensure cross-borderflows and keep conflict zones under control. The long-term trendis still toward alliances for peacekeeping and economic develop-ment purposes. Right now, however, it is toward regional alliances SAAB ANNUAL REPORT 2011 11
  • 16. GRIPENA YEAR FOCUSED ON GRIPENAt the start of 2011, the first six Gripen were delivered from Sweden to In November, the Swiss government announced that it had cho-the Royal Thai Air Force, as planned. Thailand has ordered a further sen Gripen as a potential future combat aircraft – a clear acknowl-six Gripen C/D aircraft, which are in production. edgement that Gripen is a world-class and highly cost-effective Last spring, Gripen was involved in a conflict situation for the combat aircraft system. Besides the Gripen system being offered,first time when the Swedish Air Force joined the NATO-led opera- the programme also includes a long term industrial cooperationtion in Libya. between Switzerland and Sweden. “We received confirmation that both the aircraft and the unit Gripen’s successes in 2011 are indicators of the Gripen system’sperformed well. We provided what was asked of us without any world-leading ability to meet the international market’s demands –damage or losses. For me, this is an affirmation that practice makes in terms of function, quality and cost.perfect – with realistic training, we can assist in such actions,” said Gripen is operated by the air forces in Sweden, South Africa,Lt Col Anders Segerby, who was Chief of Operations for the unit in Thailand, the Czech Republic and Hungary. The UK’s Empire TestLibya, FL01. Pilots’ School (ETPS) uses Gripen for training test pilots from In April, the Indian Ministry of Defence announced that Gripen across the world. Gripen’s development is supported by the Swedishwould no longer be included in the Indian Multi-Role Combat government and Armed Forces, which has stated that Gripen willAircraft (MMRCA) procurement programme. India remains one of form the backbone of the Swedish Air Force until at least 2040.Saab’s most important markets and we see great business potential Countries that have been offered Gripen are: Brazil, Bulgaria, Den-within the aviation, defence and security industries. mark, the Netherlands, India, Croatia, Switzerland and Romania.Throughout Saab’s 75-year history, operations have grown from militaryaviation into a portfolio of products and solutions for defence and civilsecurity. These systems can help countries develop their capacity tomeet current and future security threats.12 SAAB ANNUAL REPORT 2011 SAAB ANNUAL REPORT 2011
  • 17. GRIPEN – today and in the future Air combat Gripen C/D Facts:Gripen is the world’s first new generation multi- Gripen is one of the most agile fighters around. Length: 14,1 metersrole fighter that can perform a complete range Its highly developed aerodynamic construction Wingspan: 8,4 metersof different roles. It is suitable for reconnais- and triplex digital flight control system, com-sance and monitoring (air policing) missions as bined with its world-beating new-generation Thrust: >18,000 lbswell as air-to-air and air-to-ground operations. weapons system, gives it enormous advan- Weapons Stations: 8Gripen was designed with ease of handling in tages in air combat.mind – both for the pilot and ground crew. Turnaround-time, i.e. the time it takes for Digital cockpit an aircraft to land, fill up fuel, change cargo andThe Gripen system Gripen has a state-of-the-art, fully integrated take off again:The Gripen system was designed for continu- digital cockpit with clear, manageable displays Less than 10 minutes with weapons forous development. New sensors and weapons and Hands-On-Throttle and Stick (HOTAS) Air-To-Air Combat, less than 20 minutes withare easy to integrate, thus making Gripen controls. This, along with the on-board inte- weapons for Air-To-Ground combat.flexible and cost-effective to develop further as grated data link capability, gives the Gripennew technologies become available.  pilot total Situational Awareness and, with its advanced weaponry, the pilot has a decisive Gripen E/F Facts:Cost-effective system edge in combat situations. Length: 14,9 metersGripen is designed for minimal cost in terms of Wingspan: 8,6 metersprocurement, logistics support and mainte- Gripen Next Generationnance. The cost of ownership was catered for Gripen NG is the next generation of Gripen, an Thrust: >22,000 lbsin the aircraft design from the very beginning, enhanced version of the well-established multi- Weapons Stations: 10since this was one of the driving requirements role fighter. It is the next and natural step in theset by the Swedish customer. successful development of Gripen, which will Turnaround-time: Less than 10 minutes withOperating costs are low due to: secure the system’s life span and competitive- weapons for Air-To-Air Combat, less than ness beyond 2040. Gripen NG is equipped - 20 minutes with weapons for Air-To-Ground with a more powerful engine, increased range, nance and fuel usage thanks to the efficient combat. new AESA (Active Electronically Scanned single engine. Array) radar and a new avionic system, giving the user new and improved capabilities in the battle arena. average time to repair is short. based – so they do not require as many expensive hardware modifications. SAAB ANNUAL REPORT 2011 13
  • 18. SAAB’S CORE COMPETENCESYSTEMS EXPERTISEIS OUR CORE BUSINESSWe address the global market and meet traditional defence needs as well as the needs of the growing market for civilsecurity. Our core offering consists of systems know-how in products and systems to safeguard national borders aswell as the functional and security needs of the global flow society. OUR VIEW OF THE MARKET OUR CORE COMPETENCE Our customers increasingly want integrated solutions that Our core competence is systems engineer- meet local requirements. These solutions are evaluated based ing, i.e., understanding and being able to on performance as well as the cost to own and operate. De- integrate complex systems: our own and mand is increasing for proven systems that offer “more bang others’. At the same time we have developed for the buck” and can be combined with other systems. world-leading technologies in a number of important areas and today work with open systems as far as possible. OUR MARKET POSITION Our strongest position and good growth opportunities are in fighter aircraft, com- mand and control systems, radar, reconnais- sance and surveillance systems, including Airborne Early Warning (AEW) systems, tactical weapon and missile systems, and Command, Control, Computing Intel- ligence, Surveillance and Reconnaissance (C4ISR) systems. We also have a strong niche position in commercial aviation and in selected regions in civil security, support and services, train- ing and underwater systems, as well as in niche segments such as signals intelligence and countermeasure systems. Geographi- cally we have a strong position in Sweden and good positions in South Africa and Australia. Read more on pages 10–1114 SAAB ANNUAL REPORT 2011
  • 19. SAAB’S CORE COMPETENCEOUR VISION OUR STRATEGIC HOUSEIt is a human right to feel safe. Since 2010, our strategy has focused on four priority areas. Our aim is to create long-term value by accomplishing these strategic priori-OUR MISSION ties. We will also maintain a solid balance sheet, focus on capitalTo make people safe by push- efficiency and generate strong cash flow.ing intellectual and technologi- Our long-term financial goals since 2011 relate to organic salescal boundaries. growth, the operating margin after depreciation/amortisation (EBIT) and the equity/assets ratio; see also page 48.OUR BUSINESS CONCEPTSaab constantly develops, adopts and improves new Profitable growth Performancetechnology to meet changing customer needs. Saab We continuously evaluate our We work with efficiencies and positioning and identify growth continuous improvements.serves the global market of governments, authorities opportunities. We focus on areasand corporations with products, services and solu- with a strong market position and Peopletions for military defence, commercial aviation and on strengthening in areas with good growth opportunities. We want to be an employer ofcivil security. choice in the global market. Our Portfolio employees are the backbone of our offering and our growth.OUR VALUES We adapt our portfolio to areas with strong competitive advantagesExpertise – We combine a strong history of and growth opportunities. We alsoknowledge with constant learning. target areas with a strong market position or leading technology.Trust – We are global citizens, honest and reliableand we keep our promises.Drive – We have a passion for innovation, we areopen to change and we are committed to being fastand flexible. PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLE Read more on pages 16–29 SAAB ANNUAL REPORT 2011 15
  • 20. STRATEGIC GOALS PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLEDELIVERING ON STRATEGIC GOALSSaab’s four strategic priorities are profitable growth, performance, a focused portfolio and people. In 2011, we took anumber of important steps toward meeting them. PROFITABLE1. GROWTHActivities during the year Outcome/goal attainment Priorities 2012During the year, we focused on expanding operations Sales decreased in 2011 compared to 2010 as a In 2012, we will continue to focus on ain priority markets, including through focused acquisi- result of lower activity levels in major projects and the number of key markets, including thetions. Among other things, we expanded in the UK challenging business climate in South Africa. US, Sweden, India and the UK. Ourthrough a new office and a design centre for the de- priority is to increase local competencevelopment of Sea Gripen. We also strengthened our and establish a stronger local presencepresence in the US, through the acquisition of Sensis Sales EBIT in selected markets.Corporation. In addition, we established a researchcentre in Brazil and a product and technological MSEK %development centre in India, where we also signed a 25,000 20number of strategic agreements with partners. 20,000 16 15,000 12 10,000 8 5,000 4 0 Long-term financial goals and outlook for 0 2009 2010 2011 2009 2010 2011 2012, see page 1.2. PERFORMANCEActivities during the year Outcome/goal attainment Priorities 2012We have continued to focus on standardising opera- Profitability increased in 2011 compared to 2010. In 2012, we will continue to focus ontions and our functional processes to achieve func- This included capital gains MSEK 1,169 (14), improving tied-up capital and generat-tional synergies. Our improved processes for project compared to structural costs of MSEK 616 in 2010. ing strong cash flow. It is important toimplementation and risk management have enabled Underlying profitability increased in 2011, with us to have a strong balance sheet andus to identify savings and improve our forecasting successful project execution as one of the most sound profitability to facilitate growth-abilities. Our cost base is now more transparent, important drivers. enhancing investments.which has given us greater flexibility when costadjustments must be made. Administrative Gross margin costs MSEK % 1,500 30 1,200 24 900 18 600 12 300 6 Long-term financial goals and outlook for 0 0 2012, see page 1. 2009 2010 2011 2009 2010 201116 SAAB ANNUAL REPORT 2011
  • 21. STRATEGIC GOALS3. PORTFOLIOActivities during the year Transactions Priorities 2012We completed several transactions during the year First half-year 2011: We will continue to invest in productin order to focus operations. This included streamlin- development and renewal as well asing the corporate portfolio, acquiring companies in Investment in Scandinavian Air Ambulance prioritise and strengthen our currentgrowth areas and divesting non-core operations. The Acquisition of E-COM of the Czech Republic competitive position in a number ofdivestments included the shares in the 3D mapping Divestment of interest in Grintek Ewation selected markets and a number ofcompany C3 Technologies AB and the Norwegian technological specialties. In several Divestment of interest in Denel Saab Aerostruc-company Aker Holding AS, where we exercised an markets, we are cooperating with tures (Pty) Ltdoption. In the US, Sensis Corporation was acquired, selected partners to build a local pres-a transaction that strengthens our offering in air traffic Additional consideration was received from the ence and gain better access to themanagement as well as radar and sensors. In the sale of Saab Space in 2008 market.Czech Republic, we acquired E-COM, a company Divestment of interest in Image Systems ABactive in training and simulation. Exercise of option to sell Aker Holding ASIn total, more than 10 transactions were completed. Investment in ISD Technologies Int AB Second half-year 2011: Acquisition of Sensis Corporation in the US Divestment of shares in the 3D mapping company C3 Technologies AB4. PEOPLEActivities during the year Results 2011 Priorities 2012During the year, we started building Saab Academy We will continue to develop Saabto ensure we have the competence needed to grow HR goals Results 2011 Academy.now and in the future. Employer of choice – internally We will improve long-term talentWe are continuously evaluating our employees. Dur- (index) 67 management.ing the year, we implemented a uniform performance Employer of choice – externally We will develop HR support globallymanagement process. (ranking by Universum) 12th place and locally. Communicative leadership (index) 68 Employee reviews, % 84 Development plans, % 72 Percentage of female managers, % 21 SAAB ANNUAL REPORT 2011 17
  • 22. STRATEGY > PROFITABLE GROWTH PERFORMANCE VERKSAMHET PROFITABLE PORTFOLIO PORTFÖLJ EFFEKTIV TILLVÄXT GROWTH LÖNSAM MEDARBETARE PEOPLE1. PROFITABLE GROWTHGROWTH THROUGHMARKET FOCUSOur business targets markets with strong demand where Priorities 2012–2016: Clearer market focusour technologies and solutions can meet security needs. Through acquisitions to support our financial goals in defence andDuring the year, we continued to deliver on our strategic civil security, we will continue to build a strong presence in key markets. A focused Gripen strategy is also critical.goal to focus on key existing markets and strengthen our Our customers can be found in around 100 countries, at thepresence in selected markets. same time that the majority of order bookings come from around 30 countries where for the most part we also have our own opera-Saab has a strong position in Sweden. While we expect this to con- tions. We will concentrate our efforts primarily on these countries.tinue, the large share of future growth will come from outside the Decisions where we operate around the world are based oncountry. Becoming a more international business – in both military extensive market analyses of political, regulatory and competitiveand civil security, through investments in selected markets and a conditions and growth potential. We also look at how our productdeeper market presence – is also one of our principal strategies. portfolio fits the local market’s needs.Our sales outside Sweden have gradually increased in recent years. A stronger local presence is necessary to meet our goals. ThisToday, Sweden and the rest of Europe currently account for slightly includes everything from marketing to joint ventures, partner-over 56 per cent of sales. ships, industrial cooperations and technology transfers. Our local Profitable growth is one of our financial goals. Our organic sales presence can also be strengthened through acquisitions, with thegrowth will amount to five per cent over a business cycle. In 2011, acquisition of Sensis Corporation in the U.S. in 2011 being a primeour sales decreased slightly compared to 2010 as a result of lower example.activity levels in major projects and the challenging business cli- Naturally we continue to do business in other countries wheremate in Africa. Despite the decrease, we took a series of steps in line the conditions are right.with our strategic goals to create a stronger platform for growth. We will also be intensifying efforts to find applications for our know-how and technologies in new areas such as green technology.Priorities 2011: Measures to increase our global presence At year-end 2011, we had 13,068 employees, about 79 per centTo create profitable growth, we are gradually building our global of whom are in Sweden, five per cent in the U.S. and 11 per cent inpresence in priority markets by giving employees in Sweden the South Africa and Australia.opportunity to work abroad and by recruiting local competence.In 2011, we signed important agreements in markets where we areexpanding our local presence, e.g., with the Thai Royal Navy, and inkey markets such as the U.S. and Asia. We acquired Sensis Corporation in the US, broadening ourfoundation for growth in the North American market and globally.Sensis has a strong local presence in the U.S. in radar and sensorsand a world-leading position in the market for air traffic manage-ment systems; see also page 20. During the year we also acquired the Czech company E-COM,which specialises in the development and production of virtualsimulators. We have also established research and developmentcentres in the strategically important markets of India, Brazil andthe UK; see also pages 30–31.18 SAAB ANNUAL REPORT 2011
  • 23. STRATEGY > PROFITABLE GROWTHSALES TREND BY MARKET SEGMENT SALES TREND BY MARKET REGION MSEK MSEK12,000 12,000 9,000 9,000 6,000 6,000 3,000 2010 3,000 2010 2011 2011 0 0 Air Land Naval Civil Comm. Other Sweden Rest of North Central and Asia, Africa Security Aeronautics and Europe America South Middle rest of America East and Nordic region Australia FOCUS ON SELECTED MARKETS OUR EXPANDING OPERATIONS IN THAILAND One of our criteria to establish in a new geo- graphical market is that there is a demand for our products, services and solutions. We want there to be in a growing market or a market where we can gain a strong position. There have to be op- portunities to build partnerships with authorities and businesses. In addition, we have to have ac- cess to engineers and other skilled workers. Another important factor is that the business environment, in both the state and private sectors, is trans- parent and complies with international- ly accepted principles. Our operations in Thailand are a successful example where we have found excellent opportunities for our civil and military products and services. Thailand has ordered twelve Gripen in two batches, two Saab 340 Erieye AEW (Airborne Early Warning), one Saab 340B and an air command and control system – a complete air defence concept. Moreover, we received an order in 2011 for the upgrade of combat management and fire control systems. A cornerstone of our Thai venture was becoming part-owner of the Our presence and the deals we have finalised also open up other Thai company Aviasatcom, which develops and supplies products to business opportunities in Thailand and the region. the Thai defence forces. This consolidates our presence in the country and gives us good opportunities to support customers locally. SAAB ANNUAL REPORT 2011 19
  • 24. STRATEGY > PROFITABLE GROWTHSENSIS – BRIDGEHEAD TO AGLOBAL MARKETIn 2011, Saab acquired the U.S. company Sensis Corporation Stronger position in important market(Sensis), a leading provider of air traffic management solutions Through the Sensis acquisition, we strengthen our offering inand surveillance technology. The acquisition is fully in line with advanced air traffic management and surveillance. There areour strategic priorities to create profitable growth, increase our several factors driving demand in this market:geographical presence and continually adapted our portfolio. Demand for air traffic management and infrastructure is Sensis has a strong position in the U.S. in radar and sensors driven by growth between and within regions.and is a world leader in air traffic management, an important Global air traffic is growing, increasing congestion. By 2030,complement to Saab’s existing offering. For example, Sensis has around 50 per cent of growth is expected to come froma strong position with major airports, while Saab is a leader in travel to, from and within Asia.Remote Towers for small airports. With this combination, theGroup creates a stronger product portfolio – and new growth Higher fuel prices and increased security demands.opportunities in a growing global market. A desire among customers to meet future security, capability The acquisition of Sensis also gives us a growth platform in and environmental needs.the important North American market, where a local presence Access to new technology.is critical to success. We have also identified operational syner-gies in both the medium and long term, which we are currently The Air Traffic Management (ATM) market is cyclical,working to capitalise on. programme-driven, dominated by increased automation and Sensis has developed and distributed air traffic management characterised by limited growth in Europe and North America.and air defence systems since 1985. It maintains a global base Emerging regions, on the other hand, will account for a largeof more than 200 installations among over 60 customers in 35 share of market growth, since growing traffic volumes are creat-countries on six continents. Operations rest on two divisions: ing demand for new systems. At the same time, it remains a factAir Traffic Management, which accounts for about 75 per cent that existing systems will not be able to satisfy future needs. Aof sales and has installations at more than 85 airports, and De- large number of players are now planning to modernise theirfence & Security Systems, which works with defence organisa- systems and implement new technology.tions around the world. Saab Sensis’ products and systems are installed with over 60 customers in 35 countries on six continents.20 SAAB ANNUAL REPORT 2011
  • 25. STRATEGY > PROFITABLE GROWTHStrategy for civil security Air Traffic Maritime Safety Security & Safety Management & Surveillance National Security ManagementInvestments in products and solutions for civil security are in-creasing around the world. We have good positions in Sweden,Central Europe, South Africa and Australia, e.g., through thenew security system SAFE (Situation Awareness For EnhancedSecurity), which covers every security need for the protectionof critical infrastructure, prisons and emergency services . Formore information on SAFE, see page 27.We are well-positioned in the area and our offering is based onexpertise in military technology, with an emphasis on situationalcontrol as well as efficient, safe and secure trade flows.Our civil security strategy is also based on our role as a systemsupplier and integrator with a focus on airports and aviation,ports and shipping, as well as on having a competitive portfolioof solutions to measure-analyse-act. SAAB ANNUAL REPORT 2011 21
  • 26. STRATEGY > PERFORMANCE PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLE2. PERFORMANCEIMPROVED COMPETITIVENESSTHROUGH COST EFFICIENCYWe will continue at a rapid pace to improve efficiencies in Priorities 2011: Organisation and implementationthe ways we work throughout the Group. The goal is to In 2011, we strengthened cash flow by further improving ourbecome even more competitive. processes for managing capital employed, finalising divestments and maintaining our programme to sell account receivables. AnAn efficient business means creating the right conditions to be the efficient organisation is especially important to project imple-most competitive partner possible for our customers and to pave mentation, which we focused on in 2011 and which will remainthe way for growth. In our daily work this means continuously a priority.developing and refining our processes and work methods. Due to the long lead times between order bookings and the We are working in a structured manner to increase harmonisa- receipt of revenue, it is critical that we can do more for less,tion and standardisation within the Group. We also continuously which is already one of our strengths. We have also continued tore-evaluate and prioritise our activities to ensure the highest pos- improve R&D efficiency through a uniform lifecycle process forsible return on our efforts. The work is measured, followed up and our products. This work requires that our organisation and man-communicated internally. To succeed, we have to promote a culture agement model support product development.that puts the entire Group’s best first. Since the cost-cutting programme was completed in 2010, we have continued to work with improvements in day-to-day operations. An important element are our centres of excellence in research and development, which we began opening in 2010. They will support our collective actions while increasing internal efficiency. FIVE PRIORITIES PRIORITIES 2011 Strengthen cash flow through divestments Priorities in our efficiency improvement efforts: Standardise and harmonise operations to achieve functional Successful project implementation synergies. R&D efficiency Focus on contract quality, project implementation and risk Continuous improvements management to improve project results and forecasting abilities. Increase the flexibility in our cost base to quickly adapt to variations in volume. Focus on cash flow and tied-up capital to facilitate investments for growth and acquisitions, R&D and marketing. Develop uniform processes for product management and development to optimise R&D efficiency.22 SAAB ANNUAL REPORT 2011
  • 27. STRATEGY > PERFORMANCE SUCCESSFUL CENTRES OF EXCELLENCE To increase operating efficienc, not least by eliminating redundancies, In addition to the Optics Design Centre, Saab established three other we established centres of excellence within various areas of the Group centres of excellence in 2010. As planned, seven new centres were in 2010. The goal is to make important knowledge more widely avail- added in 2011. All of them are in different stages of development. able and in that way maintain our desired level of competence in certain “Before establishing each centre, we analyse detailed calculations and areas while improving it in others. The resources that are freed up will arguments,” Göran Johansson continued. “In some cases, we have be used for investments in our future. After a short time, the benefits of found commercial applications, where customers have shown interest the centres have become increasingly evident. in utilising the competence.” “We can already safely say that the centres which are furthest along The work is now continuing. In 2012, around four more centres will be in their development, such as the Optics Design Centre, have lowered established, and those already in operation will be re-evaluated accord- their fixed and variable costs and are seeing greater cooperation be- ing to various criterias. tween business areas,” said Göran Johansson, who is leading the effort to create Saab’s centres of excellence. “This means that we are erasing the dividing lines within Saab and creating synergies.” Centres of excellence that Saab has established 2010 2011 Optics Design Centre Power ILS Common Component Sourcing Centre Aerodynamics Antenna EM Field Geo Data Centre (digital maps) in a portal, a Technical Test Equipment central geodata library Publications Rugged Computers Power Electronics Design Centre Ballistics ADMINISTRATIVE MARKETING CASH FLOW FROM OUR PRIORITY 2012–2016: EXPENSES EXPENSES OPERATING CONTINUOUS ACTIVITIES IMPROVEMENTS MSEK MSEK MSEK To achieve our goal of an operating margin 1,400 2,000 5,000 after depreciation/amortisation of at least ten per cent, we have to work in a structured 1,050 1,500 3,750 manner with continuous efficiency improve- ments. Maintaining a stable cash flow and 700 1,000 2,500 high capital efficiency make us more com- petitive and facilitate investments that drive 350 500 1,250 growth. Payment plans in tenders/contracts, 0 0 0 resource-efficient project execution and 2009 2010 2011 2009 2010 2011 2009 2010 2011 reductions in working capital, for example in account receivables and inventories are important aspects. SAAB ANNUAL REPORT 2011 23
  • 28. STRATEGY > PORTFOLIO PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLE3. PORTFOLIODEVELOPMENT OF OURCORE COMPETENCEMaintaining a product portfolio that meets our customers’ Examples of investments in leading niche products that we sell individuallycurrent needs and develops based on their future needs or as part of more complex systems include the weapon systems Carl-is critical if we are to reach our overarching goals in the Gustaf, AT4 and NLAW, the RBS 70 ground-based air defence system, the unmanned helicopter Skeldar, the Arthur and Giraffe AMB radar systems,short and long term. The ability to continuously supply and our unmanned underwater vehicles. Niche products also includesought-after defence and security solutions is also one of combat training, where we have a leading position.our biggest strengths. One niche area that was strengthened during the year was Air Traffic Management (ATM), partly through the launch of theOur strategic priority of a “focused portfolio” refers to how we Remote Tower concept and partly through the acquisition of Sensis,develop our offering in defence and security. Our focus is on a leader in the market segment. In terms of development, we aredeveloping products and services in areas where we have a leading well-positioned through our participation in the Single Europeanposition or the potential to secure one. Our product portfolio and Sky ATM Research Program (SESAR).geographical presence create growth potential in a number of areas, We are also seeing increased demand for solutions based onfrom complex systems to niche products. The Gripen system and open systems as well as systems that can be integrated with those ofERIEYE radar system, and their further development, are two of different suppliers. We have positioned ourselves as a supplier thatour best examples of strategic offerings. can meet these needs. PRIORITIES 2011: Research and development Acquisitions and streamlining Our research and development has been focused on the further de- Through the acquisition of US-based Sensis in 2011 we have velopment of products and services that support our core portfolio. complemented our portfolio in Air Traffic Management (ATM), Work on the Group-wide product management process established radar and sensors. The acquisition of the Czech company E- in 2010 has continued. We are now seeing major benefits from COM further strengthens our offering in training and education. having every business area work and follow up their results in a Moreover, we have maintained the focus on our core areas uniform manner. by divesting our shares in the 3D mapping company C3 This will increase efficiencies in development work, create Technologies AB. synergies between projects, reduce costs and shorten development times. As part of this work, we are increasingly using model-based development for complex software and software systems. Every research and product development investment is preceded by a careful analysis where customer benefits, future market poten- tial and profitability are the decisive criteria.24 SAAB ANNUAL REPORT 2011
  • 29. STRATEGY > PORTFOLIOR&D AS SHARE OF SALES SELF-FINANCED R&D AND DEPRECIATION, AMORTISATION AND WRITE-DOWNS MSEK % 2,500 24 1,875 18 1,250 12 625 6 0 0 2008 2009 2010 2011 2008 2009 2010 2011 Self-financed Depreciation, research & amortisation and development write-downs of capitalised development costsWe develop and supply products and services in both the short greener air transports. Saab’s role in the project is to develop a new,term (about 12 months) and the longer term. Short-term projects energy-efficient smart wing, which will be launched on the marketinclude the area of civil security, where Saab is developing security in 2020-2025. This type of long-term project accounts for about tenmanagement systems for prisons and airports. per cent of Saab’s self-financed research and development budget. A typical example of a long-term research project is the Europe-an research collaboration Clean Sky, which is designed to promote Reduced balance sheet risk and stable foundation for OUR FOCUS 2012: STRENGTHENED future profitability CORE PORTFOLIO As of 1 January 2009, we changed the application of the ac- Acquisitions and collaborations counting principles for development costs. As a result of this To strengthen our core portfolio while maintaining our desired more conservative view, development costs are capitalised at a ratio between development costs and sales, we continue to take later stage in all projects and all capitalised development costs strategic measures. This includes everything from divestments are amortised over a maximum of 10 years. Consequently, capi- to international partnerships and acquisitions. talised development costs have decreased by 46 per cent, from MSEK 3,628 at year-end 2008 to MSEK 1,950. This means we Research and development have reduced our exposure to unexpected write-downs. During the period, we are planning to increase the rate of investment in many of our product segments. Investments in CAPITALISED DEVELOPMENT COSTS the development of the Gripen system are expected to remain 2008–2011 extensive depending on whether we receive addition orders for MSEK Gripen. The large part of these investments will be customer- 4,000 financed. In other product segments, we expect future product development to be self-financed to varying degrees. 3,000 We will continue to improve our product management 2,000 process by introducing a uniform product portfolio process in 2012. The purpose of the process is to be able to analyse gaps in 1,000 the portfolio and prioritise potential investments. 0 2008 2009 2010 2011 SAAB ANNUAL REPORT 2011 25
  • 30. STRATEGY > PORTFOLIO PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLESAAB VENTURES Core portfolioSaab is a research and development focused company. Some of our Ownershipdevelopment projects result in product ideas that fall outside our Company Specialisation interest, %core areas. These projects have been consolidated in a corporate C-leanship Aps Hull Cleaning Vehicles 27portfolio, where Saab Ventures’ role is to initially drive and develop Cold Cut Systems AB Cutting Fire Extinguisher 29the businesses together with other co-investors before finding a ISD Technologies AB Virtual Training & Simulation 33natural home for each company. Opax AS Intelligent Video Surveillance 100 Protaurius AB Mobile Ballistic Protection 6 Saab Venture’s other purpose is to find and invest in small, rap-idly growing companies that could eventually complement Saab’s Spin-offscore portfolio. In 2011, new investments were made in C-leanship and ISD OwnershipTechnologies AB. In November, Svenska Tracab AB filed for bank- Company Specialisation interest, %ruptcy. Saab Ventures’ holding in the company was 6.49 per cent. Minesto AB Tidal Energy Solution 14 Since 2001, Saab Ventures has divested eleven companies. Dur- Lemon Planet AB Software 17ing the year, the shares in C3 Technologies AB, which specialises Wrap International AB Spectrum Management 23in 3D-mapping and in Image Systems AB, which specialises intechnology based on image processing, were sold.Saab’s offering COMMERCIAL AIR LAND NAVAL CIVIL SECURITY AERONAUTICSSOLUTIONS iNTEGRATED SOLUTIONS, INCLUDING C4ISR1, TRAINING & SIMULATION Gripen and unmanned C4ISR1 systems Support weapons systems Aeronautical Civil security and traffic man- Training andPRODUCTS Missile systems sub-systems agement systems (incl. ATM2) simulation systemsAND SYSTEMS Radar and Camouflage Underwater electronic warfare solutions productsSERVICES TECHNICAL CONSULTANCY AND SUPPORT AND SERVICE1) Command, Control, Computing, Communication, Intelligence, Surveillance and Reconnaissance2) ATM – Air Traffic Management26 SAAB ANNUAL REPORT 2011
  • 31. STRATEGY > PORTFOLIOSAFE – THE NEXT GENERATION OF SECURITY SYSTEMS IS HERESituation Awareness for Enhanced Security (SAFE) is totally new type of SAFE is based on a powerful command and control system and ansecurity system for enhanced situation awareness among multiple users. advanced integration platform. The system covers every security need toSAFE can handle any type of incident, store data and statistics, and even protect critical infrastructure, prisons and emergency services. Today it ismake its own decisions. For customers this translates into significantly less installed at a number of Sweden’s largest power plants, correction facilitiesadministration and more time to focus on their core business. The system and Arlanda Airport, as well as used by first responders. It is also a clearis also easy-to-use, scalable and robustly designed to optimise security and example of how Saab’s experience, development and existing IT solutionsbusiness flows. are integrated in a new software program that now offers an attractive solu- tion in civil security. SAAB ANNUAL REPORT 2011 27
  • 32. STRATEGY > PEOPLE PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLE4. PEOPLECOMPETITIVE STRENGTH ISCREATED BY EMPLOYEESTo remain on the forefront of technological developments, and our employees are the backbone of our offering and our growth.we must have employees who take responsibility for mak- Our philosophy as an employer is to create a stimulating, enrichinging the company a market leader. climate and to develop and support our managers in their role as leaders.Saab is a global company with strong ties to Sweden. We are active One of our goals is a more even gender distribution. At thein a highly competitive market where our customers’ needs are management level we want 30 per cent of managers to be female byconstantly changing. An emphasis on business thinking is crucial 2015. We are engaged in a structured effort to reach this goal, whichto our success and to reach our goals. We need to be attentive and begins with the recruitment of new talents. We are convinced that adevelop close cooperations with our customers in order to under- more even gender distribution will make us more successful in ourstand their needs and develop attractive solutions in terms of both business thinking and in our ability to deliver attractive solutionstechnology and cost efficiency. for customers. This applies to both our civil and military offerings. Technologies are developing at a rapid and our business con-ditions are constantly changing. This means that we, like othercompanies, face the challenge of maintaining and recruiting the rightcompetence. We want to be the natural choice in the global market, 150 MANAGERS DISCUSS THE FUTURE In a changing world, high demands are placed on understanding the drivers and challenges that affect and will affect Saab’s business. The future was therefore the overarching theme when 150 Saab managers gathered last autumn. The areas discussed included overarching targets, the importance of an increased market focus and our priorities in the years to come. It was stressed that we have an attractive product portfo- lio and a strong position to be successful in the global market.28 SAAB ANNUAL REPORT 2011
  • 33. STRATEGY > PEOPLESAAB ACADEMY – DEVELOPINGCOMPETENCEIn the highly competitive global market where we are active, educated em-ployees with the right competence are an important success factor. At thesame time, our employee demographics are changing. A large group bornin the 1940s is retiring and a new generation is taking their place. This willchange the demands we face as a company and employer. In several areaswe face major recruitment needs. Finding the right talents and building onthose already in the company is one of the keys to our continued growth.We are making an ambitious effort to remain the natural choice for tomor-row’s talents. Competition for the top talents is great, however. Twoconcrete measures now being taken to ensure that Saab has the rightcompetence to meet the future and achieve its business goals are thenewly formed Saab Academy and a trainee programme. Saab Academy isan international venture which will be adapted to the needs of each countrywhere Saab is active. Skills training will be provided on multiple fronts,including by improving and broadening the internal programmes already inplace, developing cooperations with schools, institutes of technology anduniversities, and, not least, working even harder with individual programmesto further develop certain key positions. FEMALE ENGINEER OF THE CLOSE COOPERATION YEAR – ANNA PERNESTÅL WITH SCHOOLS AND A self-described nerd won the Saab-sponsored UNIVERSITIES award for Sweden’s female engineer of the year We collaborate with around 50 schools, in 2011. A project manager at Scania and former universities and institutes of technology. The Uppsala student, Anna Pernestål impressed the jury aim is to keep children and young people with her dedication to engineering sciences and her interested in education and technology, inspirational drive. drive research projects and show what we Today slightly over 20 per cent of Saab’s employees can offer as an employer. Learn more on in Sweden are female. This percentage will rise. With page 43. the award, Saab is trying to stimulate interest in en- gineering and to encourage women to choose it as a career path. When she received the award in October, GUIDING VALUES Anna felt it was a strong acknowledgement that she Expertise, trust and ambition. Our code of is headed in the right direction. conduct describes how we work internally and externally. Learn more on page 38. SAAB ANNUAL REPORT 2011 29
  • 34. LOCAL PRESENCE AROUNDTHE WORLDIn 2011, we established new research and development centres in several locationsworldwide: India, the UK and Brazil. They are important to future product develop-ment and a stronger presence in strategically important markets.Major investment in the USIn 2010 we opened an office in Washing-ton, DC to strengthen our local presenceon a continent that accounts for half ofthe global market for defence and civilsecurity.All our business areas will eventually berepresented here as part of a cohesiveteam. Starting with our current productportfolio, growth will be achieved organi-cally through industrial partnerships as wellas through acquisitions.As part of these efforts, Saab acquiredSensis Corporation in 2011. Read moreon page 20.Research and development in BrazilIn São Bernardo do Campo, Brazil, we were thedriving force behind the Swedish-Brazilian Centrefor Research and Innovation (CISB). The aim isto create innovations that will find commercialapplication in Brazil and internationally. Modelledon the Lindholmen Science Park in Göteborg,CISB brings together representatives from thepublic sector, academia, and industry. The goalis that the centre will be self-financed and itsresearch will focus on defence & security, energy& the environment, transportation & logistics andsustainable urban development. To date, thecentre has attracted over 40 partners that arehelping to select research projects. In November2011, we signed an agreement to offer around100 Brazilian scholarship winners the opportunityto study at Swedish universities.30 SAAB ANNUAL REPORT 2011
  • 35. The UK: A priority market Sweden The UN: A future marketIn London, Saab has established both a new Saab is the first company in the world to supply The United Nations (UN) has quickly becomehead office for its UK operations and the Saab an airport with a Remote Tower for air traffic an important and growing market for Saab. TheDesign Centre, where around ten engineers from management, which reduces costs and allows journey that culminated in the UN becoming aSweden and the UK will initially work on the de- several different airports to be managed from market began in earnest in 2009. An initial ordervelopment of an aircraft carrier-based version of a single centre. The first installations at the was received in May 2010. The same year aGripen, Sea Gripen. This is a new area for Saab, airports in Sundsvall and Örnsköldsvik represent more extensive contract was signed to supplywhere the aim is to utilise British experience. a paradigm shift. The system is expected to be maintenance and technical services for the placed in operation in 2012, when air traffic at UN’s missions in East Africa. Three of Saab’s six both will be is managed from a Remote Tower in business areas are participating and initially have Sundsvall. focused on logistics and training for peacekeep- ing missions – in particular, solutions for energy, water and waste management. One of the biggest reasons why Saab’s business relationship with the UN has grown is our local presence. Saab already has an office in Nairobi, Kenya and is now looking at opportunities to increase its presence Entebbe, Uganda as well. At the same time, the UN’s operations in New York are monitored from Saab’s North American office.South Africa Development centre opened in India Success for WISE in AustraliaSaab has a multi-faceted commit- In cooperation with Mahindra Satyam, we With WISE (Widely Integrated Systems Environ-ment to South Africa. At the same opened the Saab India Technology Centre ment), our innovative software suite, users cantime that we supply the country with (SITC) in Hyderabad during the year. SITC will quickly and easily integrate command and controlcutting-edge defence and security be part of our global offering, while supporting systems from different domains and countries,technologies, we are investing heavily operational excellence within the Group and thereby improving situational awareness andin local industry to drive growth. With facilitating an expansion in the Indian market. Its increasing efficiency.over 1,000 employees on site, we can work will focus on aeronautics, defence systems Unlike conventional system integration, WISEcombine a local presence with our and urban development, including civil security. communicates with linked systems through theirinternational organisation to promote The most important development areas are own communication standards and protocols,prosperity and improve the nation’s software, electrotechnology and mechanical eliminating the need to modify the integrateddefence. Together with the South Afri- engineering. The establishment of SITC is also a systems.can Army and Bakenberg Traditional strategic measure to develop synergies betweenCouncil, Saab has donated MZAR 2 to Mahindra Satyam’s unique expertise in enterprise The software has been demonstrated for, amongfinance the iLab classroom for schools solutions, technical services, aerospace systems others, the Australian Department of Defence. Wein Limpopo province to give students and integration and our expertise in aeronau- showed how advanced technology can produceaccess to computer training. tics, network-centric warfare and specialised major improvements in important defence areas. IT systems. In late 2011, Saab placed its first Our successful demonstration met the customer’s development order with the new centre. stringent technical requirements and strict budget and time parameters. SAAB ANNUAL REPORT 2011 31
  • 36. MARKET SEGMENTSA changing security marketWe operate in five different market segments, where needs differ but the solutions are partly basedon the same technologies. AIR LAND Annual sales in the market segment for unman- Land combat is a broad segment and one of theDRIVERS ned aerial vehicles are expected to grow from fastest growing areas of the military market in recent around SEK 270 billion to over SEK 340 billion in years. The total market is estimated at SEK 550–580 the next ten years. The UAV market is estimated at billion. SEK 25–27 billion per year. Complex conflicts, often in urban environments, Growth is driven by nations that want new fighter require new strategies, materiel systems and aircraft with better performance, more flexibility technology. and better overall economic efficiency. Reduced operational needs are expected to result Alliances and political factors affect the market. in lower market growth in the next five years. Global economic turbulence has delayed a num- The increase in multinational missions requires ber of procurements. cooperation between different countries’ forces and different types of forces. Demands to reduce defence spending are making performance and life cycle costs more important. Higher demands are being placed on system integration, interoperability, and command and Military aircraft are increasingly used in multina- control capabilities. tional operations on extended flights over long distances. As security threats grow, the need for training does as well. Aeronautics systems require open architecture and must be upgradable. New types of military operations and technology are driving demand for training and education, often as part of multi-year turnkey commitments. We offer fighter systems, air C4I solutions, unman- We have leading positions in many segments ofOUR POSITION ned aerial vehicles, countermeasures and electro- this market and offer, among other things, tactical nic warfare, avionics solutions, weapon systems, weapon systems and highly sophisticated surveil- sensors, training solutions and aftermarket services. lance and command and control systems (C4I) as Gripen is a competitive single-engine fighter currently well as solutions for troop protection. Our offering in service in five countries. During the year, Swit- includes sensors, signature management and zerland decided to continue negotiations on Gripen countermeasures, reconnaissance and air defence as its future fighter aircraft. Our sales amounted to systems, and training solutions. Our sales amounted MSEK 10,611 (10,393). to MSEK 7,201 (7,611). SALES SHARE OF SALES SHARE OF TOTAL SALES TOTAL SALES MSEK MSEK 12,000 12,000 9,000 9,000 31% 6,000 6,000 45% 3,000 3,000 0 0 2009 2010 2011 2009 2010 201132 SAAB ANNUAL REPORT 2011
  • 37. MARKET SEGMENTSNAVAL CIVIL SECURITY COMMERCIAL AERONAUTICSThe total naval market is estimated at SEK 300–370 The civil security market currently generates slightly The total market is growing by an estimated fivebillion per year. over SEK 400 billion a year and is anticipating annual per cent per year. For new commercial aircraft, the growth of 10–11 per cent, divided equally between market is estimated at SEK 600 billion annually. The naval market is stable with growing demand protection for borders, ports, energy systems and for expeditionary and coastal capabilities. Growth fluctuates greatly with the economy, with airports. commercial carriers currently in a recovery phase. More than 90 per cent of global trade is trans- Growth is driven by new laws and the realisation ported by sea, which has made the protection of The market is exposed to the U.S. dollar and of how costly disruptions to society’s various flows trade flows increasingly important. exchange rates. can be. For navies and coast guards, the trend is toward The industry is capital-intensive with long develop- Investments in national security to protect people, broader-based industrial commitments with grea- ment cycles and has consolidated into oligopolis- critical facilities and large flows are increasing ter demand for integration and lifecycle solutions. tic structures. around the world. International alliances make the ability to act far New players, especially from China, are challen- The continued growth and increased complexity from home more important. ging Boeing of the U.S. and Europe’s Airbus in the of large cities is placing tougher demands on market for large aircraft. There is growing interest in long-endurance ships sustainability, flow efficiency and interoperability. with smaller crews, where sensors and combat High fuel prices and new environmental require- management are the highest priority. ments are strengthening demand for fuel-efficient aircraft models. Public-private partnerships are becoming more common. Subcontractors continue to face price pressure. An extensive naval build-up is under way in the Delivery volumes are increasing significantly as Middle East and Southeast Asia (mainly China). new aircraft such as the B787 and A350 are introduced on the market. New aircraft models contain larger modules than before, with systems content integrated into the structure.We have a strong position in radar and early Our civil security offering is focused on monitoring We are a supplier to the world’s leading aircraftwarning, command, control and communication and situational control as well as ensuring efficient manufacturers, including Boeing and Airbus, mainlysystems (C4ISR), tactical weapons and underwa- flows, with an emphasis on airports and air travel, of durable, lightweight aerostructures, avionics,ter systems. Our sales amounted to MSEK 2,065 ports and shipping, and emergency response operating systems, structural and system integration(2,278). planning. Our position, while challenging, is good services, and support solutions. We have a track in Sweden, Central Europe, the US, South Africa record of having built more than 4,000 aircraft. Our and Australia. Our sales amounted to MSEK 1,479 sales amounted to MSEK 1,309 (1,348). (1,427).SALES SHARE OF SALES SHARE OF SALES SHARE OF TOTAL SALES TOTAL SALES TOTAL SALESMSEK MSEK MSEK3,000 3,000 3,0002,250 2,250 6% 2,250 6% 9%1,500 1,500 1,500 750 750 750 0 0 0 2009 2010 2011 2009 2010 2011 2009 2010 2011 SAAB ANNUAL REPORT 2011 33
  • 38. MARKETS BY REGIONSAAB – A SWEDISH GLOBAL SECURITY GROUPSaab is a global group with operations on every continent. In recent years, we have sharpenedour market focus with an aim to strengthen our local presence while increasing sales and marketshares. In 2011, approximately 63 per cent of sales and 56 per cent of order bookings weregenerated outside Sweden.AMERICASSaab’s position Through the acquisition of Sensis, Saabstrengthened its position in the important North Americanmarket. The order intake in the market increased in 2011 andincluded orders for the Carl-Gustaf man-portable weaponsystem and the Giraffe AMB multi-mission radar system. MSEK 3,000 AFRICA 2,250 Saab’s position Since the acquisition of Grintek Defence in 2005, Saab has maintained a strong position in South Africa. The order intake and sales decreased in 2011 compared to 1,500 2010 due to challenging market conditions in South Africa. MSEK 750 3,000 0 2,250 2010 2011 2010 2011 Sales Order bookings 1,500 MARKET TRENDS 750 North and South America accounted for nearly half of global defence spending in 2010, or about SEK 791 bil- lion. Defence spending is expected to decrease in North 0 2010 2011 2010 2011 America in the coming years, at the same time that invest- ments in civil security continue to rise rapidly. Brazil, one of Sales Order bookings the stronger economies in South America, accounted for the large share of its defence spending. MARKET TRENDS In recent years, the African continent has experienced economic growth, although several countries are facing political turbulence. In 2010, defence spending in the region accounted for about 2 per cent of the global total. Spending on defence and civil security is expected to increase in the coming years.34 SAAB ANNUAL REPORT 2011
  • 39. MARKETS BY REGIONSWEDEN REST OF EUROPESaab’s position Since Saab was founded, Sweden has Saab’s position Important markets include the UK, France,been its largest market and the majority of its research and Germany and Finland. In 2011, Saab strengthened its positiondevelopment is conducted there. The order intake and in the UK by opening a new office and design centre. The ordersales both decreased slightly in 2011 compared to 2010. intake increased in 2011 compared to 2010 and included live training capabilities to the British Army. MSEK MSEK10,000 6,000 7,500 4,500 5,000 3,000 2,500 1,500 0 0 2010 2011 2010 2011 2010 2011 2010 2011 Sales Order bookings Sales Order bookings MARKET TRENDS MARKET TRENDS Sweden accounted for less than a half per cent of global Defence budgets are being reassessed in Europe in light of defence spending in 2010. Together, the Nordic countries’ the current economic situation. Defence spending is expec- defence spending represented about one per cent of the ted to decline not only in Greece, Italy and Spain but also the global total in 2010. This figure is expected to rise slightly UK, Germany and France, which accounted for about ten per in the coming years. cent of the global total in 2010. In total, Europe accounted for about 23 per cent of global defence spending in 2010. Defence appropriations are expected decline in the coming years. Investments in civil security are expected to continue to rise at the same rate as previous years, i.e., by about ten per cent per year.ASIA, MIDDLE EAST AND AUSTRALIASaab’s position India and Thailand are two important markets forus in Asia, where our investments have given us a strong position.We have also been working for many years in Australia, wherewe today have a strong local presence in command and controlsystems and are growing in traffic management systems andcivil security. Parts of the region represent markets that are notavailable to Saab for political reasons. The order intake decreasedin 2011 compared to 2010 and sales rose due to a higher levelof order activity. Orders included an upgrade of combat manage-ment and fire control systems from Thailand, the weapon locatingsystem Arthur from Korea och ammunition to the Carl-Gustafman-portable weapon system. MSEK10,000 7,500 5,000 2,500 0 2010 2011 2010 2011 Sales Order bookings MARKET TRENDS Defence budgets are expected to increase throughout the region in future years. In 2010, defence spending here accounted for about 26 per cent of the global total, with the Middle East accounting for about seven per cent. After China, Japan has the highest spending in the region, according to the Stockholm International Peace Research Institute (SIPRI). Investments in civil security are expected to continue to grow in the region. SAAB ANNUAL REPORT 2011 35
  • 40. SAAB’S RESPONSIBILITIES > SUSTAINABILITYSUSTAINABILITY AT SAABThrough its operations, Saab plays an important part in High expectationssociety’s development. Our defence and security solu- Predicting the needs and expectations of our various stakeholderstions contribute to a safer society. The actions we take is critical to the long-term success of our operations. Saab’s primary stakeholders are its customers, business partners, employees, share-are based on a set of values and ambitious goals to be a holders and the society in which we operate.responsible business partner and employer.. Our customers and business partners expect us to offer cost- efficient solutions designed for their specific needs. They want aSaab has played an important role in Sweden since the company business relationship that develops over time, based on mutualwas founded in 1937. The acquisition of Celsius added a unique trust. And they want there to be no question that we will complyindustrial heritage dating back to the Bofors iron mill in 1646. In with international regulations and treaties and maintain high ethi-pace with globalisation and growing international trade, Saab’s cal standards.operations have become more international. Today the Group is Our employees expect Saab to be an employer that utilises theiractive in around 30 countries and has around 13,000 employees. skills and offers opportunities for professional development.Our overarching goal is to contribute positively to society. We do Our shareholders expect a consistently high return and trans-so by providing systems and solutions that make society safer and parency in our communication with the capital market.more secure. The society in which we operate expects us to responsibly man- From a societal perspective, Saab is an innovation powerhouse age our business. This includes caring for the environment andfor advanced Swedish technology. This produces positive effects contributing positively to our communities locally and globally.in a number of areas and helps to keep Sweden on the map as aknowledge leader. OUR VALUES EXPERTISE TRUST DRIVE We combine a strong history We are global citizens, We have a passion for innovation, of knowledge with honest and reliable and we we are open to change and constant learning. keep our promises. we are committed to being fast and flexible36 SAAB ANNUAL REPORT 2011
  • 41. SAAB’S RESPONSIBILITIES > SUSTAINABILITY MANAGEMENT OF SUSTAINABILITY WORKOverall responsibility for sustainability work rests with Saab’s Board ofDirectors, which, through the CEO and other members of Group Manage-ment, ensures that sustainable development is incorporated into day-to-day operations. Group Management has assigned individuals responsibilityfor each of the four areas mentioned below.Clear lines of responsibility for priority issues BUSINESS ETHICS SOCIETY The General Counsel has overarching responsibility for our code Our efforts are guided by our overall vision, business concept and of conduct and for raising business ethics issues in the organisa- values. Certain specific measures are governed by our sponsorship tion. In the course of day-to-day operations, every employee has policy, which requires that sponsorship activities generally focus on an individual and shared responsibility to comply with the code of education and technology. conduct. If any confusion arises, it is the duty of the employee to bring it to the attention of his or her immediate supervisor. Saab has also established a whistleblower function as well as an ethics and compliance unit within the legal department, which is responsible for the Group’s rules and ethical standards. BOARD OF DIRECTORS MANAGEMENT Electronic Security Support Aeronautics Dynamics Defence and Defence and Combitech Systems Solutions Services ENVIRONMENT EMPLOYEES Responsibility for Saab’s strategic development and oversight of Saab’s Senior Vice President and Head of Group Human Resources environmental work rests with Group Quality & Environment. Operat- has overarching responsibility for HR work within the Group. Co- ing issues are handled by the business areas, whose managers ordination and development of the Group’s HR work is handled by ultimately bear responsibility for compliance with environmental the HR units within each business area under the leadership of the requirements. The goals that are set at the Group level are broken HR staff. down by business area, work group, etc. The Group Environmental Council coordinates and follows up environmental work within Saab. SAAB ANNUAL REPORT 2011 37
  • 42. SAAB’S RESPONSIBILITIES > BUSINESS ETHICSA CODE OF CONDUCT WITHCLEARLY DEFINED RULESWe have a code of conduct with guidelines that define Industry cooperation to fight corruptionhow we are expected to act with each other as col- Through the Aerospace and Defence Industry Association (ASD),leagues, in contacts with our customers and in our com- the European defence industry has drafted Common Industry Standards to fight corruption. Saab participated actively in thismunities. We have a zero tolerance policy with regard to work and has implemented the requirements and procedures in itsviolations of any kind. own operations. The basic rules then served as the starting point for a more extensive cooperation between European and U.S. defenceGoal contractors as part of the International Forum on Business EthicalSaab will be a trustworthy and reliable partner that promotes an Conduct (IFBEC), which in 2011 arrived at its final form. IFBEC’sopen and transparent market. mission is to develop and in various ways promote ethical standards We are committed to acting ethically in everything we do on the within the global aerospace and defence sector. Saab is a member ofbasis of current laws, our values and code of conduct, and indus- IFBEC and participates in its Task Force. Through this internationaltry codes of conduct. We have developed our code based on the collaboration, the industry has clearly expressed its commitment toOECD’s guidelines for multinationals and the UN Global Compact. fighting every form of corruption through the use of best practicesIn 2011, we introduced an updated version of our code of conduct. and uniform rules. Business ethics at every level Marketing consultants and other cooperations In a global society, companies fill an important function by creating The use of marketing consultants and other advisers is normal in a sustainable growth and doing business ethically. Trust and transpar- complex market. At Saab all such cooperations are analysed and ency are critical to future success. During the year, Saab updated and evaluated centrally. Specific rules of procedure must be followed, and enhanced its code of conduct. All employees have been provided in- every decision must be preceded by a thorough analysis. formation on the new code and are expected to familiarise themselves with its contents and follow its guidelines. Focus on business ethics throughout the sales organisation In autumn 2011, around 150 people received training on our new code of conduct and Saab’s zero tolerance of bribes. In addition, they were all taught that responsible officials are required to conduct a corruption risk assessment in connection with every business deal. Saab will continue this exten- sive training within the mar- keting and sales organisation in 2012. All 500 employees will attend the programme. Everyone who completes it signs a document as proof that they have received train- ing in Saab’s business ethics.38 SAAB ANNUAL REPORT 2011
  • 43. SAAB’S RESPONSIBILITIES > EMPLOYEESCOMMITMENT AND COMPETENCEIN FOCUSAs a knowledge company, Saab is dependent on attract- Harmonised HR processesing the right talents today and in the future. We therefore We continued during the year to focus on creating uniform HRstrive to offer the right development opportunities for routines with the aim of increasing quality and cost efficiencies. For example, we have implemented a process to support HR and man-current employees and to be the first choice of future agers throughout the employment cycle: attract, recruit, introduce,generations of Saab employees. develop and terminate. In terms of introductions, we have also launched a Group-level introductory programme that will be usedGoal for all new hires.Our overall goal is to be an employer of choice for current and We have also implemented payroll efficiencies and signed afuture employees. Group-wide occupational health agreement in Sweden. As a result, we have reduced 26 service providers to one, a cost reduction ofPriorities 2011 about 25 per cent. The agreement also represents an opportunity toPerformance Management work more strategically with healthcare issues.During the year, we introduced a Group-wide process for goal-set-ting, development, monitoring and incentives. The aim is to ensurethat all employees have explicit goals, plans and follow-ups. SAAB ANNUAL REPORT 2011 39
  • 44. SAAB’S RESPONSIBILITIES > EMPLOYEESCulture and behaviours During the year, around 300 managers, project leaders and youngKnowing and understanding our future direction is important to talents sharpened their leadership abilities while building skills andcreating commitment and confidence in the future. In autumn know-how through our management development programmes.2011, Saab’s business plan for 2012-2016 was therefore presented to The basic programme has been modified and will be launchedthe Group, and through the business areas to every employee. in 2012. The new management development concept will focus During the autumn, the Group’s employees received the up- on personal development, business knowledge and internationaldated code of conduct, which establishes a number of important business culture and will be open to all Saab managers aroundprinciples, including that trust is the cornerstone of our business. the world. We also offer international management developmentDescriptions are provided of the rules that apply to the business as programmes, including the Advanced Corporate Managementa whole, how we are expected to act in our workplaces, the impor- Network (ACMN), which has brought together participants fromtance of business ethics to building trust and how to communicate Sweden, South Africa, England and Australia. The purpose of theinternally and externally. programme is to learn more about Saab’s entire operations in order to develop as a leader in an increasingly international environment.Competence and leadership After the recruiting process for Saab’s new training programmeWe have continued to try to create the right opportunities for cur- was completed during the year, 15 trainees were hired to begin inrent employees to develop. By maximising the commitment and the first quarter of 2012. During the year, competence mappingcompetence of every employee, Saab will be better able to meet its assessments were done in selected functions in order to harmoniseoverarching goals. development activities. During the autumn, 150 managers met to discuss the future. The During the year, a decision was made to launch a global Saabtopics included professionalism at every level of operations and Saab’s Academy to give further attention to talent management and de-foundation: its employees. By 2020, 50 per cent of the Swedish popula- velopment in all of Saab’s operations. Saab Academy will be startedtion will be born after 1978, which means that Saab’s demographics in 2012.will change as well. The managers received valuable insight on the newgeneration of employees and discussed the future demands on Saab’s Priorities 2012leadership and corporate culture. An important part of this work to at- Continue to develop Saab Academytract new talents is our cooperations with institutes of technology and Improve talent managementuniversities. Learn more on page 43. Develop HR support globally and locally40 SAAB ANNUAL REPORT 2011
  • 45. SAAB’S RESPONSIBILITIES > EMPLOYEESPERSONNEL DATA RESULTS 2011 2011 2010 2009 HR-related goals Results 2011 Results 2010 Goal 2015Total number of employees 13,068 12,536 13,159 Employer of choice – internallyof whom in – Sweden 10,321 10,396 10,916 (Index) 67 69 75 – South Africa 1,064 1,086 1,146 Employer of choice – exter- 5th place – USA 652 191 262 nally (Ranking by Universum) 12th place 10th place or better – Australia 324 348 378 Communicative leadership – UK 147 117 118 (Index) 68 67 73 – Czech Republic 143 21 - Employee reviews, % 84 83 100 – Denmark 68 72 79 Development plans, % 72 71 100 – Finland 74 74 72 Share of female managers, % 21 19 30 – Norway 55 50 47Percentage of women, total 22% 22% 22%Number of consultants 1,368 1,109 1,150– of which external 1,044 826 906GENDER DISTRIBUTION COMMENT We had a high response rate in our annual employee survey, which we see as a sign of strong commitment. The survey was conducted during the first quarter, a time of significant changes and cost cuts. Although employees gave Saab a slightly lower overall rating compared to the previous year, 22% they continued to respond positively in terms of the opportunities available and that Saab offers a good work-life balance. 78% In last year’s Corporate Barometer, Saab fell from tenth to twelfth place compared to the previous year, but retained its position as an employer of choice among Swedish engineering students. In just a few years, the crite- Men ria students use to rank employers have changed appreciably. Now most feel that it is extremely important that an employer can offer a balance Women between work and life, an area that Saab’s current employees rate highly. The survey also shows that corporate culture is becoming more impor- tant. Engineering students want a creative, dynamic and welcoming work environment, leaders who support their development and contacts with international customers and colleagues. The share of wage-setting female managers increased to 21 per cent. WeEDUCATIONAL BACKGROUND remain focused on achieving our goal of 30 per cent by 2015. 10% 10% 73% 7% Engineering and manufacturing PERCENTAGE OF EMPLOYEES Natural sciences, mathematics and computer science OUTSIDE SWEDEN Social sciences, law, business and administration Other majors % 100 75 50 25 Employees in Sweden 0 Employees outside 2001 2003 2005 2007 2009 2011 Sweden SAAB ANNUAL REPORT 2011 41
  • 46. SAAB’S RESPONSIBILITIES > SOCIETYPARTNERSHIPS FORSUSTAINABLE DEVELOPMENTAs one of Sweden’s most research-intensive compa- In Sweden, we have established alliances with several leading uni-nies, we have contributed to technological development versities and institutes of technology. Our focus in South Africa isdomestically and around the world. Today this remains on assisting children and young people to receive an education and provide them with access to the right learning materials.an important component in industrial development in aglobal market. Goal We create economic value where we operate. Our research andSaab is a company that contributes to society on several dimen- development helps to build competence and provides economicsions beyond its basic business concept. For example, it creates job benefits in our own and others’ businesses.opportunities itself as well as through its subcontractors, in Swedenand our other home markets. Having access to the right skills is Priorities 2011critical to our long-term development and success, which is why we New innovation centre in Brazilhave invested for years in collaborations and programmes to give May 18 marked the opening of the Swedish-Brazilian research andchildren and young people the opportunity of a good education in innovation centre created on Saab’s initiative. The main focus isSweden and South Africa. on transportation and logistics, defence and security, and urban FROM WET TO DRY Saab has maintained a local presence in Thailand for several years. In connection with the flooding there in fall 2011, Saab received a request from the Thai Embassy for emergency assistance. After analysing the situation, Saab’s organisations in Thai- land and Sweden donated two water treatment facilities, 300 tents and 100 electric generators for the Thai people. Since Saab has the capacity, experience and local presence in Thailand, it was able to respond quickly. Saab’s many years of experience with infrastructure services and system solutions for defence, disaster and rescue mis- sions is a vital asset for those in need. Efforts are coordi- nated as part of Project Relief. About Project Relief Project Relief is an initiative created by Saab to meet emergency needs and reduce human suffering caused by disasters. By utilising our technical expertise and long ex- perience, we can make a difference. To build on this social responsibility work and at the same time be in position to respond quickly and effectively to future disasters, Saab has decided to create a permanent capability. The initiative is still in development. A previous project in Pakistan 2010 provided water treatment plant facilities for 15,000-20,000 people. Saab also donated money to Haiti after the earth- quake in 2010.42 SAAB ANNUAL REPORT 2011
  • 47. SAAB’S RESPONSIBILITIES > SOCIETYdevelopment, specifically with regard to energy and the environ- water, medical assistance and food. To meet this need, Saab has es-ment. The centre will bring together stakeholders from the public, tablished Project Relief, through which it supplies technical exper-academia and industry and give them the opportunity, using tise and experience to save lives in affected areas. With its resources,technology, to tackle important challenges in society. Learn more Saab can help to meet basic human needs and reduce suffering inon page 30. the wake of disasters. As an example, we might donate material and provide organisational assistance with water treatment, cartographyStructured assistance and technical support.Natural and man-made disasters have increased in number in thelast 20 years. The demand for humanitarian aid in the aftermath ofsuch catastrophes is high, especially in terms of shelters, potable COLLABORATIONSSaab collaborates with around 50 schools, institutes of technology and uni- Saab is engaged in a wide array of technological collaborations with Swed-versities. The aim is to promote education and technology among children ish and foreign universities, research institutes and companies, contributingand young people, drive research projects and demonstrate that Saab is to a number of research programmes and centres of excellence. In 2011,an attractive, stimulating employer. this included eight EU projects, four ETAP projects and 24 NFFP projects.Collaborations to promote education and technology Examples include:Examples include: Together with Linné University and Chalmers University of Technology, a doctoral project is under way on dynamic forecasting models. The aim Saab Technical High School, which was established in 2009 to strength- is to measure aircraft vibrations and compare them with how aircraft en interest in engineering and the natural sciences among children and perform in reality. young people in Arboga and the surrounding area. Saab is represented on the Governing Board of Clean Sky, one of the Cooperation with Arabyskolan in Växjö, where Saab is involved in the EU’s largest research projects ever. Learn more on page 46. engineering and science curriculum. Saab is a partner in Neuron, Europe’s largest multinational military The Royal Swedish Academy of Sciences’ science and technology demonstrator project. programme for preschool and primary school students. Saab is a partner in MidCAS, the European Defence Agency’s (EDA) Venture Cup largest research project ever. Kunskapsskolan Saab is the lead partner in FAS4Europe, the first joint study of the future Female Engineer of the Year of European military aerospace. Swedish Championship in Technology and “Technology Days” events Saab is one of the founding companies behind Compraser. Created in 2011, Compraser is a Swedish research centre for fiber composites, Åke Svensson’s research grant at Linköping University where member companies are cooperatively trying to find better, more Long-term sponsorship agreement with the electrotechnology depart- efficient ways to produce, test and validate their products, mainly carbon ment at Chalmers. fiber composites. Cooperation with First Lego League and Upptech to promote technol- Several adjunct professors are dividing their time between Saab and ogy among young people. their universities as a way to develop knowledge collaboratively. A number of educational projects in South Africa, where we supply the materials and other equipment, participate in lectures and take our own teaching initiatives. iLab Classroom, where we sponsor mobile computer labs that can easily be transported to schools where children today lack access to comput- ers and IT. SAAB ANNUAL REPORT 2011 43
  • 48. SAAB’S RESPONSIBILITIES > ENVIRONMENTREDUCING OUR ENVIRONMENTALIMPACTWe are working actively to reduce our impact on the en- Hazardous substancesvironment and climate change. An important part of our Certain hazardous chemicals are still necessary to meet securitywork is to collaborate with the industry to create sustain- and technical performance requirements in the aerospace and defence industry. During the last ten years Saab has reduced its useable solutions for the future. of hazardous substances such as volatile organic solvents (VOC), trichloroethylene, brominated flame retardants, lead and cadmium.Objective It has received an exemption from the Swedish National Chemi-Our overall objective is to reduce the impact of our operations and cals Inspectorate to use trichloroethylene at the Swedish facilitiesproducts on people’s health, the environment and the climate. The in Tannefors and Järfälla. Beginning in 2010, four older facilitiesmost important environmental aspects for us are climate change, that used trichloroethylene to degrease metals have been replacedour products’ environmental impact, hazardous chemicals and by two modern, enclosed plants, which offer many environmentalenvironmental risks; learn more on page 65. Our climate objective benefits, including a reduction in trichloroethylene from over tenis to reduce relative CO2 emissions by 20 per cent during the period tons to about one ton per year. Trichloroethylene emissions to2007-2020. Emissions are measured against our turnover in MSEK. water have ceased and hazardous wastes have been reduced. In the In the area of chemicals, we work actively with needs analyses, process, energy and water consumption have decreased as well.knowledge and communication internally within Saab and with Although its products are not governed by the EU’s RoHSour suppliers. All the business areas drafted strategy documents in directive (Restriction of the use of certain Hazardous Substances in2011, where the use of hazardous substances in their products was electrical and electronic equipment), Saab is actively seeking to re-identified. These strategies will serve as the basis for prioritising duce consumption of these substances as stipulated in the directive.measures to replace hazardous chemicals. The work is monitored Moreover, we are working to adapt to the requirements of the EU’son a regular basis by the Group Environmental Council. chemicals law, REACH (Registration, Evaluation and Authorisation of Chemicals). In 2011, Saab acquired and tested an IS/IT tool toPriorities and results 2011 structure information on the chemicals contained in its products.Climate change The tool will also be used to verify that the products meet currentDuring the period 2007-2010 relative CO2 emissions were reduced chemical requirements. Implementation will begin in 2012. Wefrom 2.6 to 2.5 tons per MSEK. Vehicles, aircraft, business travel have long been using an effective Group-wide IS/IT system to man-and goods transports account for 60 per cent of emissions, while age chemical products in its operations.40 per cent is attributable to electricity and heating for our facili-ties, machinery and processes. Demands on suppliers An extensive energy conservation project was launched in 2011 We have many suppliers around the world. Because a large share ofto cut energy consumption at Saab AB’s properties in half by 2015. the components and subsystems used in its products are pur-The measures include smaller facilities, more efficient operations, chased from other companies, they too have a great impact on ourtechnological investments and increased awareness among em- environmental work. We therefore require that our suppliers actployees about consumption from computers, lighting and projec- responsibly and follow our requirements as well as those of thetors. In 2012, one of Saab’s large cooling centres will be replaced by EU and our customers. Setting environmental requirements fordistrict cooling to reduce CO2 emissions by 3,000–4,000 tons per suppliers and monitoring compliance is a continuous process. Inyear while at the same time eliminating another smaller, energy- 2011 this work was given higher priority, especially since we aredraining system. currently introducing uniform processes and routines within Saab. For the fifth consecutive year, Saab was ranked in the internationalCarbon Disclosure Project’s (CDP) Carbon Disclosure Leadership External environmental cooperationsIndex. In its Nordic report, CDP ranks companies that excel at climate We are one of the main suppliers to Clean Sky, a Joint Technologyreporting. The focus is on greenhouse gas emissions, goals and results, Initiative financed equally by the EU and the industry. The purposemeasures to limit emissions, and the risks and opportunities compa- of Clean Sky is to bring the European aviation industry together tonies see due to climate change. For more information on CDP and meet the 2020 environmental goals set by the Advisory Council forSaab’s complete CDP report, see www.cdproject.net. Aeronautic Research in Europe (ACARE). This includes reducing44 SAAB ANNUAL REPORT 2011
  • 49. SAAB’S RESPONSIBILITIES > ENVIRONMENTCO2 emissions per passenger km flown in European airspace by50 per cent, nitrogen oxide by 80 per cent and noise levels aroundairports by half. The project is now halfway complete and theresults are beginning to be released. In addition, we are helpingto develop a future wing that will utilise innovative technology interms of design and construction to reduce wind resistance, therebycutting fuel consumption by up to eight per cent. Initial productiontesting was conducted in 2011. An aircraft with a full-scale wing isscheduled for testing in 2014–2015.CO2 EMISSIONS WITHIN THE SAAB GROUP ELECTRICITY CONSUMPTION IN SAAB’S OPERATIONS GWh Electricity 60,000 3.6 200 Heating 50,000 3.0 160 tonnes CO2/MSEK sales Saab works actively to more 40,000 2.4 efficiently use electricity and 120 heating energy. The reduction tonnes CO2 30,000 1.8 in electricity consumption is 80 due to the coordination of 20,000 1.2 operations and energy savings measures. The increase in 40 heating energy consumption is 10,000 0.6 due to the cold winter in 2010. 0 0.0 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 2007 2008 2009 2010 2011 Total emissions (tonnes CO 2) The relative target for GHG emissions is a 20% decrease between 2007 and 2020 Relative emissions (tonnes CO 2/MSEK sales) CO2 EMISSIONS BY SOURCE WITHIN SAAB IN 2010*, % Group-owned boilers and accidents, 5 % Group-owned vehicles and aircraft, 25 % Purchased electricity, 25 % Purchased district heating, 12 % Purchased business travel 27 % Purchased freight, 5 % Leased properties, 1 % * Figures for 2011 were not available at the time this annual report was produced.EMISSIONS OF VOLATILE ORGANIC CONSUMPTION OF CHLORINATED VOLATILESOLVENTS (VOCs), TONNES ORGANIC SOLVENTS (VOCs), TONNES60 1550 1240 930 Chlorinated VOCs consist of trichloroethylene, which is 6 The reduction in VOC emis- used within Aeronautics and20 sions from 2010 to 2011 is Electronic Defence Systems. due to variations in production 3 The reduction in consumption10 is due to the new degreasing volume. Aeronautics and Saab 0 Barracuda AB account for the 0 facility Aeronautics used 2007 2008 2009 2010 2011 largest share of emissions. 2007 2008 2009 2010 2011 throughout the year. SAAB ANNUAL REPORT 2011 45
  • 50. SAAB’S RESPONSIBILITIES > ENVIRONMENTSUSTAINABLE SOLUTIONS TOREDUCE ENVIRONMENTAL IMPACTSEnvironmental and climate challenges are global, and all Current examples include: :our customer-countries face the daunting task of having Measuring cities – Safe & Efficient Cities is a collaborative projectto address them as a major priority. by the Linköping municipal and technical authorities, Saab and Linköping University launched in 2008. Together we have demon-In February 2011, the EU reaffirmed its goal to reduce greenhouse strated a sensor that measures drinking water in real time. Saab’sgas emissions by 80–95 per cent by 2050 to avoid a temperature contribution to the project is the control system that transmitsincrease of two degrees Celsius. Taking into account the measures the alarm from the sensors. The security system is currently beingdeveloping countries will have to take, this represents a global re- tested in Linköping and is expected to be available in the interna-duction in emissions of 50 per cent by 2050. Moreover, 50 per cent tional market within a year.of the world’s population currently lives in urban environments. In Support for wind and solar power – Saab offers complete main-20 years, this is expected to grow to 60 per cent. Cities devour en- tenance and monitoring systems for wind farms, which meansergy and resources and produce large volumes of waste. For escalat- that operators can rely on us as their sole supplier of maintenanceing urbanisation to be sustainable, new solutions and ideas will be systems. The same offering is available for solar energy, where Saabneeded. Every industry is looking for ways to effectively transition supplies weather monitoring systems that control the wind park’sto a more sustainable society. As a result, energy-efficient solutions functions. Customers include ABB and Cleanergy.are in growing demand, regardless of the energy source. Information and communication technology (ICT) is thought to Telematic Fleet Maintenance – Used at airports, for example, tohave excellent potential to reduce CO2 emissions if used optimally. monitor fuel consumption, emissions and costs per vehicle by col-In our business development we have already seen how our know- lecting data from sensors in the vehicles. The system also handleshow and solutions based on existing technology can help custom- data transfers between the backoffice and vehicles.ers. This has facilitated a leap into the greentech market. Our SESAR – (Single European Sky Air Traffic Management Research),Greentech Business Concept is to create and introduce sustainable an EU collaboration focused on developing future air traffic man-solutions for various situations where people impact of the environ- agement systems with less impact on the environment.ment. This includes cities, energy supplies, transports and traffic on Clean Sky – Saab’s technology is contributing to lighter, moreland, at sea and in the air. energy-efficient aircraft with lower wind resistance, thereby Transports, energy, water, waste management and huge amounts of reducing energy consumption. New technology will gradually beinformation flow in various directions. Several of the players responsi- incorporated into future generations of commercial cargo aircraftble for this in society are customers of Saab. Our systems can optimise beginning in 2016.these flows and represent an important step toward a sustainablesociety. Examples include: BioFuel – Saab participated in 2011 in a joint study with FMV and the Swedish military on the use of biofuels in the Gripen system. Intelligent transport solutions for air, land and sea C-lean Ship – All ships collect algae and other unwanted mate- Solutions that improve logistical and maintenance efficiency rial on their hulls, which makes them slower and increases fuel consumption. The bigger the ship, the more consumption increases. Communication and decision-making systems Most shipping companies wash the hulls once every three years, Surveillance systems for land and sea which will sideline a vessel for up to 48 hours. Saab has developed Data processing and visualisation for better decision guidance a robotic cleaning device, based on the remotely operated vehicles (ROV) from Dynamics, which can do the job in 6–8 hours. Maersk, Waste and energy for one, has seen savings of about MSEK 400 per year. Minesto - develops a new concept for a powergeneration through tidal water and ocean streams. It is a spin-off from Saab’s expertise within aerodynamics. The powerplant, called Deep Green, has a unique ability to function in a cost-efficient manner at low speeds where no other known technology functions. In 2010 Time Maga- zine named Deep Green as one of the best inventions of the year.46 SAAB ANNUAL REPORT 2011
  • 51. SAAB’S RESPONSIBILITIES > ENVIRONMENTIN THE FUTURE THE PLANTAGON GREENHOUSE WILL SUPPLYTHE CITY WITH FRESH VEGETABLESThe World Expo in Shanghai in 2010 introduced one of the most spectacu- side Linköping. The hope is that the greenhouse will supply a large sectionlar greentech projects ever conceived. Plantagon is an enormous spherical of the city’s population with fresh fruit and vegetables in an environmentallygreenhouse that could potentially supply cities with fresh produce. sustainable way that eliminates practically all shipping. Combitech is the sole supplier of Plantagon’s control systems.The company Plantagon develops futuristic greenhouses with innovativefunctions. Thanks to its collaboration with Saab, an enormous glass ballwith a spiral-shaped growing area may eventually be constructed just out- SAAB ANNUAL REPORT 2011 47
  • 52. ADMINISTRATION REPORT > FINANCIAL INFORMATIONFINANCIAL REVIEW 2011Saab AB (publ.), corporate identity number 556036-0793, with its LONG-TERM FINANCIAL GOAL PERFORMANCE IN 2011registered address in Linköping, Sweden. The address of the com- Growthpany’s head office is Gustavslundsvägen 42, Stockholm, with the Goal: Our organic sales growth will average 5 per cent per year overmailing address Box 12062, SE-102 22 Stockholm, Sweden, and the a business cycle.telephone number +46 8 463 00 00. Result 2011: In 2011, organic sales growth was -4 per cent (-1). Saab has been listed on NASDAQ OMX Stockholm since 1998 Sales decreased compared to 2010 as a result of lower activityand on the Large Cap list since October 2006. The principal owner levels in major projects and the challenging business climate inis Investor AB, with 30 per cent of the shares, corresponding to South Africa.40.8 per cent of the votes. The total number of shares in the com-pany is 109,150,344, distributed between 1,907,123 Series A shares Operating marginwith ten votes each and 107,243,221 Series B shares with one vote Goal: We have a margin goal formulated as an average over a busi-each. At year-end, a total of 3,818,386 Series B shares had been ness cycle. The operating margin after depreciation/amortisationrepurchased to guarantee the Group’s various share matching plans. will be at least 10 per cent.The repurchased shares are held as treasury shares. Result 2011: The operating margin after depreciation/amortisation In accordance with the Swedish Annual Accounts Act, Saab has (EBIT) in 2011 was 12.5 per cent (4.0).prepared a corporate governance report separate from the annual Operating income in 2011 included capital gains of MSEK 1,169.report. It can be found in this document on pages 134-143. The cor- It also included structural costs for Saab Sensis totalling MSEK 27porate governance report contains the Board of Directors’ report on and costs related to the acquisition process of Sensis of MSEK 25.internal control of financial reporting, which includes information In 2010, operating income was impacted negatively by structuralfor both the Parent Company and the Group. See pages 139-140 in costs and other non-recurring items of MSEK 616 and capital gainsthis document. of MSEK 14.Operations Equity/assets ratioAs one of the world’s leading high technology companies, Saab Goal: Our goal is an equity/assets ratio exceeding 30 per cent.offers products, solutions and services for military defence and civil Result 2011: At year-end 2011, the equity/assets ratio was 41.1security. In 2011, we had customers in over 100 countries, while per cent (39.1).research and development are principally carried out in Sweden. The equity/assets ratio increased as a result of stronger incomeWe are primarily active in Europe, South Africa, Australia and the in 2011.US. Saab is organised in six business areas: Aeronautics, Dynam-ics, Electronic Defence Systems, Security and Defence Solutions, DIVIDEND AND DIVIDEND POLICYSupport and Services, and Combitech. Combitech, which provides Proposal for 2011 dividend and dividend policyconsulting services, is an independent, wholly owned subsidiary of Saab’s long-term dividend objective is to distribute 20–40 per centSaab and is reported as a business segment. of net income over a business cycle to shareholders. In addition to the business areas, Corporate comprises Group For 2011, the Board of Directors proposes a dividend ofstaff and departments and secondary operations. It also includes SEK 4.50 per share (3.50). This would represent 21 per cent of netthe leasing fleet of Saab 340 and Saab 2000 aircraft. income in 2011 (85).Long-term financial objectives OUTLOOK 2012The long-term financial goals as of 2011 consist of goals for organic In 2012, we estimate that sales will increase slightly compared to 2011.sales growth, operating margin after depreciation and amortisation We expect the operating margin in 2012, excluding material(EBIT) and the equity/assets ratio. net capital gains, to be in line with the operating margin in 2011, excluding material net capital gains, of 7.5 per cent.48 SAAB ANNUAL REPORT 2011
  • 53. ADMINISTRATION REPORT > FINANCIAL INFORMATIONIMPORTANT EVENTS IN 2011 Saab announced it has signed a 5-year Multi-Currency revolving credit On 16 June 2011, it was announced that Board Member Michael facility of SEK 4 billion to refinance the existing credit facility maturing in O’Callaghan would immediately resign from his position as a result of March 2012. The terms of the credit facility reflect Saab’s strong financial BAE Systems’ sale of its shareholding in Saab AB. position and contain no financial covenants. The credit margin is 0.65 Saab formed its own Academy to focus more on employee training and per cent with a commitment fee of 35 per cent of the margin. The facil- competence development. The Academy is headed by Mikael Grodzin- ity is self-arranged and the agreement was signed with a total of eight sky, who left his position as Head of Group Human Resources within the banks with an MSEK 500 commitment each. Group Management during autumn 2011. Saab AB held its Annual General Meeting 2011 on Thursday, 7 April Saab announced that Carina Brorman had been appointed as new Sen- 2011 in Stockholm. Håkan Buskhe and Michael O’Callaghan were elect- ior Vice President and Head of Group Communications. She assumed ed to the Saab Board of Directors and Johan Forssell, Sten Jakobsson, her new post on 1 October 2011. Per-Arne Sandström, Cecilia Stegö Chilò, Åke Svensson, Lena Treschow Torell, Marcus Wallenberg and Joakim Westh were re-elected as Board Saab announced that Anne Gynnerstedt, Senior Vice President and Members. Erik Belfrage and George Rose declined re-election. Marcus Head of Group Legal Affairs, would leave her position in autumn 2011. Wallenberg was re-elected as Chairman of the Board of Saab AB. Saab announced the shareholder representatives who, together with the Saab announced it had received information from the Indian Ministry Chairman of the Board, constitute the Nomination Committee for the An- of Defence that Gripen has not been shortlisted for the Indian Medium nual General Meeting 2012: Marcus Wallenberg, Chairman of the Board Multi-Role Combat Aircraft (MMRCA) programme. of Saab AB; Petra Hedengran, Investor AB; Peter Wallenberg Jr, Knut and Alice Wallenberg Foundation; Thomas Eriksson, Swedbank Robur Saab launched an investigation after details emerged in the Swedish me- Funds; and Thomas Ehlin, Nordea Investment Funds. The Nomination dia about a contract with a South African consultant about which Saab Committee represents approximately 52 percent of the voting rights of had no prior knowledge. After having completed a review of the contract Saab AB based on the ownership structure as of 31 August 2011. The and the financial transactions of the company Sanip Pty Ltd during the Annual General Meeting of Saab AB will be held on Thursday, 19 April, period in question, it was revealed that approximately MZAR 24 had 2012. been paid from BAE Systems to Sanip. These payments were trans- ferred to the South African consultant shortly thereafter. The investigation Switzerland announced that it had made a type-selection of Gripen for and assembled materials were submitted to the attorney Tomas Nilsson, negotiations as a future multirole fighter aircraft for the Swiss Air Force. who thereafter commented on the investigation and handed it over to the Saab announced that Lena Eliasson had been appointed as new Senior Swedish National Anti-Corruption Unit. Vice President and Head of Group Human Resources and that Annika Saab announced that the Board has decided to utilise its authorisation to Bäremo had been appointed new Senior Vice President, General Coun- repurchase the company’s own series B shares to hedge the company’s sel and Head of Group Legal Affairs at Saab. Both are members of the share matching plans and performance share plans. Acquisitions will be Group Management. made on NASDAQ OMX Stockholm at a price within the registered share Saab announced that Lars Granlöf, Senior Vice President and Chief price interval on each occasion. Acquisitions can be made as of 20 July Financial Officer, would leave his position at the end of February 2012. 2011 until next year’s Annual General Meeting. However, no acquisi- He thereafter is available to the company during a transition period. tions will be made during the 30-day period prior to the public release of quarterly results, including the date of release. SAAB ANNUAL REPORT 2011 49
  • 54. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASAERONAUTICSAeronautics offers a product portfolio that includes the Income and marginGripen fighter and Unmanned Aerial Systems (UAS). In 2011, the ownership interest in Denel Saab Aerostruc-Aeronautics also manufactures aircraft components for tures (Pty) Ltd. was divested and generated a capital gain before tax of MSEK 58.Saab’s own aircraft as well as passenger aircraft pro- Structural costs of MSEK 98 in 2010 related to lay-offs as a con-duced by others. Products include Gripen, Skeldar sequence of the reorganisation of Aeronautics announced in 2009.and Neuron. Operating cash flowSALES, INCOME AND ORDERS Operating cash flow improved during the year due to improvedOrders received working capital.Orders received in 2011 included several orders from FMV related Several projects entered into their final stages of completionto the Gripen system. For example, orders were received for de- in 2010 and 2011. These projects have been successfully deliveredvelopment of the existing material system 39 (edition 19) and for to the customer because Saab has managed to execute them at amaintenance and development studies of the Gripen system. lower cost level than originally planned. A final price adjustment of Orders received in 2011 were substantially lower than in 2010 MSEK 680 was therefore made in the fourth quarter 2011.mainly as 2010 included a large order from FMV for six Gripenaircraft intended for the Royal Thai Air Force of SEK 1.6 billion and KEY FIGURESan order for a Tactical Unmanned Aerial Vehicle system (TUAV) of MSEK 2011 2010MSEK 407. Sales 6,351 6,741 Orders received where the order sum exceeded MSEK 100 rep- Operating income 332 191resented 84 per cent (89) of total order bookings. Adjusted operating margin, % 5.2 2.8 Order bookings 3,807 6,901Sales Order backlog at year-end 13,091 15,636 Operating cash flow 223 30Sales in 2011 decreased mainly as a result of the lower activity of EBITDA 579 438deliveries of Gripen to South Africa. All 26 aircraft ordered by EBITDA margin, % 9.1 6.5South Africa have been delivered. Markets outside Sweden accounted for 43 per cent (44) of sales.SHARE OF SALES 2011, % SALES, MSEK OPERATING INCOME AND MARGIN 8,000 350 10 25% 280 8 6,000 210 6 4,000 140 4 2,000 70 2 0 0 0 2009 2010 2011 2009 2010 2011 Operating income, MSEK Operating margin, %50 SAAB ANNUAL REPORT 2011
  • 55. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASHIGHLIGHTS 2011 STRATEGIC PRIORITIES Neuron is a European collaboration project to develop a UCAV Continue to strengthen the Gripen programme in Sweden demonstrator, Unmanned Combat Aerial Vehicle. The aim is to and through export contracts, including through an increased develop expertise in advanced aeronautics. Saab is responsible market presence. for, among other things, low signature (stealth) technology, Profitably grow the successful civil aerostructures operations flight testing, aerodynamics, and the design and production of through new and existing business. the main fuselage. The delivery to Dassault of France was made in January. Increase sales and marketing activities in Unmanned Aerial Systems and build on a strong international position through In April, Sweden’s Parliament decided to deploy fighter aircraft cooperations in both research and technology and new develop- in Libya. The mission included between five and eight Gripen ment programmes. fighters, surveillance and support resources, personnel for infor- mation operations and an aircraft for air refuelling. Operational improvements through lean manufacturing and efficiency goals in product development and production. In September, the first Boeing 787 was delivered to the airline ANA. Saab is supplying the doors and installation kits for the aircraft. PRODUCTS AND SOLUTIONS On November 30, the Swiss government announced its type-se- The Gripen fighter, which offers continuous upgrades, high cost lection of Gripen and that it would begin negotiations on Gripen efficiencies and a level of performance that meets the high demands as a possible future multirole fighter aircraft for Switzerland. of armed forces. The unmanned helicopter Skeldar, which offers a modular design and several optional features. Airborne missile systems. Subcontractor for commercial aircraft producers. The development of the unmanned helicopter Skeldar is an example of Saab’s niche innovations. SAAB ANNUAL REPORT 2011 51
  • 56. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASDYNAMICSDynamics offers a product portfolio with ground combat Income and marginweapons, missile systems, torpedoes, unmanned under- The operating margin in 2010 was impacted negatively by struc-water vehicles and signature management systems for tural costs of MSEK 278, which were partly reversed in 2011.armed forces as well as military and civil niche products Operating cash flowfrom spin-offs such as unmanned underwater vehicles for Operating cash flow in 2011 was lower compared to 2010 due tothe offshore industry and 3D mapping solutions for the timing differences of milestone deliveries in large projects.defence market. Products include Carl-Gustaf, RBS 70and Rapid 3D Mapping. KEY FIGURES MSEK 2011 2010 Sales 4,335 4,741SALES, INCOME AND ORDERS Operating income 484 322Orders received Adjusted operating margin, % 11.2 6.8Orders received in 2011 included several larger orders for ammuni- Order bookings 4,246 3,312tion to the Carl-Gustaf man-portable weapon system and contracts Order backlog at year-end 5,460 5,546for further deliveries of components for the system. An order for Operating cash flow 588 1,044the system was also received from the US Army. A large order for EBITDA 652 516the AT4 man-portable weapon system was also received. EBITDA margin, % 15.0 10.9 Orders received where the order sum exceeded MSEK 100 rep-resented 59 per cent (61) of total order bookings.SalesSales decreased as a result of a lower order intake during 2010 andconsequently lower activity levels in the first half of 2011 comparedto 2010. Markets outside Sweden accounted for 82 per cent (81) of sales.SHARE OF SALES 2011, % SALES, MSEK OPERATING INCOME AND MARGIN 5,000 500 14 17% 4,000 400 12 3,000 300 10 2,000 200 8 1,000 100 6 0 0 4 2009 2010 2011 2009 2010 2011 Operating income, MSEK Operating margin, %52 SAAB ANNUAL REPORT 2011
  • 57. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASHIGHLIGHTS 2011 STRATEGIC PRIORITIES Contract with the US Army and US Special Operations Com- To support the international expansion and future business, mand for the Carl-Gustaf man-portable weapon system valued local operations and partnerships with selected companies will at a total of MSEK 209. This is the first time that the US Army is be established internationally, including by utilising Saab’s own buying the Swedish recoilless rifle system. sales resources in selected markets such as India and North Saab sold its interest in the 3D mapping company C3 Technolo- America. gies AB. Saab will continue to offer 3D mapping applications for Continued focus on operational development and introduction of the military, government and geographical information systems lean manufacturing processes to increase efficiency and profes- (GIS) markets through the new unit R3DM (Rapid 3D Map- sionalism throughout the organisation. ping) within Dynamics. Self-financed development is being increased, as in the case of A significant order valued at MSEK 1,155 was received for RBS 70 NG. Investments to improve existing products and an ammunition for the Carl-Gustaf man-portable weapon system, increased focus on lighter missiles. with an option that could lead to additional orders of up to about MSEK 500. The order, comprising the production of anti- PRODUCTS AND SOLUTIONS armour ammunition, is expected to create around 40 new jobs at Saab’s production unit in Karlskoga, Sweden. The installed base in more than 60 countries around the world includes support weapons, camouflage, 3D mapping, missiles, torpedoes and The launch of the RBS 70 NG missile system, which, among unmanned underwater vehicles. other things, is equipped with a new sighting system and offers Ground combat weapons such as NLAW, AT4, Carl-Gustaf and Bill 2. several new functions and capabilities, including lighter weight, Land-based air defence systems, e.g., RBS 70, Bamse and ASRAD-R. night sight, automatic target tracking to assist the gunner during Missile programs such as Meteor, Taurus and IRIS-T. engagement, and built-in video recording of the gunner’s view.RBS 70 NG, the next genera-tion of air defence system,was launched in September.The system has market-leading technology, uniqueflexibility and the ability tocombat aircraft, missiles,unmanned aerial systemsand tanks. SAAB ANNUAL REPORT 2011 53
  • 58. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASELECTRONIC DEFENCE SYSTEMSElectronic Defence Systems offers a product portfolio During the second half of 2011, operating income was negativelycomprising airborne, land-based and naval systems in affected by structural costs related to the acquisition of Sensis.radar, signals intelligence and self-protection. The busi- In 2010, the operating margin was positively affected by a claim re- lated to a finalised project where Saab reduced its estimated risk share.ness area also supplies civil and military customers withavionics that increase flight mission efficiency and flight Operating cash flowsafety. Products include Giraffe AMB, Erieye, Arthur, BOL In the fourth quarter the operating cash flow was negatively im-and IDAS. pacted by delays in a few projects. Operating cash flow was positively impacted by MSEK 179 as aSALES, INCOME AND ORDERS result of the divestment of the ownership interest in Grintek Ewation.Orders received The acquisition of Sensis had a negative impact on operatingOrders received in 2011 included an airborne electronic warfare cash flow of about MSEK 230.self-protection system (named IDAS, Integrated Defensive Aids Electronic Defence Systems was a supplier to several projectsSuite) and an order from LIG Nex1, the prime contractor in South in Aeronautics that entered into their final stages of completion inKorea, for the weapon locating system Arthur. An order was also 2010 and 2011. These projects have been successfully delivered toreceived for the Giraffe AMB multi-mission radar system and the customer and Saab has managed to execute them at a lower costrelated services from the US Department of State. level than originally planned. A final price adjustment of MSEK 170 Orders received where the order sum exceeded MSEK 100 rep- was therefore made in the fourth quarter 2011.resented 23 per cent (58) of total order bookings. KEY FIGURESSales MSEK 2011 2010Sales in 2011 increased mainly as a result of a higher activity level Sales 4,561 4,354in a significant airborne early warning project during the year. The Operating income 297 99project was finalised at the end of the year. Adjusted operating margin, % 6.5 2.3 Markets outside Sweden accounted for 76 per cent (62) of sales. Order bookings 3,229 5,494 Order backlog at year-end 6,855 8,240Income and margin Operating cash flow 413 594Profitability increased in 2011 as a result of the divestment of the own- EBITDA 785 589ership interest of 42.4 per cent in the South African system engineer- EBITDA margin, % 17.2 13.5ing company Grintek Ewation to Cassidian, a division of EADS. Thetransaction generated a capital gain before tax of MSEK 122.SHARE OF SALES 2011, % SALES, MSEK OPERATING INCOME AND MARGIN 5,000 300 10 18% 4,000 240 8 3,000 180 6 2,000 120 4 1,000 60 2 0 0 0 2009 2010 2011 2009 2010 2011 Operating income, MSEK Operating margin, %54 SAAB ANNUAL REPORT 2011
  • 59. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASHIGHLIGHTS 2011 STRATEGIC PRIORITIES Order for Saab’s multi-mission radar Giraffe AMB and related Focus on strengthening Saab’s presence in selected markets, services from the U.S. Department of State. The order value is increasing sales to existing customers and developing operations about MSEK 155. in key markets that offer opportunities for repeat business. Order for the Arthur weapon locating radar from LIG Nex1, the Through acquisitions, partnerships and collaborations, the prime contractor for the Defence Acquisition Program Admin- electronic defence operations and product portfolio are being istration in South Korea. The order is worth MSEK 450. further enhanced. Products are kept attractive through spiral Order for the IDAS airborne self-defence system valued at about development, where we continuously upgrade the capabilities. MSEK 250. The system improves security for aircraft, helicopters Continue to develop a more efficient organisation, including and crews in threat environments. through lean manufacturing, and increase cost awareness in Divestment of the South African system engineering company project implementation. Grintek Ewation to Cassidian. Order together with Saab Sensis for the multi-role naval surveil- PRODUCTS AND SOLUTIONS lance radar Sea Giraffe AMB as part of the U.S. Navy’s Littoral The operations meet customer demand for solutions for surveillance Combat Ship Program. and for detection, localization and protection against the various types of threats. The product portfolio includes airborne, land-based and naval As part of ongoing efficiency improvements, changes have been systems in radar, signals intelligence and self-protection. The operations made in electronics manufacturing, e.g., circuit board produc- also comprise avionics that increase flight mission efficiency and flight safety. tion has been outsourced to three subcontractors The sensor systems ERIEYE, Carabas, Arthur and Giraffe AMB. Electronic warfare systems, including IDAS, Camps, BOL and LEDS. Avionics, including surveillance, display and digital recording systems. Saab Sensis’ expertise in various types of radar upgrades.The weapon locating systemArthur is one of Saab’s leadingniche products and has beenexported to the Czech Republic,Denmark, Greece, Norway,Spain, Sweden and the UK,among others. SAAB ANNUAL REPORT 2011 55
  • 60. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASSECURITY AND DEFENCE SOLUTIONSSecurity and Defence Solutions offers a product portfolio Salescomprising defence reconnaissance systems, airborne early Sales declined as a result of a challenging market situation in Southwarning systems, training and simulation, air traffic manage- Africa. Markets outside Sweden accounted for 77 per cent (77) of sales.ment, maritime security, security and monitoring systems,and solutions for safe, robust communications. Products Income and margininclude 9LV combat management and fire control systems, During the second half of 2011, operating income was negativelythe Remote Tower air traffic management system and the affected by structural costs related to the acquisition of Sensis.Tacticall communication integration system. During 2010, profitability was negatively impacted by costs of MSEK 290 related to a terminated contract and a write-down of capitalised development of MSEK 20.SALES, INCOME AND ORDERSOrders received Operating cash flowOrders received in 2011 included orders from the UK Ministry of The acquisition of Sensis had a negative impact on operating cashDefence to enhance its existing provision of live training capabili- flow of about MSEK 730.ties to the British Army in the UK and abroad. An order was alsoreceived from the Swedish Prison and Probation Service (Krimi- KEY FIGURESnalvården) for the communication solution Tacticall. The contract MSEK 2011 2010consists of ten operator positions for use in prisons around Sweden. Sales 5,704 6,210Two orders were also received from the Royal Thai Navy to upgrade Operating income 394 137combat management and fire control systems on two frigates of the Adjusted operating margin, % 6.9 2.2Naresuan class. Orders were received from FMV for hardware for Order bookings 4,582 6,647the Hydra sonar system 135/137 and for modifications to the com- Order backlog at year-end 7,712 8,434bat management system used by the Swedish Armed Forces’ Gävle- Operating cash flow 584 1,066and Visby-class corvettes. In addition a framework agreement was EBITDA 502 265secured with the US Army Program Executive Office of Simula- EBITDA margin, % 8.8 4.3tion, Training and Instrumentation (PEO STRI). The frameworkagreement covers radio communication systems (LT 2-IRS) for livetraining. Orders received where the order sum exceeded MSEK 100represented 40 per cent (40) of total order bookings.SHARE OF SALES 2011, % SALES, MSEK OPERATING INCOME AND MARGIN 7,000 400 10 22% 5,600 320 8 4,200 240 6 2,800 160 4 1,400 80 2 0 0 0 2009 2010 2011 2009 2010 2011 Operating income, MSEK Operating margin, %56 SAAB ANNUAL REPORT 2011
  • 61. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASHIGHLIGHTS 2011 STRATEGIC PRIORITIES Extended maintenance agreement valued at MSEK 150 signed Focus on growing internationally and in civil security. An with the British Army. The order covers the maintenance and expanded market presence is the key to global expansion and support of delivered training systems used by the British Army can be implemented in several ways, e.g., through increased and implementation of the OSAG 2.0 laser code. marketing and local presence, as well as through collaborations Acquisition of the Czech company E-COM, with operations in and partnerships. training and simulation, and the US company Sensis a leading The strategic growth areas are aviation, airport, port and coastal supplier of solutions for air traffic management and surveillance surveillance, and cyber security. Priority areas include security, technology. The acquisition os Sensis strengthens Saab’s presence efficiency, green flights, surveillance, automated air traffic con- in the US market and expands the product portfolio in air traffic trol, safe harbours, cyber warfare and reliable communications. management, radar and sensors. The company is Saab’s Centre The product portfolio is a cornerstone to growth. We integrate of Excellence in air traffic management. military and civil technology to build a safer society. Saab and Airservices Australia signed a contract to commence a trial of remotely operated air traffic control tower technology. PRODUCTS AND SOLUTIONS Two orders from the Royal Thai Navy for the upgrade of com- Operations are concentrated on C4ISR (computerised command, mand combat and control systems on two frigates of the Nar- control, communications and intelligence) systems, WISR solutions and esuan class. The total order value is MSEK 454 and comprises security solutions, as well as training and simulation. the upgrade of the frigates with the latest generation of combat Remote air traffic control uses cameras and sensors installed around air- management and fire control systems. ports. All the information they record is linked in real time to the air traffic control centre and projected onto a 360-degree view. This cost-effective Order from the (FMV) to upgrade a naval sonar system worth solution allows several airports to be monitored from a single location. MSEK 400. Airborne surveillance systems, e.g., AEW&C (Airborne Early Warning & Control).Saab supplies the armedforces in North America andthe UK, among others, withrealistic combat training solu-tions. With Saab’s systems,soldiers can see where eachindividual is and how theyare acting, allowing them topractice tactics and improvetheir personal capabilities. SAAB ANNUAL REPORT 2011 57
  • 62. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASSUPPORT AND SERVICESSupport and Services primarily offers support solutions, Income and margintechnical maintenance and logistics, and products, solu- Profitability improved in 2011 as a result of improved project ex-tions and services for military and civil missions in loca- ecution and finalisation of a major airborne early warning project.tions with limited infrastructure. Operating cash flow Operating cash flow in 2011 was lower compared to 2010 due toSALES, INCOME AND ORDERS timing differences of milestone payments.Orders receivedOrders received in 2011 included an order related to the eight-year KEY FIGURESagreement signed with Scandinavian Air Ambulance Holding AB MSEK 2011 2010in December 2010 which came into force during the first quarter. Sales 3,428 3,403A major order was also received from FMV for the support and Operating income 426 351maintenance of Helicopter 15 (Agusta 109 LUHS), operated by the Adjusted operating margin, % 12.4 10.3Swedish Armed Forces. The Norwegian Defence Logistics Organi- Order bookings 3,174 4,124sation placed an order for an upgrade of the steering control con- Order backlog at year-end 4,455 4,743 Operating cash flow 420 894soles on the ULA class submarine, which will ensure that new high EBITDA 444 366technology components are used in the steering control consoles EBITDA margin, % 13.0 10.8for autopilot functionality and integration. Orders received where the order sum exceeded MSEK 100 rep-resented 26 per cent (32) of total order bookings.SalesSales were in line with 2010, despite lower orders received, due to astrong inflow of smaller orders in 2011. Markets outside Sweden accounted for 24 per cent (26) of sales.SHARE OF SALES 2011, % SALES, MSEK OPERATING INCOME AND MARGIN 4,000 500 15 14% 3,200 400 12 2,400 300 9 1,600 200 6 800 100 3 0 0 0 2009 2010 2011 2009 2010 2011 Operating income, MSEK Operating margin, %58 SAAB ANNUAL REPORT 2011
  • 63. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASHIGHLIGHTS 2011 STRATEGIC PRIORITIES Significant growth in small and medium-sized orders. Continued focus on the successful helicopter operations and on Teaming agreement signed with Sikorsky on services and train- growing through Saab’s current installed base of products and ing for the Swedish Black Hawk Programme. solutions. Eight-year agreement with Scandinavian Air Ambulance to Strengthening the marketing and sales organisation in grow- assume responsibility for technical and maintenance personnel ing markets such as the Sub-Sahara, North America and India, and operations of helicopters and aircraft. including by establishing harmonised support operations in several different countries. Five-year agreement with the South African Navy on mainte- nance of logistical solutions for various platforms. Implement a streamlined organisational structure that consoli- dates capabilities and growth areas, while strengthening oppor- Three employees from Support and Services spent two weeks in tunities to win new business. Thailand, where they assisted flood victims. PRODUCTS AND SOLUTIONS Integrated service solutions for operations in the air, on land and at sea, as well as civil security. Offer a package solution for equipment maintenance and service, technical training, spare parts, logistical solutions and field support, and round-the-clock service centres. Flexible, scalable, adaptable and upgradable solutions. Operations are global and comprise Saab as well as other OEM systems and equipment. Support and service of a large part of the Saab 340 and Saab 2000 operating globally today with 469 aircraft by 71 operators in 38 countries. Total of around 1,400 flights a day. Helicopter maintenance has become an increasingly important part of Saab’s operations and several central support agree- ments were signed in 2011 with military and commercial customers. Saab is responsible for maintenance and support of the Swedish Armed Forces’ latest helicopter systems – Helicopter 15 and Helicopter 16 – and has also signed an eight-year agreement with the commer- cial company Scandinavian Air Ambulance, which is responsible for Sweden’s ambulance flights. Through our operations, we contribute to international peace- keeping and rescue missions and provide support in connection with major disasters. SAAB ANNUAL REPORT 2011 59
  • 64. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASCOMBITECHCombitech, an independent subsidiary of the Saab Income and marginGroup, is one of Sweden’s largest technology consulting The improved profitability is a result of increased sales volume, afirms. By combining technology with cutting-edge exper- high utilisation rate and higher efficiency.tise in the environment and security, we create solutions Operating cash flowfor our clients’ specific needs. Operating cash flow improved due to a higher sales volume.SALES, INCOME AND ORDERS KEY FIGURESOrders received MSEK 2011 2010Orders received increased in 2011 compared to 2010 as a result of Sales 1,000 915higher demand in several areas and several major orders received. Operating income 92 81Important framework agreements were also signed during the year. Adjusted operating margin, % 9.2 8.9 Order bookings 1,118 964 Order backlog at year-end 344 226Sales Operating cash flow 87 65Sales increased as a result of a good order intake and about 100 new EBITDA 94 83employees have been hired as a consequence of this. The highest EBITDA margin, % 9.4 9.1growth rate was in the industry and defence segments. Sales withclients other than Saab accounted for 62 per cent (65).SHARE OF SALES 2011, % SALES, MSEK OPERATING INCOME AND MARGIN 4% 1,000 100 15 800 80 12 600 60 9 400 40 6 200 20 3 0 0 0 2009 2010 2011 2009 2010 2011 Operating income, MSEK Operating margin, %60 SAAB ANNUAL REPORT 2011
  • 65. ADMINISTRATION REPORT > SAAB’S BUSINESS AREASHIGHLIGHTS 2011 STRATEGIC PRIORITIES Several important framework agreements were signed during Continued focus on the development of a Nordic technology the year. consulting company. Combitech has announced plans to establish a development Further additions to the range of services. centre in Trollhättan with the capability to take on turnkey com- Continued focus on growth among existing clients and in prior- mitments. ity market segments. In a highly competitive recruiting market, Combitech managed INDUSTRIES AND SERVICES well in recruiting engineers in particular. In total, 100 employees were added in 2011. Combitech is active in the defence, aeronautics, telecom and other industries as well as the public sector. In 2011, sales grew fastest among The operations of Combitech’s Norwegian subsidiary. defence and other industrial clients. Sörman Information was acquired in early 2012. The acquisition Combitech offers services in systems development, systems integration, information security, systems security, communications, mechanics and is part of Combitech’s strategy to expand its range of services logistics. Demand in mechanics and systems development was espe- and grow in the Nordic consulting market. cially favourable in 2011. The Combitech Learning Lab (CLL) is a major attraction for new employees. CLL includes a number of courses and methods that have been developed as part of a 15-year collaboration with the Royal Institute of Technology. SAAB ANNUAL REPORT 2011 61
  • 66. ADMINISTRATION REPORT > RISKS AND RISK MANAGEMENTRISKS AND RISK MANAGEMENTSaab’s business generally entails significant investments, MANAGING RISKSlong periods of time and product development or refine- Significant risks that are identified are managed continuously at all lev-ment. In addition to customer and supplier relations, els of the organisation and in strategic planning. Various policies and instruments govern the management of significant risks. In addition,international operations involve joint ventures and other Saab has an independent audit unit that serves as a dedicated resourcecollaborations as well as the establishment of operations to independently audit the effectiveness of internal control processes.abroad. Risks are also managed by procuring insurance. Saab has a Group-wide programme where insurance is obtained on the market or through theAll businesses entail risk. A risk can be specific to the company Group’s own insurer, Lansen Försäkrings AB.or related to a certain industry or market. Certain risks can befully managed by the company, while others are out of its control. Risk analysis and activities 2011Saab’s operations primarily involve the development, production In 2011, we worked on introducing a uniform risk evaluation pro-and supply of technologically advanced hardware and software to cess within the Group in line with international risk managementcustomers around the world. The international part of the business standards. The process is designed based on an analysis in 2010 ofis growing. various aspects of the risk processes used by the business areas and Operations entail significant risk-taking in various respects. The divisions. The work also included a review of the risk managementkey risk areas are political, financial and operational risks. Pages process for long-term customer projects.62–63 provide information on the political and financial risks. See In 2011, we also began introducing an improved process forpages 64–65 for more information on the operating risks. reporting financial controls within Saab. For more information, see the corporate governance report, pages 139–140.RISK MANAGEMENT PRIORITIES 2010-2012 2010 2011 2012 Analysis of business risks and risk Design and implementation of a Training, follow-up and completed processes harmonised rsk management pro- introduction of the harmonised rsk cess throughout the company management process Review of financial controls POLITICAL RISKS Part of Saab’s sales is classified as Access to vital components and systems RISK strategic products which are regu- may be subject to export restrictions and Customers’ inability to fulfil lated by various laws. regulations of various kinds. current contracts The risk consists of customers’ in- Amendments to national laws and ability to fulfil current contracts due to Amendments to national laws and ordinances, including international economic, political or other circum- SIGNIFICANCE ordinances, including international agreements, could affect access to vital stances such as natural disasters, an agreements, could affect Saab’s components in various systems and economic crisis, a shift in power or an sales. subsystems. embargo. Saab manages political risks through various types of export guarantees, insurance solutions and other instruments. It is MANAGEMENT impossible, however, to avoid losing business opportunities or incurring damage if political risks are realised.62 SAAB ANNUAL REPORT 2011
  • 67. ADMINISTRATION REPORT > RISKS AND RISK MANAGEMENT FINANCIAL RISKS Foreign currency risk Interest rate risk RISK Refinancing risk Credit and counterparty risks Commodity risk Pension obligations Management of financial risks is governed by the Group Treasury Policy established by the Board of MANAGEMENT Directors. Learn more about financial risks in Note 41. See below.FINANCIAL RISKS Application of the standard changes the recognition of yield tax andIn its operations, Saab is exposed to various financial risks. Man- special payroll tax. The effect of this change has not yet beenagement of financial risks is governed by the Group Treasury Policy evaluated.established by the Board of Directors. Moreover, detailed directives The standard has not been adopted yet by the EU.and processes are in place for operating management of each area.Overarching responsibility for managing financial risks lies with OPERATING RISKSGroup Treasury. A number of significant areas have been identified with respect to operating risks, which are important in assessing the Group’s resultsPension obligations and financial position.The Group’s pension obligations are substantial, as indicated inNote 37. In the calculation of pension obligations, future pension Develop and introduce new systems and productsobligations are discounted to present value. The size of the liability The Group invests heavily in the research and development of itsis dependent on the choice of discount rate: a low interest rate pro- own products and systems as well as acquisitions of technology. Itsduces a high liability, and vice versa. To manage the pension liabil- biggest systems are the export version of Gripen, missile systemsity, the Saab Pension Fund was established in 2006 and capitalised and electronic warfare systems. One example of acquired technol-with the corresponding PRI liability. The Group’s obligations are ogy is the world-leading radar technology obtained through the ac-calculated on an actuarial basis each year, after which a comparison quisition of Ericsson Microwave Systems AB in 2006. Investmentsis drawn with the fund’s assets. Deficits according to such calcula- in new systems and products are made after a strategic and financialtions may require Saab to contribute additional funds. The Saab analysis and assessment of future business opportunities.Pension Fund’s objective is a real annual return of at least 4 per centon invested capital. The fund invests in interest-bearing securities, Management of development and introduction of new systemsequities and hedge funds. and products The accounting principle IAS 19 Employee Benefits was Various measures were launched in 2011 to further improve ef-amended in June 2011, due to which the Group will stop applying ficiencies in development processes, including the continued estab-the “corridor approach” and instead recognise all actuarial gains lishment of centres of excellence within Saab for different aspects ofand losses in other comprehensive income when they arise. Past development work. This means that we consolidate all developmentservice costs will be recognised immediately. Interest expenses and within the same area in one location.the expected return on plan assets will be replaced by net interest Certain development costs are capitalised in accordance withcalculated with the help of the discount rate, based on the net established accounting principles. Amortisation of capitalised develop-surplus or net deficit in the defined benefit plan. The Group intends ment costs is scheduled over the estimated production volume orto apply the amended standard for financial years beginning on or an estimated period of use, though not more than five to ten years.after 1 January 2013. If the new standard had been applied in the If the estimated period of use is shorter than five years, the costs areannual accounts for 2011, retained earnings would have decreased amortised over the shorter period. Future business opportunities areby MSEK 2,000 and the pension obligation increased by periodically reassessed, which can lead to impairment losses. Capital-MSEK 2,700. The year’s actuarial loss amounted to MSEK 1,344, ised development costs are shown in Note 16.which would have affected other comprehensive income negatively. SAAB ANNUAL REPORT 2011 63
  • 68. ADMINISTRATION REPORT > RISKS AND RISK MANAGEMENT OPERATING RISKS Develop and introduce Managing long-term Environmental risks Liquidation of leasingRISK new system and products customer projects and liabilities operations In its operations, Saab handles a wide variety of Saab offers lease financing chemical products that in connection with aircraft are classified as harmful to sales on the market. TheSIGNIFI- humans and the environ- risk in the portfolio is thatCANCE The risk is that Saab will ment. The most important Saab is unable to lease out The risk is that Saab does be unsuccessful in meeting environmental risks involve the aircraft. The impact on not reach the levels of customer requirements, as a hazardous chemicals, Saab’s profitability could be business required for its result of which the commit- building and plant fires, negative if the aircraft are not products to be profitable. ment is not fulfilled. and soil contamination. being used. Part of the leasing fleet is fi- nanced through US leverage leases, rents from which are insured through the Export Credits Guarantee Board Before a contract is entered (EKN) in Sweden. Part of theRESPONSI- into with a customer to portfolio is financed internallyBILITY The Group takes an ac- supply a product, solution or and recognised as assets tive approach to product service, a thorough analysis in the statement of financial management. A high degree is always done of the condi- Saab has introduced strict position. Saab’s direct risk- of modularisation in project tions and risks associated routines for assessment, taking in the leasing fleet management allows Saab to with the delivery using a pro- supervision and control has been managed primarily reuse product solutions in its ject management process of various environmental through various types of offerings. established by Saab. risks. insurance. Saab’s leasing portfolio consisted on 31 December 2011 of 82 turboprop Saab 340 and Saab 2000 aircraft. Of the portfolio, 42 aircraft Various measures were are financed through US launched in 2011 to further leverage leases. Reserves2011 improve efficiencies in devel- in the statement of financial opment processes, including A review was made of the Only a few minor soil position related to the leas- the continued establishment project management pro- remediation projects ing portfolio and provisions of centres of excellence for cess in 2010 and a modified were necessary in 2011, for commitments for regional various aspects of develop- process for managing long- the total cost of which aircraft are considered suf- ment work. Learn more on term customer projects was amounted to less than ficient to cover the remaining page 23. introduced in 2011. MSEK 0.5. risks. The leasing fleet is expected We will continue to improve to be liquidated by 2015. our product managament In 2012, Sensis and Until then, Saab will carry2012 process by introducing a Follow-up and ensure E-COM will be integrated out these operations in ac- uniform product portfolio implementation of the risk in Saab’s environmental cordance with the terms and pocess. management process. risk work. conditions of its insurance.64 SAAB ANNUAL REPORT 2011
  • 69. ADMINISTRATION REPORT > RISKS AND RISK MANAGEMENTLong-term customer projects Saab works actively to assess and minimise fire risks in its opera-Management of long-term customer projects involves risks. Saab’s tions. Since a fire in a production facility can cause extensiveoperations entail complex development projects on the leading environmental damage to the local area, effective fire prevention isedge of technology where the competitive situation is complex. an important part of the efforts to reduce environmental risks.Success depends on the ability to offer cost-effective high technol- We analyse our operations and properties around the world to as-ogy solutions, though also in some cases on participation in the sess Saab’s risk exposure resulting from soil contamination.customer-country’s economy through various forms of industrial When a contaminated area is identified, liability is determinedco-operation. The risk in managing long-term customer projects is and an overall risk assessment is made. Information on contami-that Saab will be unsuccessful in meeting customer requirements, nated areas is documented as it is received. An insurance solutionas a result of which the commitment is not fulfilled. to manage soil contamination cases has been in place since 2009. Overall risk assessments are made to determine how operationsManagement of long-term customer projects are affected by climate change. These risks are reported within theA majority of all long-term customer projects contains significant framework of reporting for the Carbon Disclosure Project (CDP).development work, which is associated with risks. Before a contractis entered into with a customer to supply a product, solution or ser- Divestment of the leasing portfoliovice, a thorough analysis is always done of the conditions and risks Saab decided in 1997 to discontinue the manufacture of turbopropassociated with the delivery using an established process within aircraft.Saab for customer contracts. As with other manufacturers, Saab had a business model that Periodic reviews are subsequently made of the project during its included lease financing in connection with aircraft sales on theimplementation stage using the same process. An important aspect market. The risk in the portfolio is that Saab is unable to lease outis to identify and assess risks, then take the measures needed to the aircraft. The impact on Saab’s profitability could be negative ifmitigate them with the help of a risk assessment method. the aircraft are not being used. The Group applies the percentage-of-completion method to rec-ognise revenue from long-term customer projects. An estimation of Management of risks in connection with leasing operationstotal costs is critical to revenue recognition and provisions for loss Saab’s direct risk-taking in the leasing fleet has been managedcontracts as well as valuating inventories. The outcome of technical primarily through various types of insurance. The leasing fleet isand commercial risks may affect income. expected to be divested by 2015. Until then, Saab will manage the A review was made of the project management process in 2010, operations in accordance with the terms of its insurance.and we are now working continuously to improve this process and Saab’s leasing portfolio at 31 December 2011 consisted of 82ensure its implementation. turboprop Saab 340 and Saab 2000 aircraft. Of the portfolio, 42 are financed through US leverage leases. Rents from these leasesEnvironmental risks and liabilities are insured through The Swedish Export Credits Guarantee BoardThe most important environmental risks are improper manage- (EKN). 40 aircraft are financed internally and recognised as assetsment of hazardous chemicals, fires in buildings and plants, and soil in the statement of financial position.contamination. For more information on environmental risks and Reserves in the statement of financial position related to theliabilities, see Note 48. leasing portfolio and provisions for commitments associated with regional aircraft are considered sufficient to cover remaining risks.Management of environmental risks and liabilitiesThe operations in Linköping and Karlskoga are subject to Europe’sSeveso law, which is designed to reduce risks in connection with thelarge-scale use of chemicals. Against this backdrop, we have intro-duced strict routines for risk assessment, supervision and control ofchemicals for the entire Saab Group. Strict routines are also appliedto purchases of chemical products. Health and environmentalinformation on chemical products is available in the Group’s chemi-cal data system. SAAB ANNUAL REPORT 2011 65
  • 70. ADMINISTRATION REPORT > OTHER INFORMATIONOTHER INFORMATIONCORPORATE These guidelines apply from the Annual General Meeting 2011. InCorporate reported operating income of MSEK 916 (-206). 2011 terms of fixed salary, the guidelines shall apply from 1 January 2011.included a capital gain of MSEK 13 from the sale of Image Sys-tems AB to Digital Vision AB and an additional consideration of Fixed remunerationMSEK 60 for the divestment of Saab Space. It also included a capital Cash remuneration shall consist of fixed salary. The fixed salarygain of MSEK 916 from the divestment of the shares in the 3D shall be reviewed annually as per 1 January for all members of themapping technology company, C3 Technologies AB. C3 Technolo- Group Management. The fixed salary shall be at market terms andgies was created by Saab Ventures in 2008 and the technology is based on factors such as position, competence, experience andbased on Saab’s, in particular the business area Saab Dynamic’s, performance.more than 40 years of experience in image processing for targetseekers and expertise in navigation systems. Variable remuneration Operating income also included costs of MSEK 25 related to the It is important that senior executives have a long-term view and aacquisition process of Sensis. long-term commitment in the Company’s operations and profits. In addition, Saab Aircraft Leasing completed several sales in- Therefore long-term incentive is especially well suited to Saab andvolving Saab aircraft and booked reversals of risk provisions related its shareholders.to these transactions, which impacted earnings positively. The President and CEO and senior executives are entitled to participate in the long-term incentive programs resolved by theGUIDELINES FOR REMUNERATION AND OTHER TERMS OF Annual General Meeting.EMPLOYMENT FOR SENIOR EXECUTIVES 2011 In extraordinary cases, agreements of a one-time nature forAccording to the Swedish Companies Act, the Board of Directors shall variable cash remuneration may be made provided that such agree-to each Annual General Meeting propose guidelines for determin- ments are made solely on an individual base for recruitment oring salaries and other remuneration for the President and CEO and retention purposes, or as compensation for extraordinary effortsother senior executives in the Company. The Annual General Meeting beyond the individual’s ordinary assignment. Such remuneration2011 adopted the Board of Directors’ proposed guidelines for such shall never exceed the amount of the fixed annual salary and shallremuneration. This group comprises the President and Chief Executive not be paid more than once a year per individual. Resolutions onOfficer and other members of the Group Management, as defined on such cash remuneration shall be made by the Board based on athe Company’s website (www.saabgroup.com). In some special cases, proposal from the Remuneration Committee.these guidelines may also comprise Board Members of Saab AB, as Variable cash remuneration shall not be paid in other cases.described below. Saab shall offer market terms, enabling the Company to recruit Other benefitsand retain senior executives. To the greatest extent possible, All members of the Group Management are entitled to a companyremuneration structures shall be characterized by predictability car according to Saab’s regulations.with respect to both the cost for the Company and the benefitfor the employee. They shall be based on factors such as position, Pensioncompetence, experience and performance. Benchmarking shall be For pension agreements entered into after 1 January 2005, thepracticed regularly relative to comparable industries and markets. pension age is 62. In addition to the ITP agreement, the pension The Board shall be entitled to divert from the guidelines, if there is part of a defined contribution plan where provisions are madeare reasonable grounds to do so in an individual case. annually. For the President and CEO, the provision is equivalent to The Board’s proposal is based mainly on agreements in effect be- 35 per cent of his fixed salary, and for other executives the percent-tween Saab AB and individual executives. No board fees are paid to age is based on a set of regulations in the so-called Saab plan. Themembers of the Group Management for participation on the boards percentage is dependent on the number of years remaining untilof the business areas or Saab subsidiaries. the age of retirement upon joining the plan. The Remuneration Committee is responsible for developingand reviewing remuneration and other employment terms for theGroup Management.66 SAAB ANNUAL REPORT 2011
  • 71. ADMINISTRATION REPORT > OTHER INFORMATIONOther terms Proposal for guidelinesAll executives in the Group Management, including the President, In light of the above background and reasons, the Board of Direc-may terminate their employment with six months’ notice. If the tors therefore proposes that the guidelines for remuneration ofemployment is terminated by Saab, the notice period is six months, senior executives are changed.and after the notice period, severance equal to one year’s salary is In respect of fixed and variable remuneration, miscellaneous termspaid. An additional year’s salary is payable if no new employment and consultant fees to members of the Board of Directors thehas been obtained in the first 18 months from the time the notice of guidelines are unchanged from 2011 except for minor linguistictermination was served. adjustments. With respect to employment agreements made after 1 Janu- The new guidelines are proposed to have the following word-ary 2005, and in cases where Saab terminates the employment, a ing regarding incentive programs proposed to the Annual Generalmaximum severance pay of 18 months is payable in addition to the Meeting 2012, other benefits and pension.six-month notice period. In both cases, any income from termina- The guidelines are proposed to apply from the Annual Generaltion pay and severance pay will be deducted against income from Meeting 2012.other employment during the corresponding time. Incentive programs proposed to the Annual General Meeting 2012Remuneration to Board Members The Board of Directors proposes that the Annual General MeetingBoard Members, elected by the Shareholders’ Meeting, may in spe- resolves on the implementation of a Share Matching Plan 2012 andcial cases receive a fee for services performed within their respec- a Performance Share Plan 2012.tive areas of expertise, separately from their Board duties and for a The terms and estimated costs for the Share Matching Plan 2012limited period time. Compensation for these services shall be paid and the Performance Share Plan 2012 are presented in the Board’sat market terms. complete proposal to the Annual General Meeting.Incentive programs proposed to the Annual General Meeting 2011 Other benefitsThe Board of Directors proposed that the Annual General Meeting All members of the Group Management may be entitled to othershould resolve on the implementation of a Share Matching Plan benefits in accordance with local practice. The benefits shall2011 and a Performance Share Plan 2011. The Annual General contribute to facilitating the executive’s discharge of his or her du-Meeting resolved in accordance with the Board’s proposal. ties. These benefits shall not constitute a material part of the total compensation and shall be equivalent to what is considered reason-THE BOARD OF DIRECTORS’ PROPOSAL FOR GUIDELINES able in relation to market practice. Other benefits may for exampleFOR REMUNERATION OF SENIOR EXECUTIVES TO APPLY AS be a company car, travels, overnight accommodation and medicalOF THE NEXT ANNUAL GENERAL MEETING insurance.Background and reasonsThe Remuneration Committee has evaluated the application of the Pensionguidelines for remuneration for senior executives of Saab that were For pension agreements entered into after 1 January 2005, the pen-resolved at the Annual General Meeting in 2011 and the current sion age is 62. In addition to the ITP agreement, the pension is partremuneration structures and remuneration levels in the Company. of a defined premium based contribution plan where provisions areThe Remuneration Committee is of the opinion that the guidelines made annually. For the President and CEO, the provision is equivalentthat were resolved in 2011 achieve their purposes to facilitate the to maximum 35 per cent of the fixed salary. For other senior execu-recruitment and retention of senior executives. tives the percentage is based on a set of regulations in the so-called The Remuneration Committee has recommended the Board of Saab plan. According to this plan, the percentage is dependent on theDirectors to propose to the Annual General Meeting to adopt prin- number of years remaining until the age of retirement upon joining theciples of remuneration whose terms and conditions in essence are plan. The aggregate insurance balance should cover a targeted pensionthe same as those that were resolved at the Annual General Meeting from 65 years of age of approximately 32.5 percent of salary levels be-in 2011. However, in consideration of a general review of senior ex- tween 20 and 30 basic income amounts and approximately 50 percentecutive employment agreements, certain clarifications are proposed of segments above 30 basic income amounts.to be made in the guidelines pertaining to customary executive All senior executives may also be entitled to strengthened dis-benefits and to the “Saab Plan” that regulates pension terms. ability pension and survivors’ pension. SAAB ANNUAL REPORT 2011 67
  • 72. ADMINISTRATION REPORT > OTHER INFORMATIONInformation in the Annual Report note 37 The purpose of the authorisation was to provide the Board withNote 37 of the Annual Report includes a description of existing greater scope in working with the company’s capital structure andremunerations for senior executives, including fixed and variable enable acquisitions when considered appropriate, as well as tocompensation, long-term incentive programs and other benefits. secure the Group’s share matching plan. The mandate applied until the next Annual General Meeting. Repurchases may be effectedDeviation from the guidelines for remuneration for senior executives over the stock exchange or through offerings to shareholders. It wasresolved at the Annual General Meeting 2011 also proposed that the Board’s mandate include the possibility toThe Board of Directors resolved to deviate from the guidelines transfer repurchased shares as allowed by law. Repurchased sharesduring 2011. can also be transferred in connection with the company’s share The President and CEO has during 2011 received a benefit in matching plan and performance share plan.the form of flight travels. The reason for this was that at the time of During the second quarter 2011, Saab announced that the Boardemployment and for a period of time thereafter, the President and had decided to utilise its authorisation for repurchases and thatCEO had his residence in another place than the place of work. In the repurchases could be made on NASDAQ OMX Stockholm at aaddition, other customary benefits have been provided to mem- price within the registered share price interval on each occasion.bers of the Group Management in order to facilitate the persons’ No shares were repurchased in 2011.discharge of his or her duties. NUMBER OF REPURCHASED SHARESSHARE REPURCHASE The number of repurchased B shares held in treasury on 31Share repurchase December 2011 was 3,818,386, which was 614,229 shares fewerIn April 2007, Saab’s Annual General Meeting resolved to offer employ- than at year-end 2010.ees the opportunity to participate in a voluntary share matching plan The Saab Pension Fund did not hold any shares in Saab on 31where they can purchase Series B shares in Saab during a 12-month December 2011.period. Purchases are made through deductions of between 1 and 5per cent of the employee’s monthly salary. If the employee retains the DIVIDENDpurchased shares for three years after the investment date and is still The Board of Directors proposes that shareholders receive a divi-employed by the Saab Group, the employee will be allotted a corre- dend of SEK 4.50 per share (3.50), or a total of MSEK 474 (367).sponding number of Series B shares. The plan was introduced in au- The proposed record day for the dividend is 24 April 2012, and thetumn 2007 in Sweden and Norway. In 2008 it was expanded to include dividend is expected to be paid on 27 April 2012.employees in Denmark, Germany, the UK, the U.S., Switzerland and IMPORTANT EVENTS AFTER THE BALANCE SHEETAustralia, and in 2009 it was expanded again to cover employees in EVENTS AFTER THE BALANCE SHEET DATESouth Africa. In April 2008, Saab’s Annual General Meeting resolved Saab announced that Combitech had acquired Sörman Information.to introduce a performance-based plan for senior executives and key The acquisition is part of Combitech’s strategy to expand its range ofemployees entitling them to 2–5 matching shares depending on the services and grow in the Nordic consultancy market. Following the ac- quisition of Sörman, Combitech has an annual turnover of approximatelycategory the employee belongs to. In addition to the requirement that SEK 1.1 billion and 1,100 employees.the employee remain employed by Saab after three years, there is a re- Saab Sensis was selected by the US Federal Aviation Administrationquirement that earnings per share grow in the range of 5 to 15 per cent. (FAA) for the Airport Surface Surveillance Capability (ASSC) program. The Annual General Meetings in 2009, 2010 and 2011 resolved FAA incrementally funded MSEK 34 (MUSD 5) of the MSEK 370 (MUSD 55) five-year contract. In addition, options for deliveries beyondto renew the share matching plan and performance share plan. the five-year period were valued at MSEK 442 (MUSD 65), for a totalThe 2011 share matching plan comprises all employees, including contract value of MSEK 825 (MUSD 119).senior executives and key persons. The performance share plan for Saab received a framework order worth MSEK 98 from FMV concerning2011, which is directed to senior executives and key persons entitles technical system support for materiel operated by the Swedish Armed Forces during 2012.participants to 1–4 matching shares, depending on the category theemployee belongs to. Saab received a multi-year contract for the next generation of laser- based training systems for the US Army’s armoured combat vehicles. In 2007, Saab repurchased 1 million shares, in 2008 and 2009 it The order value was MSEK 116 (MUSD 17.2). The indefinite delivery/repurchased 1,340,000 shares per year, and in 2010 it repurchased indefinite quantity (ID/IQ) contract consists of this order and options that838,131 shares to hedge the plans. can be exercised over a time period of five years with a potential value of MSEK 600 (MUSD 90). The Annual General Meeting on 7 April 2011 renewed theBoard of Directors’ mandate to repurchase up to 10 per cent of the No other significant events have occurred after the closing date thatCompany’s shares, of which 1,340,000 shares to hedge the share affect the Group’s results or financial position.matching plan and performance share plan.68 SAAB ANNUAL REPORT 2011
  • 73. FINANCIAL INFORMATION > FINANCIAL STATEMENTS AND NOTESFINANCIAL STATEMENTSAND NOTES Income Statement, Consolidated 70 Statement of Comprehensive Income, Consolidated 71 Statement of Financial position, Consolidated 72 Statement of Changes in Equity, Consolidated 74 Statement of Cash Flows, Consolidated 75 Income Statement, Parent Company 77 Comprehensive Income, Parent Company 77 Balance Sheet, Parent Company 78 Statement of Changes in Equity, Parent Company 80 Statement of Cash Flows, Parent Company 81NOTES TO THE FINANCIAL STATEMENTS 1 Accounting principles 82 26 Other long-term securities holdings 108 2 Assumptions in the application of the accounting 27 Long-term receivables and other receivables 108 principles 90 28 Inventories 109 3 Revenue distribution 90 29 Accounts receivable 109 4 Segment reporting 91 30 Prepaid expenses and accrued income 109 5 Other operating income 93 31 Liquid assets 110 6 Other operating expenses 93 32 Assets held for sale 110 7 Government grants 93 33 Shareholders’ equity 110 8 Business combinations and divestments 93 34 Earnings per share 111 9 Employees and staff costs 95 35 Interest-bearing liabilities 111 10 Auditors’ fees and compensation 96 36 Liabilities to credit institutions 111 11 Operating expenses 96 37 Employee benefits 111 12 Depreciation/amortisation and impairments 96 38 Provisions 116 13 Financial income and expenses 97 39 Other liabilities 117 14 Appropriations 97 40 Accrued expenses and deferred income 118 15 Taxes 97 41 Financial risk management and 16 Intangible fixed assets 100 financial instruments 118 17 Tangible fixed assets 102 42 Assets pledged and contingent liabilities 125 18 Lease assets and lease agreements 103 43 Transactions with related parties 126 19 Biological assets 105 44 Group companies 126 20 Investment properties 105 45 Untaxed reserves 127 21 Shares in associated companies consolidated 46 Statement of cash flows, according to the equity method 106 supplemental information 127 22 Shares in joint ventures consolidated according to 47 Information on Parent Company 129 the proportional method 107 48 Environmental report 129 23 Parent Company’s shares in associated 49 Exchange rates companies and joint ventures 107 used in financial statements 130 24 Receivables from Group companies, associated 50 Definitions of key ratios 130 companies and joint ventures 108 25 Financial investments 108 SAAB ANNUAL REPORT 2011 69
  • 74. FINANCIAL INFORMATION > FINANCIAL STATEMENTSCONSOLIDATEDINCOME STATEMENT 1 January – 31 December ORDERS Order bookings for 2011 decreased by 28 per cent compared toMSEK Note 2011 2010 2010 to MSEK 18,907 (26,278). The order intake was lower compared to the previous year, partlySales 3, 4 23,498 24,434 as a result of major orders in 2010 which included a large orderCost of goods sold -16,791 -18,843 from FMV (Swedish Defence Material Administration) for six Gripen aircraft intended for the Royal Thai Air Force of approximatelyGross income 6,707 5,591 SEK 2.2 billion and an order for an airborne surveillance system ofOther operating income 5 1,351 222 approximately SEK 4.5 billion. 2011 did not include any orders of similar significant size. In addition, we saw further delays in cus-Marketing expenses -1,879 -1,727 tomers’ investment decision making processes during the secondAdministrative expenses -1,217 -1,235 half of 2011 as a result of subdued global economic conditions.Research and development costs -1,928 -1,820 The order backlog at the end of the year amounted toOther operating expenses 6 -77 -70 MSEK 37,172 (41,459).Share in income of associated companies 21 -16 14 During 2011, index and price changes had a positive effect on order bookings of MSEK 308 (377).Operating income 10, 11 ,12 2,941 975 In all, 85 per cent (86) of order bookings were attributable toShare in income of associated companies 21 4 26 defence-related operations and 56 per cent (66) of order book-Financial income 162 116 ings are from customers outside Sweden.Financial expenses -324 -341 Orders received where the order sum was larger than MSEK 100Net financial items 13 -158 -199 represented 48 per cent (58) of total order bookings. Order backlog duration :Income before taxes 2,783 776 2012: SEK 17.7 billionTaxes 15 -566 -322 2013: SEK 8.4 billionNet income for the year 2,217 454 2014: SEK 4.8 billionAttributable to: 2015: SEK 2.7 billion Parent Company’s shareholders 2,225 433 After 2015: SEK 3.6 billion Non-controlling interest -8 21Earnings per share before dilution (SEK) 34 21.19 4.12Earnings per share after dilution (SEK) 34 20.38 3.97SALES BY REGION SALES BY MARKET SEGMENTS SALES Sales decreased slightly compared to 2010 as a result of lower Jan-Dec Jan-Dec Jan-Dec Jan-Dec activity levels in major projects and the challenging businessMSEK 2011 2010 MSEK 2011 2010 climate in South Africa.Sweden 8,679 9,223 Air 10,611 10,393 Exchange rates had a 1 per cent negative impact on sales dueEU excluding Land 7,201 7,611 to depreciation of the ZAR and USD to SEK.Sweden 4,514 4,737 Naval 2,065 2,278 Saab Sensis contributed to sales with MSEK 265.Rest of Europe 320 368 Civil Security 1,479 1,427Americas 1,899 2,199 In 2010, sales decreased with approximately MSEK 100 as an CommercialAsia 5,176 3,937 Aeronautics effect of lower revenue recognition related to a terminated 1,309 1,348Africa 1,789 2,833 contract in Security and Defence Solutions. Other 833 1,377Australia, etc. 1,121 1,137 Total 23,498 24,434 Sales in markets outside Sweden amounted to MSEK 14,819Total 23,498 24,434 (15,211), or 63 per cent (62) of total sales. Of sales, 84 per cent (83) was related to the defence market.70 SAAB ANNUAL REPORT 2011
  • 75. FINANCIAL INFORMATION > FINANCIAL STATEMENTSCONSOLIDATEDSTATEMENT OF COMPREHENSIVEINCOME 1 January – 31 DecemberMSEK 2011 2010Net income for the year 2,217 454Other comprehensive income: Translation differences -60 16 Net gain/loss on cash flow hedges Change in value 22 658 Reversed through profit and/or loss -278 108 Tax attributable to net gain/loss on cash flow hedges 69 -201 Share of other comprehensive income in associated companies -26 2Other comprehensive income -273 583Net comprehensive income for the year 1,944 1,037 of which Parent Company’s shareholders’ interest 1,995 1,006 of which non-controlling interest -51 31 opment costs amounted to MSEK 588 (664). In 2010, it included a write-The order backlog primarily includes : down of capitalised development costs of MSEK 20. The share of income in associated companies, MSEK -16 (14), primarily and Boeing relates to net income in Hawker Pacific Airservices Ltd. FINANCIAL NET MSEK Jan–Dec 2011 Jan–Dec 2010 Project interest from unutilised -30 -17 advance payment Net interest items 33 -40 Currency losses/gains -32 57INCOME, MARGIN AND PROFITABILITYIn 2011, the gross margin was positively impacted by several sales transac- Financial net related to pensions -60 -168tions by Saab Aircraft Leasing and reversals of risk provisions related to Other net financial items -69 -31these transactions. Total -158 -199Operating income in 2011 included capital gains of MSEK 1,169. It also in-cluded structural costs for Saab Sensis totalling MSEK 27 and costs related Project interest on unutilised advance payment refers to orders that areto the acquisition process of Sensis of MSEK 25. financed to a significant extent with advance payment from customers.Saab Sensis reported a loss before structural costs of MSEK -34 in 2011. The effect on interest of advance financing is recognised in gross income and reduces financial net.In 2010, operating income was impacted by structural costs and other non-recurring items of MSEK 616 and capital gains of MSEK 14. The currency losses/gains reported above related to the tender portfolio where the hedged part was valued at market value. Other net financialTotal depreciation and amortisation amounted to MSEK 1,261 (1,358). items consisted of income from shares in associated companies and otherDepreciation and write-down of tangible fixed assets amounted to exchange rate effects. Other exchange rate effects included an accountingMSEK 352 (382), while depreciation of the leasing fleet amounted to loss related to a pre-maturity closing of an interest rate swap.MSEK 114 (146). Current and deferred taxes during the year amounted to MSEK -566 (-322),Total expenditure for research and development amounted to MSEK 5,116 or an effective tax rate of 20 per cent (41). Tax-exempt income in 2011 led to(5,008). The expenditures in research and development that are internally a lower tax rate in the year.funded amounted to MSEK 1,355 (1,203), of which a total of MSEK 15 (47) The pre-tax return on capital employed was 22.2 per cent (7.9) and thehas been capitalised. after-tax return on equity was 18.1 per cent (4.1), both measured over aAmortization and write-down of intangible fixed assets amounted to rolling 12-month period.MSEK 795 (830), of which amortization and write-down of capitalised devel- SAAB ANNUAL REPORT 2011 71
  • 76. FINANCIAL INFORMATION > FINANCIAL STATEMENTSCONSOLIDATEDSTATEMENT OF FINANCIAL POSITION as of 31 December STATEMENT OF FINANCIAL POSITION Since the beginning of 2011, the net cash position has in-MSEK Note 2011 2010 creased by MSEK 2,042 to MSEK 5,333 at the end of 2011. Major reasons for the improvement in the net cash position areAssets an increased profitability, an increased level of customer ad- vances and milestone payments. Intangible fixed assets 16 6,699 6,413 Intangible assets increased as a result of the acquisition of Tangible fixed assets 17 3,272 3,052 Sensis. Lease assets 18 771 1,154 As of 1 January 2009, Saab changed its view on the applica- Biological assets 19 305 299 tion of the accounting principles for development costs. As a Investment properties 20 224 236 result of this more conservative view, development costs are capitalised at a later stage in all projects and all capitalised de- Shares in associated companies 21 288 251 velopment costs are amortised over maximum ten years. Financial investments 25 197 203 Inventories are recognised after deducting utilised advances. Long-term receivables 27 1,046 856 Other receivables decreased as a result of the divestment of Deferred tax assets 15 86 - the shares in Aker Holding AS.Total fixed assets 12,888 12,464 Short-term interest-bearing liabilities decreased by MSEK 69 from the beginning of the year. Inventories 28 4,334 4,100 Derivatives 41 520 1,105 Provisions for pensions amounted to MSEK 12 (5). During 2011, the Saab Pension Fund was capitalised with a total of Tax assets 23 46 MSEK 102 (108). The fund was set up in 2006 with the overall Accounts receivable 29 3,153 3,052 objective to secure the Group’s defined-benefit pension plans and at the same time hedge the interest rate volatility of the Other receivables 27 3,579 3,630 pension liability and reduce the overall cost of pensions. Prepaid expenses and accrued income 30 829 680 Short-term investments 25 4,555 1,544 For more information on the reporting of Saab’s pension obli- Liquid assets 31 1,918 2,544 gations, see Note 37.Total current assets 18,911 16,701Assets held for sale 32 - 113TOTAL ASSETS 31,799 29,27872 SAAB ANNUAL REPORT 2011
  • 77. FINANCIAL INFORMATION > FINANCIAL STATEMENTSCONSOLIDATEDSTATEMENT OF FINANCIAL POSITION as of 31 DecemberMSEK Note 2011 2010Equity 33 Capital stock 1,746 1,746 Other capital contributions 543 543 Other reserves 457 687 Retained earnings 10,204 8,298Equity attributable to Parent Company’sshareholders 12,950 11,274Non-controlling interest 119 170Total equity 13,069 11,444Liabilities Long-term interest-bearing liabilities 35 1,218 1,117 Other liabilities 39 439 294 Provisions for pensions 37 12 5 Other provisions 38 1,728 2,207 Deferred tax liabilities 15 1,012 803Total long-term liabilities 4,409 4,426 Short-term interest-bearing liabilities 35 520 589 Advance payments from customers 1,022 643 Accounts payable 1,785 1,799 Derivatives 41 628 750 Tax liabilities 244 265 Other liabilities 39 747 819 Accrued expenses and deferred income 40 8,629 7,751 Provisions 38 746 792Total current liabilities 14,321 13,408Liabilities attributable to assets held for sale 32 - -Total liabilities 18,730 17,834TOTAL EQUITY AND LIABILITIES 31,799 29,278For information on the Group’s assets pledged and contingent liabilities,see Note 42. SAAB ANNUAL REPORT 2011 73
  • 78. FINANCIAL INFORMATION > FINANCIAL STATEMENTSCONSOLIDATEDSTATEMENT OF CHANGES IN EQUITY Other reserves Total equity Net result attributable of cash to Parent Non- Capital Other capital flow Translation Revaluation Retained Company’s controlling Total MSEK stock contributions hedges reserve reserve earnings shareholders interest equity Opening balance, 1 January 2010 1,746 543 84 -21 51 8,139 10,542 140 10,682 Net comprehensive income for the year - - 564 9 - 433 1,006 31 1,037 Transactions with shareholders: Repurchase of shares - - - - - -80 -80 - -80 Share matching plan - - - - - 43 43 - 43 Dividend - - - - - -237 -237 - -237 Acquisition and sale of non-controlling interest - - - - - - - -1 -1 Closing balance, 31 December 2010 1,746 543 648 -12 51 8,298 11,274 170 11,444 Opening balance, 1 January 2011 1,746 543 648 -12 51 8,298 11,274 170 11,444 Net comprehensive income for the year - - -191 -39 - 2,225 1,995 -51 1,944 Transactions with shareholders: Share matching plan - - - - - 47 47 - 47 Dividend - - - - - -367 -367 - -367 Acquisition and sale of non-controlling interest - - - - - 1 1 - 1 Closing balance, 31 December 2011 1,746 543 457 -51 51 10,204 12,950 119 13,069For a definition of other reserves, see Note 33.74 SAAB ANNUAL REPORT 2011
  • 79. FINANCIAL INFORMATION > FINANCIAL STATEMENTSCONSOLIDATEDSTATEMENT OF CASH FLOWS 1 January – 31 December CAPITAL EXPENDITURES Gross capital expenditures in property, plant and equipment,MSEK Note 2011 2010 excluding lease assets, amounted to MSEK 325 (262). Investments in intangible assets amounted to MSEK 41 (117)Operating activities of which MSEK 15 (47) are related to capitalised product Income after financial items 2,783 776 development and MSEK 26 (70) to other intangible assets. Transferred to pension fund -132 -147 CASH FLOW Adjustments for items not affecting cash flow 46 141 2,317 Operating cash flow amounted to MSEK 2,477 (4,349) in Income tax paid -450 -196 2011. The lower level compared to 2010 was mainly causedCash flow from operating activities before changes by certain projects in Aeronautics which entered into their finalin working capital 2,342 2,750 stages in 2010 and 2011. These projects were successfully delivered to the customer, and Saab managed to executeCash flow from changes in working capital them at a lower cost than originally planned. Therefore a final Increase(–)/Decrease(+) in inventories -243 586 price adjustment was made in the fourth quarter 2011 of about MSEK 850. This had a negative impact on the operating cash Increase(–)/Decrease(+) in current receivables -96 855 flow of both Aeronautics and Electronic Defence Systems. Increase(+)/Decrease(–) in advance payments from Operating cash flow was distributed between cash flow from customers 409 194 core operating activities of MSEK 2,123 (4,043), acquisitions Increase(+)/Decrease(–) in other current liabilities 610 399 and divestments of operations and associated companies of Increase(+)/Decrease(–) in provisions -630 -297 MSEK 129 (161) and the leasing aircraft business of MSEK 225 (145). See table on page 76.Cash flow from operating activities 2,392 4,487 Saab has an established programme to sell accounts receiv-Investing activities able to strengthen its financial position and increase financial Investments in intangible fixed assets -26 -70 flexibility. The accounts receivable sold are in most cases re- Capitalised development costs -15 -47 lated to customers with high credit worthiness, and one hun- dred per cent of the value of the receivables is sold at favour- Investments in tangible fixed assets -325 -262 able funding levels. As per 31 December 2011, receivables of Investments in lease assets -1 -2 MSEK 872 were sold, compared to MSEK 1,409 at 31 De- cember 2010. Hence it had a negative impact of MSEK 537 on Sale of tangible fixed assets 23 11 cash flow for the year. Sale of lease assets 301 65 Investments in and sale of short-term investments -2,967 -993 For more detailed information on operating cash flow, refer to Sale of and investments in other financial assets 306 -6 Note 46. Investments in operations and associated compa- nies, net effect on liquidity 8, 46 -1,135 - Sale of subsidiaries and associated companies, net effect on liquidity 8, 46 1,264 161Cash flow from investing activities -2,575 -1,143Financing activities Repayment of loans -50 -1,950 Repurchase of shares - -80 Dividend paid to Parent Company’s shareholders -367 -237Cash flow from financing activities -417 -2,267CASH FLOW FOR THE YEAR 46 -600 1,077 Liquid assets at beginning of year 2,544 1,463 Exchange rate difference in liquid assets -26 4Liquid assets at year-end 46 1,918 2,544For Saab’s operating cash flow, see Note 46 and page 76. SAAB ANNUAL REPORT 2011 75
  • 80. FINANCIAL INFORMATION > FINANCIAL STATEMENTSSpecification of operating cash flow 2011 Saab excl acquisi- Total Total tions /divest- Acquisitions and Saab Aircraft Group GroupMSEK ments and SAL divestments Leasing 2011 2010Cash flow from operating activities before changes inworking capital 2,178 - 164 2,342 2,750CASH FLOW FROM CHANGES IN WORKING CAPITALInventories -245 - 2 -243 586Current receivables -98 - 2 -96 855Advance payments from customers 409 - - 409 194Other current liabilities 762 - -152 610 399Provisions -538 - -92 -630 -297Change in working capital 290 - -240 50 1,737Cash flow from operating activities 2,468 - -76 2,392 4,487INVESTING ACTIVITIESInvestments in intangible fixed assets -41 - - -41 -117Investments in tangible fixed assets -325 - - -325 -262Investments in lease assets -1 - - -1 -2Sale of tangible fixed assets 23 - - 23 11Sale of lease assets - - 301 301 65Investments in and sale of financial assets -1 - - -1 6Investments in operations and associated companies,net effect on liquidity - -1,135 - -1,135 -Sale of subsidiaries and associated companies,net effect on liquidity - 1,264 - 1,264 161Cash flow from investing activities excluding changein short-term investments and other interest-bearingfinancial assets -345 129 301 85 -138OPERATING CASH FLOW1) 2,123 129 225 2,477 4,3491) For a reconciliation of operating cash flow to cash flow for the year, see Note 46.76 SAAB ANNUAL REPORT 2011
  • 81. FINANCIAL INFORMATION > FINANCIAL STATEMENTSPARENT COMPANYINCOME STATEMENT 1 January – 31 December MSEK Note 2011 20101) Sales 3, 4 15,415 14,745 Cost of goods sold -11,785 -11,650 Gross income 3,630 3,095 Marketing expenses -1,220 -1,114 Administrative expenses -664 -727 Research and development costs -1,143 -1,024 Other operating income 5 219 82 Other operating expenses 6 -3 -16 Operating income 819 296 Result from financial items: 13 Result from shares in Group companies 1,410 1,171 Result from shares in associated companies/joint ventures 59 32 Result from other securities and receivables held as fixed assets 81 107 Other interest income and similar items 182 114 Interest expenses and similar items -207 -173 Income after financial items 2,344 1,547 Appropriations 14 -293 -83 Income before taxes 2,051 1,464 Taxes 15 -462 -423 Net income for the year 1,589 1,0411) The income statement for the parent company has been restated for the year 2010 due to a correction of classification and valuation of intangible and financial fixed assets. The income statement for the year 2010 has also been restated due to changes in accounting principles regarding group contributions paid to subsidiariesSALES AND INCOMEThe Parent Company includes units within the business areas Aeronautics, Operating income in 2010 included expenses of MSEK 290 mainly relatedElectronic Defence Systems, Security and Defence Solutions, and Support to a terminated contract in Security and Defence Solutions and structuraland Services. Group staffs and Group support are included as well. The costs of MSEK 98 in Aeronautics related to lay-offs announced in JanuaryParent Company’s sales in 2011 amounted to MSEK 15,415 (14,745). Op- 2010 as well as the reorganisation announced in 2009.erating income was MSEK 819 (296). Operating income included expenses Net financial income and expenses amounted to MSEK 1,525 (1,251).of approximately MSEK 330 regarding increased pension obligations ac- After appropriations of MSEK -293 (-83) and taxes of MSEK -462 (-423),cording to the FPG/PRI system due to changed mortality assumptions; net income for the year amounted to MSEK 1,589 (1,041).see also Note 37.PARENT COMPANYCOMPREHENSIVE INCOME 1 January – 31 December MSEK Note 2011 2010 Net income for the year 1,589 1,041 Other comprehensive income - - Net comprehensive income for the year 1,589 1,041 SAAB ANNUAL REPORT 2011 77
  • 82. FINANCIAL INFORMATION > FINANCIAL STATEMENTSPARENT COMPANYBALANCE SHEET as of 31 DecemberMSEK Note 2011 20101)ASSETSFixed assetsIntangible fixed assets 16 1,938 2,273Tangible fixed assets 17 2,137 2,205Financial fixed assets Shares in Group companies 44 6,407 5,770 Receivables from Group companies 24 911 557 Shares in associated companies and joint ventures 23 552 491 Receivables from associated companies and joint ventures 24 17 32 Other long-term securities holdings 26 24 1,457 Other long-term receivables 27 34 10 Deferred tax assets 15 233 417Total financial fixed assets 8,178 8,734Total fixed assets 12,253 13,212Current assetsInventories, etc. 28 3,152 2,782Current receivables Accounts receivable 29 1,424 1,338 Receivables from Group companies 2,280 2,107 Receivables from associated companies and joint ventures 6 26 Tax assets - - Other receivables 27 2,045 1,991 Prepaid expenses and accrued income 30 640 512Total current receivables 6,395 5,974Short-term investments 4,511 1,544Cash and bank balances 1,237 1,935Total current assets 15,295 12,235TOTAL ASSETS 27,548 25,4471) The balance sheet for the parent company has been restated for the year 2010 due to a correction of classification and valuation of intangible and financial fixed assetsLIQUIDITY, FINANCE, CAPITAL EXPENDITUREAND NUMBER OF EMPLOYEESThe Parent Company’s net liquidity amounted to MSEK 516 at 31 Decem- by MSEK 149. Gross capital expenditures in property, plant and equipmentber 2011 compared to a net debt of MSEK 2,395 at 31 December 2010. amounted to MSEK 168 (150). Investments in intangible assets amountedThe change in net liquidity is related to strong operating cash flow and the to MSEK 22 (68).divestment of shares in Aker Holding AS that impacted the net cash position At the end of 2011, the Parent Company had 7,873 employees, comparedpositively by approximately MSEK 1,500 as well as the divestment of the to 7,915 at the beginning of the year.shares in C3 Technologies AB that impacted the net cash position positively78 SAAB ANNUAL REPORT 2011
  • 83. FINANCIAL INFORMATION > FINANCIAL STATEMENTSPARENT COMPANYBALANCE SHEET as of 31 DecemberMSEK Note 2011 20101)EQUITY AND LIABILITIESEquity 33Restricted equity Capital stock 1,746 1,746 Revaluation reserve 713 718 Statutory reserve 543 543Unrestricted equity Retained earnings 2,399 1,673 Net income for the year 1,589 1,041Total equity 6,990 5,721Untaxed reserves 45 795 502Provisions Provisions for pensions and similar commitments 37 469 192 Other provisions 38 1,034 1,465Total provisions 1,503 1,657Liabilities Liabilities to credit institutions 36 1,100 2,223 Liabilities to Group companies 7,697 7,084 Advance payments from customers 471 98 Accounts payable 1,247 1,034 Liabilities to associated companies and joint ventures 51 69 Tax liabilities 101 83 Other liabilities 39 487 671 Accrued expenses and deferred income 40 7,106 6,305Total liabilities 18,260 17,567TOTAL EQUITY AND LIABILITIES 27,548 25,4471) The balance sheet for the parent company has been restated for the year 2010 due to a correction of classification and valuation of intangible and financial fixed assets.Assets pledged 42 10 110Contingent liabilities 42 5,829 5,918 SAAB ANNUAL REPORT 2011 79
  • 84. FINANCIAL INFORMATION > FINANCIAL STATEMENTSSTATEMENT OF CHANGES IN EQUITYFOR THE PARENT COMPANY Restricted equity Unrestricted equity Net compre- Revaluation Statutory Retained hensiveMSEK Capital stock reserve reserve earnings income Total equityOpening balance, 1 January 2010 1,746 724 543 3,103 - 6,116Restatement due to a correction of classification andvaluation of intangible and financial fixed assets1) - - - -1,162 - -1,162Adjusted opening balance, 1 January 2010 1,746 724 543 1,941 - 4,954Items reported directly in equity:Change in revaluation reserve - -6 - 6 - -Net comprehensive income for the year - - - - 1,041 1,041Transactions with shareholders:Dividend to shareholders - - - -237 - -237Repurchase of shares - - - -80 - -80Share matching plan - - - 43 - 43Closing balance, 31 December 2010 1,746 718 543 1,673 1,041 5,721Opening balance, 1 January 2011 1,746 718 543 2,714 - 5,721Items reported directly in equity:Change in revaluation reserve - -5 - 5 - -Net comprehensive income for the year - - - - 1,589 1,589Transactions with shareholders:Dividend to shareholders - - - -367 - -367Share matching plan - - - 47 - 47Closing balance, 31 December 2011 1,746 713 543 2,399 1,589 6,9901) Other balance sheet items that have been restated through the correction of the opening balance for 2010 are intangible fixed assets, by MSEK 2,473, from MSEK 96 to MSEK 2,569, and shares in Group companies, by MSEK -3 635, from MSEK 9,520 to MSEK 5,885. See also Note 16 and Note 44.80 SAAB ANNUAL REPORT 2011
  • 85. FINANCIAL INFORMATION > FINANCIAL STATEMENTSPARENT COMPANYSTATEMENT OF CASH FLOWS 1 January – 31 DecemberMSEK Note 2011 2010Operating activities Income after financial items 2,344 1,547 Adjustments for items not affecting cash flow 46 -642 -296 Income tax paid -328 -Cash flow from operating activities before changes in working capital 1,374 1,251Cash flow from changes in working capital Increase(–)/Decrease(+) in inventories -329 441 Increase(–)/Decrease(+) in current receivables -296 1,149 Increase(+)/Decrease(–) in advance payments from customers 373 -93 Increase(+)/Decrease(–) in other current liabilities 1,045 553 Increase(+)/Decrease(–) in provisions -559 -324Cash flow from operating activities 1,608 2,977Investing activities Shareholders’ contributions paid -718 -25 Investments in intangible fixed assets -22 -68 Investments in tangible fixed assets -168 -151 Sale of tangible fixed assets 17 2 Investments in and sale of short-term investments -2,967 -993 Sale of and investments in financial assets 1,176 223 Investments in operations -41 - Investments in subsidiaries -215 -2 Sale of subsidiaries 2 -Cash flow from investing activities -2,936 -1,014Financing activities Change in receivables/liabilities, Group companies 128 857 Repurchase of shares - -80 Repayment of loans -396 -2,415 Dividend paid to shareholders -367 -237 Group contributions and dividends received 1,297 1,223 Group contributions paid -32 -164Cash flow from financing activities 630 -816CASH FLOW FOR THE YEAR -698 1,147Liquid assets at beginning of year 1,935 788Liquid assets at year-end 46 1,237 1,935 SAAB ANNUAL REPORT 2011 81
  • 86. FINANCIAL INFORMATION > NOTES NOTE 1 Application of new and revised accounting rules The International Accounting Standards Board (iasb) and the InternationalACCOUNTING PRINCIPLES Financial Reporting Interpretations Committee (ifric) have issued and the euOperations has adopted the following new and revised standards, which apply as of theSaab ab is a Swedish limited company with its registered address in financial year 2011:Linköping. The company’s shares are listed on the nasdaq omx Stockholm’s Amendment to ias 32 Financial Instruments: Classification of Rightslarge cap list. The operations of Saab ab with its subsidiaries, joint ventures Issuesand associated companies (jointly referred to as Saab or the Group) are ifric 19 Extinguishing Financial Liabilities with Equity Instrumentsdivided into six business areas: Aeronautics, Dynamics, Electronic Defence Amendment to ifrs 1 First-time Adoption of ifrsSystems, Security and Defence Solutions, Support and Services, and Revised ias 24 Related Party DisclosuresCombitech. The operations in each business area are described in Note 4. Amendment to ifric 14 “ias 19 – The Limit on a Defined Benefit Saab has a strong position in Sweden and the large part of its sales are Asset, Minimum Funding Requirements and their Interaction”generated in Europe, in addition to which Saab has a local presence in SouthAfrica, Australia, the U.S. and other selected countries. iasb annual improvements projects 2010 On 10 February 2012, the Board of Directors and the President approved ifrs 1 First-time Adoption of ifrsthis annual report and consolidated accounts for publication, and they will be ifrs 3 Business Combinationspresented to the Annual General Meeting on 19 April 2012 for adoption. ifrs 7 Financial instruments: Disclosures ias 1 Presentation of Financial StatementsConformity to standards and laws ias 27 Consolidated and Separate Financial StatementsThe consolidated accounts have been prepared in accordance with the Interna- ias 34 Interim Financial Reportingtional Financial Reporting Standards (ifrs) issued by the International Account- ifric 13 Customer Loyalty Programmesing Standards Board (iasb) and the interpretations of the International FinancialReporting Interpretations Committee (ifric) as approved by the eu. The consol- These new and amended standards and interpretations have not had anyidated accounts have also been prepared in accordance with the Swedish Finan- effect on the Group’s financial reports for 2011.cial Reporting Board’s recommendation rfr 1 Supplementary Accounting Rulesfor Groups, which contains certain additional disclosure requirements for Swed- New and amended standards and interpretations that have not yetish consolidated accounts prepared in accordance with ifrs. entered into force The annual report for Saab ab has been prepared according to the Annual The International Accounting Standards Board (iasb) has issued the follow-Accounts Act, the Swedish Financial Reporting Board’s recommendation rfr 2 ing new and amended standards that have not yet entered into force and theReporting by Legal Entities and the pronouncements of the Swedish Finan- International Financial Reporting Interpretations Committee (ifric) hascial Reporting Board. Differences between the accounting principles applied published the following new and amended interpretations that have not yetby Saab ab and the Group are the result of limitations on opportunities to entered into force and have not yet been adopted by the eu:apply ifrs by the Parent Company owing to the Annual Accounts Act, theAct on Safeguarding Pension Commitments and in certain cases current tax Will apply to financialrules. Significant differences are described below under “Significant differ- Standards years beginning:ences between the Group’s and the Parent Company’s accounting principles.” Amendments to ias 19 Employee Benefits 1 January 2013Assumptions in the preparation of the financial reportsThe Parent Company’s functional currency is Swedish kronor (sek), which is Amendment to ifrs 7 Disclosures: Transfersalso the reporting currency for the Parent Company and for the Group. The of Financial assets 1 July 2011financial reports are presented in sek. All amounts, unless indicated other- ifrs 9 Financial Instruments 1 January 2015wise, are rounded off to the nearest million. ifrs 10 Consolidated Financial Statements 1 January 2013 Assets and liabilities are carried at historical cost, with the exception ofcertain financial assets and liabilities, investment properties and biological ifrs 11 Joint arrangements 1 January 2013assets, which are carried at fair value or amortised cost. Derivatives are car- ifrs 12 Disclosures of interests in other entities 1 January 2013ried at fair value. Non-current assets and disposal groups held for sale are carried at the ifrs 13 Fair value measurement 1 January 2013lower of their carrying amount and fair value less selling expenses at the time ifrs 1 First-time Adoption of ifrs 1 July 2011they were classified as held for sale. The preparation of the financial reports in accordance with ifrs requires ias 1 Presentation of Financial Statements 1 July 2012the Board of Directors and Management to make estimates and assumptions ias 12 Income Taxes 1 January 2012that affect the application of the accounting principles and the carrying ias 27 Separate Financial Statements 1 January 2013amounts of assets, liabilities, revenue and expenses. Estimates and assump-tions are based on historical experience and knowledge of the industry that ias 28 Investments in Associates andSaab operates in, and under current circumstances seem reasonable. The Joint Ventures 1 January 2013result of these estimates and assumptions is then used to determine the carry-ing amounts of assets and liabilities that otherwise are not clearly indicated The effect on Saab of the application of ifrs 9 and ifrs 11 has not yet beenby other sources. Actual outcomes may deviate from these estimates and determined.assumptions. Estimates and assumptions are reviewed regularly, and the effect of Effects of amendments to IAS 19 Employee Benefitschanged estimates is recognised in profit or loss. Saab applies the current standard’s option to apply the so-called corridor Estimates made by the Board of Directors and Management in applying approach. This means that the effects of changes in so-called actuarialthe accounting principles in compliance with ifrs that may have a significant assumptions about pension liabilities and assets under management are notimpact on the financial reports as well as estimates that may necessitate recognised directly but rather over the remaining period of employment (seesignificant adjustments in financial reports in subsequent years are described also Note 1 and Note 37). The updated standard eliminates this option. Thisin more detail in Note 2. means that changes in actuary of assumptions, e.g., discount rates, are recog- The accounting principles described below for the Group have been nised directly in other comprehensive income. The updated standard alsoapplied consistently for all periods presented in the Group’s financial reports, requires the company to use the same interest rate to discount pension liabili-unless otherwise indicated below. ties as in the calculation of the projected return on assets under management.82 SAAB ANNUAL REPORT 2011
  • 87. FINANCIAL INFORMATION > NOTESThe updated standard will be applied retroactively as of the first quarter of tially recognised at their acquisition-date fair value. The exceptions to this2013. For Saab, this means an immediate increase in its net pension liability principle are acquired tax assets/liabilities, employee benefits, share-based(classified as a financial liability) and a corresponding decrease in retained payment and assets held for sale, which are valued in accordance with theearnings after taking into account the tax effects. If the standard had been principles described in the sections below for each item. Exceptions are alsoapplied as of 31 December 2011, the net pension obligation would have been made for indemnification assets and repurchased rights. Indemnificationabout msek 2,700 higher and retained earnings about msek 2,000 lower. The assets are valued according to the same principle as the indemnified item.effect on operating and net results for 2011 would not have changed signifi- Repurchased rights are valued based on the remaining contractual periodcantly. The updated standard also contains rules on the reporting of the spe- regardless of whether other market players might consider opportunities forcial employer’s contribution and tax on returns from pension funds. There contract extensions in connection with valuations. Recognised goodwill con-remains uncertainty with regard to the Swedish portion of the net pension sists of the difference between, on the one hand, the cost of Group company’sdebt about the reporting of the special employer’s contribution and tax on interests, the value of non-controlling interests in the acquired company andreturns from pension funds. The effect on the reporting of this has not been the fair value of the previously owned interest and, on the other, the carryingfactored into the above amounts. amount of the acquired assets and assumed liabilities in the acquisition analy- Other standards and interpretations are not expected to have a material sis. Goodwill is recognised according to the section on intangible fixed assets.effect on the consolidated financial statements. Non-controlling interests are recognised on the acquisition date either at fair value or their proportionate share of the carrying amount of the acquiredOperating segments company’s identified assets and liabilities. Acquisitions of non-controllingSegment information is presented based on management’s view, and operat- interests are recognised as transactions affecting the owners’ equity.ing segments are identified based on internal reporting to the company’s The financial reports of Group companies are included in the consoli-chief operating decision maker. Saab has identified the Chief Executive dated accounts from the point in time when a decisive influence arisesOfficer as its chief operating decision maker, while the internal reports used (acquisition date) until this influence ceases. When decisive influence overby the ceo to oversee operations and make decisions on allocating resources the Group company ceases but the Group retains an interest in the company,serve as the basis of the information presented. The segments are monitored the remaining shares are initially recognised at fair value. The gain or loss thatat the operating income level. The accounting principles for reportable seg- arises is recognised in profit or loss.ments conform to the principles applied by the Group as a whole. Associated companies The Group had six reportable segments in 2011: Associated companies are companies over which the Group has a significant (but not decisive) influence over operating and financial controls, usually through a shareholding of between 20 and 50 per cent of the votes. From the point in time when the significant influence arises, the shares in the associ- ated company are recognised according to the equity method in the consoli- dated accounts. The equity method is applied until the point in time when the significant influence ceases. The equity method means that the carrying amount of the shares in the associated company corresponds to the Group’sComplementing the six segments is Corporate, which comprises Group staffs share of the company’s equity based on an application of the Group’s account-and departments as well as other non-core operations. ing principles as well as Group goodwill and any remaining Group surplus or Sales of goods and services between segments are made on market terms. deficit values. “Share in income of associated companies” in the income state- A detailed description of the segments, together with the factors used to ment comprises the Group’s share of the net income after tax and the non-identify segments, can be found in note 4 and on pages 50–61. controlling interest in associated companies adjusted for any depreciation, impairment loss or dissolution of acquired surplus and deficit values deter-Classification of assets and liabilities mined in the same way as for operating acquisitions. Dividends receivedCurrent assets and current liabilities generally consist of amounts that can be from the associated company reduce the carrying amount of the investment.recovered or paid within twelve months of the closing day. Other assets and If the Group’s share of the accumulated deficit in an associated companyliabilities are recognised as fixed assets or long-term liabilities. exceeds the carrying amount of the shares in the Group, the value of the shares is reduced to nil. Losses are also offset against long-term uncollateralised finan-Consolidation principles cial balances that in their economic significance represent part of the owner-Group companies company’s net investment in the associated company. Subsequent losses are notGroup companies are companies in which Saab ab has a decisive influence recognised as a liability in the consolidated accounts as long as the Group hasthrough a direct or indirect shareholding amounting to more than 50 per not issued any guarantees to cover losses arising in the associated company.cent of the votes, other than in exceptional circumstances where it can be When decisive inflluence over the associated company ceases but the Groupclearly demonstrated that such ownership does not constitute a decisive retains an interest in the company, the remaining shares are initially recog-influence. Decisive influence also exists when the parent owns not more than nised at fair value. The gain or loss that arises is recognised in profit or loss.half of the voting power of an entity but otherwise has a decisive influenceover more than half the voting rights or the power to govern the company’s Joint venturesfinancial and operating policies under a statute or agreement. When deter- Companies in which the Group, through a cooperative agreement with onemining whether a decisive influence exists, potential voting shares that can be of more parties, shares a decisive influence over operating and financial con-exercised or converted without delay are taken into account. trols are recognised in the consolidated accounts according to the propor- Subsidiaries and acquired operations (business combinations) are recog- tional method. For joint ventures, this means that the Group’s share of thenised according to the purchase accounting method. This means that a busi- companies’ revenue and expenses and their assets and liabilities is recognisedness combination is treated as a transaction whereby the Group indirectly in the consolidated income statement and statement of financial positionacquires the business’s assets and takes over its liabilities and contingent liabil- based on application of the Group’s accounting principles. This is done byities. The Group’s cost is determined through an acquisition analysis with combining Saab’s share of revenue and expenses and assets and liabilities inregard to the acquisition of operating entities. Cost is comprised of the sum of the joint venture with the corresponding items in the consolidated accounts.the fair value of what of is paid in cash on the acquisition date through the When a joint venture is terminated but the Group retains an interest in theassumption of liabilities or shares issued. Contingent consideration is company, the remaining shares are initially recognised at fair value. The gainincluded in cost and recognised at its fair value on the acquisition date. The or loss that arises is recognised in profit or loss.subsequent effects of revaluations of contingent consideration are recognisedin profit or loss. Acquired identifiable assets and assumed liabilities are ini- SAAB ANNUAL REPORT 2011 83
  • 88. FINANCIAL INFORMATION > NOTESEliminated transactions progress from customers for whom invoiced amounts exceed projectIntra-Group receivables and liabilities, revenue or expenses, and gains or expenses and reported profits are recognised as liabilities to those customers.losses that arise from transactions between Group companies are eliminatedin their entirety in the preparation of the consolidated accounts. Operating expenses Gains that arise from transactions with associated companies and joint The income statement is classified according to function as follows:ventures are eliminated to an extent corresponding to the Group’s ownership Cost of goods sold comprises costs for material handling and manufac-interest in the company. Losses are eliminated in the same way as gains, but turing costs, including salary and material costs, purchased services,only to the extent there that is no impairment loss. premises, and the depreciation/amortisation and impairment of intan- gible and tangible fixed assets. Customer-financed research and devel-Foreign currency opment is recognised in cost of goods sold.Functional currencies are the currencies in each primary economic environ- Administrative expenses relate to expenses for the Board of Directors,ment where units of the Group conduct their operations. Group Management and staff functions. Marketing expenses comprise expenses for the in-house marketing andTransactions and assets and liabilities in foreign currency sales organisation as well as external marketing and selling expenses.Transactions in foreign currency are recognised in the functional currency at Research and development costs are recognised separately and com-the exchange rate on the transaction day. Monetary assets and liabilities are prise the cost of self-financed new and continued product developmenttranslated to the functional currency on the closing day at the exchange rate as well as amortisation of capitalised development costs; see below.then in effect. Exchange rate differences that arise through these translations Other operating revenue and expenses relate to secondary activities, ex-are recognised in profit and loss. Non-monetary assets and liabilities recog- change rate differences on items of an operating nature, changes in thenised at fair value are translated to the functional currency at the rate in effect value of derivatives of an operating nature and capital gains/losses onat the time of valuation at fair value. Changes in exchange rates are then rec- the sale of tangible fixed assets. Also included at the Group level are cap-ognised in the same way as other changes in value of the asset or liability. ital gains/losses on the sale of subsidiaries and associated companies.Translation of financial reports of foreign operations to sek Government grantsAssets and liabilities in operations with a functional currency other than sek Government grants are recognised in the statement of financial position asare translated to sek at the closing day exchange rate. Revenue and expenses prepaid or accrued income when there is reasonable certainty that the grantin foreign operations are translated to sek at the average rate. Translation dif- will be received and that the Group will meet the conditions associated withferences that arise through currency translations are recognised directly in the grant. Grants are systematically recognised in the income statement inother comprehensive income. The amount is recognised separately as a trans- the same way and over the same periods as the expenses for which the grantslation reserve in equity. are intended to compensate. Government grants related to assets are recog- nised in the statement of financial position as a reduction in the asset’s carry-Revenue ing amount.Revenue is measured at the fair value of what is received or will be receivedafter deducting sales tax, returns, discounts or other similar deductions. Financial revenue and expenses Financial revenue and expenses consist of interest income on bank balances,Sales of goods receivables and marketable securities, interest expenses on loans, dividends,Revenue from the sale of goods is recognised in profit or loss when the signifi- exchange rate differences, unrealised and realised gains on financial invest-cant risks and benefits associated with ownership have transferred to the buyer, ments, amortisation of actuarial gains and losses on pensions, and derivativeswhen it is considered likely that payment will be received and the revenue and used in financial operations.related expenses can be calculated reliably. Intangible fixed assetsService assignments GoodwillRevenue from service assignments is recognised when the services are ren- Goodwill is distributed among cash-generating units and tested annually fordered. Revenue from services rendered as part of fixed-price contracts is rec- impairment in the fourth quarter. Goodwill arising through the acquisition ofognised in accordance with the principles that apply to long-term customer associated companies is included in the carrying amount of the shares in thecontracts; see below. Revenue is recognised only if it is likely that the eco- associated company.nomic benefits will accrue to the Group. In acquisitions where the cost is less than, on the one hand, the net of the cost of the Group company’s shares, the value of non-controlling interests inLong-term customer contracts the acquired company and the fair value of the previously owned interest and,A large part of the Group’s operations comprises long-term customer con- on the other, the carrying amount of the acquired assets and assumed liabilitiestracts. Long-term customer contracts relate to the development and manu- in the acquisition analysis, the difference is recognised directly through profitfacture of complex systems that stretch over several reporting periods. When or loss.such contracts concern development and hardware that can be reliably calcu-lated, revenue and expenditures attributable to the assignment are recognised Research and developmentin the consolidated income statement in relation to the assignment’s stage of Expenditures for research undertaken in an effort to gain new scientific orcompletion, i.e., according to the percentage of completion method. technological knowledge are expensed when incurred. The stage of completion is based on a determination of the relationship Expenditures for development, where the research results or other knowl-between expenditures incurred for services rendered as of the closing day edge is applied to new or improved products or processes, are recognised asand estimated total expenditures. Of the estimated total revenue for an an asset in the statement of financial position from the time when the prod-assignment, the portion corresponding to the stage of completion is recog- uct or process in the future is expected to be technically and commerciallynised in each period. The stage of completion can also be determined in cer- usable, the company has sufficient resources to complete development andtain cases based on milestones or deliveries. With regard to orders that are subsequently use or sell the intangible asset, and the product or process isfinanced to a significant extent with advance payment from customers, the likely to generate future economic benefits. The carrying amount includeseffect on interest of advance financing is recognised in gross income. The expenditures for material, direct expenditures for salaries and, if applicable,interest amount that affected gross income is indicated in Note 13. other expenditures that are considered directly attributable to the asset. An anticipated loss is recognised in profit or loss as soon as it is identified. Other expenditures for development are recognised in profit for loss as an Recognised subcontracting revenue for which the customer has not yet expense when they arise. Development expenditures are recognised in thebeen invoiced is recognised as a receivable from that customer. All projects in statement of financial position at cost less accumulated amortisation and any84 SAAB ANNUAL REPORT 2011
  • 89. FINANCIAL INFORMATION > NOTESimpairment losses. Customer-financed research and development is recog- Borrowing costsnised in cost of goods sold rather than capitalised. Borrowing costs that are directly attributable to the acquisition, construc- tion or production of an asset and takes a substantial period of time to pre-Other intangible fixed assets pare for its intended use or sale is capitalised as part of the asset’s cost whenOther acquired intangible fixed assets, which include acquired assets such as it is likely that they will lead to future economic benefits for the Group andtrademarks and customer relations, are recognised at cost less accumulated the expenditures can be measured reliably. Other borrowing costs areamortisation and any impairment losses. expensed in the period in which they arise.Amortisation DepreciationAmortisation is recognised in profit or loss over the intangible fixed assets’ Depreciation is booked on a straight-line basis based on the asset’s cost lessestimated periods of use, provided such periods can be determined. Intangi- estimated residual value at the end of the period of use, over the asset’s esti-ble fixed assets, excluding goodwill and other intangible fixed assets with mated period of use. Land is not depreciated. Component depreciation isindeterminate periods of use, are amortised from the day they are available applied, which means that fixed assets consisting of various components orfor use. Estimated periods of use and amortisation methods are as follows: where significant parts have different periods of use are depreciated as sepa- Patents, trademarks, customer relations and other technical rights: rate assets based on their periods of use. 5-10 years on a straight line basis Capitalised development costs: Self-financed capitalised development Estimated periods of use: costs are amortised based on estimated production volume, but over a Operating properties: 20–90 years maximum period of 5 years. Production volume is set using future Property, plant and equipment: 5–10 years sales projections according to a business plan based on identified Equipment, tools, installations and computers: 3–10 years business opportunities. Acquired development costs are amortised on Aircraft: 20–25 years a straight line basis over a maximum of 10 years. Goodwill: In the Parent Company, goodwill is amortised over a maxi- Each asset’s residual value and period of use are estimated annually. Periods mum 20 years. Goodwill is not amortised in the Group. of use are unchanged compared with the previous year.Periods of use are tested annually and unfinished development work is tested Lease assetsfor impairment at least once a year regardless of any indications of dimin- Lease assets mainly refer to 40 aircraft owned by legal entities within Saabished value. Aircraft Leasing and leased out via operating leases. Saab Aircraft Leasing’s fleet consists of 82 Saab 340 and Saab 2000, of which 42 aircraft are leased inTangible fixed assets through operating leases and leased out through operating leases.Tangible fixed assets are recognised as an asset in the statement of financial Leasing is classified in the consolidated accounts as either finance orposition if it is likely that the future economic benefits will accrue to the operating leasing. Finance leasing exists when the economic risks and bene-Group and the cost of the asset can be reliably estimated. fits tied to ownership are essentially transferred to the lessee; otherwise it is Tangible fixed assets are recognised at cost after deducting accumulated operating leasing.depreciation and any impairment. Cost includes the purchase price and costs For anticipated or established deficits according to current leases withdirectly attributable to putting the asset into place and condition to be uti- respect to aircraft financing in Saab Aircraft Leasing, provisions are allocatedlised in accordance with the purpose of the purchase. Examples of directly at an amount corresponding to the obligation. See also Note 18.attributable expenditures included in cost are delivery and handling, installa-tion, title and consulting services. Saab as lessor The cost of fixed assets produced by Saab includes expenditures for mate- At year-end 2011, Saab only had operating leases. Leasing revenue is recog-rial, expenditures for employee benefits and, where applicable, other produc- nised on a straight-line basis over the leasing period. Direct expenditures thattion costs considered directly attributable to the fixed asset. arise by entering into an operating lease are expensed on a straight-line basis The cost of tangible fixed assets includes estimated costs for disassembly over the leasing period.and removal of the assets as well as restoration of the location or area wherethese assets are found. Saab as lessee The carrying amount of a tangible fixed asset is excluded from the state- At year-end 2011, Saab only had operating leases. Leasing fees for operatingment of financial position when the asset is sold or disposed of or when no leases are expensed on a straight-line basis over the leasing period.future economic benefits are expected from its use. The gain or loss that ariseson the sale or disposal is comprised of the difference between the sales price Biological assetsand the asset’s carrying amount less direct selling expenses. Such gains and Biological assets in the form of forests are carried at fair value after deductinglosses are recognised as other operating income/expenses. estimated selling expenses. Fair value is based on the valuation of an inde- pendent appraiser.Incremental expendituresIncremental expenditures are added to cost only if it is likely that the future Investment propertieseconomic benefits tied to the incremental expenditures will accrue to the Investment properties are properties held to earn rental income, for capitalGroup and the expenditures can be reliably estimated. All other incremental appreciation or a combination of both. Investment properties are carried inexpenditures are recognised as costs in the period they arise. the statement of financial position at fair value. Fair value has been deter- The determining factor whether an incremental expenditure is added to mined by calculating net rental income, which then serves as the basis of acost is whether it relates to the replacement of identifiable components, or valuation of fair value.parts thereof. If so, the cost is capitalised. Even in cases where a new com-ponent is created, the expenditure is added to cost. Any undepreciated car- Assets held for salerying amount of replaced components, or parts of components, is disposed When an asset is classified as held for sale, it means that its carrying amountof and expensed in connection with the replacement. Repairs are expensed will be recovered primarily through a sale rather than through use. In orderas incurred. to classify a fixed asset as an asset held for sale, the asset must be available for immediate sale and it has to be highly likely that a sale will take place. Immediately before classification as held for sale, the recognised value of the assets is determined according to the Group’s accounting principles. SAAB ANNUAL REPORT 2011 85
  • 90. FINANCIAL INFORMATION > NOTESUpon initial classification as held for sale, assets are recognised at the lower of On each reporting date, Saab evaluates whether there are objective indica-their carrying amount and fair value less selling expenses. tions that a financial asset or pool of financial assets is in need of impairment. Assets are not depreciated/amortised after they are classified as held for sale. Financial assets and liabilities are offset and recognised as a net amount in the statement of financial position when the there is a legal right to a set-off andImpairment when the intent is to settle the items with a net amount or to realise the assetThe carrying amount of fixed assets, with the exception of assets stated at fair and settle the liability at the same time.value, is tested on each closing day for any indication of impairment. If anindication exists, the asset’s recoverable amount is calculated. A description of Financial assets and liabilities are classified in one of the following categories:impairment principles for available-for-sale financial assets is provided below. Financial assets and liabilities at fair value through profit or loss: For goodwill and other intangible fixed assets with an indeterminate Assets and liabilities in this category are carried at fair value withperiod of use and intangible fixed assets not yet ready for use, recoverable val- changes in value recognised in profit or loss. This category consists ofues are calculated annually in the fourth quarter. two subgroups: financial assets and liabilities held for trading and The recoverable amount of an asset is the higher of its fair value less sell- other financial assets and liabilities that the company initially chose toing expenses and value in use. Value in use is measured by discounting future recognise at fair value through profit or loss. A financial asset is classi-cash flows using a discounting factor that takes into account the risk-free rate fied as held for trading if it is acquired for the purpose of selling in theof interest plus supplemental interest corresponding to the risk associated near term. Derivatives are always recognised at fair value throughwith the specific asset. profit or loss, unless hedge accounting is applied. If essentially independent cash flows cannot be isolated for individual Held-to-maturity investments:assets, the assets are grouped at the lowest levels where essentially independ- Financial assets in this category relate to non-derivative assets with pre-ent cash flows can be identified (cash-generating units). An impairment loss determined or determinable payments and scheduled maturities thatis recognised when the carrying amount of an asset or cash-generating unit the company intends and has the ability to hold to maturity. They are val-exceeds its recoverable value. Impairment losses are charged against the ued at amortised cost.income statement. Loans receivable and accounts receivable: Impairment losses attributable to a cash-generating unit (pool of units) Loans receivable and accounts receivable are non-derivative financialare mainly allocated to goodwill, after which they are divided proportionately assets with fixed payments which are not listed on an active market.among other assets in the unit (pool of units). Receivables arise when the company provides money, goods or ser- Impairment of goodwill is not reversed. Impairment losses from other vices directly to the debtor without the intent to trade its claim. Theassets are reversed if a change has occurred in the assumptions that served as category also includes acquired receivables. Assets in this category arethe basis for determining recoverable value. Impairment is reversed only to recognised after acquisition at amortised cost.the extent the carrying amount of the assets following the reversal does not Accounts receivable are recognised at the amount expected to be re-exceed the carrying amount that the asset would have had if the impairment ceived based on an individual valuation. Accounts receivable have ahad not been recognised, taking into account the depreciation or amortisa- short maturity, due to which they are recognised at their nominaltion that would have been recognised. amount without discounting. Impairment losses on accounts receiva- ble are recognised in operating expenses. Saab has an accounts receiv-Financial assets and liabilities and other financial instruments able sales programme with an independent party. When a receivableFinancial instruments recognised in the statement of financial position is sold, the entire credit risk is transferred to the counterparty, becauseinclude, on the asset side, liquid assets, accounts receivable, shares, loans of which the proceeds received are recognised as liquid assets.receivable, bonds receivable, derivatives and part of accrued income and Other receivables are receivables that arise when the company pro-other receivables. Liabilities include trade accounts payable, loans payable, vides money without the intent to trade its claim.derivatives and certain accrued expenses and other liabilities. Financial assets Other financial liabilities:are recognised as of their settlement date. Liabilities classified as other financial liabilities are initially recog- Financial instruments are initially recognised at cost, corresponding to nised at the amount received after deducting transaction expenses.the instrument’s fair value plus transaction expenses for all financial instru- After acquisition, the loans are carried at amortised cost, according toments with the exception of those in the category financial assets at fair value the effective rate method.through profit or loss. The instruments are subsequently recognised at fair Trade accounts payable are classified in the category other financial li-value or amortised cost, depending on how they have been classified as fol- abilities. Trade accounts payable have a short expected maturity andlows. The fair value of listed financial assets and liabilities is determined using are carried without discounting at their nominal amount.market prices. Saab also applies various valuation methods to determine thefair value of financial assets and liabilities traded on an inactive market or Calculation of recoverable valueunlisted holdings. These valuation methods are based on the valuation of The recoverable value of financial assets in the categories held-to-maturitysimilar instruments, discounted cash flows or accepted valuation models investments, loans receivable and accounts receivable measured at amortisedsuch as Black-Scholes. Amortised cost is determined based on the effective cost is calculated using the present value of future cash flows discounted byinterest rate calculated on the acquisition date. the effective interest rate in effect when the asset was initially recognised. A financial asset or financial liability is recognised in the statement of Assets with a maturity of less than one year are not discounted.financial position when the company becomes party to the instrument’s con- Impairment of held-to-maturity investments and loans receivable andtractual terms. Accounts receivable are recognised in the statement of finan- accounts receivable recognised at amortised cost is reversed if a subsequentcial position when an invoice has been sent. Liabilities are recognised when increase in recoverable value can objectively be attributed to an event occur-the counterparty has performed and there is a contractual obligation to pay, ring after the impairment.even if an invoice has not yet been received. Accounts payable are recognisedwhen an invoice is received. Liquid assets A financial asset is removed from the statement of financial position Liquid assets consist of cash and cash equivalents, immediately accessiblewhen the rights in the agreement are realised, expire or the company loses balances with banks and similar institutions, and short-term liquid invest-control over them. The same applies to part of a financial asset. A financial ments with a maturity from acquisition date of less than three months, whichliability is removed from the statement of financial position when the obliga- are exposed to no more than an insignificant risk of fluctuation in value.tion in the agreement has been discharged or otherwise extinguished. Thesame applies to part of a financial liability.86 SAAB ANNUAL REPORT 2011
  • 91. FINANCIAL INFORMATION > NOTESFinancial investments Fair value hedgesFinancial investments comprise either financial fixed assets or short-term Certain forward exchange contracts and currency swaps (hedge instruments)investments, depending on the intent of the holding. If the maturity or the entered into to hedge future receipts and disbursements for currency andanticipated holding period is longer than one year, they are considered finan- interest rate risk are accounted for according to the rules for fair value hedg-cial fixed assets, and if it is shorter than one year they are short-term invest- ing. These hedges are recognised at fair value in the statement of financialments. position with regard both to the derivative itself and the future receipt or dis- With recognition at fair value through profit or loss, changes in value are bursement (hedge item) for the risk being hedged. The change in fair value ofstated in financial revenue and expenses. the derivative is recognised in the profit and loss together with the change in value of the hedged item.Valuation principlesThe fair value of listed financial assets is determined using market prices. Hedge of currency exposure in assets and liabilitiesFurthermore, Saab applies various valuation methods to determine the fair Currency exposure from an asset or liability is hedged with forward exchangevalue of financial assets that are traded on an inactive market or unlisted contracts. No hedge accounting is applied, due to which both the hedgedholdings. These methods are based on the valuation of similar instruments, item and hedging instrument are recognised with respect to currency risk atdiscounted cash flows or customary valuation methods such as Black- fair value with changes in value through profit or loss. Changes in the value ofScholes. See Note 41. operations-related receivables and liabilities are recognised in operating income, while changes in the value of financial receivables and liabilities areDerivatives and hedge accounting recognised in financial revenue and expenses.Derivatives include forward exchange contracts, options and swaps utilisedto cover risks associated with changes in exchange rates and exposure to Inventoriesinterest rate risks. Derivatives are recognised on their acquisition date at cost Inventories are valued at the lower of cost and net realisable value. Net realis-and subsequently at fair value. able value is the estimated selling price in continuing operations after deduct- Derivatives with positive values are recognised as assets and derivatives ing estimated expenses for completion and expenses incurred in selling.with negative values are recognised as liabilities under the heading deriva- Cost is calculated by applying the first-in first-out method (fifo) andtives in the statement of financial position. Gains and losses on a derivative includes expenses to acquire inventory assets and bring them to their presentarising due to a change in fair value are recognised in profit or loss if the location and condition. For finished and semifinished goods, cost consists ofderivative is classified among financial assets and liabilities at fair value direct manufacturing expenses and a reasonable share of indirect manufac-through profit or loss. turing expenses as well as expenses to customise products for individual cus- In hedge accounting, derivatives are classified as fair value hedges or cash tomers. Calculations take into account normal capacity utilisation.flow hedges. The recognition of these hedging transactions is described below. DividendsCash flow hedges The dividend proposed by the Board of Directors reduces earnings availableCertain forward exchange contracts and currency swaps (hedge instruments) for distribution and is recognised as a liability when the Annual Generalentered into to hedge future receipts and disbursements against currency Meeting has approved the dividend.risks are accounted for according to the rules for cash flow hedging. Deriva-tives that protect future receipts and disbursements are recognised in the Employee benefitsstatement of financial position at fair value. Changes in value are recognised The Group has two types of pension plans: defined-contribution and defined-in other comprehensive income and separately recognised in the hedge benefit pension plans.reserve in equity until the hedged cash flow meets the operating profit or loss,at which point the cumulative changes in value of the hedging instrument are Defined-contribution planstransferred to profit or loss to meet and match the effects on earnings of the In defined-contribution plans, pensions are based on the premiums paid.hedged transaction. Obligations with regard to defined-contribution plans are expensed in the Interest rate exposure from future variable-rate liabilities is hedged with income statement.interest rate swaps. In its reporting, Saab applies cash flow hedging, whichmeans that the change in value of the interest rate swap is recognised in other Defined-benefit planscomprehensive income and separately recognised in the hedge reserve in In defined-benefit plans, pensions are based on a percentage of the recipient’sequity. The change in value is recognised in financial revenue and expenses salary. Saab has around ten different types of defined-benefit plans. The pre-when transferred to profit or loss. dominant plan is the itp plan, which accounts for approximately 80 per cent When the hedged future cash flow refers to a transaction that will be capi- of the total obligation. The second largest plan refers to the state-fundedtalised in the statement of financial position, the net gain or loss on cash flow retirement pension and vested pensions in Affärsverket ffv when it washedges in equity is dissolved when the hedged item is recognised in the state- incorporated on 1 January 1991.ment of financial position. If the hedged item is a non-financial asset or a non- The Group’s net obligation for defined-benefit plans is calculated sepa-financial liability, the reversal from the net gain or loss on cash flow hedges in rately for each plan by estimating the future compensation that employeesequity is included in the original cost of the asset or liability. If the hedged item have earned through employment in present and previous periods. This com-is a financial asset or financial liability, the net gain or loss on cash flow hedges pensation is discounted to present value. Saab has secured main part of thein equity is gradually reversed through profit or loss at the same rate that the obligation through provisions to a pension fund, and the fair value of thehedged item affects earnings. fund’s assets is offset against the provision for the pension obligation at pre- When a hedging instrument expires, is sold or is exercised, or the com- sent value in the statement of financial position. The discount rate to calculatepany revokes the designation as a hedging relationship before the hedged the commitment at present value has been determined based on the interesttransaction occurs and the projected transaction is still expected to occur, the rate on the closing day for a first-class mortgage bond with a maturity corre-recognised cumulative gain or loss remains in the net gain or loss on cash sponding to the pension obligation. The calculation is made by a qualifiedflow hedges in equity and is recognised in the same way as above when the actuary using the projected unit credit method.transaction occurs. When the compensation terms in a plan improve, the portion of the If the hedged transaction is no longer expected to occur, the hedging increased compensation attributable to the employees’ services in previousinstrument’s cumulative gains and losses are immediately recognised in profit periods is expensed through the income statement on a straight-line basisor loss in accordance with principles described above for derivatives. over the average period until the compensation is fully vested. If the compen- sation is fully vested, an expense is recognised directly through profit or loss. SAAB ANNUAL REPORT 2011 87
  • 92. FINANCIAL INFORMATION > NOTESThe obligation is estimated on the closing day, and if the calculated amount Regional aircraftdeviates from the estimated commitment an actuarial gain or loss arises. All A provision for an aircraft lease is recognised when future lease receipts areactuarial gains and losses as of 1 January 2004, the date of transition to ifrs, less than unavoidable lease disbursements.are recognised in equity and other items in the statement of financial posi-tion. For actuarial gains and losses that arise from the calculation of the RestructuringGroup’s obligation for different plans after 1 January 2004, the so-called corri- A provision for restructuring is recognised when a detailed, formal restruc-dor method is applied. This means that the portion of the cumulative actuar- turing plan has been established and the restructuring has either begun orial gains and losses exceeding 10 per cent of the higher of the commitments’ been publicly announced. No provision is made for future operating losses.present value and the fair value of assets under management is recognisedover the expected average remaining period of employment of the employees Loss contractscovered by the plan. Actuarial gains and losses otherwise are not taken into A provision for a loss contract is recognised when anticipated benefits areaccount. lessthan the unavoidable costs to fulfil the obligations as set out in the con- If pension obligations are lower than assets under management and actu- tract.arial losses, this amount is recognised as an asset. When there is a difference in how the pension cost is determined for a Guaranteeslegal entity and the Group, a liability or receivable for the special employer’s A provision for guarantees is normally recognised when the underlyingcontribution arises based on this difference. products or services are sold if a reliable calculation of the provision can be made. The provision is based on historical data on guarantees for the prod-Severance ucts or similar products and an overall appraisal of possible outcomes in rela-A provision is recognised in connection with termination of personnel only if tion to the likelihood associated with these outcomes.the company is obligated to terminate an employment before the customarytime, e.g., when compensation is paid in connection with a voluntary termi- Soil remediationnation offer. In cases where the company terminates personnel, a detailed In accordance with the Group’s publicly announced environmental policyplan is drafted containing at the minimum the workplaces, positions and and applicable legal requirements, periodic estimates are made of Saab’s obli-approximate number of individuals affected as well as compensation for each gations to restore contaminated soil. Anticipated future payments are dis-personnel category or position and a schedule for the plan’s implementation. counted to present value and recognised as an operating expense and a provi- sion.Share-based paymentShare-based payment refers solely to remuneration to employees, including Contingent liabilitiessenior executives. Share-based payment settled with the company’s shares or A contingent liability exists if there is a possible commitment stemming fromother equity instruments is comprised of the difference between the fair value events whose occurrence is dependent on one or more uncertain futureat the time these plans were issued and the consideration received. This events and there is a commitment that is not recognised as a liability or provi-remuneration is recognised as staff costs during the vesting period. To the sion because it is unlikely that an outflow of resources will be required or theextent the vesting conditions in the plan are tied to market factors (such as size of the obligation cannot be estimated with sufficient reliability. Informa-the price of the company’s shares), they are taken into consideration in deter- tion is provided as long as the likelihood of an outflow of resources is notmining the fair value of the plan. Other conditions (such as earnings per extremely small.share) affect staff costs during the vesting period by changing the number ofshares or share-related instruments that are expected to be paid. Taxes Income taxes consist of current tax and deferred tax. Income taxes are recog-Share matching plan for employees nised in profit or loss unless the underlying transaction is recognised in otherSaab has a Global Share Matching Plan where all employees are entitled to comprehensive income, whereby the related tax effect is also recognised inparticipate. The payroll expenses for matching shares in the plan are recog- other comprehensive income.nised during the vesting period based on the fair value of the shares. The Current tax is the tax paid or received for the current year, applying theemployees pay a price for the share that corresponds to the share price on the tax rates that have been set or essentially set as of the closing day to taxableinvestment date. Three years after the investment date, employees are allotted income and adjusting for current tax attributable to previous periods.as many shares as they purchased three years earlier provided that they are Deferred tax is calculated according to the balance sheet method based onstill employees of the Saab Group and that the shares have not been sold. In temporary differences that constitute the difference between the carryingcertain countries, social security expenses are paid on the value of the amount of assets and liabilities and their value for tax purposes. Deductibleemployee’s benefit when matching takes place. During the vesting period, temporary differences are not taken into account in the initial reporting ofprovisions are allocated for these estimated social security expenses. Share assets and liabilities in a transaction other than a business combination andrepurchases to fulfil the commitments of Saab’s share matching plans are rec- which, at the time of the transaction, do not affect either the recognised or tax-ognised in equity. able result. Moreover, temporary differences are not taken into account if they In addition, a plan was introduced for senior executives entitling them to are attributable to shares in subsidiaries and associated companies that are not2–5 matching shares depending on the category the employee belongs to. In expected to be reversed within the foreseeable future. The valuation ofaddition to the requirement that the employee remain employed by Saab after deferred tax is based on how the carrying amounts of assets or liabilities arethree years, there is also a requirement that earnings per share grow in the expected to be realised or settled. Deferred tax is calculated by applying the taxrange of 5 to 15 per cent. See also, Note 37. rates and tax rules that have been set or essentially are set as of the closing day. Deferred tax assets from deductible temporary differences and tax lossProvisions carry forwards are only recognised to the extent it is likely that they will beA provision is recognised in the statement of financial position when the utilised. The value of deferred tax assets is reduced when it is no longer con-Group has a legal or informal obligation owing to an event that has occurred sidered likely that they can be utilised. Deferred tax assets are set off againstand it is likely that an outflow of economic resources will be required to settle deferred tax liabilities when the receivable and liability refer to the same taxthe obligation and a reliable estimate of the amount can be made. Where it is authority.important when in time payment will be made, provisions are estimated bydiscounting projected cash flow at a pre-tax interest rate that reflects currentmarket estimates of the time value of money and, where appropriate, the risksassociated with the liability.88 SAAB ANNUAL REPORT 2011
  • 93. FINANCIAL INFORMATION > NOTESSignificant differences between the Group’s and the Parent Company’saccounting principlesThe Parent Company follows the same accounting principles as the Groupwith the following exceptions.Business combinationsTransaction costs are included in the cost of business combinations.Associated companies and joint venturesShares in associated companies and joint ventures are recognised by the Par-ent Company according to the acquisition value method. Revenue includesdividends received.Intangible fixed assetsAll development costs are recognised in profit or loss.Tangible fixed assetsTangible fixed assets are recognised after revaluation, if necessary. All leasesare recognised according to the rules for operating leasing.Borrowing costsThe Parent Company recognises borrowing costs as an expense in the periodin which they arise.Investment propertiesInvestment properties are recognised according to acquisition cost method.Financial assets and liabilities and other financial instrumentsThe Parent Company carries financial fixed assets at cost less impairment andfinancial current assets according to the lowest value principle. If the reasonfor impairment has ceased, it is reversed. The Parent Company does not apply the rules for setting off financialassets and liabilities.Derivatives and hedge accountingDerivatives that are not used for hedging are carried by the Parent Companyaccording to the lowest value principle. For derivatives used for hedging, rec-ognition is determined by the hedged item. This means that the derivative istreated as an off balance sheet item as long as the hedged item is recognised atcost or is not included on the balance sheet. Receivables and liabilities in for-eign currency hedged with forward contracts are valued at the forward rate.Employee benefitsThe Parent Company complies with the provisions of the Law on Safeguardingof Pension Commitments and the regulations of the Swedish FinancialSupervisory Authority, since this is a condition for tax deductibility.Untaxed reservesThe amounts allocated to untaxed reserves constitute taxable temporary dif-ferences. Due to the connection between reporting and taxation, the deferredtax liability is recognised in the Parent Company as part of untaxed reserves.Group contributions and shareholders’ contributionsShareholders’ contributions are recognised directly in the equity of the recipi-ent and capitalised in the shares and participating interests of the contributor,to the extent impairment is not required. Group contributions received and paid are recognised through profit orloss in financial income and expenses. SAAB ANNUAL REPORT 2011 89
  • 94. FINANCIAL INFORMATION > NOTES NOTE 2 NOTE 3ASSUMPTIONS IN THE APPLICATION OF THE ACCOUNTING PRINCIPLES REVENUE DISTRIBUTIONThe Board of Directors and Group Management together have identified thefollowing areas where estimates and assumptions in the application of the Revenue by significant sourceaccounting principles may have a siginificant impact on the accounting of the Group Parent CompanyGroup’s results of operations and financial position and may result in signifi-cant adjustments in subsequent financial reports. Developments in these MSEK 2011 2010 2011 2010areas are monitored continuously by Group Management and the Board of Sale of goods 3,999 4,359 1,669 1,670Directors’ audit committee. Long-term customer contracts 13,811 13,826 9,653 8,836UNCERTAINTIES IN ESTIMATES AND ASSUMPTIONS Service assignments 5,684 6,246 4,090 4,237Long-term customer contracts Royalties 4 3 3 2A majority of all long-term customer contracts contain significant develop-ment aspects, which are associated with risks. Before a contract is signed Total 23,498 24,434 15,415 14,745with a customer on delivery of a product, solution or service, a thoroughanalysis is always made of the prerequisites and risks of the delivery through Sale of goodsa project management process established within Saab. In the execution The sale of goods includes sales of goods manufactured by Saab and goodsstage, continuous reviews are then made of the work in the project accord- purchased for resale, e.g., spare parts and other equipment which is solding to the same process. An important aspect is to identify risks and assess separately.them and the measures that are taken to mitigate the risks with the help of arisk assessment method. Long-term customer contracts The Group applies the percentage of completion method to recognise Long-term customer contracts relate to the development and manufacture ofrevenue from long-term customer contracts. An estimation of total costs is complex systems that stretch across several accounting periods.critical in revenue recognition and provisions for loss contracts as well as For long-term customer contracts on development and hardware thatinventory valuations, and the outcome of technical and commercial risks can be calculated reliably, revenue and expenditures attributable to themay affect income. assignment are recognised as income and expenses in the consolidated income statement in relation to the assignment’s stage of completion, i.e.Recovery of value of development costs according to the percentage of completion method.The Group has invested significant amounts in research and development. Thereported amounts in the statement of financial position are primarily due to Service assignmentsdevelopment projects relating to exports of Gripen, electronic warfare sys- Service assignments refer to the performance of a service on behalf of a cus-tems, missile systems, Air Traffic Management (atm), radar and sensors. Cap- tomer during a contractual period, e.g. consulting and support services.italised development costs amount to msek 1,950 (2,428). The recognition ofdevelopment expenditures as an asset on the statement of financial position Royaltiesrequires an assumption that the product is expected to be technically and Royalties include revenue from outside parties for the use of Saab’s assetscomercially usable in the future and that future economic benefits are likely. such as patents, trademarks and software.Capitalised development costs are amortised over the estimated productionvolume or period of use, up to a maximum of 5 years, with the exception ofacquired development costs, where the maximum period of use is 10 years.Projected production volumes and periods of use may later be reassessed,which could necessitate impairment.Impairment testing of goodwillIn the calculation of cash-generating units to determine whether there hasbeen an impairment of goodwill, assumptions have been made with regardto the calculation of value in use, which is based on discounted cash flowprojections. A significant deviation in the conditions will affect the value ofgoodwill. The carrying amount for goodwill amounts to msek 4,223 (3,470).PensionsSaab has two types of pension plans: defined-benefit and defined-contribu-tion. In defined-benefit plans, post-employment compensation is based on apercentage of the recipient’s salary. The present value of defined-benefit obli-gations amounts to msek 6,541 (5,233). The value of the pension obligation isdetermined through a number of actuarial assumptions, because of whichthe obligation can significantly increase or decrease if the actuarial assump-tions change. Due to the revisions to the reporting standard ias 19, whichenter into force in 2013, the so-called corridor approach will disappear. Thismeans changes in actuarial gains and losses directly affect the pension obliga-tion and hence the Group’s financial position.90 SAAB ANNUAL REPORT 2011
  • 95. FINANCIAL INFORMATION > NOTES NOTE 4SEGMENT REPORTING Security and Defence SolutionsSaab is one of the world’s leading high technology companies, operating The operations comprise products and solutions in the areas of military com-principally in the areas of defence, aeronautics and civil security. Operations mand and control, airborne early warning, training and simulation, air trafficprimarily comprise well-defined areas in defence electronics and missile sys- management, maritime security, security and surveillance, and secure, robusttems as well as military and civil aeronautics. Saab is also active in technical communication.services and maintenance. Saab has a strong position in Sweden and the Support and Serviceslarge part of sales is generated in Europe. In addition, Saab has a local Support and Services offer reliable, cost-effective service and support for allpresence in South Africa, Australia, the u.s. and other selected countries. As a of Saab’s markets. This primarily includes integrated support solutions, tech-result of a reorganisation as of 1 January 2010, Saab is divided into five busi- nical maintenance and logistics, and products, solutions and services for mil-ness areas, which also represent operating segments, Aeronautics, Dynamics, itary and civil missions in locations with limited infrastructure.Electronic Defence Systems, Security and Defence Solutions, and Supportand Services. As of 2011 Combitech is also reported as a business area and an Combitechoperating segment. The comparative year is restated accordingly. The busi- Combitech, an independent subsidiary of the Saab Group, is one of Sweden’sness areas are described below. Complementing them is Corporate, which largest technology consulting firms. They create solutions for our customers’comprises Group staffs and departments as well as other non-core opera- specific needs through a combination of high technology and expertise ontions. the environment and security.Aeronautics Significant items not affecting cash flowAeronautics engages in advanced development of military and civil aviation No significant items not affecting cash flow arose during the year.technology. The product portfolio includes the Gripen fighter and Restructuring expenses not affecting cash flow amounted to msek 477 inUnmanned Aerial Systems (uas). Aeronautics also manufactures aircraft 2010 and are divided by operating segment as follows: Aeronautics msek 31 ,components for Saab’s own aircraft as well as passenger aircraft produced by Dynamics msek 240, Electronic Defence Systems msek  55, Security andothers. Defence Solutions msek 36, Support and Services msek 50, and Corporate msek 65.DynamicsDynamics offers a highly competitive product range comprising ground Information on major customerscombat weapons, missile systems, torpedoes, unmanned underwater vehicles Saab has one customer, the Swedish Defence Materiel Administration (fmv),and signature management systems for armed forces as well as spin-off niche which accounts for 10 per cent or more of the Group’s revenue. fmv is a cus-products for the civil and the defence market, such as unmanned underwater tomer of every business area, generating total revenue of msek 6,555 (6,404)vehicles for the off-shore industry and 3D-mapping for the defence market. in 2011.Electronic Defence Systems Information on geographical areasThe operations are based on Saab’s close interaction with customers requiring ef- External sales are distributed to the market where the customer is domiciled,ficient solutions for surveillance and for threat detection, location and protec- while fixed assets are distributed to the market where the asset is geographi-tion. This has created a unique competence in the area of radar and electronic cally located.warfare, and a product portfolio covering airborne, land-based and naval radar,electronic support measures and self-protection systems. For increased flightmission efficiency and flight safety we supply mission avionics and safety criticalavionics computers for both civil and military customers. SAAB ANNUAL REPORT 2011 91
  • 96. FINANCIAL INFORMATION > NOTESNOTE 4, CONT. Electronic Security and Defence Defence Support and Group Aeronautics Dynamics Systems Solutions Services Combitech Corporate Eliminations Group MSEK 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 External revenue 6,168 6,482 4,219 4,648 3,928 3,366 5,507 6,086 3,143 3,084 618 595 -85 173 - - 23,498 24,434 Internal revenue 183 259 116 93 633 988 197 124 285 319 382 320 1 -3 -1,797 -2,100 - - Total revenue 6,351 6,741 4,335 4,741 4,561 4,354 5,704 6,210 3,428 3,403 1,000 915 -84 170 -1,797 -2,100 23,498 24,434 Operating income be- fore share in income of associated compa- nies 332 191 482 300 297 90 394 137 426 351 92 81 934 -189 - - 2,957 961 Share in income of as- sociated companies - - 2 22 - 9 - - - - - - -18 -17 - - -16 14 Operating income 332 191 484 322 297 99 394 137 426 351 92 81 916 -206 - - 2,941 975 Share in income of as- sociated companies - - 6 3 - - - - - - - - -2 23 - - 4 26 Financial income 52 18 16 7 15 - 34 28 3 3 1 1 234 199 -193 -140 162 116 Financial expenses -88 -111 -20 -43 -36 -40 -80 -72 -29 -31 -2 -5 -262 -179 193 140 -324 -341 Income before taxes 296 98 486 289 276 59 348 93 400 323 91 77 886 -163 - - 2,783 776 Taxes -96 -67 -135 -72 92 72 -54 -107 -26 -3 -25 -20 -322 -125 - - -566 -322 Net income for the year 200 31 351 217 368 131 294 -14 374 320 66 57 564 -288 - - 2,217 454 Assets 6,104 7,303 4,104 4,117 8,698 7,970 6,503 5,131 2,403 2,250 567 522 19,170 15,183 -15,750 -13,198 31,799 29,278 Of which shares in as- sociated companies - - 55 53 11 124 - - - - - - 222 74 - - 288 251 Liabilities 5,945 7,214 2,535 2,575 4,400 3,852 4,088 4,064 1,638 1,541 274 258 8,659 5,907 -8,809 -7,577 18,730 17,834 Operating cash flow 223 30 588 1,044 413 594 584 1,066 420 894 87 65 162 656 - - 2,477 4,349 Capital employed 2,103 2,118 2,359 2,496 5,037 4,584 3,309 2,282 1,243 1,248 381 355 7,328 5,693 -6,941 -5,621 14,819 13,155 Investments 35 63 102 53 92 70 27 33 2 15 3 2 106 145 - - 367 381 Depreciation and am- ortisation 247 247 168 156 488 490 108 108 18 15 2 2 209 277 - - 1,240 1,295 Impairments - - - 38 - - - 20 - - - - 21 5 - - 21 63Geographical areas Group Sweden Rest of EU Rest of Europe North America Latin America MSEK 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 External revenue 1) 8,679 9,223 4,514 4,737 320 368 1,803 2,083 96 116 as % of revenue 37 38 19 19 1 2 8 9 - - Fixed assets 9,530 10,066 115 139 29 34 2,377 1,088 5 5 Group Asia Africa Australia, etc. Total MSEK 2011 2010 2011 2010 2011 2010 2011 2010 1) External revenue 5,176 3,937 1,789 2,833 1,121 1,137 23,498 24,434 as % of revenue 22 15 8 12 5 5 100 100 Fixed assets 19 17 550 825 263 290 12,888 12,4641) External sales are distributed according to the market where the customer is domiciled.92 SAAB ANNUAL REPORT 2011
  • 97. FINANCIAL INFORMATION > NOTESNOTE 4, CONT.Revenue by operating segment NOTE 6Parent Company OTHER OPERATING EXPENSESMSEK 2011 2010 Group Parent CompanyAeronautics 6,178 6,401 MSEK 2011 2010 2011 2010Electronic Defense Systems 3,631 2,534 Loss from other operatingSecurity and Defence Solutions 2,538 2,846 activities -33 -33 - -8Support and Services 3,068 2,964 Revaluation of investmentTotal 15,415 14,745 properties -12 - - - Change in value of deriva- tives -3 - - -Revenue by geographical market Loss on sale of tangibleParent Company fixed assets -3 -7 -3 -7MSEK 2011 2010 Loss on sale of GroupSweden 7,380 7,623 companies - -22 - -Rest of EU 1,857 1,997 Other -26 -8 - -1Rest of Europe 51 54 Subtotal -77 -70 -3 -16North America 916 832 Change in fair value of deriv- atives 6 50 - -Latin America 33 51 Change in value ofAsia 3,793 2,490 contracted flows -6 -50 - -Africa 851 1,380 Subtotal - - - -Australia, etc. 534 318Total 15,415 14,745 Total -77 -70 -3 -16 Other operating activities consist of results from subsidiaries that fall outside NOTE 5 core operations.OTHER OPERATING INCOME NOTE 7 Group Parent CompanyMSEK 2011 2010 2011 2010 GOVERNMENT GRANTSGain on sale of Group Saab receives government grants, mainly various grants from eu relatedcompanies 976 13 - - research and development projects. For 2011, msek 78 (112) has been received.Gain on sale of associated msek 85 (91) has been recognised through profit or loss by reducing researchcompanies 193 24 - - and development expenditures and as other operating income. In the state-Exchange rate gains ment of financial position at year-end, msek 44 is recognised as prepaidon operating receivables/ income.liabilities and change in Saab and the Ministry of Enterprise, Energy and Communications havevalue of derivatives 52 27 16 11 reached an agreement with the National Debt Office to co-finance Saab’s par-Gain from other operating ticipation in the Airbus A380 project. The co-financing is in the form of aactivities 47 29 - 2 royalty loan maximised at msek 350. Repayment will take the form of a roy-Trading result 32 35 32 35 alty on each delivery to Airbus. Through 2011, the National Debt Office hasGovernment grants 23 26 21 26 paid out a net of msek 263 (263), which reduces inventory in the financial statements.Change in fair value of No contingent liabilities or contingent assets are reported.biological assets 6 43 - -Gain on sale of intangibleand tangible fixed assets 4 - 148 - NOTE 8Other 18 25 2 8 BUSINESS COMBINATIONS AND DIVESTMENTSTotal 1,351 222 219 82 On 29 June 2011, Saab announced a definitive agreement to acquire us. com-Trading result refers to the result in Saab Treasury from trading in currency pany Sensis Corporation. Sensis is a leading provider of air traffic manage-and money market instruments according to the risk mandate approved by ment (atm) solutions and surveillance technologies. The acquisition wasthe Board of Directors; see note 41. completed on 12 August for approximately musd 150, about msek 962 (effect Other operating activities consist of results from subsidiaries that fall out- on liquid assets). In addition, the parties agreed on a maximum potentialside core operations and net rental income from property rentals. earn out payment of musd 40. Saab has estimated the earn out payment at Gain on sale of Group companies primarily refers to C3 Technologies ab. musd 36. The acquisition of Sensis strengthens Saab’s existing offer within radar, sensors, atm, and defence solutions and establishes a stronger market pres- ence globally as well as in the u.s. The acquisition provides a growth platform from which Saab can build on the combined installed base and skills in sys- tems engineering, design and integration. Sensis’ customers and partners will benefit from Saab’s product portfolio and global support operations. SAAB ANNUAL REPORT 2011 93
  • 98. FINANCIAL INFORMATION > NOTESNOTE 8, CONT. Preliminary purchase price analysis for Sensis: Other acquisitions Purchase consideration On 14 December 2010, Saab announced the signing of an eight-year agree- MUSD MSEK ment with Scandinavian Air Ambulance Holding ab. In addition, Saab acquired inventories and equipment. The purchase price amounted to Purchase price paid 12 August 170 1,089 msek 41 and was paid on 1 March 2011. Contingent consideration 36 231 Saab also acquired assets from the Czech company e-com, with its main Total consideration 206 1,320 operations in the development and production of virtual simulators. The pur- chase price amounted to msek 17 and was paid on 1 May 2011. Effect on liquid assets These acquisitions have only had a minor impact on the consolidated income and financial position. MUSD MSEK The fair value of the identifiable assets and liabilities as at the date of the Purchase price paid 170 1,089 acquisition were: Less; liquid assets in the acquired company -20 -127 Purchase consideration in summary Effect on liquid assets 150 962 Scandinavian Air E-COM MSEK Ambulance Intangible fixed assets 24 1The fair value of the identifiable assets and liabilities of Sensis as at the date Tangible fixed assets 3 13of the acquisition were: Inventories 14 4 Acquired assets and liabilities Other current assets - 1 MUSD MSEK Total assets 41 19 Intangible fixed assets: Developed technologies 17 110 Provisions - 2 Customer relationships 18 115 Total liabilities - 2 Trademarks 2 13 Total identifiable net assets at fair Other intangible fixed assets 1 6 value 41 17 Tangible fixed assets 42 270 Goodwill - - Inventories 7 45 Purchase consideration 41 17 Other current assets 51 324 Liquid assets 20 127 Divestments On 14 March, Saab signed an agreement to divest its ownership share of 42.4 Total assets 158 1,010 per cent in South African system engineering company Grintek Ewation to Interest-bearing lease obligation 16 102 Cassidian, a division of eads. The transaction generated a capital gain before Provisions 5 32 tax of msek 122 and positive cash flow of msek 179. In the second quarter, Saab divested its 20 per cent share in the South Current liabilities 40 256 African company Denel Saab Aerostructures (Pty) Ltd. The transaction gen- Deferred tax liabilities 6 38 erated a capital gain of msek 58 and positive cash flow of msek 61. Total liabilities 67 428 On 8 April, Saab announced it had received additional consideration of msek 60 for the divestment of Saab Space. On 19 April, Saab announced it had divested its 36 per cent share in the Total identifiable net assets at fair value 91 582 image processing company Image Systems ab to Digital Vision ab. Image Goodwill 115 738 Systems ab had been a part of Saab Venture’s portfolio since 2008. The price Purchase consideration 206 1,320 received was approximately msek 17, which impacted cash flow positively. The transation generated a capital gain of msek 13. On 16 May, Saab announced it intended to utilise its option to divest itsThe goodwill of msek 738 comprises the value of expected synergies through shares in Aker Holding as, which were acquired in 2007. The divestment gen-the consolidation of the operations of the Saab Group and Sensis arising from erated cash of msek 400 to Saab and had a positive impact on the operatingthe acquisition. None of the acquired goodwill is expected to be deductible cash flow and net liquidity by msek 130. The transaction had no impact onfor income tax purposes. results. The fair value of intangible fixed assets amounted to msek 244. On 14 July, Saab announced it had agreed to divest its shares, correspond- ing to 57.8 per cent on a fully diluted base, in the 3D mapping companyTerms for calculation of earn out merger consideration: C3 Technologies ab. The consideration amounted to msek 1,007 and gener-The seller and the buyer have agreed on a two-year earn out period between 1 ated a capital gain of msek 916.July 2011 and 30 June 2013. The contingent consideration of musd 40 is split Overview of capital gains 2011into two parts: one if determined EBIT targets are achieved and one depend-ing of the order intake for new technologies. MSEK Jan–Dec Of the purchase price, musd 20 is deposited in an escrow account to cover C3 Technologies 916warranties and representations. Grintek Ewation 122 From the date of the acquisition Sensis has contributed msek 265 to salesand msek -66 to income before taxes. If Sensis had been consolidated as of Saab Space 601 January 2011, sales would have increased by approximately msek 560 and Denel Saab Aerostructures 58income before taxes would have decreased by approximately msek 140. Image Systems 13 The transaction costs of msek 25 have been expensed and are included inadministrative expenses. In the statement of cash flow, they are included in Total 1,169cash flow from operating activities. No other significant acquisitions or divestments were made during 2011.94 SAAB ANNUAL REPORT 2011
  • 99. FINANCIAL INFORMATION > NOTES NOTE 9 The average number of employees has been calculated as the average of the number of full-time equivalents. The term full-time equivalents excludesEMPLOYEES AND STAFF COSTS long-term absentees and consultants. Part-time employees and probationersAverage number of employees are however included in the calculation. of whom of whom 2011 men 2010 men Gender distribution of corporate managementParent Company Share of women, per cent 2011 2010Sweden 7,566 80% 7,656 80% Parent CompanyUnited Arab Emirates 15 93% 14 93% Board of Directors 22 20South Africa 12 92% 6 100% Other senior executives 29 23Thailand 6 83% 1 100%Brazil 6 83% 1 100% Salaries, other remuneration and social security expensesUSA 4 100% 5 100% 2011 2010India 4 50% 3 67% Salaries and Social Salaries and SocialCanada 3 100% 2 100% other remu- security other remu- securitySaudi Arabia 3 100% 1 100% MSEK neration expenses neration expensesFrance 3 100% 1 100% Parent Company 3,960 2,043 3,861 1,689Czech Republic 2 100% 1 100% of which pension costs - 1,066 1) - 5091)Belgium 1 100% 2 50% Group companies 2,443 225 2,355 885Chile 1 100% 1 100% of which pension costs3) - -174 - 503South Korea 1 100% 1 100% Joint ventures 5 2 11 4Poland 1 100% 1 100% of which pension costs - 1 - 2Australia 1 100% 1 100% Group, total 6,408 2,270 6,227 2,578Germany 1 100% - -UK 1 100% - - of which pension costs - 8932) - 1,0142)Parent Company, total 7,631 80% 7,697 80% 1) Of the Parent Company’s pension costs, MSEK 8 (6) refers to the Board and President, including deputies andGroup companies Executive Vice Presidents. The company’s outstanding pension obligations for these individuals amount to MSEK 45 (47), of which MSEK 45 (47) refers to former Board members and Presidents, including deputies andSweden 2,435 79% 2,498 78% Executive Vice Presidents.South Africa 1,081 71% 1,115 71% 2) Of the Group’s pension costs, MSEK 18 (15) refers to the Group’s boards and Presidents, including Group com- panies. The Group’s outstanding pension obligations for these individuals amount to MSEK 48 (49), of whichUSA 698 74% 233 55% MSEK 45 (47) refers to former board members and Presidents. 3) Adjustment according to different accounting principles regarding defined-benefit plans between Parent Com-Australia 320 80% 354 78% pany and Group. See also note 1.Czech Republic 137 76% 14 64% Salaries and other remuneration distributed between Board members,UK 135 80% 115 79% President and Vice Presidents and other employeesFinland 73 75% 74 76% 2011 2010Denmark 71 86% 76 86% Board, Board,Norway 51 86% 50 88% President PresidentSwitzerland 48 100% 49 100% and Vice Other and Vice Other MSEK Presidents employees Presidents employeesIndia 37 78% 6 83% Parent Company 20 3,940 27 3,834Kenya 33 100% 31 100% of which variable remuneration - 2Germany 22 91% 33 91%Canada 12 92% 11 91% Group companies 68 2,375 58 2,297Nigeria 4 75% 24 71% of which variable remuneration 6 6South Korea 4 75% 4 75%Netherlands 4 100% 4 100% Joint ventures - 5 1 10Hungary 2 50% 2 50% Group total 88 6,320 86 6,141Chile 2 50% 2 50% of which variable remuneration 6 8Slovenia 2 100% 2 100%United Arab Emirates 1 - 1 - Of the salaries and remuneration paid to other employees in the Group,Japan 1 100% 1 100% msek 43 (38) refers to senior executives other than Board members and theSingapore 1 - 1 - President.Greece 1 100% 1 100% For information on post-employment compensation and share-relatedFrance - - 3 100% compensation, see Note 37.Group companies, total 5,175 76% 4,704 76%Joint venturesSweden 8 88% 25 88%Joint ventures, total 8 88% 25 88%Group total 12,814 79% 12,426 79% SAAB ANNUAL REPORT 2011 95
  • 100. FINANCIAL INFORMATION > NOTES NOTE 10 Operating expenses refer to cost of goods sold, marketing expenses, adminis- trative expenses and research and development costs. Depreciation and am-AUDITORS’ FEES AND COMPENSATION ortisation in the leasing operations (Saab Aircraft Leasing) are not included Group Parent Company in depreciation and amortisation above.MSEK 2011 2010 2011 2010PwC NOTE 12Audit assignments 15 1 7 - DEPRECIATION/AMORTISATION AND IMPAIRMENTSAudit work in excess of theaudit assignment 5 - 5 - GroupTax advice 1 - - - MSEK 2011 2010Other services 1 - 1 - Depreciation/amortisation Capitalised development costs -588 -644Ernst & Young Other intangible fixed assets -186 -161Audit assignments - 10 - 4 Operating properties -80 -83Audit work in excess of theaudit assignment - 1 - 1 Property, plant and equipment -172 -145Tax advice - 2 - 1 Equipment, tools and installations -99 -114Other services - 2 - 1 Leasing aircraft -114 -146 Other lease assets -1 -2Deloitte Total -1,240 -1,295Audit assignments - 3 - -Audit work in excess of theaudit assignment - 1 - 1 ImpairmentsTax advice - - - - Goodwill -21 -5Other services - 1 - 1 Capitalised development costs - -20 Operating properties - -33Other Property, plant and equipment - -2Audit assignments 1 1 - - Equipment, tools and installations - -3Total 23 22 13 9 Total -21 -63Audit assignments refer to expenses for the statutory audit, i.e. the work thatwas necessary to issue the audit report as well as advice in connection with In 2011, goodwill impairment of msek 21 was recognised for companies in thethe audit assignment. venture portfolio. In 2010, impairments of msek 38 were recognised on build- Audit work in excess of the audit assignment relates to expenses for opin- ings, machinery and equipment in connection with the restructuring of theions and other assignments associated to a fairly high degree with audits and underwater operations in Dynamics. Impairments of capitalised develop-which are normally performed by the external auditor, including consulta- ment costs of msek 20 were recognised for projects in Security and Defencetions on advisory and reporting requirements, internal control and the Solutions, while goodwill impairments amounted to msek 5 for companies inreview of interim reports. the venture portfolio. Other services relate to expenses that are not classified as audit assign-ments, audit work in excess of the audit assignment and tax advice. Parent Company The Annual General Meeting on 7 April 2011 elected the registered MSEK 2011 2010accounting firm PricewaterhouseCoopers ab as the new auditor for a periodof four years. Håkan Malmström has been appointed auditor in charge. Depreciation/amortisation Capitalised development costs -200 -200 Goodwill -39 -39 NOTE 11 Other intangible fixed assets -146 -125OPERATING EXPENSES Buildings -58 -60Group Property, plant and equipment -108 -110MSEK 2011 2010 Equipment, tools and installations -50 -48Raw materials, materials and consumables 5,135 6,390 Total -601 -582Subsystems and equipment 1,567 2,305Purchased services 2,717 2,691Change in inventory of finished goods and workin progress, excluding write down 267 -21Personnel costs 8,678 8,805Depreciation and amortisation 1,126 1,149Impairments -73 193Other expenses 2,398 2,113Total 21,815 23,62596 SAAB ANNUAL REPORT 2011
  • 101. FINANCIAL INFORMATION > NOTES NOTE 13 Interest expenses and Parent Company similar profit/loss itemsFINANCIAL INCOME AND EXPENSES MSEK 2011 2010Group Interest expenses, Group companies -120 -53MSEK 2011 2010 Other interest expenses -87 -120Interest income on loans receivable 186 61 Total -207 -173Financial income from revaluation of financial assets andliabilities measured at fair value through profit or loss - 65Dividends 5 6 NOTE 14Other financial income 1 1 APPROPRIATIONSLess project interest applied to gross income -30 -17Financial income 162 116 Parent Company MSEK 2011 2010Interest expenses on loans and financial liabilities -140 -104 Buildings and land 17 19Financial expenses from revaluation and disposal of Property, plant and equipment as well as toolsfinancial assets and liabilities measured at fair value and installations 40 -102through profit or loss -110 -52 Total difference between tax depreciation and deprecia-Financial expenses related to pensions -60 -169 tion according to plan 57 -83Other financial expenses -14 -16 Tax allocation reserve -350 -Financial expenses -324 -341 Total -293 -83Share in income of associated companies 4 26 NOTE 15Net financial income and expenses -158 -199 TAXES Tax recognised through profit or loss Result from shares in Result from shares in associated compa- GroupParent Company Group companies nies/joint ventures MSEK 2011 2010MSEK 2011 2010 2011 2010 Current tax expense (-)/tax income (+)Dividends 543 419 2 5 Taxes for the year -442 -350Group contributionsreceived 1,087 1,039 - - Adjustment for taxes related to previous years 18 2Group contributions paid -144 -28 - - Total -424 -348Capital gain on sale ofshares 68 1 43 20 Deferred tax expense (-)/tax income (+)Impairments -128 -283 - - Deferred tax related to temporary differences -186 312Other -16 23 14 7 Deferred tax related to value of tax lossTotal 1,410 1,171 59 32 carry forwards capitalised during the year 48 9 Deferred tax expense due to utilisation of previously capitalised tax value in tax loss carry forwards -2 -276 Result from other securities and Other interest income Deferred tax related to previous years -2 -19 receivables held as and similar profit/loss Total -142 26Parent Company fixed assets itemsMSEK 2011 2010 2011 2010 Total recognised tax in Group -566 -322Interest income,Group companies - - 66 114Other interest income - - 146 16 The Group’s table, “Change in deferred tax in temporary differences and tax loss carry forwards”, on page 99 specifies how deferred tax affects income.Capital gain on sale ofshares 112 - - - The net change in the tax loss carry forwards for the year excluding acquisi- tion/divestment of operations amounts to msek 46, which is the sum of theImpairment -4 -23 - - deferred tax on the capitalised tax value of tax loss carry forwards, msek 48,Dividends 26 27 - - and the deferred tax expense resulting from the utilisation of the previouslyTranslation differences 43 113 - - capitalised value of tax loss carry forwards, msek -2. The remaining amount in the table’s column, “Recognised in profit orNet change in value from loss”, amounts to msek -188, which is the sum of deferred tax related to tem-revaluation of financialassets/liabilities -77 15 - - porary differences and deferred tax related to previous years. In total, the Group’s deferred tax amounts to msek -142 (26) and current tax expense forLess project interestapplied to gross income - - -30 -16 the year to msek -424 (-348) which generate a total reported tax of msek -566 (-322) in the consolidated income statement.Other -19 -25 - -Total 81 107 182 114 SAAB ANNUAL REPORT 2011 97
  • 102. FINANCIAL INFORMATION > NOTESNOTE 15, CONT. Deferred tax assets and liabilities Parent Company Deferred MSEK 2011 2010 Deferred tax Current tax expense (-)/tax income (+) Group tax assets liabilities Net Taxes for the year -278 -168 1) MSEK 31-12-2011 31-12-2011 Adjustment for taxes related to previous years - 17 Intangible fixed assets 1 -646 -645 Total -278 -151 Tangible fixed assets 20 -504 -484 Lease assets 5 -105 -100 Deferred tax expense (-)/tax income (+) Biological assets - -52 -52 Deferred tax related to temporary differences -184 8 Long-term receivables - -38 -38 Deferred tax expense due to utilisation of previously Inventories 243 -2 241 capitalised tax value in tax loss carry forwards - -274 Accounts receivable 6 - 6 Deferred tax related to previous years - -6 Prepaid expenses and accrued income 30 -3 27 Total -184 -272 Long-term liabilities 91 -2 89 Provisions for pensions 167 -458 -291 Total recognised tax expense in Parent Company -462 -423 Other provisions 617 -14 6031) The current tax expense for 2010 has been restated due to a change in the application of tax in Group contributions. Tax allocation reserves - -94 -94Reconciliation of effective tax Contingency reserve attributable to Lansen Försäkrings AB - -357 -357 Group Accrued expenses and deferred income 169 - 169 MSEK 2011 (%) 2011 2010 (%) 2010 Other 55 -197 -142 Income before taxes 2,783 - 776 Tax loss carry forwards 142 - 142 Tax according to current tax Tax assets/liabilities 1,546 -2,472 -926 rate for Parent Company -26.3 -732 -26.3 -204 Set-off -1,460 1,460 - Effect of other tax rates for foreign Group companies 0.6 15 -2.7 -21 Tax assets /liabilities, net 86 -1,012 -926 Non-deductible expenses -4.9 -135 -8.4 -65 Tax-exempt income 10.1 280 5.8 45 Deferred Deferred tax Revaluation of deferred tax Group tax assets liabilities Net assets from the leasing MSEK 31-12-2010 31-12-2010 portfolio - - -5.0 -39 Tax on additional, uncapital- Intangible fixed assets 11 -745 -734 ised tax loss carry forwards -0.4 -12 -2.3 -18 Tangible fixed assets 23 -465 -442 Tax related to previous years 0.6 18 -2.1 -16 Lease assets 19 -189 -170 Other - - -0.5 -4 Biological assets - -51 -51 Reported effective tax rate -20.3 -566 -41.5 -322 Long-term receivables 22 -52 -30 Inventories 193 -16 177Operations divested during the year have generated tax-exempt capital gains Accounts receivable 5 - 5totaling msek 952 (13). In connection with dividends from Group companiesin certain non-European countries, taxation may exceed normal company Prepaid expenses and accrued income 15 -2 13tax. The dividend paid to shareholders has no tax consequences. Long-term liabilities 82 -22 60 Provisions for pensions 152 -279 -127 Parent Company Other provisions 800 -19 781 MSEK 2011 (%) 2011 2010 (%) 2010 Tax allocation reserves - -2 -2 Income before taxes - 2,051 - 1,464 Contingency reserve attributable to Lansen Tax according to current tax Försäkrings AB - -357 -357 rate for Parent Company -26.3 -539 -26.3 -385 Accrued expenses and deferred income 229 -12 217 Tax related to previous years - - 0.8 11 Other 67 -243 -176 Non-deductible expenses -6.8 -140 -12.2 -178 Tax loss carry forwards 33 - 33 Tax-exempt income 10.6 217 8.8 129 Tax assets/liabilities 1,651 -2,454 -803 Reported effective tax rate -22.5 -462 -28.9 -423 Set-off -1,651 1,651 - Tax assets /liabilities, net - -803 -803Income before taxes for the Parent Company, Saab ab, has been restated for2010 due to a change in accounting principles for Group contributions tosubsidiaries. Income before taxes has also been restated for 2010 due to a cor- In the company’s view, the tax value of future taxable surpluses will exceedrection in the classification and valuation of intangible and financial assets. reported deferred tax assets. In the u.s. there are approximately msek 200 inAs a result, the tax on non-deductible expenses has increased and the tax loss carry forwards, of which approximately msek 120 is expected to bereported effective tax rate is -28.9%, compared with -23.6% previously. offset against future taxable earnings. The tax loss carry forwards attributable to the u.s. operations can be utilised through 2029, but partly expire as of 2021.98 SAAB ANNUAL REPORT 2011
  • 103. FINANCIAL INFORMATION > NOTESNOTE 15, CONT. Change in deferred tax in temporary differences and tax loss Deferred Deferred tax carry forwardsParent Company tax assets liabilities Net Recog-MSEK 31-12-2011 31-12-2011 nised in Acquisi- Opening Recog- the com- tion/di- ClosingTangible fixed assets - -240 -240 balance nised in prehen- vestment Transla- balance Group 1 Jan. profit or sive of opera- tion dif- 31 DecInventories 87 - 87 MSEK 2011 loss income tions ference 2011Accounts receivable 1 - 1 Intangible fixed as-Prepaid expenses and accrued income 3 - 3 sets -734 195 - -98 -8 -645Provisions for pensions 107 - 107 Tangible fixed assets -442 -2 - -37 -3 -484Other provisions 238 - 238 Lease assets -170 78 - - -8 -100Accrued expenses and deferred income 37 - 37 Biological assets -51 -1 - - - -52Tax assets/liabilities 473 -240 233 Long-term receiva- bles -30 -8 - - - -38Set-off -240 240 - Inventories 177 64 - - - 241Tax assets/liabilities, net 233 - 233 Accounts receivable 5 15 - -13 -1 6 Deferred Prepaid expenses Deferred tax and accrued income 13 14 - - - 27Parent Company tax assets liabilities Net Long-term liabilities 60 - - 27 2 89MSEK 31-12-2010 31-12-2010 Provisions forTangible fixed assets - -242 -242 pensions -127 -164 - - - -291Inventories 77 - 77 Other provisions 781 -186 - 7 1 603Accounts receivable 2 - 2 Tax allocation re- serves -2 -92 - - - -94Long-term receivables 22 - 22 Contingency reservePrepaid expenses and accrued income 13 - 13 attributable to LansenProvisions for pensions 92 - 92 Försäkrings AB -357 - - - - -357Other provisions 383 - 383 Accrued expensesAccrued expenses and deferred income 70 - 70 and deferred income 217 -60 - 12 - 169Tax assets/liabilities 659 -242 417 Other -176 -41 69 6 - -142Set-off -242 242 - Tax loss carry for- wards 33 46 - 58 5 142Tax assets/liabilities, net 417 - 417 Total -803 -142 69 -38 -12 -926The change in deferred tax assets and liabilities in the Parent Company, The Group’s total deferred tax expense in the 2011 income statementSaab ab, has been recognised in profit or loss. amounted to msek -142. The Group’s total deferred tax income in the state-Estimated utilisation dates of recognised deferred tax assets ment of comprehensive income amounted to msek 69. The closing balance on 31 December 2011, msek -926, consisted of deferred tax assets of msek 86MSEK Group Parent Company and tax liabilities of msek -1,012, see table on page 98.Deferred tax assets expected to be The tax items in the column Acquisition/divestment of operations pri-recovered within one year 62 13 marily relates to the acquisition of Sensis Corporation.Deferred tax assets expected to berecovered after one year 1,484 460Estimated utilisation dates of recognised deferred tax liabilitiesMSEK Group Parent CompanyDeferred tax liabilities due for payment withinone year 39 6Deferred tax liabilities due for payment afterone year 2,433 234 SAAB ANNUAL REPORT 2011 99
  • 104. FINANCIAL INFORMATION > NOTESNOTE 15, CONT. Goodwill Recog- nised in Acquisi- Group Parent Company Opening Recog- the com- tion/di- Closing balance nised in prehen- vestment Transla- balance MSEK 2011 2010 2011 2010Group 1 Jan. profit or sive of opera- tion dif- 31 Dec Acquisition valueMSEK 2010 loss income tions ference 2010 Opening balance,Intangible fixed as- 1 January 4,146 4,128 784 784sets -929 195 - - - -734 Acquired through businessTangible fixed assets -417 -25 - - - -442 acquisitions 738 19 - -Lease assets -240 70 - - - -170 Reclassification - 8 - -Biological assets -39 -12 - - - -51 Translation differences 36 -9 - -Long-term Closing balance,receivables -10 -20 - - - -30 31 December 4,920 4,146 784 784Inventories 123 54 - - - 177Accounts receivable 9 -4 - - - 5 Amortisation and impairmentsPrepaid expenses Opening balance,and accrued income 1 12 - - - 13 1 January -676 -671 -174 -135Long-term liabilities 83 -23 - - - 60 Amortisation for the year - - -39 -39Provisions for Impairments for the year -21 -5 - -pensions -199 72 - - - -127 Closing balance,Other provisions 757 24 - - - 781 31 December -697 -676 -213 -174Tax allocation re-serves -7 5 - - - -2 Carrying amount,Contingency reserve 31 December 4,223 3,470 571 610attributable toLansenFörsäkrings AB -357 - - - - -357 Acquired through business acquisitions 2011 relates to Sensis. GoodwillAccrued expenses impairments of msek 21 (5) in 2011 related to companies in the venture port-and deferred income 267 -50 - - - 217 folio.Other 11 21 -201 - -7 -176 Capitalised development costsTax loss carry for- Group Parent Companywards 326 -293 - - - 33 MSEK 2011 2010 2011 2010Total -621 26 -201 - -7 -803 Acquisition valueThe Group’s total deferred tax income in the 2010 income statement Opening balance, 1 January 5,457 5,406 2,000 2,000amounted to msek 26. The Group’s total deferred tax expense in the state-ment of comprehensive income amounted to msek -201. The closing balance Acquired through business acquisitions 110 - - -on 31 December 2010, msek -803, consisted of deferred tax assets of msek 0and tax liabilities of msek -803; see table on page 98. Internally developed assets 15 47 - - Disposals andTax items recognised directly against other comprehensive income reclassifications - -3 - -Group Translation differences -31 7 - -MSEK 2011 2010 Closing balance, 31 December 5,551 5,457 2,000 2,000Cash flow hedges 69 -201Total 69 -201 Amortisation and impairments Opening balance, 1 January -3,029 -2,368 -744 -544 NOTE 16 Amortisation for the year -588 -644 -200 -200 Impairments for the year - -20 - -INTANGIBLE FIXED ASSETS Disposals and reclassifications - 3 - - Group Parent Company Translation differences 16 - - -MSEK 31-12-2011 31-12-2010 31-12-2011 31-12-2010 Closing balance, 31 December -3,601 -3,029 -944 -744Goodwill 4,223 3,470 571 610Capitalised development Carrying amount,costs 1,950 2,428 1,056 1,256 31 December 1,950 2,428 1,056 1,256Other intangible assets 526 515 311 407Total 6,699 6,413 1,938 2,273 Acquired through business acquisitions 2011 relates to Sensis. Capitalised development costs of msek 20 in 2010 related to a project in Security and Defense Solutions.100 SAAB ANNUAL REPORT 2011
  • 105. FINANCIAL INFORMATION > NOTESNOTE 16, CONT.Other intangible assets Goodwill in the Parent Company relates to acquired goodwill from Saab Group Parent Company Microwave Systems.MSEK 2011 2010 2011 2010 MSEK 31-12-2011 31-12-2010Acquisition value Dynamics 572 571Opening balance, 1 January 1,551 1,500 1,376 1,310 Electronic Defence Systems 2,253 1,988Acquired through businessacquisitions 160 1 24 - Security and Defence Solutions 999 491Investments 26 70 22 68 Support and Services 240 240Disposals and reclassifications 3 -9 4 -2 Combitech 159 159Translation differences 9 -11 - - Other units, aggregated - 21Closing balance, 31 December 1,749 1,551 1,426 1,376 Total goodwill 4,223 3,470Amortisation and impairments Impairment testing for cash-generating units is based on the calculation ofOpening balance, 1 January -1,036 -887 -969 -846 value in use. This value is based on discounted cash flow forecasts accordingAmortisation for the year -186 -161 -146 -125 to the units’ business plans.Disposals and reclassifications - 9 - 2 VARIABLES USED TO CALCULATE VALUE IN USETranslation differences -1 3 - - Volume/growthClosing balance, 31 December -1,223 -1,036 -1,115 -969 Growth in the cash-generating units’ business plans is based on Saab’s expec- tations with regard to development in each market area and previous experi-Carrying amount, ence. The first five years are based on the five-year business plan formulated31 December 526 515 311 407 by Group Management and approved by the Board. For cash flows after five years, the annual growth rate has been assumed to be 0 (0) per cent.Acquired through business acquisitions 2011 largely relates to Sensis and Operating margincomprises customer relations and trademarks. The operating margin is comprised of the units’ operating income after depreciation and amortisation. The units’ operating margin is calculatedAmortisation is included in the following lines in income statement against the backdrop of historical results and Saab’s expectations with regard Group Parent Company to the future development of markets where the units are active. The busi-MSEK 2011 2010 2011 2010 ness areas Dynamics, Electronic Defence Systems and Security and Defence Solutions have a substantial order backlog of projects that stretches over aCost of goods sold 185 161 185 164 number of years. The risks and opportunities affecting the operating marginMarketing expenses 1 - - - are managed through continuous cost forecasts for all significant projects.Research anddevelopment costs 588 644 200 200 Capitalised development costs In the five-year business plans, consideration is given to additional invest-Impairments are included in the following lines in income statement ments in development considered necessary for certain units to reach the growth targets in their respective markets. Group Parent CompanyMSEK 2011 2010 2011 2010 Discount rateOther operating expenses 21 5 . - Discount rates are based on the weighted average cost of capital (wacc). The wacc rate that is used is based on a risk-free rate of interest in five yearsResearch anddevelopment costs - 20 . - adjusted for operational and market risks. The discount rate is in line with the external requirements placed on Saab and similar companies in the market. All units have sales of defence materiel, unique systems, products and sup-Development costs port solutions in the international market as their primary activity, and theirThe significant items in total capitalisation are development costs for radar business risk in this respect is considered equivalent. However, units with aand sensors, electronic warfare systems, air traffic management (atm), the significant share of the business plan’s invoicing in the order backlog haveexport version of Gripen and the anti-ship missile rbs15 mk3. been discounted at an interest rate that is slightly lower units with a short Development costs are capitalised only in the consolidated accounts. In order backlog.legal units, all costs for development work are expensed. Capitalised develop- The following discount rates have been used (pre-tax):ment costs in the Parent Company relate to acquired development costs. Pretax discount rate (WACC)Other intangible fixed assets Per cent 2011 2010Significant items in the carrying amount are attributable to the acquisitions Dynamics 11 11of Ericsson Microwave Systems and Sensis and relate to expenses incurredfor customer relations, trademarks and values in the order backlog. Of the Electronic Defence Systems 11 11carrying amount, msek 526, msek 413 is attributable to acquired values and Security and Defence Solutions 11 11msek 113 to licenses for operating systems etc. Support and Services 13 13Impairment tests for goodwill Combitech 13 13In connection with business combinations, goodwill is allocated to the cash-generating units that are expected to obtain future economic benefits in the Sensitivity analysisform, for example, of synergies from the acquisition. Saab’s business areas Group Management believes that reasonable possible changes in the abovehave been identified as separate cash-generating units. The following cash- variables would not have such a large impact that any individually wouldgenerating units have significant recognised goodwill values in relation to the reduce the recoverable amount to less than the carrying amount.Group’s total recognised goodwill value. Goodwill in every cash-generatingunit has been tested for impairment. SAAB ANNUAL REPORT 2011 101
  • 106. FINANCIAL INFORMATION > NOTES NOTE 17 Operating properties include a property leased by u.s. company Saab Sensis, which was acquired during the year. The finance lease extends through 2025.TANGIBLE FIXED ASSETS The carrying amount is msek 111. The property is depreciated on a straight- Group Parent Company line basis over its period of use through 2025. Total future minimum lease fees amount to msek 139, of which msek 9 is MSEK 31-12-2011 31-12-2010 31-12-2011 31-12-2010 due within one year, msek 39 after one year but within five years, and msek 91 Operating properties/ after five years. The present value of future minimum lease fees is msek 111. buildings and land1) 2,050 2,033 1,410 1,464 Property, plant and Property, plant and equipment equipment 799 636 460 531 Group Parent Company Equipment, tools and MSEK 2011 2010 2011 2010 installations 292 315 149 158 Acquisition value Construction in progress 131 68 118 52 Opening balance, Total 3,272 3,052 2,137 2,205 1 January 2,504 2,465 1,909 1,897 1) In the Group, the reported amount refers to operating properties. In the Parent Company, the reported amount refers to buildings and land. Acquired through business acquisitions 400 - 3 - Investments 118 77 35 61Operating properties/buildings and land 1) Other reclassifications -7 35 2 23 Group Parent Company Divestments -61 -78 -56 -72 MSEK 2011 2010 2011 2010 Translation differences 8 5 - - Acquisition value Closing balance, 31 December 2,962 2,504 1,893 1,909 Opening balance, 1 January 4,822 4,824 1,881 1,853 Acquired through business Depreciation and acquisitions 112 - - - impairments Investments 38 35 14 28 Opening balance, 1 January -1,868 -1,772 -1,378 -1,318 Other reclassifications -34 -46 4 - Depreciation for the year -172 -145 -108 -110 Divestments -27 - -27 - Impairments for the year - -2 - - Translation differences -12 9 - - Acquired through business Closing balance, acquisitions -197 - - - 31 December 4,899 4,822 1,872 1,881 Other reclassifications 15 -13 - -13 Divestments 58 66 53 63 Depreciation and impairments Translation differences 1 -2 - - Opening balance, Closing balance, 1 January -2,789 -2,719 -1,314 -1,254 31 December -2,163 -1,868 1,433 -1,378 Depreciation for the year -80 -83 -58 -60 Impairments for the year - -33 - - Carrying amount, 31 December 799 636 460 531 Acquired through business acquisitions -32 - - - Reclassifications 42 46 - - Acquired through business acquisitions largely relates to Sensis. Equipment impairments of msek 2 were recognised in 2010 in connection with the Divestments 13 - 13 - restructuring of the underwater operations in Dynamics. Translation differences -3 - - - Closing balance, 31 December -2,849 -2,789 -1,359 -1,314 Revaluations Opening balance, 1 January - - 897 897 Closing balance, 31 December - - 897 897 Carrying amount, 31 December 2,050 2,033 1,410 1,4641) In the Group, the reported amount refers to operating properties. In the Parent Company, the reported amount refers to buildings and land.Acquired through business acquisitions largely relates to Sensis. In 2010impairments of msek 33 related to buildings were recognised in the Groupas a consequense of the reorganisation of the underwater operations inDynamics.102 SAAB ANNUAL REPORT 2011
  • 107. FINANCIAL INFORMATION > NOTESNOTE 17, CONT.Equipment, tools and installations NOTE 18 Group Parent Company LEASE ASSETS AND LEASE AGREEMENTSMSEK 2011 2010 2011 2010 As the former manufacturer of the regional aircraft Saab 340 and Saab 2000,Acquisition value Saab has a great interest in ensuring that these aircraft maintain high capacityOpening balance, 1 January 2,134 2,092 1,290 1,271 utilisation. Over 500 aircraft have been delivered and 82 are included in Saab’s leasing fleet, of which 40 aircraft are owned by Saab. Leasing operations areAcquired through businessacquisitions 12 - - - carried out in the global market. Operating lease terms conform to customary terms in the international aircraft leasing market, which may entail the right toAcquisitions from compa- early termination, purchases and extensions, as well as security, geographicalnies within the Group - - - 8 and tax-related limitations on the allocation of the aircraft in question. No air-Investments 83 125 40 46 craft are held via finance leases, nor is Saab the lessor in any finance leases. TheReclassifications 4 -11 4 -11 operations are carried out in usd. Owned aircraft are depreciated on a straight-line basis over 20–25 years.Sales -132 -72 -63 -24 The leasing fleet is expected to be divested around 2015.Translation differences -20 - - -Closing balance,31 December 2,081 2,134 1,271 1,290 Leasing aircraft obtained for leasing purposes MSEK 2011 2010Depreciation and impairments Acquisition valueOpening balance, 1 January -1,819 -1,784 -1,132 -1,115 Opening balance, 1 January 3,792 4,224Depreciation for the year -99 -114 -50 -48 Sales -1,514 -158Impairments for the year - -3 - - Reclassifications - -145Acquired through business Translation differences 58 -129acquisitions -5 - - - Closing balance, 31 December 2,336 3,792Acquisitions from compa-nies within the Group - - - -7Reclassifications - 14 -1 14 DepreciationSales 116 68 61 24 Opening balance, 1 January -2,238 -2,337Translation differences 18 - - - Sales 991 93Closing balance, Reclassifications - 8931 December -1,789 -1,819 -1,122 -1,132 Depreciation for the year -114 -146 Translation differences -12 63Carrying amount, Closing balance, 31 December -1,373 -2,23831 December 292 315 149 158Acquired through business acquisitions largely relates to Sensis. Equipment Impairmentsimpairments amounted to msek 3 in 2010 in connection with the restructur- Opening balance, 1 January -404 -427ing of the underwater operations in Dynamics. Sales and revaluations 208 22Construction in progress Translation differences 1 1 Group Parent Company Closing balance, 31 December -195 -404MSEK 2011 2010 2011 2010Acquisition value Total 768 1,150Opening balance,1 January 68 68 52 49 Other lease assetsInvestments 86 25 79 15 Opening balance, 1 January 4 4Reclassifications -23 -25 -13 -12 Acquisitions 1 2Carrying amount, Depreciation for the year -1 -231 December 131 68 118 52 Translation differences -1 -Collateral Closing balance, 31 December 3 4On 31 December 2011 property with a carrying amount of msek 0 (0) waspledged as collateral for bank loans. Carrying amount, 31 December 771 1,154 SAAB ANNUAL REPORT 2011 103
  • 108. FINANCIAL INFORMATION > NOTESNOTE 18, CONT.Leasing fees for aircraft obtained/leased via operating leases Financial position Saab Aircraft Leasing Payments Payments MSEK 31-12-2011 31-12-2010 Payments from from MSEK to lessors airlines1) airlines2) Assets Outcome Lease assets 768 1,150 2010 264 59 199 Receivables from Group companies 1,501 1,575 2011 238 66 126 External receivables 326 297 Inventories 15 16 Contracted Liquid assets 15 11 2012 254 76 12 Total assets 2,625 3,049 2013 249 68 5 2014 100 25 4 Equity and liabilities 2015 - - 3 Equity 1,168 1,414 2016 - - - Provisions 811 851 2017 and forward - - - Other liabilities 646 784 Total contracted 603 169 24 Total equity and liabilities 2,625 3,0491) Receipts from airlines for aircraft held via operating leases and leased out via operating leases.2) Receipts from airlines for owned aircraft leased out via operating leases. Leasing fees for other assets obtained via operating leases1)The leasing fleet is periodically valuated in terms of the present value of the Other leasing fees refer to premises, computers and cars.future payments it is expected to generate. The inflow is represented by pro-jected receipts from customers and the Export Credits Guarantee Board Group Premises Machinery(ekn) in Sweden. Disbursements consist of fees to the lessee and for technical, and and equip-legal and administrative activities directly related to management of the fleet. MSEK buildings ment Insurance protection limits Saab’s risk. However, the internal distribution Outcomebetween expected receipts from customers and those from ekn will beaffected in each instance by current projections. 2010 239 83 Income from leasing operations (Saab Aircraft Leasing) is recognised net 2011 281 104through profit and loss on the line cost of goods sold after offsetting the lossrisk reserve. Saab Aircraft Leasing’s income statement and balance sheet arelargely usd-related, since its agreements on the sale and lease of aircraft are in Contractedusd, which is its functional currency. The exchange rates used for translation 2012 253 93of the financial statements are indicated in Note 49. 2013 214 69 2014 178 26Income statement Saab Aircraft Leasing 2015 169 2 MSEK 2011 2010 2016 160 2 Leasing revenue 276 328 2017 and forward 790 1 Interest income 55 40 Total contracted 1,764 193 Other revenue 378 216 Total revenue 709 584 Parent Company Premises Machinery and and equip- Leasing expenses -216 -239 MSEK buildings ment Interest expenses -19 -31 Outcome Depreciation -114 -146 2010 172 62 Other expenses -455 -227 2011 195 78 Total expenses -804 -643 Contracted Utilisation of loss risk reserve 145 84 2012 172 72 Operating income 50 25 2013 164 57 2014 146 21 2015 137 1 2016 136 - 2017 and forward 786 - Total contracted 1,541 151 1) The Group has a finance lease on a building; see Note 17.104 SAAB ANNUAL REPORT 2011
  • 109. FINANCIAL INFORMATION > NOTES NOTE 19 GroupBIOLOGICAL ASSETS MSEK 2011 2010Group Effect on net income/net rental incomeMSEK 2011 2010 Rental income 26 26 Direct costs for investment properties that generatedLiving forest rental income during the year -10 -12Carrying amount, 1 January 299 256 Effect on net income /net rental income 16 14Change in fair value 15 53Less fair value logging -9 -10 Information on fair value of investment properties in Parent Company In the Parent Company, investment properties are recognised as buildingsCarrying amount, 31 December 305 299 according to the acquisition cost method. Investment properties in the ParentOf which fixed assets 305 299 Company are leased out to other companies in the Group and are therefore classified as operating properties in the Group.On 31 December 2011, biological assets consisted of approximately403,000 m³ of spruce, 637,000 m³ of pine and 69,000 m³ of hardwood. Forest Parent Companygrowth is estimated at 35,000–40,000 m³ timber per year. During the year, MSEK 2011 2010approximately 23,200 m³ of timber was felled, which had a fair value in theGroup, after deducting selling expenses, of msek 9 on the felling date. Accumulated fair value The valuation of forests has been done with the help of independent Opening fair value, 1 January 159 159appraisers. The forestry property has been valued according to the market Revaluation 6 -comparison method. In the valuation according to the market comparisonmethod, the environmental impact on the firing range has not been taken Closing fair value, 31 December 165 159into account. An adjustment for the environmental impact has been made byreducing fair value by an amount corresponding to the market value of the Parent Companysize of the firing range (4,457 hectares) less the value of the timber. MSEK 2011 2010 Effect on net income/net rental income NOTE 20 Rental income 27 24INVESTMENT PROPERTIES Direct costs for investment properties that generated rental income during the year -9 -11Information on fair value of investment properties in the GroupIn the Group, investment properties are reported according to the fair value Effect on net income /net rental income 18 13method.Group Information on carrying amount of investment properties in Parent CompanyMSEK 2011 2010 Parent CompanyCarrying amount, 1 January 236 25 MSEK 2011 2010Reclassification from/to asset held for sale - 211 Accumulated acquisition valueRevaluation -12 - Opening balance, 1 January 127 127Carrying amount, 31 December 224 236 Closing balance, 31 December 127 127Investment properties are recognised in the statement of financial positionat fair value, while changes in the value of these properties are recognised in Accumulated depreciation according to planthe income statement; see also Note 1. Opening balance, 1 January -87 -83 Investment properties comprise a number of rental properties leased to Depreciation according to plan for the year -4 -4outside tenants. Leases on offices and production space are normally signedfor an initial period of 2–6 years. Prior to expiration, renegotiations are held Closing balance, 31 December -91 -87with the tenant on the rent level and other terms of the agreement, providedthe lease has not been terminated. Accumulated revaluations Fair values have been determined by analysing rental income andexpenses for each property, thereby producing a net rental income figure. Net Opening balance, 1 January 73 73rental income has then served as the basis of a valuation of fair value with a Closing balance, 31 December 73 73yield of 8 per cent. The yield requirements corresponds to the risk in netrental income. Fair value is not based on the valuation of an independentappraiser. Carrying amount, 31 December 109 113 The 2010 reclassification refers to a real estate company that was previ-ously recognised as an asset held for sale. SAAB ANNUAL REPORT 2011 105
  • 110. FINANCIAL INFORMATION > NOTES NOTE 21 Share in associatedSHARES IN ASSOCIATED COMPANIES CONSOLIDATED ACCORDING TO THE 2010 companies’EQUITY METHOD MSEK Country Sales income Group Associated companies MSEK 2011 2010 Hawker Pacific Airservices Ltd Hong Kong 638 -16 Carrying amount, 1 January 251 356 Wah Nobel (Pvt) Ltd Pakistan 17 3 Acquisition of associated companies 104 - Taurus Systems GmbH Germany 163 12 Sale of associated companies -4 -25 S.N. Technologies SA Switzerland 19 8 Share in associated companies’ income 1) -12 40 Industrikompetens i Östergötland AB Sweden 44 1 Hedge reserve - 2 Omnigo (Pty) Ltd South Africa 21 -2 Reclassifications to assets held for sale - -113 Kontorsbolaget i Karlskoga AB Sweden 15 2 Other reclassifications - -4 Sörman Intressenter AB Sweden 36 - Translation differences and internal gains -1 1 Grintek Ewation (Pty) Ltd South Africa 247 9 Dividends -50 -6 Denel Saab Aerostructures (Pty) Ltd 1) South Africa 49 - Carrying amount, 31 December 288 251 Other associated companies in the venture portfolio 25 -1) Share in associated companies’ net income and non-controlling interests. Reversal provision related to Eurenco SA - 23Results from Wah Nobel (Pvt) Ltd. are recognised as financial income and Total 1,274 40expenses through profit or loss. Other associated companies are held for 1) Our share of the company’s result amounted to MSEK -61.operating purposes, i.e., they are related to operations of the business units orin the venture portfolio and are therefore recognised in operating income. During the first half of 2011, Saab sold all its shares in the associated com- Bookedpany Grintek Ewation (Pty) Ltd. (42.4 per cent) to Cassidian, a division of value,eads. These shares were classified as assets held for sale in 2010. It also sold shares inall the shares in the associated company Image Systems ab (36 per cent) to 31-12-2011 associated Ownership MSEK Assets Liabilities companies interest, %Digital Vision ab and all its shares in the associated company Denel SaabAerostructures (Pty) Ltd (20 per cent). Associated companies Acquisitions of shares in associated companies mainly refer to 36.6 per Hawker Pacific Airservices Ltd 291 181 110 32.3cent in Avia Satcom Co., Ltd. In addition, Saab invested msek 11, representingmore than 30 per cent of total shares, in the Swedish systems development Wah Nobel (Pvt) Ltd 31 7 24 27.2company isd Technologies Int ab. Taurus Systems GmbH 58 55 3 33.0 Shares in associated companies as of 31 December 2011 include goodwill S.N. Technologies SA 21 10 11 50.0of msek 61 (8). Industrikompetens i The Group’s share of sales, income, assets, liabilities and the carrying amount Östergötland AB 18 7 11 33.0of shares in associated companies is as follows. Omnigo (Pty) Ltd 16 8 8 40.0 Kontorsbolaget i Karlskoga Share in AB 126 121 5 50.0 associated Sörman Intressenter AB 18 14 4 25.3 2011 companies’ MSEK Country Sales income FFV Services Private Limited 25 12 13 49.0 Associated companies Avia Satcom Co.Ltd 106 28 78 36.6 Hawker Pacific Airservices Ltd Hong Kong 540 -17 Other associated companies in the venture portfolio 26 5 21 - Wah Nobel (Pvt) Ltd Pakistan 16 4 Total 736 448 288 - Taurus Systems GmbH Germany 50 2 S.N. Technologies SA Switzerland 15 - Industrikompetens i Östergötland AB Sweden 46 - Omnigo (Pty) Ltd South Africa 26 1 Kontorsbolaget i Karlskoga AB Sweden 21 1 Sörman Intressenter AB Sweden 40 3 FFV Services Private Limited India - - Avia Satcom Co.Ltd Thailand 21 - Other associated companies in the venture portfolio 11 -6 Total 786 -12106 SAAB ANNUAL REPORT 2011
  • 111. FINANCIAL INFORMATION > NOTESNOTE 21, CONT. NOTE 23 Booked value, shares in PARENT COMPANY’S SHARES IN ASSOCIATED COMPANIES AND JOINT VENTURES 31-12-2010 associated Ownership MSEK Assets Liabilities companies interest, % Parent Company MSEK 2011 2010 Associated companies Hawker Pacific Airservices Ltd 310 152 158 33.0 Accumulated acquisition value Wah Nobel (Pvt) Ltd 28 6 22 27.2 Opening balance, 1 January 491 528 Taurus Systems GmbH 91 76 15 33.0 Acquisitions 78 7 S.N. Technologies SA 20 9 11 50.0 Divestments -68 -154 Industrikompetens i Reclassifications -19 - Östergötland AB 21 11 10 33.0 Share of net income for the year in limited partnerships 70 110 Omnigo (Pty) Ltd 15 6 9 40.0 Closing balance, 31 December 552 491 Kontorsbolaget i Karlskoga AB 124 119 5 50.0 Accumulated impairments Sörman Intressenter AB 16 14 2 25.3 Opening balance, 1 January - -98 Denel Saab Aerostructures (Pty) Ltd 2) 88 172 - 20.0 Divestments - 98 Other associated companies Closing balance, 31 December - - in the venture portfolio 24 5 19 - Carrying amount, 31 December 552 491 Total 737 570 251 -2) Saab is confident that the negative equity will not affect its results and liquidity. Specification of Parent Company’s (co-owner’s) directly owned holdings of shares in associated companies and joint ventures. NOTE 22 2011 % of votes Carrying MSEK and capital amountSHARES IN JOINT VENTURES CONSOLIDATED ACCORDING TO THE Associated companiesPROPORTIONAL METHOD Hawker Pacific Airservices Ltd, Hong Kong 32.3 22The Group has a 50 per cent holding in the joint venture Gripen International Industrikompetens i Östergötland AB,kb, whose principal activity is to offer, market and provide services for air- 556060-5478, Linköping 33.0 2craft, military materiel and related equipment. The Group’s remaining hold- Sörman Intressenter AB, 556741-2233, Stockholm 25.3 3ings in joint ventures are of an insignificant amount. Avia Satcom Co Ltd, Thailand 36.6 78 The Group’s financial reports include the following items that constitutethe Group’s ownership interest in the joint venture’s sales, income, assets and Joint venturesliabilities. Gripen International KB, 969679-8231, Linköping 50.0 434Gripen International KB Industrigruppen JAS AB, 556147-5921, Stockholm 80.0 4 MSEK 2011 2010 Avia Tech Systems Co. Ltd., Thailand 40.0 9 Total 552 Sales 42 96 Net income 70 110 2010 % of votes Carrying MSEK and capital amount MSEK 31-12-2011 31-12-2010 Associated companies Fixed assets - 6 Hawker Pacific Airservices Ltd, Hong Kong 33.0 22 Current assets 821 793 Industrikompetens i Östergötland AB, 556060-5478, Linköping 33.0 2 Total assets 821 799 Sörman Intressenter AB, 556741-2233, Stockholm 25.3 3 Denel Saab Aerostructures (Pty) Ltd, South Africa 20.0 64 Current liabilities 387 435 Vingtec Saab AS, Norway 49.0 - Total liabilities 387 435 Image Systems AB, 556550-5400, Linköping 35.8 4 Joint ventures Net assets 434 364 Saab Natech AB, 556627-5003, Jönköping 51.0 7 Gripen International KB, 969679-8231, Linköping 50.0 365 Gripen Venture Capital AB, 556298-6629, Linköping 50.0 12 SAAB-BAE SYSTEMS Gripen AB, 556527-6721, Linköping 50.0 - Saab Ericsson NBD Innovation AB, 556628-6406, Stockholm 60.0 - Industrigruppen JAS AB, 556147-5921, Stockholm 80.0 3 Avia Tech Systems Co. Ltd., Thailand 40.0 9 Total 491 SAAB ANNUAL REPORT 2011 107
  • 112. FINANCIAL INFORMATION > NOTES NOTE 24 NOTE 26RECEIVABLES FROM GROUP COMPANIES, ASSOCIATED COMPANIES OTHER LONG-TERM SECURITIES HOLDINGSAND JOINT VENTURES Parent Company Receivables from MSEK 2011 2010 Receivables from associated companiesParent Company Group companies and joint ventures Accumulated acquisition valueMSEK 2011 2010 2011 2010 Opening balance, 1 January 1,468 1,529Accumulated acquisition Acquisitions 1 2value Divestments -1,431 -63Opening balance,1 January 557 760 32 116 Closing balance, 31 December 38 1,468Acquisitions 642 2 1 -Sales -288 -205 -16 -84 Accumulated impairmentsClosing balance, Opening balance, 1 January -11 -3431 December 911 557 17 32 Impairments for the year -3 -18 Divestments - 41 Closing balance, 31 December -14 -11 NOTE 25FINANCIAL INVESTMENTS Carrying amount, 31 December 24 1,457GroupMSEK 31-12-2011 31-12-2010 Divestments in 2011 relate to the holding in Aker Holding AS.Financial investments held as fixed assets NOTE 27Financial assets measured at fair value throughprofit or loss: LONG-TERM RECEIVABLES AND OTHER RECEIVABLES Shares and participations 54 56 GroupInvestments held to maturity: MSEK 31-12-2011 31-12-2010 Interest-bearing securities 143 147 Long-term receivables held as fixed assetsTotal 197 203 Receivables from associated companies, interest-bearing 70 130 Receivables from associated companies, non interest-Short-term investments classified as current assets bearing 2 2Financial assets measured at fair value through Receivables from joint ventures, interest-bearing - 8profit or loss: Other interest-bearing receivables 29 12 Interest-bearing securities 4,555 1,544 Other non interest-bearing receivables 945 704Total 4,555 1,544 Total 1,046 856Investments in interest-bearing securities consist of government, mortgage Other non interest-bearing receivables primarily consist of net receivablesand corporate bonds, corporate and bank commercial paper, and mortgage attributable to pensions according to ias 19.credit certificates, as well as Floating Rate Notes. The fair value of interest- Saab does not consider there to be a significant difference between bookbearing securities held to maturity amounts to msek 145 (147). and fair value. Group MSEK 31-12-2011 31-12-2010 Other receivables held as current assets Receivables from associated companies, non interest- bearing 22 43 Receivables from joint ventures, non interest-bearing 37 3 Advance payments to suppliers 58 80 Other interest-bearing receivables 368 617 Other non interest-bearing receivables 451 415 Subtotal 936 1,158 Receivables from customers Assignment revenue 3 438 4,153 Less utilised advance payments -795 -1,681 Subtotal 2 643 2,472 Total 3 579 3,630108 SAAB ANNUAL REPORT 2011
  • 113. FINANCIAL INFORMATION > NOTESNOTE 27, CONT.The decrease in other interest-bearing receivables mainly relates to the The Group’s cost of goods sold includes inventory impairments ofdivestment of Aker Holding as. msek 16 (145). The reversal of previous impairments amounts to msek 89 (0). Assignment revenue refer to assignment costs incurred plus reported The value of inventories measured at fair value less selling expenses amountsgross income less any losses attributable to the work performed. Unutilised to msek 100 (59). Of inventories, msek 407 is expected to be realised moreadvance payments amount to msek 1,022 (643). than twelve months after the closing day. Costs attributable to assignment revenue amounted to msek 2,481 (3,150).Reported gross income amounted to msek 957 (1,003). Parent Company MSEK 31-12-2011 31-12-2010Parent Company Raw materials and consumables 1,518 1,263MSEK 31-12-2011 31-12-2010 Work in progress 1,059 948Other long-term receivables Finished goods and goods for resale 519 540Interest-bearing receivables 25 1 Advance payments to suppliers 56 31Non interest-bearing receivables 9 9 Total 3,152 2,782Total 34 10 Cost of goods sold for the Parent Company includes inventory impairmentsParent Company of msek 11 (66) after the reversal of previous impairments of msek 86 (0). TheMSEK 31-12-2011 31-12-2010 value of inventories measured at fair value less selling expenses amounts to msek 100 (59). Of the Parent Company’s inventories, msek 282 is expected toOther receivables held as current assets be realised more than twelve months after the closing day.Non interest-bearing receivables 286 126Subtotal 286 126 NOTE 29Receivables from customersAssignment revenue 2,194 2,741 ACCOUNTS RECEIVABLELess utilised advance payments -435 -876 Accounts receivable in the Group amount to msek 3,153 (3,052). In 2011, SaabSubtotal 1,759 1,865 sold receivables as part of the sales programme arranged in 2009 to strengthen its financial position and increase financial flexibility. Customers in most cases are nations with high credit worthiness.Total 2,045 1,991 The receivables were sold in their entirety at a favourable funding level. This reduced accounts receivable at year-end by msek 872 (1,409) and alsoAssignment revenue refer to assignment costs incurred plus reported gross has a negative effect on cash flow of msek -537 (620). During the year,income less any losses attributable to the work performed. Unutilised accounts receivable were written down by msek 5 (12). Reversals of previousadvance payments amount to msek 471 (98). write-downs amounted to msek 3 (15). Costs attributable to assignment revenue amounted to msek 1,583 (2,100). Accounts receivable in the Parent Company amount to msek 1,424 (1,338).Reported gross income amounted to msek 611 (641). During the year, receivables were written down by msek 4 (3). Reversals ofParent Company previous write-downs amounted to msek 2 (8). See also Note 41.MSEK 2011 2010Long-term receivables NOTE 30Accumulated acquisition value PREPAID EXPENSES AND ACCRUED INCOMEOpening balance, 1 January 10 44 Group Parent CompanyIncremental receivables 25 1 MSEK 31-12-2011 31-12-2010 31-12-2011 31-12-2010Deductible receivables -1 -35 Prepaid expenses 367 399 275 347Closing balance, 31 December 34 10 Accrued service income 143 148 73 87 Other accrued income 319 133 292 78 NOTE 28 Total 829 680 640 512INVENTORIES Prepaid expenses relate to pension premiums, rents, licenses and insurance,Group among other things.MSEK 31-12-2011 31-12-2010Raw materials and consumables 2,109 1,681Work in progress 1,470 1,534Finished goods and goods for resale 755 885Total 4,334 4,100Saab and the Swedish Ministry of Enterprise, Energy and Communicationshave reached agreement with the National Debt Office to co-finance Saab’sparticipation in the Airbus A380 project. The co-financing is in the form of aroyalty loan maximised at msek 350. Repayment will take the form of a roy-alty on each delivery to Airbus. Through 2011, the National Debt Office haspaid out a net of msek 263 (263), which reduces inventory in the financialstatements. SAAB ANNUAL REPORT 2011 109
  • 114. FINANCIAL INFORMATION > NOTES NOTE 31 In 2011 no Series b shares were repurchased on the market to secure Saab’s Share Matching Plan and Performance Share Plan. During the year, 614,229LIQUID ASSETS shares were matched in Saab’s Share Matching Plan. A total of 3,818,386Group shares are held in treasury. The dividend to shareholders amounted to msek 367 (237), or sek 3.50MSEK 31-12-2011 31-12-2010 (2.25) per share.Cash and bank balances 681 703 Management of the Group’s capitalBank deposits 1,083 1,830 The Group’s capital under management consists of equity. The Group’s capitalFunds in escrow accounts 139 - management goal is to facilitate continued operating growth and to remainDeposits held on behalf of customers 15 11 prepared to capitalise on business opportunities. The long-term equity/assetTotal according to statement of financial position 1,918 2,544 goal is at least 30 per cent. Net result of cash flow hedgesTotal according to statement of cash flows 1,918 2,544 The net result of cash flow hedges comprises the effective share of the cumu- lative net change in fair value of a cash flow hedging instrument attributable to hedge transactions that have not yet taken place.Bank deposits relate to short-term investments, the large part of which has amaturity of less than one month. Funds in escrow accounts relate to cash Translation reservedeposited with independent third parties until contractual terms are met. The translation reserve comprises exchange rate differences that arise fromThe Group’s unutilised account overdraft facility amounted to msek 118 (131) the translation of financial reports from operations that have prepared theirat year end. With regard to the Group’s other loan facilities, refer to Notes 36 reports in a currency other than the currency that the Group’s financialand 41. reports are presented in. The Parent Company and the Group present their financial reports in sek. The translation reserve at year-end amounts to msek -51 (-12). Of the translation reserve msek -4 (2) has been reclassified to NOTE 32 gains/losses.ASSETS HELD FOR SALE Revaluation reserveThe Group holds no assets or liabilities for sale. Assets held for sale in 2010 The revaluation reserve comprises the difference between the fair value and car-amounted to msek 113 and included an associated company within Electronic rying amount of operating properties reclassified as investment properties.Defence Systems, Grintek Ewation. Saab’s interest in Grintek Ewation wasdivested during the second quarter to Cassidian, a division of EADS; see PARENT COMPANYnote 8. Restricted reserves Restricted reserves may not be reduced through profit distributions. NOTE 33 Revaluation reserve When a tangible or financial fixed asset is revaluated, the revaluation amountSHAREHOLDERS’ EQUITY is allocated to a revaluation reserve.The shares in the Parent Company are divided into two series, a and b. Bothclasses of shares carry equal rights, with the exception that each Series a share Legal reserveis entitled to ten votes and each Series b share one vote. The shares have a Provisions to the legal reserve has previously amounted to at least 10 per centquota value of sek 16. of net income for the year, until the legal reserve corresponded to 20 per cent of the Parent Company’s capital stock. As of 2006 provisions are voluntaryOutstanding shares as of Number of Per cent of Per cent of and the Parent Company makes no provisions to the statutory reserve.31 December 2011 shares shares votes Unrestricted equitySeries A 1,907,123 1.8 15.6 Retained earningsSeries B 103,424,835 98.2 84.4 Consists of previous year’s unrestricted equity after profit distribution andTotal 105,331,958 100.0 100.0 Group contributions paid. Retained earnings together with net income for the year comprise unrestricted equity, i.e., the amount available for distribu- tion to the shareholders.Outstanding shares as of Number of Per cent of Per cent of31 December 2010 shares shares votesSeries A 1,907,123 1.8 15.6Series B 102,810,606 98.2 84.4Total 104,717,729 100.0 100.0Change in number ofoutstanding shares 2011 Series A Series B TotalNumber of outstanding shares as of1 January 1,907,123 102,810,606 104,717,729Early share matching - 55,352 55,352Share matching plan - 558,877 558,877Number of outstanding shares as of31 December 1,907,123 103,424,835 105,331,958110 SAAB ANNUAL REPORT 2011
  • 115. FINANCIAL INFORMATION > NOTES NOTE 34 NOTE 36EARNINGS PER SHARE LIABILITIES TO CREDIT INSTITUTIONS 2011 2010 Parent CompanyNet income for the year attributable to Parent Company’s MSEK 31-12-2011 31-12-2010shareholders (MSEK) 2,225 433 Current liabilitiesWeighted average number of common sharesoutstanding: Overdraft facilities: Available credit/limit 118 1,254 before dilution (thousands) 104,982 105,218 Short-term portion of bank loans: Unutilised portion -118 -131 after dilution (thousands) 109,150 109,150 Utilised credit amount - 1,123Earnings per share, before dilution (SEK) 21.19 4.12 Short-term borrowing from credit institutions - -Earnings per share, after dilution (SEK) 20.38 3.97 Total - 1,123The weighted average number of shares outstanding before dilution refers to Long-term liabilitiesthe total number of shares in issue less the average number of repurchased Overdraft facilities: Available credit/limit 4,000 4,000treasury shares. The weighted average number of shares outstanding after Long-term portion of bank loans: Unutilised portion -4,000 -4,000dilution refers to the total number of shares in issue. Utilised credit amount - - Long-term borrowing from credit institutions 1,100 1,100 NOTE 35 Total 1,100 1,100INTEREST-BEARING LIABILITIES Total liabilities to credit institutions 1,100 2,223GroupMSEK 31-12-2011 31-12-2010 In December 2009, Saab established a mtn programme of sek 3 billion inLong-term liabilities order to enable the issuance of long-term loans on the capital market. UnderLiabilities to credit institutions 1,103 1,103 the terms of this programme, Saab has issued bonds and Floating Rate NotesOther interest-bearing liabilities 115 14 (frn) for msek 1,100. The Parent Company had mnok 975 in financing arranged in connectionTotal 1,218 1,117 with the acquisition of 7.5 per cent of the shares in Aker Holding as in 2007. Saab’s investment amounted to approximately nok 1.2 billion, of which aboutCurrent liabilities 80 per cent was financed through the above mentioned loans. Saab has exercised the option which gave it the right to sell its shares inLiabilities to credit institutions 46 78 Aker Holding as. The loan was amortised and the interest rate swap was ter-Liabilities to joint ventures 449 428 minated. The net amount in nok was hedged through forward contracts. TheOther interest-bearing liabilities 25 83 sale had a positive effect on cash flow in the Parent Company of approximately msek 1,500 and on net liquidity in the Group of approximately msek 130.Total 520 589Total interest-bearing liabilities 1,738 1,706 NOTE 37 EMPLOYEE BENEFITSTerms and repayment schedulesCollateral for bank loans amounts to msek 0 (0). Of the long-term liabilities, Saab has two types of pension plans: defined-benefit and defined-contribu-msek 1,128 (1,110) falls due between one and five years of the closing day and tion. In defined-benefit plans, post-employment compensation is based on amsek 90 (7) later than five years of the closing day. percentage of the recipient’s salary. Saab has around ten types of defined-ben- Liabilities to credit institutions largely consist of Medium Term Notes efit plans. The predominant plan is the itp plan, and the second largest plan(mtn), and in the previous year of commercial paper as well. For more infor- refers to state-funded retirement pension. Saab’s defined-benefit plans aremation on financial risk management, refer to Note 41. secured in three ways: as a liability in the balance sheet, in pension funds or The fair value of mtns and commercial paper exceeds book value by funded through insurance with mainly Alecta. The Saab Pension Fund, thatmsek 13 (8). Saab otherwise does not consider there to be a significant differ- secured part of the itp plan, had assets of msek 4,050 (3,969) as of 31 Decem-ence between book and fair value. ber 2011, compared to an obligation of msek 5,866 (4,675) according to ias 19, or a solvency margin of 69 per cent (85). The portion secured through insurance with Alecta refers to a defined- benefit plan that comprises several employers and is reported according to a pronouncement by the Swedish Financial Reporting Board, ufr 3. For fiscal year 2011, the Group did not have access to the information that would make it possible to report this plan as a defined-benefit plan. The itp pension plan, which is secured through insurance with Alecta, is therefore reported as a defined-contribution plan. Alecta’s surplus can be distributed to policyhold- ers and/or insureds. At year-end 2011, Alecta’s surplus in the form of the col- lective funding ratio amounted to 113 per cent (146). The collective funding ratio is the market value of Alecta’s assets as a percentage of the insurance obligations calculated according to Alecta’s actuarial assumptions, which does not conform to ias 19. In defined-contribution plans, pensions are based on the premiums paid and return on assets. SAAB ANNUAL REPORT 2011 111
  • 116. FINANCIAL INFORMATION > NOTESNOTE 37, CONT.Group Changes in net obligation for defined-benefit plans reported in the statement of financial positionMSEK 31-12-2011 31-12-2010 GroupWholly or partially funded obligations MSEK 2011 2010Present value of defined-benefit obligations 6,319 4,969 Net obligation for defined-benefit plans, 1 January -469 -475Fair value of assets under management -4,446 -4,298 Compensation paid -208 -189Net wholly or partially funded obligations 1,873 671 Deposits to pension fund and other funding -132 -170 Cost reported in income statement 216 339Present value of unfunded defined-benefit obligations 222 264 Settlement/Translation difference -9 3Present value of net obligation 2,095 935 Withdrawals from pension fund 19 23 Net obligation for defined-benefit plans, 31 December -583 -469Unreported actuarial losses -2,678 -1,404Net obligation employee benefits -583 -469 Change in pension obligation GroupThe net amount is reported in the following items in the statement of financial MSEK 2011 2010position Opening fair value, 1 January 5,233 5,577Provisions for pensions 12 5 Benefits vested during the year 156 170Long-term receivables 595 474 249 Interest expense 226 Pension disbursements -208 -189The net amount is divided among plans in the 56 Settlement -14following countries Actuarial gain/loss 1,048 -523Sweden -523 -413 Translation differences 7 -14USA -72 -61 Closing fair value, 31 December 6,541 5,233Germany 5 5Switzerland 7 - Change in assets under managementNet amount in the statement of financial position -583 -469 Group MSEK 2011 2010Unreported actuarial losses amount to msek 2,678 (1,404). Actuarial losses Opening fair value, 1 January 4,298 3,907are calculated as the difference between pension obligations and the liabilityaccording to the statement of financial position. If the actuarial losses are Assumed return 259 201more than 10 per cent of the pension obligation, the portion exceeding 10 per Withdrawals -19 -23cent is amortised over the remaining period of employment for employees Settlement 60 -14covered by defined-benefit plans. According to the above table, the actuariallosses exceed the pension obligation for 2011 by more than 10 per cent. This Contributions 132 170means that the difference between msek 654 and msek 2,678 will be distrib- Actuarial gain/loss -290 68uted over anticipated remaining years in service. Translation differences 6 -11 During 2012, amortisation will be approximately msek 183. Closing fair value, 31 December 4,446 4,298Unreported actuarial lossesGroup 31 December Cost reported in income statementMSEK 2011 2010 2009 2008 2007 GroupPresent value of defined-benefit MSEK 2011 2010obligations -6,541 -5,233 -5,577 -5,004 -4,679 Costs for employment during current year 156 170Fair value of assets under man- Interest expense for obligation 249 226agement 4,446 4,298 3,907 3,356 3,565 Assumed return on assets under management -259 -201Net obligation in the statement offinancial position -583 -469 -475 -424 101 Amortised actuarial losses 70 144 Losses -2,678 -1,404 -2,145 -2,072 -1,013 Cost of defined-benefit plans in income statement 216 339The unreported actuarial loss amounted to msek 1,344 in 2011, primarily due Cost of defined-contribution plans 531 490to two negative factors. The return on assets under management was lower Payroll tax 146 185than expected at -0.7 per cent, compared to an anticipated 6 per cent, whichproduced an actuarial loss of msek 290. The actuarial loss on pension obliga- Total cost of post-employment compensation 893 1,014tions amounted to msek 1,048, which was due to a 130 bp lower discount rate.The actuarial loss was amortised by msek 70 during the year. The net lossincreased by msek 1,274.112 SAAB ANNUAL REPORT 2011
  • 117. FINANCIAL INFORMATION > NOTESNOTE 37, CONT.The cost is reported on the following lines in the income statement: Employee turnover: The likelihood that an individual ends his/her employ- Group ment is assumed to be 3 per cent per year. MSEK 2011 2010 Parent Company’s pension obligations Cost of goods sold 630 685 Funds allocated for pensions according to the balance sheet correspond to Marketing expenses 76 59 the net present value of existing pension obligations less funds that are Administrative expenses 48 56 secured by Saab’s pension fund. Research and development costs 79 45 Financial expenses 60 169 Parent Company Total cost of post-employment compensation 893 1,014 MSEK 31-12-2011 31-12-2010 FPG/PRI pensions 309 75Interest expense and amortisation of actuarial losses less the assumed return Other pensions 88 44on assets under management is classified as financial expense. Other pension Other provisions for pensions 72 73costs are divided by function in the income statement in relation to how Total 469 192payroll expenses are charged to the various functions. Of which credit guarantees via FPG/PRI 389 107Return on assets under management Group Parent Company Group MSEK 2011 2010 2011 2010 MSEK 2011 2010 Amount of provision Actual return on assets under management -31 269 expected to be settled after Assumed return on assets under management -259 -201 more than 12 months 12 5 333 67 Actuarial result from assets under management during the year -290 68 Share Matching Plan In April 2007, Saab’s Annual General Meeting resolved to offer employees theAssumptions for defined-benefit obligations opportunity to participate in a Global Share Matching Plan. The Board consid- Group ers it important that Saab’s employees share a long-term interest in the appre- Per cent 2011 2010 2009 2008 2007 ciation of the company’s shares. Employees who participate in the plan can have up to 5 per cent of their gross base salary withheld to purchase shares on Significant actuarial assumptions as of closing day (expressed as the nasdaq omx Stockholm during a twelve-month period. If the employee weighted averages)1) retains the purchased shares for three years after the investment date and is Discount rate, 31 December 3.50 4.80 4.00 4.25 4.50 still employed by the Saab Group, the employee will be allotted a correspond- Assumed return on assets under ing number of Series b shares. management, 31 December 6.00 6.00 5.00 5.00 5.00 In April 2008, Saab’s Annual General Meeting resolved to introduce a per- Future salary increase 3.00 3.00 3.00 3.00 3.00 formance-based plan for senior executives and key employees entitling them Future increase in pensions 2.00 2.00 2.00 2.00 2.00 to 2–5 matching shares depending on the category the employee belongs to. In addition to the requirement that the employee remain employed by Saab Employee turnover 3.00 3.00 5.00 5.00 5.00 after three years, there is a requirement that earnings per share grow in the Anticipated remaining years in service 12.9 13.0 11.2 11.2 11.3 range of 5 to 15 per cent. The Annual General Meeting 2011 amended the1) Refers to Sweden since essentially all defined-benefit plans are in Sweden. terms of the Performance Share Plan 2011, compared to previous years’ pro- grams, so that those who are eligible may also participate in Saab’s ShareThe following assumptions serve as the basis of the valuation of Saab’s Matching Plan 2011, and that the Performance Share Plan 2011 entitles partic-pension liability: ipants to 1-4 matching shares, depending on the category to which the employee belongs.Discount rate: The valuation is based on covered Swedish mortgage bonds(aaa). Each assumed cash flow is discounted using an interest rate for the 2007 Share Matching Plancorresponding maturity. In 2008, employees purchased 673,235 Series b shares, corresponding to the totalAssumed return on assets under management: Of the assets managed by the number of matching shares. The number of participants from the start wasSaab Pension Fund, 50 per cent is invested in interest-bearing bonds and 50 5,104. Matching shares were issued on four occasions in 2011. In total, 633,479per cent in equities and hedge funds. The risk premium above current inter- shares have been matched by the plan, corresponding to 94 per cent of theest rate levels, which has historical support and is used by many companies shares that have been purchased.for shares, is approximately 3-6 per cent above interest rates. For bonds, theinterest rate used is the same as the discount rate less a risk premium for 2008 Share Matching Planmortgage bonds. The assumed rate of return is 3 per cent (4) on the interest- In April 2008, Saab’s Annual General Meeting resolved to offer employees a newbearing bonds and 9 per cent (8) on equities and hedge funds. Saab’s pension Share Matching Plan with similar terms as the 2007 plan. In 2009, employeesfund does not own any Saab shares. purchased 680,267 Series b shares, corresponding to the maximum number ofLong-term salary increase assumption: Assumed to be as high as the increase matching shares. The number of participants from the start was 3,194. Match-in the basic income amount. This means that Saab expects the same salary ing shares will be issued on four occasions in 2012, beginning in January.increases as the national average. 2009 Share Matching PlanLong-term increase in basic income: Data from Statistics Sweden on current In April 2009, Saab’s Annual General Meeting resolved to offer a third Sharewage increases in the private sector provide an historical average during the Matching Plan with similar terms as the previous years’ plans. In 2010, partici-period 1974–2000 of approximately 1 per cent above inflation. pants purchased 462,877 Series b shares, corresponding to the total number ofLong-term rate of inflation: Based on the Riksbank’s inflation target of 2 matching shares. The number of participants from the start was 2,841.per cent.Mortality: Mortality is the same assumption recommended by the Financial 2010 Share Matching PlanSupervisory Authority (fffs 2007:31), based on Makeham formulas for men In April 2010, Saab’s Annual General Meeting resolved to offer a fourth Shareand women. Matching Plan with similar terms as the previous years’ plans. In 2011, partici-Marriage: Marriage is the same assumption recommended by the Financial pants purchased 303,033 Series b shares, corresponding to the total number ofSupervisory Authority (fffs 2001:13). matching shares. The number of participants from the start was 2,315. SAAB ANNUAL REPORT 2011 113
  • 118. FINANCIAL INFORMATION > NOTESNOTE 37, CONT.2008 Performance Share Plan mined at the time of the participants’ investment adjusted by the dividendIn the first Performance Share Plan, around 280 senior executives and key that does not accrue to the employee during the vesting period.employees were invited to participate. The number of participants from the The expense for the share plans is included in operating income and isstart was 193. Participants in the plan purchased 123,590 shares, corresponding to recognised in the balance sheet as equity and accrued expenses (social secu-about 275,000 matching shares. After the end of the measurement period, on rity fees). Administrative expenses for the share matching plans amounted to30 September 2011, it was determined that the growth requirement of 5 to 15 per msek 5 (4) in 2011.cent had not been reached, due to which no matching will be issued in 2012. SENIOR EXECUTIVES’ BENEFITS2009 Performance Share Plan Remuneration to Board membersIn the second Performance Share Plan, the 138 participating employees pur- In accordance with the resolution of the Annual General Meeting, the fees paidchased 62,633 shares in 2010. The maximum number of matching shares is to the members of the Board amount to sek 4,075,000 (4,075,000), consistingabout 140,000. of sek 1,100,000 (1,100,000) to the Chairman and sek 425,000 (425,000) to each of the other members elected by the Annual General Meeting, with the2010 Performance Share Plan exception of the President. The member nominated by bae Systems, MichaelIn the third Performance Share Plan, the 115 participating employees purchased O’Callaghan, an employee of bae Systems, stepped down from his position on46,972 shares in 2011. The maximum number of matching shares is about 110,000. the Board during the year after bae Systems sold its shares in Saab. Michael O’Callaghan has declined his fees with reference to bae Systems’ policy.2011 Share Matching Plan and Performance Share Plan For audit committee work, committee chairman Per-Arne SandströmIn April 2011, Saab’s Annual General Meeting resolved to offer employees a also received fees of sek 150,000 (150,000) and committee members Johannew Share Matching Plan and a new Performance Share Plan. The Share Forssell and Joakim Westh sek 100,000 (100,000) each.Matching Plan for 2011 comprises all employees, including senior executives For compensation committee work, committee chairman Lena Treschowand key persons. The Performance Share Plan for 2011, which is designed Torell also received fees of sek 135,000 (135,000) and committee memberssolely for senior executives and key persons, entitles participants to 1-4 Marcus Wallenberg sek 80,000 (80,000) and Sten Jakobsson sek 80,000 (0).matching shares, depending on the category to which the employee belongs. In his capacity as a consultant, Board member Åke Svensson receivedThe plans start in January 2012 and continue through the calender year 2012. sek 106,334 from Saab ab through 31 March 2011 for assisting the new Presi-The maximum number of matching shares in these two plans is 1,040,000. dent and ceo and the Group Management. Hence the assignment has been completed.Share Matching Plan 2007 plan 2008 plan 2009 plan 2010 plan TotalNumber of matching shares Remuneration to the Presidentat beginning of the year 582,381 628,913 456,056 - 1,667,350 The salary paid to the President and ceo consists of a fixed portion. The previ-Allotted during the year ous short-term variable portion has been discontinued as of 2011 in accord-(treasury shares) - - - 303,033 303,033 ance with the resolution of the Annual General Meeting. The preparation pro-Less early matching -18,883 -22,766 -12,501 -1,202 -55,352 cess for compensation issues regarding the President is handled by the Board’sOrdinary matching -558,877 - - - -558,877 Remuneration Committee according to the principles laid down by theForfeited matching shares -4,621 -17,351 -11,859 -2,559 -36,390 Annual General Meeting and then voted on by the Board.Number of matching shares Håkan Buskhe has participated since 1 September 2010 in the Saab Globaleligible at year-end - 588,796 431,696 299,272 1,319,764 Performance Share Plans approved by the 2009 and 2010 Annual GeneralNumber of participants, Meetings.31 Dec. 2011 - 2,805 2,638 2,272 Outstanding matching rights in the Saab Global Performance Share Plan% of total number of 2009 amount as of 31 December 2011 to sek 260,329 (14,237) and in the Saabemployees - 21 20 17 Global Performance Share Plan 2010 to sek 275,318 at a estimated outcome.Average remaining maturity, During the period 1 January through 31 December 2011, Håkan Buskheyears - 0.4 1.7 2.7 received salary and other benefits totalling sek 10,341,508 (2,958,466), of which other benefits, including performance share plans, amounted toPerformance Share Plan 2009 plan 2010 plan Total sek 1,678,261 (31,326).Number of matching shares at beginningof the year 61,023 - 61,023 Pension termsAllotted during the year (treasury shares) - 46,972 46,972 The retirement age for the President is 62. The President has a defined-contri- bution pension plan. He may decide himself on the payment term, thoughForfeited matching shares -5,754 -322 -6,076 within the provisions of Swedish income tax law. The pension cost for SaabNumber of matching shareseligible at year-end 55,269 46,650 101,919 consists of pension premiums amounting to 30 per cent of fixed salary until the President turns 50, after which the pension premium will amount to 35 perNumber of participants, 31 Dec. 2011 123 110 cent of fixed salary. Pension premiums are paid as long as the PresidentAverage remaining maturity, years 1.7 2.7 remains an employee of the company, but not beyond the age of 62. During his first five years of employment, the President also receives an extra pensionRecognised expense for above-mentioned plan, contribution of sek 440,000, payment of which is made annually and is con-including social security expenses 2011 2010 ditional on Håkan Buskhe remaining an employee at the time.Share Matching Plan 2007 22 33 To this is added the cost of pension premiums according to the itp plan.Share Matching Plan 2008 25 23 The pension commitment is vested.Share Matching Plan 2009 20 8 For 2011, the cost of President Håkan Buskhe’s pension, including itp, wasShare Matching Plan 2010 4 - sek 3,187,551 (1,391,089).Performance Share Plan 2008 - -4 Severance termsPerformance Share Plan 2009 5 2 If terminated by the company, the President will receive a salary and pensionPerformance Share Plan 2010 1 - benefits for a period of six months (period of notice). Thereafter he will receiveTotal 77 62 severance pay equivalent to one year of salary, based on his current fixed sal- ary. If the President does not obtain new employment, he will receive an addi-The fair value of the services rendered is based on the share price of the tional six months of severance pay. The salary during the period of notice andmatching shares that are expected to be allotted. The share price is deter- severance will be deducted from income received from other employment114 SAAB ANNUAL REPORT 2011
  • 119. FINANCIAL INFORMATION > NOTESNOTE 37, CONT.during the same period. If the President resigns voluntarily, there is a six- In addition to itp or its equivalent, 13 members of the group (13) are affiliatedmonth period of notice with salary and pension benefits, but no severance pay. with the Saab plan, which is defined-contribution and vested. The Saab planThe President’s agreement contains a non-compete clause. provides pensions benefits over and above itp or its equivalent on salary levels between 20 and 30 basic amounts as well as on salary segments over 30 basicRemuneration to other senior executives amounts. The individuals themselves can decide on the payment term, thoughThe group of other senior executives included 13 individuals (13) in 2011, con- within the provisions of Swedish income tax law. Moreover, an insurance pol-sisting of the Executive Vice Presidents, heads of the business areas and heads icy finances the period between the ages of 60 or 62 years and 65 years.of Group staffs. Carina Brorman took over as the new Head of Group Com- The pension cost for Saab consists of pension premiums, which are basedmunications on 1 October. At the turn of 2011/2012, Group Management there- on a percentage of qualifying salaries. The percentage rate is determined byfore consisted of 14 persons, including the ceo. each executive’s time remaining until the pension age, 60 or 62 years, when The salaries paid to other senior executives consist of a fixed portion. The joining the plan. The aggregate insurance balance should cover a targetedprevious short-term variable portion has been discontinued as of 2011 in pension from 65 years of approximately 32.5 per cent of salary levels betweenaccordance with the resolution of the Annual General Meeting. Compensa- 20 and 30 basic amounts and approximately 50 per cent of segments over 30tion issues regarding the other senior executives are prepared by the Head of basic amounts of qualifying salaries. Premium payments continue as long asGroup Human Resources and presented to the President, who makes a deci- the individuals remain in their positions or as employees of the company.sion pending the approval of the Compensation Committee and the Board. Pension obligations are vested. In 2011, pension costs for other senior During the period November 2007 through October 2008, other senior executives, including itp and its equivalent, amounted to sek 16,127,093executives participated in the Saab Share Matching Plan approved by the 2007 (14,076,215). Other senior executives are entitled, or obliged if the companyAnnual General Meeting for all company employees. The Saab Share Match- so requests, to retire on pension as of the age of 60 or 62 years.ing Plan 2007 was concluded in November 2011. Since November 2008 all eli-gible executives have participated in the Saab Global Performance Share Plans Severance termsapproved by the Annual General Meetings in 2008, 2009 and 2010. Outstand- If terminated by the company, the group of other senior executives will receiveing matching rights in the Saab Global Performance Share Plan 2008 amount a salary and pension benefits for six months (period of notice). Thereafterto sek 0 (0) as of 31 December 2011, while the Saab Global Performance Share they will receive severance pay equivalent to 18 months of salary, based onPlan 2009 amounts to sek 2,373,575 (587,843) and the Saab Global Perfor- their fixed salary. Severance is paid monthly with the first payment in themance Share Plan 2010 amounts to sek 668,333 at a estimated outcome. month after employment has ended. Severance is not paid for the period that During the year, three members of Group Management received total falls after the contractual pension age. Employees hired before 1 January 2005variable cash remuneration of sek 2,393,866 before tax for their extraordinary who have reached the age of 55 are entitled to another six months of severance.performance in 2011. The salary during the period of notice and severance will be deducted In 2011, the other senior executives received salaries and other benefits from income received from other employment during the same period. Iftotalling sek 48,405,129 (37,880,302), of which other benefits, including per- they resign voluntarily, there is a six-month period of notice with salary andformance share plans, accounted for sek 4,112,686 (684,594). pension benefits, but no severance pay.Pension terms Other benefitsAs of 1 January 2005, a pension age of 62 years applies to new executives. All senior executives have a company car and medical insurance. Several sen-Among other senior executives, two individuals have a pension age of ior executives also have benefits in the form of overnight housing and travel.60 years.Summary of compensation and other benefits during 2011 Provisions 2011 for Base salary/ long-term variable Board and Variable Performance compensation at SEK Committee fee compensation Share Plan Other benefits 6) Pension cost Total estimated outcome Chairman of the Board Marcus Wallenberg 1,180,000 - - - - 1,180,000 - Deputy Chairman Sten Jakobsson 505,000 - - - - 505,000 - Other Board members 1) Åke Svensson 425,000 - - - - 425,000 - Johan Forssell 525,000 - - - - 525,000 - Per-Arne Sandström 575,000 - - - - 575,000 - Cecilia Stegö Chilò 425,000 - - - - 425,000 - Lena Treschow Torell 560,000 - - - - 560,000 - Joakim Westh 525,000 - - - - 525,000 - Michael O’Callaghan 7) - - - - - - - President and CEO Håkan Buskhe 4) 8,663,247 - 520,042 1,158,219 2) 3,187,551 13,529,059 535,647 4) 5) 3) Other senior executives 41,898,577 2,393,866 2,365,683 1,747,003 16,127,093 5) 64,532,222 3,041,908 Total 55,281,824 2,393,866 2,885,725 2,905,222 19,314,644 82,781,281 3,577,5551) Excluding consultant’s fee payed to member of the Board.2) Including benefits for air travel described in the administration report on page 68.3) Including remuneration to two senior executives, which, according to their contracts, was paid in the form of pension premiums.4) In addition, cash payments related to bonuses for 2010 were made in the amount of SEK 3,665,530.5) Including estimated remuneration allocated for seniors executives who leave Group Management in 2012.6) Including compensation for the additional costs the benefits lead to.7) Employed by BAE Systems. Resigned on June 16 2011, as a result of BAE System’s sale of its shareholding in Saab.Guidelines for remuneration and other benefits for senior executives are described in the financial review. SAAB ANNUAL REPORT 2011 115
  • 120. FINANCIAL INFORMATION > NOTESNOTE 37 CONT.Summary of compensation and other benefits during 2010 Provisions 2010 for Base salary/ long-term variable Board and Variable compensation at SEK Committee fee compensation Other benefits Pension cost Total estimated outcome Chairman of the Board Marcus Wallenberg 1,180 000 - - - 1,180,000 - Deputy Chairman Sten Jakobsson 425,000 - - - 425,000 - 1) Other Board members Åke Svensson - - - - - - Erik Belfrage 425,000 - - - 425,000 - Johan Forssell 525,000 - - - 525,000 - George Rose - - - - - Per-Arne Sandström 575,000 - - - 575,000 - Cecilia Stegö Chilò 425,000 - - - 425,000 - Lena Treschow Torell 560,000 - - - 560,000 - Joakim Westh 525,000 - - - 525,000 - President and CEO Åke Svensson 5,933,537 1,123,200 15,178 1,626,631 8,698,546 - President and CEO Håkan Buskhe 2,927,140 - 31,326 1,391,089 4,349,555 14,237 Other senior executives 34,534,548 2,661,160 684,594 14,076,215 51,956,517 1,210,056 Total 48,035,225 3,784,360 731,098 17,093,935 69,644,618 1,224,2931) Excluding consultant’s fee paid to Board member. NOTE 38 Obligations related to regional aircraft MSEK Group Parent CompanyPROVISIONS Opening balance, 1 January 2011 1,301 451 Group Amount utilised during the year -190 -131 MSEK 31-12-2011 31-12-2010 Translation differences and other 20 - Provisions that are long-term liabilities Closing balance, 31 December 2011 1,131 320 Obligations related to regional aircraft 1,119 1,199 Expenditures for restructuring measures 89 290 Expenditures for restructuring measures Loss contracts 245 401 MSEK Group Parent Company Other 275 317 Opening balance, 1 January 2011 544 248 Total 1,728 2,207 Provisions allocated during the year 76 50 Amount utilised during the year -316 -197 Provisions that are current liabilities Reversal of unutilised amount -83 -5 Obligations related to regional aircraft 12 102 Reclassification -17 -18 Expenditures for restructuring measures 115 254 Closing balance, 31 December 2011 204 78 Loss contracts 160 97 Other 459 339 Loss contracts Total 746 792 MSEK Group Parent Company Opening balance, 1 January 2011 498 490 Parent Company Provisions allocated during the year 182 142 MSEK 31-12-2011 31-12-2010 Amount utilised during the year -301 -293 Obligations related to regional aircraft 320 451 Reversal of unutilised amount -34 -21 Expenditures, for restructuring measures 78 248 Reclassification 52 40 Loss contracts 358 490 Translation differences and other 7 - Other 278 276 Closing balance, 31 December 2011 404 358 Total 1,034 1,465116 SAAB ANNUAL REPORT 2011
  • 121. FINANCIAL INFORMATION > NOTESNOTE 38, CONT.Other provisions NOTE 39MSEK Group Parent Company OTHER LIABILITIESOpening balance, 1 January 2011 656 276 GroupProvisions allocated during the year 306 147 MSEK 31-12-2011 31-12-2010Amount utilised during the year -194 -137 Other long-term liabilitiesReversal of unutilised amount -20 -5 Long-term prepaid revenue 49 82Reclassification 8 -3 Other 390 212Translation differences and other -21 - Total 439 294Closing balance, 31 December 2011 735 278 Other current liabilitiesTotal provisions Liabilities to associated companies 6 21MSEK Group Parent Company Value-added tax 240 358Opening balance, 1 January 2011 2,999 1,465 Withholding tax 129 163Provisions allocated during the year 564 339 Deposits in leasing operations 31 17Amount utilised during the year -1,001 -758 Other 341 260Reversal of unutilised amount -137 -31 Total 747 819Reclassification 43 19Translation differences and other 6 - Liabilities due for payment more than five years after closing day 32 133Closing balance, 31 December 2011 2,474 1,034Regional aircraft Parent CompanyCommitments regarding regional aircraft refer to anticipated deficits related MSEK 31-12-2011 31-12-2010to lease agreements. Saab expects the leasing portfolio to be divested around Value-added tax 163 2972015. Withholding tax 73 110Restructuring Other 251 264Structural costs primarily relate to the costs to adapt resources and change- Total 487 671over costs. The expenditure is expected to fall in 2012-2015.Project losses Liabilities due for payment more than five yearsProvisions for project losses on the closing day primarily relate to Helicop- after closing day 12 -ter 14, command and control projects and certain other military projects. Theprovisions are utilised in pace with the project’s completion. Other liabilities in the Parent Company include both interest-bearing and non-interest-bearing liabilities. For a comparison with the Group, see alsoOther provisions Note 35.Other provisions primarily relate to provisions for guarantees and remaining Saab does not consider there to be a significant difference between bookcosts in projects as well as for environmental commitments. and fair value. SAAB ANNUAL REPORT 2011 117
  • 122. FINANCIAL INFORMATION > NOTES NOTE 40 NOTE 41ACCRUED EXPENSES AND DEFERRED INCOME FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS Group Parent Company Saab’s financial assets and liabilities and contractual obligations give rise to financial risks. These risks are managed to a large extent with various finan-MSEK 31-12-2011 31-12-2010 31-12-2011 31-12-2010 cial instruments.Accrued expenses Financial risk managementAccrued project costs 1,620 782 1,134 451 The Board of Directors of Saab has approved a Group Treasury Policy, whichVacation pay liability 787 807 584 607 provides an overall description of the management of financial risks andExpected invoices 467 382 419 296 treasury operations. The goal is to identify and actively manage financial risksSocial security expenses 444 475 321 357 in order to reduce the negative impact on the Group’s results, competitive strength and financial flexibility.Personnel liabilities 238 246 171 186Accrued leasing costs 103 135 - - The financial risks are defined as follows:Cost of customer commit- Foreign currency riskments in regional aircraft 95 108 95 108 Interest rate riskClaims reserve 57 67 2 4 Liquidity and financing risk Commodity riskRoyalties and commissions 35 28 22 16 Credit and counterparty riskAccrued interest 23 37 23 56Other 223 228 50 111 Saab uses derivatives primarily to: convert anticipated commercial cash flows in foreign currency to sekTotal accrued expenses 4,092 3,295 2,821 2,192 convert borrowings in sek, or surpluses in sek, to the currencies in which assets are denominated (primarily relates to aircraft that SaabDeferred income owns in its leasing fleet) convert the fixed interest periods in leases to coincide with leasingLiabilities to customers 4,038 3,883 3,628 3,437 revenue and the desired fixed interest rates for other assets and liabili-Prepaid insurance tiescompensation 417 486 - -Retained project interest 12 27 12 27 Responsibility for managing the Group’s financial risks and developing meth-Capitalised changes in value ods and principles to manage financial risks is centralised in Group Treasury.related to forward contract The operating business areas have directives and processes that describe howrollovers - - 578 598 financial risks are managed. Furthermore, Group Management has issuedOther 70 60 67 51 detailed directives and guidelines for Group Treasury’s operations. Management of insurance is centralised in the Group’s insurance com-Total deferred income 4,537 4,456 4,285 4,113 pany, Lansen Försäkrings ab, where external transactions are handled as well. Customer finance, guaranty and finance issues are also managed byTotal 8,629 7,751 7,106 6,305 Group Treasury. The Group’s internal bank, Saab Treasury, is responsible for the Group’sSaab does not consider there to be a significant difference between book and cash management, financing, management of interest rate and currency risksfair value. and also electricity risks. Saab has an agreement with an external party to manage the Group’s electricity risks through discretionary management. Other commodity risk is managed primarily through contractual clauses. To a limited extent, the Group Treasury Policy allows proprietary trading in currency and fixed income derivatives. The main purpose of this trading is to gain access to qualitative market information and maintain a high level of market expertise. Saab Treasury has a risk mandate expressed as VaR (Value at Risk) of msek 50 (50), which is divided between trading and management of economic risks, expressed primarily in the Tender to Contract portfolio. During the year, approximately msek 10 was allocated to the trading portfolio and approximately msek 40 to the Tender to Contract portfolio.VaR is a probability-based method based on historical price fluctuations and correla- tions and is considered a standard in the financial industry. The method pro- vides a measure of the probability of the maximum loss over a specific num- ber of days. Saab uses three days and a 99-per cent probability. The Treasury Risk Analysis unit reports each portfolio’s risk defined according to estab- lished risk measures to Group Management on a daily basis. Financial instruments Financial assets in the Group mainly comprise accounts receivable, accrued income, interest-bearing receivables, liquid assets, fixed income investments and derivatives with positive market values. Saab’s financial liabilities mainly comprise interest-bearing liabilities, accounts payable, accrued expenses and derivatives with negative market values. The following tables show a sub- divided statement of financial position categorised and classified according to ias 39. A more detailed description of the categories can be found in note 1, Accounting principles.118 SAAB ANNUAL REPORT 2011
  • 123. FINANCIAL INFORMATION > NOTESNOTE 41, CONT. Fair value Designated Loans Derivatives Derivatives through as at fair Held-to- receivable identified identified profit and value through maturity and as cash as fair Total financialClassification and categorisation of loss for profit and invest- accounts Financial flow value assets Measured atfinancial assets and liabilities trading loss ments receivable liabilities hedges hedges and liabilities fair value2011Financial assetsFinancial investments - 54 143 - - - - 197 199Long-term receivables - - - 1,046 - - - 1,046 1,046Derivatives Forward exchange contracts 15 - - - - 430 21 466 466 Currency options 29 - - - - - - 29 29 Interest rate swaps 1 - - - - - - 1 1 Electricity derivatives 23 - - - - 1 - 24 24Total derivatives 68 - - - - 431 21 520 520Accounts receivable and other receivables - - - 7,136 - - - 7,136 7,136Short-term investments - 4,555 - - - - - 4,555 4,555Liquid assets - - - 1,918 - - - 1,918 1,918Total financial assets 68 4,609 143 10,100 - 431 21 15,372 15,372Financial liabilitiesInterest-bearing liabilities - - - - 1,738 - - 1,738 1,751Derivatives Forward exchange contracts 15 - - - - 492 8 515 515 Currency options 43 - - - - - - 43 43 Interest rate swaps 31 - - - - - - 31 31 Electricity derivatives 22 - - - - 17 - 39 39Total derivatives 111 - - - - 509 8 628 628Other liabilities - - - - 6,201 - - 6,201 6,201Total financial liabilities 111 - - - 7,939 509 8 8,567 8,5802010Financial assetsFinancial investments - 56 147 - - - - 203 203Long-term receivables - - - 856 - - - 856 856Derivatives Forward exchange contracts 88 - - - - 801 21 910 910 Currency options 24 - - - - - - 24 24 Interest rate swaps 80 - - - - - - 80 80 Electricity derivatives - - - - - 74 - 74 74 Other derivatives 17 - - - - - - 17 17Total derivatives 209 - - - - 875 21 1,105 1,105Accounts receivable and other receivables - - - 6,883 - - - 6,883 6,883Short-term investments - 1,544 - - - - - 1,544 1,544Liquid assets - - - 2,544 - - - 2,544 2,544Total financial assets 209 1,600 147 10,283 - 875 21 13,135 13,135Financial liabilitiesInterest-bearing liabilities - - - - 1,706 - - 1,706 1,714Derivatives Forward exchange contracts 57 - - - - 504 14 575 575 Currency options 8 - - - - - - 8 8 Interest rate swaps 84 - - - - 39 - 123 123 Electricity derivatives - - - - - 44 - 44 44Total derivatives 149 - - - - 587 14 750 750Other liabilities - - - - 5,078 - - 5,078 5,078Total financial liabilities 149 - - - 6,784 587 14 7,534 7,542 SAAB ANNUAL REPORT 2011 119
  • 124. FINANCIAL INFORMATION > NOTESNOTE 41, CONT.Outstanding derivativesCurrency derivatives Fair value 2011 Fair value 2010 Cur- Nominal Liability Nominal LiabilityMillion rency currency Asset SEK SEK Net currency Asset SEK SEK NetMaturity up to one year EUR -299 160 46 114 -255 224 87 137 USD -342 57 160 -103 -310 202 126 76 Other - 67 79 -12 - 166 80 86Outstanding currency derivatives with maturitiesup to one year, total 284 285 -1 592 293 299Maturity one to three years EUR -119 78 39 39 -160 149 37 112 USD -186 46 115 -69 -142 59 125 -66 Other - 12 17 -5 - 57 45 12Outstanding currency derivatives with maturitiesof one to three years, total 136 171 -35 265 207 58Maturity three to five years EUR -32 22 11 11 -36 28 17 11 USD -172 27 49 -22 -143 27 48 -21Outstanding currency derivatives with maturitiesof three to five years, total 49 60 -11 55 65 -10Maturity over five years EUR -30 20 - 20 -19 18 3 15 USD -59 7 15 -8 -139 24 21 3Outstanding currency derivatives with maturities overfive years, total 27 15 12 42 24 18Currency derivatives, total1) 496 531 -35 954 589 3651) Retained premiums on open contracts amount to MSEK 28 (13).Interest derivatives Fair value 2011 Fair value 2010 Cur- Nominal Liability Nominal LiabilityMillion rency currency Asset SEK SEK Net currency Asset SEK SEK NetMaturity up to one year SEK 600 - 4 -4 200 - 3 -3 USD - - 2 -2 - - - -Outstanding interest derivatives with maturitiesup to one year, total - 6 -6 - 3 -3Maturity one to three years SEK 1,021 1 22 -21 1,256 2 5 -3 NOK - - - - 500 104 111 -7 USD - - - - 10 - 9 -9Outstanding interest derivatives with maturitiesof one to three years, total 1 22 -21 106 125 -19Maturity three to five years SEK 100 - 6 -6 150 1 1 - USD 20 - 16 -16 25 - 24 -24Outstanding interest derivatives with maturitiesof three to five years, total - 22 -22 1 25 -24Maturity over five years SEK - - - - 30 1 - 1Outstanding interest derivatives with maturities overfive years, total - - - 1 - 1Interest derivatives, total2) 1 50 -49 108 153 -452) Market value includes accrued interest of MSEK -19 (-17) and retained premiums on open contracts of MSEK -0 (-1).Electricity derivatives Fair value 2011 Fair value 2010 Mega- Liability Mega- LiabilityMillion watt Asset SEK SEK Net watt Asset SEK SEK NetMaturity up to one year 15 24 34 -10 17 66 42 24Outstanding electricity derivatives with maturitiesup to one year, total 24 34 -10 66 42 24Maturity one to three years 14 - 5 -5 16 8 2 6Outstanding electricity derivatives with maturitiesof one to three years, total - 5 -5 8 2 6Electricity derivatives, total 24 39 -15 74 44 30DERIVATIVES, TOTAL 521 620 -99 1,136 786 350(of which derivatives used for cash flow hedges) - - -78 - - 288Accrued interest and retained premiums, see Notes 1 and 2 above -9 - -9 - -5 5Netting accrued interest and premiums 8 8 - -31 -31 -DERIVATIVES ACCORDING TO GROUP’S FINANCIAL POSITION 520 628 -108 1,105 750 355120 SAAB ANNUAL REPORT 2011
  • 125. FINANCIAL INFORMATION > NOTESNOTE 41, CONT.Foreign currency risk Transaction exposureThe Group hedges the entire order backlog with the help of currency deriva- Future cash flows in foreign currency from the order backlog and frameworktives. As a result, changes in exchange rates do not affect the Group’s future agreements are hedged to safeguard gross margins. In 2011, countries outsideresults with respect to the current order backlog. Future order bookings are Sweden accounted for 63 per cent (62) of Saab’s sales. Since a large part ofexposed to fluctuations in exchange rates in terms of competitive strength. production takes place in Sweden with expenses denominated in sek, SaabThis is managed partly by Group Treasury, which hedges the economic expo- has large net flows in foreign currency.sure in fixed price tenders. The order backlog contains contracted flows and therefore constitutes a transaction exposure. The predominant contract currencies in the orderDefinitions backlog of sek 37.2 billion (41.5) are sek, usd, eur and gbp. Of the total orderForeign currency risk refers to the risk that fluctuations in exchange rates will backlog, 63 per cent (70) is in fixed prices with or without indexing, while thenegatively affect income. Exchange rate fluctuations affect Saab’s income and remaining 37 per cent (30) contains variable prices with index and/or cur-equity in various ways: rency clauses. Income is affected when sales revenue and the cost of goods and services Netting is applied at the Group level to minimise the transaction expo- sold are in currencies other than the functional currency (economic and sure in foreign currencies, i.e., incoming currency is utilised to pay for pur- transaction exposure) chases in the same currency. Currency clauses or transactions in the cur- Income is affected when the income of foreign Group companies is rency market with forward exchange contracts as hedging instruments are translated to sek (translation exposure) used as well. Hedges are normally arranged for each specific contract. The Income or equity is affected when the assets and liabilities of foreign average forward rate is then used as the contract’s rate of revenue recogni- Group companies are translated to sek (translation exposure) tion. Income can be affected by impairment tests of non-hedged future cash An analysis has been made of the currency sensitivity of the market flows in foreign currency in unprofitable contracts (impairment testing) value of outstanding external hedges for the order backlog and framework agreements. The effect of a change in exchange rates in the net result of cashSaab distinguishes between the above-mentioned types of exposure. Policy flow hedges (pre-tax) where the sek depreciates (making foreign currencydescriptions are provided under each exposure. more expensive) or appreciates is shown in the following table. Framework agreements, which contain both transaction and economicexposures, are in place mainly for various civil aeronautics programmes. Market value SEK depreciation SEK appreciation 31-12-2011 of 10% of 10%Economic exposure Market value in MSEK -45 -880 790Fixed-price tenders in foreign currency entail a foreign currency risk thatconsitutes an economic exposure. The risk is limited primarily through con- Change -835 835tract formulations (foreign currency clauses) or by bidding in the same cur-rency as the Group unit’s expenses. The currency sensitivity in the order backlog is shown in the table below, i.e., In cases where fixed-price tenders are issued in foreign currency, the net the effects of a changes in exchange rates when the krona depreciates orexposure is hedged with financial instruments. The foreign currency risk that appreciates in value. In the table, the order backlog for foreign subsidiariesarises for tenders are managed by Saab Treasury within the framework of the has been restated to msek.Tender to Contract portfolio. The purpose of the portfolio is to minimise theGroup’s foreign currency risk during the tender period and reduce hedging Order backlog SEK depreciation SEK appreciationcosts. The following table shows outstanding nominal net hedges by currency 31-12-2011 of 10% of 10%as of year-end. Order backlog, MSEK 37,172 37,508 36,837 Forward contracts1) Options2) Total hedge Change 336 -336Net hedges(million) 2011 2010 2011 2010 2011 2010 Hedge accounting according to ias 39 is applied to derivatives intended toUSD 6 -79 -177 -63 -171 -142 hedge the transaction exposure. The inefficiency in the cash flow hedges thatEUR -31 -43 -88 -49 -119 -92 affected net income for the year amount to msek 1 (4).GBP -6 -20 -11 -29 -17 -49CAD - - -37 - -37 -CZK 35 - - - 35 -THB -1,382 -1,060 - -500 -1,382 -1,5601) Also contains sold call and put options.2) Refers to the net of purchased call and put options.The tender insurance portfolio is governed by a risk measure based on aprobability-weighted VaR measure consisting of two parts. One part is theVaR measure for the internal hedges multiplied by the estimated probabilityof receiving the tenders. The other part relates to VaR for external hedges. Arisk-neutral situation is defined as one where the sum of the probability-weighted internal VaR measure and the external VaR measure amounts tonil, which means that the probability-weighted amount is hedged externally. The VaR for tender hedges amounted to msek 24 (23) at year-end. Hedgeaccounting is not applied to the portfolio’s hedges, due to which the Group’sresults are affected by the outcome of the tenders and the exchange rate forthe underlying currency pair. The portfolio’s effect on the Group’s result in2011 was msek -32 (57). SAAB ANNUAL REPORT 2011 121
  • 126. FINANCIAL INFORMATION > NOTESNOTE 41, CONT.The table below shows the cash flows corresponding to the derivatives recognisedas cash flow hedges in 2011 and 2010 expressed in millions in local currency.Cash flow hedges by currency CZK EUR GBP NOK THB USD ZAR Out- In- Out- In- Out- In- Out- In- Out- In- Out- In- Out- In-Million flow flow Net flow flow Net flow flow Net flow flow Net flow flow Net flow flow Net flow flow Net< 90 days -19 58 39 -43 116 73 -22 52 30 -2 5 3 -8 309 301 -91 199 108 -63 38 -2591-180 days -15 32 17 -26 65 39 -9 29 20 -1 2 1 -4 359 355 -36 97 61 -16 2 -14181-210 days - 4 4 -8 55 47 -7 21 14 -6 - -6 - 22 22 -14 46 32 -12 - -12211-360 days - 19 19 -12 39 27 -8 19 11 - 1 1 -34 280 246 -23 54 31 -13 - -132013 - 25 25 -31 115 84 -5 29 24 - - - - 988 988 -66 167 101 -25 1 -242014 - 6 6 -20 50 30 - 8 8 - - - - 392 392 -13 111 98 - - -2015 - 4 4 -9 23 14 - - - - - - - - - -2 91 89 - - -2016 - - - -3 13 10 - - - - - - - - - - 86 86 - - -2017 and forward - - - -1 25 24 - - - - - - - - - - 61 61 - - - Total flows 2011 -34 148 114 -153 501 348 -51 158 107 -9 8 -1 -46 2,350 2,304 -245 912 667 -129 41 -88 Total flows 2010 -61 161 100 -230 585 355 -114 232 118 -15 6 -9 - - - -439 1,120 681 -154 70 -84Translation exposure Impairment testsThe translation exposure in the Group relates to the operations of foreign Long-term contracts in commercial aircraft programmes consist of an ordersubsidiaries. Saab Aircraft Leasing’s operations in Sweden have their eco- backlog and estimated future orders (business case) with cash flows primarilynomic environments in usd (functional currency) and are translated from in usd. Cash flows from the latter are normally hedged when they becomethe functional currency to sek. The translation exposure comprises net assets confirmed orders. In connection with impairment tests of loss contracts, in-in foreign currency and arises in connection with acquisitions and divest- come is affected by the revaluation of future cash flows at spot rates. Largerments. The value of equity subject to translation exposure amounted to changes in exchange rates, primarily in usd against sek, have a significantmsek 2,704 (2,247) at year-end; see the table below: impact on income. This exposure is not hedged.Net assets translated to SEK Interest rate risksMSEK 31-12-2011 31-12-2010 Interest rate risk refers to the risk that Saab will be negatively affected by changes in interest rate levels.USD 1,861 727EUR 33 56 Interest rate risk has been identified in the following areas:AUD 470 465 Saab is exposed to interest rate risk when the market value of certain items in the statement of financial position is affected by changes inZAR 573 664 underlying interest rates. Large such items refer to pension obligationsOther currencies 433 335 and leasing operations.Total 3,370 2,247 Saab’s net financial items are affected by changes in market rates. Interest rate effects on advance financing affect gross income.The effect on net assets of a change in exchange rates where the krona depre- Interest rate risks in the Group’s financial investments are managed based onciates or appreciates is shown in the table below. high liquidity and a duration of 12 months, with the option of deviating bySensitivity analysis of net assets +/– 12 months. As of year-end, the duration for investments was 18 months (4). Interest rate risks in the Group’s funding are managed based on a bench- Net assets SEK appreciation SEK depreciationMSEK 31-12-2011 of 10% of 10% mark with an 18-month duration, with the option of deviating by +/–18 months. As of year-end, the duration for financing was 14 months (18).USD 1,861 1,675 2,047 Interest rate futures and swaps are used for interest risk management toEUR 33 30 36 achieve the desired duration in the financing. For a sensitivity analysis, seeAUD 470 423 517 also under liquidity and financing risk. Lending to subsidiaries in foreign currency is normally financed in sek, which is converted to the subsidiary’sZAR 573 516 630 currency through swaps. Interest rate swaps in usd are used mainly for inter-Other currencies 433 391 476 est risk management in the leasing portfolio, where the interest rate risk isTotal 3,370 3,035 3,706 fully matched. The pension liability, the present value of future pension obligations, is the largest interest rate risk due to the liability’s long duration; see also theThe foreign currency risk to the Group’s income and equity from translation Saab Pension Fund.effects – the translation exposure – is not hedged according to the GroupTreasury Policy.122 SAAB ANNUAL REPORT 2011
  • 127. FINANCIAL INFORMATION > NOTESNOTE 41, CONT.Liquidity and financing risks MSEK Note 31-12-2011 31-12-2010Liquidity and financing risk refers to the risk that the company will not beable to meet its payment obligations due to insufficient liquidity or difficulty Liabilitiesraising external loans on acceptable terms. Short-term interest-bearing liabilities 35 520 589 According to the Group Treasury Policy, Saab must always maintain unu- Long-term interest-bearing liabilities 35 1,218 1,117tilised credit facilities or liquid assets corresponding to the higher of (but notless than msek 3,000): Provisions for pensions 37 12 5 Total interest-bearing liabilities 1,750 1,711 commitments NET LIQUIDITY 5,333 3,291Liquidity and financing risks are minimised by diversifying financingsources and maturities. As of 31 December 2011, net liquidity amounted to msek 5,333 (3,291) with an Saab’s policy is to insure on-demand guarantees for major projects average during the year of msek 4,560 (890). The net of interest expensesagainst unauthorised use. This applies to contracts where the counterparty is paid and interest income received amounted to msek -70 (-89). Of the liquidclassified as a developing country according to the definition of the Export investments of msek 6,473 (4,088), msek 10 (10) was pledged as trading secu-Credits Guarantee Board (ekn). Insurance can be obtained from state guar- rity to omx. The sensitivity analysis below shows the effect on income of anantee institutions or the private insurance market. increase in market interest rates and the credit margin of 1 basis point for Saab’s investments.Saab has access to the following credit facilities:Loan facilities Placements in interest-bearing securities and bank depositsMSEK Facility Utilised Available Sensitivity analysis of financial riskClub loan (matures 2016) 4,000 - 4,000 Effect of Effect of market in- credit Effect onTotal confirmed credit facilities 4,000 - 4,000 MSEK Fixed terest rate, Tied-up spread, financial Maturities interest 1% capital 1% costsCommercial paper 5,000 - 5,000 1 year 2,632 26 1,992 20 46Medium Term Notes (MTN) 3,000 1,100 1,900 2 years 1,348 13 1,785 18 31Receivables financing 1,515 872 643 3 years 697 7 900 9 16Total loan programmes 9,515 1,972 7,543 4 years 730 7 730 7 14 5 years andTotal loan facilities 13,515 1,972 11,543 forward - - - - - Total 5,407 53 5,407 54 107The club loan was renegotiated and extended one year before expiration. The Adjustment 1) 231 - - - -club loan is a credit facility with an equivalent value of msek 4,000 evenlydivided between eight banks and expiring in 2016. No financial covenants are Total 5,638 - - - -attached to the club loan or the other credit facilities. 1) Adjustment of nominal value compared to book value due to market valuation at a premium or discount. A commercial paper programme with a limit of msek 5,000 is available aswell. Neither the commercial paper programme nor the club loan were used Current interest-bearing liabilities mainly consist of liabilities to joint ven-in 2011. tures of msek 449 (428). Long-term interest-bearing liabilities amount to In 2009, Saab established a Medium Term Note programme (mtn) with a msek 1,218 (1,117) and mainly consist of mtns in issue. Of the long-term inter-limit of msek 3,000 or an equivalent value in eur. The mtn programme pro- est-bearing liabilities, msek 1,128 (1,100) matures within 1-5 years andvides access to financing for up to 15 years, which is an element in diversifying msek 90 (17) in more than 5 years.loan maturities. The maturity structure of liabilities to credit institutions is indicated in During the year, the entire shareholding in Aker Holding as was divested the tied-up capital column of the “Sensitivity analysis of financial risk” table.and related loans of mnok 975 and derivatives were repaid. The volume of tied-up capital includes interest rate swaps. The interest rate risk in the loans given a 1 basis point parallel shift in the yield curve wasNet liquidity msek 21 (25) as of 31 December 2011. The sensitivity analysis below shows theNet liquidity excluding interest-bearing receivables and provisions for impact on results of an increase in market interest rates and an equally largepensions amounted to msek 4,735 (2,382) on 31 December 2011. Liquidity var- increase in the credit margin of 1 basis point for Saab’s refinancing of credits.ied during the year, and surplus liquidity was placed as per the Group Treas-ury Policy. At year-end, placements in interest-bearing securities and bank Financing (refers to utilised credit facilities)deposits amounted to msek 5,638 (3,374). Sensitivity analysis of financial risk Effect of Effect ofNet liquidity market in- credit Effect onMSEK Note 31-12-2011 31-12-2010 MSEK Fixed terest rate, Tied-up spread, financial Maturities interest 1% capital 1% costsAssets 1 year -1,472 -15 -872 -9 -24Liquid assets 31 1,918 2,544 2 years -250 -3 -1,100 -11 -14Short-term investments 25 4,555 1,544 3 years -150 -2 - - -2Total liquid investments 6,473 4,088 4 years -100 -1 - - -1Short-term interest-bearing receivables 27 368 617 5 years and forward - - - - -Long-term interest-bearing receivables 27 99 150 Total -1,972 -21 -1,972 -20 -41Long-term interest-bearing financial investments 25 143 147Total interest-bearing assets 7,083 5,002 SAAB ANNUAL REPORT 2011 123
  • 128. FINANCIAL INFORMATION > NOTESNOTE 41, CONT.Commodity risksPrice risks are divided into two parts: The following table shows an age analysis of the Group’s overdue receivables: Commodity price risk refers to the risk that purchasing costs for MSEK 31-12-2011 31-12-2010 material will rise. Electricity price risk refers to the risk that Saab could be negatively <30 days 221 265 affected by changes in electricity prices. 30 to 90 days 393 225 91 to 180 days 303 52According to the Group’s policy, commodity risk is minimised and managedprimarily through contract clauses with customers/suppliers. To minimise >181 days 125 102the risk to Saab’s operating margin, future electricity consumption is hedged. Accounts receivable overdue 1,042 644This is done by hedging projected consumption according to a model where Accounts receivable not overdue 2,111 2,408100 per cent of the next quarter’s consumption is hedged. The hedging level Total accounts receivable 3,153 3,052then drops on a straight-line basis to 0 per cent in quarter 13. Swedish unitsconsume around 156 GWh per year with a spot price risk of msek 1.6 perevery time the price of electricity changes by sek 0.01. Electricity directives Since accounts receivable are largely secured via bank or insurance guaran-are managed through a discretionary management mandate, where the man- tees or are from states, the commercial credit risk is low despite overdueager has the mandate to accept risks in relation to benchmarks (hedging receivables.strategy) at the equivalent of msek 1 (1) expressed in VaR. The market value ofelectricity derivatives as of year-end was msek -15 (30). After the introduction Advances paid to suppliersof additional price areas in Sweden on 1 November 2011, the name sto was Advances paid to suppliers constitute a credit risk, since the counterparty’schanged to se3. Since 1 January 2010, electricity derivatives are used as cash services have not been fully rendered. As of 31 December 2011, the Group hadflow hedges for the Stockholm price area (se3). The ineffectiveness that paid its suppliers advances of msek 139 (282). As the Group’s policy is toaffected net income for the year amounted to msek 1 (-1). maintain bank-guaranteed security for any advances it pays, the commercial supplier credit risk is considered low.Credit and counterparty risksCredit risk is the risk that the counterparty in a transaction will not be able to Financial credit risksfulfill the financial obligations of a contract. In the course of its day-to-day Financial credit risk consists of exposures to banks through deposits, securi-operations, Saab is exposed to credit risks as a result of transactions with ties investments and/ or the market value of outstanding derivatives.counterparties in the form of customers, suppliers and financial players. TheGroup’s aggregate credit risks consist of commercial credit risks and financial The Group’s policy for managing financial credit risks is to:credit risks. Ensure that all financial counterparties have a long-term credit rating of no lower than A from Standard and Poor’s or A3 from Moody’sCommercial credit risks Assign each financial counterparty a credit limit based on its long-According to the Group’s policy, commercial credit risks are identified and term credit ratingactively managed on a case-by-case basis. Credit risks that arise in customer Enter into isda master agreements with financial counterparties tocontracts are managed by utilising available banking, insurance or export net the positive and negative market values of outstanding derivativescredit institutions. According to the policy, credit risks that arise throughadvances paid to suppliers are managed by always maintaining bank-guaran- Credit risk is calculated on established and anticipated risks according to theteed security for any advances. Commercial credit risks consist of outstand- recommendations of the Bank of International Settlements (bis I). On 31ing accounts receivable and advances paid to suppliers. December 2011, counterparty risks amounted to msek 5,859 (4,100), of which deposits with banks, mortgage institutions, companies and the Swedish stateAccounts receivable totalled msek 5,651 (3,300).On 31 December 2011, the Group’s outstanding accounts receivable amountedto msek 3,153 (3,052). The Receivables Financing Programme reduced Tradingaccounts receivable at year-end by approximately msek 872 (1,409). Defence- The Board has given Saab Treasury a risk mandate for trading in currencyrelated sales accounted for 84 per cent (83) of total sales, where the counter- and money market instruments. During the year, msek 10 was allocated toparties in most accounts receivable are nations with high creditworthiness. trading expressed according to VaR. If the cumulative result for the year isThe Group’s receivables are mainly in the EU, which accounted for 48 per cent negative, the mandate is reduced correspondingly. In 2011, trading income(51) of the total. Where counterparties’ creditworthiness is deemed unsatisfac- was msek 32 (35), which is reported as other operating income. The averagetory, bank or insurance guarantees or guarantees from ekn are secured. utilised risk mandate (VaR) during the year was msek 3 (1). In connection with cash transactions, Saab generally requires that a letterof credit is opened in its name to ensure that payment is received. Hedge accounting Write-downs of accounts receivable amounted to msek 19 (22), corre- Hedge accounting to fair value is applied to foreign exchange contracts andsponding to 0.5 per cent (0.5) of total accounts receivable. Write-downs of currency swaps, primarily for derivatives entered into before 31 Decemberaccounts receivable have changed as follows. 2006. The market value of currency derivatives accounted for as fair value hedges and the market value of hedged items are indicated in the table below.MSEK 2011 2010 For information on the impact on net income for the year of gains and losses on derivatives accounted for as fair value hedges, see Note 6 Other operatingWrite-downs, 1 January -22 -32 expenses.Write-downs for calculated losses -5 -12Reversal of previous write-downs 3 15 Hedge accouting to fair value, MSEK 2011 2010Actual credit losses 5 7 Foreign currency risk in order backlog (hedged item) -13 -7Write-downs, 31 December -19 -22 Currency derivatives (hedging instrument) 13 7 Cash flow hedges are applied to forward exchange contracts and currency swaps entered into after 31 December 2006 and to electricity derivatives. Cash flows hedges are expected to affect profit and loss in the period hedged cash flows occur, with the exception of those related to the manufac-124 SAAB ANNUAL REPORT 2011
  • 129. FINANCIAL INFORMATION > NOTESNOTE 41, CONT.turing of inventory, which affect profit and loss on the day delivery is made to Pension fundthe customer. The hedge reserve before tax amounted to msek 621 (872), of The Saab Pension Fund was established in 2006 to secure the main part of thewhich the value of derivatives was msek -78 (288) and the effects arising from Group’s pension obligation and is not consolidated in the Group.rollovers of derivatives were msek  699 (584). The fund has a long-term real yield requirement of 4 per cent per year. The change in the hedge reserve in 2011 of msek -251 consists of a reversal The investment policy requires an asset distribution of a maximum of 50 perto profit or loss of msek -278, the change in the value of existing derivatives of cent equities/alternative investments (hedge funds) and 50-100 per centmsek -13, the market value of hedges obtained during the year of msek -75, interest-bearing instruments. Investments are made in interest-bearing secu-and the change that arose due to the extension of derivatives of msek 115. For rities from issuers with a credit rating of no lower than bbb(Baa) according toinformation on the amount recognised in other comprehensive income, see Standard & Poor’s and Moody’s. Of the fund’s capital at year-end, 53 per centconsolidated net comprehensive income. (50) was invested in interest-bearing assets and the remaining 47 per cent The inefficiency in cash flow hedges that affected net income for the year (50) in equity and alternative investments. The market value of the fund’samounted to msek 2 (3). assets as of 31 December 2011 was msek 4,050 (3,969) and the annual return was 0 per cent (7). In 2011, the fund was capitalised by msek 105 (124) andValuation methods for financial assets and liabilities msek 3 (16) in refunds were paid. The table below shows the solvency marginThe fair value of listed financial assets is determined using market prices. for the pension fund.Furthermore, Saab applies various valuation methods to determine the fairvalue of financial assets that are traded on an inactive market or are unlisted MSEK 31-12-2011 31-12-2010 31-12-2009 31-12-2008holdings. These valuation methods are based on the valuation of similarinstruments, discounted cash flows or customary valuation methods such as Fair value of assets under management 4,050 3,969 3,609 3,082Black-Scholes. Present value of defined- benefit obligations1) 5,866 4,675 5,002 4,432The following instruments were valued at fair value (unadjusted) on an activemarket on the closing date (Level 1): Solvency margin 69% 85% 72% 70% Bonds Pension obligation accord- Electricity derivatives ing to PRI 4,489 4,042 3,844 3,678 Interest derivatives Solvency margin 90% 98% 94% 84% 1) Refers to the pension obligation that the assets under management are designed to cover.The following instruments are valued at fair value according to accepted valu-ation models based on observable market data (Level 2): Forward exchange contracts: Future payment flows in each cur- rency are discounted by current market rates to the valuation day and NOTE 42 valued to sek at year-end exchange rates Options: The Black-Scholes option pricing model is used in the mar- ASSETS PLEDGED AND CONTINGENT LIABILITIES ket valuation of all options Group Parent Company Interest swaps: Future variable interest rates are calculated with the help of current forward rates. These implicit interest payments are dis- MSEK 31-12-2011 31-12-2010 31-12-2011 31-12-2010 counted on the valuation date using current market rates. The market Assets pledged for own value of interest rate swaps is obtained by contrasting the discounted liabilities and provisions variable interest payments with the discounted present value of fixed Chattel mortgages - 100 - 100 interest payments Bonds and other securities 10 10 10 10Unlisted shares and participations: Valued according to accepted principles, Total 10 110 10 110e.g., for venture capital firms (Level 3). As of 31 December 2011, the Group had the following financial assets and Contingent liabilitiesliabilities at fair value: Guarantees to insurance company, FPG/PRI 90 81 90 81Assets at fair value Guarantees for GroupMSEK 2011 Level 1 Level 2 Level 3 companies’ commitments to customers - - 5,336 5,164Bonds and interest-bearingsecurities 4,555 4,555 - - Contingent liabilities related to legal dispute1) 301 302 301 302Forward exchange contracts 466 - 466 - Sureties for joint ventures 6 6 - -Currency options 29 - 29 - Sureties for associatedInterest rate swaps 1 - 1 - companies 8 2 102 371Electricity derivatives 24 24 - - Total 405 391 5,829 5,918Shares and participations 54 - - 54 1) Saab has an ongoing legal dispute in Denmark with the Danish Defence Acquisition and Logistics Organization (DALO). The Maritime and Commercial Court in Copenhagen issued a judgment dismissing DALO’s claim againstTotal 5,129 4,579 496 54 Saab. DALO has filed an appeal against the judgment. DALO’s counterclaim amounts to approximately MDKK 250.Liabilities at fair valueMSEK 2011 Level 1 Level 2 Level 3Forward exchange contracts 515 - 515 -Currency options 43 - 43 -Interest rate swaps 31 - 31 -Electricity derivatives 39 39 - -Total 628 39 589 - SAAB ANNUAL REPORT 2011 125
  • 130. FINANCIAL INFORMATION > NOTESNOTE 42, CONT.The table below shows the total sum of guarantees that do not represent con- NOTE 44tingent liabilities and a distribution by category and issuer. GROUP COMPANIES Significant Group company holdings per cent of per cent ofMSEK 31-12-2011 total 31-12-2010 total Ownership Group share,Parent Company guarantees 1,540 21 2,275 21 company’s per centBank guarantees 5,674 79 8,407 79 Group company registered office, country 2011 2010Total guarantees 7,214 100 10,682 100 Combitech AB Växjö, Sweden 100 100Bank guarantees: Saab Barracuda AB Västervik, Sweden 100 100On demand 5,014 88 5,700 68 Saab Barracuda LLC USA 100 100Proprietary 660 12 2,707 32 Saab Czech s.r.o. Czech Republic 100 100Total bank guarantees 5,674 100 8,407 100 Saab Dynamics AB Karlskoga, Sweden 100 100 Saab Danmark A/S Denmark 100 100Type of guarantee: Saab Grintek Defence (Pty) Ltd South Africa 75 75Advances 3,177 44 4,127 39Completion 3,365 47 3,666 34 Saab Seaeye Ltd UK 100 100Milestone payments - - 2,558 24 Saab Sensis Corporation USA 100 -Tenders, credits and other 672 9 331 3 Saab Systems Oy Finland 100 100Total guarantees 7,214 100 10,682 100 Saab Systems Pty Ltd Australia 100 100 Saab Training Systems AB Jönköping, Sweden 100 100With regard to the Group’s so-called fulfilment guarantees for commitmentsto customers, the likelihood of an outflow of resources is extremely smalland, as a result, no value is recognised. Parent Company MSEK 2011 2010 Accumulated acquisition value NOTE 43 Opening balance, 1 January 16,321 16,362TRANSACTIONS WITH RELATED PARTIES New issues/shareholders’ contributions 566 20The Group’s financial agreements conform to market principles. In January Acquisitions 203 142012, Combitech ab, a wholly owned subsidiary of Saab ab, acquired SörmanInformation ab. The largest shareholder in Sörman was Investor ab. In Saab’s Sales and liquidations -23 -3view, the purchase price corresponds to market value. Saab otherwise did not Reduction of purchase price - -72have any material transactions with Investor. Neither does Saab have any sig- Reclassifications 19 -nificant transactions with Board members or members of Closing balance, 31 December 17,086 16,321Group Management. For information on remuneration, see Note 37. Of the Parent Company’s sales, 3 per cent referred to sales to Group com-panies, while 14 per cent of the Parent Company’s purchases were from Accumulated impairmentsGroup companies. Opening balance, 1 January -10,551 -10,477 Sales to and purchases from the Group’s associated companies amountedto approximately msek 26 (26) and msek 120 (127), respectively. Impairments for the year -128 -74 During the year bae Systems divested its shares in Saab and is no longer Closing balance, 31 December -10,679 -10,551considered a related party. Carrying amount, 31 December 6,407 5,770 Impairment reversals and impairments for the year are reported in the income statement on the line “Result from shares in Group companies.”126 SAAB ANNUAL REPORT 2011
  • 131. FINANCIAL INFORMATION > NOTESNOTE 44, CONT.Specification of Parent Company’s holdings of shares NOTE 45in Group companies UNTAXED RESERVES 31-12-2011 Carrying Parent Company No. of Share, amount, MSEK 2011 2010Group company/Corp. ID no./Reg. office shares per cent MSEK Tax allocation reserve:Celsius AB, 556194-4652, Linköping 5,000 100.0% 144 Opening balance, 1 January - -Celsius Invest AB, 556164-6588, Stockholm 1,720,000 100.0% 155 Provision for the year 350 -Combitech AB, 556218-6790, Växjö 100,000 100.0% 994 Closing balance, 31 December 350 -EMC Services Elmiljöteknik AB, 556315-6636,Mölndal 2,000 100.0% 3Fastighets AB Linköping Malmen 27, 556354-6349, Accumulated accelerated depreciationLinköping 20,000 100.0% 4 Buildings and land:Fastighets AB Odengatan Jönköping, 556378-6226,Järfälla 2,000 100.0% - Opening balance, 1 January 65 84Fastighets AB Solhusgatan, 556230-7404, Göteborg 1,000 100.0% 67 Under depreciation for the year -17 -19FFV Ordnance AB, 556414-8194, Karlskoga 100,000 100.0% 10 Closing balance, 31 December 48 65Gripen International AB, 556628-6380, Linköping 1,000 100.0% 5Kockums Holdings AB, 556036-4100, Linköping 48,000 100.0% 5 Machinery and equipment:Lansen Försäkrings AB, 516401-8656, Linköping 500,000 100.0% 51 Opening balance, 1 January 437 335Linköping City Airport AB, 556366-8333, Linköping 5,000 100.0% 3 Under/accelerated depreciation for the year -40 102Saab d.o.o., Slovenia - 100.0% - Closing balance, 31 December 397 437Saab Aerospace Overseas AB, 556628-6448,Linköping 1,000 100.0% 3 Total untaxed reserves, 31 December 795 502Saab Aircraft Leasing Holdings AB, 556124-3170,Linköping 30,000 100.0% 1,500Saab Barracuda AB, 556045-7391, Västervik 200,000 100.0% 84 NOTE 46Saab Czech s.r.o, Czech Republic - 100.0% 24 STATEMENT OF CASH FLOWS, SUPPLEMENTAL INFORMATIONSaab Danmark A/S, Denmark - 100.0% 103 The Group’s operating cash flow and a reconciliation between operating cashSaab Dynamics AB, 556264-6074, Karlskoga 500,000 100.0% 357 flow and cash flow for the year are shown below. Operating cash flow differsSaab India Technologies Private Limited, Indien - 100.0% - in the following respect from the statement of cash flows on page 75:Saab International AB, 556267-8994, Stockholm 50,000 100.0% 11 Investments in or sales of short-term investments and other interest-Saab Microwave Systems AB, 556028-1627,Mölndal 300,000 100.0% 49 bearing financial investments as well as interest-bearing receivables are not included in investing activitiesSaab North America, Inc., USA - 100.0% 1,141Saab Precision Components AB, 556627-5003, OPERATING CASH FLOWJönköping 2,000 100.0% 8 GroupSaab Seaeye Holdings Ltd, UK - 100.0% 194 MSEK 2011 2010Saab South Africa (Pty) Ltd, South Africa - 95.0% 443 Operating activitiesSaab Systems Oy, Finland - 100.0% 103 Income after financial items 2,783 776Saab Surveillance Solutions AB, 556627-1929,Linköping 1,000 100.0% - Transferred to pension fund -132 -147Saab Surveillance Systems AB, 556577-4600, Adjustments for items not affecting cash flow 141 2,317Järfälla 1,000 100.0% - Income tax paid -450 -196Saab Training Systems AB, 556030-2746, Jönköping 150,000 100.0% 42 Cash flow from operating activities before changes inSaab Training Systems B.V., Netherlands - 100.0% 6 working capital 2,342 2,750Saab Training Systems Kenya Ltd, Kenya - 100.0% -Saab Ventures AB, 556757-5211, Linköping 1,000 100.0% - Working capitalDormant companies etc. - - 898 Inventories -243 586Carrying amount at year-end 6,407 Current receivables -96 855 Advance payments from customers 409 194 Other current liabilities 610 399 Provisions -630 -297 Change in working capital 50 1,737 Cash flow from operating activities 2,392 4,487 SAAB ANNUAL REPORT 2011 127
  • 132. FINANCIAL INFORMATION > NOTESNOTE 46, CONT. Interest paid and dividends receivedGroup Group Parent CompanyMSEK 2011 2010 MSEK 2011 2010 2011 2010Investing activities Dividends received 55 12 226 236Investments in intangible fixed assets -41 -117 Interest received 69 40 212 130Investments in tangible fixed assets -325 -262 Interest paid -139 -129 -198 -165Investments in lease assets -1 -2 Total -15 -77 240 201Sale of tangible fixed assets 23 11Sale of lease assets 301 65 Adjustments for items not affecting in cash flowInvestments in operations and associated companies,net effect on liquidity -1,135 - Group Parent CompanySale of subsidiaries and associated companies, net effect MSEK 2011 2010 2011 2010on liquidity 1,264 161 Depreciation and amortisation 1,240 1,295 601 582Investments in and sale of financial assets -1 6 Impairments 21 63 - -Cash flow from investing activities excluding change inshort-term investments and other interest-bearing Changes in the value of biological assets -6 -43 - -financial assets 85 -138 Changes in the value of investment properties 12 - -Operating cash flow 2,477 4,349 Profit shares in associated companies 12 -40 - - Dividends from associated companies 50 6 - - Dividends and Group contributionsOPERATING CASH FLOW VS. CASH FLOW FOR THE YEAR IN STATEMENT from/to Group companies - - -1,547 -1,457OF CASH FLOWS Capital gains/losses from sales of GroupMSEK 2011 2010 companies, associated companies and other shares -1,169 -15 -181 -9Operating cash flow 2,477 4,349 Capital gains/losses on sales ofInvesting activities – interest-bearing: tangible fixed assets -1 7 2 7Short-term investments -2,967 -993 Inventory impairment - 60 - -Other financial investments and receivables 307 -12 Impairment of shares and receivables 9 26 128 290Financing activities: Provisions 9 717 94 541Repayment of loans -50 -1,950 Provisions for pensions -114 213 278 -187Repurchase of shares - -80 Other 78 28 -17 -63Dividend paid to the Parent Company’s shareholders -367 -237 Total 141 2,317 -642 -296Cash flow for the year -600 1,077 Investments in operations and subsidiariesSUPPLEMENTAL INFORMATION ON STATEMENT OF CASH FLOWS GroupLiquid assets MSEK 2011 2010Group Acquired assets and liabilitiesMSEK 31-12-2011 31-12-2010 Intangible fixed assets 1,007 1The following components are included Tangible fixed assets 286 -in liquid assets: Inventories 63 -Cash and bank 681 703 Current receivables 325 1Bank deposits 1,083 1,830 Liquid assets 127 -Funds in escrow account 139 - Total assets 1,808 2Deposits on behalf of customers 15 11Total according to the statement of financial position 1,918 2,544 Provisions 34 - Deferred tax liability 38 -Total according to statement of cash flows 1,918 2,544 Interest-bearing liabilities 102 - Current liabilities 256 2Parent Company Total liabilities 430 2MSEK 31-12-2011 31-12-2010The following components are includedin liquid assets: Purchase price paid 1,158 -Cash and bank balances 154 105 Less: Liquid assets in acquired operations -127 -Bank deposits 1,083 1,830 Effect on the Group’s liquid assets 1,031 -Total according to balance sheet 1,237 1,935 Effect on the Group’s net liquidity 929 -Total according to statement of cash flows 1,237 1,935128 SAAB ANNUAL REPORT 2011
  • 133. FINANCIAL INFORMATION > NOTESNOTE 46, CONT.Acquisitions in 2011 relate to Sensis Corporation of the US, assets from NOTE 47Scandinavian Air Ambulance Holding and assets from the Czech company INFORMATION ON PARENT COMPANYE-COM. The acquisition in 2010 relates to the remaining 66.7 per cent ofthe shares in the associated company Opax as in Norway. Saab ab (publ) is a limited company registered in Sweden, with its registered office in Linköping. The Parent Company’s shares are registered on theAcquisitions of associated companies nasdaq omx Stockholm. The address of the head office is Saab ab, Box 12062,Group SE-102 22 Stockholm, Sweden. The consolidated accounts for 2011 comprise the Parent Company and itsMSEK 2011 2010 Group companies, together referred to as the Group. The Group also includesAcquired assets and liabilities the holdings in associated companies and joint ventures.Financial fixed assets 104 -Total assets 104 - NOTE 48Purchase price paid 104 - ENVIRONMENTAL REPORTEffect on the Group’s liquid assets 104 - Operations subject to permit requirements in the Parent Company Production of aircraft and aircraft components by the Parent Company, Saab ab, in the Tannefors industrial zone in the municipality of Linköping is sub-Acquisitions in 2011 primarily relate to 36.6 per cent in Avia Satcom Co. Ltd ject to licensing according to the Swedish Environment Code due to aero-and shares in associated companies in the venture portfolio. nautics operations, surface treatment processes, manufacturing of composite materials, handling of chemical substances and the size of the manufacturingSale of subsidiaries and associated companies facilities. The environmental impact of these operations primarily arises fromGroup emissions of volatile organic compounds (vocs) and aircraft emissions intoMSEK 2011 2010 the atmosphere and of metals into waterways, the generation of industrial wastes and noise disturbing local surroundings. The operations subject toDivested assets and liabilities licensing predominantly entail manufacturing. The National Licensing BoardTangible fixed assets 11 - for Environmental Protection granted the license for aircraft manufacture inFinancial fixed assets 3 - 1990. The supervisory authorities have decided on additional terms for these operations against the backdrop of the eu’s ippc directive.Current receivables 23 6 In Järfälla, Saab ab has operations involving the manufacture of advancedAssets held for sale 113 107 command and control systems, among other things, which are also subject toLiquid assets 8 - licensing according to the Environment Code. The licensing requirement isTotal assets 158 113 due to surface treatment processes and the size of the manufacturing facili- ties. The environmental impact of these operations primarily arises from voc emissions into the atmosphere and of metals into waterways. The NationalCurrent liabilities 8 12 Licensing Board for Environmental Protection granted the license in 1990.Total liabilities 8 12 With the exception of a few exceeded limits, Saab ab did not exceed any conditions in its permits or injunctions in 2011.Sales price 1,272 161 Operations subject to permit requirements in subsidiariesPurchase price received 1,272 161 The operations carried on by Linköping City Airport ab are subject to licens- ing according to the Environment Code and are covered by the permit issued by the National Licensing Board for Environmental Protection in 1990 forLess: Liquid assets in divested operations -8 - Saab ab’s collective operations in the Tannefors industrial zone in the munic-Effect on the Groups net liquidity 1,264 161 ipality of Linköping. This permit also covers the operations of Saab Dynam- ics  ab in the area, despite that they are not subject to licensing and notifica-where of interest-bearing receivables - 130 tion requirements according to the Environment Code.where of liquid assets 1,264 31 Saab Dynamics ab and Saab Bofors Test Center ab carry on operations in Karlskoga which are subject to licensing according to the Environment Code.Divestments in 2011 relate to the shares in Grintek Ewation (Pty) Ltd, Denel Saab Dynamics ab carries on similar operations in Eskilstuna. In addition,Saab Aerostructures (Pty) Ltd, C3 Technologies ab and Image Systems ab. Saab Barracuda ab carries on operations subject to licensing in Gamleby.The divestment in 2010 relates to Saab Bofors Industrier ab and 16 per cent of The environmental impact from subsidiaries subject to licensing primar-the associated company Hawker Pacific Ltd. ily consists of emissions of vocs and emissions from aircraft into the atmos- phere, emissions of metals and deicing solvents into waterways, generation of industrial wastes and noise disturbing local surroundings. In 2011, none of Saab’s subsidiaries exceeded any conditions of their per- mits or injunctions. Operations subject to notification requirements Saab ab has operations in Arboga, Gothenburg, Ljungbyhed, Malmslätt, Nyköping and Östersund which are subject to notification requirements in accordance with the Swedish Environment Code. Permits granted by the county boards in Arboga and Malmslätt in 1993 and 1994, respectively, still apply. The Group also has operations subject to notification requirements in the subsidiaries Saab Underwater Systems ab in Motala, Saab Training Sys- tems ab in Huskvarna and Saab Precision Components ab in Jönköping. The environmental impact of these operations is very limited. SAAB ANNUAL REPORT 2011 129
  • 134. FINANCIAL INFORMATION > NOTES NOTE 49 NOTE 50EXCHANGE RATES USED IN FINANCIAL STATEMENTS DEFINITIONS OF KEY RATIOS Gross margin Year-end rate Average rate Gross income as a percentage of sales.Country 2011 2010 2011 2010Australia AUD 1 7.03 6.92 6.70 6.61 Operating margin Operating income as a percentage of sales.Denmark DKK 100 120.33 120.75 121.26 128.13Euro EUR 1 8.94 9.00 9.03 9.54 EBITDA marginCanada CAD 1 6.78 6.81 6.57 6.99 Operating income before depreciation, amortisation and impairments less depreciation and impairments of lease aircrafts as a percentage of sales.Norway NOK 100 115.05 115.20 115.87 119.16Switzerland CHF 1 7.36 7.24 7.35 6.91 Capital employedUK GBP 1 10.68 10.55 10.41 11.13 Total capital less non-interest-bearing liabilities.South Africa ZAR 100 85.08 103.00 89.72 98.41 Return on capital employedCzech Republic CZK 100 34.64 35.54 36.76 37.76 Operating income plus financial income as a percentage of average capital employed.USA USD 1 6.92 6.80 6.50 7.20 Return on equity Net income for the year as a percentage of average equity. Profit margin Operating income plus financial income as a percentage of sales. Capital turnover Sales divided by average capital employed. Net liquidity/net debt Liquid assets, short-term investments and interest-bearing receivables less interest-bearing liabilities and provisions for pensions. Equity/assets ratio Equity in relation to total assets. Interest coverage ratio Operating income plus financial income divided by financial expenses. Earnings per share Net income for the year attributable to Parent Company shareholders’ interest, divided by the average number of shares before and after full dilution. There is no dilution impact if the result is negative. Equity per share Equity attributable to the Parent Company’s shareholders divided by the number of shares, excluding treasury shares, at the end of the year. Operating cash flow per share Operating cash flow divided by the average number of shares after dilution. Cash flow from operating activities per share Cash flow from operating activities divided by the average number of shares after dilution.130 SAAB ANNUAL REPORT 2011
  • 135. FINANCIAL INFORMATION > DIVIDEND MOTIVATIONDIVIDEND MOTIVATIONThe Board of Directors’ statement according to chapter 18, § 4 of the Companies Act with regard to the proposeddividend – Saab ABSaab is one of the world’s leading high-technology companies, ments in tangible fixed assets. Investments are also made in researchbecause of which its operations are distinguished by complex devel- and development, which in 2011 amounted to msek 1,355, of whichopment assignments on the cutting edge of technology. Over the msek 15 was capitalised in the balance sheet.years, Saab has conducted significant development projects and At year-end, Saab had a net cash position, which includes liquidmanaged the associated risks with great success. See also risks and assets, short-term investments and interest-bearing receivables lessuncertainties in the annual report. interest-bearing liabilities, including provisions for pensions, The Board of Directors’ proposed dividend amounts to sek 4.50 amounted to msek 5,333. Saab’s ability to carry out its commitmentsper share, corresponding to a total dividend of msek 474. Unrestricted is not affected by the proposed dividend either on a short- orequity amounts to msek 3,988 in Saab ab and profit carried forward in a long-term basis.the Group before the dividend paid amounts to msek 10,204. Net income for the year attributable to Parent Company’s share- The proposed dividend is considered justifiable with regard to what isholders amounted to msek 2,225 for the Group and msek 1,589 for stated in chapter 17, § 3, paragraphs two and three of the Companiesthe Parent Company. Act (2005:551): After paying the dividend to the shareholders, the Group’s equity/ 1. The demands that the company’s nature, scope and risks place onassets ratio amounts to 40.2 per cent, compared to the long-term the size of its equity, andobjective of 30 per cent. Since the ipo in 1998, the equity/assets ratio 2. The company’s consolidation needs, liquidity or financial positionhas risen from 22 per cent to 41 per cent in 2011. in other respects. Saab’s gross capital expenditure in 2011 amounted to msek 325,which is considered a good approximation of annual future invest- The Board of Directors of Saab ab SAAB ANNUAL REPORT 2011 131
  • 136. FINANCIAL INFORMATION > PROPOSED DISPOSITION OF EARNINGSPROPOSEDDISPOSITION OF EARNINGSThe Board of Directors and the President propose that the unappro- After the proposed disposition, equity in the Parent Company willpriated earnings in the Parent Company at disposal of the Annual be as follows:General Meeting, amounting to:SEK SEKRetained earnings 2,398,918,842 Capital stock 1,746,405,504Net income for the year 1,589,444,977 Statutory reserve 542,471,135Total 3,988,363,819 Revaluation reserve 712,411,900 Retained earnings 3,514,370,008Be disposed as follows: Total 6,515,658,547To the shareholders, a dividend of SEK 4.50 per share 473,993,811Funds to be carried forward 3,514,370,008 The company’s policy is to issue a dividend of 20–40 per cent of netTotal 3,988,363,819 income over a business cycle. The Board of Directors and the President propose that msek 474 (367), or sek 4.50 per share (3.50) be issued as a dividend. Saab’s equity/assets ratio is currently 41.1 per cent (39.1) and after the proposed disposition of earnings will be 40.2 per cent (38.3).The undersigned certify that the consolidated accounts and the annual report have been prepared in accordance with International Financial Reporting Standards(IFRS), as adopted for use in the European Union, and generally accepted accounting principles, and give a true and fair view of the financial positions and resultsof the Group and the Parent Company, and that the management report gives a fair review of the development of the operations, financial positions and results ofthe Group and the Parent Company and describes substantial risks and uncertainties that the Group companies faces. Linköping, 10 February 2012 Marcus Wallenberg Chairman Johan Forssell Sten Jakobsson Per-Arne Sandström Board member Board member Board member Cecilia Stegö Chilò Joakim Westh Lena Treschow Torell Åke Svensson Board member Board member Board member Board member Catarina Carlqvist Stefan Andersson Conny Holm Board member Board member Board member Håkan Buskhe President and Chief Executive Officer (CEO) and Board member Our audit report was submitted on 24 February 2012 Håkan Malmström Authorised Public Accountant132 SAAB ANNUAL REPORT 2011
  • 137. FINANCIAL INFORMATION > AUDIT REPORTAUDIT REPORTTo the annual meeting of the shareholders of Saab AB, corporate identity number 556036-0793Report on the annual accounts and consolidated accounts We therefore recommend that the annual meeting of shareholdersWe have audited the annual accounts and consolidated accounts of adopt the income statement and balance sheet for the parent com-Saab AB for the year 2011. The annual accounts and consolidated pany and the group.accounts of the company are included in the printed version of thisdocument on pages 48–132. Other matters The annual accounts and consolidated accounts for 2010were auditedResponsibilities of the Board of Directors and the Managing Director by other auditors who, in their audit report dated 16 February 2011,for the annual accounts and consolidated accounts expressed an unmodified opinion on those annual accounts and con-The Board of Directors and the Managing Director are responsible solidated accounts.for the preparation and fair presentation of these annual accountsand consolidated accounts in accordance with International Finan- Report on other legal and regulatory requirementscial Reporting Standards , as adopted by the EU, and the Annual In addition to our audit of the annual accounts and consolidatedAccounts Act, and for such internal control as the Board of Directors accounts, we have examined the proposed appropriations of theand the Managing Director determine is necessary to enable the company’s profit or loss and the administration of the Board ofpreparation of annual accounts and consolidated accounts that are Directors and the Managing Director of ABC AB for the year 2011.free from material misstatement, whether due to fraud or error. Responsibilities of the Board of Directors and the Managing DirectorAuditor’s responsibility The Board of Directors is responsible for the proposal for appropria-Our responsibility is to express an opinion on these annual accounts tions of the company’s profit or loss, and the Board of Directors andand consolidated accounts based on our audit. We conducted our audit the Managing Director are responsible for administration under thein accordance with International Standards on Auditing and generally Companies Act.accepted auditing standards in Sweden. Those standards require thatwe comply with ethical requirements and plan and perform the audit Auditor’s responsibilityto obtain reasonable assurance about whether the annual accounts and Our responsibility is to express an opinion with reasonable assuranceconsolidated accounts are free from material misstatement. on the proposed appropriations of the company’s profit and on the An audit involves performing procedures to obtain audit evi- administration based on our audit. We conducted the audit indence about the amounts and disclosures in the annual accounts and accordance with generally accepted auditing standards in Sweden.consolidated accounts. The procedures selected depend on the audi- As a basis for our opinion on the Board of Directors’ proposedtor’s judgement, including the assessment of the risks of material appropriations of the company’s profit or loss, we examined themisstatement of the annual accounts and consolidated accounts, Board of Directors’ reasoned statement and a selection of supportingwhether due to fraud or error. In making those risk assessments, the evidence in order to be able to assess whether the proposal is inauditor considers internal control relevant to the company’s prepara- accordance with the Companies Act.tion and fair presentation of the annual accounts and consolidated As a basis for our opinion concerning discharge from liability, inaccounts in order to design audit procedures that are appropriate in addition to our audit of the annual accounts and consolidatedthe circumstances, but not for the purpose of expressing an opinion accounts, we examined significant decisions, actions taken and cir-on the effectiveness of the company’s internal control. An audit also cumstances of the company in order to determine whether anyincludes evaluating the appropriateness of accounting policies used member of the Board of Directors or the Managing Director is liableand the reasonableness of accounting estimates made by the Board of to the company. We also examined whether any member of theDirectors and the Managing Director, as well as evaluating the over- Board of Directors or the Managing Director has, in any other way,all presentation of the annual accounts and consolidated accounts. acted in contravention of the Companies Act, the Annual Accounts We believe that the audit evidence we have obtained is sufficient Act or the Articles of Association.and appropriate to provide a basis for our audit opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.OpinionsIn our opinion, the annual accounts have been prepared in accordance Opinionswith the Annual Accounts Act and present fairly, in all material We recommend to the annual meeting of shareholders that the profit berespects, the financial position of the parent company as of 31 Decem- appropriated in accordance with the proposal in the statutory adminis-ber 2011 and of its financial performance and its cash flows for the year tration report and that the members of the Board of Directors and thethen ended in accordance with the Annual Accounts Act, and the con- Managing Director be discharged from liability for the financial year.solidated accounts have been prepared in accordance with the AnnualAccounts Act and present fairly, in all material respects, the financial Stockholm 24 February 2012position of the group as of 31 December 2011 and of their financial per- PricewaterhouseCoopers ABformance and cash flows in accordance with International Financial Håkan MalmströmReporting Standards, as adopted by the EU, and the Annual Accounts Authorised Public AccountantAct. The statutory administration report is consistent with the otherparts of the annual accounts and consolidated accounts. SAAB ANNUAL REPORT 2011 133
  • 138. CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORTIntroduction of Corporate Governance (“the Code”). The Code is available atSaab ab is a Swedish public limited liability company listed on www.bolagsstyrning.senasdaq omx Stockholm. Saab applies the Code and strives to maintain a high standard in Saab’s corporate governance is based on Swedish legislation, pri- its corporate governance. This Corporate Governance Report is inmarily the Swedish Companies Act, the Swedish Annual Accounts accordance with the Annual Accounts Act and the Code, andAct, nasdaq omx Stockholm Rules – which also includes the Swed- describes how Saab applied the Code during the financial year 2011.ish Code of Corporate Governance – and other relevant Swedish and Moreover, the Annual General Meeting 2011 was carried out inforeign laws and guidelines. accordance with the Code and the Annual General Meeting in 2012 will also be planned and carried out pursuant to the provisions of theSwedish Code of Corporate Governance Code. Saab’s website has a special area for corporate governanceThe Saab shares are admitted to trading at nasdaq omx Stockholm issues, which is updated in accordance with the Code.and Saab must therefore follow good practices in the securities mar- The Board annually issues a report on how the internal control ofket, which includes an obligation to comply with the Swedish Code financial reporting is organised, which can be found at the end of this report.Organisation 2011 Nomination Commitee Shareholders’ Meeting External Auditors Remuneration Committee Board of Directors Audit Committee Internal Audit President and CEO Internal boards * Group Management Finance Board Operational Excellence Board Strategy Board Ethics and Compliance Board Human Resources Board* The internal boards handle and resolve issues within their respective areas on a Group level. They also prepare certain issues to be resolved by the Group Management.134 SAAB ANNUAL REPORT 2011
  • 139. CORPORATE GOVERNANCE REPORTThis Corporate Governance Report has been reviewed by the com- process includes procedures, where necessary, to replace a memberpany’s auditor pursuant to the Annual Accounts Act, see the Audi- who leaves the committee before its work has been completed.tor’s Report attached to the Corporate Governance Report. According to the nomination committee process adopted at the Saab has not deviated from the provisions of the Code during Annual General Meeting 2011, the Nomination Committee shall2011 and hence does not report any deviations from the Code. provide proposals regarding the following issues, to be presented to the Annual General Meeting for resolution:Ownership structure and number of sharesSaab’s share capital amounted to sek 1,746,405,504 on 31 December, (a) the Chairman of the Shareholders’ Meeting,2011 and consisted of 1,907,123 series a shares and 107,243,221 series b (b) the Board of Directors,shares. Series a shares have ten votes each, while series B shares have (c) the Chairman of the Board,one vote each. One series a share may, on demand of the owner, be (d) the remuneration to the members of the Board, allocatedconverted into one series b share. The Saab shares are registered with between the Chairman and other members of the Board, andEuroclear Sweden ab. The quota value per share is sek 16. The series remuneration for committee work,B shares are listed on nasdaq omx Stockholm on the large cap list. (e) election of auditors, if applicable, andThe series a shares are not listed. A round lot consists of 100 shares. (f) audit fees.All series a shares are owned by Investor ab. Before the Annual General Meeting of Saab AB on 19 April 2012, itLargest shareholders, 31 December 2011 was announced through a press release on 12 October 2011 that, in Share of Share of addition to Chairman of the Board, Marcus Wallenberg, the follow-According to SIS Ownership Service capital, % votes, % ing shareholder representatives had been appointed to Saab’s Nomi- nation Committee (shareholder’s name in parentheses): PetraInvestor AB, Sweden 30.0 40.8 Hedengran (Investor AB), Peter Wallenberg Jr (Knut and Alice Wal-Wallenberg Foundations, Sweden 8.7 7.7 lenberg Foundation), Thomas Eriksson (Swedbank Robur Funds)Swedbank Robur funds, Sweden 4.8 4.3 and Thomas Ehlin (Nordea Investment Funds). Petra Hedengran isUnionen, Sweden 2.5 2.2 the Chairman of the Nomination Committee.AFA Insurance, Sweden 2.3 2.0 These persons represent in the aggregate approximately 52 per-SEB funds, Sweden 2.1 1.9 cent of the votes in Saab based on the ownership structure as of 31 August 2011.Fourth AP Fund, Sweden 2.1 1.8 The proposal of the Nomination Committee will be presentedSHB funds, Sweden 2.1 1.8 not later than in connection with the notice of the Annual GeneralOrkla ASA, Norway 1.6 1.5 Meeting 2012.Länsförsäkringar funds, Swede