6.3.1 Profit sharing and incentive plans
Profit sharing
The amounts paid in respect of special reserves for profit sharing during the last five financial years are as follows (in € million):
2002 2003 2004 2005 2006
7.24 1.89 2.97 11.28 19.27
Incentive plans
Most companies in the Group have incentive plans enabling employees’ compensation to be related to the company’s performance. Such performance is determined as a function of operating income or loss in relation to sales.
Amounts paid in this respect during the last five financial years are as follows (in € million):
2002 2003 2004 2005 2006
8.95 5.41 15.8 44.25 38.07
Company savings plan
In France, in 1989, the Vallourec Group formed a Company savings plan to help employees build up capital over the medium and long term. In 2005, these arrangements were supplemented by the implementation, by agreement, of a group retirement savings plan (Plan d’Epargne Retraite Collectif – PERCO).
Employees’ voluntary payments are topped up by the company in accordance with a scale updated each year in relation to the Group performance.
The amounts paid by way of Company contributions over the last five financial years were as follows (in € million):
2002 2003 2004 2005 2006
PEE PERCO PEE PERCO
0.79 0.61 0.48 0.56 0.93 1.45 1.53
6.3.2 Options
(The figures in the following tables have been recalculated, where necessary, to take into account the rights offering in July 2005 and the division by 5 of the nominal value of Vallourec shares, effective as from 18 July 2006).
Share subscription options
Plan
Date of General Meeting 15 June 2000
Date of Management Board Meeting 15 June 2000 Number of option holders when plan implemented 144 Total number of options granted at the outset 892,500 – dof which number of options granted to those employees
who were members of the Executive Committee
as at 31/12/2006 102,500
– number of senior managers involved 7
– exercise price (*) €7.60
– exercise price adjusted after rights offering on 13/07/2005 €7.49 Number of options cancelled since date granted
(option holders who have left the Group) 33,750 Date from which options may be exercised 15 June 2004
Expiry date 14 June 2007
Number of shares subscribed at 31/12/2006
(1 option = 1 share) 829,180
– of which number of shares subscribed by members
of the Executive Committee 102,500
Number of options that could be exercised as at 31/12/2006 30,660 (*) 95% of the average for the 20 trading sessions preceding the grant date.
Share purchase options
Plan
Date of General Meeting 15 June 2000
Date of Management Board Meeting 15 June 2003 Number of option holders when plan implemented 148 Total number of options granted at the outset 979,480 – of which number of options granted
to those employees who were members
of the Executive Committee as at 31/12/2006 195,000
– number of senior managers involved 7
– exercise price (*) €10.73
– exercise price adjusted
after rights offering on 13/07/2005 €10.57
Number of options cancelled since date granted
(option holders who have left the Group) 13,750 Number of options that employees may exercise
as at 31/12/2006 (1 option = 1 share) 965,730 Date from which options may be exercised 11 June 2007
Expiry date 10 June 2010
Number of shares purchased as at 31/12/2005 – (*) Average of the last 20 prices for the 20 trading sessions preceding the grant date, not discounted.
6.3.3 Allocation of bonus shares
■Date of General Meeting: 7 June 2005
■Date of Management Board Meeting: 16 January 2006
■Number of option holders when plan implemented: 199
■Acquisition period: 2 years as from 16 January 2006
■Conditions of allocation
Half of the rights in respect of each of the years 2006 and 2007.
The definitive allocation will be based on the ratio of consolidated EBITDA to consolidated sales achieved by the Group in 2006 and 2007. For each of the two years it will be calculated by applying a coefficient, (K), based on this EBITDA/sales ratio, to half of the theoretical number of shares allocated on 16 January 2006. The definitive allocation will be the total of the amount resulting from the two applications.
■Value of coefficient K
Coefficient K is equal to zero if the EBITDA/sales ratio is less than or equal to 10% and equal to a maximum of 1.33 in the event of an EBITDA/sales ratio equal to or higher than 30%.
Between these two limits, coefficient K is calculated by interpolation (K = 1 for EBITDA/sales ratio = 25%).
■Theoretical number of shares allocated on 16 January 2006:
148,000(*) on the basis of K = 1
■Last listed price on 13 January 2006: (last trading day preceding the allocation):€92.76 (*)
■Impact on dilution: none
■Theoretical number of shares allocated to members of the Management Board (on the date of allocation): 15,000 (*)
■Theoretical number of shares allocated to the 10 main beneficiaries other than the members of the Management Board:
37,500 (*)
■Holding period: 2 years as from 16 January 2008
■Number of shares allocated in respect of 2006 (K = 1.33):
148,000/2 x 1.33 = 98,420
(*) Figure recalculated to take into account the division by 5 of the nominal value of Vallourec shares, effective as from 18 July 2006.
6.3.4 Employee shareholding
An employee share ownership plan introduced in July 2001 reached its maturity after five year in July 2006. After taking into account employees who had left the plan early (legal provisions) there remained, at the end of the plan, 3,308 subscribers of whom 1,581 were French and 1,727 were German, for a total amount of capital subscribed at the outset of € 2.9 million. Taking into account movements in the Vallourec share price, performances have been remarkable, with subscribers’ investments having been multiplied by 27.6 on average.
A new five-year plan was proposed, which was implemented on 13 July 2006. This plan was intended for all French and German employees with at least three months’ service. The plan was not introduced in other countries due to the complex problems, particularly regulatory and tax problems, that would need to be overcome in view of the amounts involved. The investment, the capital of which was guaranteed, was capped at € 1,000 per person with a target of 4,000 subscribers.
The operation was a real success since the number of employees subscribing totalled 4,956, i.e. 1,054 more than in 2001, of whom 2,397 were in France and 2,559 in Germany, for a total of € 4.4