FORM 10-K - ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1997
Commission file Number: 001-12933
AUTOLIV, INC.
Incorporated in the State of Delaware I.R.S. Employer
Identification No. 51-0378542
Address of principal executive offices:
World Trade Center,
Klarabergsviadukten 70, SE-107 24 Stockholm, Sweden
Telephone number, including area code: +46 8 587 20 600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- -----------------------------------------------------------------------
Common Stock, par value $1.00 per share New York Stock Exchange
Stockholm Stock Exchange (Swedish
Depositary Receipts)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to
such filing requirements for the past 90 days.
Yes: X No: __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the Common Stock held by non-affiliates, based
upon the closing price on the New York Stock Exchange-Composite Transaction
Listing on March 12, 1998: $3,174 million.
Number of shares of Common Stock outstanding as of February 20,
1998:102,201,288
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Shareholders for the fiscal year ended
December 31, 1997 (the "Annual
Report"): Parts I ,II, III and IV
2. Portions of definitive Proxy Statement dated March 10, 1998 (the "1998
Proxy Statement"): Part III
3. Certain Exhibits of Registration Statement on Form S-4 (File #333-23813)
(the "Registration Statement"): Part IV
PART I
Item 1. Business*
General
Autoliv, Inc. ("Autoliv"), a Delaware holding corporation with principal
executive offices in Stockholm, Sweden, was formed in October 1996 for the
purpose of effecting the combination (the "Combination") of Autoliv AB
("AAB" or "Autoliv AB") and the automotive safety products business of
Morton International, Inc. Effective April 30, 1997, Morton International,
Inc. (subsequently renamed Autoliv ASP, Inc. ("ASP")) contributed its
businesses other than the automotive safety products business to a newly
created subsidiary (subsequently renamed Morton International, Inc.) and all
the outstanding common stock of this newly created subsidiary was spun off
on a share for share basis to the shareholders of Morton International, Inc.
Pursuant to the Combination AAB shareholders exchanged their shares in AAB
for 53.2 percent of Autoliv's shares and Morton International, Inc.'s
shareholders received 46.8 percent of Autoliv's shares. The Combination was
a tax free reorganization under both Swedish and United States tax laws. For
accounting purposes the Combination was treated as a purchase by Autoliv
of ASP.
Shares of Autoliv common stock are traded on the New York Stock Exchange
under the symbol "ALV" and Swedish Depositary Receipts representing shares
of Autoliv common stock trade on the Stockholm Stock Exchange under the
symbol "ALIV." Options in Autoliv shares are listed on the Chicago Board
Options Exchange under the symbol "ALIV." Autoliv's fiscal year ends on
December 31.
Autoliv is a holding company which owns two principal subsidiaries, AAB and
ASP.
_______________________________
* THIS FORM 10-K CONTAINS STATEMENTS WHICH ARE NOT HISTORICAL
FACTS BUT FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE THE COMPANY'S RESULTS TO DIFFER
MATERIALLY FROM WHAT IS PROJECTED, INCLUDING THE FOLLOWING:
HIGHER RAW MATERIAL COSTS OR OTHER EXPENSES; A MAJOR LOSS OF
CUSTOMERS; INCREASED COMPETITIVE PRICING PRESSURE ON THE
COMPANY'S BUSINESS; FAILURE TO DEVELOP OR COMMERCIALIZE
SUCCESSFULLY NEW PRODUCTS OR TECHNOLOGIES; THE OUTCOME OF
PENDING AND FUTURE LITIGATION AND GOVERNMENTAL PROCEDURES;
CHANGES IN LAWS OR REGULATIONS, INCLUDING ENVIRONMENTAL; PLANT
DISRUPTIONS OR SHUTDOWNS DUE TO ACCIDENTS, NATURAL ACTS OR
GOVERNMENTAL ACTION; PRODUCT LIABILITY AND RECALL ISSUES; AND
OTHER DIFFICULTIES IN IMPROVING MARGIN OR FINANCIAL PERFORMANCE.
IN ADDITON, THE COMPANY'S FORWARD LOOKING STATEMENTS COULD BE
AFFECTED BY GENERAL INDUSTRY AND MARKET CONDITIONS AND
GROWTH RATES, GENERAL DOMESTIC AND INTERNATIONAL ECONOMIC
CONDITIONS INCLUDING CURRENCY EXCHANGE RATE FLUCTUATIONS AND
OTHER FACTORS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE
PUBLICLY ANY FORWARD-LOOKING STATEMENTS WHETHER AS A RESULT
OF NEW INFORMATION OR FUTURE EVENTS.
AAB, a Swedish corporation, is a leading developer, manufacturer and
supplier to the automotive industry of car occupant restraint systems.
Starting with seat belts in 1956, AAB expanded its product lines to include
seat belt pretensioners (1989), frontal airbags (1991), side-impact airbags
(1994), steering wheels (1995) and seat sub-systems (1996).
ASP, an Indiana Corporation, pioneered airbag technology in 1968 and has
since grown into one of the world's leading producers of airbag modules and
inflators. ASP designs, develops and manufactures airbag inflators,
modules and airbag cushions. It sells inflators and modules for use in
driver, passenger, side-impact and knee bolster airbag systems for worldwide
automotive markets.
Business
Autoliv is one of the world's leading suppliers of automotive occupant
safety restraint systems with a broad range of product offerings including
modules and components for passenger and driver-side airbags, side-impact
airbag protection systems, seat belts, steering wheels, safety seats and
other safety systems and products. Autoliv has production facilities in 26
countries and has as customers almost all of the world's largest car
manufacturers.
Autoliv employs approximately 17,800 people and its head office is located
in Stockholm, Sweden and employs about 25 people. Autoliv's sales in 1997 on
a pro forma basis exceeded $3 billion, approximately 70% of which consisted
of airbags and associated products and approximately 30% of which consisted
of seat belts and associated products. Autoliv's major markets are in Europe
and the United States.
Financial Information on Industry Segment
Autoliv considers its products to be components of integrated car passenger
protection systems which fall within a single industry segment. The
financial data relating to Autoliv's business in such segment over the last
three fiscal years is contained in the Financial Statements of the Annual
Report (pages 34-45 of the printed report) and is incorporated herein by
reference. A statement of net sales by product group for the last three
years is contained in Note 17 of the Notes to Consolidated Financial
Statements of the Annual Report and is incorporated herein by reference.
Financial Information on Geographic Segments
Financial information concerning Autoliv's geographic segments is included
in Note 18 in the Notes to Consolidated Financial Statements of the Annual
Report, and is incorporated herein by reference.
Products, Market and Competition
Information concerning products, markets and competition is included in the
sections entitled "The Market", "Autoliv's Safety Systems", "Airbags" and
"Seat belts" in the Annual Report and is incorporated herein by reference
(pages 8 through 15 in the printed report).
Research and Development
Expenses incurred for research and development activities were $136.6
million, $100.0 million, and $87.5 million for the years ended December 31,
1997, 1996 and 1995, respectively. Further information is included in the
section entitled "Research and Development" of the Annual Report and is
incorporated herein by reference (pages 16 and 17 in the printed report).
Manufacturing and Production
Including joint venture operations, Autoliv has 60 wholly or partially owned
production facilities located in 26 countries, consisting of both component
factories and assembly factories. See "Item 2. Properties" for a
description of Autoliv's principal properties. The component factories
manufacture inflators, initiators, textile cushions, webbing materials,
pressed steel parts, springs, moulded plastic parts, and over-moulded steel
parts used in seat belt and airbag assembly, seat subsystems and steering
wheels. In addition, electronics are produced at the production facilities
of some of the joint venture operations. The assembly factories source
components from a number of parties, including Autoliv's own component
factories, and assemble complete restraint systems for "just-in-time"
delivery to customers. The products manufactured by Autoliv's assembly
factories in 1997 consisted of approximately 40 million complete seat belt
systems (almost 18 million of which were fitted with pretensioners), and
about 20 million airbag modules (including 3 million side impact airbags).
Autoliv's "just-in-time" delivery systems have been designed to accommodate
the specific requirements of each customer for low levels of inventory and
rapid stock delivery service. "Just-in-time" deliveries cause manufacturing
close to the customers to be an important competitive advantage. The fact
that the major automobile manufacturers are continually expanding
production activities into more countries and require the same or similar
safety systems as produced in Europe or the US increases the importance to
suppliers of having production capacity in several countries. Autoliv
currently operates production facilities for car safety products in more
countries than its competitors.
Automobile manufacturers are seeking competitive quotes from suppliers and
demand significant staged price reductions over a product's life cycle. In
line with its customers' purchasing strategies, Autoliv has implemented
cost-saving programs which are reducing Autoliv's own material, production
and administrative costs.
If the supply of raw materials and components is not disrupted, the Autoliv
assembly operations will not generally be constrained by capacity
considerations. Autoliv can adjust capacity in response to changes in demand
within a few weeks by the addition or removal of standardized production and
assembly lines. Most of Autoliv's assembly factories can make sufficient
space available to accommodate additional production lines to satisfy
foreseeable increases in capacity.
Quality Management. Autoliv's products face extremely high reliability
requirements. In order to meet high customer quality requirements and
internal production efficiency requirements, Autoliv has for several years
operated an advanced quality management system. The system is a zero defect
rate system and is based upon preventive principles involving the
measurement of a number of quality indicators. By reference to best practice
within its industry segment, Autoliv had developed quality benchmarks
applied throughout Autoliv and places great emphasis on continually
improving the quality of its products, customer service and production
processes.
All wholly owned Autoliv companies that deliver products directly to car
manufacturers, with the exception of one company which is expected to be
certified later this year, are certified according to ISO 9000 (as defined
below) requirements. Most of Autoliv's joint venture companies are also ISO
9000-certified, with the remaining ones expected to be certified during
1998. "ISO 9000", a quality assurance management system endorsed by European
nations and many other countries, is a checklist of functions, policies and
rules, considered necessary to assure the quality of a company's products
and services.
Over 20 Autoliv subsidiaries have already received QS 9000 certification, a
quality standard stipulated by U.S. car manufacturers ("QS 9000"), and
Autoliv's other major assembly companies are in the process of becoming
QS 9000-certified. QS 9000 applies to all suppliers, internal and external,
who provide production and service parts and materials to Chrysler, Ford and
General Motors.
Major Components Production Units - Integration. For several years, Autoliv
has continually increased the level of backward vertical integration of its
production activities. This integration helps Autoliv maintain low production
costs and gives Autoliv direct control and experience with the underlying
production phases.
Sources and Availability of Raw Materials and Components
Autoliv's business uses many raw materials in the manufacture of its
products, nearly all of which are generally available from a number of
qualified suppliers. Peaks in worldwide demand have had an impact on raw
material costs and availability, particularly with single or sole sourced
supplies. Autoliv's business, however, has not experienced significant or
long-term difficulty in obtaining raw materials.
Autoliv's Dependence on Suppliers
Autoliv may be dependent in certain instances on a single supplier for
certain components.
Delays or stoppages in the delivery of components could result in Autoliv
being unable to supply complete products. Such delays or stoppages could
result in Autoliv's customers having to halt their own production processes,
which might result not only in loss of income to Autoliv on the reduced
volume of supplied products but also in the customer seeking recoupment for
consequential losses incurred due to its own lost production.
Global Operations
An important element of Autoliv's strategy has been to establish joint
ventures to promote Autoliv's geographical expansion and technological
development and to gain assistance in marketing Autoliv's full product line
to local automobile manufacturers. Total sales of Autoliv's joint venture
operations to outside customers aggregated to approximately $135 million in
1997. These joint venture operations are accounted for according to the
equity method.
Autoliv typically contributes its design and production knowledge to the
joint venture, with the local partner providing sales support and
manufacturing facilities. However, certain partners also make technological
contributions in the areas of pyrotechnics and electronics. Several of these
local partners manufacture and sell standardized seat belt systems, but
will, through the joint venture with Autoliv, be able to upgrade their
technology to meet specific customer demands. In addition to joint ventures
established in emerging markets, Autoliv has, also in certain instances,
established joint ventures in markets such as France and South Africa,
either to strengthen its sales position or to gain access to the market.
These operations of Autoliv will be subject to the usual risks inherent in
global operations, including, but not limited to: risks with respect to
currency exchange rates; economic and political destabilization; other
disruption of markets; restrictive laws and actions of certain governments
(such as restrictions on transfers of funds, export duties and quotas,
foreign customs and tariffs, and unexpected changes in regulatory
environments); difficulty in obtaining distribution and support;
nationalization; the laws and policies of the United States, the European
Union, and the World Trade Organization affecting trade, investment and
loans; and tax laws.
There can be no assurance that these factors will not have a material
adverse impact on Autoliv's ability to increase or maintain its
international sales or on its results of operations.
Patents and Proprietary Technology
Autoliv has developed a considerable amount of proprietary technology
related to car occupant restraint systems and relies on a number of patents
to protect such technology. Autoliv protects many of its innovations with
patents, and vigorously protects and defends its patents, trademarks and
know-how against infringement and unauthorized use. At present, Autoliv
holds approximately 2,800 patents covering a large number of innovations and
product ideas, mainly in the fields of seat belt and airbag technologies. In
addition, Autoliv utilizes, and has access to, the patents of Autoliv's
joint ventures and joint venture partners. These patents expire on various
dates during the period 1998 to 2017. The expiration of any single patent is
not expected to have a material adverse effect on Autoliv's financial
position.
Although Autoliv believes that its products and technology do not infringe
the proprietary rights of others, there can be no assurance that third
parties will not assert infringement claims against Autoliv in the future.
In addition, there can be no assurance that any patents now owned by
Autoliv, will afford protection against competitors that develop similar
technology.
Dependence on the Automotive Industry
The customers of Autoliv are automobile manufacturers whose production
volumes are dependent upon general economic conditions and the level of
consumer spending. The volume of car production in Autoliv's most important
markets in North America, Europe and Asia has fluctuated considerably from
year to year, and such fluctuations may give rise to fluctuations in the
demand for Autoliv's products.
Substantial Reliance by Autoliv on Major Customers
A relatively small number of automobile manufacturers compose the existing
customer base of Autoliv. Although business with any given customer is
typically split into several contracts (usually one contract per car model),
the loss of all of the business of certain customers could have a material
adverse effect on Autoliv. Combined sales to Autoliv's largest customer
represented approximately 14% of total fiscal 1997 sales. See Note 17 to
the Notes to Consolidated Financial Statements of the Annual Report, which
is incorporated herein by reference.
Autoliv's Pricing Pressures
As a consequence of the major automobile manufacturers' strong purchasing
power, and the competitive pressures on car occupant restraint system
suppliers to increase such suppliers' manufacturing capabilities, the unit
prices of airbag systems and seat belts will continue to decline in the
future. In addition, similar to other automobile component manufacturers,
Autoliv expects that Autoliv and its subsidiaries will, under certain
circumstances, quote fixed or maximum prices for long-term supply
arrangements. The future profitability of Autoliv will depend upon, among
other things, its ability to continue to reduce its per unit costs and
maintain a cost structure, internally and with its suppliers, that will
enable it to remain cost-competitive. Autoliv's profitability may also be
influenced by its success in designing and marketing technological
improvements in car occupant restraint systems.
Product Recalls
The possibility of substantial product recalls could pose a significant
commercial risk to Autoliv in the future. AAB carries product recall
insurance with coverage limits that Autoliv management believes are
sufficient to cover potential product recalls. However, product recall
insurance generally is unavailable in the United States, and ASP currently
carries no such product recall insurance. A substantial product recall that
is not covered by insurance or results in liabilities in excess of any
coverage limits could have a material adverse effect on the financial
condition and operating results of Autoliv.
Seasonality and Backlog
Autoliv's business is not subject to significant seasonal fluctuations.
There are no material backlogs in Autoliv's business.
Certain Regulatory Matters and Developments
The automotive safety industry is subject to substantial regulation, both in
the United States and in many other countries, which may affect the demand
for Autoliv's products and Autoliv's manufacturing and development costs.
These regulations are subject to frequent review by applicable regulatory
authorities and other governmental entities, and are subject to change. In
the United States, current federal legislation requires driver-side and
passenger-side airbags in all new passenger cars (effective since September
1, 1997), and in all new light vehicles (unloaded vehicle weight of 5,500
pounds or less) by September 1, 1998. Changes in regulations, including
permitting delays, in implementing certain provisions regarding installation
of airbags under applicable U.S. regulations, could have a material impact
on Autoliv's operations and financial condition. Such regulations are
subject to a number of factors that are not within the control of Autoliv,
including adverse publicity regarding the safety risks of airbags to
children and small adults, domestic and foreign political developments, and
litigation relating to Autoliv's and its competitors' products. There can be
no assurance that regulatory developments or adverse publicity will not
adversely affect customer demand for automotive safety products of Autoliv's
business. Such changes could also result in slower increases, or in
decreases, in demand for automotive safety products in other countries.
In November and December 1996, the U.S. National Highway Traffic Safety
Administration("NHTSA") announced a series of proposed and final regulations
relating to airbags. NHTSA has proposed certain regulations, to be in force
until the regulations requiring adaptive airbags take effect, relating to the
depowering of airbags (which proposed regulations were adopted on an interim
basis in March 1997) and the deactivation of airbags at the request of
certain high-risk profile groups. NHTSA has also indicated its intention to
propose regulations that would require the phase-in of "smart airbags", the
deployment of which would vary depending upon the severity of the crash and
certain physical characteristics of the seat occupant. Implementation of such
regulations could result in additional capital expenditures by Autoliv, could
require additional technological improvements, and could result in lower
sales than would otherwise be expected. The final regulations also require
various additional warning labels to be conspicuously installed on new cars
with airbags prior to the implementation of the regulations requiring
adaptive airbags. The effect on Autoliv of the proposed regulations, if
implemented, or of future regulatory developments in the United States or
other countries is dependent upon many factors, some of which are outside
Autoliv's control and cannot be predicted.
Environmental
AAB has no pending environmental related problems to the best of Autoliv's
management's knowledge. Information concerning ASP environmental matters is
included in Note 14 in the Notes to Consolidated Financial Statements of the
Annual Report, and is incorporated herein by reference. Based on available
information Autoliv does not believe that material expenditures for
environmental compliance will be requested.
Employees
At December 31, 1997, Autoliv and its subsidiaries had approximately 17,800
employees.
Autoliv considers its labor relations to be good and has not experienced any
major strike or other significant labor dispute for many years.
The majority of Autoliv's employees in its subsidiaries in Sweden are
unionized. The principal unions to which Autoliv's Swedish employees belong
are the Swedish Metal Workers Union, the Swedish Union of Clerical and
Technical Employees in Industry, the Swedish Foremen and Supervisors'
Association and the Swedish Association of Graduated Engineers. Important
unions to which some of Autoliv's employees in subsidiaries in countries
other than Sweden belong are IG Metall and Textil und Bekleidung in Germany,
Amalgamated Engineering and Electrical Union in the United Kingdom, the
Metal Workers Union in Australia, the Union of Needletraders and Industrial
and Textile Employees in the United States, Confederation Generale des
Travaileurs in France and Federacion Minerometalurgica, Union General de
Trabajadores and Comisiones Obereras in Spain.
In Sweden, wages and general working conditions are typically the subject of
centrally negotiated collective bargaining agreements. Within the limits
established by these agreements, Autoliv's subsidiaries negotiate directly
with the local unions representing the employees. In Australia, France and
Spain, wages, salaries and general working conditions are negotiated with
the local unions. In Germany, wages but not salaries are negotiated with the
local unions, while in the United Kingdom and the United States there is far
less union involvement in establishing wages, salaries and working
conditions than in, for instance, Germany.
Under Swedish law, Autoliv's subsidiaries must negotiate important changes
in operations and working conditions with the unions representing its
employees. Although these negotiations may from time to time affect the
timing of certain management decisions and actions, Autoliv's experience is
that such negotiations contribute to good labor relations. In many other
countries (e.g. Germany, Spain and France), negotiations must take place
when a company wishes to dismiss employees and under certain other
circumstances.
Employees in the Netherlands and Germany are represented by legally mandated
workers' councils or similar organizations.
Item 2. Properties
Autoliv's various businesses operate through a number of production
facilities and offices. Autoliv believes its properties to be adequately
maintained and suitable for their intended use and its production facilities
to have a capacity adequate for its current and foreseeable needs.
<TABLE>
<CAPTION>
AUTOLIV MANUFACTURING FACILITIES
<S> <C>
Country Production facility Current primary activities Ownership*
Argentina Autoliv Argentina SA, Seat belts, airbags 100%
Buenos Aires
Australia Autoliv Australia, Melbourne Seat belts 100%
VOA Webco, Melbourne Seat belt webbing 100%
Moxham Industrial, Melbourne Height safety equipment 100%
Canada VOA Colfab, Collingwood Seat belt webbing 100%
China CHA, Changchun Seat belts JV
NHA, Nanjing Seat belts JV
Shanghai-VOA Seat belt webbing JV
France Autoliv France,
Gournay-en-Bray Seat belts and airbags 100%
Autoliv Automation, Gournay Production machinery equipment100%
Autoliv Composants, Caudebec Metal components for seat
belts 100%
EAK, Valentigney Seat belts and airbags JV
Isodelta, Poitiers Steering wheels and covers 77%
Livbag, Brest Pyrotechnical inflators 51%
NCS, Survillier Initiators for airbag
inflators 51%
Sagem-Autoliv, Rouen Airbags and electronics JV
Germany Autoliv, Dachau Airbags and pretensioners 100%
Autoliv, Elmshorn Seat belts 100%
Autoliv, Dobeln Seat belts 100%
Autoliv, Braunschweig Airbag module assembly 100%
Stakupress, Norderstedt Metal and plastic components 100%
Great
Britain Autoliv, Havant Seat belts and airbags 100%
Precision Components,
Chichester Metal and plastic components 100%
Tensator, Milton Keynes Springs for belt retractors 100%
and height adjusters
Airbags International,
Congleton Textile airbags 100%
Marling Leek, Leek Industrial webbing 100%
Rykneld Tean, Derby Industrial webbing 100%
Hungary Autoliv, Sopron Seat belts 100%
India Autoliv-IFB, Bangalore Seat belts JV
*Denotes direct or indirect ownership by Autoliv
Indonesia Autoliv Indonesia, Jakarta Seat belts JV
Italy Cosma, Turin Injection-moulded components 100%
Japan Autoliv Japan, Kirihara Airbags 100%
Malaysia Autobelt, Kuala Lumpur Seat belts JV
Airbag Systems Malaysia,
Kuala Lumpur Airbags JV
Furniweb-VOA Safety Webbing,
Kuala Lumpur Seat belt webbings JV
Mexico Autoliv Mexico, Toluca Seat belts 100%
Netherlands Autoliv, Landgraaf Seat belts and integrated
child seats 100%
Autoliv, Amsterdam Airbag module assembly 100%
Van Oerle Alberton, Boxtel Seat belt webbing 100%
CSV, Scherpenzeel Industrial webbing 100%
New Zealand Autoliv NZ, Auckland Seat belts 100%
Philippines Autoliv QB, Manila Seat belts JV
Romania Autoliv Romania, Brasov Seat belts 80%
Russia Autoliv Russia, Dubna Seat belts 100%
South Africa Autoflug, Johannesburg Seat belts JV
Spain Autoliv-KLE, Barcelona Seat belts and airbags 100%
Autoliv-BKI, Valencia Seat belts and airbags 100%
Sweden Autoliv Sverige, Vargarda Airbags, seat belts and
integrated child seats 100%
Autoflator, Vargarda Cold inflators 51%
Autoliv Hammarverken, Vaxjo Components for car seats
and knee protection 100%
Autoliv Mekan, Hassleholm Components for car seats 100%
Autoliv Nokia, Motala Airbag electronics JV
Svensk Airbag, Kungalv Textile airbags 100%
Taiwan Mei-An Autoliv, Taipei Seat belts JV
Thailand Autoliv Thailand, Bangkok Seat belts JV
Turkey Autoliv Cankor, Istanbul Seat belts JV
USA Autoliv North America, Seat belts 100%
Indianapolis, Indiana
Brigham City, Utah Inflators 100%
North Ogden, Utah Component subassembly 100%
Ogden, Utah Airbag Modules 100%
Ogden, Utah Cushions 100%
Ogden, Utah Inflators 100%
Promontory, Utah Gas generant 100%
Maryville, Tennessee Airbag module assembly 50%
Technical Centers and Crash Laboratories**
Location Function
Autoliv Research, Vargarda (Sweden) Research center
Autoliv Safety Center, Vargarda (Sweden) Technical center for full-scale
tests, roll-overs, etc.
Autoliv Germany, Dachau Technical center with full-scale
test laboratory
Autoliv France, Gournay-en-Bray Technical center with full-scale
test laboratory
Autoliv UK, Havant Technical center with full-scale
test laboratory
Autoliv North America, Detroit Technical center with full-scale
test laboratory
Autoliv Australia, Melbourne Full-scale test laboratory
Autoliv Spain, Barcelona Full-scale test laboratory
Autoliv Germany, Hamburg Full-scale test laboratory
Autoliv Inflator, Utah Pyrotechnic Research
Autoliv North America, Sled Testing
Rochester Hills, Michigan
Autoliv Japan,Yokohama Sled Testing
Autoliv Germany, Markgroningen Sled Testing
**All such facilities are wholly owned directly or indirectly by Autoliv
</TABLE>
Item 3. Legal Proceedings.
From time to time, Autoliv has been named as defendant in product liability
and other lawsuits. Such lawsuits historically have not had an adverse
impact on the financial condition of Autoliv. However, although AAB and ASP
each carry product liability insurance to the extent reasonably available
against insurable risks, future damages awards in the United States in
product liability lawsuits could exceed the limits of available insurance
coverage, and Autoliv might be held liable for punitive damages which are not
capable of estimation. In addition, from time to time, the customers of
Autoliv request their suppliers to participate in the defense of product
liability litigation or to contribute to claim settlements. A substantial
product liability award that is not covered by insurance or results in
liabilities in excess of any coverage limits could have a material adverse
effect on the financial condition and operating results of Autoliv.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of Autoliv during
the fourth quarter of 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters Information
Information concerning the market for Autoliv's common stock including the
relevant trading market, recent share prices, dividends, and approximate
number of shareholders is included in the section entitled "Shareholder
Information" of the Annual Report and is incorporated herein by reference
(pages 22 and 23 in the printed report).
Item 6. Selected Financial Data
Selected financial data for the five years ended December 31, 1997 is
included in the Annual Report and is incorporated herein by reference
(page 50 in the printed report).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three years ended December 31, 1997 is included in the
Annual Report and is incorporated herein by reference (pages 31 through 33
in the printed annual report). The financial data in respect of the period
prior to May 1, 1997, is that of Autoliv AB and its consolidated
subsidiaries only and excludes that of ASP. The financial data for the
period commencing May 1, 1997 is that of Autoliv, Inc. and its consolidated
subsidiaries.
Item 8. Financial Statements and Supplementary Data
The Consolidated Balance Sheet of Autoliv as of December 31, 1997 and 1996,
and the Consolidated Statements of Income and Cash Flows for each of the
three years in the period ended December 31, 1997, the Notes to Consolidated
Financial Statements, and the Report of Independent Auditors are included in
the Annual Report and are incorporated herein by reference (pages 34 through
46 in the printed annual report).
All of the schedules specified under Regulation S-X to be provided by
Autoliv, have been omitted either because they are not applicable, are not
required or the information required is included in the financial statements
or notes thereto.
Item 9. Changes in and disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors:
Information concerning the directors and nominee for director of Autoliv is
included on pages 2-3 in the 1998 Proxy Statement and is incorporated herein
by reference.
Executive Officers:
GUNNAR BARK, age 58, Chief Executive Officer, appointed May 1, 1997. See
Directors for further details.
LEIF BERNTSSON, age 42, Vice President Purchasing, appointed May 1, 1997.
Mr. Berntsson has been Vice President Quality of Autoliv AB since 1988 and
also Vice President Purchasing of Autoliv AB since 1992. Mr. Berntsson holds
a Master of Science degree from the Chalmers Institute of Technology in
Gothenburg.
WILHELM KULL, age 61, Chief Financial Officer, appointed May 1, 1997. See
Directors for further details.
CLAES HUMBLA, age 58, Vice President Human Resources, appointed May 1, 1997.
Mr. Humbla has been Vice President Human Resources of Autoliv AB since 1989.
Mr. Humbla holds a Master of Science degree from the Chalmers Institute of
Technology in Gothenburg.
YNGVE HALAND, age 52, Vice President Research, appointed May 1, 1997. Dr.
Haland has been Vice President Research of Autoliv AB since 1994. Prior to
that he was Group Manager Research for Autoliv AB since 1989. Dr. Haland
holds a Master of Science degree from the Chalmers Institute of Technology
in Gothenburg, from which he also holds a doctorate's degree.
BENOIT MARSAUD, age 45, Vice President Manufacturing, appointed February 4,
1998. Mr. Marsaud has been Vice President Manufacturing of Autoliv AB since
1992 and in addition was appointed President of Autoliv France in May 1997.
He holds a Master of Science Degree from Ecole Nationale Superieure Des Arts
et Metiers in Paris.
MATS ODMAN, age 47, Director of Investor Relations, appointed May 1, 1997.
Mr. Odman has been Director of Investor Relations of Autoliv AB since 1994.
Before that Mr. Odman had the same position in Fermenta AB and Gambro AB.
Prior to that Mr. Odman was Investor Relations Manager of Pharmacia AB.
JAN OLSSON, age 43, Vice President Engineering, appointed October 1, 1997.
Mr. Olsson has been Manager of Engineering of Autoliv Sverige AB since
1989 and President of the same company since August 1994. Mr. Olsson
holds a Master of Science degree from the Chalmers Institute of Technology
in Gothenburg.
JORGEN I. SVENSSON, age 36, Vice President Legal Affairs, General Counsel
and Secretary, appointed May 1, 1997. Mr. Svensson has been Legal Counsel of
Autoliv AB since 1989, General Counsel since 1991, and Vice President Legal
Affairs and General Counsel since 1994. Mr. Svensson holds a degree of
Master of Law from the University of Lund.
Item 11. Executive Compensation
Information concerning executive compensation for the year ended December
31, 1997 is included on pages 4, 5 and 7 through 12 of the 1998 Proxy
Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information concerning beneficial ownership of Autoliv's common stock is
included on page 4 of the 1998 Proxy Statement and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents Filed as Part of This Report
(1) Financial Statements
The following consolidated financial statements are included on pages 34
through 46 of the Annual Report and are incorporated herein by reference:
Consolidated Statement of Income-Years ended December 31, 1997, 1996 and
1995 (page 34)
Consolidated Balance Sheet-as of December 31, 1997 and 1996(page 35)
Consolidated Statement of Cash Flows-Years ended December 31, 1997, 1996,
and 1995 (page 36)
Notes to Consolidated Financial Statements (pages 37-45)
Report of Independent Auditors (page 46)
(2) Financial Statement Schedules
All of the schedules specified under Regulation S-X to be provided by
Autoliv have been omitted either because they are not applicable, they are
not required or the information required is included in the financial
statements or notes thereto.
(3) Index to Exhibits
2.1(a) Combination Agreement, dated as of November 25, 1996, by and
among Autoliv AB, Morton International, Inc., Autoliv and ASP
Merger Sub Inc. (the "Combination Agreement"), incorporated
herein by reference to Exhibit 2.1(a) to the Registration
Statement. Autoliv agrees to furnish supplementally a copy of
any omitted exhibit or schedule to the Securities and Exchange
Commission (the "Commission") upon request.
2.1(b) Amendment No. 1 to the Combination Agreement, dated as of April
30, 1997, by and among Autoliv AB, Morton International, Inc.,
Autoliv and ASP Merger Sub Inc. incorporated herein by reference
to Exhibit 2.1(b) to the Registration Statement.
2.2 Distribution Agreement, dated as of April 30, 1997, by and
between Morton International, Inc. and New Morton International
Inc., incorporated herein by reference to Exhibit 2.2 to the
Registration Statement. Autoliv agrees to furnish supplementally
a copy of any omitted exhibit or schedule to the Commission upon
request.
2.3 Tax Sharing Agreement, dated as of April 30, 1997, by and
between Morton International, Inc. and New Morton International
Inc. incorporated herein by reference to Exhibit 2.3 to the
Registration Statement. Autoliv agrees to furnish supplementally
a copy of any omitted exhibit or schedule to the Commission upon
request.
2.4 Employee Benefits Allocation Agreement, dated as of April 30,
1997, by and between Morton International, Inc. and New Morton
International Inc., incorporated herein by reference to Exhibit
2.4 to the Registration Statement, Autoliv agrees to furnish
supplementally a copy of any omitted exhibit or schedule to the
Commission upon request.
3.1 Autoliv's Restated Certificate of Incorporation incorporated
herein by reference to Exhibit 3.1 to the Registration
Statement.
3.2 Autoliv's Restated By-Laws incorporated herein by reference to
Exhibit 3.2 to the Registration Statement.
4 Rights Agreement dated as of December 4, 1997 between Autoliv
and First Chicago Trust Company of New York incorporated herein
by reference to Exhibit 3 to Autoliv's Registration Statement on
Form 8-A (File No. 1-12933).
11 Information concerning the calculation of Autoliv 's earnings
per share is included in Note 1 of the Consolidated Notes to
Financial Statements contained in the Annual Report and is
incorporated herein by reference.
13 Autoliv's Annual Report to Shareholders for the fiscal year
ended December 31, 1997.
21 A list of Autoliv's subsidiaries is included under the section
entitled "Addresses" in the Annual Report and is incorporated
herein by reference (pages 47 through 49 in the printed report).
22 No matters were submitted to Autoliv's stockholders during the
fourth quarter of 1997.
23 Consent of Ernst and Young AB.
27 Financial Data Schedule.
99.1 Autoliv, Inc. 1997 Stock Incentive Plan, incorporated herein by
reference to Autoliv's Registration Statement on Form S-8 (File
No. 333-26299)
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for the three months ended
December 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, as of
the 26 day of March, 1998.
<TABLE>
AUTOLIV, INC.
(Registrant)
<S> <C>
By /s/ Wilhelm Kull
Wilhelm Kull
Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, as of
the 26 day of March, 1998.
Chairman and Chief Executive Officer and Director
(Principal Executive Officer) /s/ Gunnar Bark
Gunnar Bark
Vice President and Chief Financial Officer and Director
(Principal Financial and Accounting Officer) /s/ Wilhelm Kull
Wilhelm Kull
Director /s/Per-Olof Aronson
Per-Olof Aronson
Director /s/George A. Schaefer
George A. Schaefer
Director /s/ S. Jay Stewart
S. Jay Stewart
Director /s/ Roger W. Stone
Roger W. Stone
Director /s/ Per Welin
Per Welin
</TABLE>
Exhibit 13
AUTOLIV ANNUAL REPORT 1997
Autoliv Inc. is a leading global automotive safety systems company,
which manufactures airbags, seat belts, safety electronics, steering
wheels, seat components and child seats for all major automotive
manufacturers in the world.
The company has over 60 subsidiaries and joint ventures with 20,000
employees in 27 vehicle-producing countries. In addition, the company
has eight technical centers around the world, including 19 test tracks -
more than any other automotive safety supplier.
Autoliv's shares are listed on the New York Stock Exchange (NYSE: ALV),
its Swedish Depository Receipts on the Stockholm Stock Exchange
(SSE:ALIV) and its stock options on the Chicago Board of Option Exchange
(CBOE:ALV).
Contents
4 Summary
5 Two Leaders Merge
6 Letter to Shareholders and Employees
8 The Market
10 Autoliv's Safety Systems
12 Airbags
Latest News, Airbags p.13
PHOTO
14 Seat Belts
Latest News, Seat Belts p.15
PHOTO
16 Research and Development
Latest News, R&D p.17
PHOTO
18 Autoliv in the World
22 Shareholder Information
24 Board of Directors
25 Management
Pro Forma Financial information (UNAUDITED)
26 Management's Discussion and Analysis
28 Consolidated Statement of Income
28 Selected Cash Flow Items
29 Consolidated Balance Sheet
30 Quarterly Pro Forma Financial Information
Financial statements of Autoliv Inc.
31 Management's Discussion and Analysis
34 Consolidated Statement of Income
35 Consolidated Balance Sheet
36 Consolidated Statement of Cash Flow
37 Notes to Consolidated Financial Statements
46 Report of Independent Auditors
47 Addresses
50 Selected Financial Data; Definitions
(page 4)
SUMMARY
Company formed by a merger of Europe's leading automotive
safety company and the leading U.S. airbag company.
Acquisitions of the world-leading supplier of seat belt
webbing and a Japanese airbag company.
Introduction of the world's first side-impact airbag for head
protection.
Launch of Gentle Airbags and a Smart Airbag System.
Order for Anti-Whiplash System.
Start of development of a Safety Radar System.
Construction of a U.S. steering wheel plant, a Brazilian airbag and seat
belt plant and a Russian seat belt plant.
Substantial expansion of production capacity for airbag cushions and
ignitors, and of the Spanish and Swedish manufacturing facilities.
Increased holdings in the companies in Argentina, Romania and South
Africa, and start of a branch office in South Korea.
GRAPH (showing Net Sales, Earnings per share and cash flow per share on
a proforma basis for 1997 and 1996).*
*(Data in this report on pages 4-30 for periods prior to May 1, 1997,
when the company started its operations, are included on a Pro Forma
basis)
(page 5)
TWO LEADERS MERGE
ILLUSTRATION
(page 6-7)
LETTER TO THE SHAREHOLDERS AND EMPLOYEES
"Well-Positioned for Worldwide Growth"
On May 1, we started Autoliv Inc., thereby creating a company
twice the size of each of the two original companies Autoliv AB and
Morton ASP. The new company has sales neck-to-neck with the former
market leader in our industry.
We have now started to coordinate purchases and increase internal supply
of key components. We have laid down a common airbag inflator program
and we have formed common organizations in countries where both
companies were active. Luckily, that was the case in only four
countries, which has facilitated the amalgamation process. Being on a
growth trend has also made this process easier.
In total, we estimate that these and similar measures could lead to
annual cost savings on the magnitude of $100 million. In addition, we
expect top line synergies from cross-selling, etc. to be at least as
important, although these effects will take longer to materialize. These
positive effects will be important factors in offsetting the current
pricing pressure.
The new company has been very well received, both by customers and
employees. In Eastern Europe, Korea and South America, for instance,
where both old Autoliv and Morton Automotive Safety Products had limited
presence, we are now rapidly receiving new contracts.
Strategy and objectives
In tandem with the merger and the restructuring, we have continued to
advance Autoliv's position in line with the company's strategy, which is
to:
- - Expand globally
- - Expand productwise
- - Increase vertical integration
- - Continue to improve quality and reduce cost
With this strategy, Autoliv has been able to grow its sales faster than
the average market growth, thereby giving its shareholders a better
long-term return on their investments in Autoliv than in most listed
companies.
Global expansion
In 1997, we agreed to acquire the assets of an airbag company in Japan.
This will allow us to ramp up local production much faster and improve
our support to the Japanese auto manufacturers than if we had started a
greenfield operation.
We have also started to build a plant in Indiana, USA, following the
contracts we have won for integrated steering wheels with airbags. With
this new concept we have in less than two years' time received orders
corresponding to 10% of the annual steering wheel demand in North
America from the U.S. car manufacturers.
We have also started to build a plant in Brazil in response to contracts
we have received from most of the auto manufacturers there.
In Russia we completed a seat belt plant in 1997 and commenced shipments
to the local car manufacturers. Recently we also got the first airbag
contract there.
Furthermore, we have strengthened Autoliv's position in emerging markets
by increasing Autoliv's holdings in the partially-
owned companies in South Africa and Romania and by making the Argentine
joint venture a wholly-owned subsidiary.
Last but not least, we have won a new customer: Fiat in Italy, to whom
we will start delivering seat belts with pretensioners later this year.
Product expansion
Also in 1997, we established a completely new market: Head protection in
side collisions.
The first product is the ITS (Inflatable Tubular Structure), which we
have developed together with BMW and the American company Simula.
This year we will add two alternative products to the line: the
Inflatable Curtain, for which interest currently is rapidly building,
and the Head&Thorax Bag.
For frontal protection our Gentle Bag concept has been very well
received, and shipments will start later this year of all of our four
Gentle Bag technologies (Radial Deployment System, High-Efficiency Bag,
Dual-Stage Inflator and Adaptive Inflator).
At the same time, Smart Airbags - the next airbag generation - are being
developed. These will use advanced sensor technologies to detect e.g.
rear-facing child seats and when the front seat is unoccupied. The
system will also "see" how an occupant is positioned and determine the
severity of the crash. The bag deployment can then be optimized
according to the situation.
We have also entered into a cooperative venture with the military high-
tech company Celsius for the development of an Adaptive Cruise Control
system, which is based on Celsius' radar technology.
In 1998, we will also start production of a smaller, lighter and more
cost-efficient line of airbag inflators based on a new,
environmentally friendly propellant.
PHOTO
Vertical integration
We are currently rapidly expanding our in-house production of
initiators (i.e. ignitors) and textile cushions for airbags. In the
U.K., for instance, we have built a new weaving plant which will
increase our cushion manufacturing capacity there by 80%, and in France
we are currently expanding annual airbag initiator capacity from five
million units to more than 20 million.
We have also acquired our most important supplier of seat belt webbing,
the British group Marling Industries with plants in Europe, North
America, Australia and Asia Pacific, i.e. in all our main
markets.
These kinds of actions will lower costs, as well as improve qual-ity by
increasing internal control of material flows.
Top-line growth
In 1997, Autoliv reported record sales of $3.3 billion - an increase of
2% from the previous year - despite continued price decline and a 6%
negative effect of the stronger U.S. dollar. Since 70% of our business
is outside the U.S., a stronger dollar has a significant negative impact
on Autoliv's reported sales and earnings.
Growth was also hampered by the already high airbag penetration rate in
the U.S. In other markets, however, sales were driven by higher
penetration rates for frontal airbags, continued success for our seat
belt pretensioners, higher vehicle production and by side airbag
deliveries which started during the year. Autoliv currently delivers
such airbags (which were introduced mid-1994) to 18 customers, split
between more than 60 car models. Unit sales of side airbags tripled
versus the previous year.
Our seat belt pretensioners continued their success. Unit sales were up
20% to almost 18 million units which means that more than every second
new car in Europe now has this safety feature from Autoliv in the front
seats.
Income and cash generation
We managed to grow reported earnings per share by 6% or somewhat faster
than reported sales (and adjusted for currency effects the growth was at
least twice as fast). This improvement was driven by the success of our
new products, the introductions of more cost-efficient components and
designs, and the further enhanced vertical integration.
These actions have made it possible to offset the price decline and to
report earnings per share of $1.81 for 1997 compared to $1.69 for 1996.
Cash generation improved even faster than earnings or from $0.13 per
share during 1996 to $1.76 (i.e. $180 million in total after capital
expenditures and acquisitions of $261 million). This has allowed us to
reduce Autoliv's already modest net-debt-to-equity ratio from 43% to
38%.
It is therefore fair to say that with these strategic actions taken
during 1997 and given the financial outcome for the year, New Autoliv
got off to a good start.
Prospects
Looking at the year ahead, the toughest challenge will be the current
strong price decline in the U.S. for airbags. In the rest of the world -
and that is where Autoliv has most of its sales - prices have already
fallen to a lower level, and here the decline has started to moderate.
In addition, frontal airbags will gradually be upgraded to Gentle Bags
and Smart Bags with better prices.
At the same time, unit sales will continue to grow as penetration rates
for frontal airbags keep rising outside the U.S. and manufacturers start
installing side airbags in more car models. So, even if there currently
are some short-term challenges for the airbag industry, there are
certainly long-term growth opportunities as well.
In addition, this year we will introduce whiplash protection devices,
head protection systems for side collisions and several other new
products which should generate substantial sales in some years' time.
Autoliv is therefore well-positioned for long-term world-wide growth.
Gunnar Bark
Chairman and Chief Executive Officer
(page 8-9)
THE MARKET
LOGOTYPES
With its successful growth strategy, Autoliv has managed to become a
global leader in the expanding, $10.5 billion car occupant restraints
market. In 1997, the expansion that began in the early 1990's continued
with a growth rate of approximately 5%. Airbag modules accounted for
approximately 50%, seat belts for 35% and electronics for 15% of the
total market.
For the rest of the decade, growth will be driven by increased
vehicle production, higher seat belt penetration rates in emerging
markets and the introduction of new advanced products, such as side-
impact protection systems. Growth rates in Europe, Japan and the rest of
the world will be higher than in the United States.
Although the global steering wheel market is expected to remain at
approximately one billion U.S. dollars, steering wheels with special
features, such as integrated airbags, is an area of strong growth.
The seat belt market
The world market for seat belts keeps growing, despite the fact that
seat belts were introduced 40 years ago. This is mainly because seat
belt systems are becoming increasingly sophisticated with such
features as pretensioners, automatic height adjusters and load
limiters. A growing number of cars are also being equipped with three
complete retractor belts in the rear seat.
The price decline in this segment of the market is offset by the
increase in global auto production. As a result, the world market for
seat belts displays a growth trend of a couple of percent annually, with
some emerging markets growing 5 to 10 times as fast.
The airbag market
The world market for airbags has been an area of spectacular growth
during the 1990's. In 1997 alone, installations of frontal airbags
increased from 54 million in 1996 to 62 million. The number of side-
impact airbags installed jumped from 2 million to almost 6 million. By
the year 2000, the number of frontal airbags sold could amount to 80
million units and side-impact airbags to more than 30 million, including
special head airbags for side-impact.
Much of the current rapid unit growth is offset by strong pressure on
prices. This situation is likely to change, however, when current airbag
systems are upgraded to Gentle and later to Smart and Adaptive airbags.
The range of special side-impact airbags for head protection, which
Autoliv started to introduce in 1997, could also, in a couple of years,
contribute to a continued growth trend.
In the U.S., airbags became mandatory in 1997 in all passenger cars,
both on the driver and the front seat passenger sides. From September
1998, the law will also cover all other light vehicles. Beyond that, the
installations of frontal airbags will fluctuate with the car production
cycle. The penetration rate for side-impact airbags is, however, still
close to zero among the U.S. car companies.
The installation rates in Europe are also on a strong growth trend.
Currently, three new cars out of four have a driver airbag, and more
than every second car has dual airbags, compared to a penetration rate
of close to zero in 1990. Installations of side-impact airbags, which
began in 1994, after only three years amount to 4.5 million, but
nevertheless "only" 15% of all new cars sold in 1997 in Europe had this
safety device.
In Japan, where the development started later than in Europe, more than
60% of the new cars produced in 1997 were equipped with a driver airbag,
and every third new car had dual airbags. Penetration rates for side-
impact airbags are currently increasing almost as fast as in Europe, but
the penetration level is still only about 5%.
Airbag installations are also growing fast in Australia and South Korea.
Autoliv's markets
The North American markets account for about 30% and the European
markets for about 55% of Autoliv's sales. The most important markets are
the United States, Germany, France, Great Britain, Japan and Spain.
Sweden accounts for about 4% of revenues.
In North America, Autoliv accounts for approximately one third of the
airbag product market and close to 10% of the seat belt market. Autoliv
did not sell seat belts in the United States until 1993, but already
Autoliv accounts for one third of Chrysler's seat belts, and shipments
to Ford and General Motors have started recently. In addition, Autoliv
has received steering wheel contracts, equivalent to 10% of the demand
of the U.S. car manufacturers in North America. Shipments will start in
1998, when Autoliv's steering wheel plant in Fort Wayne, Indiana, will
be completed.
In Europe, Autoliv's market share is close to 45% for airbags, 50% for
seat belts and 10% for steering wheels.
In Japan, Autoliv has a strong position in the airbag inflator market,
with a market share of over 50%.
In many emerging markets, such as Argentina, Hungary, India, Malaysia,
South Africa and Turkey, Autoliv has achieved market positions of 50% or
more by early establishment of joint ventures or subsidiaries.
Customers
Autoliv sells to all major auto manufacturers in the world with
particulary high sales levels to those manufacturers who have a
reputation for concerted efforts in auto safety.
The largest customers are Audi, BMW, Chrysler, Citron, Ford, General
Motors, Honda, Mercedes-Benz, Mitsubishi, Nissan, Peugeot, Renault,
Rover, Toyota, Volkswagen and Volvo.
No customer accounts for more than 15% of Autoliv's sales. The contracts
are typically divided among a car maker's different car models with each
contract usually running as long as that car model is being produced.
In the development of a new car model, a process that takes several
years, Autoliv in many cases functions as a development partner. This
means that Autoliv gives advice on new safety-enhancing products and
assumes responsibility for adaptation and evaluation of these systems.
The industry
Within less than a year and a half, the number of major suppliers of
occupant restraint systems has been reduced from nine to six.
Autoliv and the American company TRW are the market lead-ers, followed
by the American company Breed which last year acquired the seat belt and
airbag operations of AlliedSignal. Other important companies in the auto
safety industry are the Japanese company Takata, the American auto
supplier Delphi and the German steering wheel company Petri.
Autoliv's competitive strategy is to be a specialist company offering a
complete range of automotive safety system products, with in-house
expertise of all key components and manufacturing close to the major
customers. Autoliv has more technical centers and crash test facilities
for automotive safety than any other company in the industry. This gives
Autoliv the possibility not only to offer just-in-time supply of safety
products, but also to provide customers with excellent engineering
services and testing capabilities "just-in-time".
(page 10)
AUTOLIV'S SAFETY SYSTEMS
Adaptive cruise control & safety radar
Will make a car maintain a constant distance from the car in front of it
by affecting throttle and brakes. Under development in cooperation with
the Swedish military high-tech company Celsius Tech.
Electronic control unit
Micro processor with an electronic sensor which determines if and
exactly when the seat belt pretensioners and the airbags should be set
off.
Knee airbag
First introduced in the world market in 1995 by Autoliv. Protects knees
(and hips) and reduces the risk for submarining. Also leads to reduced
chest load. Unlike conventional knee bolsters and paddings, knee airbags
don't take away any leg room.
Knee box
An energy-absorbing metal structure which reduces the risk for
submarining.
Driver airbag
Reduces driver fatalities in frontal crashes by 25% and the risk of
facial injuries by 75% for belted drivers. Autoliv not only develops and
assembles various airbag systems, but also produces all key components.
Steering wheel
Driver airbags are increasingly being integrated into the steering
wheel. Autoliv is a leader in this development through its subsidiary
Isodelta in France, one of Europe's leading steering wheel producers.
Steering wheel production will soon start in the United States, Latin
America and Asia.
Passenger airbag
Reduces fatalities in frontal crashes by approximately 20%. Autoliv has
a complete offering of various systems (full-size bags, face bags,
gentle bags, smart bags, etc.) and a comprehensive offering of airbag
inflators, cushions and other key components.
Inflatable curtain
Cushions the heads of the driver and all passengers seated next to the
doors in side-impact collisions and roll-over accidents. Manufactured
using Autoliv's patented one-piece woven technology.
Belt-in-seat
Allows the shoulder belt to better wrap around the occupant's body,
thereby increasing the efficiency of the belt system. Also contributes
to keeping the clearance between the head and the roof in roll-overs.
Anti-whiplash seat
To be introduced in 1998. Will reduce neck injuries in rear-end
collisions.
Seat frames & sliding rails
Produced by Autoliv since 1996. Autoliv has developed a unique, stronger
recliner for Belt-In-Seat Systems and develops neck ("whiplash")
protection systems which involve the metal frame of a seat.
Integrated child seat
Makes it possible for children to use the car's regular seat belts
(which is better than a separate belt system). Since the seat is
integrated into the backrest of the rear seat, it does not take away any
space when not used.
Safety rear seat structure
A backrest in the form of a strong, specially designed aluminum
structure which prevents luggage from penetrating into the passenger
compartment in a frontal crash.
Seat belt beam
Facilitates installation of a complete 3-point retractor belt in the
mid-rear seat, especially in hatch-backs and station wagons. Also
provides passengers with improved side-impact protection.
Trunk belts
Safety belts which protect fragile goods and prevent luggage in cars
with folding rear seats from penetrating into the passenger compartment.
ILLUSTRATION
Seat belt systems
Produced by Autoliv since 1956. Autoliv today has the most comprehensive
offering with in-house production of all key components and all new seat
belt features (see page 14) such as:
Pretensioners
Load limiters
Automatic height adjusters
Thorax bags
Introduced in the world market - by Autoliv - in 1994. Is as efficient
in side impacts as a frontal airbag is in frontal crashes.
Side-impact satellite
Electronic sensing system which determines if and when the different
side-impact protection systems should be triggered.
Its (inflatable tubular structure)
The world's first head airbag for side-impact protection. Introduced in
1997 together with BMW and the American company Simula.
(page 12)
AIRBAGS
The first airbag was patented in the early 1950's, but it was not until
towards the end of the 1980's that sales began to gain momentum, and
only then as a result of a law in the United States requiring passive
restraint systems in the front seats, i.e. airbags or seat belts that
are fastened automatically. The law was later expanded, requiring dual
airbags in all new passenger cars sold after September 1, 1997, and from
the following model year in all light vehicles.
Protective effect
According to the U.S. National Highway Traffic Safety Administration
(NHTSA), airbags have saved more than 2,700 lives since 1987 (a third of
which were saved during the last year) and prevented hundreds of
thousands of personal injuries. NHTSA also forecasts that 3,000 lives
will be saved annually, when all light vehicles on the U.S. roads are
equipped with dual frontal airbags.
Frontal airbags are estimated to reduce the number of deaths in head-on
collisions by about 25% among drivers using seat belts, and by more than
30% among unbelted drivers. The number of deaths for belted front seat
passengers is reduced by about 15%, and by more than 20% among unbelted
front seat occupants.
With a combination of seat belt and airbag, the number of serious chest
injuries in frontal collisions can be reduced by 65% and serious head
injuries by up to 75%, according to NHTSA.
Since almost 2 million airbags have been deployed in actual car crashes
in the U.S. alone, these evaluations of the protective effect of airbags
are now mostly based on actual crash data rather than on data from
tests.
Products
Autoliv pioneered airbag technology as early as 1968, and has since
grown into being the world-leading producer of airbags, with about 20
million airbags sold in 1997 (including 3 million side-impact airbags).
For frontal protection, Autoliv has developed both full-size airbags (in
accordance with the original federal law in the United States which
required airbags to be optimized for unbelted occupants), and face bags
or "Eurobags" for countries where wearing a seat belt is compulsory. In
1997, Autoliv introduced "De-powered" airbags, following a change in the
U.S. regulations. In addition, Autoliv has developed a series of new
airbag technologies which are in the process of being launched (see next
page).
In 1994, Autoliv was the first company in the world to introduce a side-
impact airbag system, mainly for protection of an occupant's torso. In
1997, Autoliv achieved yet another break-through in automotive safety
when the world's first airbag for head protection in side collisions was
introduced. This ITS (Inflatable Tubular Structure) has been developed
in close cooperation with BMW and the American company Simula. Two
alternative products are under development: The Inflatable Curtain (IC),
which is being developed in cooperation with Mercedes and Volvo, and the
Head & Thorax Bag, which is being developed in cooperation with other
car manufacturers, including Ford and Renault.
Manufacturing resources
Autoliv currently develops and produces complete airbag systems in ten
countries. In addition, Autoliv has specialized companies in four
countries for developing and manufacturing of all key components of the
systems. In 1997, these companies produced more than 50% of the Group's
key components for the airbag systems.
Autoliv Inflators is the world-leading producer of airbag inflators,
with the widest product offering in its industry. It also has extensive
sales to airbag module assemblers other than the Autoliv companies.
Autoliv's inflator group produces its own sodium azide propellant for
the most frequently used inflators, and cooperates for other propellants
with Thiokol, a leading aerospace and rocket fuel producer in the United
States, and with SNPE, a leading pyrotechnic group in Europe.
Major production plants are located in the United States, France and
Sweden. In France, Autoliv Inflators also has a rapidly expanding
production of initiators (i.e. ignitors for airbag inflators).
Autoliv Textiles produces textile cushions, using both the
traditional cut-and-sew method and Autoliv's patented one-piece
woven technology, whereby the cushion can be ready-made on the loom.
Production is located in England, Utah, Sweden and the Netherlands.
Autoliv Electronics produces the electronic control unit which evaluates
a crash and determines if and when the airbag shall be deployed. Autoliv
Electronics has one joint venture with the leading French electronics
company SAGEM and one joint venture in Sweden with the leading Finnish
electronics group, Nokia.
Autoliv's 77% owned subsidiary Isodelta is a leading European steering
wheel manufacturer, which produces both traditional steering wheels and
steering wheels for integration with driver airbags. Isodelta (and other
Autoliv companies) also produces airbag covers. Production is located in
France. A new plant is under construction in Fort Wayne, Indiana, for
the North American market, where Autoliv has managed to win substantial
contracts for integrated steering wheels.
(page 13)
LATEST NEWS
PHOTOS
The Umbrella RDS Bag is a type of gentle airbag which deploys radially
before it approaches the occupant. Although the Umbrella RDS Bag is as
efficient as a traditional airbag, it is less aggressive than a
traditional airbag. The first order was received within three months
after the new product was launched.
The High-Efficiency Bag uses less gas and offers a better controlled
ride down ("soft landing" of the occupant against the bag) than existing
airbags, because the vent holes on the underside of the bag are kept
closed (unlike traditional airbags) during inflation. When the bag then
catches the occupant and the pressure in the cushion rises, one or more
vent holes (depending on the crash severity, occupant's weight, etc.) is
opened. Developed together with Renault, who will use the system
(together with seat belt load limiters) in all cars.
Autoliv's Inflatable Curtain has been developed in cooperation with
Mercedes and Volvo. Stored in the head-liner, its cells will be inflated
in less than 25 thousands of a second. It protects in both side-impact
collisions and roll-over accidents (not least by preventing ejection).
Injuries to the head account for about half of the fatal injuries in
side collisions, while roll-overs are common in sport utility and other
higher vehicles.
Autoliv's Adaptive Inflators consist of two separate charges of solid or
other pyrotechnic material. Only one charge will be ignited in, for
instance, low speed crashes, while both charges will be needed in severe
circumstances. By varying the delay of the second ignition, the gas flow
can be controlled very efficiently. These inflators will therefore be
used in Autoliv Adaptive Airbags. Commercial shipments will start in
1998.
PHOTO AND GRAPH
(page 14)
SEAT BELTS
Two-point static seat belts were introduced in the 1950's, while three-
point seat belts came into use towards the end of the 1950's. In the
beginning of the 1970's they were followed by three-point retractor
belts.
During the 1970's and 1980's, laws were passed in most European
countries, Australia, New Zealand and Japan making seat belt use
mandatory in front seats. Many countries have expanded the requirement
to include rear seats, too.
In the United States, the installation of seat belts is mandated, but
wearing them is not required in all states.
Also in emerging markets, such as India, seat belt legislation has
recently been passed.
Protective effect
According to National Highway Traffic Safety Administration, the number
of deaths is reduced by 45% if conventional three-point seat belts are
used. In the United States alone, seat belts currently save more than
10,000 lives per year and prevent over 200,000 serious personal
injuries. In addition, another 4,000 lives and six billion dollars could
be saved annually if the belt usage rate in the U.S. came up to the
goals set by the authorities.
The modern belt systems manufactured by Autoliv have been developed to
hold the occupant in the seat in case of a collision. The purpose of the
seat belt is also to distribute the force of the collision to the
strongest body parts, i.e. the rib cage and the hip bones.
In high-speed collisions, however, rib and abdominal injuries may be
suffered as a result of the very strong forces involved, especially if
the seat belt is not correctly positioned. These risks are minimized
with the most recent innovations from Autoliv, e.g. belt pretensioners
and load limiters, which also play an important role in Autoliv's
airbag/seat belt optimized systems.
Seat belt products
During 1997, Autoliv's wholly owned companies delivered approximately 40
million belt systems, of which almost 18 million were equipped with belt
pretensioners. Seat belts manufactured by Autoliv's joint venture
companies and licensees are additional.
The seat belt systems and components are based on Autoliv's own research
and development, and all components can be manufactured in-house.
In fact, however, Autoliv's key component companies account for
approximately 25% of the deliveries to Autoliv's assembly companies. As
part of Autoliv's vertical integration strategy, this share will be
raised to approximately 30% in 1998.
Seat belt systems with retractors were introduced in 1967 by Autoliv and
have subsequently been upgraded several times. Today all Autoliv
retractors have two sensors which work independently of each other on
the locking mechanism. The retractor springs are typically produced by
Autoliv's company Tensator in the U.K.
Autoliv's buckle is a unique, patented lock which is completely "G-force
insensitive", i.e. it will not open even if pulled in any direction by
great acceleration forces. This has contributed to giving Autoliv an
especially strong market position for buckle-mounted pretensioners.
Autoliv's pretensioners prevent an occupant from being hurled forward in
a crash before the seat belt starts to restrain him and prevents the
seat belt from catching him with a sudden jerk that could break his
ribs. This is an increasing problem since the driving population is
getting older and a sixty year old person can only take half as much
load on his rib cage as a twenty year old person.
Pretensioners can tighten the belt up to 15 cm (6 inches) either by a
steel spring, activated by a mechanical sensor, or by a small
pyrotechnic charge, activated by an electronic sensor, usually the same
sensor as in the car's airbag system.
Autoliv's belt grabber is a web clamp, which prevents the so-called
film-spool effect. This occurs when the belt is yanked out when the
loops of rolled-up webbing are tensioned upon impact.
Autoliv's load limiter allows the belt to be pulled out slightly if the
load on the rib cage becomes excessive. The airbag is used instead to
absorb the excessive energy, and the concentrated loading from the
shoulder belt is redistributed to a more uniform load, given by the
airbag. This is important for the growing elderly part of the driving
population (see pretensioners above).
Introduced by Autoliv in 1995, Autoliv sold 0.6 million load
limiters in 1996, 3 million in 1997, and is expected to sell three
times as many in 1998.
Autoliv's seat belt webbings are customized to make the "catch" of the
belt soft and to minimize the rebound effect. A major portion of
Autoliv's webbings is manufactured by Van Oerle Alberton BV, a world-
leader in this field and a subsidary of Marling Industries which Autoliv
acquired in 1997.
Autoliv's height adjusters assure correct belt geometry, which enhances
both the effectiveness of the belt and the ease and comfort of use.
Autoliv has developed both mechanical and automatic height adjusters.
(page 15)
LATEST NEWS
ILLUSTRATION
The Swinging Backrest Seat is an Anti-Whiplash Seat (AWS) which will be
in commercial production in 1998. With this seat, the distance between
an occupant's head and his head rest is reduced in a rear-end collision.
The backrest will then yield i.e. be tilted to absorb energy and reduce
the forward rebound of the occupant.
Rear-end collisions are rarely fatal, but they give rise to fully one
quarter of all personal injuries - often with permanent impairment - and
to sick-leave and inability to work. In addition to the human suffering,
they account in many industrial countries for more than 50 percent of
all insurance claims for personal injury sustained by car occupants.
Interest from car manufacturers in various anti-whiplash systems is
therefore significant.
Marling Industries, the world-leading manufacturer of seat belt webbing,
was acquired by Autoliv in 1997. Marling has webbing factories in the
Netherlands, Canada, Australia and joint ventures in China and Malaysia.
The acquisition strengthens Autoliv's vertical integration.
R-27 is a new - and Autoliv's ninth - generation of seat belt
retractors. Despite the fact that it is smaller and 20 percent lighter
than the previous generation, it has a higher webbing capacity. It also
has 30 percent fewer parts. R-27 is a modular system to which various
features, e.g. load limiters and comfort enhancers, can be added.
PHOTO AND GRAPH
(page 16)
RESEARCH AND DEVELOPMENT
Each year approximately a quarter of a million car occupants perish in
car collisions around the world. The number of severely injured persons
is about ten times as large.
Accidents not only cause a great deal of human suffering, but
also large expenses for care and rehabilitation, and lost income.
Consequently, there are huge sums to be saved by introducing better car
occupant restraint systems. Some calculations estimate these potential
savings to exceed $150 billion annually. There is thus a compelling need
for measures to improve safety - and hence for further research and
development.
Almost two thousand employees
During 1997 Autoliv invested $148 million, corresponding to 4.5% of
sales, in research and developments. Autoliv with joint ventures has
close to 2,000 employees engaged in these areas.
Autoliv's research and development is based on the Company's own tests
and trials, as well as on car occupant collision data. Reports from
independent researchers at universities and technical institutes are
another important source of information. The Group's research is also
conducted in consultation with the Autoliv Technical Advisory Board,
which consists of internationally recognized scientists in traffic
safety and biomechanical research, as well as with the safety design
engineers of major car manufacturers.
Many crash tracks
The Group's joint research is concentrated at Autoliv Research in
Sweden, while the corporate development activities are divided among
Autoliv's major technical centers in France, Germany, Great Britain,
Sweden and the United States. In addition, Autoliv has technical centers
in Australia, Japan and Spain, and in 1997 Autoliv's joint venture in
India opened a sled test facility.
With 19 crash tracks, including eight tracks for full-scale tests, at
nine locations globally, Autoliv has more crash test resources than any
other auto safety company. Proximity for the most important customers to
the test centers is an important means to ensure that Autoliv will be
the customers' preferred development partner in auto safety. The test
facilities and specialists are to a considerable extent utilized by the
car manufacturers and other external customers.
Some of Autoliv's crash labs perform more than 100 full-scale tests with
complete cars and over 1000 sled tests annually. Mathematical crash
simulations in computers are performed in tandem with the crash tests.
Total safety system
Autoliv's research and development is based on the company's Total
Safety System philosophy, i.e. the aim shall be to give the best
possible protection to any automobile occupant in any type of collision
without inducing any significant injury to an occupant in any position.
This means that components and sub-systems have to be designed to
interact with each other as one system.
Seat belt pretensioners and frontal airbags, for instance, are
tuned to each other via the same electronic control system to give the
best possible protective effect. This is also the way car safety
products are being increasingly demanded by customers: as macro-
components.
It is important to fine-tune the current systems so that they
provide protection for all kinds of occupants; infants as well as the
growing population of elderly people; short women as well as big,
heavy males, - all of whom can be in many different positions in their
seats, with or without a seat belt, etc.
In real life, crashes are almost never just head-on into a rock or a
concrete wall at just one specific speed as in most tests required by
the authorities. Consequently, future safety systems should be able to
do more than just determine if an accident is a frontal crash, a side-
impact or rear-end collision, or a roll-over. An ideal system should
also be able to identify the object that a car hits in a crash; if it is
a small passenger car or a big truck and the speed of those vehicles and
the car itself.
The crash severity depends also on the type of crash. If it is an off-
set, oblique or head-on crash.
Autoliv's research and development activities are therefore aimed at
protecting real people in real crashes, and not just protecting test
dummies in crash tests mandated by the authorities.
At the same time, Autoliv aims at making its safety systems light-er
(both to save gasoline in the vehicle and raw material in the system),
smaller and environmentally more friendly. Major efforts are also
continuously expended on developing more cost-efficient technical
solutions.
(page 17)
LATEST NEWS
ILLUSTRATION AND GRAPH
A Smart Airbag System was launched in September 1997. This
intelligent system can prevent deployment of the airbag when an
occupant is too close to the airbag, if there is a rear-facing child
seat in the passenger front seat, or if the seat is unoccupied. Four
ultra-sonic sensors allow a computer to create a three-dimensional
picture of the front seat area. This picture is up-dated every 50 milli-
seconds, half the time of a blink of the eye, to make it possible to
detect dynamic out-of-position i.e. when a front seat passenger is
hurled forward in a panic braking immediately before a crash.
Development has started together with the Swedish military high-tech
company CelsiusTech on a Safety Radar System, which uses Celsius' target
seeking radar for missiles and aircraft. The first application will be
an Adaptive Cruise Control (ACC) which will be connected to the car's
cruise control and brakes to assure that a pre-determined distance is
kept to the vehicle ahead. In the next generation, the radar will also
be able to warn the driver and alert the car's airbags and pretensioners
before a crash.
Two new lines of airbag inflators have been developed which will be
introduced in 1998. The first inflator type is based on a new,
environmentally friendly, smokeless propellant, which produces
gases with much lower temperature than traditional inflators, there-by
eliminating the need for expensive coating of the nylon bag. The
inflators are also small and light.
The other inflator line is a new type of hybrid inflator, where the bag
is primarily inflated by compressed gas. This type is more cost-
efficient, lighter and has better gas characteristics than its
predecessors.
A crash lab was opened in India, and the new Automotive Safety Center in
Sweden that was constructed during 1996, was brought into operation.
ILLUSTRATION AND PHOTO
(page 18)
AUTOLIV IN THE WORLD
PHOTO
World headquarters
Airbag & seat belt assembly
Seat belt assembly
Airbag assembly
Component manufacturing
Other
Licensee
(page 20)
AUTOLIV IN THE WORLD
Argentina
Autoliv Argentina in Buenos Aires manufactures seat belts for Argentina
and Brazil.
Australia
Autoliv Australia in Melbourne manufactures seat belts and airbags. Has
a technical center for full-scale tests.
VOA Webco, Webco Australia and Moxham Industrial in Melbourne belong to
the Marling group which was acquired in 1997. Weaves seat belt webbing
and manufactures height safety equipment.
Brazil
Autoliv do Brasil in Taubae outside Sao Paulo is currently building a
seat belt and airbag plant.
Canada
VOA Colfab and Collingwood Fabrics in Collingwood, Ontario, belong to
the Marling group which was acquired in 1997. Weavers and dyers of seat
belt webbing and industrial webbing, respectivly.
China
Nanjing Hongguang Autoliv, a joint venture with Nanjing Hongguang
Airborne Equipment Factory (NHAEF). Manufactures seat belts in Nanjing.
Changchun Hongguang Autoliv, a joint venture with NHAEF and Changchun
Automobile Gaskets Factory. Manufactures seat belts in Changchun in
Manchuria.
Shanghai-VOA in Shanghai belongs to the Marling group which was acquired
in 1997. Weaves and dyes seat belt webbing.
Colombia
Mecanismos Automotices is a licensee in Bogota which manufactures seat
belts.
France
Autoliv France, headquartered in Paris, develops, manufactures seat
belts and airbags, and is responsible for the Group's development of
pyrotechnic seat belt pretensioners. The facilities, which include a
crash laboratory for full-scale tests are located in Gournay, north-west
of Paris.
Autoliv Automation in Gournay develops and manufactures production
equipment for the Group's manufacturing entities.
Autoliv Composants in Caudebec manufactures metal components for seat
belts and airbags.
EAK in Valentigney, a joint venture with ECIA. Manufactures seat belts
and airbags.
Isodelta in Poitiers, a leading European manufacturer of steering
wheels, also produces airbag covers.
Livbag, a company jointly owned with SNPE, a leading pyrotechnic
manufacturer in Europe. Develops south of Paris and manufactures outside
Brest, airbag inflators and micro gas generators for seat belt
pretensioners.
NCS in Survilliers, north of Paris, develops and manufactures initiators
for airbag inflators and micro gas generators.
Sagem-Autoliv in Rouen, a joint venture with SAGEM, the leading
electronics company in France. Develops and manufactures airbag
electronics.
Germany
Autoliv GmbH, headquartered in Elmshorn outside Hamburg, develops and
manufactures seat belts, pretensioners and side-impact head protection
systems. In Dachau outside Munich, Autoliv develops and
manufactures front airbags, side-impact airbags and seat belts with
pretensioners. Airbags are also assembled in Braunschweig. Crash
laboratories are located in Elmshorn, Dachau and Markgroningen (with
tracks for full-scale tests at the first two locations).
Autoliv Stakupress in Norderstedt, also outside Hamburg, manufactures
metal and plastic components for seat belts.
Autoliv Sicherheitstechnik in Dobeln outside Dresden manufactures seat
belts and height adjusters.
Great Britain
Autoliv Ltd in Havant manufactures seat belts and airbags and has its
own technical center with a full-scale crash track.
Precision Components in Chichester, manufactures metal and plastic
components for the Group's seat belt products.
Tensator in Milton Keynes develops and manufactures springs for belt
retractors and height adjusters.
Airbags International in Congleton (near Manchester) develops, weaves
and sews nylon airbags. During 1997, the company expanded into a new
plant which will increase production capacity by 80%.
Marling Industries with headquarters in London was acquired in 1997.
Marling Leek in Leek weaves industrial webbing.
Rykneld Tean in Derby belongs to the Marling group which Autoliv
acquired in 1997. Weaves industrial narrow fabrics.
Hungary
Autoliv Kft in Sopron manufactures seat belts for the auto industry in
Hungary and is a contract manufacturer of seat belts for Autoliv in
Germany.
India
Autoliv-IFB in Bangalore and with a distribution center outside New
Delhi is a joint venture with IFB Industries Ltd. Manufactures seat
belts. Completed a crash test
laboratory in 1997.
Indonesia
Autoliv Indonesia in Jakarta is a joint venture with automotive
component manufacturer Bimantara Cakra Nusa. Began to manufacture seat
belts in 1996.
Italy
Autoliv Italia in Turin is a sales company which was established in
1997.
Cosma outside Torino, makes injection-molded components, primarily for
the Group's seat belts.
Japan
Autoliv Japan Ltd. in Yokohama coordinates Autoliv's global contacts
with the Japanese auto industry and is currently expanding its airbag
production capacity by acquiring the facilities of a local airbag
company in Tsukuba, north of Tokyo. Technical center is located in
Hiroshima, and customer service offices in Nagoya and Hiroshima.
Korea
Autoliv Korea, a sales office in Seoul which coordinates Autoliv's
global contacts with the Korean auto industry.
Mando, a licensee in Munmak. Manufactures airbags.
Samsong, a licensee in Ulsan. Manufactures seat belts.
Sungwoo, a licensee in Munmak. Will start manufacturing of seat belts in
1998 and later airbags.
Hyundai Electronics, a licensee in Kyungki-do. Will manufacture airbags.
Malaysia
Autoliv Asia Pacific, a regional office which supports and coordinates
local companies in the Asia Pacific region.
Autobelt in Kuala Lumpur, a joint venture with Autoindustries.
Manufactures seat belts.
Airbag Systems (Malaysia) in Kuala Lumpur is a joint venture with
Autoindustries. Manufactures airbags.
Furniweb-VOA in Kuala Lumpur belongs to the Marling group which Autoliv
acquired in 1997. Weaves seat belt webbing.
Mexico
Autoliv de Mexico in Toluca outside Mexico City manufactures seat belts,
also for the Mexican and the U.S. markets.
The Netherlands
Autoliv BV in Landgraaf manufactures seat belts and integrated child
seats.
Autoliv ASP BV in Amsterdam manufactures airbags, airbag inflators and
cushions.
Van Oerle Alberton BV is the world-leading manufacturer of seat belt
webbing.
CSV in Scherpenzeel, belongs to the Marling group which was acquired in
1997. Weaves industrial webbing.
New Zealand
Autoliv N.Z. in Auckland manufactures seat belts.
Pakistan
Plastech Autosafe, a licensee in Karachi which manufactures seat belts.
The Philippines
Autoliv QB in Manila is a joint venture with the auto seat manufacturer
Qualibrand and Autobelt in Malaysia. Began seat belt production in 1997.
Romania
Autoliv Romania, an 80% owned company with Metaloplast in Brasov.
Manufactures seat belts for Dacia and Daewoo in Romania and will work as
a sub-contractor for Autoliv Germany.
Russia
Autoliv Russia in Dubna, North of Moscow, started to manufacture seat
belts in 1997.
South Africa
Autoflug in Johannesburg, a joint venture with Automotive Manufacturing
Investments Ltd. In 1997 Autoliv increased its holding from 26% to 49%.
Manufactures seat belts.
Spain
Autoliv-KLE outside Barcelona and Autoliv-BKI outside Valencia
manufacture seat belts and airbags, also for other markets. KLE has a
crash lab for full-scale tests.
Sweden
Autoliv in Stockholm, the Group's headquarters.
Autoliv Research in Vargarda is responsible for the Group's research in,
for instance, protection for side-impact collisions, rear-end collisions
and roll-overs. An advanced Auto Safety Center was opened in 1997.
Autoliv Sverige, Vargarda, manufactures and develops airbags, seat belts
and integrated child seats.
Autoflator in Vargarda develops and manufactures hybrid inflators for
the Group's airbag systems.
Autoliv Hammarverken in Vaxjo and Autoliv Mekan in Hassleholm
manufacture components for car seats.
Autoliv Nokia in Motala, a joint venture with Nokia Audio & Electronics.
Develops and manufactures airbag electronics.
Svensk Airbag in Kungalv manufactures sewn nylon cushions for airbag
systems.
Taiwan
Mei-An Autoliv in Taipei is a joint venture with Holmsgreen.
Manufactures seat belts.
Thailand
Autoliv Thailand in Bangkok is a joint venture with the automotive
component manufacturer Thai Rung Union Car.
Turkey
Autoliv Cankor in Istanbul. A joint venture with the Alaca family.
Manufactures seat belts.
USA
Autoliv North America, with headquarters in Ogden, Utah, and sales
office and technical centers (with full-scale test track) in Detroit,
Michigan. Manufactures airbags in Ogden and seat belts in Indianapolis,
Indiana. A steering wheel plant is under construction in Fort Wayne,
Indiana.
Autoliv Inflators in Ogden, Utah, develops and manufactures airbag
inflators (including propellants) and coordinates the Group's global
activities in this field.
Autoliv North American Components in Ogden, Utah, manufactures airbag
cushions and other key components.
(page 22)
SHAREHOLDER INFORMATION
Autoliv, Inc. is incorporated in Delaware, USA. The company's common
stock is listed on the New York Stock Exchange (NYSE symbol ALV) and its
Swedish Depositary Receipts are listed on the Stockholm Stock Exchange
(SSE symbol ALIV). Options in Autoliv's securities are also listed on
the Chicago Board Options Exchange (CBOE symbol ALIV).
The closing price on the first trading day on the NYSE, May 1, 1997, was
$35.50, and on the SSE (May 2) was SEK274. The last quotes during 1997
were $32.75 and SEK259, respectively.
A total of 48 million Autoliv shares were traded on the NYSE in 1997 and
a total of 116 million on the SSE. The trading on the SSE represented a
total value of SEK35 billion ($4.5 billion) which means that Autoliv's
depositary receipts were the 6th most traded issue during 1997,
accounting for 4% of the trading volume on the SSE.
Shares and number of shares
The number of shares outstanding on December 31, 1997, was 102.2 million
and could increase to 102.6 million if all outstanding stock options
(including those granted in 1998) are exercised. For details of options
granted through 1997, see Note 13 on page 42. The options granted in
February 1998 have an exercise price of $31.07 with similar terms and
conditions as previously granted
options.
Autoliv has adopted a Shareholder Rights Plan designed to encourage
third parties interested in acquiring the company to negotiate with the
Board to preserve the best interests of all Autoliv stockholders (see
Note 11 on page 42).
Dividend
Dividends are paid on the first Thursday in the last month of each
quarter (March, June, September and December). Currently, the quarterly
dividend amounts to 11 cents per share.
In lieu of receiving dividends by checks through the mail, holders of
Autoliv shares or depositary receipts may have dividends deposited
electronically into a checking or savings account on the payment dates.
This service is offered at no cost. For more information, please call
First Chicago Trust at +1(800)446-2617 for holders of common stock and
VPC (Swedish Securities Register Center) at +46(8)402-9000 for holders
of Swedish Depositary Receipts.
Shareholders
Autoliv estimates that approximately 40% of the shares in the company
are held in the U.S. and 40% are held in Sweden, while most of the
remaining 20% are held in the U.K. The number of shareholders is
estimated to amount to approximately 60,000.
The largest shareholders, known to the Company, are shown on the next
page.
General meeting of shareholders
Autoliv's next Annual Meeting of Shareholders will be held at 9.00 a.m.
(local time) on Tuesday, April 21, 1998, at The Banquet Room, 57th
floor, The First National Bank of Chicago, One First National Plaza,
Chicago, Illinois.
Shareholders are urged to return their proxies whether or not they plan
to attend the Meeting.
GRAPHS
(page 23)
<TABLE>
<S> <C>
The largest shareholders* Number Percentage of
Domicile of shares share capital
Nordbanken Asset Management Sweden 4,934,000 4.8
SPP Investment Management Sweden 3,224,850 3.2
Scudder Kemper Investments USA 2,351,685 2.3
Handelsbanken Funds Sweden 2,755,000 2.7
Fourth AP Pension Fund Sweden 1,867,050 1.8
TIAA-CREF Investment Management USA 1,652,721 1.6
Skandia Insurances Sweden 1,599,076 1.6
S-E Banken Funds Sweden 1,404,614 1.4
Barclay Global Investors USA 1,386,060 1.4
Wanger Assets Managment USA 1,208,000 1.2
60,000 other shareholders 79,807,968 78.1
Total December 31, 1997 102,191,024 100.0
*Known to the company
</TABLE>
Analyses
The following banks and securities brokers have published reports on
Autoliv Inc.
- - ABG
- - Aros
- - Alfred Berg
- - Bikuben
- - Carnegie
- - Cheuvreux de Virieu Nordic
- - Den Danske Bank
- - Den Norske Bank
- - Deutsche Morgan Grenfell
- - Enskilda Securities
- - Furman Selz
- - Goldman Sachs
- - H Lundens
- - Handelsbanken
- - J P Morgan
- - Kleinwort Benson
- - Myrberg & Wiklund
- - NatWest
- - Nordiska
- - Ohmans
- - Olde
- - Paribas
- - SwedBank
- - UBS Warburg
- - William Blair
<TABLE>
<S> <C> <C> <C>
Share Price and Dividends New York (US$)Stockholm (SEK) Declared Dividend
High Low High Low US$ SEK
May 1 - June 30, 1997 $40 $34 3/8 313.5 271 NA NA
July 1 - Sept. 30, 1997 45 1/8 34 13/16 346.5 277 $0.11 0.86
Oct. 1 - Dec. 31, 1997 43 3/16 30 5/8 330 240 0.11 0.85
Jan. 1 - Feb. 20, 1998$ 33 11/16 $28 1/8 282 224 $0.11 NA
</TABLE>
Investor Requests:
Autoliv Inc.
Box 70381
SE-107 24, Stockholm, Sweden
Tel +46 (8) 587 20 623
Fax +46 (8) 24 44 79
E-mail: [email protected]
Mats Odman
Autoliv North America
1320 Pacific Drive,
Auburn Hills, MI 48326-1569, USA;
Tel +1 (248) 475-0409
Fax +1 (248) 475-9831
Barry Murphy
Transfer Agent & Registrar
First Chicago Trust Company
P.O. Box 250
Jersey City, New Jersey 07303-2500
+1 (800) 446-2617 (U.S. only)
+1 (202) 324-0498
+1 (201)222-4955 (Hearing Impaired)
+1 (201)222-4877) Fax
The transfer agent, First Chicago Trust Company, performs the following
functions over the telephone when a shareholder identifies his or her
account by providing a taxpayer identification number, registration of
the securities and the address of record: information regarding stock
transfer requirements; address changes; replacement of dividend checks,
duplicate 1099 forms and W-9 tax certification forms; transcripts of
shareholder accounts ; and information regarding the Direct Deposit of
Dividends.
Other requests for information should be mailed to the address above for
the Stock Transfer Agent and Registrar.
Financial Information on Fiscal Year 1998
Quarterly Reports
January-March April 22, 1998
April-June July 23, 1998
July-September October 22, 1998
October-DecemberJanuary 28, 1999
Annual Report March 1999
These reports, news releases, proxy statements and other general
information on Autoliv are published in English and Swedish and can be
obtained without charge upon request from Autoliv at the addresses given
above. They are also available in English on the Internet at
http://www.huginonline.com/sweden/aliv/.
The filings with the Securities & Exchange Commission (SEC) of Autoliv's
annual 10-K report and quarterly 10-Q reports can also be obtained on
the Internet at http://www.sec.gov.
(page 24)
BOARD OF DIRECTORS
Gunnar Bark 1
Chairman & Chief Executive Officer
Born 1939
Director since 1982
Elected until 2000
Chairman of Allgon AB and Spectra-Physics AB; Director of Esselte AB
M.Sc., Ph.D. h.c.
Shares: 25,000
Per-Olof Aronson 1, 2, 3
Born 1930
Director since 1994
Elected until 1998
Former President and Chief Executive Officer of Granges AB, Vice
Chairman of Granges AB.
Graduate Engineer,
Shares: 4,260
Wilhelm Kull 1
Vice President and Chief Financial Officer
Born 1936
Director since 1997
Elected until 1999
MBA
SAR's: 20,000
George A. Schaefer 1, 3
Born 1928
Director since 1990
Elected until 1998
Former Chairman and Chief Executive Officer of Caterpillar Inc.
Director of Aon Corporation; Caterpillar Inc.;
Helmerich & Payne, Inc. and Morton International, Inc.
B. Sc.
Shares: 2,817
S. Jay Stewart 1, 2, 3
Born 1938
Director since 1986
Elected until 1999
Chairman and Chief Executive Officer of Morton International, Inc.
Director of Household International, Inc.
B.Sc. and MBA
Shares: 68,747
Roger W. Stone 1, 2
Born 1935
Director since 1989
Elected until 1999
Chairman, Chief Executive Officer and President of Stone Container
Corporation.
Director of McDonald's Corporation; Morton International, Inc; Option
Care, Inc; Abitibi-Consolidated Inc and Venepal S.A.C.A
B.Sc
Shares:1,794
Per Welin 1, 2, 3
Born 1936
Director since 1995
Elected until 2000
Executive Vice President and Director of L-E Lundberg-
foretagen AB.
Director of Allgon AB,
MoDo AB and NCC AB.
Techn. Lic.; MBA.
Shares: 260
1. Nomination Committee
2. Compensation
Committee
3. Audit Committee
Note:
"Director since" includes time as Director of Autoliv AB and Morton
International, Inc.
Each Director is elected for a three-year term.
(page 25)
MANAGEMENT
Executive Committee
Gunnar Bark
Chairman and Chief Executive Officer
Born 1939. Employed 1982.
Shares: 25,000
Leif Berntsson
Vice President Purchasing
Born 1955. Employed 1988.
Shares: 200; SAR's: 12,870
Jacques Croisetiere
President North American Components,
Chief Financial Officer Autoliv ASP Inc.
Born 1954. Employed 1996.
Shares: 2,500; Options: 30,647
Thomas Hartman
President of Autoliv Inflators and Chief
Operating Officer of Autoliv ASP Inc.
Born 1953. Employed 1996.
Options: 13,981
Yngve Haland
Vice President Research
Born 1945. Employed 1984.
SAR's: 8,425
Claes Humbla
Vice President Human Resources
Born 1940. Employed 1989.
SAR's: 13,170
Wilhelm Kull
Vice President and Chief Financial Officer
Born 1936. Employed 1975.
SAR's: 20,000
Benoit Marsaud
Vice President Manufacturing
Born 1952. Employed: 1980.
Options: 4,000
Brad Murray
President Autoliv North America
Born 1959. Employed 1987.
Shares: 275; Options: 6,500
Mats Odman
Director of Investor Relations
Born 1950. Employed 1994.
Shares: 400; SAR's: 8,425
Jan Olsson
Vice President Engineering
Born 1954. Employed 1987.
SAR's: 6,000
Jorgen I. Svensson
Vice President Legal Affairs, General Counsel and Secretary
Born 1962. Employed 1989.
SAR's: 12,870
Roger D. Tea
Vice President Human Resources Autoliv ASP Inc.
Born 1951. Employed 1987.
Shares: 405; Options: 5,925
"Employed" refers to the first year of employment with the Autoliv AB
Group or with the Automotive Safety Products group of Morton
International, Inc.
For information on options and SAR's, refer to page 22 and 42.
(page 26)
Autoliv, Inc. started its operations on May 1, 1997, following the
combination of Autoliv AB and Automotive Safety Products ("ASP") of
Morton International, Inc. Since the Company, therefore, has not had
operations during a full twelve-month period, this annual report
contains a pro forma section on pages 26 through 30. Financial data are
presented to facilitate comparisons as if the new company had been
active during the full years 1997 and 1996, i.e. as if the combination
had been in effect on December 31, 1995. For accounting purposes, the
combination was treated as the acquisition of ASP by Autoliv AB. This
pro forma presentation, which is unaudited, is based on accounting
principles and assumptions described on page 29.
In accordance with US GAAP, a one-time write off of acquired R&D is
reported as operating expense in the audited financial statements. This
write off is not included in the pro forma statement of income as it is
not part of the ongoing operations in 1997.
The audited financial statements are presented on pages 31 through 46.
In this section, the fiscal year 1997 consists of a four-month period
before Autoliv, Inc. commenced operations with only data related to
Autoliv AB and subsidiaries, and an eight-month period with the new
Autoliv Group, i.e. including ASP.
(page 26)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF PRO FORMA FINANCIAL STATEMENTS
General
Net sales by product group
<TABLE>
<S> <C> <C>
Years ended December 31,
(Dollars in millions) 1997 1996
Airbag products $2,317 $2,287
Seat belt products 940 917
Total $3,257 $3,204
</TABLE>
Year ended December 31, 1997
versus year ended December 31, 1996
Net sales and Gross profit
Net sales for the full year 1997 increased by 2% to $3,257 million. The
stronger U.S. dollar is estimated to have reduced reported sales by 6%.
Acquisitions increased sales by about 2%. The production of light
vehicles in Europe and the U.S. is estimated to have grown by 4% during
the year.
Posted sales of airbag products, including steering wheels, increased by
1% to $2,317 million, while sales adjusted for currency effects and
acquisitions grew by 4%. Acquisitions accounted for $26 million of
sales. Prices in the U.S. have continued to decline from a higher level,
while the price declines in Europe have started to moderate. Side-impact
airbag sales grew particularly fast.
Posted sales of seat belt products, including seat sub-systems, grew by
3% to $940 million, while sales excluding currency effects and
acquisitions grew by 11%. Acquisitions increased sales by about 2%. The
underlying growth is mainly due to higher vehicle production and
continued strong demand for new products, such as pretensioners and load
limiters.
In line with the long-term trend in the increasingly global automotive
components industry, unit sales prices are continually under pressure.
In response to this constant price pressure, reduction of costs remains
a major strategic objective of the Company. At the gross profit level,
cost control has been achieved by efficiencies from global purchasing
contracts, vertical integration through acquisition of suppliers and
continual improvements in manufacturing productivity, to a large extent
due to the introduction of more cost-efficient components and designs.
Thus, despite pricing pressures, the Company has maintained, and even
slightly increased its gross margin percentage. The gross margin
increased to 22.1% in 1997 compared to 21.2 % in 1996.
Operating income
Operating income in 1997 was $356 million or 10.9% of sales. This
compares with Operating income of $346 million in 1996, which was 10.8%
of sales. The improved gross margin in 1997 more than offset an increase
in the level of operating expenses of 0.7% of sales. The operating
expense increase is a result of higher spending in both selling,
general, and administrative expenses and research and development
spending. Research and development spending amounted to 4.5% of sales in
1997 compared to 4.2% of sales in 1996. The Company remains committed to
maintaining a high level of such spending. The Company considers the
development of new technologies and new products an essential element in
achieving a high level of future profitability in the Company.
Interest expense, net
Interest expense, net was $48.8 million in 1997 compared to $48.1
million in 1996. Net debt (short and long-term debt, less cash) at
December 31, 1997 was $646 million against net debt of $704 million at
December 31, 1996. Despite the lower debt level at year-end 1997,
interest expense was essentially unchanged from the prior year. The
level of debt fluctuates significantly throughout the year and during
each month.
Income taxes
The effective tax rate in 1997 was 40.8% versus 41.9% in 1996. Excluding
non-deductible goodwill amortization, the Company's effective tax rate
would have been about 37%.
Net income and Earnings per share
Net income increased by 6% to $184.9 million in 1997 compared to $173.8
million in 1996. Return on sales improved to 5.7% in 1997 from 5.4% in
1996. This improvement was due to the higher operating margin and the
lower effective tax rate in 1997 compared to 1996. Earnings per share
were $1.81 in 1997 compared to $1.69 in 1996.
Liquidity, Capital Resources and Financial Position
Operating and Investing activities
Net cash provided by operating activities was $441 million during 1997
and $352 million in 1996. A reduction in working capital (excluding cash
and short-term debt) generated cash of $56 million in 1997. It is not
realistic to assume that working capital can be further reduced from the
current level. Working capital at December 31, 1997 was $9 million.
Cash generation was more than adequate to cover capital expenditures.
Capital expenditures for property, plant and equipment were $216 million
in 1997 versus $270 million in 1996. Capital expenditures as a
percentage of sales were 6.6% in 1997 compared to 8.4% in 1996. Most
capital expenditure is allocated to additional manufacturing capacity,
which supports both volume increases and the production of new products.
In recent years, however, development resources have also been allocated
for new facilities in the U.S., Sweden and Germany. This spending
accounts for much of the higher level of capital expenditure in 1996.
Budgeted capital expenditure for 1998 is $230 million.
The Company has continued its program of geographic expansion and of
vertical integration through the acquisition of supply companies. Cash
(net of cash acquired) paid for acquisition was $45 million in 1997 and
$69 million in 1996. During 1997, the Company acquired Marling
Industries plc, a U.K. based supplier of seat belt webbing. The Company
also increased its 50% shareholding in Autoliv Slowik Argentina to 100%.
During 1996, the Company purchased an additional 27% interest in
Isodelta S.A., a steering wheel manufacturer. During 1995, the Company
had purchased a 49% interest in Isodelta S.A. Also in 1996, the Company
purchased Autoliv Hammarverken AB and Autoliv Mekan AB. Both companies
are manufacturers of seat components.
The Company's acquisition of ASP was for shares of Autoliv, Inc. and
thus did not use cash. The transaction, however, generated goodwill of
$1,361 million, which is being amortized over a period of 40 years, and
additionally, other intangible assets of $270 million, which are being
amortized over 7 to 25 years.
Financing activities
Cash generated after operating and investing activities was $180 million
in 1997. Net cash generated was $31 million. Cash used for financing
activities included a "dividend" of $24 million to Old Morton (see
Prospectus). Other financing activities, consisting mainly of debt
repayment and dividends paid, totaled $108 million. The effect of
exchange rates reduced cash by about $17 million.
During 1997, net debt was reduced by $58 million to $646 million at the
end of the year. Net debt to equity stood at 38% at year-end, compared
to 43% at the beginning of the year.
The Company pays regular quarterly dividends. The current dividend is
$0.11 per share each quarter. Total cash dividends of $42.9 million were
paid to Autoliv shareholders in 1997. At December 31, 1997 there were
102.2 million shares outstanding.
For the foreseeable future, cash flow from operations, together with
available financial resources, are expected to be adequate to fund the
Company's anticipated working capital requirements, capital
expenditures, acquisition program and dividend payments.
Personnel
The number of employees increased by 2,500 during 1997 to 17,800 at
year-end. Of the increase, approximately 70% is due to acquisitions and
increased in-house production of components.
Compensation paid to Directors and Senior Management is reported, as for
all public U.S. companies, in the Company's proxy statement which is
distributed to Autoliv's shareholders.
Restructuring Costs and Savings Potential
Goodwill related to the ASP and Autoliv AB combination was increased
during the fourth quarter of 1997 by $99 million, net of income tax. The
adjustment reflects revised estimates of restructuring costs, pre-
acquisition contingencies and liabilities, as well as accruals for
contract losses.
The corresponding cost savings from the combination are expected to
reach approximately $100 million annually, when fully realized in 1999.
In addition the combination is expected to generate top-line synergies
by higher sales by improved market penetration, particularly for seat
belts and steering wheels.
(page 28)
PRO FORMA condensed CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
<TABLE>
Years ended December 31,
(Dollars in millions, except per share data)1997(1) 1996(2)
<S> <C> <C>
Net sales
- - Airbag products $2,316.4 $2,287.3
- - Seat belt products 940.4 917.1
Total net sales 3,256.8 3,204.4
Cost of sales (2,537.0) (2,523.9)
Gross profit 719.8 680.5
Selling, general and administrative
expenses (159.7) (145.4)
Research and development (147.7) (133.5)
Amortization of intangibles, primarily
goodwill (59.6) (60.7)
Other income, net 3.2 4.7
Operating income 356.0 345.6
Equity in earnings of affiliates 10.3 3.0
Interest income 7.1 6.4
Interest expense (55.9) (54.5)
Income before taxes 317.5 300.5
Income taxes (129.4) (126.0)
Minority interests in subsidiaries (3.2) (0.7)
Net Income $184.9 $173.8
Earnings per share $1.81 $1.69
</TABLE>
<TABLE>
<CAPTION>
SELECTED CASH FLOW ITEMS (UNAUDITED)
Years ended December 31,
(Dollars in millions) 1997(1) 1996(2)
<S> <C> <C>
Net income $184.9 $173.8
Depreciation and amortization 207.7 207.0
Deferred taxes and other (7.7) 1.2
Change in working capital 55.6 (30.0)
Net cash provided by operating
activities 440.5 352.0
Capital expenditures (215.8) (269.6)
Acquisitions of businesses (44.7) (68.6)
Net cash after operating and investing
activities $180.0 $13.8
Cash flow per share $1.76 $0.13
<FN>
1) Pro forma Jan-April, 1997
2) Pro forma 1996
</TABLE>
Pro forma condensed
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<S> <C> <C>
December 31,
(Dollars in millions) 1997 1996(1)
Assets
Cash and cash equivalents $152.0 $121.0
Accounts receivable 569.2 598.2
Inventories 197.8 172.2
Other current assets 55.2 48.2
Total current assets 974.2 939.6
Property, plant & equipment, net 727.2 692.7
Investments and other receivables 34.6 28.6
Intangible assets, net (mainly goodwill)1,694.5 1,593.0
Total assets $3,430.5 $3,253.9
Liabilities and shareholders' equity
Short-term debt $186.2 $62.1
Accounts payable 385.3 360.7
Accrued expenses 326.1 258.1
Other current liabilities 69.6 54.3
Income taxes 32.3 32.1
Total current liabilities 999.5 767.3
Long-term debt 611.8 762.8
Other non-current liabilities 100.8 80.8
Minority interest in subsidiaries 14.4 22.0
Shareholders' equity 1,704.0 1,621.0
Total liabilities and shareholders'
equity $3,430.5 $3,253.9
1) Pro forma 1996
</TABLE>
UNAUDITED PRO FORMA CONDENSED Consolidated
FINANCIAL INFORMATION
The unaudited pro forma information set forth above gives effect to the
acquisition (as described in Notes to Consolidated Financial Statements)
as if it had been consummated on December 31, 1995, for balance sheet
presentation purposes, and January 1, 1996, for income statement
purposes.
The unaudited pro forma condensed consolidated balance sheet and
statement of income of Autoliv, Inc. have been derived from historical
consolidated balance sheets and statements of income of Autoliv AB, and
the combined balance sheets and statements of income of Morton ASP,
using the purchase method of accounting and prepared in accordance with
U.S. GAAP, after giving effect to certain costs and expenses as
described in the Prospectus dated March 24, 1997. Adjustments for
subsequent changes to the initial purchase price allocation are also
reflected.
For purposes of preparing the unaudited pro forma information for
Autoliv 1996, exchange rates of US$1= SEK6.87 and US$1 = SEK 6.7046 were
used to convert SEK amounts as of and for the year ended December 31,
1996, respectively.
(page 30)
QUARTERLY PRO FORMA
FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
(Dollars in millions, except per share data)
Q1 Q2 Q3 Q4 Year
<S> <C> <C> <C> <C> <C>
1997
Net sales $834.3 $849.4 $716.8 $856.3 $3,256.8
Gross profit 195.6 184.2 155.4 184.6 719.8
margin % 23.4% 21.7% 21.7% 21.6% 22.1%
Operating income 103.7 91.0 70.5 90.8 356.0
margin % 12.4% 10.7% 9.8% 10.6% 10.9%
Income before tax 93.9 83.0 61.6 79.0 317.5
Net income 55.0 48.5 34.9 46.5 184.9
Per share 0.54 0.47 0.34 0.45 1.81
1996
Net sales 813.6 823.3 729.5 838.0 3,204.4
Gross profit 175.0 170.4 154.1 181.0 680.5
margin % 21.5% 20.7% 21.1% 21.6% 21.2%
Operating income 95.9 86.1 72.8 90.8 345.6
margin % 11.8% 10.5% 10.0% 10.8% 10.8%
Income before tax 85.8 74.9 62.5 77.3 300.5
Net income 48.9 43.5 35.0 46.4 173.8
Per share 0.48 0.42 0.34 0.45 1.69
</TABLE>
Foreign exchange rates
The balance sheets of non-U.S. subsidiaries have been converted into
dollars using the year-end rate of exchange. Income statements have been
converted using the average rate of exchange for the year. The rates for
the most important currencies are:
<TABLE>
1997 1997 1996 1996 1995 1995
Average Year- Average Year- Average Year-
end end end
<S> <C> <C> <C> <C> <C> <C>
AUD 0.727 0.655 0.782 0.798 0.742 0.745
DEM 0.567 0.559 0.666 0.643 0.699 0.696
ESP/1000 6.715 6.601 7.902 7.627 8.039 8.220
FRF 0.169 0.167 0.196 0.191 0.201 0.204
GBP 1.641 1.667 1.568 1.689 1.582 1.548
NLG 0.503 0.496 0.594 0.573 0.624 0.622
SEK 0.129 0.127 0.149 0.146 0.140 0.150
JPY/1000 8.327 7.700 9.218 8.624 10.742 9.682
</TABLE>
The DEM is the most representative currency for Autoliv in Europe. The
DEM, at average rates, translated into 14.9% fewer dollars in 1997
compared to 1996. During 1996 the DEM decreased by 4.7% but in 1995
increased by 13.3% compared to the dollar.
(page 31)
MANAGEMENT'S DISCUSSION AND ANALYSIS
On May 1, 1997, the Auto Safety Products Business of Morton
International, Inc. ("ASP") was combined with Autoliv AB to form
Autoliv, Inc. For accounting purposes the combination was treated as
the acquisition of ASP by Autoliv AB. Financial position and results of
operations prior to May 1, 1997 are for Autoliv AB and its consolidated
subsidiaries only and exclude ASP. References to the Company refer to
Autoliv, Inc. and its consolidated subsidiaries commencing May 1, 1997
and to Autoliv AB and its consolidated subsidiaries prior to May 1,
1997.
<TABLE>
<CAPTION>
General
Net sales by product group
Years ended December 31,
(Dollars in millions) 1997 1996 1995
<S> <C> <C> <C>
Airbag products $1,800 $ 818 $ 682
Seat belt products 940 917 750
Total $2,740 $1,735 $1,432
</TABLE>
Year ended December 31, 1997
versus year ended December 31, 1996
Net sales and Gross profit
Net sales for 1997 increased by $1,005 million to $2,740 million, a 58%
increase. In addition to ASP, the company acquired Marling Industries
plc, a publicly traded U.K. company. Also, Autoliv Argentina, previously
50% owned, became a wholly owned subsidiary. Other than ASP,
acquisitions did not have a material effect on financial position or
results of operations. Excluding acquisitions, U.S. dollar sales were
essentially unchanged from year to year, reflecting the increased value
of the U.S. dollar. Substantially all of the 1996 sales were outside of
the U.S. Sales in local currencies, exclusive of acquisitions,
increased by approximately 11%. The local currency increase does not
fully reflect the increase in unit sales volumes, which was in excess of
15% on average. In line with the long-term trend in the increasingly
global automotive components industry, unit sales prices are continually
under pressure.
In response to this constant price pressure, reduction of costs remains
a major strategic objective of the Company. At the gross profit level,
cost control has been achieved by efficiencies from global purchasing
contracts, vertical integration through acquisition of suppliers and
continual improvements in manufacturing productivity. Despite pricing
pressures, the Company has maintained, and even slightly increased its
gross margin percentage over the past several years. The gross margin
was 21.4% in 1997 compared to 20.0 % in 1996. The significant gross
margin increase in 1997 was largely due to the effect of the acquisition
of ASP which has historically had higher margins than Autoliv AB.
Operating income (loss)
Operating loss was $453.0 million in 1997. As a result of independent
appraisals of the assets and liabilities of ASP, $732.3 million was
allocated to In-process research & development as part of the purchase
price allocation process. As the Company's policy is to immediately
expense research & development costs, this asset was written off
following completion of the acquisition of ASP. Excluding this one-time
write-off, operating income in 1997 was $279.3 million or 10.2% of
sales. This compares with Operating income of $163.0 million in 1996,
which was 9.4% of sales. The improved gross margin in 1997 more than
offset an increase in operating expenses of 0.6% of sales. The operating
expense increase is a result of the amortization of the goodwill and
intangibles arising in connection with the acquisition of ASP. Excluding
this amortization, operating expenses showed a slight decrease as a
percentage of sales.
Interest expense, net
Interest expense, net was $33.8 million in 1997 compared to interest
income, net of $0.3 million in 1996. Net debt (short-term and long-term
debt, less cash) at December 31, 1997 was $646 million. At December 31,
1996, the Company was in a net cash position, with net cash of $56
million. The net interest cost in 1997 was a result of the debt assumed
in the acquisition of ASP. This interest cost more than offset the
benefit of the higher operating margin.
Income taxes
Excluding the effect of the write-off of acquired R&D, the effective tax
rate in 1997 was 38.9% versus 33.3% in 1996. The goodwill amortization
arising in connection with the acquisition of ASP was the principal
reason for the increase. In addition, an unfavorable country mix
increased the effective rate. In particular, the rate on ASP's income,
which is primarily U.S., is higher than the effective rate on the income
of Autoliv AB, which is virtually all non-U.S. The non-U.S. effective
rate benefitted from a favorable country mix in 1996 compared to 1997.
Net income (loss) and Earnings (loss) per share
The R&D write-off in 1997 caused a net loss for the year of $579.6
million. Excluding the effect of the write-off of acquired R&D, net
income was $152.7 million in 1997 compared to $113.3 million in 1996.
Return on sales decreased to 5.6% in 1997 from 6.5% in 1996. This
decrease was due to the effect of net interest expense on the pre-tax
margin and the higher effective tax rate in 1997 compared to 1996. The
loss per share in 1997 was $6.70 compared to income per share of $2.06
in 1996.
Year ended December 31, 1996
versus year ended December 31, 1995
Net sales and Gross profit
The company reported net sales of $1,735 million in 1996, an increase of
21% over 1995. Virtually all of these sales were outside the U.S.
Acquisitions contributed sales of $148 million. In 1996, the Company
increased its ownership in the steering wheel manufacturer Isodelta S.A.
from 49% to 77% and acquired Autoliv Hammarverken and Autoliv Mekan AB,
both manufacturers of seat components. These three companies were
consolidated into the Company's financial statements as of January 1,
1996.
For comparable units, excluding the effect of changes in exchange rates,
the increase in consolidated sales was $177 million in 1996, an increase
of 12% compared to 1995 sales.
Sales of seat belts and associated products were $917 million in 1996,
compared to $750 million in 1995, an increase of 22%. Adjusted for
acquisitions and currency effects, the increase was 14%. As Europe
accounts for approximately 90% of the Company's consolidated sales, the
growth in the Company's sales of seat belts and associated products is
comparable to the 3% growth in production of light vehicles in Europe in
1996. The increase in sales of seat belts and associated products was
mainly due to the increase in deliveries of belt pretensioners, which
increased by approximately 50% to nearly 15 million units.
Sales of airbags and associated products were $818 million in 1996,
compared to $682 million in 1995, an increase of 20%. Adjusted for
acquisitions and currency effects, the increase was 12%. The increase in
sales of airbags and associated products was mainly attributable to
increased market penetration (i.e. an increase in the number of light
vehicles with airbags) with respect to existing customers but also new
customers for side-impact airbags (e.g. Audi and Volkswagen) contributed
to sales growth.
The gross margin was 20.0% in 1996 compared to 19.7 % in 1995. Cost of
goods sold is dependent upon a number of factors. These include changes
in costs of raw material, improvements in manufacturing technologies, a
higher degree of integration in manufacturing, efficient cost controls
and productivity gains, and, as for all costs, fluctuations in the
exchange rates of currencies in countries in which the Company's
production facilities are located.
Operating income
Total operating expenses to sales remained constant at approximately
10.6%. As a percentage of sales, selling, general and administrative
expenses decreased from 4.6% in 1995 to 4.4% in 1996, while research and
development amounted to 5.8% of sales, compared to 6.1% of sales in
1995. Despite the slight decrease in the level of research and
development costs, the Company remains committed to maintaining a high
level of such spending. The Company considers the development of new
technologies and new products an essential element in achieving a high
level of future profitability in the Company.
Operating income in 1996 was $163.0 million or 9.4% of sales. This
compares with Operating income of $128.6 million in 1995, which was 9.0%
of sales. The increase in operating income was mainly due to the growth
in sales, with a higher degree of integration and other productivity
enhancing measures offsetting ongoing price pressures from customers.
Interest income, net
Interest income, net was $0.3 million in 1996 versus $8.2 million in
1995. This decrease in income was principally due to the reduction of
net cash to $56 million at December 31, 1996 from $113 million at
December 31, 1995.
Income taxes
The effective tax rate in 1996 was 33.3% versus 35.7% in 1995. The
decrease in the effective rate was primarily due to a favorable country
mix.
Net income and Earnings per share
Net income was $113.3 million in 1996 compared to $91.1 million in 1995.
Net income as a percentage of sales was essentially unchanged from year
to year at 6.5%. Net income per share increased from $1.66 in 1995, to
$2.06 in 1996. The earnings per share for 1995 have been recalculated
to reflect the 2:1 share split, effected during 1996.
Liquidity, Capital Resources and Financial Position
Operating and Investing activities
Net cash provided by operating activities was $343 million during 1997
and about $159 million in both 1996 and 1995. This cash generation was
more than adequate to cover capital expenditures. These expenditures
for property, plant and equipment were $183 million in 1997, $148
million in 1996, and $99 million in 1995. Budgeted capital expenditure
for 1998 is $230 million. Capital expenditures as a percentage of sales
were 6.7% in 1997, 8.5% in 1996, and 6.9% in 1995. Most capital
expenditure is allocated to additional manufacturing capacity. This
expenditure supports both volume increases and the production of new
products. In recent years, resources have also been allocated for new
test facilities in the U.S., Sweden and Germany.
Recent capital expenditures for increased manufacturing capacity
included a new plant in the United Kingdom for production of textile
airbags, a new seat belt plant in Mexico and an extension of the plant
in Barcelona, Spain.
In Sweden, the construction of the Autoliv Safety Center was completed
in 1997. The total cost for the Safety Center, one of the most advanced
of its kind in the world, was $11 million, most of which was spent in
1996.
At Elmshorn in northern Germany, another crash test facility was
completed in 1997 as a complement to the Tech Center Autoliv already has
in the south of Germany. The production of seat belts at Rellingen in
northern Germany, which emanates from the acquisition of Autoflug in
1992, has been concentrated in the Elmshorn site to streamline
operations.
In the U.S., the construction of Autoliv's North American Tech Center
was completed in 1996. The total cost of this complex amounted to $13
million, most of which was spent in 1996.
The Company has continued its program of geographic expansion and of
vertical integration through the acquisition of supply companies. Cash
(net of cash acquired) paid for acquitions was $45 million in 1997, $69
million in 1996, and $52 million in 1995. During 1997, the Company
acquired Marling Industries plc, a U.K. based supplier of seat belt
webbing. The Company also increased its 50% shareholding in Autoliv
Slowik Argentina to 100%. During 1996, the Company purchased an
additional 27% interest in Isodelta S.A., a steering wheel manufacturer.
During 1995, the Company had purchased a 49% interest in Isodelta S.A.
Also in 1996, the Company purchased Autoliv Hammarverken AB and Autoliv
Mekan AB. Both companies are manufacturers of seat components. Goodwill
of $38 million in 1997 and $33 million in 1996 associated with these
acquisitions is being amortized over 10 to 20 years.
The Company's acquisition of ASP in 1997 was for shares of Autoliv Inc.
and thus did not use cash. The transaction, however, generated goodwill
of $1,361 million, which is being amortized over a period of 40 years,
and additionally, other intangible assets of $270 million, which are
being amortized over 7 to 25 years.
Financing activities
The Company has historically been self-financing and has generally
operated in a net cash position. However, a substantial amount of debt
was assumed with the purchase of ASP. At acquisition on May 1,1997,
ASP had net debt of $705 million. This was reduced somewhat by ASP's
cash flow from operations subsequent to the acquisition.
At December 31, 1997, virtually all of the Company's long-term debt
consisted of U.S. commercial paper borrowings. Commercial paper
borrowings of $598.0 million were outstanding at a weighted average rate
of 6.45%. Commercial paper outstanding at December 31, 1997, was
classified as long-term since the Company intends to refinance these
borrowings on a long-term basis either through continued commercial
paper borrowings or utilization of the available credit facilities. At
December 31, 1997, the Company's net debt to equity ratio was 37.9%. The
Company has entered into interest rate swap, collar and treasury lock
agreements to reduce the impact of changes in interest rates on its
floating rate debt. These programs and agreements are described in the
Notes to Consolidated Financial Statements.
The Company pays regular quarterly dividends. The current dividend is
$0.11 per share each quarter. At December 31, 1997 there were 102.2
million shares outstanding versus 55.0 million at December 31, 1996. The
increase in shares outstanding is principally due to the issuance of
shares to acquire ASP. Total cash dividends of $42.9 million were paid
in 1997, compared to $18.5 million in 1996 and $11.5 million in 1995.
For the foreseeable future, cash flow from operations, together with
available financial resources, are expected to be adequate to fund the
Company's anticipated working capital requirements, capital
expenditures, acquisition program and dividend payments.
Year 2000 Issue
As the 21st century approaches, there is an increasing level of public
concern about the potential for disruption as a result of the inability
of certain computer systems to operate properly vis a vis the processing
of data sensitive to dates. This concern is frequently referred to as
the "Year 2000 Issue". In conjunction with its customers and suppliers,
the Company has performed a comprehensive analysis of potential year
2000 problems in its computer hardware, operating systems and software
programs. The Company has also analyzed computerized equipment in
critical operational areas such as manufacturing and R&D. Such
computerized equipment could be subject to malfunction or failure as a
result of the microchips, which are an integral part of the equipment.
Remedial action is either under way or is planned in order to ensure
that no major disruptions occur as a result of the Year 2000 Issue. The
Company mainly using internal resources to address this issue, and
believes that these resources will be sufficient to mitigate any
potentially significant problems. Related expenses are charged to income
as incurred.
New Accounting Pronouncement
In June, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, Disclosures about Segments of
an Enterprise and Related Information ("Statement 131"). Statement 131
establishes standards for the way that public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and
services, geographic areas, and major customers. Statement 131 is
effective for financial statements for fiscal years beginning after
December 15, 1997, and therefore the Company will adopt the new
requirements retroactively in 1998. The Company has not completed its
review of Statement 131, but does not anticipate that the adoption of
this statement will have a significant effect on the Company's reported
segments.
Impact of Inflation
Inflation generally has not had a significant impact upon the Company's
financial position or results of operations. Inflation is currently
expected to remain low in all of the major countries in which the
Company operates.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: Except for the historical information contained herein, the
matters discussed in this annual report are forward-looking statements
which involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting
the Company's operations, markets, products, services and prices, and
other factors discussed in the Company's filings with the Securities and
Exchange Commission.
(page 34)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
Years ended December 31,
(Dollars in millions,
except per share data) 1997 (1) 1996 (2) 1995 (2)
<S> <C> <C> <C>
Net sales $2,739.6 $1,734.5 $1,432.4
Cost of sales (2,152.6) (1,387.3) (1,150.5)
Gross profit 587.0 347.2 281.9
Selling, general and
administrative expenses (131.9) (76.3) (65.6)
Research and development
expense (136.6) (100.0) (87.5)
Write-off of acquired R&D (732.3) - -
Amortization of intangibles,
primarily goodwill (43.1) (11.2) (3.9)
Other income, net 3.9 3.3 3.7
Operating income (loss) (453.0) 163.0 128.6
Equity in earnings of affiliates 9.5 7.5 4.9
Interest income 5.6 5.7 10.8
Interest expense (39.4) (5.4) (2.6)
Income (loss) before income taxes (477.3) 170.8 141.7
Income taxes (99.1) (56.8) (50.6)
Minority interests in subsidiaries(3.2) (0.7) -
Net income (loss) $(579.6) $113.3 $91.1
Earnings (loss) per common share
- - and earnings (loss) per common
share assuming dilution $(6.70) $2.06 $1.66
Number of shares used in
computing per share amount 86.5 55.0 55.0
Number of shares outstanding 102.2 55.0 55.0
<FN>
See Notes to Consolidated Financial Statements
1) Autoliv AB and subsidiaries for period on and prior to April 30,
1997;
Autoliv, Inc., for May 1 to December 31, 1997
2) Autoliv AB and subsidiaries
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
December 31,
(Dollars in millions) 1997 1996(1)
<S> <C> <C>
Assets
Cash and cash equivalents $152.0 $131.7
Receivables, net of allowances
of $8.2 and $4.7 million, respectively 569.2 383.4
Inventories 197.8 100.8
Refundable and deferred income tax
benefit 20.5 15.9
Prepaid expenses 34.7 9.4
Total current assets 974.2 641.2
Property, plant and equipment, net 727.2 322.4
Investments and other receivables 34.6 26.0
Intangible assets, net (mainly goodwill) 1,694.5 64.0
Total assets $3,430.5 $1,053.6
Liabilities
Short-term debt $186.2 $62.1
Accounts payable 385.3 230.6
Accrued expenses 326.1 182.1
Other current liabilities 69.6 50.6
Income taxes 32.3 21.1
Total current liabilities 999.5 546.5
Long-term debt 611.8 12.8
Other non-current liabilities 100.8 13.8
Minority interests in subsidiaries 14.4 22.0
Total non-current liabilities and
minority interests 727.0 48.6
Shareholders' equity
Common stock (shares outstanding 102.2
million and 55.0 million) 102.2 70.8
Additional paid-in capital 1,938.5 60.0
Retained earnings (accumulated deficit)
and foreign currency translation
adjustments (336.7) 327.7
Total shareholders' equity 1,704.0 458.5
Total liabilities and shareholders'
equity $3,430.5 $1,053.6
<FN>
See Notes to Consolidated Financial Statements
1) Autoliv AB and subsidiaries
</TABLE>
(page 36)
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended December 31,
(Dollars in millions) 1997 (1) 1996 (2) 1995 (2)
<S> <C> <C> <C>
Operating activities
Net income (loss) $(579.6) $113.3 $91.1
Adjustments to reconcile net
income (loss)to net cash
provided by operating activities:
Write-off of acquired R&D 732.3 - -
Depreciation and amortization 162.6 82.0 58.0
Deferred income taxes 1.4 - (0.7)
Undistributed earnings from
affiliated companies (7.8) (7.5) (4.9)
Changes in operating assets and
liabilities
Receivables and other assets 47.0 (4.2) (23.7)
Inventories (16.1) (2.4) (12.3)
Accounts payable and accrued
expenses 22.2 (20.0) 67.0
Income taxes (18.6) (2.2) (14.9)
Net cash provided by operating
activities 343.4 159.0 159.6
Investing activities
Expenditures for property,
plant and equipment (182.8) (147.8) (99.1)
Acquisition of businesses and
investments in affiliated
companies, net of cash acquired (44.8) (68.9) (51.8)
Other 4.2 5.7 3.4
Net cash used for investing
activities (223.4) (211.0) (147.5)
Net cash before financing 120.0 (52.0) 12.1
Financing activities
Increase/(decrease)
in short-term debt 108.6 18.4 10.9
Increase/(decrease)
in long-term debt (163.0) (0.4) (0.8)
Increase/(decrease) in
minority interest (10.9) 22.0 -
Dividends paid (42.9) (18.5) (11.5)
Compulsory acquisition of
Autoliv AB shares and
options exercised (20.8) - -
Other, net 1.5 4.5 5.3
Net cash (used for) provided by
financing activities (127.5) 26.0 3.9
Effect of exchange rate
changes on cash (17.4) (3.3) 5.0
Increase /(decrease) in cash
and cash equivalents (24.9) (29.3) 21.0
Cash in Morton ASP May 1, 1997 45.2 - -
Cash and cash equivalents at
beginning of year 131.7 161.0 140.0
Cash and cash equivalents at
end of year $152.0 $131.7 $161.0
<FN>
See Notes to Consolidated Financial Statements
1) Autoliv AB and subsidiaries for period on and prior to April 30,
1997; Autoliv Inc. for May 1 to December 31,1997
2) Autoliv AB and subsidiaries
</TABLE>
(page 37)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data)
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include Autoliv, Inc. and all
companies in which Autoliv, Inc., directly or indirectly, owns more than
50% of the voting rights (the "Company") and have been prepared in
accordance with U.S. GAAP.
All intercompany accounts and transactions within the Company have been
eliminated from the consolidated financial statements.
Investments in affiliated companies in which the Company owns between 20
and 50 percent of the votes at the end of each year are reported
according to the equity method of accounting.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Accounting Policies
Translation of non-U.S. Subsidiaries
The balance sheets of non-U.S. subsidiaries are translated using year-
end rates of exchange. Income statements are translated at the average
rate of exchange for the year. Translation differences are reflected in
a separate component of shareholders' equity.
Revenue Recognition
Sales of products are recorded as of the actual date of shipment. Sales
include the sales value exclusive of added tax.
Research and Development
Research and development expenses are charged to income as incurred.
Depreciation of Property, Plant and Equipment
The Company provides for depreciation of property, plant and equipment,
all of which are recorded at cost, by annual charges to income, computed
under the straight-line method over their estimated useful lives,
ranging from 3 to 40 years.
Amortization of Intangible Assets
Goodwill is amortized on a straight-line basis over periods ranging from
10 to 40 years. Other intangible assets, principally related to
technology, are amortized over 8 to 25 years.
Income Taxes
Current tax liabilities and assets are recognized for the estimated
taxes payable or refundable on the tax returns for the current year.
Deferred tax liabilities or assets are recognized for the estimated
future tax effects attributable to temporary differences and carry-
forwards that result from events that have been recognized in either the
financial statements or the tax returns, but not both. The measurement
of current and deferred tax liabilities and assets is based on
provisions of enacted tax laws. Deferred tax assets are reduced, if
necessary, by the amount of any tax benefits that is not expected to be
realized.
Impairment of Long Lived and Identifiable Intangible Assets
The Company evaluates the carrying value of long lived assets and
identifiable intangible assets for potential impairment on an ongoing
basis.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement 128,
"Earnings Per Share". Statement 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. The difference between basic and diluted earnings per share is
not material in 1997 and not applicable for prior years, as no dilutive
securities were issued.
Earnings per share is based on the weighted average number of shares
outstanding, adjusted for the 2 for 1 stock split in Autoliv AB in May
1996.
Cash Equivalents
The Company considers all highly liquid investment instruments purchased
with a maturity of three months or less to be cash equivalents.
Receivables and Liabilities in non-U.S. Currency
Receivables and liabilities denominated in non-U.S. currency are
remeasured at year-end rates of exchange. Transaction gains (losses)
reflected in current income, amounted to $(3.8) million in 1997 $(1.2)
million in 1996 and $(2.5) million in 1995.
Inventories
Inventories are valued at the lower of cost or market. Cost is computed
according to the first-in, first-out method (FIFO).
Note 2. Significant Business Acquisitions
Acquisition of Morton ASP
On May 1, 1997, Autoliv, Inc. consummated the transactions described in
the Prospectus relating to the following transactions: (i) the exchange
by Autoliv, Inc. (the "Exchange Offer") of one share of Autoliv, Inc.
for each share of Autoliv AB, a Swedish corporation ("Autoliv AB"),
which was tendered in the Exchange Offer and (ii) the merger (the
"Merger," and, together with the Exchange Offer, the "Combination") of
Morton International, Inc. ("Morton") into a wholly owned subsidiary of
Autoliv, Inc. in which Morton (renamed Autoliv ASP, Inc.) was the
surviving corporation and the shareholders of Morton received one share
of New Autoliv for approximately every three shares they owned of
Morton. On April 30, 1997, Morton transferred all of its assets and
liabilities other than those relating exclusively to the Automotive
Safety Products Business of Morton ("ASP") to a newly formed subsidiary
of Morton, New Morton International, Inc. (the "Spin-off"). Prior to
May 1, 1997, Autoliv, Inc. had no operations. Following the transactions
described above, Autoliv, Inc. began conducting operations May 1, 1997,
through its two wholly owned subsidiaries - Autoliv AB and Autoliv ASP Inc.
As of November 30, 1997, 54,391,516 shares of Autoliv AB, representing
approximately 98.9% of the outstanding shares of Autoliv AB had been
exchanged for the same number of shares of Autoliv, Inc. A compulsory
acquisition procedure pursuant to Swedish law was started in July.
Autoliv, Inc. now has control of the remaining 608,484 shares in Autoliv
AB and will compensate the previous shareholders in cash for these
shares when the price is determined. A liability has been recorded for
this. Pursuant to the Merger, Morton shareholders received 47,753,108
shares of Autoliv, Inc. As of December 31, 1997, there were 102,191,024
shares issued and outstanding with a par value of $1 per share.
The Combination has been accounted for as a purchase for financial
accounting purposes in accordance with U.S. generally accepted
accounting principles, with Autoliv, Inc. treated as the acquirer of
ASP. The purchase price for ASP was allocated to the assets acquired and
liabilities assumed based on the estimated fair values at the date of
acquisition as follows:
<TABLE>
Purchase price:
<S> <C>
Debt assumed less cash $704.8
Other long-term liabilities assumed 87.2
Stock issued (1) 1,931.3
Merger cost 32.9
2,756.2
Fair market value of assets and liabilities acquired:
Net working capital 25.0
Property, plant and equipment 361.0
Investments and other non-current assets 2.2
Deferred taxes - non-current 4.7
Intangible assets 270.0
In-process research and development (2) 732.3
Purchase price over fair value of
net assets acquired (goodwill) $1,361.0
<FN>
1) Based on SEK267.5, the average share price of Autoliv AB on the
Stockholm Stock Exchange during the period of two days prior and
two days post announcement of the combination on September 30,
1996 (or $40.41/share based on an exchange rate of $1 = SEK6.62).
The issuance of 47.8 million new shares results in a purchase
price for ASP of $1,931.3 million.
2) The In-process research and development was charged to
operating expense immediately after the completion of the
acquisition.
</TABLE>
The excess of the purchase price over the fair value of net assets
acquired has been recorded as goodwill. Independent appraisals have been
used in establishing the fair market values. The preliminary allocation
of the purchase price was adjusted during the fourth quarter of 1997 to
reflect revised estimates of pre-acquisition contingencies, liabilities,
restructuring costs and loss contracts all in ASP of $99 million, net of
deferred income tax of $62 million.
The In-process research and development was charged to income in May,
1997 as a non-tax deductible item. The goodwill amortization is also
non-tax deductible.
The estimated life and yearly amortization using the straight-line
method are:
<TABLE>
Yearly
Intangible assets: Years amortization
<S> <C> <C>
Assembled work force 8.0 $1.7
Specific patent technology 7.5 9.1
Common technology 25.0 7.5
Goodwill 40.0 34.0
Total $52.3
</TABLE>
The unaudited pro forma statements shown on pages 26-30 in the Annual
Report present the consolidated results of operation as if the
acquisition had occurred at the beginning of the periods presented and
do not purport to be indicative of what would have occurred, had the
combination been made as of those dates or of results which may occur in
the future.
Other Acquisitions
Effective October 1, 1997, the Company purchased Marling Industries plc.
In its last full fiscal year prior to the acquisition, ending March 31,
1997, Marling Industries plc had sales of approximately $100 million.
In May the Company increased its 50% shareholding in Autoliv Slowik
Argentina to 100%. Autoliv Argentina has yearly sales of less than $20
million.
In January 1996, the Company purchased an additional 27% interest in
Isodelta S.A., in which the Company previously held a 49% interest since
October 1, 1995. Prior to the acquisition the Company accounted for its
investment using the equity method. Additionally, in January 1996, the
Company purchased 100% of Autoliv Hammarverken AB and Autoliv Mekan AB.
The acquisitions have been accounted for using the purchase method of
accounting, and accordingly the results of operations of the entities
have been consolidated since the respective dates of acquisition. The
total purchase price of these acquisitions amounted to $49 million in
1997 and $58 million in 1996. Goodwill of $38 million and $33 million,
respectively, associated with these acquisitions is being amortized over
10 to 20 years.
Note 3. Fair Values of Financial Instruments
The following methods were used by the Company to estimate its fair
value disclosures for financial instruments.
Current Assets and Liabilities
The carrying amount reported in the balance sheet for current assets and
liabilities approximates their fair value because of the short maturity
of these items.
Long-Term Debt and Other non-Current Liabilities
The carrying amount reported in the balance sheet for long-term debt and
other non-current liabilities approximates their fair value because
these instruments bear rates consistent with current market interest
rates.
<TABLE>
Note 4. Income Taxes
1997 1996 1995
<S> <C> <C> <C>
Income (loss) before income taxes
United States $(655.4) $(16.0) $(7.7)
Non-U.S. 178.1 186.8 149.4
Total (477.3) 170.8 141.7
Provision for income taxes
Current
U.S. federal $26.1 $0.0 $0.0
Non-U.S. 66.8 54.7 50.6
U.S. state and local 4.8 0.0 0.0
Deferred
U.S. federal 4.7 0.0 0.0
Non-U.S. (5.4) 2.1 0.0
U.S. state and local 2.1 0.0 0.0
Total income taxes $99.1 $56.8 $50.6
1997 1996 1995
Effective income tax rate
U.S. Federal income tax rate 35.0% 35.0% 35.0%
Goodwill amortization 3.8 1.0 0.1
Non-utilized operating losses 4.1 3.7 2.5
Foreign tax rate variances (2.1) (5.0) (0.6)
State taxes, net of federal
benefit 1.8 0.0 0.0
Earnings of equity investments (1.3) (1.5) (1.3)
Other (2.4) 0.1 0.0
Effective income tax rate 38.9% 1) 33.3% 35.7%
<FN>
1) The effective income tax rate in 1997 is computed as the ratio of
reported income taxes to the income before income taxes
which would result if the non-deductible $732.3 million write-off
of R&D were added back to the reported loss before income taxes.
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. At December 31, 1997, the Company had net operating loss
carry-forwards of approximately $84 million which expire on various
dates through 2012. Valuation allowances have been established to offset
the total of the related deferred assets due to the uncertainty of
realizing the benefit of the loss carry-forwards.
<TABLE>
Deferred taxes
December 31, 1997 1996
<S> <C> <C>
Assets:
Loss contracts $ 49.3 $ 0.0
Accruals and reserves 40.1 8.8
Costs capitalized for tax 19.3 0.0
Property, plant and equipment 10.5 0.0
Pensions 8.1 0.0
Future tax benefits, principally NOL's 42.7 10.9
Other temporary differences 2.0 1.6
172.0 21.3
Valuation allowance (35.2) (10.9)
136.8 10.4
Liabilities:
Acquired intangibles (102.0) 0.0
Statutory tax allowances (8.3) (12.1)
Other temporary differences (13.8) 0.0
Net deferred tax asset (liability) $ 12.7 $ (1.7)
</TABLE>
Deferred income taxes have not been provided on approximately $350
million of undistributed earnings of foreign subsidiary companies, which
are considered to be permanently reinvested. Any U.S. taxes payable on
foreign earnings which may be remitted, however, will be substantially
offset by foreign tax credits.
<TABLE>
Note 5. Inventories
December 31, 1997 1996
<S> <C> <C>
Raw material $113.1 $55.5
Finished products and work in-progress 84.7 45.3
Total $197.8 $100.8
</TABLE>
Note 6. Investment and Long-Term Receivable
The Company has invested in about 20 affiliated companies where the
ownership is 20-50%. These are accounted for under the equity method.
Total investment was $33 million and $26 million at December 31, 1997
and 1996, respectively.
<TABLE>
Note 7. Property, Plant and Equipment
December 31, 1997 1996
<S> <C> <C>
Land and land improvements $31.1 $12.2
Machinery and equipment 712.6 437.4
Buildings 268.3 131.6
Construction in progress 95.8 35.9
1,107.8 617.1
Less accumulated depreciation (380.6) (294.7)
Net $727.2 $322.4
</TABLE>
Depreciation was $119.5 million, $70.8 million and $54.1 million in
1997, 1996 and 1995, respectively.
<TABLE>
Note 8. Intangible assets
December 31, 1997 1996
<S> <C> <C>
Goodwill $1,463.6 $62.0
Other intangible assets from acquisitions 311.4 44.4
1,775.0 106.4
Less accumulated amortization (80.5) (42.4)
Net $1,694.5 $64.0
</TABLE>
Note 9. Debt and Credit Agreements
The Company has non-U.S. dollar credit agreements, principally in the
form of overdraft facilities, with banks in different countries. Total
available facilities as of December 31, 1997, amounted to $590 million,
of which $162 million was utilized. The weighted average interest rate
on short-term borrowings outstanding at December 31, 1997, and 1996 was
5.8% and 6.3% respectively. The aggregate amount of unused lines of
credit at December 31, 1997 was $428 million.
<TABLE>
Note 10. Long-Term Debt
December 31, 1997 1996
<S> <C> <C>
Long-term debt $611.8 $12.8
</TABLE>
At December 31, 1997, virtually all of the Company's long-term debt
consisted of U.S. commercial paper borrowings. Commercial paper
borrowings of $598.0 million were outstanding at a weighted average rate
of 6.45%. Other long-term debt of $13.8 million consisted of unsecured
medium term bank borrowings in Europe due in yearly installments through
2010. The loans carry floating interest rates based on various indices
and ranged from 5% to 8% at December 31, 1997.
The Company's principal U.S. operating subsidiary (the "U.S.
Subsidiary") has a $850.0 million revolving credit facility with a group
of banks expiring in April, 2002. The facility supports the
U.S. Subsidiary's commercial paper borrowings and is available for other
corporate purposes. The amount available for borrowings is reduced by
the outstanding commercial paper. Borrowings are unsecured and bear
interest, at the U.S. Subsidiary's option, at various rates based on the
base rate or adjusted EuroDollar rate. The U.S. Subsidiary pays a
facility fee based on the aggregate loan exposure of all lenders.
Borrowings are prepayable at any time and are due at expiration. The
facility is subject to financial covenants requiring the U.S. Subsidiary
to maintain certain levels of cash flow and an interest coverage ratio,
as well as a limitation on indebtedness and dividends. The U.S.
Subsidiary was in compliance with these covenants at December 31, 1997.
These covenants do not impair the ability of Autoliv, Inc. to make
regular quarterly dividend payments or to meet other expected cash
commitments.
Commercial paper outstanding at December 31, 1997, is classified as
long-term since the U.S. Subsidiary intends to refinance these
borrowings on a long-term basis either through continued commercial
paper borrowings or utilization of the available credit facilities.
The U.S. Subsidiary enters into interest rate swap, collar and treasury
lock agreements to reduce the impact of changes in interest rates on its
floating rate debt. The swap and treasury lock agreements are contracts
to exchange floating rate for fixed interest payments periodically over
the life of the agreements without the exchange of the underlying
notional amounts. The notional amounts of interest rate agreements are
used to measure interest to be paid or received and do not represent the
amount of exposure to credit loss. The differential paid or received on
interest rate agreements is recognized as an adjustment to interest
expense.
As of December 31, 1997, the U.S. Subsidiary had entered into an
interest rate swap agreement with certain lenders providing bank
financing. The agreement effectively fixed the interest rate on
floating rate debt at a rate of 5.87% for a notional principal amount
of $60.0 million through December 2002. The U.S. Subsidiary also
purchased an interest rate treasury lock at a rate of 5.78% for a
notional principal amount of $150.0 million maturing June 30, 1998. In
addition, the U.S. Subsidiary has entered into interest rate collar
agreements, ending December 31, 1998, which effectively set maximum and
minimum interest rates on $300.0 million notional principal with a floor
of 5.0% to a maximum cap of 7.0%. The swap and collar agreements are
based upon the H.15 30-day commercial paper rates; and the treasury lock
is based upon the 5 year U.S. treasury rate.
<TABLE>
Note 11. Shareholders' Equity
Number Share Paid in Foreign Retained Total
of shares Capital capital currency earnings shareholders'
(in millions) translation equity
adjustment
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 27.5 $70.8 $60.0 $33.0 $109.6 $273.4
Dividend 1995 (11.5) (11.5)
Translation differences 25.8 25.8
Net income 1995 91.2 91.2
Balance at
December 31, 1995 27.5 70.8 60.0 58.8 189.3 378.9
Stock split 2:1 27.5
Dividend 1996 (18.5) (18.5)
Translation differences (15.3) (15.3)
Net income 1996 113.4 113.4
Balance at
December 31, 1996 55.0 70.8 60.0 43.5 284.2 458.5
Dividend April, 1997 (20.4) (20.4)
Net income Jan 1
- -April 30, 1997 38.5 38.5
Difference in par
value in Autoliv AB
exchange (15.8) 15.8
New issue and
conversion of
Morton shares 47.7 47.7 1,883.6 1,931.3
Compulsory
acquisition
Autoliv AB shares (0.6) (0.6) (21.3) (21.9)
Translation differences (0.6) (45.7) (46.3)
Balance at
Creation May 1 102.1 102.1 1,937.5 (2.2) 302.3 2,339.7
Stock options
exercised 0.1 0.1 1.0 1.1
Dividend May 1
- -Dec 31 (22.4) (22.4)
Translation differences 3.8 3.8
Net income (loss)
May 1-Dec 31, 1997 (618.2) (618.2)
Balance at
December 31, 1997 102.2 $102.2 $1,938.5 $1.6 $(338.3) $1.704.0
</TABLE>
Common Stock - $1.00 par value, 325.0 million shares authorized 102.2
million shares issued and outstanding.
Preferred Stock - $1.00 par value, 25.0 million shares authorized, non
issued.
Shareholder Rights Plan
Autoliv, Inc. has a shareholder rights plan under which each shareholder
of record as of November 6, 1997, received one right for each share of
Autoliv, Inc. common stock held. Each right entitles the registered
holder, upon the occurrence of certain events, to buy one one-hundredth
of a share of Series A Junior Participating Preferred Stock with a par
value of $1 at a price of $150, subject to adjustment.
Initially the rights will be attached to all Common Stock Certificates
representing shares then outstanding and upon the occurrence of certain
events the rights will separate from the Common Stock, and each holder
of a right will have the right to receive, upon exercise, common stock
(or in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the
right.
Autoliv, Inc. may redeem the rights in whole at a price of one cent per
right.
Note 12. Supplemental Cash Flow Information
Cash payments during the years 1997, 1996 and 1995 included interest
paid of $35, $5 and $3 million, and income taxes paid of $95, $59, and
$62 million respectively.
Note 13. Stock Incentive Plan
Under the 1997 Stock Incentive Plan (the "Plan") adopted by the
Company, subject to stockholder approval, awards have been made to
selected executive officers of the Company located in Sweden in the form
of Stock Appreciaton Rights ("SAR's") and to selected officers of
Autoliv ASP Inc. (the "officers") in the form of stock options. Upon
consummation of the transactions described in Note 2, options which had
previously been awarded to the officers were converted, under the Plan,
into options for shares of Autoliv, Inc. (the "converted options").
Other than the exercise prices of the converted options, which were
adjusted to reflect Autoliv, Inc.'s share price, all terms and
conditions are the same. During 1997, 52,250 SAR's were granted. The
market price of Autoliv, Inc's shares was $35.75 at that time. All
options and rights granted during 1997 are for 10 year terms, have an
exercise price equal to the stock market price on the date of grant, and
become exercisable after one year of continued employment following the
grant date. In addition, during 1997, the Company awarded 31,000 shares
of Autoliv, Inc. common stock to certain key employees. The employees
will receive these shares after one year of employment subsequent to the
grant date. The Plan provides for the issuance of up to 800,000 common
shares through the exercise of options awarded under the Plan.
The Company applies APB Opinion 25 "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its stock
option plan. Accordingly, no compensation cost has been recognized in
the Company's financial statements. Had compensation cost for the
Company's stock option plan been determined based on the fair value of
such awards at the grant date, consistent with the methods of Financial
Accounting Standards Board Statement No. 123 "Accounting for Stock-Based
Compensation", the Company's total and per share net income would have
been as follows:
<TABLE>
1997
<S> <C>
Net income (loss)
As reported $(579.6)
Pro forma (580.1)
Earnings (loss) per share
As reported $(6.70)
Pro forma (6.71)
</TABLE>
The fair value of options granted during 1997, was estimated at $15.02
using the Black-Scholes option-pricing model based on the following
assumptions:
<TABLE>
1997
<S> <C>
Risk-free interest rate 5.5%
Dividend yield 1.5%
Expected life in years 10.0
Expected volatility 30%
</TABLE>
A summary of the status of the Company's stock option plan as of
December 31, 1997 is as follows:
<TABLE>
Weighted average
Shares exercise price
<S> <C> <C>
Outstanding, beginning of year 0 $0.00
Converted options 285,055 26.27
Granted 28,200 35.75
Exercised 109,405 28.72
Cancelled 0 -
Outstanding, end of year 203,850 $26.27
Options exercisable at
year-end 175,650 $24.75
Weighted average
Number remaining contract Weighted average
Range of exercise prices outstanding life (in years) exercise price
$10.44 - $15.26 39,950 3.61 $14.62
$24.38 - $27.57 100,374 6.78 25.99
$32.69 - $35.75 63,526 9.11 34.05
203,850 6.89 $26.27
</TABLE>
All of the above options are exercisable except those granted during
1997.
Note 14. Contingent Liabilities
The Company is subject to claims and legal proceedings that arise in the
ordinary course of business, principally related to alleged defects in
products manufactured by the Group. The Company diligently defends
itself in such actions and, in addition, carries insurance coverage to
the extent reasonably available against insurable risks. The Company
believes, based on currently available information, that the resolution
of outstanding claims, after taking into account available insurance
coverage, should not have a material effect on the Group's financial
position or results of operations.
As part of the combination between Autoliv AB and Morton International,
Inc's. automotive safety business, Morton spun-off its salt and chemical
businesses into a new company which we here refer to as "New Morton".
New Morton has as part of the Distribution Agreement, assumed all
obligations other than those directly related to the automotive safety
business and has expressly indemnified Autoliv ASP, Inc. (the former
Morton International, Inc.) against any such liabilities, including
historical environmental liabilities, related to the non-automotive
safety business.
Note 15. Lease Commitments
The Company leases certain offices, manufacturing and research
buildings, machinery, automobiles and data processing and other
equipment. Such operating leases, some of which are non-cancelable and
in many cases include renewals, expire at various dates. The Company
pays most maintenance, insurance and tax expenses relating to leased
assets. Rental expense for operating leases was $11.0 million for 1997,
$11.5 million for 1996 and $9.5 million for 1995.
At December 31, 1997, future minimum lease payments for non-cancelable
operating leases totaled $49.4 million and are payable as follows (in
millions): 1998: $9.9; 1999: $7.6; 2000: $6.1; 2001: $4.8; 2002: $3.9;
2003 and thereafter: $17.1.
Note 16. Retirement Plans
Pensions
Substantially all of the Company's non U.S.-employees are covered by
government sponsored pension and welfare programs. Under the terms of
the programs, the Company makes periodic payments to various government
agencies. In addition, in certain countries the Company sponsors defined
contribution plans. Contributions to these defined contribution plans
for the years ended December 31, 1997, 1996, and 1995 were $5.1 million,
$4.7 million and $3.8 million respectively.
The Company has noncontributory defined benefit pension plans covering
most U.S. employees. Benefits are based on an average of the employee's
earnings in the years preceding retirement and on credited service.
Certain supplemental unfunded plan arrangements also provide retirement
benefits to specified groups of participants.
The funding policy for U.S. plans is to contribute amounts sufficient to
meet the minimum funding requirements of the Employee Retirement Income
Security Act of 1974, as amended, plus any additional amounts which may
be determined to be appropriate.
The actuarially computed portion of net pension expense for U.S. pension
plans consisted of the following components:
<TABLE>
1997
<S> <C>
Service cost - benefits earned during the year $2.6
Interest cost on projected benefit obligation 1.7
Return on plan assets:
Actual $(5.7)
Deferred portion 4.0
Expected return (1.7)
Net pension expense $2.6
</TABLE>
The reconciliation of the funded status of the U.S. pension plans was as
follows:
<TABLE>
December 31, 1997
Plans in Plans in
which assets which
exceed accumulated accumulated benefit
benefit obligation
obligation exceeds
assets
<S> <C> <C>
Plan assets at fair value $33.0 $0.0
Actuarial present value of
projected benefit obligations:
Accumulated benefit obligation
Vested 21.1 0.8
Non-vested 6.2 0.0
Provisions for future
salary increases 16.3 0.2
43.6 1.0
Plan assets less than
projected benefit
obligation 10.6 1.0
Unrecognized net experience
loss (gain) (2.6) (0.1)
Net pension liability
recognized in the
consolidated balance sheet $8.0 $0.9
</TABLE>
The weighted averages of assumptions used in the determination of the
projected benefit obligation were:
1997
Discount rate 7.8%
Rate of increases in compensation level 4.8%
Expected long-term rate of return on assets 9.5%
The assets of the U.S. plans are invested primarily in equities and
bonds.
Postretirement Benefits Other than Pensions
The Company currently provides postretirement health care and life
insurance benefits to most U.S. retirees. In general, the terms of the
plans provide that U.S. employees who retire after attaining age 55,
with five years of service, are eligible for continued health care and
life insurance coverage. Dependent health care and life insurance
coverage are also available. Most retirees contribute toward the cost of
health care coverage with the contributions generally varying based on
service. In June, 1993, a provision was adopted which caps the level of
the Company's subsidy at the amount in effect as of the year 2000 for
most U.S. employees who retire after December 31, 1992.
Net periodic postretirement benefit cost included the following
components:
1997
Service cost - benefits earned during the year $0.4
Interest cost on accumulated postretirement
benefit obligation 0.4
Net periodic postretirement benefit cost $0.8
At present, there is no prefunding of the postretirement benefits
recognized under FASB Statement No. 106. The following table presents
the status of the plans' liability reconciled with amounts recognized in
the consolidated balance sheet for the U.S. postretirement benefits:
December 31, 1997
Accumulated postretirement benefit obligation:
Retirees and dependants $1.2
Fully eligible active plan participants 0.3
Other active plan participants 7.7
9.2
Unrecognized prior period gain (0.9)
Postretirement benefit liability recognized in
the consolidated balance sheet $8.3
For measurement purposes, the assumed weighted average annual rate of
increase per capita cost of health care benefits was 10.5 percent for
1998 and assumed to grade to 6.5 percent in 2001 and remain constant
thereafter. As noted above, for U.S. employees retiring after December
31, 1992, the Company's policy is to increase retiree contributions so
that the annual per capita cost contribution remains constant at the
level incurred in the year 2000.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.8 percent at December 31, 1997.
The rate of increase of compensation levels assumed was 4.8 percent.
A one percent increase in the annual health care cost trend rates would
have increased the Company's accumulated postretirement benefit
obligation at December 31, 1997, by approximately $0.1 million and
increased postretirement benefit expense for 1997 by less than $0.1
million.
Note 17. Segment Information
Autoliv, Inc. is a United States registered company providing advanced
technology products for the automotive market. Airbag modules, seat
belts and inflators for airbags are supplied to all major European, U.S.
and Asian automobile manufacturers. The Company's revenues are generated
by sales to the automotive industry, which is made up of relatively
small number of customers. A significant disruption in the industry, a
significant change in demand or pricing or a dramatic change in
technology could have a material effect on the Company. Sales to
individual customers representing 10% or more of net sales in 1997: 14%
and 11%, respectively, in 1996: 20%, 15%, 13%, respectively, and in
1995: 25%, 15%, 11% and 11%, respectively.
The seat belts and airbags are considered as integrated systems that
should function together under common electronic control systems for the
protection of occupants in light vehicles. The company does not consider
these as separate segments.
The sales by product group are:
<TABLE>
1997 1996 1995
<S> <C> <C> <C>
Airbags and associated products 1) $1,800 $818 $682
Seat belts and associated products 2) 940 917 750
$2,740 $1,735 $1,432
<FN>
1) includes sales of steering wheels from 1996
2) includes sales of seat components from 1996
</FN>
</TABLE>
<TABLE>
<CAPTION>
Note 18. Geographic Segments
1997 1996 1995
<S> <C> <C> <C>
Net sales
United States $1,008 $81 $39
Europe 1,618 1,540 1,295
Other regions 114 114 98
Total 2,740 1,735 1,432
Pre-tax income (loss)
United States (655) (16) (8)
Europe 163 175 140
Other regions 15 12 10
Total (477) 171 142
Identifiable assets
United States 2,304 58 41
Europe 1,062 958 773
Other regions 64 38 23
Total $3,430 $1,054 $837
</TABLE>
<TABLE>
<CAPTION>
Note 19. Quarterly Financial Data (unaudited)
Q1 Q2 Q3 Q4 Year
<S> <C> <C> <C> <C> <C>
1997
Net sales $445.7 $720.8 $716.8 $856.3 $2,739.6
Gross profit 92.2 154.8 155.4 184.6 587.0
Income (loss) before
taxes 43.2 (661.0)1 61.5 79.0 (477.3)2
Net income (loss) 28.4 (689.4)1 34.9 46.5 (579.6)1
Earnings (loss)per
share 0.52 (7.97) 0.34 0.45 (6.70)1
1996
Net sales 445.0 454.0 376.6 458.9 1,734.5
Gross profit 86.5 90.0 77.5 93.2 347.2
Income before taxes 44.8 47.3 36.6 42.1 170.8
Net income 28.7 31.5 23.7 29.4 113.3
Earnings per share 0.52 0.57 0.43 0.54 2.06
<FN>
1) Including a write-off of acquired R&D of $732.3 million from the
acquisition of Morton ASP in May, 1997.
In the 10-Q for June, 1997, this write-off was reported as a non
operating item. This write-off has now been reclassified to operating
expense.
</TABLE>
(page 46)
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Autoliv, Inc.
We have audited the accompanying consolidated balance sheets of Autoliv,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Autoliv, Inc. and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Ernst & Young AB
Torbjorn Hanson
Stockholm, Sweden
January 29, 1998
Addresses
Headquarters
Autoliv, Inc.
World Trade Center
Klarabergsviadukten 70
Box 70381
SE-107 24 Stockholm
Tel: +46 (8) 587 20 600
Fax: +46 (8) 24 44 79/24 44 93
Gunnar Bark
Argentina
Autoliv Argentina S.A.
Santiago de Chile 6475
Capital Federal
(1408) Buenos Aires
Tel: +54 (1) 641 0853
Fax: +54 (1) 644 2547
Claudio Siracusano
Australia
Autoliv Australia Pty. Ltd.
1521 Hume Highway
Campbellfield, Victoria 3061
Tel: +61 (3) 9359 9822
Fax: +61 (3) 9359 9811
Robert Franklin
Moxham Industrial Pty. Ltd.
4 Park Drive
Dandenong South
Melbourne, Victoria 3175
Tel: +61 (3) 9794 5005
Fax: +61 (3) 9794 0880
Bob Williamson
VOA Webco Pty. Ltd.
P O Box 294
Thomastown
Melbourne, Victoria 3074
Tel: +61 (3) 9464 0833
Fax: +61 (3) 9465 6531
Kerry Wallace
Webco Australia Pty Ltd
P O Box 294
Thomastown
Melbourne, Victoria 3074
Tel: +61 (3) 9464 0833
Fax: +61 (3) 9465 6531
Kerry Wallace
Brazil
Autoliv do Brasil Ltda
Avenida Moema 265
Conjunto 81/82
CEP 04077-20 Sao Paulo,SP
Tel: +55 (11) 570 9940
Fax: +55 (11) 571 6629
Anders Carlen
(Factory)
Rod. Floriano Rodriguez
Pinheiro 551
Area Industrial Pirancangagua
Taubate, S.P.
Tel: +55 (12) 221 3990
Fax: +55 (12) 221 8195
Anders Carlen
Canada
Collingwood Fabrics Inc.
190 MacDonald Road
Collingwood
Ontario L9Y 4N6
Tel: +1 (705) 445 9211
Fax: +1 (705) 445 8048
Harold Krause
VOA Colfab Inc.
190 MacDonald Road
Collingwood
Ontario L9Y 4N6
Tel: +1 (705) 444 2561
Fax: +1 (705) 444 7209
Gerry Steegers
China
Changchun Hongguang
Autoliv Ltd.*
67-19 the Fourth Street
North Railroad
Postcode 130052
Changchun, Jilin Province
Tel: +86 (431) 292 8968
Fax: +86 (431) 292 8967
Liu Yu Zhi
Nanjing Hongguang Autoliv Ltd.*
Yu Hua Men Wai
P.O. Box 1204 Shuang Q190
Xin Cun
Nanjing
Tel: +86 (25) 241 0727
Fax: +86 (25) 241 2149
Pelle Malmhagen
(Autoliv Shanghai Representative Office)
German Center
1233 Si Ping Lu, Suite 404
Shanghai 200092
Tel: +86 (21) 6501 2976
Fax: +86 (21) 6501 2977
Philip F. Pang
Shanghai-VOA Safety Belt Webbing Co. Ltd.*
No. 635 Yaohua Road
Shanghai 200126
Tel: +86 (21) 5886 3100
Fax: +86 (21) 5886 2150
Gerry Steegers/Kerry Wallace
France
Autoliv France SNC
(Headquarters)
2, rue Villaret-de-Joyeuse
F-75017 Paris
Tel: +33 (1) 53 81 21 00
Fax: +33 (1) 53 81 21 19
Benoit Marsaud
(Factory)
Z.I. Avenue de l'Europe
B.P. 99
F-76220 Gournay-en-Bray
Tel: +33 (2) 32 89 40 00
Fax: +33 (2) 35 90 12 50
Benoit Marsaud
Autoliv Composants SNC
6, rue Lesage Maille
F-76320 Caudebec-les-Elbeuf
Tel: +33 (2) 32 96 53 00
Fax: +33 (2) 35 77 58 86
Michel Marion
EAK*
ZAC des Comboffes
F-25700 Valentigney
Tel: +33 (3) 81 36 20 20
Fax: +33 (3) 81 36 20 00
Daniel Nyons
Isodelta SA
Z.I. Chire-en-Montreuil
F-86190 Vouille
Tel: +33 (5) 49 39 36 00
Fax: +33 (5) 49 51 81 85
Jean Geron
Livbag SA
(Factory)
Route du Beuzit
F-29590 Pont-de-Buis
Tel: +33 (2) 98 81 30 00
Fax: +33 (2) 98 73 05 04
Benoit Marsaud
(Engineering Center)
BP 22
91170 Vert-le-Petit
Tel: +33 (1) 64 99 1272
Fax: +33 (1) 64 93 2252
Benoit Marsaud
N.C.S. SA
Rue de la Cartoucherie
B.P. No. 10
F-95471 Survilliers
Tel: +33 (1) 34 68 57 57
Fax: +33 (1) 34 68 57 62
Jean-Noel Moisset
Sagem-Autoliv SNC*
Bd. Lenine
B.P. No. 506
F-76807 St Etienne du Rouvray
Tel: +33 (2) 35 64 54 56
Fax: +33 (2) 35 64 53 61
Bernard Christophe
Germany
Autoliv GmbH
Otto-Hahn-Strasse 4
D-25337 Elmshorn
Tel: +49 (4121) 797-0
Fax: +49 (4121) 757-76
Rolf Henke/Bo Cavell
Autoliv GmbH
Theodor-Heuss-Strasse 2
D-85221 Dachau
Tel: +49 (8131) 295-0
Fax: +49 (8131) 295-136
Bo Cavell/Rolf Henke
Autoliv ASP GmbH
Hansestrasse 46
D-38112 Braunschweig
Tel: +49 (531) 2181-0
Fax: +49 (531) 2181-111
Helmut Straden
Autoliv ASP GmbH
An den Bracke 9
D-71706 Markgroningen
Tel: +49 (7145) 971-0
Fax: +49 (7145) 971-220
Udo Bendig
Autoliv Sicherheitstechnik GmbH
Eichbergstrasse 10-13
D-04720 Dobeln
Tel: +49 (3431) 6601-0
Fax: +49 (3431) 6601-14
Helmut Straden
Autoliv Stakupress GmbH
In de Tarpen 71-99
D-22848 Norderstedt
Tel: +49 (40) 523 060-0
Fax: +49 (40) 523 060-19
Franz-Ludwig Schmittmann
Great Britain
Autoliv Ltd.
Penner Road
Havant, Hampshire PO9 1QH
Tel: +44 (1705) 483 333
Fax: +44 (1705) 459 102
Tony King
Autoliv Ltd
Precision Components Division
Terminus Road
Chichester, West Sussex PO19 2TX
Tel: +44 (1243) 788 141
Fax: +44 (1243) 813 009
Terry Golding
Autoliv Ltd Southfield Office
6 Sylvan Court
Southfield Business Park
Basildon, Essex SS15 6TH
Tel: +44 (1268) 451 000
Fax: +44 (1268) 415 521
Martin Ryder
Autoliv Textiles Ltd.
Bromley Road
Congleton, Cheshire CW12 1TT
Tel: +44 (1260) 29 43 00
Fax: +44 (1260) 29 88 36
Lars-Eric Florberger
Airbags International Ltd.
Bromley Road
Congleton, Cheshire CW12 1TT
Tel: +44 (1260) 29 43 00
Fax: +44 (1260) 29 88 36
William Gabbott
Marling Industries p.l.c.
17 Aylmer Parade
Great North Road
London N2 OPF
Tel: +44 (181) 340 4046
Fax: +44 (181) 348 5878
Jim Bentley
Marling Leek Ltd.
Marling Mills
Nelson Street
Leek, Staffs ST13 6BB
Tel: +44 (1538) 384 108
Fax: +44 (1538) 387 350
Mike Hall
Rykneld Tean Ltd.
Bridge Street
Derby DE1 3LH
Tel: +44 (1332) 362 525
Fax: +44 (1332) 291 455
Terry Wilkinson
Tensator Ltd.
Continental House
Sherbourne Drive
Tilbrook,
Milton Keynes MK7 8BW
Tel: +44 (1908) 27 11 53
Fax: +44 (1908) 27 45 72
Ernie Reading
Hungary
Autoliv Kft
H-9483 Sopronkovesd. Ujmajor
Tel: +36 (99) 363 079
Fax: +36 (99) 363 313
Wolfgang Hecht
India
Autoliv IFB India Ltd.*
16, Visveswaraiah Industrial Estate
1st Main Road, off Whitefield Road
Mahadevapura Post
Bangalore - 560 048
Tel: +91 (80) 851 2392
Fax. +91 (80) 851 7651
V. Raghu
Indonesia
P.T. Autoliv Indonesia*
Jalan Haji Wahab
Affam Km 28
Pondok Ungu
Bikasa Berat
Tel: +62 (21) 885 97 30
Fax: +62 (21) 885 93 33
Lindsay Beeson
Italy
Autoliv Italia S.p.A.
Via Robassomero 47
10078 Venaria (To)
Tel: +39 (11) 923 6386
Fax: +39 (11) 923 5416
Benoit Marsaud
Cosma S.p.A.
Via Einaudi 4
I-100 70 Robassomero (To)
Tel: +39 (11) 924 1187
Fax: +39 (11) 924 1018
Gustaf Brakenhielm
Japan
Autoliv Japan Ltd
2-15-13 Shinyokohama
Kohoku-ku
Yokohama 222-0033
Tel: +81 (45) 475 3501
Fax: +81 (45) 475 3502
Curt Sorensen
(Nagoya Field Office)
Midori Bldg. Room 203
3-121-1 Issha
Meito-ku
Nagoya 465-0093
Tel: +81 (52) 702 5232
Fax: +81 (52) 702 5234
John Jensen
(Hiroshima Field Office)
HIOS Hiroshima, Room 501
7-1 Kami Hacchobori
Naka-ku
Hiroshima 730-0012
Tel: +81 (82) 212 4546
Fax: +81 (82) 222 9145
Dwaine Palmer
Korea
Autoliv Inc. Korea
7th Floor, Doojin Building
158 Samsung-Dong,
Kangnam-Ku
Seoul 135-090
Tel.: +82 (2) 563 9201
Fax: +82 (2) 563 9491
L. Karlbrink/J.K. Kim
Malaysia
Autoliv Asia Pacific
Suite 25-03, 25th Floor
Menara Keck Seng
203 Jalan Bukit Bintang
55100 Kuala Lumpur
Tel: +60 (3) 466 7666
Fax: +60 (3) 466 2066
Gunnar Dahlen
Autobelt Sdn. Bhd.*
Lot 1, Persiaran Kemajuan
Seksyen 16
40200 Shah Alam
Selangor Darul Ehsan
Tel: +60 (3) 541 7486
Fax: +60 (3) 541 7585/71
M. Yusoff Ghani
Airbag Systems Malaysia Sdn. Bhd.*
Lot 1, Persiaran Kemajuan
Seksyen 16, 40200 Shah Alam
40200 Selangor Darul Ehsan
Tel: +60 (3) 541 7486
Fax: +60 (3) 541 7585
M. Yusoff Ghani
Furniweb-VOA Safety Webbing
Sdn. Bhd.*
Lot 208, Jalan Sungai Besi, Batu 12
Kampung Baru Balakong,
43300 Cheras, Selangor Darul Ehsan
Tel: +60 (3) 961 1803
Fax: +60 (3) 961 2826
Kerry Wallace/Gerry Steegers
Mexico
Autoliv de Mexico S.A. de C.V.
Av. de Las Sauces No. 9
Parque Industrial Lerma
C.P. 52000 Lerma
EDO. de Mexico
Tel: +52 (728) 50844/50323
Fax: +52 (728) 50802
Gustavo Lichtenberger
Netherlands
Autoliv B.V.
Einsteinstraat 3
P.O. Box 31127
NL-6370 AC Landgraaf
Tel: +31 (45) 532 6699
Fax: +31 (45) 532 6623
Bengt Andersson
Autoliv ASP B.V.
Johan Huizingalaan 759
1066 VH Amsterdam
P O Box 90486
1006 BL Amsterdam
Tel: +31 (20) 408 8000
Fax: +31 (20) 408 8001
Henk Van den Boom
C & S Valkenburg & Co. B.V.
P O Box 7
3925 ZG Scherpenzeel
Tel: +31 (33) 277 2834
Fax: +31 (33) 277 4254
Rene Boeve
Van Oerle Alberton B.V.
P O Box 52
5280 AB Boxtel
Tel: +31 (411) 617 961
Fax: +31 (411) 617 969
Gerry Steegers
New Zealand
Autoliv N.Z. Ltd.
74-82 Richmond Road, Ponsonby
P.O. Box 1761
Auckland
Tel: +64 (9) 376 4068
Fax: +64 (9) 378 0942
Alan Fletcher
Philippines
Autoliv QB Inc.*
Molave Street
Ceris 1, Canlubana
Calamba, Laluna
Tel: +63 (49) 549 2888
Fax: +63 (49) 549 2961
David Goodson
Romania
Autoliv Romania S.A.
Str. Ecaterina Teodoroiu 38
2200 Brasov
Tel.: +40 (68) 164 822
Fax: +40 (68) 425 255
Ionel Fierbinteanu
Russia
A.O. Autoliv
Leningradskaya str. 27
141980 Dubna, Moscow region
Tel: +7 (09621) 22817/22835
Fax: +7 (09621) 22834
Alexander Korneytchuk
South Africa
Autoflug S.A. (Pty) Ltd*
P.O. Box 3058
Kenmare 1745
Gauteng
Tel: +27 (11) 762 1067
Fax: +27 (11) 762 5635
Chris Biddle
Spain
Autoliv-BKI S.A.
Poligono Industrial
"Fuente del Jarro"
Villa de Bilbao, 3 Parc. 84
E-46988 Paterna (Valencia)
Tel: +34 (6) 134 3040
Fax: +34 (6) 134 0858
as of April 4, 1998, area code (96)
Arturo Lopez-Abente
Autoliv-KLE S.A.
Carretera Nacional 152, Km 24
Poligono Industrial Batzacs
E-08400 Granollers (Barcelona)
Tel: +34 (3) 861 5000
Fax: +34 (3) 849 8582
as of April 4, 1998 area code (93)
Jose Company
Sweden
Autoliv Sverige AB
Wallentinsvagen 22
SE-447 83 Vargarda
Tel: +46 (322) 62 62 00
Fax: +46 (322) 62 67 00
Lars-Gunnar Skotte
Autoliv Research
Wallentinsvagen 22
SE-447 83 Vargarda
Tel: +46 (322) 62 63 00
Fax: +46 (322) 62 01 18
Yngve Haland
Autoflator AB
Gjuterigatan 1
Box 23
SE-447 21 Vargarda
Tel: +46 (322) 62 61 00
Fax: +46 (322) 62 15 10
Torbjorn Skanberg
Autoliv Electronics AB
Medevivagen 55
SE-591 83 Motala
Tel: +46 (141) 22 80 00
Fax: +46 (141) 57 200
Roland Allardh
Autoliv Nokia AB*
SE-591 83 Motala
Tel: +46 (141) 22 80 00
Fax: +46 (141) 528 57
Leif Lundberg
Autoliv Seat Sub-Systems
Box 3044
Stinavagen 1
SE-350 33 Vaxjo
Tel: +46 (470) 747 300
Fax: +46 (470) 747 399
Jan Ahlqvist
Autoliv Hammarverken AB
Box 3044
Stinavagen 1
SE-350 33 Vaxjo
Tel: +46 (470) 747 300
Fax: +46 (470) 747 399
Jan Ahlqvist
Autoliv Mekan AB
Box 34
S-281 21 Hassleholm
Tel: +46 (451) 425 00
Fax: +46 (451) 159 13
Bertil Nordqvist
Autoliv Steel & Plastics
Klarabergsviadukten 70
Box 70381
SE-107 24 Stockholm
Tel: +46 (8) 402 06 00
Fax: +46 (8) 24 44 59
Gustaf Brakenhielm
Svensk Airbag AB
Smedmastaregatan 3
SE-442 34 Kungalv
Tel: +46 (303) 20 45 00
Fax: +46 (303) 20 45 50
Lars-Eric Florberger
Taiwan
Mei-An Autoliv Co., Ltd.*
No. 706, Fu-Kai Road
Taoyuan City
Taoyuan, Taiwan, R.O.C.
Tel: +886 (3) 325 2612
Fax: +886 (3) 325 0304
Wen-Tsung Chiang
Thailand
Autoliv Thailand Limited*
700/415 Moo 7
Bangpakong Industrial Park 2
Bangna-Trad Road, Km. 57
T. Donhualoh, A. Muang
Chonburi 20000
Tel: +66 (38) 213 014/5
Fax: +66 (38) 213 016
David Goodson
Turkey
Autoliv Cankor A.S.*
Cemal Ulusoy Caddesi Baslangici
Inony Mahallesi
Papaz Kopru Mevkii
Sefakoy - 34620 Istanbul
Tel: +90 (212) 698 4751/57
Fax: +90 (212) 698 4704
Mustafa Alaca
U.S.A.
Autoliv North America
3350 Airport Road
Ogden, Utah 84405
Tel: +1 (801) 625 9200
Fax: +1 (801) 625 4911
Brad Murray
(Airbag Module Facility)
1000 West 3300 South
Ogden, Utah 84401
Tel: +1 (801) 629 9800
Fax: +1 (801) 629 9619
Lisa Frary
(Service Parts Facility)
3250 Pennsylvania Avenue
Ogden, Utah 84401
Tel: +1 (801) 629 9800
Fax: +1 (801) 629 9619
Dave Wilson
(Sales & Tech Centers)
1320 Pacific Drive
Auburn Hills, Michigan 48326
Tel: +1 (248) 475 9000
Fax: +1 (248) 475 9044
Gustaf Celsing
2910 Waterview Drive
Rochester Hills, Michigan 48309
Tel: +1 (248) 853 8600
Fax: +1 (248) 853 8620
Gustaf Celsing
(Seat Belt Facility)
5851 West 80th Street
Indianapolis, Indiana 46278
Tel: +1 (317) 875 7579
Fax: +1 (317) 875 8171
Joseph Ralston
(Steering Wheel Facility)
320 West Stable Drive
Fort Wayne, Indiana 46825
Tel: +1 (219) 471 9558
Fax: +1 (219) 471 5779
Ervin Glass
and as of May 1, 1998
Autoliv North America
4868 East Park 30 Drive
Columbia City, Indiana 46725
Tel: +1 (219) 244 4941
Fax: +1 (219) 244 4951
Ervin Glass
Autoliv Inflators
3350 Airport Road
Ogden, Utah 84405
Tel: +1 (801) 625 9200
Fax: +1 (801) 625 4911
Tom Hartman
(Airbag Inflator Facilities)
3350 Airport Road
Ogden, Utah 84405
Tel: +1 (801) 625 8200
Fax: +1 (801) 625 4911
Steve Smith
250 American Way
Brigham City, Utah 84302
Tel: +1 (435) 734 6100
Fax: +1 (435) 734 6120
Tim Ambrey
(Pyrotechnic Processing Facility)
9160 North Highway 83
Promontory, Utah 84302
Tel: +1 (435) 471 4300
Fax: +1 (435) 471 3007
John Shaw
Autoliv North American Components
3350 Airport Road
Ogden, Utah 84405
Tel: +1 (801) 625 9200
Fax: +1 (801) 625 4911
Jacques Croisetiere
(Components Facility)
1973 North Rulon White Blvd
North Ogden, Utah 84404
Tel: +1 (801) 625 7700
Fax: +1 (801) 625 7742
Mark Newton
(Cushion Facility)
300 West 12th Street
Ogden, Utah 84404
Tel: +1 (801) 620 8030
Fax: +1 (801) 734 8010
Tim Nickerson
<TABLE>
<CAPTION>
Selected Financial data
Autoliv Inc Autoliv AB1)
(Dollars in millions,
except per share data)
1997 1996 1997 2) 1996 1995 1994 1993
Pro Forma Pro Forma 3)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and income
Net sales $3,257 $3,204 $2,740 $1,735 $1,432 $1,157 $685
Operating income (loss) 356 346 (453)4) 163 129 86 40
Income (loss) before taxes 317 300 (477)4) 171 142 88 31
Net income (loss) 185 174 (580)4) 113 91 56 16
Financial position
Current assets
excluding cash 822 819 822 509 400 357 219
Property, plant
and equipment 727 693 727 322 198 138 98
Intangible assets
(mainly goodwill) 1,694 1,593 1,694 64 7 7 18
Non-interest bearing
liabilities (813) (705) (813) (484) (410) (353) (184)
Capital employed 2,465 2,428 2,465 438 266 165 165
Net debt/(cash) 646 704 646 (56) (113) (108) 23
Shareholders' equity 1,704 1,621 1,704 458 379 273 144
Total assets 3,430 3,254 3,430 1,054 837 658 367
Long-term debt 612 763 612 13 15 10 6
Per share data (adjusted for 2:1 split in 1996)
Earnings (loss) per share 1.81 1.69 (6.70)6) 2.06 1.66 1.05 0.38
Dividend per share 0.42 0.41 0.42 0.41 0.32 0.19 -
Number of shares
outstanding (million) 102.2 102.8 102.2 55.0 55.0 55.0 50.0
Ratios
Operating margin (%) 10.9 10.8 10.2 4) 9.4 9.0 7.4 5.8
Pretax margin (%) 9.7 9.4 9.3 4) 9.8 9.9 7.6 4.5
Return on capital
employed (%) 15.2 14.4 10.9 4) 44.5 68.5 52.7 22.6
Return on shareholders'
equity (%) 11.1 10.7 9.2 4) 27.1 28.0 25.6 19.0
Return on total
capital (%) 11.3 10.9 8.9 4) 18.2 19.0 17.4 10.6
Equity ratio (%) 49.7 49.8 49.7 43.5 45.2 41.5 39.3
Net debt equity ratio (%) 37.9 43.4 37.9 (12.4) (29.8) (39.5) 15.7
Interest coverage ratio 6.7 6.5 7.5 4) 32.8 54.0 16.2 3.9
Other data
Seat belt sales incl.
seat components 940 917 940 917 750 623 521
Airbag sales, incl.
steering wheels 2,317 2,287 1,800 818 682 534 164
Net cash provided by
operations 441 352 343 159 160 148 58
Capital expenditures 216 270 172 148 99 76 50
Net cash after operating
and investing activities 180 14 128 (52) 12 72 10
Number of employees,
December 31 17,840 15,330 17,840 9,000 6,670 5,740 4,390
<FN>
1) Data in Swedish Kronor are converted to dollars at average or year-end
rates
2) Including ASP from May 1, 1997
3) According to the Autoliv prospectus for the public offering in 1994
4) Includes a one-time write-off of acquired R&D of $732 million.
5) Weighted average number of shares used in computing per share amount 86.5
million.
6) Before one-time item, the write-off of acquired R&D of $732 million.
Definitions
Operating margin
Operating income relative to sales.
Pretax margin
Income before taxes relative to sales.
Return on capital employed
Income before financial items relative to average capital employed.
Return on shareholders' equity
Net income relative to average shareholders' equity.
Return on total capital
Income before taxes, plus interest expense, relative to average total assets.
Equity ratio
Shareholders' equity relative to total assets.
Net debt equity ratio
Net debt relative to shareholders' equity.
Interest coverage ratio
Income before taxes, plus interest expense, relative to interest expense.
Net debt
Short and long-term debt less cash.
Capital employed
Total assets, less cash and current operating liabilities.
Capital expenditures
Investments in property, plant and equipment.
Earnings (loss) per share
Net income (loss) relative to average number of shares outstanding.
</TABLE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K)of Autoliv, Inc. of our report dated January 29, 1998, included in
the 1997 Annual Report to the Shareholders of Autoliv, Inc. We also consent
to the incorporation by reference in the Registrations Statements (Forms S-8
No. 333-26299 and No. 333-26303) pertaining to the Autoliv, Inc. 1997 Stock
Incentive Plan and Autoliv ASP Employee Investment Plan of Autoliv, Inc.,
respectively, of our report dated January 29, 1998, with respect to the
consolidated financial statements of Autoliv, Inc. incorporated by reference
in the Annual Report (Form 10-K) for the year ended December 31, 1997.
/s/ Ernst & Young AB
Torbjorn Hanson
Stockholm, Sweden
March 26, 1998
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 152
<SECURITIES> 0
<RECEIVABLES> 579
<ALLOWANCES> 10
<INVENTORY> 198
<CURRENT-ASSETS> 974
<PP&E> 1,377
<DEPRECIATION> 650
<TOTAL-ASSETS> 3,430
<CURRENT-LIABILITIES> 999
<BONDS> 612
<COMMON> 102
0
0
<OTHER-SE> 1,602
<TOTAL-LIABILITY-AND-EQUITY> 3,430
<SALES> 2,740
<TOTAL-REVENUES> 2,740
<CGS> 2,153
<TOTAL-COSTS> 2,153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> (477)
<INCOME-TAX> 99
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (580)
<EPS-PRIMARY> (6.70)
<EPS-DILUTED> (6.70)
</TABLE>
