SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
---------------
For the period ended March 31, 1998
AUTOLIV, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0378542
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Trade Center
Klarabergsviadukten 70 Box 70381
S-107 24 Stockholm, Sweden
(Address of principal executive offices)
Registrant's telephone number, including area code: 46 (8) 587 20 600
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 the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: There were
approximately 102 million shares of Common Stock of Autoliv, Inc., par
value $1.00 per share, outstanding as of April 20, 1998.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
AUTOLIV, INC.
Consolidated Statement of Income (unaudited)
(dollars in millions except per share data)
<TABLE>
<CAPTION>
Three Months ended
Mar. 31, Mar. 31, 1)
1998 1997
<S> <C> <C>
Sales $ 837.9 $ 445.7
Cost of sales (655.1) (353.5)
------- -------
Gross profit 182.8 92.2
Selling, administration and general (39.4) (20.3)
expense
Research and development expenses (46.1) (28.2)
Amortization of intangibles, (15.2) (2.9)
primarily goodwill
Other income - net 0.7 0.7
------- -------
Operating income 82.8 41.5
Equity in earnings of 1.8 2.1
affiliates
Interest income 1.6 1.1
Interest expense (15.5) (1.5)
------- -------
Income before income taxes 70.7 43.2
Income taxes (28.3) (14.4)
Minority interests in subsidiaries 0.0 (0.4)
------- -------
Net income 42.4 28.4
Net income per share - assuming 0.41 0.52
dilution
Number of shares used in computing 102.2 55.0
per share amount
Number of shares outstanding 102.2 55.0
</TABLE>
See notes to consolidated financial statements
1) Autoliv AB and subsidiaries
AUTOLIV, INC.
Consolidated Balance Sheet (unaudited)
(dollars in millions)
March 31, December 31,
1998 1997
------------ ------------
ASSETS
Cash and cash equivalents $ 250.1 $ 152.0
Receivables, less allowances 629.3 569.2
Inventories 201.9 197.8
Refundable and deferred income tax
benefit 33.4 20.5
Prepaids 40.6 34.7
-------- --------
Total current assets 1,155.3 974.2
Property, plant and equipment, net 740.3 727.2
Investments and other receivables 29.4 34.6
Intangible assets, net (mainly
acquisition goodwill) 1,674.5 1,694.5
-------- --------
TOTAL ASSETS 3,599.5 3,430.5
======== ========
LIABILITIES AND EQUITY
Short-term debt 229.2 186.2
Accounts payable 397.4 385.3
Accrued expenses 326.3 326.1
Other current liabilities 77.8 69.6
Income taxes 58.2 32.3
-------- --------
Total current liabilities 1,088.9 999.5
Long-term debt 676.6 611.8
Other noncurrent liabilities 97.9 100.8
Minority interests in subsidiaries 13.5 14.4
-------- --------
Total noncurrent liabilities
and minority interests 788.0 727.0
Common stock, par value $1 per share 102.2 102.2
Additional paid-in capital 1,938.5 1,938.5
Retained earnings (accumulated
deficit) and foreign currency
translation adjustments (318.1) (336.7)
-------- --------
Total shareholders' equity 1,722.6 1,704.0
-------- --------
TOTAL LIABILITIES AND EQUITY 3,599.5 3,430.5
======== ========
See notes to consolidated financial statement
AUTOLIV, INC.
Consolidated Statement of Cash Flows (unaudited)
(dollars in millions)
THREE MONTHS ENDED
MAR. 31, MAR. 31,
1998 1997 (1)
OPERATING ACTIVITIES
Net Income $ 42.4 $ 28.4
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 54.3 24.1
Deferred income taxes 4.3
Undistributed earnings from affiliated
companies (1.7) (2.0)
Changes in operating assets and liabilities
Receivables and other assets (68.5) (6.5)
Inventories 0.4 10.5
Accounts payable and accrued expenses 3.8 (28.7)
Income taxes 24.9 0.9
------ ------
Net cash provided by operating activities 59.9 26.7
INVESTING ACTIVITIES
Expenditure for property, plant and equipment (59.0) (24.5)
Acquisition of businesses and
investments in affiliated companies (3.3) 0.0
Other 5.3 0.1
------ ------
Net cash used for investing activities (57.0) (24.4)
Cash flow before financing 2.9 2.3
FINANCING ACTIVITIES
Increase in short-term debt 41.1 7.8
Increase / (decrease) in long-term liabilities 63.6 (2.7)
Decrease in minority interest (0.9) (0.5)
Dividends paid (11.2)
Other - net 4.6 (0.6)
------ ------
Net cash (used for) provided by financing
activities 97.2 4.0
Effect of exchange rate changes on cash (2.0) (8.0)
INCREASE / (DECREASE) IN CASH AND
CASH EQUIVALENTS 98.1 (1.7)
Cash and cash equivalents at beginning of
period 152.0 131.7
------ ------
Cash and cash equivalents at end of period 250.1 130.0
====== ======
- - --------------
See notes to consolidated financial statements
1 Autoliv AB and subsidiaries
Autoliv, Inc.
Notes to Consolidated Financial Statements
(unaudited)
March 31, 1998
1. Basis of Presentation
The accompanying interim unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Rule 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all adjustments considered necessary for a fair presentation
have been included in the financial statements. All such adjustments are
of a normal recurring nature.
For comparison purposes the proforma income statement first quarter 1997
and proforma full year 1997 is included below.
For a further description of the combination on May 1, 1997 of Autoliv AB
with the Auto Safety Products Business of Morton International, Inc. ("ASP"),
see Autoliv Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997.
Statements in this report that are not historical facts are forward-looking
statements, which involve risks and uncertainties that could affect the
actual results of Autoliv Inc. ("Autoliv" or the "Company"). A description
of the important factors that could cause Autoliv's actual results to
differ materially from the forward-looking statements contained in this
report may be found in Autoliv's reports filed with the
Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF INCOME PROFORMA (UNAUDITED)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Quarter Jan.- Mar. Full Year
1998(1) 1997(2) 1997(3)
<S> <C> <C> <C>
Net sales
- - - Airbag products $ 583.6 $ 601.3 $ 2,316.4
- - - Seat belt products 254.3 232.9 940.4
---------- ---------- ----------
TOTAL NET SALES 837.9 834.2 3,256.8
Cost of sales (655.1) (638.7) (2,537.0)
---------- ---------- ----------
GROSS PROFIT 182.8 195.5 719.8
Selling, general &
administrative expense (39.4) (36.7) (154.7)
Research & development (46.1) (40.3) (152.7)
Amortization of intangibles (15.2) (15.2) (59.6)
Other income, net 0.7 0.4 3.2
---------- ---------- ----------
OPERATING INCOME 82.8 103.7 356.0
Equity in earnings of affiliates 1.8 2.7 10.3
Interest income 1.6 1.3 7.1
Interest expense (15.5) (13.8) (55.9)
---------- ---------- ----------
INCOME BEFORE TAXES 70.7 93.9 317.5
Income taxes (28.3) (38.6) (129.4)
Minority interests in subsidiaries - (0.3) (3.2)
---------- ---------- ----------
NET INCOME BEFORE ONE-TIME ITEMS 42.4 55.0 184.9
EARNINGS PER SHARE 0.41 0.54 1.35 4)
Write-off of acquired R&D - - (732.3) 4)
---------- ---------- ----------
REPORTED NET INCOME $ 42.4 $ 55.0 $ (547.4)
</TABLE>
1) Actual results
2) Pro forma results
3) Comprised of proforma results for January 1, 1997 to April 30, 1997
and actual results for May 1, 1997 to December 31, 1997.
4) Included in the audited financial statements for Autoliv, Inc.
(Autoliv AB and subsidiaries for period on and prior to
April 30, 1997 and Autoliv, Inc. for May 1 to December 31, 1997)
is the Write-off of acquired R&D reflected as operating expense
for which a loss per share of $6.70 is reported.
2. Inventories
Inventories are stated at lower of cost (principally FIFO) or market. The
components of inventories were as follows:
(Dollars in millions) March 31, 1998 Dec. 31, 1997
-------------- -------------
Finished products
and work in progress $105.9 mil. 113.0
Raw material 96.0 84.8
---- ----
201.9 197.8
3. Other recent developments
Autoliv acquired on April 7, 1998 the remaining 50% of the shares in
Autoliv-Nokia and the other parts of Nokia's automotive-related electronics
business. These operations are consolidated as of January 1, 1998.
Following the acquisition in October, 1997 of the Marling Group, Autoliv
sold four of the five Marling units not related to seat belt
webbing, Marling's core business. The divestitures became effective as
of January 1, 1998.
Autoliv's holding in Autoliv-Cankor in Turkey has been increased from
50% to 90%.
The acquisitions and divestitures decribed above have not has a material
effect on the financial results of Autoliv for the first quarter of 1998.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Whereas the data provided under Item 1 in the Consolidated Statement of
Income, Consolidated Balance Sheet and Consolidated Statement of Cash
Flows reflect the results of Autoliv, Inc. for all periods subsequent to
April 30, 1997 and for Autoliv AB for all periods prior to May 1, 1997,
the analysis provided below is based on actual results of Autoliv, Inc.
for all periods subsequent to April 30, 1997 and pro forma results of
Autoliv, Inc. for all periods prior to May 1, 1997.
THREE MONTHS ENDED MARCH 31, 1998 (ACTUAL) COMPARED WITH THREE MONTHS
ENDED MARCH 31, 1997 (PROFORMA)
Autoliv, Inc. reported sales and income before taxes of $838 million and
$71 million, respectively, for the three-month period ended March 31, 1998,
as compared to first quarter prior-year sales and income before taxes of
$834 million and $94 million, respectively. The net income and earnings per
share were $42 million and $0.41, respectively, in the first quarter of 1998,
compared to $55 million and $0.54, respectively for first quarter 1997.
Posted consolidated net sales for the first quarter 1998 were $838 million
compared to $834 million during the first quarter 1997. The underlying
sales increase (i.e. excluding currency effects and acquisitions) was
3%. Since approximately 70% of Autoliv's business is outside North America,
a major portion of sales was negatively affected by the stronger U.S. dollar.
The production of light vehicles is estimated to have grown by 6% in Europe
and by 2% in North America, while light vehicle production in Japan is
estimated to have fallen by 6%. The average increase for the three regions
was 1.5%.
Posted sales of airbags products (incl. steering wheels) amounted to $584
million for first quarter 1998, compared to $601 million during the first
quarter 1997. Adjusted for currency effects and corporate acquisitions, the
decrease was 1%. Volumes have continued to rise outside the U.S.
(airbags are mandated in the U.S.). Price pressure has, however, at the same
time been strong, especially in the U.S. The demand for side-impact airbags
has continued to increase sharply, mainly as a result of higher installation
rates. Currently, Autoliv ships this product to 18 car manufacturers divided
among more than 60 different car models.
During the first quarter 1998 posted sales of seat belt products
(incl. seat sub-systems) grew by 9% compared to first quarter 1997 to
$254 million, while sales excluding currency effects and acquisitions grew
by 12%. Corporate acquisitions accounted for 4 percentage points of the
reported increase. The significant increase in seat belt sales is due to new
products and a higher sales volume. For example, the latest pretensioner
generation introduced in 1997, has made it possible for Autoliv to increase
its already high market share.
Due to the strong price pressure and the stronger U.S. dollar, operating
income declined to $83 million in the first quarter 1998 from $104 million for
the corresponding quarter of 1997. Selling, general and administrative expense
has increased as a result of the consolidation of the newly acquired companies
(Marling, Autoliv-Nokia and Autoliv Argentina). The research and development
expense, also affected by the acquisitions, has in addition risen as a result
of the safety radar system, smart airbag systems and other new projects for
long-term growth. The weak Asian market also had a negative impact on both
sales and earnings.
The gross margin and the operating margin for first quarter 1998 was 21.8% and
9.9%, respectively, compared to 22.1% and 10.9%, respectively for the full year
1997.
The effective tax rate for first quarter 1998 was 40.0%, compared to 40.8% for
the full year 1997. Excluding non-deductible amortization, the tax rate was 36%.
LIQUIDITY AND SOURCES OF CAPITAL
The cash generated by operations amounted to $60 million for first quarter 1998.
Of that amount, $54 million was used for capital expenditures (net) and $3
million for acquisitions of businesses. The most important corporate
acquisition was that of Nokia's automotive-related electronic business.
Net debt increased by $10 million to $656 million during the first quarter of
1998. Net debt to equity stood unchanged at 38% as of March 31, 1998 compared to
the beginning of the year.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K for the three months
ended March 31, 1998.
SIGNATURE
Pursuant to the requirements 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.
Autoliv, Inc.
(Registrant)
Date: May 14, 1998 By: /s/ Wilhelm Kull
-----------------------
Wilhelm Kull
Chief Financial Officer
