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 June 30, 2000
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 101,9 million shares of Common Stock of Autoliv, Inc., par
value $1.00 per share, outstanding as of July 12, 2000.
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> Six month Latest
Quarter Apr. - June Jan. - June 12 months Full Year
2000 1999 2000 1999 00/99 1999
<S> <C> <C> <C> <C> <C> <C>
Net sales
- - - - Airbag products $ 769.8 $ 698.0 $ 1,548.5 $ 1,357.2 $ 2,906.2 $ 2,714.9
- - - - Seat belt products 304.4 279.0 609.7 555.2 1,151.8 1,097.3
------ ------- --------- --------- --------- ---------
TOTAL NET SALES 1,074.2 977.0 2,158.2 1,912.4 4,058.0 3,812.2
Cost of sales (851.2) (767.8) (1,707.1) (1,512.0) (3,200.5) (3,005.4)
----- ------- --------- --------- --------- ---------
Gross profit 223.0 209.2 451.1 400.4 857.5 806.8
Selling, administration and general (51.0) (44.8) (100.2) (87.7) (189.3) (176.8)
expense
Research and development expenses (49.6) (50.3) (108.5) (99.2) (206.6) (197.3)
Amortization of intangibles, (17.1) (16.1) (33.0) (32.4) (64.7) (64.1)
primarily goodwill
Other income - net 1.6 0.1 1.8 0.4 1.4 0.0
------- ------- --------- --------- --------- ---------
Operating income 106.9 98.1 211.2 181.5 398.3 368.6
Equity in earnings of 0.7 (0.4) 1.4 0.8 5.2 4.6
affiliates
Interest income 2.5 2.4 5.3 5.1 11.5 11.3
Interest expense (16.8) (13.6) (29.3) (28.0) (56.1) (54.8)
------- ------- --------- --------- --------- ---------
Income before income taxes 93.3 86.5 188.6 159.4 358.9 329.7
Income taxes (37.6) (35.6) (76.4) (65.0) (143.4) (132.0)
Minority interests in subsidiaries (0.6) 0.3 (1.9) 0.9 (0.6) 2.2
------- ------- --------- --------- --------- ---------
Net income 55.1 51.2 110.3 95.3 214.9 199.9
Net income per share - assuming 0.54 0.50 1.08 0.93 2.10 1.95
dilution
Number of shares used in computing 102.3 102.3 102.3 102.3 102.3 102.4
per share amount
Number of shares outstanding 101.9 102.3 101.9 102.3 101.9 102.3
</TABLE>
See notes to consolidated financial statements
<TABLE>
<CAPTION>
AUTOLIV, INC.
Consolidated Balance Sheet (unaudited)
(dollars in millions)
June 30, December 31,
2000 1999
------------ ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 95.9 $ 119.2
Receivables, less allowances 869.3 709.6
Inventories 299.6 274.0
Refundable and deferred income tax
benefit 65.7 35.8
Prepaids 83.4 42.9
-------- --------
Total current assets 1,413.9 1,181.5
Property, plant and equipment, net 927.6 834.6
Investments and other receivables 86.3 34.7
Intangible assets, net (mainly
acquisition goodwill) 1,726.9 1,595.7
-------- --------
TOTAL ASSETS 4,154.7 3,646.5
======== ========
LIABILITIES AND EQUITY
Short-term debt 243.8 244.5
Accounts payable 544.1 453.4
Accrued expenses 244.8 291.5
Other current liabilities 147.9 92.5
Income taxes 47.5 22.7
-------- --------
Total current liabilities 1,228.1 1,104.6
Long-term debt 792.6 470.4
Other noncurrent liabilities 133.9 131.5
Minority interests in subsidiaries 17.3 9.0
-------- --------
Total noncurrent liabilities
and minority interests 943.8 759.4
Common stock, par value $1 per share 102.3 102.3
Additional paid-in capital 1,941.5 1,941.5
Retained earnings (accumulated
deficit) and foreign currency
translation adjustments (49.2) (112.8)
Treasury Stock (11.8)
-------- --------
Total shareholders' equity 1,982.8 1,931.0
-------- --------
TOTAL LIABILITIES AND EQUITY 4,154.7 3,646.5
======== ========
See notes to consolidated financial statement
</TABLE>
<TABLE>
<CAPTION>
AUTOLIV, INC.
Consolidated Statement of Cash Flows (unaudited)
(dollars in millions)
Quarter Six months Latest Full Year
Apr. - June Jan. - June 12 months 1999
2000 1999 2000 1999 00/99
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 55.1 $ 51.2 $ 110.3 $ 95.3 $ 214.9 $ 199.9
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 67.3 64.3 132.9 131.0 255.3 253.4
Deferred income taxes (0.7) 13.2 (3.2) 16.8 26.5 46.5
Undistributed earnings from affiliated
companies 0.7 (0.4) 1.4 1.7 4.2 4.6
Changes in operating assets and liabilities
Receivables and other assets 27.1 1.6 (80.9) (48.8) (95.6) (63.4)
Inventories 2.3 (7.2) 16.8 12.6 (11.8) (16.1)
Accounts payable and accrued expenses (67.5) (4.2) (50.1) (16.0) (22.0) 12.1
Income taxes (3.8) (11.1) 23.5 12.0 10.5 (0.9)
------ ------ ------ ------ ------ ------
Net cash provided by operating activities 80.5 107.3 150.7 204.7 382.1 436.1
INVESTING ACTIVITIES
Expenditure for property, plant and equipment (50.9) (72.3) (106.9) (139.2) (228.6) (260.9)
Acquisition of businesses and
investments in affiliated companies (215.6) (9.3) (220.3) (34.1) (229.9) (43.7)
Other 7.3 8.8 15.1 13.2 51.1 49.2
------ ------ ------ ------ ------ ------
Net cash used for investing activities (259.2) (72.8) (312.2) (160.1) (407.4) (255.4)
Cash flow before financing (178.7) 34.5 (161.5) 44.6 (25.3) 180.7
FINANCING ACTIVITIES
(Decrease)/(increase) in short-term debt (57.3) 40.7 (39.4) 54.4 (51.1) 42.7
Increase/(decrease) in long-term liabilities 256.3 (35.0) 206.3 (66.8) 117.3 (155.8)
(Decrease)/(increase) in minority interest (3.1) (14.8) 8.4 (12.3) 15.2 (5.5)
Dividends paid (11.3) (11.2) (22.6) (22.5) (45.0) (45.0)
Cost acquiring Treasury Stock (11.8) (11.8) (11.8)
Other - net 1.9 4.7 2.5 (3.0) (2.8) (8.4)
------ ------ ------ ------ ------ ------
Net cash (used for) provided by financing
activities 174.7 (15.6) 143.4 (50.2) 21.8 (172.0)
Effect of exchange rate changes on cash (1.8) (2.1) (5.1) (6.7) (6.5) (8.0)
(DECREASE) / INCREASE IN CASH AND
CASH EQUIVALENTS (5.8) 16.8 (23.2) (12.4) (10.2) 0.7
Cash and cash equivalents at beginning of
period 101.9 89.4 119.2 118.5 106.2 118.5
------ ------ ------ ------ ------ ------
Cash and cash equivalents at end of period 95.9 106.2 95.9 106.2 95.9 119.2
====== ====== ====== ====== ====== ======
- ----------------
See notes to consolidated financial statements
</TABLE>
Autoliv, Inc.
Notes to Consolidated Financial Statements
(unaudited)
June 30, 2000
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.
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.
2. Inventories
Inventories are stated at lower of cost (principally FIFO) or market. The
components of inventories were as follows:
(Dollars in millions) June 30, 2000 Dec. 31, 1999
-------------- -------------
Finished products
and work in progress $121.8 mil. $119.7 mil.
Raw material 177.8 154.3
---- ----
$299.6 $274.0
3. Other recent developments
The Board of Directors has authorized Autoliv's management to repurchase up to
ten million of the Company's shares. As of June 30, the Company had acquired
0.5 million of its own shares, reducing the number of Autoliv shares
outstanding to 101.9 million.
As of April 1, the North American seat belt operations of NSK were acquired
together with a 40% interest in NSK's Asian seat belt operations. Autoliv has
an option to acquire the remaining 60% in two steps on April 1, 2002 and 2003.
The U.S. operations have annual sales of approximately $70 million and the
Asian operations of almost $250 million. These acquisitions make Autoliv the
global leader in seat belts.
As of May 1, Autoliv finalized a tender offer worth $206 million for the
shares in OEA, Autoliv's main external supplier of initiators for airbag
inflators. During its latest fiscal year which ended by July 31, 1999, OEA had
sales of nearly $250 million, including $45 million in its aerospace division.
Since Autoliv intends to sell this division it is not consolidated. The planned
integration of OEA is expected to have a positive effect on Autoliv's earnings
within one year from the acquisition.
The credit rating agency Standard & Poor's has given Autoliv Inc. BBB+ as its
long-term rating and A-2 as its short-term rating, which is among the best
ratings achieved for an automotive supplier. The agency also reaffirmed it's
A-2 rating and Moody's its P-2 rating of the U.S. Commercial Paper Program
issued by Autoliv's U.S. subsidiary. During July, Autoliv's subsidiary, Autoliv
AB, launched a Swedish Commercial Paper Program and a Medium Term Note Program.
Autoliv has signed a letter of intent to partner with Covisint, the planned
exchange on the Internet being formed between DaimlerChrysler, Ford,
General Motors, Renault and Nissan.
The National Highway Traffic Safety Administration in the U.S. has issued new
regulations, which will require more sophisticated frontal airbag systems.
These "advanced airbags", which will be phased in during a three-year period
starting on September 1, 2003, are expected to increase the supply value per
vehicle.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1999
Consolidated net sales grew by 10% to $1,074 million from $977 million.
Acquisitions increased sales by 9%, as a result of the consolidation of Izumi
and Norma from January 1 and of NSK's North American seat belt business from
April 1 and of OEA from May 1. Of OEA's operations, only the company's
automotive business has been consolidated. Currency translation effects
reduced Autoliv's reported sales by 6%.
Adjusted for currency effects and acquisitions/ divestitures, Autoliv's sales
rose by 7%. This compares favorably with global light vehicle production, which
is estimated to have risen by less than 4% compared to the corresponding period
last year. (Compared to the first quarter, however, production was almost
unchanged). The fact that Autoliv's revenues increased faster than vehicle
production is a reflection of the continuous growth of safety products
installed.
The U.S. market contributed the most to Autoliv's sales increase (mainly due
to a three-fold increase in steering wheel sales and a 40% increase in seat
belt sales). Strong demand from French customers also helped grow Autoliv's
sales in France and Spain. Sales rose fast in Australia due to higher export
sales to Korea and increased penetration rates in the domestic market.
Sales of airbag products (incl. steering wheels) rose by 10% to $770 million
from $698 million. The decline in average selling prices continues to moderate.
Currency effects reduced reported sales by 5% and acquisitions increased sales
by 8%. Consequently, the underlying increase was 7%. Sales were mainly driven
by a tripling of steering wheel sales and higher penetration rates for the
Inflatable Curtain, Autoliv's new side-impact airbag for head protection.
Sales of seat belt products (incl. seat sub-systems) grew by 9% to $304 million
from $279 million. Currency effects reduced reported sales by 9%, while
acquisition increased sales by 12%. Consequently, underlying sales rose by 6%.
This organic growth is mainly due to introduction of Autoliv's anti-whiplash
system in more car models and to market share gains in the U.S. and Korea.
Consolidated sales for the six-month period January through June rose by 13%
to $2,158 million or at the same rate as the underlying sales. Autoliv's
airbag sales rose by 14% to $1.548 million and seat belt sales by 10% to $610
million, while the underlying sales growths were 13% and 12%, respectively.
Global vehicle production increased by just over 4% during the same six-month
period.
In the second quarter, gross profit improved by 7% to $223 million
from $209 million, operating income by 9% to $107 million from $98 million,
net income by 8% to $55 million from $51 million and earnings per share by 8%
to $.54 from $.50.
The acquisitions of OEA and the North American seat belt operations of NSK in
the second quarter contributed $61 million to sales, but after interest on
acquisition costs and taxes there was a negative impact on net income of
$2 million, corresponding to $.02 in earnings per share.
Since Autoliv has almost 60% of its business in Europe, the stronger U.S.
dollar to the Euro also had a negative impact. For the quarter, this factor is
estimated to have reduced reported earning per share by $.03. The combined
negative effect from currency translation effects and acquisitions in the
quarter therefore amounted to $.05 per share.
Autoliv's consolidated gross margin was 20.8% and the operating margin 10.0%,
compared to 21.4% and 10.0%, respectively, during the same period 1999.
Adjusted for the second quarter acquisitions of OEA and the North American
seat belt operations of NSK, margins improved, however, to 21.5% and 10.4%,
respectively. The restructuring of these new operations has just started.
The margin improvement in the underlying business is the result of Autoliv's
own cost saving actions (such as transferring more than 1000 jobs to low
labor-cost countries during the last 12 months) and the rapid technology
enhancements being introduced in the automotive safety market.
Net financial expenses increased by $3.2 million to 16.8 million as a result
of higher debt following the acquisitions.
The effective tax rate was 40.6% compared to 41.0% for the second quarter 1999.
Excluding non-deductible goodwill amortization, the tax rate was 36%.
During the first half of 2000, gross profit improved by 13% to $451 million
from $400 million, operating income by 16% to $211 million from $182 million
and earnings per share by 16% to $1.08 from $0.93.
The tax rate was 40.8% compared to 41.0%.
The gross margin remained at 20.9% i.e. the level achieved during the
corresponding period 1999. The operating margin improved to 9.8% from 9.5%.
The number of employees increased by 2,600 during the quarter to 27,200.
Excluding acquisitions the increase was 600 - almost exclusively in low
labor-cost countries.
If the current exchange rate between the U.S. dollar and the Euro were to
prevail for the rest of this year, Autoliv's sales and earnings would be
negatively affected by approximately 4% compared to the second half of
1999. On the other hand, acquisitions are expected to add approximately 10%
to Autoliv's underlying sales growth. The market analyst institute DRI
expects light vehicle production in North America and Europe to remain
almost unchanged during the remainder of the year. In addition, the supply
value of safety products is expected to continue to grow.
LIQUIDITY AND SOURCES OF CAPITAL
The operations generated $81 million in cash compared to $107 million during
the same quarter 1999. Capital expenditures, net amounted to $44 million and
$64 million, respectively, and acquisitions to $216 million and $9 million. The
largest capital expenditures were capacity expansions for the Inflatable
Curtain, other airbag products and inflators, as well as expansion of the tech
centers in the U.S. and France. Divestitures amounted to $7 million and related
to a building in the U.S.
The net cash flow after operating and investing activities declined by $213
million to a deficit of $179 million. Liquid funds declined by $10 million to
$96 million.
Net debt increased during the second quarter by $322 to $941 million and
the interest-bearing debt to $1,036 million. Acquisitions increased net debt
by $334 million. The acquisitions were OEA for approximately $306 million
(including approximately $100 million in acquired debt) and the first phase
in acquiring NSK's seat belt business for $28 million (including $6 million
in acquired debt).
The net debt-to-equity ratio increased to 47%. Equity has been negatively
impacted by currency effects and the share-buy-back program.
Dividend
A dividend of 11 cents per share will be paid on September 7 to Stockholders
of record as of August 10, 2000. The ex-date will be August 8.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Autoliv, Inc. was held on May 4, 2000.
At the meeting, the following matters were submitted to a vote of the
stockholders of Autoliv, Inc.
<TABLE>
<CAPTION>
(1) The reelection of Director Mr. Gunnar Bark and Director Mr. Per Welin to
hold office until the 2003 Annual Meeting of Stockholders. The vote was
as follows:
<S> <C> <C>
For Against Witheld
--- ------- -------
82,344,441 37,755 2,091,923
(2) The ratification of Ernst & Young AB as the Corporation's independent
auditing firm for the fiscal year ending December 31, 2000.
For Against Witheld
--- ------- -------
80,445,952 24,663 4,003,504
</TABLE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated May 9, 2000, as to
the repurchase program authorizing the repurchase by
the company of up to ten million shares of its outstanding
stocks.
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: June 20, 2000 By: /s/ Hans Biorck
-----------------------
Hans Biorck
Chief Financial Officer
