SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the period ended September 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:
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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 98.4 million shares of Common Stock of Autoliv, Inc., par
value $1.00 per share, outstanding as of October 26, 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> Nine months Latest
Quarter July - Sept. Jan. - Sept. 12 months Full Year
2000 1999 2000 1999 00/99 1999
<S> <C> <C> <C> <C> <C> <C>
Net sales
- - - - Airbag products $ 681.8 $ 622.3 $ 2,230.3 $ 1,979.5 $ 2,965.7 $ 2,714.9
- - - - Seat belt products 273.0 251.5 882.7 806.7 1,173.3 1,097.3
------ ------- --------- --------- --------- ---------
TOTAL NET SALES 954.8 873.8 3,113.0 2,786.2 4,139.0 3,812.2
Cost of sales (775.3) (689.6) (2,482.4) (2,201.6) (3,286.2) (3,005.4)
----- ------- --------- --------- --------- ---------
Gross profit 179.5 184.2 630.6 584.6 852.8 806.8
Selling, administration and general (43.1) (41.0) (143.3) (128.7) (191.4) (176.8)
expense
Research and development expenses (42.0) (45.7) (150.5) (144.9) (202.9) (197.3)
Amortization of intangibles, (18.0) (16.3) (51.0) (48.7) (66.4) (64.1)
primarily goodwill
Other income - net 3.0 (0.3) 4.8 0.1 4.7 0.0
------- ------- --------- --------- --------- ---------
Operating income 79.4 80.9 290.6 262.4 396.8 368.6
Equity in earnings of 1.6 2.2 3.0 3.0 4.6 4.6
affiliates
Interest income 2.1 2.6 7.4 7.7 11.0 11.3
Interest expense (16.5) (13.9) (45.8) (41.9) (58.7) (54.8)
------- ------- --------- --------- --------- ---------
Income before income taxes 66.6 71.8 255.2 231.2 353.7 329.7
Income taxes (26.0) (28.6) (102.4) (93.6) (140.8) (132.0)
Minority interests in subsidiaries (1.7) 0 (3.6) 0.9 (2.3) 2.2
------- ------- --------- --------- --------- ---------
Net income 38.9 43.2 149.2 138.5 210.6 199.9
Net income per share - assuming 0.39 0.42 1.46 1.35 2.06 1.95
dilution
Number of shares used in computing 100.9 102.3 101.9 102.3 102.2 102.4
per share amount
Number of shares outstanding 98.4 102.3 98.4 102.3 98.4 102.3
</TABLE>
See notes to consolidated financial statements
<TABLE>
<CAPTION>
AUTOLIV, INC.
Consolidated Balance Sheet (unaudited)
(dollars in millions)
Sept 30, December 31,
2000 1999
------------ ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 111.5 $ 119.2
Receivables, less allowances 808.8 709.6
Inventories 321.5 274.0
Refundable and deferred income tax
benefit 61.2 35.8
Prepaids 78.7 42.9
-------- --------
Total current assets 1,381.7 1,181.5
Property, plant and equipment, net 900.4 834.6
Investments and other receivables 84.2 34.7
Intangible assets, net (mainly
acquisition goodwill) 1,700.3 1,595.7
-------- --------
TOTAL ASSETS 4,066.6 3,646.5
======== ========
LIABILITIES AND EQUITY
Short-term debt 279.5 244.5
Accounts payable 507.3 453.4
Accrued expenses 241.6 291.5
Other current liabilities 108.3 92.5
Income taxes 36.3 22.7
-------- --------
Total current liabilities 1,173.0 1,104.6
Long-term debt 845.0 470.4
Other noncurrent liabilities 135.9 131.5
Minority interests in subsidiaries 17.5 9.0
-------- --------
Total noncurrent liabilities
and minority interests 998.4 610.9
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 (59.1) (112.8)
Treasury Stock (89.5)
-------- --------
Total shareholders' equity 1,895.2 1,931.0
-------- --------
TOTAL LIABILITIES AND EQUITY 4,066.6 3,646.5
======== ========
See notes to consolidated financial statement
</TABLE>
<TABLE>
<CAPTION>
AUTOLIV, INC.
Consolidated Statement of Cash Flows (unaudited)
(dollars in millions)
Quarter Nine months Latest Full Year
July - Sept. Jan. - Sept. 12 months 1999
2000 1999 2000 1999 00/99
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 38.9 $ 43.2 $ 149.2 $ 138.5 $ 210.6 $ 199.9
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 66.9 58.4 199.8 189.4 263.8 253.4
Deferred income taxes 1.0 18.7 (2.2) 35.5 8.8 46.5
Undistributed earnings from affiliated
companies 1.7 3.0 3.0 4.7 2.9 4.6
Changes in operating assets and liabilities
Receivables and other assets 12.0 (2.0) (68.9) (50.7) (81.6) (63.4)
Inventories (37.0) (18.7) (20.2) (6.2) (30.1) (16.1)
Accounts payable and accrued expenses (28.7) (12.2) (78.8) (28.2) (38.5) 12.1
Income taxes (8.2) (14.5) 15.3 (2.4) 16.8 (0.9)
------ ------ ------ ------ ------ ------
Net cash provided by operating activities 46.6 75.9 197.2 280.6 352.7 436.1
INVESTING ACTIVITIES
Expenditure for property, plant and equipment (64.3) (48.0) (171.3) (187.2) (245.0) (260.9)
Acquisition of businesses and
investments in affiliated companies 0 7.7 (220.2) (26.4) (237.5) (43.7)
Other 4.3 11.3 19.4 24.5 44.1 49.2
------ ------ ------ ------ ------ ------
Net cash used for investing activities (60.0) (29.0) (372.1) (189.1) (438.4) (255.4)
Cash flow before financing (13.4) 46.9 (174.9) 91.5 (85.7) 180.7
FINANCING ACTIVITIES
(Decrease)/(increase) in short-term debt 47.8 9.3 8.4 63.7 (12.6) 42.7
Increase/(decrease) in long-term liabilities 64.9 (24.6) 271.3 (91.4) 206.9 (155.8)
(Decrease)/(increase) in minority interest 1.4 0.3 9.8 (12.0) 16.3 (5.5)
Dividends paid (11.2) (11.2) (33.8) (33.7) (45.1) (45.0)
Cost acquiring Treasury Stock (77.7) (89.5) (89.5)
Other - net 11.8 (9.6) 14.1 (12.7) 18.4 (8.4)
------ ------ ------ ------ ------ ------
Net cash (used for) provided by financing
activities 37.0 (35.8) 180.3 (86.1) 94.4 (172.0)
Effect of exchange rate changes on cash (8.0) 2.6 (13.1) (4.0) (17.1) (8.0)
(DECREASE) / INCREASE IN CASH AND
CASH EQUIVALENTS 15.6 13.7 (7.7) 1.4 (8.4) 0.7
Cash and cash equivalents at beginning of
period 95.9 106.2 119.2 118.5 119.9 118.5
------ ------ ------ ------ ------ ------
Cash and cash equivalents at end of period 111.5 119.9 111.5 119.9 111.5 119.2
====== ====== ====== ====== ====== ======
- ----------------
See notes to consolidated financial statements
</TABLE>
Autoliv, Inc.
Notes to Consolidated Financial Statements
(unaudited)
September 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) Sept. 30, 2000 Dec. 31, 1999
-------------- -------------
Finished products
and work in progress $129.5 mil. $119.7 mil.
Raw material 192.0 154.3
---- ----
$321.5 $274.0
3. Other recent developments
Autoliv has received its first order for electronics in North America.
It is a development and production contract for Autoliv's new high-
performance, silicon based rollover sensor, which will be installed in over
1.2 million North American vehicles starting with the 2004 model year. The
contract calls for the use of Autoliv's new patented decision making software
program, which is integrated with the sensor.
One of the world's first post-crash systems - Volvo On Call - has been
introduced in cooperation with Volvo Car Corporation. It is a crash-robust
system that automatically calls the Emergency Medical Service Center
immediately after a crash and gives the rescue team the exact location of the
accident.
As of September 30, Autoliv had repurchased 3.9 million of its shares
following the authorization in May of the Board of Directors to repurchase up
to 10 million shares. Since the program commenced, nearly $90 million has been
used to buy back Autoliv shares. The buy-backs have improved earnings per
share by less than one cent in the third quarter.
In October, Autoliv sold its leadwire business in the U.S. The
divestiture follows the sale and closure over the last two years of seven
other non-core units with a total of 1,000 employees. In addition to reducing
costs, these transactions and the sales of two properties have released close
to $60 million. The sale of the leadwire business will not have a material
effect on Autoliv's earnings.
Autoliv Inc. is replacing its current credit agreement with a new
syndicated multi-currency credit facility amounting to $800 million, arranged
by Bank One in the U.S. and SEB in Sweden. The transaction will be split into
a $300 million 364-day renewable credit line and a $500 million credit
facility running for five years. The agreement replaces both the $850 million
credit facility from 1997 associated with the ASP merger and the $300 million
loan used for the acquisition of OEA this year.
The dispute with Simula Inc. about a licensing agreement for the head
side airbag ITS has been settled and Simula has granted Autoliv a non-
exclusive license to the ITS and some other products. Together with other
features in the settlement, the agreement should secure a productive
cooperation in the future.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1999
Consolidated net sales grew by 9% to $955 million from $874 million for the
quarter July through Sepbember. Acquisitions increased sales by 12%, as a
result of the consolidation of Izumi, Norma, NSK's North American seat belt
operations and OEA (excluding OEA's Aerospace division which is intended to
be sold). Currency translation effects reduced Autoliv's reported sales by 7%.
Autoliv's organic sales (i.e. consolidated sales adjusted for currency
effects and acquisitions/divestitures) rose by 4% this quarter. This compares
favorably with global light vehicle production, which is estimated to have
decreased by approximately 2% compared to the corresponding period last year.
The fact that Autoliv's revenues rose faster than the underlying market is a
reflection of the increasing demand for more - and more - advanced safety
systems in each vehicle. It is also a result of Autoliv's market shares gains
within the automotive safety industry.
The U.S. market contributed the most to Autoliv's sales increase (mainly
due to the acquisition of OEA and NSK's seat belt operation, a doubling in
steering wheel sales and a 50% plus increase in seat belt sales). Sales also
rose rapidly in Sweden (due to a higher supply value per vehicle) and
Australia (incl. export sales). Although France and Spain reported continued
strong sales performances in local currencies, the improvements were not
enough to offset the negative currency translation effect.
Sales of airbag products (incl. steering wheels) rose by 10% to $682
million from $622 million for the third quarter. Currency effects reduced
reported sales by 6% and acquisitions increased sales by 13%. Consequently,
the organic increase was 3%. Sales were mainly driven by a tripling of steering
wheel sales and higher volumes 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 $273
million from $252 million for the third quarter. Currency effects reduced
reported sales by 11%, while acquisitions increased sales at the same rate.
Consequently, organic sales growth was the same as reported growth or 9%.
The growth is mainly due to substantial market share gains in the U.S. and
breakthroughs in the U.S. for Autoliv's seat belt pretensioners.
Consolidated sales for the nine-month period January through September
rose by 12% to $3,113 million, while the organic sales growth was 10%.
Autoliv's airbag sales rose by 13% to $2,230 million and seat belt sales by 9%
to $883 million, while the organic sales growths was 10% for both product
lines. Global vehicle production increased by less than 3%.
For the third quarter Autoliv's gross profit declined by 3% to $180 million
from $184 million and operating income by 2% to $79 million from $81 million,
partly as a result of a 50% increase in the number of program launches and
associated supply chain problems. The results have also been reduced by a
substantial fall in demand from UK customers and by development and startup
costs for new electronic systems, such as intelligent airbag systems and post-
crash telematics. In addition, Autoliv's cost reduction targets for material
costs have not been fully realized due to increased world market prices for
plastics, electronic components and raw materials.
The acquisitions of OEA and NSK's seat belt operations in North America
("newly acquired companies") have also reduced Autoliv's margins, since the
integration of the new companies has just begun. The newly acquired companies
have lower gross profit margin than Autoliv, while they spend relatively less
in R&D and SG&A. The performance of these companies is according to plan and
is expected to contribute to consolidated earnings next year.
The third quarters consolidated gross margin declined to 18.8% from 21.1% and
the operating margin to 8.3% from 9.3% during the same period in 1999. Adjusted
for newly acquired companies, the margins were 19.6% and 8.7%, respectively.
Net financial expenses increased by $3 million to $14 million the third
quarter, mainly as a result of higher debt following the acquisitions, but
also as a result of increased debt due to the effect of Autoliv's share
repurchase program. The effective tax rate was 40% compared to 41% for
the third quarter 1999.
Since Autoliv has almost 50% of its business in Europe, the stronger U.S.
dollar to the Euro had a negative impact. For the quarter, this factor is
estimated to have reduced reported earnings per share by $.03. The combined
negative effect from currency translation effects and acquisitions amounted to
$.06 per share.
During the first nine months, gross profit improved by 8% to $631 million
from $585 million, operating income by 11% to $291 million from $262 million
and earnings per share by 8% to $1.46 from $1.35. The tax rate was approxi-
mately 41% in both periods. Excluding non-deductible goodwill amortization,
the tax rate was 35%. The gross margin was 20.3% compared to 21.0% and
operating margin 9.3% compared to 9.4%. Adjusted for newly acquired companies
427: the margins were 20.8% and 9.5%, respectively.
The number of employees increased by 300 during the quarter to 27,500. The
increase was entirely in low labor-cost countries where the number of
employees increased by nearly 500 people.
According to market analyst institutes, light vehicle production in North
America and Europe is expected to continue to fall during the fourth quarter.
At the same time, Autoliv's sales will be negatively impacted by approxi-
mately 9%, if today's exchange rates prevail for the rest of the year.
Autoliv's sales will be favorably impacted, on the other hand, by acquisi-
tions, which are expected to add approximately 11% to sales, and by the
increasing supply value of safety systems per vehicle. This value is
estimated to have grown, in local currencies, in the magnitude of 5% annually
over the last few years.
The negative effect on Autoliv's earnings from the newly acquired
companies is expected to be negligible during the fourth quarter. Start-up
costs for program launches and the related supply chain issues are also
expected to diminish. At the same time, actions are being taken to address the
problems in the UK operations and to reduce the effect from increasing
materials prices, but these actions will not have time to yield full effect in
the fourth quarter. Using current exchange rates, it is estimated that
currency translation effects will reduce earnings per share by approximately
$.05.
LIQUIDITY AND SOURCES OF CAPITAL
During the third quarter the operations generated $47 million in cash compared
to $76 million during the same quarter of 1999. Capital expenditures, net
amounted to $60 million and $37 million, respectively, and acquisitions to
$0 million and $8 million. Last year's capital expenditures, net were reduced
by disposals of fixed assets. The largest capital expenditures were capacity
expansions for the Inflatable Curtain, other airbag products and inflators, as
well as expansions of the tech centers in the U.S. and France. OEA's capital
expenditures added $12 million to the consolidated capital expenditures.
The net cash flow after operating and investing activities declined by $60
million to a deficit of $13 million.
Net debt increased during the third quarter by $72 to $1,013 million and
the gross interest-bearing debt by $89 million to $1,125 million. The share
buy-back program increased the net debt during the quarter by $78 million.
The net debt-to-equity ratio increased during the quarter to 53% from 47%.
The equity has been reduced by currency effects and the share-buy-back
program.
DIVIDEND
A dividend of 11 cent per share will be paid on December 7 to Stockholders
of record as of November 9. The ex-date will be November 7.
NEW ACCOUNTING PRONOUNCEMENT
In June, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instru-
ments and Hedging Activities ("Statement 133"). This statement establishes
new standards for the recognition and measurement of derivatives and hedging
activities. Statement 133 is effective for financial statements of all fiscal
quarters for all fiscal years beginning after June 15, 2000, and therefore
Autoliv will adopt the new requirements in 2001. Autoliv has not completed
its review of Statement 133, but does not anticipate that the adoption of
this statement will have a significant effect on the Company's reported
financial position or results of operations.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
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: October 26, 2000 By: /s/ Hans Biorck
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Hans Biorck
Chief Financial Officer
