Please note that this is a second version to which some editorial amendments have been made. Original version was filed on 9 March, 2001. Autoliv Annual Report 2000 Autoliv Inc. is a Fortune 500 company and the world's largest automotive safety supplier with sales to all the leading car manufacturers in the world. The company's business mission is "to develop, produce and sell systems worldwide for mitigation of injuries to automobile occupants and pedestrians, and avoidance of traffic accidents". Autoliv develops, markets and manufactures airbags, seat belts, safety electronics, steering wheels, anti-whiplash systems, seat components and child seats. Autoliv has 80 subsidiaries and joint ventures with almost 30,000 employees in over 30 vehicle-producing countries. In addition, Autoliv has eight technical centers around the world, including 19 crash test tracks - more than any other automotive safety supplier. Autoliv's shares are listed on the New York Stock Exchange (NYSE: ALV) and its Swedish Depository Receipts on the OM Stockholm Stock Exchange (SSE: ALIV). To our Shareholders 2000 marks a year when Autoliv faced new challenges but was also able to achieve several important long-term results. The drop at the end of the year in U.S. vehicle production coincided with a peak in prices for many raw materials and a low Euro. This reduced our earnings per share by 14% to $1.67. The drop-off in U.S. vehicle production occurred so sharply that neither we nor our largest U.S. customers had time to scale back operations to the new, lower demand. In 2000, we continued to increase our global market share. During the year, we were awarded a number of "break-through" contracts for electronic products, including rollover sensors and weight sensing systems. These contracts, in combination with our expanding orders for current products, will provide a solid base for our long-term growth. Improved Market Position During 2000 we advanced Autoliv's position in many important markets. In Japan, we have made several acquisitions that will enable us to double our market share to roughly 25%. Since our Japanese customers and the Asian markets are expected to grow faster than the rest of the global car industry, this advancement in Autoliv's position will be increasingly important. The acquisitions that will contribute to this result are described on page 20 in the Management Discussions and Analysis. In Korea, an agreement was established with Mando Corporation, a leading Korean auto parts supplier, to form a joint venture. The new company, Autoliv Mando Corporation, in which Autoliv holds 65% of the shares, is expected to reach $200 million in sales in a few years time. In the United States, Autoliv was awarded a contract to supply 1.2 million rollover sensors starting in the fall of 2003. We were also awarded a contract to annually supply nearly one million weight sensing systems which will be used to meet the new U.S. regulations for advanced airbags. This contract will also begin in the fall of 2003 and is believed to be the largest production contract awarded for such a system. These orders, which were our first orders for electronics in North America, demonstrate our capabilities in electronics and the vehicle manufacturers' desire to obtain complete safety systems, in-cluding electronics, from a single supplier. In Europe, Autoliv was awarded an electronics contract from BMW. This is our first opportunity to supply such products to this important customer. In terms of market share gains, Autoliv's organic sales (i.e. excluding acquisitions and currency effects) grew two percentage points faster than the global restraint market and our reported sales grew by 8% to $4.1 billion. The growth was particularly strong in the U.S. seat belt market and the global steering wheel market. Our overall market share gains were also a reflection of the fact that Autoliv has a relatively strong position inside airbags and other above-aver-age growth segments. Product Expansion The contract awards for weight sensing systems and rollover sensors were not the only examples of last year's achievements in product development. One of our new airbag inflators received The PACE Award from the prestigious magazine Automotive News in recognition of "outstanding contributions to the improvement of automotive products". We also received an award from the British Automobile Association for a new airbag system (see page 14 and 15). In 2000, Saturn as well as the Chrysler Cirrus/Stratus were the first car models in the U.S. to include our Inflatable Curtain. Currently, we deliver this product, which was introduced in 1998, to nine customers and over 20 car models. Cost Efficiency Programs A comprehensive action program was developed in the 4th quarter of last year in response to the fall in U.S. vehicle production and increasing raw materials prices. The program includes reduction of headcount by more than 1,000 or approximately 12% of the U.S. personnel. A quarter of the reduction has already taken place this year and the remaining reductions will become effective gradually during the rest of the year 2001. The program also includes consolidation of manufacturing by closing, phasing out and downsizing plants in both the U.S., Asia and Europe, as well as continued moves of production to low labor-cost countries. In 2000, the move of production to low labor-cost countries increased significantly. Roughly 2,000 jobs were created in these countries. Almost as many were added through acquisitions. As a result, Autoliv now has 19% of its employees in these countries, compared to 8% a year ago. This will lead to significant cost savings over the next few years. The closures and divestitures of none-core operations continued during the year as two plants were closed and three sold. These production facilities had more than 1,000 employees. The components these plants produced are now purchased from external suppliers at a lower overall cost. In addition to reducing purchase costs, the divestitures and closures improved cash flow by releasing $35 million that was tied up in these operations. A share repurchase program was implemented during the year. This program was initiated to create shareholder value and reduce Autoliv's cost of capital. Last year $103 million was utilized for this program and $45 million for the ordinary dividend. Stronger and Better Prepared In summary, Autoliv has develop-ed its position and is better prepared to take advantage of the potential of the automotive safety market. Although that potential is short-term likely to be impacted by the expected slow-down in global vehicle production, there is a steady growth in demand for more - and more advanced - safety technologies This underlying growth will become particularly evident in two to three years time when advanced airbag systems and rollover protection systems will be introduced in many U.S. vehicles. As this growth is realized, we will continue to focus on optimizing Autoliv's cost reduction opportunities and to advance our company's market position in terms of products and geographical regions. Lars Westerberg President and Chief Executive Officer Employees Motivated, well-educated and dedicated people are key to any company's success. Autoliv has therefore implemented several employee programs that are aimed at taking advantage of and developing this important asset. But the strategic planning in the human resources sphere begins with the recruitment of new employees. Recruitment Autoliv has made a concerted effort to recruit well-educated people who have the potential of assuming greater and greater responsibilities as the Company grows. Such employees can also function well in a competitive international environment such as Autoliv's. As a result, approximately 15% of Autoliv's employees globally have a college degree. Autoliv has an active and close relationship with universities and colleges in many countries, which is an important advantage in the recruiting process. The fact that Autoliv is an expanding company and a company in the forefront of technology also helps to attract and retain qualified people. Training programs A successful company must have people who develop in pace with the company. Education and training on all levels is therefore an integrated part of Autoliv's value-creation process. Skills development and on-the-job-training is provided by each local Autoliv company, starting with the job orientation for new employees. For the further development of its employees, most Autoliv companies organize specialized training courses, often under the Autoliv Academy name in areas such as APDS where R&D and manufacturing people learn how to apply APDS (The Autoliv Product Development System, i.e. Autoliv's system-atic plan for developing new products). On a global level, Autoliv runs the MDP (Manufacturing Development Program) for junior managers in engineering and manufacturing. Another high-level international training program for junior managers is The AMD Program (Autoliv Management Development) for leadership training. Participants also learn more about Autoliv's corporate plans and policies and about companies and functions outside their own working area. AMD is held once a year, with the time equally divided between the U.S. and Europe. Incentives To attract, retain and motivate management talent, the compensation to key employees in Autoliv consists of a package with three components: a base salary, a performance-based bonus and a long-term incentive plan. A manager's bonus is typically based on the operating profit of Autoliv Inc and the local unit where he/she works. The long-term incentives are usually in the form of stock options with a 10-year life (see Note 12 on page 30). Corporate Compliance Program Autoliv is committed to a belief in the maintenance, by all of its personnel, of the highest ethical and legal standards in the conduct of its business. The Company has therefore adopted a Corporate Compliance Program to promote ethical and lawful behavior by the employees and the agents of the Autoliv companies. Moves to Low Cost Countries For several years Autoliv has implemented a program for moving high labor-content production to low labor-cost countries. As a result, the Company currently has 5,200 or 19% of its employees in these countries, compared to 8% at the beginning of the year, an increase during the year of 3,300 people. Of the increase, nearly half was due to acquisitions and the rest was the result of Autoliv's cost saving programs. A key benefit of the program has been that existing labor and other key resources in high-cost countries have been able to be released to support the development and initial production for Autoliv's latest products and other high value-added systems. The Market There is no official data source for the automotive safety market, but Autoliv estimates that the market has increased by approximately 10% annually since 1993 (when Autoliv started to gather global market data). Currently, the market exceeds $12 billion (excluding steering wheels). In 2000, the market was flat due to the stronger U.S. dollar. Adjusted for this, the growth rate was 4%. Side airbags is the fastest growing segment of the market. In 2000, this part of the market grew by nearly 15% in value and by 25% in unit sales to 33 million side airbags. For the next few years, growth will mainly be driven by head side airbags, such as Autoliv's Inflatable Curtain and the I.T.S., rather than by side airbags for chest protection. The frontal airbag market has recently experienced modest growth due to pricing pressure and already high vehicle penetration rates. In unit sales, however, there was an estimated 8% increase to 90 million globally in 2000. This segment is expected to expand again in 2003, when "advanced airbags" will start to be phased in the U.S. in accordance with new regulations that were adopted in May, 2000. The seat belt segment has shown a relatively consistent growth of about 3% annually in value for the past decade. The steadiness in this growth trend is a result of the on-going introduction of new safety enhancements, such as pretensioners, automatic height adjusters and load limiters (see page 13). In 2000, global unit sales of pretensioners rose by 12% to 52 million. The safety electronics market (which in 2000 exceeded $2 billion) currently shows a growth of two to three percent. The electronics segment is expected to be revitalized in 2003 when advanced airbag systems will become mandatory. Both Autoliv's customer base and Autoliv's own industry have undergone considerable consolidation during the past five years. In 1995, the six largest vehicle producers accounted for less than 60% of the global light vehicle production. By 2000, these companies had increased their combined share to 80%. The largest company alone - GM with affiliates - now accounts for a quarter of the global vehicle production. This consolidation reflects several mergers and acquisitions aimed at creating synergies. The new entities that have been formed require suppliers to be cost efficient, and have the capability to deliver the same products to all the new entity's plants worldwide. Another competitive tool that has become increasingly im-portant is a supplier's capability to deliver and develop complete systems. As a result of these trends, the four leading car occupant restraint suppliers now account for 80% of the market instead of 50% five years ago. During this period, Autoliv has increased its share to slightly more than 30% and has replaced TRW (an American publicly-traded company) as the market leader. Other important auto safety suppliers are Takata (a privately-held, Japanese company), Delphi (the world's largest automotive components supplier) and Breed (an American company which recently emerged from Chapter 11 bankruptcy). Autoliv's competitive strategy is to be a specialist company for automotive safety with in-house expertise for all key components and manufacturing close to major customers. Autoliv also has more technical centers and crash test facilities for automotive safety than any other company in the industry. Autoliv has a well-diversified customer base, serving all major auto manufacturers in the world and particularly those who are in the forefront of automotive safety. The largest customer groups during 2000 were BMW, DaimlerChrysler, Ford/Volvo/Mazda, General Motors/Isuzu/Opel/Saab, Peugeot/Citroën, Renault/Nissan, Toyota and Volkswagen/Audi/Seat/Skoda. No customer group accounts for more than 20% of Autoliv's sales and no contract for more than 4%. 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. During the development of a new car model (a multi-year process), Autoliv often functions as a development partner by sharing expertise on new safety-enhancing products. Products are typically delivered "just-in-time", often more than once a day. Since 1993, the global average supply value of safety products has increased by almost 7% annually, from close to $135 per vehicle to about $216 in 2000. In calendar year 2000, however, the safety supply value reported in U.S. dollars declined as a result of the stronger U.S. dollar. Excluding currency effects the value increased to $227 per vehicle. The other growth driver, i.e., global light vehicle production has increased the market by an annual average rate of less than 3% since 1993. The trend towards higher safety content per vehicle is expected to continue due to the following key reasons: 1) Higher-valued "advanced airbags" will be phased-in into all new light vehicles in the United States starting September 2003. This regulation could increase the value of the U.S. airbag market by 30% or more, and have significant ripple effects on the rest of the world. 2) Ford and General Motors have announced that they will begin to install head curtain side airbags - particularly in their sport utility vehicles - for rollover protection. 3) The growth of side airbags and of new seat belt features. In the U.S., for instance, only 15% of new vehicles have side airbags and only 25% have seat belt pretensioners, compared to 60% and 95%, respectively, in European vehicles and in Europe the pretensioners are beginning to be installed in the rear seats as well. During 2000, customers in North America accounted for 33% of Autoliv's sales compared to 31% in 1999. The increase is mainly due to the acquisitions of OEA and NSK's North American seat belt business. The Japanese share also increased, from 8% to 9%, as a result of the acquisition of Izumi's steering wheel operations. The European share fell from 58% to 53%, mainly due to the weaker Euro, while the share for rest of the world increased from 3% to 5%, as a result of rapidly growing sales to Korea. The most important individual markets are the United States, Germany, France, Japan, Spain, Great Britain and Canada. Sweden accounts for nearly 5% of sales. In North America, Autoliv accounts for approximately one third of the airbag product market. In 2000, the U.S. market share for seat belts rose from 13% to 20% and for steering wheels increased from 2% to 7%. In Europe, Autoliv's market share is around 50% for airbags and seat belts and approxi-mately 10% for steering wheels. In Japan, Autoliv has a strong position in the airbag inflator market with a share exceeding 40%. For complete airbags, however, the market share is still less than 10%, because local assembly of airbag modules did not begin until 1998. The market share for steering wheels exceeds 20% following the acquisition in 2000 of Izumi. The market share for seat belts will amount to 25% in 2002 when Autoliv will start to consolidate NSK's seat belt business. In the rest of the world, Autoliv has achieved strong market positions by early establishment of joint ventures or subsidiaries in such countries as Argentina, Australia, China, India, Malaysia, New Zealand, South Africa and Turkey. Autoliv's Safety Systems 1. CARGO BELT A restraining belt for the luggage compartment. Protects fragile goods and prevents luggage from penetrating into the passenger compartment in cars with foldable rear seats. 2. SEAT BELT BEAM Facilitates installation of a 3-point seat belt system in the center-rear seat position for foldable seats. Also provides passengers with improved side-impact and rollover protection. 3. 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 crash. 4. SELF-INFLATING HEAD RESTRAINT (SIHR) An anti-whiplash system specially developed for rear-seat occupants. 5. INTEGRATED CHILD SEAT Makes it possible for children to use the vehicle's seat belt system instead of a separately attached belt. Since the seat is integrated into the backrest of the rear seat, it is completely hidden when not in use. 6. ISOFIX CHILD SEAT Autoliv's child seat is available both for children up to one year and for children between one and three years. Isofix is a new global standard for attaching child seats, which should reduce the risk for fastening the seat incorrectly. 7. INFLATABLE CURTAIN (IC) Offers improved safety both in side impacts and in rollover accidents for occupants seated by the windows of the vehicle. Introduced in 1998 in Volvo, Mercedes, Toyota and Audi cars. Manufactured using Autoliv's patented one-piece weaving technology. 8. ANTI-WHIPLASH SEAT (AWS) Reduces significantly the risk for neck injuries in rear-end collisions. Introduced in the world market in 1998 in Volvo cars. 9. BELT-IN-SEAT (BIS) Allows the shoulder belt to be more effectively positioned over the occupant's body, independently of the position of the seat. Also contributes to maintaining clearance between the head and the roof in rollover accidents. 10. SEAT FRAMES & SLIDING RAILS Produced by Autoliv since 1996. Autoliv has developed a unique, stronger recliner for Belt-In-Seat Systems. 11. OCCUPANT WEIGHT SYSTEM Four weight sensors (one in each corner of the seat structure) measure the weight of the occupant to determine whether there is a child or an adult present, or if the seat is unoccupied. The OWS will be used in systems that will fulfill the new U.S. regulations for advanced airbags (FMVSS 208) that will be phased-in starting with the 2003 model year. 12. THORAX BAGS Introduced in the world market by Autoliv and Volvo in 1994. Estimated to reduce the risk of severe chest injuries in side impact crashes by approximately 20%. 13. SEAT BELT SYSTEMS Produced by Autoliv since 1956. A seat belt typically reduces the risk for serious injuries in frontal crashes by 40-50%. Autoliv has the most comprehensive offering of advanced seat belt features such as: 14. LOAD LIMITER Pays out some seat belt webbing before the load on the occupant's chest becomes too high. The excessive energy is instead absorbed more uniformly by the frontal airbag, thereby reducing the risk of chest injuries. 15. PRETENSIONER Tightens the belt at the onset of a crash so that the restraining of the occupant starts as early as possible. Pretensioners are also used in rollover crashes to maintain clearance between the head and the inner roof. 16. CRASH-ZONE SENSORS Electronic sensors that help the central ECU identify a crash as quickly as possible, which is particularly critical in side-impact protection systems. 17. OCCUPANT POSITION DETECTION Four ultra sonic sensors continuously monitor and provide information to the airbag computer about the position of the occupant and about objects in the front passenger seat. This information enables the airbag computer to deploy the airbag more gently or suppress the deployment altogether. 18. ITS (INFLATABLE TUBULAR STRUCTURE) The world's first head airbag for side-impact protection. Introduced in 1997 in cooperation with BMW and the American company Simula. 19. PASSENGER AIRBAG Estimated to reduce fatalities in frontal crashes by approximately 20% (for belted occupants). Autoliv has a complete offering of various systems and a comprehensive offering of airbag inflators, cushions and other key components. 20. KNEE AIRBAG Protects legs, knees and hips in frontal crashes. Unlike conventional knee bolsters and padding, knee airbags do not restrict the occupant's leg room. Introduced in the world market in 1995 by Autoliv. 21. INFLATABLE CARPET (InCa) An airbag that cushions the impact of an intruding floor panel on an occupant's feet, ankles and lower legs. 22. DRIVER AIRBAG Estimated to reduce driver fatalities in frontal crashes by approximately 25%. 23. STEERING WHEEL Driver airbags are increasingly being integrated with the steering wheel. 24. POST-CRASH SYSTEM Automatically calls an emergency center after a severe crash and provides the rescue team with the location of the vehicle. Can also be used to trace a stolen vehicle (see page 17). 25. ELECTRONIC CONTROL UNIT (ECU) A microprocessor which determines, by use of electronic crash sensors and crash evaluation algorithms, if and exactly when the seat belt pretensioners and the airbags should be deployed. In the future, the ECUs will contain a: 26. ROLLOVER SENSOR Will make it possible for the ECU to deploy the seat belt pretensioners (No. 15) and the Inflatable Curtain (No. 17) in a rollover. Research and Development Autoliv's research and development is based on the company's own tests and trials and on the expertise that Autoliv's specialists have gathered over many years. The R&D is also based on traffic accident data and insights into what various human body parts can withstand in a crash. Cooperation with leading car manufacturers is instrumental, as well as co-operation with independent scientists. Autoliv's research is also conducted in consultation with the Autoliv Technical Advisory Board, which consists of internationally recognized scientists. Patents Currently Autoliv holds more than 3,000 patents covering a large number of innovations, such as the Inflatable Curtain, the new rollover sensor, the one-piece-weaving technology for airbags and a vast number of seat belt and inflator technologies. The patents expire on varying dates through the year 2020. More Resources Autoliv has more technical centers with crash test labs than any other automotive safety supplier. Proximity for customers to a test center is an important competitive advantage. The labs not only support Autoliv's own internal product development, but also act as an important "full service" capability for the car manufacturers. The labs also perform tests and accept assignments from car suppliers and other external companies and organizations. Some of Autoliv's crash test centers perform more than 100 full-scale vehicle tests annually with complete cars and over 1,000 sled tests. A vast number of mathematical crash simulations are performed on computers in parallel with these tests. Total Safety Concept The car occupant restraint industry has so far mainly focused on "In-crash systems" aimed at mitigating the consequences of an accident. However, as part of Autoliv's Total Safety System Concept, the company has widened its scope of safety enhancing areas by starting to develop both "pre-crash systems" aimed at preventing collisions and "post-crash systems" aimed at increasing the chances of surviving after a traffic accident has occurred. Autoliv's Total Safety System concept means that the Company's safety products shall be aimed at giving the best possible protection to any occupant in any type of collision without introducing any significant injury to any occupant in any position. This means that components and sub-systems must 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 unit to give the best possible protective effect. It is important to further develop and modify the current systems so that they provide protection for all kinds of occupants; for children as well as for the growing population of elderly people; for petite females as well as for large males - all of whom can be sitting in many different positions, with or without a seat belt. In real life, crashes are almost never "head-on" frontal collisions into a rigid, unmovable object at one specific speed (as in most crash tests required by the government regulators). Consequently, future safety systems should be able to do more than just determine if an accident is a frontal crash, a side impact, a rear-end collision or a rollover. An ideal system should be able to identify and provide protection to car occupants in collisions with various types of vehicles and objects (car-to-car, car-to-truck, car-to-pole, etc.) up to a collision speed (i.e. crash severity) where there is still a survivable space in the vehicle's compartment. Autoliv's research and development is therefore aimed at improving the protection for real people in real crashes, and not just protecting test dummies in crash tests mandated by authorities. Sales Driven by Innovations For a company such as Autoliv, whose strategy is to be the technology leader, it is important to have a steady flow of new products. During the five last years, the sales contribution from new products has doubled, from less than 2% in 1995 to over 4% of total sales in 2000. During this period, the new products which accounted for the 2% of sales in 1995 by the year 2000 had grown to account for 8% of total sales, which is significant for the long lead times in the auto safety business. New products are defined as completely new inovations (such as thorax airbags in 1995 and the Inflatable Curtain in 2000) which have been launched during three years within the reporting year (e.g. between 1998 and 2000 for the 2000 revenues). Pre-Crash Systems for Accident Prevention Night Vision By using an infrared camera, the driver's vision can be significantly improved at night. The camera, which detects heat from objects, is calibrated to be especially sensitive to the wavelength at the temperature of human beings and animals. Autoliv's technology is not dependent on any light source and can therefore give a broader and longer view than headlights. The system also gives the driver the possibility to see what happens in the dark area between two meeting cars when high beams are off. The new Autoliv system will therefore enable the driver to detect traffic dangers much faster and more accurately, making night driving safer and easier. The infrared view is projected on a pop-up display, a screen in front of the driver, just as in modern jet fighters. In-Crash Systems for Injury Mitgation Leg Airbag In cooperation with Renault, Autoliv is developing a new airbag that will be installed in the front edge of the seat cushion. This will reduce the risk (left) that the occupant could slide under the seat belt in a crash. The system will not only keep the occupant's knees and legs at a safe distance from the instrument panel, but also improve the protective effect offered by the frontal airbag and the seat belt by keeping the occupant in a more upright position. Pedestrian Protection A new EU directive for pedestrian protection is expected to become effective from 2005 or 2006. As a result, several car makers are researching ways to fulfill the possible new requirements, and Autoliv has started to de-velop a new sensor system to be placed in a vehicles front bumper, that utilizes actuators to slightly raise the hood, thereby softening the "landing area" for the pedestrian as raising the hood increases its flexibility. Whiplash Protection Together with Folksam (a Swedish insurance company) and under the supervision of the Swedish road traffic authorities, Autoliv is performing a "real world" test of a new anti-whiplash system developed especially for the aftermarket for front-seat occupants. The field test is being conducted on 10,000 vehicles that have been equipped with crash recorders to be able to verify the promising data from the laboratory tests. The great interest that the project has attracted is due to the fact that whiplash injuries are the single most important cost item for insurance companies and societies for personal injuries to traffic victims. The new Autoliv product consists of a metal sheet with tear grooves that is installed between the seat rails and the seat. When the vehicle is hit from behind, the tear grooves absorb the impact by gradually ripping apart. The seat then pivots rearwards in a controlled manner instead of violently pushing the occupant's shoulders and lower neck forward. Post-Crash Systems for Injury Survival On Call System In 2000, Autoliv and Volvo introduced one of the world's first post-crash safety systems, "Volvo On Call". It is a crash-robust system that automatically calls the EMS (Emergency Medical Service) Center after a crash and gives the rescue team the exact location of the accident. All available crash statistics show that the very first minutes after a severe crash are critical for an occupant's chances of surviving. The vehicle's electronic system registers the airbag deployment and sends a text message to a Volvo On Call Alarm Center through the vehicle's integrated car phone. In tandem, a voice line is opened so an operator at the alarm center can try to talk to the car occupants and find out more about the accident. If, however, no one in the car is able to answer, the operator can send an ambulance directly to the vehicle. The vehicle's location is provided by the car's GPS satellite navigation system and relayed as a part of the alarm text message. The driver can also press an SOS-button for alerting the alarm center in case of emerg-ency, such as an assault or a witnessed accident. There is also a button for road assist-ance if the vehicle has a mechanical difficulty or if the driver wants to know the best way around traffic congestion. Additionally, the system can be used for tracing the car if it has been stolen. The alarm center can then establish the location of the car, even if the phone is switched off. The owner can also get help if he has lost his car keys. By stating his security code, the alarm center can activate the car's electrical system and unlock the doors. The new system is the result of a joint development project between Volvo Car Corporation, Autoliv and the telecom company Ericsson. Environment Since 1996, Autoliv has had an environmental plan which supports the Company's environmental policy (see web site: www.autoliv.com/overview). According to the plan, all Autoliv plants and units will become certified according to ISO 14001, an international standard for environmental management systems. So far, more than 50% of Autoliv's plants (excl. recently acquired companies) have been certified according to the standard, including all major plants in Europe and North America. Product Improvement In Autoliv's case, one of the most important ways to reduce environmental impact is to reduce the weight of its products. This reduces not only the raw material need but also the weight of a vehicle and thereby lowers the fuel consumption during the vehicle's lifetime. In addition, there is less material to be scrapped or recycled at the end of the vehicle's life. With these objectives in mind, Autoliv has systematically improved its products by reducing weight while maintaining, and often improving, the product's performance. One such example is Autoliv's buckle pretensioner, in which weight has been reduced by more than 50% since the introduction in the 1980s. With more than 10 million buckle pretensioners produced every year, the total annual weight savings exceeds 5,000 tons for this product alone. Other Autoliv products show similar improvements. In addition, the materials in Autoliv's products are chosen to make it easy to recycle the products and to minimize the environmental impact from the manufacturing process through the entire supply chain. This is one of the requirements at the check points ("tollgates") in Autoliv's Product Development System (APDS) when a new product is being developed. Improvements in Manufacturing The environmental impact from Autoliv's assembly plants is minimal since the assembly of pre-manufactured components does not require as much energy or chemicals. Nevertheless, each plant has an environmental plan for con-tinuous improvement and con-tinuously monitors such parameters as: o Energy consumption o Chemical index o Water consumption o Freight o Use of packaging material o Environmental training of personnel New EU Directive A new directive that will impact the whole auto industry was adopted during 2000 by the European Parliament. This ELV (End of Life of Vehicles) directive states that 95% of the material in a new vehicle shall be recoverable. It also significantly restricts the use of hazardous substances. Even though the directive only applies to the European Community, it will have a global impact, since most car models sold in Europe are also sold in other markets, with similar design and materials. The directive will become effective gradually, but all new vehicle models must fulfill the requirements from the calendar year 2005. Autoliv is very well prepared for this new directive, since Autoliv started several years ago to focus on material reduction, elimination of hazardous substances and use of recyclable materials. The Company has implemented a system to involve its suppliers in these efforts. As a result, Autoliv is considered by many vehicle manufacturers to be one of the most advanced suppliers in this area. We are committed to maintaining that lead by continuing to optimize the design and recyclability of our products and improving our manufacturing processes. Management's Discussion and Analysis NET SALES BY PRODUCT GROUP |
| Years ended December 31, | ||||||
| (Dollars in millions) | 2000 | % | 1999 | % | 1998 | % |
| Airbag products | ||||||
| (incl. steering wheels) | $2,934 | 71 | $2,715 | 71 | $2,417 | 69 |
| Seat belt products | ||||||
| (incl. seat components) | 1,182 | 29 | 1,097 | 29 | 1,072 | 31 |
| Total | $4,116 | $3,812 | $3,489 | |||
| Components of sales | Airbag | Seatbelt | |
| increase in 2000 | products | products | Total |
| Organic sales growth | 5% | 9% | 6% |
| Impact of acquisitions, net of divestitures | 9% | 9% | 9% |
| Effect of exchange rates | (6%) | (10%) | (7%) |
| Reported sales increase | 8% | 8% | 8% |
Net sales for 2000 increased by 8%. In reported dollars, the increase was $304 million. The strengthening of the U.S. dollar, particularly against the Euro, reduced reported sales by approximately 7%. Acquisitions made during 2000 and 1999 added incremental sales in 2000 of $357 million or 9%. The disposition of non-core operations resulted in a reduction in sales of $13 million. Consequently, Autoliv's organic sales (i.e. local currency sales excluding acquisitions/divestitures) increased by approximately 6%, while the overall growth in worldwide production of light vehicles was just over 1%. The organic increase in sales of airbag products was principally due to the continuing rollout of new products, such as side-impact airbags (including the Inflatable Curtain) as well as gains in market share in steering wheels. The organic growth in sales of seat belt products was primarily due to continued gains in market share, especially in the North American market. The pressure on unit sales prices in the automotive components industry continues and reduction of costs remains a major strategic objective of the Company. Despite the beneficial effect of ongoing cost reduction programs (e.g. product redesigns, product standardization, efficiencies from global purchasing activities, and continued improvements in manufacturing productivity), the gross margin percentage fell in 2000 to 19.1% from 21.2% in 1999. In the second half of the year, increases in the price of steel, petroleum-based materials and electronic components fed through to cost of sales. In addition, margins were hurt by supply chain issues associated with fast volume ramp-ups of new program launches and with production shifts to low labor cost countries. The margin declines were particularly pronounced in the fourth quarter, with the gross margin falling to 15.5%. On top of the effect of raw materials price increases and the supply chain issues, the North American market contracted sharply in the fourth quarter. It was not possible to reduce production overheads as quickly as decreases in production volumes occurred. In response, the Company has begun implementing a comprehensive action program to reduce headcount and to consolidate manufacturing. The program principally affects North America, but will impact Europe as well. Operating income Operating income in 2000 was $340 million or 8.2% of sales. This compares with operating income of $369 million in 1999, which was 9.7% of sales. This margin decrease was due to the decline in gross margin, partially offset by a lower level of operating expenses. The decrease in the level of operating expenses was the result of a small decrease in the level of Research and development (R&D) spending. Autoliv generally expects an increase in the level of R&D spending, as it is necessary to incur engineering expense to support the growth of order intake. Such orders, on average, go into production approximately three years after they are received. Financial expense, net Financial expense, net was $53.2 million in 2000 compared to $43.5 million in 1999. Net debt at December 31, 2000, increased to $1,009 million from $596 million at December 31, 1999. Average net debt increased by $222 million during 2000. A higher requirement for working capital, the cost of acquisitions, and the Company's share repurchase program all contributed to the higher borrowing requirement. The weighted average interest rate, net was 5.9% in 2000 compared to 6.5% in 1999. Lower interest rates, therefore, only partially offset the higher borrowing requirement. Income taxes The effective tax rate in 2000 was 40.3% versus 40.0% in 1999. The increase was due primarily to the effects of a largely fixed amount of non-deductible goodwill amortization relative to lower earnings. Net income and Earnings per share As a result of the lower operating margin and the higher interest cost, net income was $169 million in 2000 compared to $200 million in 1999. Net income as a percentage of sales decreased to 4.1% in 2000 from 5.2% in 1999. Earnings per share was $1.67 during 2000 compared to $1.95 during 1999, a 14% decrease. Currency effects are estimated to have reduced reported earnings per share by 16 cents. The Company's share repurchase program improved earnings per share by one cent. 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. |
| Selected data in Swedish Kronor | 2000 | 1999 | Change |
| Net sales (million) | 37,539 | 31,603 | 19% |
| Income before taxes (million) | 2,650 | 2,733 | (3%) |
| Net income (million) | 1,539 | 1,657 | (7%) |
| Earnings per share | 15.25 | 16.18 | (6%) |
(Average exchange rates: $1 = SEK 9.12 for 2000 and $1 = SEK 8.29 for 1999) YEAR ENDED DECEMBER 31, 1999 VERSUS YEAR ENDED DECEMBER 31, 1998 Net sales and Gross profit |
| Components of sales | Airbag | Seatbelt | |
| increase in 1999 | products | products | Total |
| Organic sales growth | 14% | 6% | 12% |
| Impact of acquisitions, net of divestitures | - | - | - |
| Effect of exchange rates | (2%) | (4%) | (3%) |
| Reported sales increase | 12% | 2% | 9% |
Net sales for 1999 increased by 9%. In reported dollars, the increase was $323 million. The financial statement effect in 1999 of acquisitions made during 1999 and 1998 was negligible, while the strengthening of the U.S. dollar, particularly against the Euro, reduced reported sales by approximately 3%. Despite overall growth of less than 4% in the worldwide production of light vehicles, Autoliv's sales in local currencies increased by approximately 12%. Overall, approximately 5 percentage points of the 12% increase in sales came as a result of gains in market share. Sales of airbag products were the main beneficiary in 1999 of a continuing rollout of new products such as side-impact airbags and the Inflatable Curtain. As a result, growth in the sales of airbag products was much stronger than the increase in sales of seat belt products, although Autoliv's seat belts continued to gain a larger share of the global market. Although moderating somewhat, the pressure on unit sales prices in the automotive components industry continued. Cost control efforts, however, were not quite sufficient to offset the effect of price and product mix. As a result, the gross margin percentage fell slightly in 1999 to 21.2% from 21.4 % in 1998. Operating income Operating income in 1999 was $369 million or 9.7% of sales. This compares with operating income of $354 million in 1998, which was 10.2 % of sales. The margin decrease was due to both the decline in gross margin and higher operating expenses. The increase in operating expenses was the result of a small increase in the level of both Selling, General and Administrative (SG&A) expenses, as well as higher R&D spending. SG&A was partly impacted by the cost of upgrading computer systems prior to year 2000. R&D expenditures rose as a result of the very strong order intake during the year, higher costs due to the development of advanced airbags and other strategic projects, as well as from the effect of consolidating, for a full year, the former joint venture Autoliv Electronics in France, which has no sales outside the Autoliv Group. Financial expense, net Financial expense, net was $43.5 million in 1999 compared to $48.0 million in 1998. Net debt at December 31, 1999 was $596 million, down from $703 million at December 31, 1998. Strong cash generation more than offset an increase in average borrowing rates. Income taxes The effective tax rate in 1999 was 40.0% versus 39.6% in 1998. The increase was primarily due to an unfavorable country mix, which was partially offset by a higher level of tax incentives and credits in the U.S. Net income and Earnings per share Net income was $200 million in 1999 compared to $188 million in 1998. Net income as a percentage of sales decreased to 5.2% in 1999 from 5.4% in 1998. Earnings per share was $1.95 during 1999 compared to $1.84 during 1998, a 6% increase. OUTLOOK FOR 2001 Assuming that the January currency exchange rates prevail for the rest of 2001, Autoliv's sales will be negatively impacted by 3% during the year's first quarter, while the effect for the full year will be up 1%. Acquisitions made during 2000 are expected to add 7% to sales in the first quarter and 2% for the full year. The supply value of safety systems per vehicle is expected to continue to grow. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION Operating and Investing activities Net cash provided by operating activities was $266 million during 2000, $436 million during 1999, and $314 million in 1998. The requirement for working capital increased throughout the year. As a result of the contraction in the U.S. automotive market, particularly in December, the number of days of inventories and accounts receivable increased. In addition, the Company's Consolidated Statement of Cash Flows shows a significant reduction of accounts payable and accrued expenses. This reduction, to a large extent, reflects the payment of accruals associated with the acquisition of OEA. Payments of such accruals are reported as a use of cash with the corresponding accrual reflected as part of the acquisition of businesses rather than an element in working capital. The reduction of accounts payable and accrued expenses also reflects the payment of accruals for items such as lost contracts and product recalls. Cash generated by operating activities continues to be more than adequate to cover capital expenditures. These expenditures, gross, for property, plant and equipment were $245 million in 2000, $261 million in 1999, and $285 million in 1998. Capital expendi-tures as a percentage of sales were 5.9% in 2000, 6.8% in 1999, and 8.2% in 1998. Capital expenditures for 2001 are expected to the range from $225 million to $250 million. Most capital expenditure is allocated to additional manufacturing capacity, which supports both order intake and the production of new products. The level of capital expenditure in 2000 and 1999 reflects more normal levels after major expansion in 1998. During 2000, the Company began a major expansion of its technical centers in the U.S. and France and substantially increased manufacturing capacity for inflators and steering wheels. There was also significant new investment in weaving capacity in the U.K. and Canada. The Company also began the construction of a new seat belt facility in Kentucky in the U.S. During 1999, new plants were completed in Argentina, Canada, Poland, Turkey and Tunisia. Also in 1999, construction of a new technical center was completed in Japan. During 1998, new plants were completed in the U.S. and Brazil. The Company has continued its expansion through acquisitions. Cash (net of cash acquired) paid for acquisitions was $211 million in 2000, $44 million in 1999 and $30 million in 1998. Goodwill of $206 million in 2000, $21 million in 1999, and $38 million in 1998 associated with these acquisitions is being amortized over 5 to 40 years. As of May 1, 2000, the Company acquired OEA, Inc., the Company's main supplier of initiators for airbag inflators. Excluding OEA's Aerospace Division, OEA had sales of approximately $205 million in its last fiscal year, which ended July 31, 1999. OEA's Aerospace Division was not consolidated by Autoliv and substantially all of the Aerospace assets were subsequently sold. As of January 1, 2000, the Company acquired Japan's second largest steering wheel business, which has annual sales of approximately $99 million. As of April 1, 2000, the North American seat belt operations of NSK, with annual sales of approximately $70 million, were acquired together with a 40% interest in NSK's Asian seat belt operations. The Company has an option to acquire the remaining 60% in two steps on April 1, 2002 and 2003. In February 2000, Autoliv exercised its option to increase, from 49.5% to 51%, its interest in the Estonian company Norma AS, the dominant seat belt supplier to the Russian vehicle industry. As a result, Norma AS, with annual sales of approximately $37 million, is now consolidated rather than treated as a joint venture investment. The Company also sold three small non-core operations during 2000. In December 2000, the Company entered into an agreement with Mando Corporation, a leading Korean auto parts supplier, to form a joint venture. Autoliv will have 65% of the shares of the new company, which will be named Autoliv Mando Corporation. Presently, the Company services the Korean market by exporting from Autoliv companies in other countries. The Company intends, in March 2001, to exercise its option to purchase, for 84 million French Francs (approximately $12 million), an additonal 17% of the Livbag inflator operations in France. This purchase, which will increase the Company's ownership interest to 83% from its current 66% interest, should have a slightly positive effect on net earnings in 2001. During 1999, Autoliv increased its ownership interest in six companies including the joint venture investments in Indonesia and Japan that became consolidated subsidiaries. Isodelta, a European steering wheel company, and Autoliv Turkey, became wholly owned. In addition, Autoliv purchased a 49.5% interest in Norma AS. Autoliv also sold a small non-core company during 1999. During 1998, Autoliv increased its ownership interest in several of its joint venture investments, in most cases converting the joint ventures, such as Autoliv-Nokia and Sagem-Autoliv, into wholly-owned subsidiaries. Financing activities Cash used after operating and investing activities was $162 million in 2000. Net cash and cash equivalents decreased by $37 million. Cash provided by financing activities was $131 million. On top of debt assumed in acquisitions, additional borrowings of $260 million were incurred. Share repurchases and dividends reduced the amount of cash generated by financing activities. As a result of these factors, the Company's net debt increased by $413 million during 2000 to $1,009 million. Consequently, the net debt to capitalization ratio increased to 35% compared to 24% at December 31, 1999. The Company has an $850 million U.S. commercial paper program, which at December 31, 2000, had notes of $559 million outstanding at a weighted average interest rate of 7.4%. During 2000, the Company launched a Euro 485 million Swedish commercial paper program, which at December 31, 2000, had notes of $197 million (SEK 1.9 billion) outstanding at a weighted average interest rate of 4.4 %. In addition, the Company's subsidiaries have credit agreements, principally in the form of overdraft facilities, with a number of local banks. Excluding the commercial paper programs, total available facilities as of December 31, 2000, amounted to $369 of which $242 million was unutilized. In 2000, the Company also launched a medium-term note program of SEK 4 billion (approximately $415 million) with a Euro-option. At December 31, 2000, $143 million of notes were outstanding under this program at an average interest rate of 6.2%. Commercial paper in the amount of $530 million has been reclassified as long-term debt, 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. The remaining $65 million of total long-term debt con-sisted of unsecured medium-term bank borrowings, primarily in Japan and Europe. During 1998, the Company entered into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt. These agreements are described in the Notes to Consolidated Financial Statements. Autoliv pays regular quarterly dividends. The current dividend is $0.11 per share each quarter. Total cash dividends of $44.5 million were paid in 2000, compared to $45.0 million in 1999. In May 2000, the Board of Directors authorized a Share Repurchase Program for up to ten million of the Company's shares. During the year, the Company repurchased 4.5 million shares at a cost of $103 million. At December 31, 2000, there were 97.8 million shares outstanding, net of shares repurchased. At December 31, 1999, there were 102.3 million shares outstanding. For the foreseeable future, cash flow from operations, together with available financial resources, are expected to be adequate to fund Autoliv's anticipated working capital requirements, capital expenditures, acquisition program, share repurchase program and dividend payments. New Accounting Pronouncements It is expected that during 2001, the Financial Accounting Standards Board will issue a statement establishing new standards in the area of accounting for business combinations. Of relevance to Autoliv are proposals that would remove, for future periods, the current requirement for the amortization of goodwill. In addition, the current general requirement to evaluate whether the value of any goodwill has been impaired would be replaced by a specific "Benchmark Assessment" process. A new standard incorporating these proposals would be material to Autoliv. The Company, at December 31, 2000, carries approximately $1.5 billion of goodwill on its balance sheet. Goodwill amortization during the year 2000 was approximately $48 million. The Financial Accounting Standards Board has not yet issued an Exposure Draft to formalize these proposals. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement, which Autoliv has adopted for the year 2001, establishes new standards for the recognition and measurement of derivatives and hedging activities. The adoption of this statement will not have a significant effect on the Company's reported financial position or results of operations. 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. Personnel The number of employees increased by 5,400 during the year 2000 to approximately 28,000 at year end. About 3,300 employees were added as a result of acquisitions, net of divestitures. The balance of the increase was primarily due to the net effect of the continuing transfer of production to low-labor cost countries. 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 the Company's shareholders. MARKET AND FINANCIAL RISKS The Company's operations consist principally of manufacturing and sales activities in several countries. The Company, at each stage of production, relies on internal or external suppliers in order to meet its delivery commitments. The Company's customers, in many cases, require that suppliers are qualified and approved by them. Therefore, disruptions in the supply chain can lead to short-term extra costs in order to meet delivery commitments. The Company manufactures its products in several countries and sells the products mostly in those countries, but also in other markets. As a result, the Company's financial results are affected by economic conditions in the markets in which the Company distributes its products. The Company is also exposed to financial risk through its international operations and debt financed activities. This financial risk is caused by variations in the Company's cash flows resulting from changes in foreign exchange and interest rate levels as well as from refinancing and counterparty risks. Below follows a description of the Company's financial risks and its policies to manage them. The Company defines the risks as currency risk, interest rate risk, refinancing risk and credit risk. In order to reduce these risks, and to take advantage of economies of scale, the Company has a central treasury function supporting operations and management. The Treasury Department handles external financial transactions and functions as the Company's in-house bank for its subsidiaries. Currency Risk - Transaction Exposure Transaction exposure arises because the cost of a product originates in one currency and the product is sold in another currency. The Company's gross transaction exposure is about $420 million annually. Part of the flow has counter-flows in the same currency pair, which reduces the net exposure to about $300 million per annum. The three largest net exposures are EUR/GBP, USD/MXN and EUR/JPY, which together account for almost half of the Company's net exposure. The total net exposure is, however, spread over 18 currency pairs. In order to mitigate the short-term impact of currency movements, the Company hedges 100% of forecasted exposure in the coming six months and 75% of forecasted exposure in the period seven to twelve months out. Currency Risk - Translation Exposure in the Income Statement Another effect of exchange rate fluctuations arises when the income statements of the non-U.S. subsidiaries are translated into U.S. dollars. The Company's policy is not to hedge this type of translation exposure. Outside the U.S., the Company's most significant currency is the Euro. The Company has estimated that a one percent change in the value of the U.S. dollar versus the Euro has approximately a $20 million annual impact on reported U.S. dollar sales and approximately a two million dollar impact on operating income. Currency Risk - Translation Exposure in the Balance Sheet A translation exposure also arises when the balance sheets of non-U.S. subsidiaries are translated into U.S. dollars. The general policy of the Company is to finance major subsidiaries in the country's local currency. Consequently, changes in currency rates relating to funding have a small impact on the Company's income. Furthermore, it is the Company's policy to hedge up to 50% of non-dollar equity using instruments with a maximum maturity of twelve months. This allows for a better match with income streams, in addition to reducing the currency risk. At year-end 2000, approximately Euro 139 million of equity was hedged. Interest Rate Risk Interest rate risk is the risk that interest rate changes will affect the Company's borrowing costs. The Company's policy is that, as a target, at least 50% of its net debt shall have fixed interest rates with an average life of at least 3 years. The Company expects to move closer towards compliance with this policy in 2001. The following table shows the maturities and composition of the Company's borrowings at December 31, 2000. |
| % of | % fixed | % floating | Maturity of | |
| total | interest | interest | fixed rate part | |
| USD | 56 | 24 | 76 | 2 years |
| EUR | 20 | 83 | 17 | 4 years |
| SEK | 11 | 32 | 68 | 5 years |
| JPY | 6 | 52 | 48 | 3 years |
| Other | 7 | 0 | 100 | |
| 100 | 37 | 63 | ||
Refinancing Risk Refinancing risk or borrowing risk refers to the risk that it could become difficult to refinance outstanding loans. In order to protect against this risk, the Company has a syndicated revolving credit facility with a group of banks which backs its short-term commercial paper programs. The committed facility of $850 million has a $530 million long-term portion, which expires in November 2005, and a $320 million 364-day facility, which may be renewed annually. See Notes to Consolidated Financial Statements for details. The Company's policy is that total net debt shall be supported by long-term facilities with an average maturity of at least three years. At December 31, 2000, net debt was $1,009 million and total long-term facilities were $737 million with an average life of over four and a half years. The Company expects to move closer towards compliance with this policy through positive cash flow and further medium-term note issuance in 2001. Credit Risk Credit risk is the risk of a counterparty being unable to fulfill an agreed obligation. In the Company's financial operations, this risk arises in connection with the investment of liquid assets and when entering forward exchange agreements, swap contracts or other financial instruments. In order to reduce credit risk, deposits and financial instruments can only be entered into with a limited number of banks and in limited amounts, as approved by the Company's Board of Directors. The policy of the Company is to work only with banks that have a high credit rating and that participate in the Company's financing. Gearing Policy At December 31, 1999, the Company had net debt to capitalization of 24%, while the average financial gearing of certain comparable automotive suppliers was 41% and at September 30, 2000, 48%. In order to increase shareholder value and reduce the weighted average cost of capital, the Company adopted a share repurchase program. However, in order to maintain a relatively conservative gearing ratio, the Company also adopted a policy that limits net debt to capitalization to 40%. At December 31, 2000, the Company had net debt to capitalization of 35%. Consolidated Statement of Income |
| (Dollars and shares in millions, except per share data) | 2000 | 1999 | 1998 | |
| Net sales | Note 17 | $4,116.1 | $3,812.2 | $3,488.7 |
| Cost of sales | (3,330.0) | (3,005.4) | (2,741.2) | |
| Gross profit | 786.1 | 806.8 | 747.5 | |
| Selling, general and administrative expenses | (190.0) | (176.8) | (158.5) | |
| Research and development expenses | (195.7) | (197.3) | (176.2) | |
| Amortization of intangibles, primarily goodwill | (66.7) | (64.1) | (61.5) | |
| Other income, net | 5.8 | - | 2.8 | |
| Operating income | 339.5 | 368.6 | 354.1 | |
| Equity in earnings of affiliates | 4.3 | 4.6 | 6.4 | |
| Financial income | Note 9 | 9.6 | 11.3 | 8.0 |
| Financial expense | Note 9 | (62.8) | (54.8) | (56.0) |
| Income before income taxes | 290.6 | 329.7 | 312.5 | |
| Income taxes | Note 4 | (117.2) | (132.0) | (123.9) |
| Minority interests in subsidiaries | (4.7) | 2.2 | (0.3) | |
| Net income | $168.7 | $199.9 | $188.3 | |
| Earnings per common share - and earnings | ||||
| per common share assuming dilution | $1.67 | $1.95 | $1.84 | |
| Number of shares used in computing per share amount | 100.9 | 102.4 | 102.3 | |
| Number of shares outstanding, net of Treasury shares | 97.8 | 102.3 | 102.3 | |
See Notes to Consolidated Financial Statements Consolidated Balance Sheet |
| Years ended December 31 | |||
| (Dollars in millions) | 2000 | 1999 | |
| ASSETS | |||
| Cash and cash equivalents | $82.2 | $119.2 | |
| Receivables, net of allowances of $10.6 and $8.9 million, respectively | 835.4 | 709.6 | |
| Inventories | Note 5 | 333.5 | 274.0 |
| Refundable and deferred income tax benefit | Note 4 | 43.7 | 35.8 |
| Prepaid expenses | 54.2 | 42.9 | |
| Total current assets | 1,349.0 | 1,181.5 | |
| Property, plant and equipment, net | Note 7 | 867.2 | 834.6 |
| Investments and other receivables | Note 6 | 112.3 | 34.7 |
| Intangible assets, net (primarily goodwill) | Note 8 | 1,739.3 | 1,595.7 |
| TOTAL ASSETS | $4,067.8 | $3,646.5 | |
| LIABILITIES | |||
| Short-term debt | Note 9 | $353.8 | $244.5 |
| Accounts payable | 540.3 | 453.4 | |
| Accrued expenses | 243.9 | 291.5 | |
| Other current liabilities | 88.6 | 92.5 | |
| Income taxes | Note 4 | 29.3 | 22.7 |
| Total current liabilities | 1,255.9 | 1,104.6 | |
| Long-term debt | Note 9 | 737.4 | 470.4 |
| Other non-current liabilities | 142.4 | 131.5 | |
| Minority interests in subsidiaries | 22.0 | 9.0 | |
| Total non-current liabilities and minority interests | 901.8 | 610.9 | |
| SHAREHOLDERS' EQUITY | |||
| Common stock (shares outstanding 102.3 million and 102.3 million) | 102.3 | 102.3 | |
| Additional paid-in capital | 1,941.6 | 1,941.5 | |
| Retained earnings (accumulated deficit) and accumulated other comprehensive income (loss) | (30.8) | (112.8) | |
| Treasury stock (4.5 million shares) | (103.0) | - | |
| Total shareholders' equity | Note 10 | 1,910.1 | 1,931.0 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $4,067.8 | $3,646.5 | |
| Years ended December 31 | ||||
| (Dollars in millions) | 2000 | 1999 | 1998 | |
| Operating activities | ||||
| Net income | $168.7 | $199.9 | $188.3 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 269.1 | 253.4 | 228.0 | |
| Deferred income taxes | 24.0 | 46.5 | 38.3 | |
| Undistributed earnings from affiliated companies | (4.3) | 4.6 | 3.3 | |
| Changes in operating assets and liabilities | ||||
| Receivables and other assets | (84.2) | (63.4) | (108.5) | |
| Inventories | (37.5) | (16.1) | (52.4) | |
| Accounts payable and accrued expenses | (68.7) | 12.1 | 26.1 | |
| Income taxes | (1.3) | (0.9) | (8.8) | |
| Net cash provided by operating activities | 265.8 | 436.1 | 314.3 | |
| Investing activities | ||||
| Expenditures for property, plant and equipment | (244.8) | (260.9) | (284.8) | |
| Acquisition of businesses and investments | ||||
| in affiliated companies, net of cash acquired | Note 11 | (211.0) | (43.7) | (29.5) |
| Other | 27.9 | 49.2 | 5.6 | |
| Net cash used for investing activities | (427.9) | (255.4) | (308.7) | |
| Net cash before financing | (162.1) | 180.7 | 5.6 | |
| Financing activities | ||||
| Increase (decrease) in short-term debt | (17.4) | 42.7 | 3.1 | |
| Increase (decrease) in long-term debt | 277.4 | (155.8) | 15.6 | |
| Increase (decrease) in minority interest | 3.3 | (5.5) | 0.2 | |
| Dividends paid | (44.5) | (45.0) | (45.0) | |
| Shares repurchased | (103.0) | - | - | |
| Stock options exercised | 0.1 | 1.5 | 1.6 | |
| Other, net | 15.0 | (9.9) | (20.1) | |
| Net cash (used for) provided by financing activities | 130.9 | (172.0) | (44.6) | |
| Effect of exchange rate changes on cash | (5.8) | (8.0) | 5.5 | |
| Increase (decrease) in cash and cash equivalents | (37.0) | 0.7 | (33.5) | |
| Cash and cash equivalents at beginning of year | 119.2 | 118.5 | 152.0 | |
| Cash and cash equivalents at end of year | $82.2 | $119.2 | $118.5 | |
| 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 have been prepared in accordance with U.S. GAAP and include Autoliv, Inc. and all companies in which Autoliv, Inc., directly or indirectly, owns more than 50% of the voting rights (the "Company"). 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 other comprehensive income as a separate component of shareholders' equity. Revenue Recognition The Company's revenue recognition policy is in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements". This requires the recognition of sales when there is evidence of a sales agreement, the delivery of goods has occurred, the sales price is fixed or determinable and the collectibility of revenue is reasonably assured. The Company records revenue from the sale of manufactured products upon shipment. Revenue from contracts to perform engineering design and product development services are generally recognized as mile-stones are achieved, with costs expensed as incurred. Contracts to supply products which extend for periods in excess of one year are reviewed when conditions indicate that cost may exceed selling prices, resulting in losses. Any such indicated losses are provided for when estimable. 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 5 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 are 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 in accordance with the provisions of Statements of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Earnings per Share The Company calculates earnings per share in accordance with the provisions of Statements of Financial Accounting Standards No.128. There was no difference between basic and diluted earnings per share in 2000, 1999 and 1998. Cash Equivalents The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. Financial Instruments The Company utilizes interest rate agreements and foreign exchange contracts to manage interest rate and foreign currency exposures. The principal objective of such contracts is to minimize the risks and/or costs associated with financial and global operating activities. The Company does not utilize financial instruments for trading or other speculative purposes. The Company periodically enters into forward exchange contracts with terms of twelve months or less to hedge anticipated or committed transactions denominated in foreign currencies and certain receiv-ables and payables. The purpose of the Company's foreign currency hedging activities is to protect the Company from the risk that the eventual functional currency net cash inflows resulting from the sale of products to foreign customers and purchases from foreign suppliers may be adversely affected by changes in exchange rates. As of December 31, 2000, the Company had no material forward contracts. Gains and losses were not significant in 2000, 1999 or 1998. For interest rate instruments, See Note 9. Receivables and Liabilities in non-U.S. Currency Receivables and liabilities not denominated in functional currencies are converted at year-end rates of exchange. Transaction gains (losses) reflected in current income amounted to $(3.3) million in 2000, $(7.9) million in 1999 and $2.3 million in 1998. Invenories Inventories are valued at the lower of cost or market. Cost is computed according to the first-in, first-out method (FIFO). Reclassifications Certain prior year amounts have been reclassified to conform to current year presentation. Note 2. Significant Business Acquisitions As of January 1, 2000, the Company acquired from Izumi 99% of Japan's second largest steering wheel business, which had annual sales of approximately $99 million. In February 2000, Autoliv exercised its option to increase, from 49.5% to 51%, its interest in the Estonian company Norma AS, the dominant seat belt supplier to the Russian vehicle industry. As a result, Norma AS, with annual sales of approximately $37 million, is now consolidated rather than treated as a joint venture investment. As of April 1, 2000, the North American seat belt operations of NSK, with annual sales of approximately $70 million, were acquired together with a 40% interest in NSK's Asian seat belt operations. The Company has an option to acquire the remaining 60% in two steps on April 1, 2002 and 2003. As of May 1, 2000, the Company acquired OEA, Inc., the Company's main supplier of initiators for airbag inflators. Excluding OEA's Aerospace Division, OEA had sales of approximately $205 million in its last fiscal year, which ended July 31, 1999. OEA's Aerospace Division was not consolidated by Autoliv and substantially all of the Aerospace assets were subsequently sold. The Company also sold three small non-core operations during 2000. On April 1, 1999, the Company increased its investment in Autoliv Nichiyu, a Japanese joint venture, from 50% to 60%. On September 30, 1999, a joint venture interest in Indonesia was increased from 50% to 100%. These two companies have annual sales of approximately $11 million. On January 31, 1999, the Company exercised its option to increase the Company's holding from 51% to 66% in the French airbag inflator company Livbag with its initiator manufacturing subsidiary, N.C.S. SA. At the same time, the Company obtained the right to acquire, and the minority owner the right to sell, the remaining Livbag shares in two steps in the years 2001 and 2003. On June 30, 1999, the Company purchased the remaining 23.25% interest it did not already own in IsoDelta, a European steering wheel company. On September 30, the Company increased its ownership interest in Autoliv Turkey from 90% to 100%. On February 28, 1999, the Company also increased its interest in a Philippine company from 60% to 75%. In addition, on October 19, 1999, the Company purchased a 49.5% interest in the Estonian company Norma AS, the dominant seat belt supplier to the Russian vehicle industry, and received an option to increase its Norma holding to 51%. The Company also sold a small textile company during 1999. Effective January 1, and October 1, 1998, the Company acquired the remaining 50% of the shares in Autoliv-Nokia and the remaining 50% in Sagem-Autoliv, two joint ventures for electronics. Autoliv's 49% interest in Autoflug South Africa was increased to 100% as of July 1, while the interest in Autoliv Cankor in Turkey was increased from 50% to 90% as of April 1. In addition, the assets of STC, Japan were acquired. Annual external sales of these companies, including Autoliv Thailand and Autoliv Philippines, in which Autoliv's holdings now exceed 50%, are approximately $65 million. 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. Investments in which the Company previously owned between 20-50% prior to these acquisitions were accounted for using the equity method. The total purchase price of these acquisitions amounted to $233 million in 2000, $53 million in 1999 and $42 million in 1998. Goodwill of $206 million, $21 million and $38 million, respectively, associated with these acquisitions is being amortized over 5 to 40 years.The pro forma effects of these acquisitions would not be materially different from reported results. 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 matur-ity 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 except for the issues under the medium term note program and the interest rate swaps. These are specified in Note 9 and had a negative net present value of $4.6 million at December 31, 2000. |
| 2000 | 1999 | 1998 | |
| Income statement | |||
| Income before income taxes | |||
| U.S. | $98.1 | $149.1 | $124.6 |
| Non-U.S. | 192.5 | 180.6 | 187.9 |
| Total | $290.6 | $329.7 | $312.5 |
| Provision for income taxes | |||
| Current | |||
| U.S. federal | $21.6 | $14.1 | $12.7 |
| Non-U.S. | 65.2 | 64.5 | 64.9 |
| U.S. state and local | 6.4 | 6.9 | 8.0 |
| Deferred | |||
| U.S. federal | $7.2 | $28.9 | $26.7 |
| Non-U.S. | 13.8 | 11.1 | 7.1 |
| U.S. state and local | 3.0 | 6.5 | 4.5 |
| Total income taxes | $117.2 | $132.0 | $123.9 |
| Effective income tax rate | |||
| % | 2000 | 1999 | 1998 |
| U.S. federal income tax rate | 35.0 | 35.0 | 35.0 |
| Goodwill amortization | 5.6 | 4.7 | 4.8 |
| Net operating loss carry-forwards | (0.4) | (2.2) | (2.5) |
| Non-utilized operating losses | 2.7 | 3.2 | 0.9 |
| Foreign tax rate variances | 1.0 | 1.9 | 0.8 |
| State taxes, net of federal benefit | 2.1 | 2.6 | 2.6 |
| Earnings of equity investments | (0.5) | (0.5) | (0.7) |
| Export sales incentives | (2.6) | (2.0) | (1.2) |
| Tax credits | (0.6) | (0.8) | (0.3) |
| Other, net | (2.0) | (1.9) | 0.2 |
| Effective income tax rate | 40.3 | 40.0 | 39.6 |
Balance sheet 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. On December 31, 2000, the Company had net operating loss carry-forwards of approximately $125 million. Approximately $30 million of these loss carry-forwards have no expiration date. The balance expire on various dates through 2019. In addition, the Company has approximately $25 million of Foreign Tax Credits, which expire at various dates through 2005. Valuation allowances have been established which partially offset the related deferred assets due to the uncertainty of realizing the benefit of certain of the carry-forwards. |
| December 31 | 2000 | 1999 |
| Assets | ||
| Loss contracts | $9.2 | $14.9 |
| Accruals and reserves | 44.6 | 50.2 |
| Costs capitalized for tax | 3.3 | 2.8 |
| Pensions | 18.6 | 14.4 |
| Property, plant and equipment | 19.1 | (8.5) |
| Future tax benefits, principally NOL's | 70.7 | 29.3 |
| Other temporary differences | 6.8 | 3.1 |
| Valuation allowance | 172.3 | 106.2 |
| (45.9) | (18.6) | |
| Total | $126.4 | $87.6 |
| Liabilities | ||
| Acquired intangibles | (80.2) | (87.5) |
| Statutory tax allowances | (13.6) | (12.1) |
| Other temporary differences | (56.0) | (52.9) |
| Total | (149.8) | (152.5) |
| Net deferred tax asset (liability) | $(23.4) | $(64.9) |
| Deferred income taxes have not been provided on approximately $320 million of undistributed earnings of non-U.S. subsidiary companies, which are considered to be permanently reinvested. These earnings, for the most part, would not be subject to withholding taxes, either upon distribution to intermediate holding companies or upon distribution to the U.S. In addition, U.S. income taxes on non-U.S. earnings which might be remitted would be substantially offset by foreign tax credits. |
| December 31 | 2000 | 1999 |
| Raw material | $205.0 | $154.3 |
| Finished products | 81.1 | 80.1 |
| Work in progress | 47.4 | 39.6 |
| Total | $333.5 | $274.0 |
| Note 6. Investments and other receivables The Company has invested in ten affiliated companies where the own-ership is 20-50%. These are accounted for under the equity method. Total investment was $35 million, $28 million, and $17 million on December 31, 2000, 1999 and 1998, respectively. Note 7. Property, Plant and Equipment |
| December 31 | 2000 | 1999 | |
| Land and land improvements | $46.5 | $49.9 | |
| Machinery and equipment | 1,242.5 | 1,160.3 | |
| Buildings | 375.3 | 348.1 | |
| Construction in progress | 107.6 | 86.1 | |
| 1,771.9 | 1,644.4 | ||
| Less accumulated depreciation | (904.7) | (809.8) | |
| Net | $867.2 | $834.6 | |
| Depreciation included in | 2000 | 1999 | 1998 |
| Cost of goods sold | $176.2 | $162.4 | $138.6 |
| Selling, general and administrative | |||
| expense | 9.1 | 9.6 | 9.9 |
| Research and development expense | 17.0 | 17.3 | 18.0 |
| Total | $202.3 | $189.3 | $166.5 |
| December 31 | 2000 | 1999 |
| Goodwill | $1,685.9 | $1,489.6 |
| Other intangible assets | 319.7 | 310.7 |
| 2,005.6 | 1,800.3 | |
| Less accumulated amortization | (266.3) | (204.6) |
| Net | $1,739.3 | $1,595.7 |
| Note 9. Debt and credit agreements Short-term debt The Company has an $850 million U.S. commercial paper program, which at December 31, 2000, had notes of $559 million outstanding at a weighted average interest rate of 7.4%. During 2000 the Company launched a Euro 485 million Swedish commercial paper program which at December 31, 2000, had notes of $197 million (SEK 1.9 billion) outstanding at a weighted average interest rate of 4.4%. |
| December 31 | 2000 | 1999 | ||
| Amount | %1) | Amount | %1) | |
| U.S. commercial paper | ||||
| (not reclassified) | $28.6 | 7.4% | $0.0 | n/a |
| Swedish commercial paper | 197.0 | 4.4% | 0.0 | n/a |
| Overdrafts and other short-term debt | 127.1 | 5.7% | 206.2 | 3.6% |
| Short-term portion of long-term loan | 1.1 | 5.0% | 38.3 | 5.0% |
| Short-term debt | $353.8 | 5.1% | $244.5 | 3.8% |
| 1) Weighted average interest rate at December 31 The Company also has credit facilities with a number of banks that manage the Company's subsidiaries' cash pools. In addition, the Company's subsidiaries have credit agreements, principally in the form of overdraft facilities, with a number of local banks. Excluding the commercial paper programs, total available facilities as of December 31, 2000, amounted to $369 million of which $127 million was utilized. The weighted average interest rate on total short-term debt outstanding at December 31, 2000 and 1999, was 5.1% and 3.8% respectively. The increase is mainly related to a shift from EUR borrowing to more USD borrowing. The aggregate amount of unused lines of credit at December 31, 2000, was $242 million. |
| Net average financial debt and financial net | |||
| 2000 | 1999 | 1998 | |
| Average interest bearing debt | $993.0 | $782.0 | $869.0 |
| Average net debt | 896.0 | 674.0 | 682.0 |
| Financial net | 53.2 | 43.5 | 48.0 |
| Financial net/average net debt | 5.9% | 6.5% | 7.0% |
| Long-term debt | ||||
| December 31 | 2000 | 1999 | ||
| Amount | %1) | Amount | %1) | |
| Commercial paper (reclassified) | 530.0 | 7.4% | 438.0 | 6.6% |
| Medium Term Notes | 142.5 | 6.2% | 0.0 | n/a |
| Other long-term debt | 64.9 | 3.4% | 32.4 | 6.0% |
| Long-term debt | $737.4 | 6.8% | $470.4 | 6.6% |
| 1)Weighted average interest rate at December 31 In 2000 the Company launched a Medium Term Note Program of SEK 4 billion (approximately $415 million) under Swedish documentation with a Euro-option. At December 31, 2000, 3-,4- and 5-year notes have been issued in Euro at 5.9% to 6.4% interest and in SEK at 5.5% to 6.3% interest. In total $142.5 million of notes were outstanding at year-end. U.S. commercial paper borrowings in the amount of $530 million outstanding at December 31, 2000, are classified as long-term because 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. The remaining other long-term debt, $64.9 million, consisted of unsecured medium-term bank borrowings primarily in Japan and Europe at fixed or floating interest rates and due in various annual installments through 2014. In 1999, virtually all of the Company's long-term debt consisted of U.S. commercial paper borrowings. At December 31, 1999, commercial paper borrowings of $438.0 million were outstanding at a weighted average rate of 6.6% and other long-term debt amounted to $32.4 million. During 2000, the Company replaced an $850 million revolving credit facility due to mature in April 2002 with a new credit agreement syndicated among 15 banks. The new agreement is divided in two facilities, one of $530 million, maturing in November 2005, and one renewable 364-day facility of $320 million. The overall commitment remains at $850 million and the facilities support the Company's commercial paper borrowings and are available for other corporate purposes. Borrowings are unsecured and bear interest based on the relevant LIBOR rate. The Company pays a facility fee based on the unused 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 Company to maintain a certain level of debt to earnings and an interest coverage ratio. The Company was in compliance with these covenants at December 31, 2000. These covenants do not impair the ability of Autoliv Inc. to make regular quarterly dividend payments or to meet other expected cash commitments. The Company's principal U.S. subsidiary has entered into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt. The swap 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 recieved on interest rate agreements is recognized as an adjustment to interest expense. As of December 31, 2000, the principal U.S. subsidiary had entered into interest rate swap agreements with certain lenders providing bank financing. The agreements effectively fix the interest rate on floating rate debt at a rate of 5.9% for a notional principal amount of $60.0 million through December 2002; and 5.9% for a notional principal amount of $75.0 million through June 2003. |
| Principal (notional) amount by expected maturity | Fair value on December 31 | |||||||
| Average interest rate | 2001 | 2002 | 2003 | 2004 | 2005 | Thereafter | Total | 2000 |
| Overdraft/Other short-term debt | $127.1 | $127.1 | $127.1 | |||||
| Weighted average interest rate 5.7% | ||||||||
| Commercial paper1) | 755.6 | 755.6 | 755.6 | |||||
| Weighted average interest rate 6.6% | ||||||||
| Medium Term Notes | 40.6 | 26.0 | 75.9 | 142.5 | 138.8 | |||
| Weighted average interest rate 6.2% | ||||||||
| Fixed long-term loans | 30.5 | 30.5 | 30.5 | |||||
| Weighted average interest rate 1.5% | ||||||||
| Other long-term loans, including | ||||||||
| current portion2) | 1.1 | 10.8 | 7.8 | 7.1 | 2.8 | 5.9 | 35.5 | 35.5 |
| Primarily floating rates based on LIBOR | ||||||||
| Total debt | $1,091.2 | $1,087.5 | ||||||
| Interest rate swap | $60.0 | $75.0 | $135 | $(0.9) | ||||
| Pay rate | 5.9% | 5.9% | ||||||
| Number of shares (in millions) | Share capital | Paid in capital | Other com- prehensive income (loss) | Retained earnings | Treasury shares | Total shareholders' equity | |
| Balance - December 31, 1997 | 102.2 | $102.2 | $1,938.5 | $1.6 | $(338.3) | $1,704.0 | |
| Stock options exercised | 0.1 | 0.1 | 1.5 | 1.6 | |||
| Dividend 1998 | (45.0) | (45.0) | |||||
| Translation differences | (2.9) | (2.9) | |||||
| Net income 1998 | 188.3 | 188.3 | |||||
| Balance - December 31, 1998 | 102.3 | $102.3 | $1,940.0 | $(1.3) | $(195.0) | $1,846.0 | |
| Stock options exercised | 1.5 | 1.5 | |||||
| Dividend 1999 | (45.0) | (45.0) | |||||
| Translation differences | (71.4) | (71.4) | |||||
| Net income 1999 | 199.9 | 199.9 | |||||
| Balance - December 31, 1999 | 102.3 | $102.3 | $1,941.5 | $(72.7) | $(40.1) | $1,931.0 | |
| Stock options exercised | 0.1 | 0.1 | |||||
| Dividend 2000 | (44.5) | (44.5) | |||||
| Share repurchase | (103.0) | (103.0) | |||||
| Translation differences | (42.2) | (42.2) | |||||
| Net income 2000 | 168.7 | 168.7 | |||||
| Balance - December 31, 2000 | 102.3 | $102.3 | $1,941.6 | $(114.9) | $84.1 | $(103.0) | $1,910.1 |
| The comprehensive income for 2000, 1999, and 1998 was $126.5, $128.5, and $185.4, respectively. In May 2000 the Board of Directors authorized a Share Repurchase Program for up to ten million of the Company's shares. During the year, the Company repurchased 4.5 million shares at a cost of $103 million. 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 11. Supplemental Cash Flow Information The Company's non-cash investing and financing activities were as follows: |
| 2000 | 1999 | |
| Acquisitions/Divestitures: | ||
| Fair value of assets acquired | $522.1 | $21.0 |
| Cash Paid | 200.7 | 26.5 |
| Liabilities assumed | $321.4 | ($5.5) |
| 2000 | 1999 | 1998 | |
| Interest | $45 | $37 | $4 8 |
| Income taxes | $110 | $80 | $113 |
| Note 12. Stock Incentive Plan Under the Autoliv, Inc. 1997 Stock Incentive Plan (the "Plan") adopted by the Company, and amended in 1999, awards have been made to selected executive officers of the Company and other key employees in the form of stock options. During 1997, 52,250 Stock Appreciation Rights (SAR's) were granted. During 1998, the SAR's were converted into stock options under the Plan. All options and rights granted during 1999, 1998 and 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 December 2000, the Compensation Committee of the Board of Directors of the Company made an offer (the "Offer") to the recipients of all outstanding stock option grants made under the Plan in 1997, 1998 and 1999. In exchange for the irrevocable can- cellation of the outstanding options, a promise was made to: (a) transfer to the optionees a number of the Company's shares (Restricted Stock Units or "RSU's") representing 30 percent of the number of options canceled and; (b) grant to the optionees on June 18, 2001, in accordance with normal terms and conditions of the Plan, a number of stock options equal to 20 percent of the number of options canceled. The RSU's carry a Date of Promise of December 15, 2000, and a Date of Vesting of December 15, 2003. Under the Offer, 920,165 options were canceled. Under the terms of the Offer, RSU's representing 276,050 of the Company's shares have been issued and 184,033 options will be granted in June 2001. The Plan provides for the issuance of up to 2,800,000 common shares for awards 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 for stock option grants has been recognized in the Company's financial statements. The Company will, however, record compensation expense for the RSU's over their three year service period. 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: |
| 2000 | 1999 | 1998 | |
| Net income | |||
| As reported | $168.7 | $199.9 | $188.3 |
| Pro forma | 165.3 | 196.1 | 184.9 |
| Earnings per share | |||
| As reported | $1.67 | $1.95 | $1.84 |
| Pro forma | 1.64 | 1.92 | 1.81 |
| No options were granted during 2000. Instead, options were granted in December 1999, as part of 2000 the compensation for key employees. The weighted average fair value of options granted during 1999 and 1998 was estimated at $9.69 and $10.41, using the Black-Scholes option-pricing model based on the following assumptions: |
| 1999 | 1998 | |
| Risk-free interest rate | 5.8% | 5.0% |
| Dividend yield | 1.5% | 1.2% |
| Expected life in years | 5.0 | 5.0 |
| Expected volatility | 30.0% | 30.0% |
| Number of shares | Weighted average exercise price | |
| Outstanding at Dec. 31, 1997 | 203,850 | $26.27 |
| Converted SAR's | 52,250 | 35.75 |
| Granted | 570,365 | 33.26 |
| Exercised | (34,881) | 22.01 |
| Canceled | (18,868) | 32.62 |
| Outstanding at Dec. 31, 1998 | 772,716 | $32.11 |
| Granted | 437,290 | 30.52 |
| Exercised | (70,619) | 26.41 |
| Canceled | (8,650) | 32.86 |
| Outstanding at Dec. 31, 1999 | 1,130,737 | $31.84 |
| Granted | - | - |
| Exercised | (6,416) | 15.58 |
| Canceled | (31,770) | 32.25 |
| Canceled under the Offer | (920,165) | 32.23 |
| utstanding at Dec. 31, 2000 | 172,386 | $30.30 |
| Options exercisable Dec. 31, 1998 | 213,601 | $28.98 |
| Options exercisable Dec. 31, 1999 | 693,447 | $32.68 |
| Options exercisable Dec. 31, 2000 | 172,386 | $30.30 |
| Range of exercise prices | Number outstanding | Weighted average remaining contract life (in years) | Weighted average exercise price |
| $15.26 - $15.58 | 10,428 | 1.38 | $15.30 |
| $24.38 - $29.37 | 91,361 | 6.21 | 27.64 |
| $31.00 - $40.62 | 70,597 | 7.16 | 35.95 |
| 172,386 | 6.31 | $30.30 |
| Note 13. 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 and provision for product recalls, should not have a material effect on the Group's financial position or results of operations. Note 14. 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 $19.0 million for 2000, $8.8 million for 1999 and $9.1 million for 1998. At December 31, 2000, future minimum lease payments for non-cancellable operating leases total $62.2 million and are payable as follows (in millions): 2001: $15.2; 2002: $11.0; 2003: $8.7; 2004: $5.2; 2005: $4.5; 2006 and thereafter: $17.6. Note 15. 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 some countries the Company sponsors or participates in certain other benefit plans. Contributions to these non-governmental plans for the years ended December 31, 2000, 1999, and 1998 were $10.9 million, $6.9 million and $5.7 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 components of net benefit cost associated with U.S. non con- tributory defined benefit retirement plans are as follows: |
| 2000 | 1999 | |
| Service cost | $7.0 | $6.2 |
| Interest cost | 4.9 | 3.9 |
| Expected return on plan assets | (4.5) | (3.4) |
| Amortization of unrecognized | ||
| net loss | 0.3 | - |
| Benefit cost | $7.7 | $6.7 |
| 2000 | 1999 | |
| Projected benefit obligation at | ||
| beginning of year | $65.2 | $56.5 |
| Service cost | 7.0 | 6.2 |
| Interest cost | 4.9 | 3.9 |
| Plan amendments | - | 3.4 |
| Actuarial (gain) loss | 1.6 | (2.9) |
| Benefit payments | (2.6) | (1.9) |
| Project benefit obligation at year end | 76.1 | 65.2 |
| Fair value of plan assets at | ||
| beginning of year | 48.6 | 43.3 |
| Actual return on plan assets | (0.4) | 7.2 |
| Company contributions | 0.1 | 0.1 |
| Benefit payments | (2.7) | (2.0) |
| Fair value of plan assets at year end | 45.6 | 48.6 |
| Funded status of the plan | (30.5) | (16.6) |
| Unrecognized net actuarial (loss) gain | 1.0 | (5.6) |
| Unrecognized prior service cost | 3.2 | 3.4 |
| Accrued retirement benefit cost | ||
| recognized in the balance sheet | $(26.3) | $(18.8) |
| % | 2000 | 1999 |
| Discount rate | 7.50 | 7.50 |
| Rate of increases in compensation level | 5.25 | 5.25 |
| Expected long-term rate of return on assets | 9.50 | 9.50 |
| Postretirement Benefits Other than Pensions The Company currently provides postretirement health care and life insurance benefits to most of its 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. At present, there is no prefunding of the postretirement benefits recognized under FASB Statement No. 106. The changes in benefit obligations and plan assets for the U.S. postretirement benefit plan as of December 31 are as follows: |
| 2000 | 1999 | |
| Projected benefit obligation at | ||
| beginning of year | $9.3 | $11.0 |
| Service cost | 0.9 | 0.8 |
| Interest cost | 0.7 | 0.6 |
| Actuarial (gain) loss | 0.4 | (3.0) |
| Benefit payments | (0.1) | (0.1) |
| Project benefit obligation at year end | 11.2 | 9.3 |
| Fair value of plan assets at | ||
| beginning of year | - | - |
| Company contributions | 0.1 | 0.1 |
| Benefit payments | (0.1) | (0.1) |
| Fair value of plan assets at year end | - | - |
| Funded status of the plan | (11.2) | (9.3) |
| Unrecognized net actuarial (gain) loss | (1.3) | (1.8) |
| Accrued postretirement benefit cost | ||
| recognized in the balance sheet | $(12.5) | $(11.1) |
| For measurement purposes, the assumed annual rate of increase of per capita cost of health care benefits was 8.0% for 2000 and assumed to grade to 6.5% 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 post retirement benefit obligation was 7.5% at December 31, 2000, 7.5% at December 31, 1999, and 6.8% at December 31, 1998. A one percent increase in the annual health care cost trend rates would have had no significant impact on the Company's accumulated postretirement benefit obligation at December 31, 2000. The components of net benefit cost associated with postretirement benefit plan are as follows: |
| Period Ended December 31 | 2000 | 1999 |
| Service cost | $0.9 | $0.8 |
| Interest cost | 0.7 | 0.6 |
| Benefit cost | $1.6 | $1.4 |
| Autoliv, Inc. is a U.S. 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 a 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 2000: 20%, 13%, 12% and 11%, respectively in 1999: 18%, 15%, 14% and 13%, respectively, 1998: 14%, 13%, and 12%, 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 has adopted Statement 131 "Disclosures about Segments of an Enterprise and Related Information" and concluded that its operating segments meet the criteria stated in Statement 131 for aggregation for reporting purposes into a single operating segment. Note 17. Enterprise Wide Disclosures |
| 2000 | 1999 | 1998 | |
| Net sales | |||
| United States | $1,562 | $1,381 | $1,350 |
| Europe | 2,162 | 2,212 | 2,027 |
| Other regions | 392 | 219 | 112 |
| Total | $4,116 | $3,812 | $3,489 |
| Long-lived assets | |||
| United States | $2,060 | $1,848 | $1,919 |
| Europe | 505 | 544 | 569 |
| Other regions | 154 | 73 | 48 |
| Total | $2,719 | $2,465 | $2,536 |
| The Company's operations are located primarily in Europe and the U.S. Exports from the U.S. to other regions amounted to approximately $550 million in 2000. The long-lived assets in the U.S. include $1,639 million of intangible assets from the acquisition of ASP. The Company has attributed net sales to the geographic area based on the location of the entity seling the final product. The sales by product group were |
| 2000 | 1999 | 1998 | |
| Airbags and associated products1) | $2,934 | $2,715 | $2,417 |
| Seat belts and associated products2) | 1,182 | 1,097 | 1,072 |
| Total | $4,116 | $3,812 | $3,489 |
| Q1 | Q2 | Q3 | Q4 | Year | |
| 2000 | |||||
| Net sales | $1,084.0 | $1,074.2 | $954.8 | $1,003.1 | $4,116.1 |
| Gross profit | 228.1 | 223.0 | 179.5 | 155.5 | 786.1 |
| Income before taxes | 95.3 | 93.3 | 66.6 | 35.4 | 290.6 |
| Net income | 55.2 | 55.1 | 38.9 | 19.5 | 168.7 |
| Earnings per share | $0.54 | $0.54 | $0.39 | $0.20 | $1.67 |
| 1999 | |||||
| Net sales | $935.4 | $977.0 | $873.8 | $1,026.0 | $3,812.2 |
| Gross profit | 191.2 | 209.2 | 184.2 | 222.2 | 806.8 |
| Income before taxes | 72.9 | 86.5 | 71.8 | 98.5 | 329.7 |
| Net income | 44.1 | 51.2 | 43.2 | 61.4 | 199.9 |
| Earnings per share | $0.43 | $0.50 | $0.42 | $0.60 | $1.95 |
Foreign Exchange Rates (unaudited) 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: |
| 2000 | 2000 | 1999 | 1999 | 1998 | 1998 | |
| Average | Year end | Average | Year end | Average | Year end | |
| EUR | 0.924 | 0.929 | 1.065 | 1.005 | 1.123 | 1.172 |
| AUD | 0.583 | 0.554 | 0.644 | 0.653 | 0.630 | 0.612 |
| GBP | 1.517 | 1.491 | 1.616 | 1.618 | 1.656 | 1.676 |
| SEK | 0.110 | 0.105 | 0.121 | 0.117 | 0.126 | 0.124 |
| JPY/1000 | 9.314 | 8.721 | 8.799 | 9.790 | 7.675 | 8.680 |
The Euro is the most representative currency for the Company in Europe. The Euro, at average rates, translated into 13.2% less dollars in 2000 compared to 1999. From year end 1999 to year end 2000 the Euro decreased by 7.6% compared to the dollar. Report of Independent Auditors 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, 2000 and 1999, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 finan- cial 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 on December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Ernst & Young AB Torbjörn Hanson Stockholm, Sweden January 25, 2001 Definitions Capital employed Total shareholders' equity and net debt. Capital expenditures Investments in property, plant and equipment. Cash flow per share Net cash before financing excluding acquisitions in relation to weighted average numbers of shares (net of Treasury shares) assuming dilution. Earnings (loss) per share Net income (loss) relative to weighted average number of shares (net of Treasury shares) assuming dilution. Equity ratio Shareholders' equity relative to total assets. Interest coverage ratio Income before taxes, plus financial expense, relative to financial expense. Gross margin Gross profit relative to sales. Net debt Short- and long-term interest bearing liabilities less cash and cash equivalents. Net debt equity ratio Net debt relative to shareholders' equity Net debt to capitalization Net debt in relation to total shareholders' equity and net debt. 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. Selected Financial Data |
| Autoliv Inc | Autoliv AB1) | ||||||
| 2000 | 1999 | 1998 | 1997 | 1996 | 19972) | 1996 | |
| (Dollars in millions, except per share data) | Pro Forma | Pro Forma | |||||
| Sales and Income | |||||||
| Net sales | $4,116 | $3,812 | $3,489 | $3,257 | $3,204 | $2,740 | $1,735 |
| Operating income (loss) | 340 | 369 | 354 | 356 | 346 | (453)3) | 163 |
| Income (loss) before taxes | 291 | 330 | 312 | 317 | 300 | (477)3) | 171 |
| Net income (loss) | 169 | 200 | 188 | 185 | 174 | (580)3) | 113 |
| Financial Position | |||||||
| Current assets excluding cash | 1,267 | 1,062 | 1,013 | 822 | 819 | 822 | 509 |
| Property, plant and equipment | 867 | 835 | 869 | 727 | 693 | 727 | 322 |
| Intangible assets (mainly goodwill) | 1,739 | 1,596 | 1,649 | 1,694 | 1,593 | 1,694 | 64 |
| Non-interest bearing liabilities | 902 | 860 | 870 | 813 | 705 | 813 | 484 |
| Capital employed | 2,919 | 2,527 | 2,549 | 2,350 | 2,325 | 2,350 | 402 |
| Net debt/(cash) | 1,009 | 596 | 703 | 646 | 704 | 646 | (56) |
| Shareholders' equity | 1,910 | 1,931 | 1,846 | 1,704 | 1,621 | 1,704 | 458 |
| Total assets | 4,068 | 3,647 | 3,668 | 3,430 | 3,254 | 3,430 | 1,054 |
| Long-term debt | 737 | 470 | 629 | 612 | 763 | 612 | 13 |
| Per share data (adjusted for 2:1 split in 1996) | |||||||
| Earnings (loss) per share4) | 1.67 | 1.95 | 1.84 | 1.81 | 1.69 | (6.70)5) | 2.06 |
| Cash flow per share4) | 0.48 | 2.19 | 0.34 | 2.20 | 0.80 | 1.915) | 0.31 |
| Equity per share | 19.49 | 18.9 | 18.0 | 16.7 | 15.8 | 16.7 | 8.3 |
| Dividend per share | 0.44 | 0.44 | 0.44 | 0.42 | 0.41 | 0.42 | 0.41 |
| Number of shares outstanding at year-end (million)6) | 97.8 | 102.3 | 102.3 | 102.2 | 102.8 | 102.2 | 55.0 |
| Ratios | |||||||
| Gross margin (%) | 19.1 | 21.2 | 21.4 | 22.1 | 21.2 | 21.4 | 20.0 |
| Operating margin (%) | 8.2 | 9.7 | 10.2 | 10.9 | 10.8 | 10.27) | 9.4 |
| Pretax margin (%) | 7.1 | 8.6 | 9.0 | 9.7 | 9.4 | 9.37) | 9.8 |
| Return on capital employed (%) | 12 | 15 | 14 | 15 | 15 | 127) | 42 |
| Return on shareholders' equity (%) | 9 | 11 | 11 | 11 | 11 | 97) | 27 |
| Equity ratio (%) | 47 | 53 | 50 | 50 | 50 | 50 | 44 |
| Net debt equity ratio (%) | 53 | 31 | 38 | 38 | 43 | 38 | (12) |
| Net debt to capitalization (%) | 35 | 24 | 28 | 27 | 30 | 27 | (14) |
| Interest coverage ratio | 5.6 | 7.0 | 6.6 | 6.7 | 6.5 | 7.57) | 32.8 |
| Other data | |||||||
| Seat belt sales, incl. seat components | 1,182 | 1,097 | 1,072 | 940 | 917 | 940 | 917 |
| Airbag sales, incl. steering wheels | 2,934 | 2,715 | 2,417 | 2,317 | 2,287 | 1,800 | 818 |
| Net cash provided by operations | 266 | 436 | 314 | 441 | 352 | 343 | 159 |
| Capital expenditures | 245 | 261 | 285 | 216 | 270 | 183 | 148 |
| Net cash after operating and investing activities | (162) | 181 | 6 | 180 | 14 | 128 | (52) |
| Number of employees, December 31 | 28,000 | 22,580 | 20,670 | 17,840 | 15,330 | 17,840 | 9,000 |
| 1) Data in Swedish Kronor are converted to dollars at average or year-end rates. 2) Including ASP from May 1, 1997. 3) Includes a one-time write-off of acquired R&D of $732 million. 4) There is no difference between basic and dilutive per share amounts. 5) Weighted average number of shares used in computing per share amount: 86.5 million. 6) At year-end, net of Treasury shares. 7) Before one-time item, the write-off of acquired R&D of $732 million. Board of Directors Gunnar Bark 1 Chairman Former President & Chief Executive Officer. Born 1939 Director since 1982 Elected until 2003 (Mr Bark has announced his intention to retire at the Shareholders Meeting ) Chairman of Allgon AB, Calix AB and STT Emtec AB M.Sc., Honorary Doctor Shares: 25,000 Options: 46,450 Restricted stock units: 30,000 Per-Olof Aronson 1, 2, 3 Born 1930 Director since 1994 Elected until 2001 Former Vice Chairman President and Chief Executive Officer of SAPA AB (Gränges AB) Graduate Engineer, Shares: 5,391 Wilhelm Kull 1 Born 1936 Director since 1997 Elected until 2002 Vice President IT, Former Chief Financial MBA Restricted stock units: 11,221 Walter Kunerth 1, 3 Born 1940 Director since 1998 Elected until 2001 Senior Advisor to Lazard & Co. Former Member of Siemens' Corporate Executive Board and President of Siemens' Automotive Systems Group. Chairman of the Supervisory Board of Basler AG, Götz AG, Paragon AG, and Suspa GmbH Director of Gildemeister AG M.Sc., Honorary Professor Shares: 858 S. Jay Stewart 1, 2, 3 Born 1938 Director since 1989 Elected until 2002 Former Chairman and Chief Executive Officer of Morton International Inc., Director of Household International Inc. and of Box USA Corp. B.Sc. and Shares: 69,878 Roger W. Stone 1, 2 Born 1935 Director since 1989 Elected until 2002 Chairman and Chief Executive Officer of Box USA Corp. Former President and Chief Executive Officer of Smurfit - Stone Container Corporation. Director of McDonald's Corporation and Option Care Inc. B.Sc. Shares: 2,925 Per Welin 1, 2, 3 Born 1936 Director since 1995 Elected until 2003 Chairman of L-E Lundberg- företagen AB. Director of Allgon AB, Holmen AB and NCC AB Techn. Lic., MBA Shares: 1,391 Lars Westerberg 1 President & Chief Executive Officer Born 1948 Director since 1999 Elected until 2001 Director of SAPA AB and Ångpanneföreningen AB M.Sc., MBA Shares: 19,000 Restricted stock units: 13,500 1. Nomination Committee 2. Compensation Committee 3. Audit Committee "Director since" includes time as Director of Autoliv AB and Morton International, Inc. For information on restricted stock units and options, refer to Note 12 on page 30 and for the work of the Board to the proxy statement which is distributed to Autoliv's shareholders with this annual report. Senior Management Lars Westerberg President & Chief Executive Officer Born 1948, Employed 1999 Shares: 19,000 Restricted stock units: 13,500 Leif Berntsson Vice President Quality Born 1955. Employed 1988 Shares: 200 Restricted stock units: 7,887 Hans Biörck Vice President Chief Financial Officer Born 1951. Employed 1998 Options: 14,570 Dr. Yngve Håland Vice President Research Associate Professor Born 1945. Employed 1984 Restricted stock units: 5,392 Claes Humbla Vice President Human Resources Born 1940. Employed 1989 Restricted stock units: 7,977 Wilhelm Kull Vice President Information Technology Born 1936. Employed 1975 Restricted stock units: 11,221 BenoÎt Marsaud Vice President Manufacturing Born 1952. Employed 1980 Restricted stock units: 5,046 Mats Ödman Director Corporate Communications Born 1950. Employed 1994 Shares: Restricted stock units: 5,302 Jan Olsson Vice President Engineering Born 1954. Employed 1987 Restricted stock units: 4,357 Hans-Göran Persson Vice President Purchasing Born 1946. Employed 1999 Restricted stock units: 2,235 Jörgen Svensson Vice President Legal, General Counsel and Secretary Born 1962. Employed 1989 Restricted stock units: 7,887 "Employed" refers also to the first year of employment with the Autoliv AB Group. For information on restricted stock units and options, refer to Note 12 on page 30. 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 Depository Receipts (SDR) listed on the OM-Stock-holm Stock Exchange, SSE (symbol ALIV). Besides on the Stockholm Stock Exchange, options in Autoliv's securities are listed on the Chicago Board Options Exchange, CBOE (symbol ALV). Trading in the Autoliv secu- rities began on NYSE on May 1, 1997, (when the stock closed at $35.50) and on the SSE on May 2 (when the depositories closed at SEK274). During 2000, a daily average volume of 48,000 Autoliv shares was traded in New York and 497,000 in Stockholm. This means that Autoliv's SDRs were the 24th most highly traded security on the SSE, accounting for 0.62% of the trading volume in Stockholm. Market Development In 2000, the stock market started the year with a rally in I.T. and telecom stocks while traditional, industrial stocks in the so-called "Old Economy" were falling out of favor. Autoliv regained, however, most of its fall from the beginning of the year following a strong first quarter and the drop in "New Economy" stocks. With the decline in U.S. car production during the autumn and Autoliv's profit warning in December, the Company's securities took a dive and the Swedish depositories ended the year with a 41% decline compared to 13% for the composite index for the Stockholm Stock Exchange. Compared to other automotive suppliers, the Autoliv stock on NYSE fell 16 percentage points more than Morgan Stanley's index for automotive parts suppliers. This difference is partly explained by the fact that the Swedish currency weakened by 10% against the U.S. dollar. (More than 90% of the trade in Autoliv securities is done in Sweden). As can be seen by the graphs on the following page, the Autoliv securities have started the 2001 year by outperforming both the general markets in Sweden and the U.S. as well as the shares in its peer group. Number of Shares The number of shares outstanding was reduced during the year by 4.5 million to 97.8 million at the end of the year. The reduction followed an authorization in May by the Board of Directors to buy back up to 10 million of the Company's shares. The repurchased shares are held as treasury stock. The number of shares outstanding could increase to 98.0 million if all outstanding options are exercised. During 2000, most of the other options were converted into restricted stock units, see Note 12 on page 30. 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 interest of all Autoliv shareholders, see page 30, Note 10. Dividend If possible, dividends are paid on the first Thursday in the last month of each quarter (March, June, September and December). The record date is usually one month earlier and the ex-date typically two days before the record date. Quarterly dividends are declared separately by the Board, announced in press releases and published on Autoliv's home page on the Internet. The latest dividend declared amounted to 11 cents per share. In lieu of receiving dividends by checks through the mail, holders of Autoliv shares or depositaries may have dividends deposited electronically into a checking or savings account on the payment day. This service is offered at no cost. For more information, please call Equi-Serve 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 depository shares. Shareholders Autoliv estimates that over one -third of the shares in the Company are held in the U.S. and more than 40% in Sweden. Most of the remaining shares are held in the U.K and central Europe. The number of shareholders is estimated to exceed 60,000. The largest shareholders, known to the Company, are shown below. Annual General Meeting Autoliv's next Annual General Meeting of Shareholders will be held on Tuesday, April 24, 2001, at Bank One, 1 Bank One Plaza, 57th floor, Chicago, Illinois 60602, USA. Shareholders are urged to return their proxies whether or not they plan to attend the meeting. Stock Transfer Agent & Registrar EquiServe P.O. Box 250 Jersey City, New Jersey 07303-2500 +1 (800) 446-2617 (within the U.S.) +1 (201) 324-0498 (outside the U.S.) +1 (201) 222-4955 (Hearing Impaired) Internet: www.equiserve.com EquiServe 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 Registar. |
| THE LARGEST SHAREHOLDERS* | Number | Percentage of | |
| Country | of shares | share capital | |
| Robur Funds | Sweden | 9,758,000 | 10.0 |
| Franklin Resources | U.S. | 4,226,175 | 4.3 |
| Alecta (insurance company) | Sweden | 2,644,093 | 2.7 |
| 4th AP-fonden (pension fund), | Sweden | 2,537,050 | 2.6 |
| Handelsbanken Funds | Sweden | 2,410,929 | 2.5 |
| Management as a group | 125,043 | 0.1 | |
| 60,000 other shareholders | 76,096,103 | 77.8 | |
| Total December 31, 2000. | 97,797,393 | 100.0 | |
| * Known to the Company | |||
| SHARE PRICE AND DIVIDENDS | |||||||||
| New York (US$) | Stockholm(SEK) | Declared dividend | |||||||
| Period | High | Low | Close | High | Low | Close | US$ | SEK | |
| Q1 | 1998 | 34.50 | 27.75 | 31.06 | 282 | 224 | 248 | 0.11 | 0.75 |
| Q2 | 1998 | 34.88 | 29.31 | 31.63 | 272 | 231 | 255 | 0.11 | 0.71 |
| Q3 | 1998 | 35.00 | 27.50 | 27.50 | 281 | 219 | 241 | 0.11 | 0.78 |
| Q4 | 1998 | 37.25 | 24.44 | 37.19 | 304 | 190 | 291 | 0.11 | 0.76 |
| Q1 | 1999 | 41.88 | 35.88 | 37.56 | 329 | 280 | 313 | 0.11 | 0.88 |
| Q2 | 1999 | 41.00 | 29.75 | 30.25 | 345 | 256 | 259 | 0.11 | 0.94 |
| Q3 | 1999 | 38.25 | 29.19 | 37.63 | 315 | 249 | 309 | 0.11 | 0.92 |
| Q4 | 1999 | 37.75 | 27.44 | 29.25 | 310 | 232 | 249 | 0.11 | 0.92 |
| Q1 | 2000 | 31.81 | 23.50 | 30.00 | 272 | 204 | 239 | 0.11 | 0.94 |
| Q2 | 2000 | 29.13 | 23.75 | 24.06 | 262 | 211 | 216 | 0.11 | 1.00 |
| Q3 | 2000 | 26.13 | 19.44 | 19.50 | 235 | 189 | 190 | 0.11 | 1.04 |
| Q4 | 2000 | 23.00 | 14.50 | 15.94 | 229 | 143 | 148 | 0.11 | 1.11 |
ANALYSTS The following banks and securities brokers follow Autoliv on a regular basis. o ArosMaizel o Alfred Berg o Carnegie o Cheuvreux de Virieux o Den Danske Bank o Deutsche Bank o Enskilda Securities o Fischer Partners o Goldman Sachs o Handelsbanken o J P Morgan o Morgan Stanley o Öhmans o Pensers Fondkommission o Schroder Salomon Smith Barney o SwedBank o UBS Warburg Investor Requests North America Autoliv ASP, Inc. 1320 Pacific Drive, Auburn Hills, MI 48326-1569, USA Tel.+1 (248) 475-0407 Fax +1 (248) 475-9838 patrick.jarboe@autolivasp.com Rest of the world Autoliv Inc. Box 70381, SE-107 24 Stockholm, Sweden Tel +46 (8) 58 72 06 23 Fax +46 (8) 411 70 25 mats.odman@autoliv.com Financial Information for 2001 January-March April 19, 2001 April-June July 26, 2001 July-September October 18, 2001 October-December January 24, 2002 Annual Report March, 2002 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. The filings with the Securities & Exchange Commission (SEC) of Autoliv's annual 10-K report and quarterly 10-Q reports can also be obtained from the Company at the addresses stated above, but only in English. All the documents are also available on Autoliv's home page on the Internet at: www.autoliv.com |
