SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the period ended June 30, 1997 Commission file number: 001-12933
AUTOLIV, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0378542
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Trade Center
Klarabergsviadukten 70
S-107 24 Stockholm
(Address of principal executive offices)
Registrant's telephone number, including area code: 46 (8) 402 0600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days.
Yes: X No:
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Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: There were
approximately 102 million shares of Common Stock of Autoliv, Inc., par
value $1.00 per share, outstanding as of August 5, 1997.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
AUTOLIV, INC.
Consolidated Statement of Income (unaudited)
(dollars in millions except per share data)
Three Months Six Months
ended June June 30, ended June June 30,
30, 1997 1) 1996 2) 30, 1997 1) 1996 2)
Sales $ 720.8 $ 454.0 $ 1166.5 $ 899.0
Cost of sales -566.0 -364.0 -919.5 -722.5
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Gross profit 154.8 90.0 247.0 176.5
Selling, administration and general -32.9 -18.9 -53.2 -36.8
expense
Research and development expense -34.9 -26.5 -63.1 -51.0
Amortization of intangibles, -10.0 -2.7 -12.9 -5.0
primarily goodwill
Other income - net -0.5 2.9 0.2 3.6
------- ------- ------- -------
Operating income 76.5 44.8 118.0 87.3
Equity in earnings (loss) of 2.1 2.2 4.2 4.0
affiliates
Interest income 1.4 1.3 2.5 2.9
Interest expense -8.6 -1.0 -10.1 -2.0
------- ------- ------- -------
Income before income taxes 71.4 47.3 114.6 92.2
Income taxes -27.8 -15.6 -42.2 -31.7
Minority interests in subsidiaries -0.6 -0.3 -1.0 -0.3
------- ------- ------- -------
Net income before one-time item 43.0 31.4 71.4 60.2
Write-off of acquired R&D -732.3 -- -732.3 --
Reported net income -689.3 31.4 -660.9 60.2
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Net income per share, fully diluted
from operations before one-time items 0.50 0.57 1.01 1.09
after one-time items -7.94 0.57 -9.32 1.09
Number of shares used in computing 86.9 55.0 70.9 55.0
per share amount
Number of shares outstanding, 102.8 55.0 102.8 55.0
including Autoliv AB shares not
converted in the Exchange Offer
(millions)
See notes to consolidated financial statement
1) Autoliv AB and subsidiaries prior to April 30, 1997; Autoliv,
Inc., for May 1 to June 30, 1997
2) Autoliv AB and subsidiaries
AUTOLIV, INC.
Consolidated Statement of Balance Sheet (unaudited)
(dollars in millions)
June 30, December 31,
1997 1996(1)
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ASSETS
Cash and cash equivalents $ 141.3 $ 131.7
Receivables, less allowances 612.1 383.4
Inventories 153.3 100.8
Refundable and deferred income tax
benefit 32.5 15.9
Prepaids 33.3 9.4
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Total current assets 972.5 641.2
Property, plant and equipment, net 680.1 322.4
Investments in affiliated companies 30.0 26.0
Miscellaneous 1.5 --
Intangible assets, net (mainly
acquisition goodwill) 1,572.9 64.0
TOTAL ASSETS 3,257.0 1,053.6
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LIABILITIES AND EQUITY
Short-term debt 65.8 62.1
Accounts payable 386.4 281.2
Accrued expenses 276.5 182.1
Income taxes 63.2 21.1
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Total current liabilities 791.9 546.5
Long-term debt 700.5 12.8
Other noncurrent liabilities 82.4 13.8
Minority interests in subsidiaries 17.0 22.0
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Total noncurrent liabilities
and minority interests 799.9 48.6
Common stock, par value $1 per share 102.0 80.1
Additional paid-in capital 1,899.7
Retained earnings (accumulated
deficit) and foreign currency
translation adjustments -336.5 378.4
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Total shareholders' equity 1,665.2 458.5
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TOTAL LIABILITIES AND EQUITY 3,257.0 1,053.6
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See notes to consolidated financial statement
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1 Autoliv AB and subsidiaries
AUTOLIV, INC.
Consolidated Statement of Cash Flows (unaudited)
(dollars in millions)
SIX MONTHS ENDED JUNE 30,
JUNE 30, 1997(1) 1996(2)
OPERATING ACTIVITIES
Net Income $ -660.9 $ 60.2
Adjustments to reconcile net income to
net cash provided by operating activities:
Write-off of acquired R&D 732.3
Depreciation and amortization 63.4 41.6
Deferred income taxes 0.5
Undistributed earnings from affiliated
companies -3.2 -3.9
Changes in operating assets and liabilities
Receivables and other assets -26.7 -33.6
Inventories 15.1 3.6
Accounts payable and accrued expenses 7.2 -18.0
Income taxes 11.1 8.3
Other-net -7.8
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Net cash provided by operating activities 131.0 58.2
INVESTING ACTIVITIES
Expenditure for property, plant and equipment -66.0 -66.3
Acquisition of businesses and
investments in affiliated companies -3.9 -65.1
Other 0.3 0 .7
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Net cash used for investing activities -69.6 -130.7
FINANCING ACTIVITIES
Increase / (decrease) in debt -55.4 9.1
Increase in long term liabilities -3.0 -6.8
Increase in minority interest -4.0 21.6
Dividends paid -20.5 -18.5
Other - net -6.3 2.2
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Net cash provided by (used for) financing
activities -89.2 7.6
Effect of exchange rate changes on cash -7.8 -0.4
INCREASE / (DECREASE) IN CASH AND
CASH EQUIVALENTS -35.6 -65.3
Cash in ASP May 1, 1997 45.2
Cash and cash equivalents at beginning of
period 131.7 161.0
Cash and cash equivalents at end of period 141.3 95.7
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See notes to consolidate financial statement
1 Autoliv AB and subsidiaries prior to April 30, 1997; Autoliv Inc.
for May 1 to June 30, 1997
2 Autoliv AB and subsidiaries
Autoliv, Inc.
Notes to consolidated Financial Statements
(unaudited)
June 30, 1997
1. Basis of Presentation
The accompanying interim unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to form 10-Q
and Rule 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all adjustments considered necessary for a fair presentation
have been included in the financial statements. All such adjustments are
of a normal recurring nature. The write-off of the appraisal value of
in-process research and development of $732 million is not a recurring
item and has not been included in the operating results for the period.
The unaudited interim financial statements should be read in conjunction
with the proforma financial statements and notes thereto contained in the
Proxy Statement/Prospectus/Exchange Offer dated March 24, 1997 (the
"Prospectus").
2. Acquisition of Business
On May 1, 1997, Autoliv, Inc. consummated the transactions described in
the Prospectus relating to the following transactions: (i) the exchange
by Autoliv, Inc. (the "Exchange Offer") of one share of Autoliv, Inc. for
each share of Autoliv AB, a Swedish corporation ("Autoliv AB"), which was
tendered in the Exchange Offer and (ii) the merger (the "Merger," and,
together with the Exchange Offer, the "Combination") of Morton
International, Inc. ("Morton") into a wholly owned subsidiary of Autoliv,
Inc. in which Morton (renamed Autoliv ASP Inc.) was the surviving
corporation and the shareholders of Morton received one share of New
Autoliv for approximately every three shares they owned of Morton. On
April 30, 1997, Morton transferred all of its assets and liabilities
other than those relating exclusively to the Automotive Safety Products
Business of Morton ("ASP") to a newly formed subsidiary of Morton, New
Morton International, Inc. (the "Spin-off"). Prior to May 1, 1997,
Autoliv, Inc. had no operations. Following the transactions described
above, Autoliv, Inc. began conducting operations May 1, 1997, through its
two wholly owned subsidiaries - Autoliv AB and Autoliv ASP Inc.
As of June 30, 1997, 54,215,184 shares of Autoliv AB, representing
approximately 98.6% of the outstanding shares of Autoliv AB were
exchanged for the same number of shares of Autoliv, Inc. Pursuant to the
Merger, Morton shareholders received 47,753,108 shares of Autoliv, Inc.
As of June 30, 1997, there were 101,970,439 shares of Autoliv, Inc.
issued and outstanding with a par value of $1 per share. Autoliv, Inc.
will exchange the remaining 784,816 Autoliv AB shares in a compulsory
acquisition procedure pursuant to Swedish law.
The Combination has been accounted for as a purchase for financial
accounting purposes in accordance with US generally accepted accounting
principles, with Autoliv AB treated as the acquiror of ASP. The purchase
price for ASP was allocated to the assets acquired and liabilities
assumed based on the estimated fair values at the date of acquisition as
follows:
(Millions of Dollars)
PURCHASE PRICE:
Debt assumed less cash $ 704.8
Other long term liabilities assumed 32.4
Stock issued 1,931.3(1)
Merger cost 32.9
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2,701.4
FAIR MARKET VALUE OF ASSETS AND
LIABILITIES ACQUIRED
Net working capital 107.9
Property, Plant and equipment 368.0
Investments and other non current 2.2
Deferred taxes - non current (38.0)
Intangible assets 267.0
In-process research and development 732.3
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Purchase Price over
Fair Value of Net Assets Acquired (Goodwill) $ 1,262.0
1) Based on the average share price of Autoliv AB on the Stockholm
Stock Exchange of SEK 267.5 - two days prior and two days post
announcement of the combination on September 30, 1997 (or
$40.41/share based on an exchange rate of $1 = SEK 6.62). The
issuance of 47,803.738 new shares results in a purchase price
for ASP of $1,931.3 million.
The excess of the purchase price over the fair value of net assets
acquired has been recorded as goodwill. Independent appraisals have been
used in establishing the fair market values.
The In-process research and development is charged to income in May, 1997
as a non-tax deductible one-time item. The intangible assets and goodwill
amortization will also be non deductible.
The estimated life and yearly amortization using the straight-line method
are:
Yearly
amortization
Intangible assets:
Assembled work force 8.0 years 1.4
Specific Patent Technology 7.5 " 9.0
Common Technology 25.0 " 7.6
Goodwill 40 " 31.5
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Total 49.5
Autoliv has not yet completed the appraisal of the assets of ASP. The
allocation of the purchase price and the proforma information presented
below may be adjusted once complete information on the fair market value
of ASP's assets and liabilities is developed.
The following unaudited proforma statements present the consolidated
results of operation as if the acquisition had occurred at the beginning
of the periods presented and does not purport to be indicative of what
would have occurred, had the combination been made as of those dates or
of results which may occur in the future.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in millions, except per share data)
Three Months April - June Six Month January - June
1997(1) 1996(2) 1997(1) 1996(2)
Net sales
- - Airbag products $ 607.1 $ 583.7 $ 1 208.4 $ 1 165.0
- - Seat belt products 242.4 239.6 475.3 471.9
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TOTAL NET SALES 849.5 823.3 1 683.7 1 636.9
Cost of sales -665.2 -652.8 -1 303.8 -1 291.4
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GROSS PROFIT 184.3 170.5 379.9 345.5
Selling, general &
administrative expense -41.3 -37.2 -80.9 -71.3
Research & development -36.9 -34.8 -74.2 -67.7
Amortization of intangibles -14.2(3) -15.1(3) -29.5(3) -29.8(3)
Other income, net -0.9 2.8 -0.5 5.4
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OPERATING INCOME 91.0 86.2 194.8 182.1
Equity in earnings of affiliates 2.2 0.7 4.9 2.0
Interest income 2.6 1.5 3.9 3.2
Interest expense -12.7 -13.4 -26.6 -26.5
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INCOME BEFORE TAXES 83.1 75.0 177.0 160.8
Income taxes -34.0 -31.2 -72.6 -68.1
Minority interests in subsidiaries -0.6 -0.3 -0.9 -0.3
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NET INCOME BEFORE ONE-TIME ITEMS 48.5 43.5 103.5 92.4
EARNINGS PER SHARE 0.47 0.42 1.01 0.90
Write-off of acquired R&D -732.3(3) - -732.3(3) -
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REPORTED NET INCOME $ -683.8 $ 43.5 $ -628.8 $ 92.4
1) Pro forma except May and June 1997
2) Pro forma
3) Based on updated independent appraisal
3. Inventories
Inventories are stated at lower of cost (principally FIFO) or market. The
components of inventories were as follows:
June 30, 1997 Dec. 31, 1997
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Autoliv AB
Finished products
and work in progress $65.0 mil. 45.3
Raw material 88.3 55.5
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153.3 100.8
4. Borrowings
Prior to the Combination on May 1, 1997, ASP obtained a new credit
facility of $850 million with a group of banks. ASP borrowed $750 million
under this facility which it contributed to New Morton in connection with
the Spin-Off. ASP currently utilizes a commercial paper program to cover
its financing needs. The amount available under the new credit facility
remains unchanged at $850 million.
5. Other recent developments
Mr Fred Musone, Chief Operating Officer of Autoliv, Inc., and Robert
Rapone, Vice President - Production of Autoliv, Inc., elected to end
their employment with the company effective June 10, 1997. Following such
resignations, Mr. Musone and Mr. Rapone became entitled to amounts owed
in accordance with the provisions in their respective employment
agreements.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Whereas the data provided under Item 1 in the Consolidated Statement of
Income, Consolidated Balance Sheet and Consolidated Statement of Cash
Flows reflect the results of Autoliv, Inc. for all periods subsequent to
April 30, 1997 and for Autoliv AB for all periods prior to May 1, 1997,
the analysis provided below is based on actual results of Autoliv, Inc.
for all periods subsequent to April 30, 1997 and pro forma results of
Autoliv, Inc. for all periods prior to May 1, 1997.
RECENT ACQUISITION
On May 1, 1997, Autoliv, Inc. consummated the transactions described in
the Prospectus, pursuant to which Autoliv, Inc, became a holding company
which conducts operations through its two subsidiaries - Autoliv AB and
Autoliv ASP Inc. In connection with such transactions, on May 1, 1997,
the shares of Autoliv, Inc. began trading on the New York Stock Exchange
under the symbol "ALV" and Swedish Depositary Receipts representing
shares of Autoliv, Inc. began trading on the Stockholm Stock Exchange
under the symbol "ALIV".
Prior to the Combination, Morton borrowed $750 million which it
contributed to New Morton in connection with the Spinoff. Such borrowing
became a liability of Autoliv ASP Inc. as a result of the Combination.
Autoliv, Inc. recognized goodwill in the amount of $1.2 billion in
connection with the Combination.
THREE AND SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE AND SIX
MONTHS ENDED JUNE 30, 1996
Consolidated net sales for the quarter ended June 30, 1997 increased by
3% to $849 million over the corresponding quarter 1996. Excluding the
impact of the translation effect of the strengthening of the US dollar,
sales grew by about 10% (65% of the company's sales are outside the
United States). Prices have continued to decline. The production of light
vehicles in Europe and the U.S., Autoliv's main markets, is estimated to
have grown by 2%.
Posted sales of airbag products (including steering wheels) rose 4%,
while airbag product sales adjusted for currency effects and corporate
acquisitions grew particularly fast with shipments to Audi, BMW, Mazda,
Mitsubishi, Nissan, Porsche, Renault, Subaru, Toyota, Volkswagen and
Volvo.
Posted sales of seat belt products (including seat sub-systems) rose 1%,
while sales excluding currency effects grew 12%. The improvements are
explained by continued strong sales of pretensioners, new contracts and
slightly higher market shares in key markets.
Net sales for the six-month period January - June, 1997 rose 3% to $1,684
million over the corresponding period 1996. Adjusted for currency
translation effects and corporate acquisitions, sales grew by about 9%.
Posted sales for airbags and seat belts increased 4% and 1%,
respectively, while the growth rates excluding currency effects and
acquisitions were 8% and 11%, respectively.
The Company's net income before a one-time write-off for the six-month
period ended June 30, 1997, rose 12% on a comparable basis to $103.5
million and earnings per share to $1.01, compared to $92.4 million and 90
cents, respectively, for the corresponding period 1996.
In accordance with the information provided in the Prospectus, posted net
income has been charged by $732 million to reflect the one-time write-off
of purchased in-process research and development. This amount - as well
as the amount for acquired patents and patent-supported technology - has
been updated from the amount reflected in the Prospectus following an
independent appraisal. The goodwill and patent amortizations have been
adjusted accordingly, from $46.4 million to $49.5 million per year.
The operating margin was 10.7% for the quarter ended June 30, 1997 and
11.6% for the six-month period ended June 30, 1997, compared to 10.5% and
11.1%, respectively, for the corresponding periods 1996. Return on equity
was 13% for the twelve months ended June 30, 1997 compared to 11% for the
twelve months ended June 30, 1996.
The tax rate is 41% for both the quarter and the six-month period ended
June 30, 1997. Excluding non-deductible amortizations, the tax rate is 36
percent.
LIQUIDITY AND SOURCES OF CAPITAL
Cash provided by operations increased from $172 million to $221 million
between the six-month periods ended June 30, 1996 and 1997. Capital
expenditures amounted to $104 million for the six month period ended June
30, 1997 compared to $123 million for the six month period ended June 30,
1996. Acquisitions of business represented only $4 million for the six
month period ended June 30, 1997 compared to $65 million for the six
month period ended June 30, 1996. Therefore cash flow after operating and
investing activities improved by $129 million to $114 million between the
two six-month periods.
As of June 30, 1997, net debt is $625 million, a decrease by $79 million
from the beginning of the year. As of June 30, 1997, net debt to total
capital stood at 27% compared to 30% at the beginning of the year.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K. Autoliv, Inc. filed the following reports on
Form 8-K during the second quarter of 1997:
(1) Report, dated April 28, 1997, containing press release announcing
preliminary results, and extension, of Exchange Offer.
(2) Report, dated April 30, 1997, containing press release announcing
results of Exchange Offer.
(3) Report, dated May 1, 1997, containing press release announcing
consummation of Combination.
(4) Report, dated June 12, 1997, containing press release announcing a
joint venture.
(5) Report, dated June 12, 1997, containing press release announcing
management change at Autoliv, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Autoliv, Inc.
(Registrant)
Date: August 11, 1997 By: /s/ Wilhelm Kull
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Wilhelm Kull
Chief Financial Officer