SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
---------------
For the period ended June 30, 1998
AUTOLIV, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0378542
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Trade Center
Klarabergsviadukten 70 Box 70381
S-107 24 Stockholm, Sweden
(Address of principal executive offices)
Registrant's telephone number, including area code: 46 (8) 587 20 600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days.
Yes: X No:
------ -------
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: There were
approximately 102 million shares of Common Stock of Autoliv, Inc., par
value $1.00 per share, outstanding as of July 20, 1998.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
AUTOLIV, INC.
Consolidated Statement of Income (unaudited)
(dollars in millions except per share data)
Three Months ended Six Months ended
June 30, June 30, 1) June 30, June 30, 1)
1998 1997 1998 1997
Sales $ 877.9 $ 720.8 $ 1,715.8 $ 1,166.5
Cost of sales (684.9) (566.0) (1,340.0) (919.5)
------- ------- --------- ---------
Gross profit 193.0 154.8 375.8 247.0
Selling, administration and general
expense (39.1) (32.9) (78.6) (53.2)
Research and development expenses (45.5) (34.9) (91.7) (63.1)
Write-off of acquired R&D (732.3) (732.3)
Amortization of intangibles, (15.3) (10.0) (30.4) (12.9)
primarily goodwill
Other income - net 0.1 (0.5) 0.9 0.2
------- ------- --------- ---------
Operating income (loss) 93.2 (655.8) 176.0 (614.3)
Equity in earnings of 2.4 2.1 4.2 4.2
affiliates
Interest income 3.1 1.4 4.7 2.5
Interest expense (14.4) (8.7) (29.9) (10.1)
------- ------- ---------- ----------
Income (loss) before income taxes 84.3 (661.0) 155.0 (617.7)
Income taxes (33.5) (27.8) (61.7) (42.2)
Minority interests in subsidiaries (0.2) (0.6) (0.2) (1.0)
------- ------- ---------- ----------
Net income (loss) 50.6 (689.4) 93.1 (660.9)
Net income (loss) per share - assuming
dilution 0.50 (7.97) 0.91 (9.34)
Number of shares used in computing 102.2 86.5 102.2 70.7
per share amount
Number of shares outstanding 102.2 102.2 102.2 102.2
See notes to consolidated financial statements
1) Autoliv AB and subsidiaries prior to April 30, 1997;Autoliv Inc,
for May 1 to June 30, 1997
AUTOLIV, INC.
Consolidated Balance Sheet (unaudited)
(dollars in millions)
June 30, December 31,
1998 1997
------------ ------------
ASSETS
Cash and cash equivalents $ 239.7 $ 152.0
Receivables, less allowances 631.9 569.2
Inventories 229.7 197.8
Refundable and deferred income tax
benefit 25.1 20.5
Prepaids 38.7 34.7
-------- --------
Total current assets 1,165.1 974.2
Property, plant and equipment, net 776.8 727.2
Investments and other receivables 27.4 34.6
Intangible assets, net (mainly
acquisition goodwill) 1,662.5 1,694.5
-------- --------
TOTAL ASSETS 3,631.8 3,430.5
======== ========
LIABILITIES AND EQUITY
Short-term debt 225.1 186.2
Accounts payable 421.1 385.3
Accrued expenses 338.9 326.1
Other current liabilities 74.1 69.6
Income taxes 39.1 32.3
-------- --------
Total current liabilities 1,098.3 999.5
Long-term debt 664.7 611.8
Other noncurrent liabilities 93.7 100.8
Minority interests in subsidiaries 12.1 14.4
-------- --------
Total noncurrent liabilities
and minority interests 770.5 727.0
Common stock, par value $1 per share 102.2 102.2
Additional paid-in capital 1,938.5 1,938.5
Retained earnings (accumulated
deficit) and foreign currency
translation adjustments (277.7) (336.7)
-------- --------
Total shareholders' equity 1,763.0 1,704.0
-------- --------
TOTAL LIABILITIES AND EQUITY 3,631.8 3,430.5
======== ========
See notes to consolidated financial statement
AUTOLIV, INC.
Consolidated Statement of Cash Flows (unaudited)
(dollars in millions)
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 (1)
OPERATING ACTIVITIES
Net Income $ 93.1 $ 660.9
Adjustments to reconcile net income to
net cash provided by operating activities:
Write-off of acquired R&D 732.3
Depreciation and amortization 110.0 63.4
Deferred income taxes 0.8 0.5
Undistributed earnings from affiliated
companies (1.6) (3.2)
Changes in operating assets and liabilities
Receivables and other assets (60.9) (26.7)
Inventories (27.3) 15.1
Accounts payable and accrued expenses 36.5 7.2
Income taxes 5.8 11.1
Other - (7.8)
------ ------
Net cash provided by operating activities 156.4 131.0
INVESTING ACTIVITIES
Expenditure for property, plant and equipment (125.3) (66.0)
Acquisition of businesses and
investments in affiliated companies (10.2) (3.9)
Other 4.0 0.3
------ ------
Net cash used for investing activities (131.6) (69.6)
Cash flow before financing 24.8 61.4
FINANCING ACTIVITIES
Increase / (decrease) in short-term debt 36.9 (55.4)
Increase / (decrease) in long-term liabilities 54.9 (3.0)
Decrease in minority interest (2.2) (4.0)
Dividends paid (22.5) (20.5)
Other - net (2.3) (6.3)
------ ------
Net cash provided by (used for) financing
activities 64.8 (89.2)
Effect of exchange rate changes on cash (2.0) (7.8)
INCREASE / (DECREASE) IN CASH AND
CASH EQUIVALENTS 87.7 (35.6)
Cash and cash equivalents at beginning of
period 152.0 176.9
------ ------
Cash and cash equivalents at end of period 239.7 141.3
====== ======
- - --------------
See notes to consolidated financial statements
1) Autoliv AB and subsidiaries prior to April 30, 1997;Autoliv Inc,
for May 1 to June 30, 1997 Autoliv AB and subsidiaries
Autoliv, Inc.
Notes to Consolidated Financial Statements
(unaudited)
JUNE 30, 1998
1. Basis of Presentation
The accompanying interim unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Rule 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all adjustments considered necessary for a fair presentation
have been included in the financial statements. All such adjustments are
of a normal recurring nature.
For comparison purposes the proforma income statement second quarter 1997
and proforma full year 1997 is included below.
For a further description of the combination on May 1, 1997 of Autoliv AB
with the Automotive Safety Products Business of Morton International, Inc.
("ASP"), see Autoliv Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997.
Statements in this report that are not historical facts are forward-looking
statements, which involve risks and uncertainties that could affect the
actual results of Autoliv Inc. ("Autoliv" or the "Company"). A description
of the important factors that could cause Autoliv's actual results to
differ materially from the forward-looking statements contained in this
report may be found in Autoliv's reports filed with the
Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF INCOME PROFORMA (UNAUDITED)
(Dollars in millions, except per share data)
Quarter Apr.- June Six Months Jan. - June Full Year
1998(1) 1997(2) 1998(1) 1997(2) 1997(3)
Net sales
- - - Airbag products $ 599.9 $ 607.1 1,183.5 1,208.4 2,316.4
- - - Seat belt products 278.0 242.4 532.3 475.3 940.4
---------- ---------- ---------- ---------- ----------
TOTAL NET SALES 877.9 849.5 1,715.8 1,683.7 3,256.8
Cost of sales (684.9) (665.2) (1,340.0) (1,303.8) (2,537.0)
---------- ---------- ---------- ---------- ----------
GROSS PROFIT 193.0 184.3 375.8 379.9 719.8
Selling, general &
administrative expense (39.1) (39.3) (78.6) (75.9) (154.7)
Research & development (45.5) (38.9) (91.7) (79.2) (152.7)
Amortization of intangibles (15.3) (14.2) (30.4) (29.5) (59.6)
Other income, net 0.1 (0.9) 0.9 (0.5) 3.2
---------- ---------- ---------- ---------- ----------
OPERATING INCOME 93.2 91.0 176.0 194.8 356.0
Equity in earnings of affiliates 2.4 2.2 4.2 4.9 10.3
Interest income 3.1 2.6 4.7 3.9 7.1
Interest expense (14.4) (12.7) (29.9) (26.6) (55.9)
---------- ---------- ---------- ---------- ----------
INCOME BEFORE TAXES 84.3 83.1 155.0 177.0 317.5
Income taxes (33.5) (34.0) (61.7) (72.6) (129.4)
Minority interests in subsidiaries (0.2) (0.6) (0.2) (0.9) (3.2)
---------- ---------- ---------- ---------- ----------
NET INCOME BEFORE ONE-TIME ITEMS 50.6 48.5 93.1 103.5 184.9
EARNINGS PER SHARE 0.50 0.47 4) 0.91 1.01 4) 1.81 4)
Write-off of acquired R&D - (732.3) 4) - (732.3) 4) (732.3)4)
---------- ---------- ---------- ---------- ----------
REPORTED NET INCOME $ 50.6 $ (683.8) $ 93.1 $ (628.8) (547.4)
1) Actual results
2) Pro forma results
3) Comprised of proforma results for January 1, 1997 to April 30, 1997
and actual results for May 1, 1997 to December 31, 1997.
4) Included in the audited financial statements for Autoliv, Inc.
(Autoliv AB and subsidiaries for period on and prior to
April 30, 1997 and Autoliv, Inc. for May 1 to December 31, 1997)
is the Write-off of acquired R&D reflected as operating expense
for which a loss per share of $6.70 is reported.
2. Inventories
Inventories are stated at lower of cost (principally FIFO) or market. The
components of inventories were as follows:
(Dollars in millions) June 30, 1998 Dec. 31, 1997
-------------- -------------
Finished products
and work in progress $ 99.5 mil. 113.0
Raw material 130.2 84.8
---- ----
229.7 197.8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Whereas the data provided under Item 1 in the Consolidated Statement of
Income, Consolidated Balance Sheet and Consolidated Statement of Cash
Flows reflect the results of Autoliv, Inc. for all periods subsequent to
April 30, 1997 and for Autoliv AB for all periods prior to May 1, 1997,
the analysis provided below is based on actual results of Autoliv, Inc.
for all periods subsequent to April 30, 1997 and pro forma results of
Autoliv, Inc. for all periods prior to May 1, 1997.
THREE AND SIX MONTHS ENDED JUNE 30, 1998 (ACTUAL) COMPARED WITH THREE AND
SIX MONTHS ENDED JUNE 30, 1997 (PROFORMA)
Autoliv, Inc. reported a 3 percent increase in sales to $878 million for
the three-month period ended June 30, 1998, and a 4 percent improvement
in earnings per share to $0.50, despite lower vehicle production,
continued severe pricing pressure on airbags and the strike at General
Motors.
Posted consolidated net sales for the second quarter 1998 rose by 3% to
$878 million from $850 million for the corresponding quarter 1997. The
underlying sales increase (i.e. excluding currency effects and acquisitions)
was also 3%. The strike at General Motors is estimated to have negatively
affected Autoliv's sales growth by about one percentage point.
The production of light vehicles is estimated to have grown by 3% in Europe,
while that production in North America and Japan is estimated to have fallen
by 6% and 17%, respectively. The average decline for the three regions
therefore exceeded 5%.
Autoliv's sales of airbag products (incl. steering wheels) amounted to
$600 million. Both posted sales and sales adjusted for currency effects and
corporate acquisitions declined by 1%. The pricing pressure has continued to
be severe, especially in the U.S. Unit sales have, however, continued to
grow sharply, particularly for passenger and side-impact airbags. The number
of customers for Autoliv's side-impact protection systems have increased to
21 vehicle manufacturers and the number of programs to more than 70 car
models.
Posted sales of seat belt products (incl. seat sub-systems) grew by 15% to
$278 million, while sales excluding currency effects and acquisitions grew
by 14%. The significant increase is mainly due to new products. The latest
pretensioner generation introduced last year has, for instance, made it
possible not only to increase sales of this innovative feature but also to
win sales for complete belt systems where the new pretensioner is an integra-
ted part of the retactor.
Net sales for the six-month period rose by 2% to $1,716 million over the
corresponding period 1997. Adjusted for currency effects and corporate
acquisitions, sales grew by 3%. Posted sales for airbags declined by 2% and
underlying sales by 1%. Posted sales for seat belt grew by 12% while the
growth excluding currency effects and acquisitions was 14%.
The Company's net income increased by 4% to $51 million as a result of
higher sales and better gross margin. This margin improved from 21.7% to
22.0% thanks to corporate acquisitions, higher vertical integration,
reduced material costs and productivity improvements. Selling, general and
administrative expense has also been kept unchanged. The R&D expense has,
however, increased by 19% to take advantage of Autoliv's many business
opportunities, not least in new areas such as pre- and post-crash systems.
The increase is also the effect of the consolidation of new companies. The
operating margin was, however, maintained at about 10.6%.
For the six-month period ended June 30 net income and earnings per share
declined by 10% to $93 million and $0.91, respectively, due to the decline
in the first quarter.
The effective tax rate was 40%, both for the quarter and the six-month
period, compared to 41% for the corresponding quarter and six-month period
1997. Excluding non-deductible amortization, the tax rate was 36%.
LIQUIDITY AND SOURCES OF CAPITAL
Cash generated by operations during the quarter amounted to $97 million,
after an increase in working capital of $7 million to $52 million. Of the
cash, $68 million was used for capital expenditures and $7 million for
acquisitions of businesses, compared to $48 million and $4 million, respec-
tively, during the second quarter 1997. Major capital expenditures were
used for increased capacity in initiators, inflators and airbag cushions,
and for the construction of a plant in Brazil and a steering wheel plant in
North America.
Net debt decreased by $3 million to $653 million during the quarter and
increased during the six-month period by $7 million. At the end of the
quarter, net debt to total equity stood at 37% compared to 38% at the
beginning of the year.
PART II - OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual Meeting of Stockholders of Autoliv, Inc. was held on April 21,
1998. At the meeting, the following matters were submitted to a vote of
the stockholders of Autoliv, Inc.
(1) The election of one director to hold office until the 2001
Annual Meeting of Stockholders. The vote was as follows:
Nominee For Witheld
------- --- -------
Per-Olof Aronsson 79,815,667 15,351,320
(2) The approval of the Corporation 1997 Stock Incentive Plan.
For Against Abstain
--- ------- -------
64,094,542 5,863,558 25,208,887
(3) The ratification of Ernst&Young AB as the Corporation's
independent auditing firm for the fiscal year ending
December 31, 1997, and for the fiscal year ending
December 31, 1998.
For Against Abstain
--- ------- -------
80,019,582 81,888 15,065,517
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K for the three months
ended June 30, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Autoliv, Inc.
(Registrant)
Date: Aug 14, 1998 By: /s/ Wilhelm Kull
-----------------------
Wilhelm Kull
Chief Financial Officer