Autoliv: Financial Report January - March
2001
-- Sales stable despite global car production down 7%
-- Income before taxes $40 million
-- Net income $21 million
-- Earnings per share $.21
STOCKHOLM, Sweden, April 19 Autoliv Inc.
(SSE: ALIV), the world wide leader in automotive safety systems, reported
better-than-expected sales and earnings for the quarter ended March 31, 2001,
despite the fact that the negative trends from the fourth quarter last year
(i.e. falling car production and higher material costs) have continued.
Sales improved by 8% compared to the most recent quarter and stood
unchanged at $1.1 billion compared to the first quarter previous year. Income
before taxes improved by 12%, net income by 7% and earnings per share by 5%
from the most recent quarter. Compared to the year-ago quarter, income before
taxes declined by 58% to $40 million, net income by 62% to $21 million and the
earnings per share by 61% to $.21.
Sales
Consolidated net sales during the three-month period ended March 31, 2001,
amounted to $1,081 million. This was the same level as recorded in the first
quarter last year, which was the best sales quarter ever. Compared to the
preceding quarter sales rose by 8%.
Sales of newly acquired companies (net of divestitures) added 8% to
consolidated sales in the first quarter primarily as a result of the
acquisitions of OEA and NSK's North American seat belt operations in the
second quarter last year. Currency translation effects reduced consolidated
reported sales by 5%. Consequently, Autoliv's organic sales (i.e.
consolidated sales adjusted for currency effects and
acquisitions/divestitures) declined by 3%.
This compares favorably with global light vehicle production, which is
estimated to have fallen by 7%. Autoliv's sales were particularly strong in
Europe, where sales rose by 7% in local currencies although European car
production did not increase. In U.S. dollars, Autoliv's European sales
declined, however, by 1% due to the weak Euro. In North America, Autoliv's
organic sales declined by 12% while light vehicle production fell by 16%. For
Autoliv's most important customers in North America (Chrysler, Ford and
General Motors) the reduction was over 20%. Including acquisitions, Autoliv's
North American sales increased slightly.
Autoliv's relatively strong sales performance was mainly driven by the
stronger-than-expected car production in Europe and the introduction of
side-impact airbags such as the Inflatable Curtain, as well as by market share
gains in the U.S. seat belt market and the global steering wheel market.
Sales of airbag products (incl. steering wheels) declined by 3% to
$757 million from $779 million. Currency effects reduced reported sales by
4%. Acquisitions increased sales by 8%. Consequently, organic sales declined
by 7% as a result of the weak U.S. car production and negative customer mix.
The negative factors have been partly offset by Autoliv's strong performance
in side airbag and steering wheel products, where consolidated sales rose by
30% and 15%, respectively. Even in the depressed U.S. market, sales of these
products rose.
Sales of seat belt products (incl. seat sub-systems) grew by 6% to
$324 million from $305 million. Currency effects reduced reported sales by
7%, while acquisitions in creased sales by 7%. Consequently, organic sales
growth was 6%. This growth in sales was mainly driven by market share gains
in the U.S. and break throughs in the U.S. for Autoliv's seat belt
pretensioners. Including the acquisition of NSK's North American seat belt
business, Autoliv's seat belt sales in North America doubled.
Earnings
Gross profit during the quarter decreased by $43 million to $186 million
and the gross margin fell to 17.2% from 21.0%. Compared to the fourth quarter
2000, however, the gross margin improved from 15.5% and the gross profit
improved by $30 million or by 19%. The deterioration from the previous year
was primarily due to the fall in U.S. vehicle production, higher material
prices and material content, as well as to an unfavorable product mix. The
acquisitions of OEA and NSK's seat belt operations in North America have also
reduced Autoliv's gross margin.
The improvement from the fourth quarter was driven by sales performance
that has been better than expected. The implementation of the action program
that Autoliv announced at the beginning of this year has been faster than
originally anticipated. Most of the benefits will materialize gradually later
in the year. A reduction in the number of supply chain issues has also
contributed to the gross profit and margin improvements.
Operating income declined by $45 million to $60 million and the operating
margin fell to 5.5% from 9.6%. Compared to the fourth quarter 2000, however,
the margin rose from 4.9% and operating income improved by $11 million or by
22%. The decrease from previous year is principally due to the
above-mentioned $43 million decline in gross profit. The R&D expenditures
were unchanged in relation to sales from the first quarter 2000 despite last
year's strong order intake. The operating margin of the newly acquired
companies was the same as for the rest of the group.
Compared to the first quarter 2000, net financial expense doubled to
$21 million, mainly as a result of higher debt incurred for acquisitions and
the share repurchase program but also due to higher interest rates. The
financial net was also impacted by a $3 million charge for the devaluation of
the Turkish Lira.
The effective tax rate increased to 42% from 41% in the first quarter
2000. This increase reflects the fact that profits have fallen while
non-deductible goodwill amortization remained almost unchanged.
Earnings per share fell by $.33 to $.21 from the corresponding quarter
previous year but improved by $.01 from the preceding quarter. Of the
decline, five cents is due to currency exchange effects (including both
translation and transaction effects). Earnings per share declined by one cent
due to the higher effective tax rate.
Cash Flow and Balance Sheet
During the quarter, the operations generated $66 million in cash compared
to $70 million during the same quarter of 2000. Net capital expenditures
amounted to $66 million and $48 million, respectively. The largest capital
expenditures were expansion of the production capacity for inflators, airbag
assembly and weaving capacity for the Inflatable Curtain.
After operating and investing activities, operations used $14 million in
cash. Investments in shares accounted for $18 million. During the
corresponding period in 2000, operations generated $17 million in cash.
Net debt fell during the quarter by $7 million to $1,002 million and gross
interest-bearing debt increased by $20 million to $1,111 million.
The net debt to capitalization ratio stood unchanged during the quarter at
35%. The equity has been reduced by currency translation effects as a result
of the stronger U.S. dollar.
Employees
The number of employees remained unchanged 28,000 during the quarter. A
reduction of 200 in high-cost countries was offset by a similar increase in
low labor-cost countries. The headcount reduction program in the U.S. has
been successfully implemented. Consequently, the total headcount in the U.S.
has been reduced during the last six months by more than 900 (approx. 10%),
including temporary hourly workers. In addition, nearly 100 employees are
currently on furlough.
Significant Events
-- Autoliv has exercised one of its options and increased its holding in
the European inflator company Livbag to 83% from 66% for approximately
$12 million. Autoliv has also invested $6 million in the new joint
venture Autoliv-Mando Corporation in Korea.
-- The machined parts business in Utah, which manufactures steel
components for inflators, has been sold as a result of Autoliv's
strategy to divest non-core businesses. Last year the business had
$11 million in sales and 60 employees. Over the last two years,
Autoliv has sold or closed nine non-core business units with 1,300
employees. In addition to reducing costs, these transactions have
released over $60 million that was tied up in the operations and their
buildings.
-- In the new European crash test program, Euro NCAP, Renault's new
Laguna, to which Autoliv is the exclusive supplier of safety systems,
became the first vehicle to receive the highest possible rating. The
vehicle has Autoliv's patented Inflatable Curtain for head protection
in side impacts, Autoliv's new frontal airbag system (for which Autoliv
received the Annual Award of the British Automobile Association) and
Autoliv's side airbags for chest protection also in the back seats.
This car is also the first vehicle in the world in which the driver's
seat belt has two pretensioners. The safety electronics and the
related software program are also sup plied by Autoliv.
-- Magnus Lindquist has been appointed new Chief Financial Officer and
Vice President Finance of Autoliv Inc. Currently, he holds the same
position at Perstorp AB, a public Swedish-based chemistry and materials
technology corporation. He will assume his new position in July.
-- The Annual General Meeting of Stockholders will be held in Chicago on
April 24, 2001. Holders of record on February 26, are entitled to be
present and vote at the Meeting. Stockholders are urged to return
their proxy cards whether or not they plan to attend the meeting. In
conjunction with the meeting, the Chairman of the Board, Mr. Gunnar
Bark, will retire from the Board. Mr. S. Jay Stewart has been elected
new Chairman.
Prospects
Assuming that the current exchange rate for the U.S. dollar prevails for
the rest of the year, Autoliv's sales will be negatively impacted by 4% and 2%
during the second quarter and the rest of the year, respectively.
Acquisitions are expected to add 2% to sales in the second quarter. The
supply value of safety systems per vehicle is expected to continue to grow.
After the cuts in car inventories during the first quarter, North American
vehicle production is expected to recover (according to market institutes) by
8% during the second quarter, but it will still be 10% below the level
recorded for the second quarter last year. During the remaining nine months,
it is expected to be 6% below the corresponding level last year. For
Autoliv's main U.S. customers the discrepancy is expected to be some what
greater. In Europe, vehicle production has been expected to be flat in the
second quarter (which would imply a 2% decrease from the first quarter 2001)
and increase by 2% in the second half of the year. Recent events, however,
indicate that car production in Europe may start to weaken.
Material prices have remained high, but on the spot markets the prices for
several commodities have fallen. Provided that these price reductions feed
through to the manufactured components that Autoliv buys, the potential to
reduce costs should increase later this year. Autoliv's costs will also be
reduced by transferring production to low labor-cost countries and by further
implementing the action program that was announced at the beginning of the
year. The program includes a reduction of the headcount by more than 1,000 in
the U.S. or approximately 12% and consolidation of the manufacturing
structure.
Dividend and Next Report
A dividend of 11 cents per share will be paid on June 7 to Shareholders of
record as of May 10. The ex-date, when the shares will trade without the
right to the dividend, is May 8.
The next quarterly report for the period April 1 through June 30 will be
published on July 26, 2001.
"Safe Harbor Statement"
Statements in this report that are not statements of historical fact may
be forward-looking statements, which involve risks and uncertainties,
including -- but not limited to -- continued fluctuation of foreign
currencies, fluctuations in vehicle production schedules for which the company
is a supplier, continued uncertainty in program awards and performance, the
financial results of companies in which Autoliv has made technology
investments, and other factors discussed in Autoliv's filings with the
Securities and Exchange Commission.
KEY RATIOS
Quarter Latest
Jan. - March 12 months Full Year
2001 2000 April 00 - March 01 2000
Earnings per share a) $.21 $.54 $1.35 $1.67
Equity per share 19.42 19.16 19.42 19.49
Working capital,
$ in millions 373 272 373 365
Capital employed,
$ in millions 2,901 2,581 2,901 2,919
Net debt,
$ in millions 1,002 619 1,002 1,009
Net debt to equity, % 53 33 53 53
Net debt to
capitalization, % b) 35 24 35 35
Gross margin, % c) 17.2 21.0 18.1 19.1
EBITDA-margin, % d) 12.3 15.7 13.9 14.8
Operating/EBIT
margin, % e) 5.5 9.6 7.2 8.2
Return on equity, % 4.4 11.4 7.0 8.7
Return on capital
employed, % 8.3 15.4 10.5 12.4
Average number of
shares in millions a) 97.8 102.4 99.8 100.9
Number of shares at
period-end in
millions a) 97.8 102.3 97.8 97.8
Number of employees
at period-end 28,000 24,600 28,000 28,000
a)Assuming dilution
b)Net debt in relation to net debt and equity
c)Gross profit relative to sales
d)Income before interest, taxes, depreciation and amortization
relative to sales
e)Operating income relative to sales
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share data)
Quarter Latest
Jan. - March 12 months Full Year
2001 2000 April 00 - March 01 2000
Net sales
- Airbag products $757.1 $778.7 $2,912.7 $2,934.3
- Seat belt products 323.5 305.3 1,200.0 1,181.8
Total net sales 1,080.6 1,084.0 4,112.7 4,116.1
Cost of sales -895.0 -855.9 -3,369.1 -3,330.0
Gross profit 185.6 228.1 743.6 786.1
Selling, general &
administrative expense -49.9 -49.2 -190.7 -190.0
Research & development -59.1 -58.9 -195.9 -195.7
Amortization of
intangibles -17.1 -15.9 -67.9 -66.7
Other income, net 0.0 0.2 5.6 5.8
Operating income 59.5 104.3 294.7 339.5
Equity in earnings
of affiliates 0.9 0.7 4.5 4.3
Financial income 2.5 2.8 9.3 9.6
Financial expense -23.3 -12.5 -73.6 -62.8
Income before taxes 39.6 95.3 234.9 290.6
Income taxes -16.7 -38.8 -95.1 -117.2
Minority interests
in subsidiaries -2.1 -1.3 -5.5 -4.7
Net income 20.8 55.2 134.3 168.7
Earnings per share $.21 $.54 $1.35 $1.67
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
March 31 December 31
2001 2000
Assets
Cash & cash equivalents $109.5 $82.2
Accounts receivable 886.0 835.4
Inventories 322.3 333.5
Other current assets 88.6 97.9
Total current assets 1,406.4 1,349.0
Property, plant & equipment, net 852.9 867.2
Intangible assets, net (mainly goodwill) 1,723.9 1,739.3
Other assets 113.0 112.3
Total assets 4,096.2 4,067.8
Liabilities and shareholders' equity
Short-term debt 387.5 353.8
Accounts payable 529.6 540.3
Other current liabilities 394.7 361.8
Total current liabilities 1,311.8 1,255.9
Long-term debt 723.7 737.4
Other non-current liabilities 139.9 142.4
Minority interest in subsidiaries 21.7 22.0
Shareholders' equity 1,899.1 1,910.1
Total liabilities and shareholders' equity $4,096.2 $4,067.8
Working capital, $ in millions 373 365
Capital employed, $ in millions 2,901 2,919
Net debt, $ in millions 1,002 1,009
SELECTED CASH-FLOW ITEMS
(Dollars in millions)
Quarter Latest
Jan. - March 12 Months Full Year
2001 2000 April 00 - March 01 2000
Net income $20.8 $55.2 $134.3 $168.7
Depreciation
and amortization 73.1 65.6 276.6 269.1
Deferred taxes and other -4.0 -1.9 17.6 19.7
Change in
working capital -23.5 -48.7 -166.5 -191.7
Net cash provided
by operations 66.4 70.2 262.0 265.8
Capital
expenditures, net -65.9 -48.3 -234.1 -216.5
Acquisitions of
businesses, net -14.9 -4.6 -221.7 -211.4
Net cash after
operating and
investing activities $-14.4 $17.3 $-193.8 $-162.1
