Autoliv Financial Report: Q1 1998
22 April 1998
Autoliv Financial Report - January - March 1998; Price Pressure on Airbags Affected Quarter
STOCKHOLM, Sweden, April 22 -- Autoliv Inc.
, a worldwide leader in automotive safety, reported sales and income
before taxes of $838 million and $71 million, respectively, for the
three-month period ended March 31, 1998, as compared to first quarter
prior-year sales and income before taxes of $834 million and $94 million
(pro forma). The net income and earnings per share were $42 million and
$0.41, respectively, in the first quarter, compared to $55 million and
$0.54 for the year-ago period.
The company had already announced after the previous quarter that this
year would be affected by strong pricing pressure and also warned that the
first quarter could be negatively impacted by currency exchange rates. In
addition, the gross margin for the corresponding quarter in 1997 was
exceptionally high.
Sales
Posted consolidated net sales for the first quarter 1998 were $838 million
compared to $834 million during the first quarter 1997. The underlying sales
increase (i.e. excluding currency effects and acquisitions) was 3%. Since
approximately 70% of Autoliv's business is outside North America, a major
portion of sales was negatively affected by the stronger U.S. dollar.
The production of light vehicles is estimated to have grown by 6% in
Europe and by 2% in North America, while light vehicle production in Japan is
estimated to have fallen by 6%. The average increase in the triad was 1.5%.
Posted sales of airbag products (incl. steering wheels) amounted to
$584 million, compared to $601 million during the first quarter 1997.
Adjusted for currency effects and corporate acquisitions, the decrease was 1%.
Volumes have continued to rise outside the U.S. (airbags are mandated in the
U.S). Price pressure has, however, at the same time been strong, especially
in the U.S. The demand for side-impact airbags has continued to increase
sharply, mainly as a result of higher installation rates. Currently, Autoliv
ships this product to 18 car manufacturers split between more than
60 different car models.
Posted sales of seat belt products (incl. seat sub-systems) grew by 9% to
$254 million, while sales excluding currency effects and acquisitions grew by
12%. Corporate acquisitions accounted for 4 percentage points of the reported
increase. The significant increase in seat belt sales is due to new products
and a higher sales volume. For instance, the latest pretensioner generation
introduced last year made it possible for Autoliv to increase its already high
market share.
Earnings
Due to the strong price pressure and the stronger U.S. dollar, operating
income declined to $83 million from $104 million for the corresponding quarter
of 1997. Selling, general and administrative expense has increased as a
result of the consolidation of the newly acquired companies (Marling,
Autoliv-Nokia and Autoliv Argentina). The research and development expense
has also been affected by the acquisitions, but in addition, the R&D
expenditures have risen as a result of the safety radar system, smart airbag
systems and other new projects for long-term growth. The weak Asian market
also had a negative impact on both sales and earnings.
The gross margin was 21.8% and the operating margin 9.9%, compared to
22.1% and 10.9% for the fall year 1997.
The effective tax rate was 40.0%, compared to 40.8% for the full year
1997. Excluding non-deductible amortization, the tax rate was 36%.
Cash Flow and Balance Sheet
The cash generated by operations amounted to $60 million. Of that amount,
$54 million was used for capital expenditures and $3 million for acquisitions
of businesses. The most important corporate acquisition was Nokia's
automotive-related electronics business.
Net debt increased by $10 million to $656 million from the beginning of
the year. Net debt to equity stood unchanged at 38% as of March 31, compared
to the beginning of the year.
Employees
The number of employees increased by 700 during the quarter to 18,500.
Almost the entire increase is estimated to come from continued vertical
integration and acquisitions.
Significant Events
-- In order to further enhance Autoliv's position in electronics the
remaining 50% of the shares in Autoliv-Nokia and the other parts of
Nokia's automotive-related electronics business were acquired. The
operations have 370 employees and sales in excess of $35 million to
non-Autoliv companies. These operations are consolidated as of
January 1.
-- Following the acquisition last October of the Marling Group, Autoliv
has now sold four of the five Marling units not related to seat belt
webbing, Marling's core business. The divestitures became effective as
of January 1.
-- As of April 1, Autoliv has finalized the agreed-upon acquisition of the
assets of Sensor Technology Ltd., a Japanese airbag company.
-- The holding in Autoliv-Cankor in Turkey has been increased from 50% to
90%.
-- A branch office has been established in Seoul to globally coordinate
Autoliv's expanding business with the Korean automotive industry.
-- Autoliv has secured its first contract for seat components in Russia.
Deliveries will start in September to Moskvitch. As part of the plans,
Autoliv will build its second plant in Russia, in addition to the
existing seat belt plant in Dubna, North of Moscow.
Dividend
A dividend of 11 cents per share will be paid on June 4 to Autoliv
stockholders of record as of May 7, 1998. Ex-date on the stock exchanges will
be May 5.
Report
This report has not been examined by the Company's auditors. The next
quarterly report will be published on July 23, 1998.
AUTOLIV INC.
KEY RATIOS (UNAUDITED)
Three-Months Jan.- Mar. Full Year
1998 1997(a) 1997(b)
Earnings per share
(basic and diluted) $0.41 $0.54 $1.81
Equity per share 16.86 -- 16.67
Net debt, $ in millions 656 -- 646
Net debt to equity, % 38 -- 38
Gross margin, % 21.8 23.4 22.1
Operating margin, % 9.9 12.4 10.9
Return on equity, %* 10 -- 11
Return on capital employed, %* 14 -- 15
Return on total capital, %* 10 -- 11
Number of employees at period-end18,500 -- 17,800
Number of shares, diluted
(in millions) 102.2 -- 102.2
* On a comparable basis
AUTOLIV INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in millions, except per share data)
Quarter Jan. - Mar. Full Year
1998 1997(a) 1997(b)
Net sales
- Airbag products $583.6 $601.3 $2,316.4
- Seat belt products 254.3 232.9 940.4
Total net sales 837.9 834.2 3,256.8
Cost of sales (655.1) (638.7) (2,537.0)
Gross profit 182.8 195.5 719.8
Selling, general &
administrative expense (39.4) (36.7)(c) (154.7)(c)
Research & development (46.1) (40.3)(c) (152.7)(c)
Amortization of intangibles (15.2) (15.2) (59.6)
Other income, net 0.7 0.4 3.2
Operating income 82.8 103.7 356.0
Equity in earnings of affiliates 1.8 2.7 10.3
Interest income 1.6 1.3 7.1
Interest expense (15.5) (13.8) (55.9)
Income before taxes 70.7 93.9 317.5
Income taxes (28.3) (38.6) (129.4)
Minority interests in subsidiaries -- (0.3) (3.2)
Net income before one-time items 42.4 55.0 184.9
Earnings per share 0.41 0.54 1.81
Write-off of acquired R&D -- -- (732.3)(d)
Reported net income $42.4 $55.0 $(547.4)
(a) Pro forma
(b) Where of January - April is reported as pro forma
(c) Pro forma numbers reclassified
(d) 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 shown as operating expense and a loss per share of $6.70
is reported.
AUTOLIV INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in millions)
Mar. 31 Dec. 31
1998 1997
Assets
Cash & cash equivalents $250.1 $152.0
Accounts receivable 629.3 569.2
Inventories 201.9 197.8
Other current assets 74.0 55.2
Total current assets 1,155.3 974.2
Property, plant & equipment, net 740.3 727.2
Intangible assets, net (mainly goodwill) 1,674.5(a) 1,694.5
Other assets 29.4 34.6
Total assets $3,599.5 $3,430.5
Liabilities and shareholders' equity
Short-term debt $229.2 $186.2
Accounts payable 397.4 385.3
Other current liabilities 462.3 428.0
Total current liabilities 1,088.9 999.5
Long-term debt 676.6 611.8
Other non-current liabilities 97.9 100.8
Minority interest in subsidiaries 13.5 14.4
Shareholders' equity 1,722.6 1,704.0
Total liabilities and shareholders' equity $3,599.5 $3,430.5
a) Whereof goodwill $1,330 million, and acquired patent and
patent-supported technology $253 million from the merger
AUTOLIV INC.
SELECTED CASH-FLOW ITEMS (UNAUDITED)
(Dollars in millions)
Three Months Jan. - Mar. Full Year
1998 1997(a) 1997(b)
Net income $42.4 $55.0 $(547.4)
Write-off of acquired R&D -- -- 732.3
Depreciation and amortization 54.3 58.5 207.7
Deferred taxes and other 2.6 (2.7) (7.7)
Change in working capital (39.4) (2.4) 55.6
Net cash provided by operating activities59.9 108.4 440.5
Capital expenditures (53.7) (55.1) (215.8)
Acquisitions of businesses, net (3.3) -- (44.7)
Net cash after operating and
investing activities $2.9 $53.3 $180.0
a) Pro forma
b) Whereof January - April is reported as pro forma
SOURCE Autoliv Inc.