Autoliv Financial Report July - September 2000
19 October 2000
Autoliv Financial Report July - September 2000
* Record number of program launches
* Sales up 9% and organic sales up 4% while global car production down 2%
* Earnings per share declined by $.03 due to currency effects to $.39
STOCKHOLM, Sweden, Oct. 19 Autoliv Inc.
(SSE: ALIV), the worldwide leader in automotive safety systems, reported a 9%
increase in sales to $955 million for the third quarter ending
September 30, 2000. This was achieved despite the fact that the underlying
market -- i.e. global vehicle production -- declined by 2%. Autoliv's
above-average growth rate is due to acquisitions and the steady increase in
the demand for car safety, which resulted in a 50% increase in the number of
program launches during the third quarter this year.
These launches, in combination with supply chain issues, have required
significant start-up efforts. At the same time, a substantial fall in the
demand from British customers has led to a structural imbalance in Autoliv's
U.K. operations. In addition, currency translation effects and newly acquired
companies have reduced earnings per share by $.03 each. Earnings per share
was $.39 compared to $.42 during the corresponding quarter last year.
Sales
The Quarter
Consolidated net sales grew by 9% to $955 million from $874 million.
Acquisitions increased sales by 12%, as a result of the consolidation of
Izumi, Norma, NSK's North American seat belt operations and OEA (excluding
OEA's Aerospace division which is intended to be sold). Currency translation
effects reduced Autoliv's reported sales by 7%.
Autoliv's organic sales (i.e. consolidated sales adjusted for currency
effects and acquisitions/divestitures) rose by 4%. This compares favorably
with global light vehicle production, which is estimated to have decreased by
approximately 2% compared to the corresponding period last year. The fact that
Autoliv's revenues rose faster than the underlying market is a reflection of
the increasing demand for more -- and more advanced -- safety systems in each
vehicle. It is also a result of Autoliv's market shares gains within the
automotive safety industry.
The U.S. market contributed the most to Autoliv's sales increase (mainly
due to the acquisition of OEA and NSK's seat belt operation, a doubling in
steering wheel sales and a 50% plus increase in seat belt sales). Sales also
rose rapidly in Sweden (due to a higher supply value per vehicle) and
Australia (incl. export sales). Although France and Spain reported continued
strong sales performances in local currencies, the improvements were not
enough to offset the negative currency translation effect.
Sales of airbag products (incl. steering wheels) rose by 10% to $682
million from $622 million. Currency effects reduced reported sales by 6% and
acquisitions increased sales by 13%. Consequently, the organic in crease was
3%. Sales were mainly driven by a tripling of steering wheel sales and higher
volumes for the Inflatable Curtain, Autoliv's new side-impact airbag for head
protection.
Sales of seat belt products (incl. seat sub-systems) grew by 9% to
$273 million from $252 million. Currency effects reduced reported sales by
11%, while acquisitions increased sales at the same rate. Consequently,
organic sales growth was the same as reported growth or 9%. The growth is
mainly due to substantial market share gains in the U.S. and breakthroughs in
the U.S. for Autoliv's seat belt pretensioners.
The Nine-Month Period
Consolidated sales for the nine-month period January through September
rose by 12% to $3,113 million, while the organic sales growth was 10%.
Autoliv's airbag sales rose by 13% to $2,230 million and seat belt sales by 9%
to $883 million, while the organic sales growths was 10% for both product
lines.
Global vehicle production increased by less than 3%.
Earnings
The Quarter
Autoliv's gross profit declined by 3% to $180 million from $184 million
and operating income by 2% to $79 million from $81 million, partly as a result
of a 50% increase in the number of program launches and associated supply
chain problems. The results have also been reduced by a substantial fall in
demand from UK customers and by development and start-up costs for new
electronic systems, such as intelligent airbag systems and post-crash
telematics. In addition, Autoliv's cost reduction targets for material costs
have not been fully realized due to increased world market prices for
plastics, electronic components and raw materials.
The acquisitions of OEA and NSK's seat belt operations in North America
("newly acquired companies") have also reduced Autoliv's margins, since the
integration of the new companies has just begun. The newly acquired companies
have lower gross profit margin than Autoliv, while they spend relatively less
in R&D and SG&A. The performance of these companies is according to plan and
is expected to contribute to consolidated earnings next year.
The consolidated gross margin declined to 18.8% from 21.1% and the
operating margin to 8.3% from 9.3% during the same period in 1999. Adjusted
for newly acquired companies, the margins were 19.6% and 8.7%, respectively.
Net financial expenses increased by $3 million to $14 million, mainly as a
result of higher debt following the acquisitions, but also as a result of
increased debt due to the effect of Autoliv's share re-purchase program. The
effective tax rate was 40% compared to 41% for the third quarter 1999.
Since Autoliv has almost 50% of its business in Europe, the stronger U.S.
dollar to the Euro had a negative impact. For the quarter, this factor is
estimated to have reduced reported earnings per share by $.03. The combined
negative effect from currency translation effects and acquisitions amounted to
$.06 per share.
The Nine-Month Period
During the first nine months, gross profit improved by 8% to $631 million
from $585 million, operating income by 11% to $291 million from $262 million
and earnings per share by 8% to $1.46 from $1.35.
The tax rate was approximately 41% in both periods. Excluding
non-deductible goodwill amortization, the tax rate was 35%.
The gross margin was 20.3% compared to 21.0% and operating margin 9.3%
compared to 9.4%. Adjusted for newly acquired companies the margins were 20.8%
and 9.5%, respectively.
Cash Flow and Balance Sheet
The operations generated $47 million in cash compared to $76 million
during the same quarter of 1999. Capital expenditures, net amounted to
$60 million and $37 million, respectively, and acquisitions to $0 million and
$8 million. Last year's capital expenditures, net were reduced by disposals
of fixed assets. The largest capital expenditures were capacity expansions for
the Inflatable Curtain, other airbag products and inflators, as well as
expansions of the tech centers in the U.S. and France. OEA's capital
expenditures added $12 million to the consolidated capital expenditures.
The net cash flow after operating and investing activities declined by
$60 million to a deficit of $13 million.
Net debt increased during the third quarter by $72 to $1,013 million and
the gross interest-bearing debt by $89 million to $1,125 million. The share
buy-back program increased the net debt during the quarter by $78 million.
The net debt-to-equity ratio increased during the quarter to 53% from 47%.
The equity has been reduced by currency effects and the share-buy-back
program.
Employees
The number of employees increased by 300 during the quarter to 27,500.
The increase was entirely in low labor-cost countries where the number of
employees increased by nearly 500 people.
Significant Events
* Autoliv has received its first order for electronics in North America.
It is a development and production con tract for Autoliv's new
high-performance, silicon based rollover sensor, which will be installed in
over 1.2 million North American vehicles starting with the 2004 model year.
The contract calls for the use of Autoliv's new patented decision making
software program, which is integrated with the sensor.
* One of the world's first post-crash systems -- Volvo On Call -- has
been introduced in cooperation with Volvo Car Corporation. It is a
crash-robust system that automatically calls the Emergency Medical Service
Center immediately after a crash and gives the rescue team the exact location
of the accident.
* As of September 30, Autoliv had repurchased 3.9 million of its shares
following the authorization in May of the Board of Directors to repurchase up
to 10 million shares. Since the program commenced, nearly $90 million has
been used to buy back Autoliv shares. The buy-backs have improved earnings
per share by less than one cent in the third quarter.
* In October, Autoliv sold its leadwire business in the U.S. The
divestiture follows the sale and closure over the last two years of seven
other non-core units with a total of 1,000 employees. In addition to reducing
costs, these transactions and the sales of two properties have released close
to $60 million. The sale of the leadwire business will not have a material
effect on Autoliv's earnings.
* Autoliv Inc. is replacing its current credit agreement with a new
syndicated multi-currency credit facility amounting to $800 million, arranged
by Bank One in the U.S. and SEB in Sweden. The transaction will be split into
a $300 million 364-day renewable credit line and a $500 million credit
facility running for five years. The agreement replaces both the $850 million
credit facility from 1997 associated with the ASP merger and the $300 million
loan used for the acquisition of OEA this year.
* The dispute with Simula Inc. about a licensing agreement for the head
side airbag ITS has been settled and Simula has granted Autoliv a
non-exclusive license to the ITS and some other products. Together with other
considerations in the settlement, the agreement should secure a productive
cooperation in the future.
Prospects
According to market analyst institutes, light vehicle production in North
America and Europe is expected to decline compared to the fourth quarter 1999.
At the same time, Autoliv's sales will be negatively impacted by approximately
9%, if today's exchange rates prevail for the rest of the year. Autoliv's
sales will be favorably impacted, on the other hand, by acquisitions, which
are expected to add approximately 11% to sales, and by the increasing supply
value of safety systems per vehicle. This value is estimated to have grown
-- in local currencies -- in the magnitude of 5% annually over the last few
years.
The negative effect on Autoliv's earnings from the newly acquired
companies is expected to be negligible during the fourth quarter. Start-up
costs for program launches and the related supply chain issues are also
expected to diminish. At the same time, actions are being taken to address the
problems in the UK operations and to reduce the effect from increasing
materials prices, but these actions will not have time to yield full effect in
the fourth quarter. Using current exchange rates, it is estimated that
currency translation effects would reduce earnings per share by approximately
$.05.
Dividend
A dividend of 11 cent per share will be paid on December 7 to Stockholders
of record as of November 9. The ex-date when Autoliv's shares and depositories
will trade without the right to the dividend will be November 7.
Report
The next quarterly report for the period October 1 through December 31
will be published on January 25, 2001.
KEY RATIOS
Quarter Nine months Latest Full Year
July - Sept. Jan. - Sept. 12 months 1999
2000 1999 2000 1999 00/99
Earnings per share
(assuming dilution) $.39 $.42 $1.46 $1.35 $2.06 $1.95
Equity per share 19.26 18.70 19.26 18.70 19.26 18.86
Net debt,
$ in millions 1,013 683 1,013 683 1,013 596
Net debt
to equity, % 53 36 53 36 53 31
Working capital,
$ in millions 377 230 377 230 377 202
Capital employed,
$ in millions 2,908 2,595 2,908 2,595 2,908 2,527
Gross margin, % a) 18.8 21.1 20.3 21.0 20.6 21.2
EBITDA-margin, % b) 15.3 15.9 15.8 16.2 16.0 16.3
Operating /
EBIT margin, % c) 8.3 9.3 9.3 9.4 9.6 9.7
Return on
equity, % 8.0 9.1 10.2 9.9 10.9 10.6
Return on
capital employed, % 11.1 12.9 14.3 13.8 14.8 14.6
Average number of
shares in
millions d) 100.9 102.3 101.9 102.3 102.2 102.4
Number of shares
at period-end
in millions d) 98.4 102.3 98.4 102.3 98.4 102.3
Number of employees
at period-end 27,500 22,100 27,500 22,100 27,500 22,600
a)Gross profit relative to sales b)Income before interest, taxes,
depreciation and amortization relative to sales c)Operating income relative to
sales d)Assuming dilution
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share data)
Quarter Nine months Latest Full Year
July - Sept. Jan. - Sept. 12 months 1999
2000 1999 2000 1999 00/99
Net sales
- Airbag
products $681.8 $622.3 $2,230.3 $1,979.5 $2,965.7 $2,714.9
- Seat belt
products 273.0 251.5 882.7 806.7 1,173.3 1,097.3
Total net sales 954.8 873.8 3,113.0 2,786.2 4,139.0 3,812.2
Cost of sales -775.3 -689.6 -2,482.4 -2,201.6 -3,286.2 -3,005.4
Gross profit 179.5 184.2 630.6 584.6 852.8 806.8
Selling, general
& administrative
expense -43.1 -41.0 -143.3 -128.7 -191.4 -176.8
Research
& development -42.0 -45.7 -150.5 -144.9 -202.9 -197.3
Amortization
of intangibles -18.0 -16.3 -51.0 -48.7 -66.4 -64.1
Other income, net 3.0 -0.3 4.8 0.1 4.7 0.0
Operating income 79.4 80.9 290.6 262.4 396.8 368.6
Equity in earnings
of affiliates 1.6 2.2 3.0 3.0 4.6 4.6
Interest income 2.1 2.6 7.4 7.7 11.0 11.3
Interest expense -16.5 -13.9 -45.8 -41.9 -58.7 -54.8
Income before
taxes 66.6 71.8 255.2 231.2 353.7 329.7
Income taxes -26.0 -28.6 -102.4 -93.6 -140.8 -132.0
Minority interests
in subsidiaries -1.7 0 -3.6 0.9 -2.3 2.2
Net income 38.9 43.2 149.2 138.5 210.6 199.9
Earnings per share $.39 $.42 $1.46 $1.35 $2.06 $1.95
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
September 30 December 31
2000 1999
Assets
Cash & cash equivalents $111.5 $119.2
Accounts receivable 808.8 709.6
Inventories 321.5 274.0
Other current assets 139.9 78.7
Total current assets 1,381.7 1,181.5
Property, plant & equipment, net 900.4 834.6
Intangible assets, net (mainly goodwill) 1,700.3 1,595.7
Other assets 84.2 34.7
Total assets $4,066.6 $3,646.5
Liabilities and shareholders' equity
Short-term debt $279.5 $244.5
Accounts payable 507.3 453.4
Other current liabilities 386.2 406.7
Total current liabilities 1,173.0 1,104.6
Long-term debt 845.0 470.4
Other non-current liabilities 135.9 131.5
Minority interest in subsidiaries 17.5 9.0
Shareholders' equity 1,895.2 1,931.0
Total liabilities and shareholders' equity $4,066.6 $3,646.5
SELECTED CASH-FLOW ITEMS
(Dollars in millions)
Quarter Nine months Latest Full Year
July - Sept. Jan. - Sept. 12 months 1999
2000 1999 2000 1999 00/99
Net income $38.9 $43.2 $149.2 $138.5 $210.6 $199.9
Depreciation
and amortization 66.9 58.4 199.8 189.4 263.8 253.4
Deferred taxes
and other 2.7 21.7 0.8 40.2 11.7 51.1
Change in
working capital -61.9 -47.4 -152.5 -87.5 -133.3 -68.3
Net cash provided
by operations 46.6 75.9 197.3 280.6 352.8 436.1
Capital
expenditures, net -60.0 -36.7 -151.9 -162.7 -200.9 -211.7
Acquisitions of
businesses, net 0.0 7.7 -220.2 -26.4 -237.5 -43.7
Net cash after
operating and
investing
activities $-13.4 $46.8 $-174.8 $91.5 $-85.6 $180.7