Autoliv's Quarterly Report

Financial Report April - June 2000 * Sales up 10% to $1.1 billion * Earnings per share up 8% to $.54 * Acquisitions of OEA and NSK's seat belts in the U.S. (Stockholm, July 20, 2000) -- Autoliv Inc. (NYSE: ALV and SSE: ALIV), the worldwide leader in automotive safety systems, reported improved sales and record second-quarter earnings for the three-month period ending June 30, 2000. Consolidated net sales rose by 10% to $1.1 billion, operating income by 9% to $107 million and earnings per share by 8% to $.54 from $.50 in the second quarter 1999. These improvements were achieved despite a negative currency translation effect and the consolidation of OEA and NSK's North American seat belt operations, which together reduced earnings per share by $.05. Sales The Quarter Consolidated net sales grew by 10% to $1,074 million from $977 million. Acquisitions increased sales by 9%, as a result of the consolidation of Izumi and Norma from January 1 and of NSK's North American seat belt busi- ness from April 1 and of OEA from May 1. Of OEA's operations, only the company's automotive business has been consolidated, since Autoliv intends to sell OEA's Aerospace division. Currency translation effects reduced Autoliv's reported sales by 6%. Adjusted for currency effects and acquisitions/divestitures, Autoliv's sales rose by 7%. This compares favorably with global light vehicle production, which is estimated to have risen by less than 4% compared to the corresponding period last year. (Compared to the first quarter, however, production was almost unchanged). The fact that Autoliv's revenues increased faster than vehicle production is a reflection of the continuous growth of safety products installed. The U.S. market contributed the most to Autoliv's sales increase (mainly due to a three-fold increase in steering wheel sales and a 40% increase in seat belt sales). Strong demand from French customers also helped grow Autoliv's sales in France and Spain. Sales rose fast in Australia due to higher export sales to Korea and increased airbag penetration rates in the domestic market.Sales of airbag products (incl. steering wheels) rose by 10% to $770 million from $698 million. The decline in average selling prices continues to moderate. Currency effects reduced reported sales by 5% and acquisitions increased sales by 8%. Consequently, the organic increase was 7%. Sales were mainly driven by a tripling of steering wheel sales and higher penetration rates 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 $304 million from $279 million. Currency effects reduced reported sales by 9%, while acquisitions increased sales by 12%. Consequently, organic sales rose by 6%. This growth is mainly due to the introduction of Autoliv's anti- whiplash system in more car models and to market share gains in the U.S. and Korea. The Six-Month Period Consolidated sales for the six-month period January through June rose by 13% to $2,158 million or at the same rate as the organic sales. Autoliv's airbag sales rose by 14% to $1,548 million and seat belt sales by 10% to $610 million, while the organic sales growths were 13% and 12%, respectively. Global vehicle production increased by just over 4% during the same six- month period. Earnings The Quarter In the second quarter, gross profit improved by 7% to $223 million from $209 million, operating income by 9% to $107 million from $98 million, net income by 8% to $55 million from $51 million and earnings per share by 8% to $.54 from $.50. The acquisitions of OEA and the North American seat belt operations of NSK in the second quarter contributed $61 million to sales, but after interest on acquisition costs and taxes there was a negative impact on net income of $2 million, corresponding to $.02 in earnings per share. Since Autoliv has almost 60% of its business in Europe, the stronger U.S. dollar to the Euro also had a negative impact. For the quarter, this factor is estimated to have reduced reported earning per share by $.03. The com- bined negative effect from currency translation effects and acquisitions in the quarter therefore amounted to $.05 per share. Autoliv's consolidated gross margin was 20.8% and the operating margin 10.0%, compared to 21.4% and 10.0%, respectively, during the same period in 1999. Adjusted for the second quarter acquisitions of OEA and the North American seat belt operations of NSK, margins improved, however, to 21.5% and 10.4%, respectively. The restructuring of these new operations has just started. The margin improvement in the underlying business is the result of Autoliv's own cost saving actions (such as transferring more than 1000 jobs to low labor-cost countries during the last 12 months) and the rapid technology enhancements being introduced in the automotive safety market. Net financial expenses increased by $3.2 million to 16.8 million as a result of higher debt following the acquisitions. The effective tax rate was 40.6% compared to 41.0% for the second quarter 1999. Excluding non-deductible goodwill amortization, the tax rate was 36%. The Six-Month Period During the first half of 2000, gross profit improved by 13% to $451 million from $400 million, operating income by 16% to $211 million from $182 million and earnings per share by 16% to $1.08 from $.93. The tax rate was 40.8% compared to 41.0%. The gross margin remained at 20.9% i.e. the level achieved during the corresponding period 1999. The operating margin improved to 9.8% from 9.5%. Cash Flow and Balance Sheet The operations generated $81 million in cash compared to $107 million during the same quarter of 1999. Capital expenditures, net amounted to $44 million and $64 million, respectively, and acquisitions to $216 million and $9 million. 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. Divestitures amounted to $7 million and related to a building in the U.S. The net cash flow after operating and investing activities declined by $213 million to a deficit of $179 million. Liquid funds declined by $10 million to $96 million. Net debt increased during the second quarter by $322 to $941 million and the interest-bearing debt to $1,036 million. Acquisitions increased net debt by $334 million. The acquisitions were OEA for approximately $306 million (including approximately $100 million in acquired debt) and the first phase in acquiring NSK's seat belt business for $28 million (including $6 million in acquired debt). The net debt-to-equity ratio increased during the quarter to 47% from 32%. Equity has been negatively impacted by currency effects and the share-buy- back program. Employees The number of employees increased by 2,600 during the quarter to 27,200. Excluding acquisitions, the increase was 600 - almost exclusively in low labor-cost countries. Significant Events ¤ The Board of Directors has authorized Autoliv's management to repurchase up to ten million of the Company's shares. As of June 30, the Company had acquired 0.5 million of its own shares, reducing the number of Autoliv shares outstanding to 101.9 million. ¤ As of April 1, the North American seat belt operations of NSK were acquired together with a 40% interest in NSK's Asian seat belt operations. Autoliv has an option to acquire the remaining 60% in two steps on April 1, 2002 and 2003. The U.S. operations have annual sales of approximately $70 million and the Asian operations of almost $250 million. These acquisitions make Autoliv the global leader in seat belts. ¤ As of May 1, Autoliv finalized a tender offer worth $206 million for the shares in OEA, Autoliv's main external supplier of initiators for airbag inflators. During its latest fiscal year, which ended by July 31, 1999, OEA had sales of nearly $250 million, including $45 million in its Aerospace division. Since Autoliv intends to sell this division, it is not consolidated. The planned integration of OEA is expected to have a positive effect on Autoliv's net income within one year from the acquisition. ¤ At the Company's Annual General Meeting of Shareholders, Mr. Gunnar Bark and Mr. Per Welin were re-elected directors for another regular three-year term, and Ernst & Young AB was ratified as Autoliv's independent auditing firm for the fiscal year 2000. ¤ The credit rating agency Standard & Poor's has given Autoliv Inc. BBB+ as its long-term rating and A-2 as its short-term rating, which is among the best ratings achieved for an automotive supplier. The agency also re- affirmed its A-2 rating - and Moody's its P-2 rating - of the U.S. Commercial Paper Program issued by Autoliv's U.S. subsidiary. During July, Autoliv's subsidiary Autoliv AB launched a Swedish Commercial Paper Program and a Medium Term Note Program. ¤ Autoliv has signed a letter of intent to partner with Covisint, the planned exchange on the Internet being formed between DaimlerChrysler, Ford, General Motors and Renault/Nissan. ¤ The National Highway Traffic Safety Administration in the U.S. has issued new regulations, which will require more sophisticated frontal airbag systems. These "advanced airbags", which will be phased in during a three-year period starting on September 1, 2003, are expected to increase significantly the supply value per vehicle Prospects If the current exchange rate between the U.S. dollar and the Euro were to prevail for the rest of this year, Autoliv's sales and earnings would be negatively affected by approximately 4% compared to the second half of 1999. On the other hand, acquisitions are expected to add approximately 10% to Autoliv's organic sales growth. The market analyst institute DRI expects light vehicle production in North America and Europe to remain almost unchanged during the remainder of the year. In addition, the supply value of safety products is expected to continue to grow. Dividend A dividend of 11 cents per share will be paid on September 7 to Stockholders of record as of August 10, 2000. The ex-date when Autoliv's shares and depositories will trade without the right to the dividend will be August 8. Report The next quarterly report for the period July 1 through September 30 will be published on October 19, 2000. KEY RATIOS Six Full Quarter month Latest Year Apr. Jan. 12 1999 - June - June months 2000 1999 2000 1999 00/99 Earnings per share $.54 $.50 $1.08 $.93 $2.10 $1.95 (assuming dilution) Equity per share 19.38 18.23 19.38 18.23 19.38 18.86 Net debt, $ in millions 941 703 941 703 941 596 Net debt to equity, % 47 38 47 38 47 31 Working capital, $ in 334 183 334 183 334 202 millions Capital employed, $ in 2 923 2 568 2 923 2 568 2 923 2 527 millions 1) Gross margin, % 20.8 21.4 20.9 20.9 21.1 21.2 2) EBITDA-margin %, 16.2 16.4 15.9 16.2 16.1 16.3 Operating/EBIT margin, % 10.0 10.0 9.8 9.5 9.8 9.7 3) Return on equity, % 11.3 11.1 11.3 10.3 11.1 10.6 Return on capital 15.1 14.2 15.9 14.3 15.3 14.6 employed, % Average no. of shares 102.3 102.3 102.3 102.3 102.3 102.4 ass. dilution (in mill.) Number of shares at 101.9 102.3 101.9 102.3 101.9 102.3 period-end ass. dilution Number of employees at 27 21 27 200 21 27 200 22 600 period-end 200 700 700 1) 2) Gross profit relative to sales Income before interest, taxes, 3) depreciation and amortization relative to sales Operating income relative to sales CONSOLIDATED STATEMENTS OF INCOME (Dollars in millions, except per share data) Six Full Quarter month Latest Year Apr. 12 1999 - June Jan. - June months 2000 1999 2000 1999 00/99 Net sales - Airbag products $769. $698. $1 $1 $2 $2 8 0 548.5 357.2 906.2 714.9 - Seat belt products 304.4 279.0 609.7 555.2 1 151.8 1 097.3 Total net sales 1 977.0 2 1 4 058.0 3 074.2 158.2 912.4 812.2 Cost of sales - - -1 -1 -3 -3 851.2 767.8 707.1 512.0 200.5 005.4 Gross profit 223.0 209.2 451.1 400.4 857.5 806.8 Selling, general & -51.0 -44.8 -100.2 -87.7 -189.3 -176.8 administrative expense Research & development -49.6 -50.3 -108.5 -99.2 -206.6 -197.3 Amortization of -17.1 -16.1 -33.0 -32.4 -64.7 -64.1 intangibles Other income, net 1.6 0.1 1.8 0.4 1.4 0.0 Operating income 106.9 98.1 211.2 181.5 398.3 368.6 Equity in earnings of 0.7 -0.4 1.4 0.8 5.2 4.6 affiliates Interest income 2.5 2.4 5.3 5.1 11.5 11.3 Interest expense -16.8 -13.6 -29.3 -28.0 -56.1 -54.8 Income before taxes 93.3 86.5 188.6 159.4 358.9 329.7 Income taxes -37.6 -35.6 -76.4 -65.0 -143.4 -132.0 Minority interests in -0.6 0.3 -1.9 0.9 -0.6 2.2 subsidiaries Net income 55.1 51.2 110.3 95.3 214.9 199.9 Earnings per share $.54 $.50 $1.08 $.93 $2.10 $1.95 CONSOLIDATED BALANCE SHEET (Dollars in millions) June 30 December 31 2000 1999 Assets Cash & cash equivalents $95.9 $119.2 Accounts receivable 869.3 709.6 Inventories 299.6 274.0 Other current assets 149.1 78.7 Total current assets 1 413.9 1 181.5 Property, plant & equipment, 927.6 834.6 net Intangible assets, net (mainly 1 726.9 1 595.7 goodwill) Other assets 86.3 34.7 Total assets $4 154.7 $3 646.5 Liabilities and shareholders' equity Short-term debt $243.8 $244.5 Accounts payable 544.1 453.4 Other current liabilities 440.2 406.7 Total current liabilities 1 228.1 1 104.6 Long-term debt 792.6 470.4 Other non-current liabilities 133.9 131.5 Minority interest in 17.3 9.0 subsidiaries Shareholders' equity 1 982.8 1 931.0 Total liabilities and $4 154.7 $3 646.5 shareholders' equity SELECTED CASH-FLOW ITEMS (Dollars in millions) Six Full Quarter months Latest Year Apr. - Jan. - 12 1999 June June months 2000 1999 2000 1999 00/99 Net income $55.1 $51.2 $110.3 $95.3 $214.9 $199.9 Depreciation and 67.3 64.3 132.9 131.0 255.3 253.4 amortization Deferred taxes and 0.0 12.8 -1.9 18.5 30.7 51.1 other Change in working -41.9 -21.0 -90.6 -40.1 -118.8 -68.3 capital Net cash provided by 80.5 107.3 150.7 204.7 382.1 436.1 operations Capital expenditures, -43.6 -63.5 -91.9 - -177.6 -211.7 net 126.0 Acquisitions of -215.6 -9.3 -220.2 -34.1 -229.9 -43.7 businesses, net Net cash after $-178.7 $34.5 $-161.4 $44.6 $-25.4 $180.7 operating and investing activities Autoliv Inc. World Trade Center, Klarabergsviadukten 70, Section E Mail: P.O Box 70381, SE-107 24 Stockholm, SWEDEN Website: www.autoliv.com E-mail: info@autoliv.comTel: +46 (8) 587 20 600 Fax: +46 (8) 24 44 79 or 411 70 25 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/07/20/20000720BIT00340/bit0001.doc http://www.bit.se/bitonline/2000/07/20/20000720BIT00340/bit0002.pdf