Autoliv's 2nd Quarter Financial Report:
20 July 2000
Autoliv's 2nd Quarter Financial Report:
* 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, Sweden - Autoliv Inc., 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 business 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 combined
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 to 47%. 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 American 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 reaffirmed
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, Renault and 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 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. Ex-date 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
Quarter Six Months 12 months
Apr.-June Jan.-June July 99- Full Year
2000 1999 2000 1999 June 00 1999
Earnings per share
(assuming dilution) $.54 $.50 $1.08 $.93 $2.10 $1.95
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
millions 334 183 334 183 334 202
Capital employed, $ in
millions 2 923 2 568 2 923 2 568 2 923 2 527
Gross margin, % a) 20.8 21.4 20.9 20.9 21.1 21.2
EBITDA-margin %, b) 16.2 16.4 15.9 16.2 16.1 16.3
Operating margin, % c) 10.0 10.0 9.8 9.5 9.8 9.7
Return on equity, % 11.3 11.1 11.3 10.3 11.1 10.6
Return on capital
employed, % 15.1 14.2 15.9 14.3 15.3 14.6
Number of shares
outstanding,
(in millions) 101.9 102.3 101.9 102,3 101.9 102.3
Average no of shares 102.3 102.3 102.3 102.3 102.3 102.4
Number of employees at
period-end 27,200 21,700 27,200 21,700 27,200 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
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share data)
Quarter Six Months 12 Months
Apr.-June Jan.-June July 99- Full Year
2000 1999 2000 1999 June 00 1999
Net sales
- Airbag products $769.8 $698.0 $1,548.5 $1,357.2 $2,906.2 $2,714.9
- Seat belt
products 304.4 279.0 609.7 555.2 1,151.8 1,097.3
Total net sales 1,074.2 977.0 2,158.2 1,912.4 4,058.0 3,812.2
Cost of sales -851.2 -767.8 -1,707.1 -1,512.0 -3,200.5 -3,005.4
Gross profit 223.0 209.2 451.1 400.4 857.5 806.8
Selling, general & administrative
expense -51.0 -44.8 -100.2 -87.7 -189.3 -176.8
Research &
development -49.6 -50.3 -108.5 -99.2 -206.6 -197.3
Amortization of
intangibles -17.1 -16.1 -33.0 -32.4 -64.7 -64.1
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
affiliates 0.7 -0.4 1.4 0.8 5.2 4.6
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
subsidiaries -0.6 0.3 -1.9 0.9 -0.6 2.2
Net income 55.1 51.2 110.3 95.3 214.9 199.9
Earnings per share $0.54 $0.50 $1.08 $0.93 $2.10 $1.95
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
June 30 Dec. 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, net 927.6 834.6
Intangible assets, net
(mainly goodwill) 1,726.9 1,595.7
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 subsidiaries 17.3 9.0
Shareholders' equity 1,982.8 1,931.0
Total liabilities and shareholders'
equity $4,154.7 $3,646.5
SELECTED CASH-FLOW ITEMS
(Dollars in millions)
Quarter Six Months 12 months
Apr.-June Jan.-June July 99- Full Year
2000 1999 2000 1999 June 00 1999
Net income $55.1 $51.2 $110.3 $95.3 $214.9 $199.9
Depreciation and
amortization 67.3 64.3 132.9 131.0 255.3 253.4
Deferred taxes and
other 0.0 12.8 -1.9 18.5 30.7 51.1
Change in working
capital -41.9 -21.0 -90.6 -40.1 -118.8 -68.3
Net cash provided
by operations 80.5 107.3 150.7 204.7 382.1 436.1
Capital
expenditures, net -43.6 -63.5 -91.9 -126.0 -177.6 -211.7
Acquisitions of
businesses, net -215.6 -9.3 -220.2 -34.1 -229.9 -43.7
Net cash after operating
and investing
activities $-178.7 $34.5 $-161.4 $44.6 $-25.4 $180.7