Autoliv Inc. (NYSE: ALV –
news; 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.
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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.
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By GlobalDataThe 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
SOURCE: Autoliv Inc.
