UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-Q
Quarterly
Report
Pursuant to
Section 13 or 15 (d) of the
Securities
Exchange Act of 1934
For the quarterly
period ended September 30, 2008
Commission File
No.: 1-12933
_____AUTOLIV,
INC.______
(Exact name of
registrant as
specified in its
charter)
_____Delaware_______
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______51-0378542____
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(State or
other jurisdic-
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(I.R.S.
Employer Identi-
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tion of
incorporation or
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fication
No.)
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organization)
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|
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World Trade
Center,
|
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Klarabergsviadukten
70,
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Box
70381,
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|
SE-107 24 Stockholm,
Sweden
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____N/A__
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(Address of
principal executive offices)
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(Zip
Code)
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___+46 8 587 20
600____
(Registrant’s
telephone number,
including area
code)
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports); and (2) has been subject to such filing requirement for the past
90 days.
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
Large
accelerated filer: [x]
|
Accelerated
filer: [ ]
|
Non-accelerated
filer [ ]
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Smaller
reporting company [ ]
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).
Indicate the
number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date: As of October 20, 2008, there were
70,301,828 shares of common stock of Autoliv, Inc., par value $1.00 per share,
outstanding.
FORWARD-LOOKING
STATEMENTS
This Form 10-Q
contains statements that are not historical facts but rather forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are those that address activities, events
or developments that Autoliv, Inc. (“Autoliv”, the “Company” or “we”) or its
management believes or anticipates may occur in the future, including statements
relating to industry trends, business opportunities, sales contracts, sales
backlog, ongoing commercial arrangements and discussions, as well as any
statements about future operating performance or financial results.
In some cases, you
can identify these statements by forward-looking words such as “estimates,”
“expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “might,”
“will,” “should,” or the negative of these terms and other comparable
terminology, although not all forward-looking statements are so
identified.
All such
forward-looking statements are based upon our current expectations and various
assumptions, and apply only as of the date of this report. Our expectations and
beliefs are expressed in good faith and we believe there is a reasonable basis
for them. However, there can be no assurance that such forward-looking
statements will materialize or prove to be correct.
Because these
forward-looking statements involve risks and uncertainties, the outcome could
differ materially from those set out in the forward-looking statements for a
variety or reasons, including without limitation, changes in and the successful
execution of the action program discussed herein and the market reaction
thereto, changes in general industry and market conditions, increased
competition, higher raw material costs particularly commodity and energy costs,
customer bankruptcies and industry consolidation, changes in consumer
preferences for end products, customer losses and changes in regulatory
conditions, availability and terms of financing necessary to fund our
operations, as well the risks identified in Item 1A “Risk Factors” in this
report. Except for the Company's ongoing obligation to disclose information
under the U.S. federal securities laws, the Company undertakes no obligation to
update publicity any forward-looking statements whether as a result of new
information or future events.
For any
forward-looking statements contained in this or any other document, we claim the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
INDEX
PART
I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
1.1 Basis
of Presentation
1.2 Receivables
1.3 Inventories
1.4 Restructuring
1.5 Product-Related
Liabilities
1.6 Comprehensive
Income
1.7 Business
Acquisitions
1.8 New
Accounting Pronouncements
1.9 Income
Taxes
1.10 Retirement
Plans
1.11 Fair Value of
Financial Instruments
1.12 Contingent
Liabilities
1.13 Subsequent
events
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM
4. CONTROLS AND PROCEDURES
ITEM
4T. CONTROLS AND PROCEDURES
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
ITEM
1A. RISK FACTORS
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM
5. OTHER INFORMATION
ITEM
6. EXHIBITS
CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
(Dollars
in millions, except per share data)
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Quarter
July-September
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First
nine months
January
- September
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2008
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|
2007
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2008
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2007
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Net
sales
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- Airbag
products
|
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|
$979.1 |
|
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|
$1,002.2 |
|
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|
$3,345.9 |
|
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|
$3,231.5 |
|
- Seatbelt
products
|
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|
565.6 |
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|
555.0 |
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|
1,934.2 |
|
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|
1,753.2 |
|
Total
net sales
|
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|
1,544.7 |
|
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|
1,557.2 |
|
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|
5,280.1 |
|
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|
4,984.7 |
|
|
|
|
|
|
|
|
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|
|
|
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Cost of
sales
|
|
|
(1,283.7) |
|
|
|
(1,254.9) |
|
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|
(4,297.8) |
|
|
|
(4,001.3) |
|
Gross
profit
|
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|
261.0 |
|
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|
302.3 |
|
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|
982.3 |
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|
983.4 |
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|
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Selling,
general & administrative expenses
|
|
|
(85.8) |
|
|
|
(84.7) |
|
|
|
(290.7) |
|
|
|
(270.6) |
|
Research,
development & engineering expenses
|
|
|
(80.9) |
|
|
|
(93.0) |
|
|
|
(303.4) |
|
|
|
(314.3) |
|
Amortization
of intangibles
|
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|
(5.8) |
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|
(4.9) |
|
|
|
(17.7) |
|
|
|
(14.5) |
|
Other income
(expense), net
|
|
|
(30.2) |
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|
(9.7) |
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|
(36.7) |
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|
(46.1) |
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Operating
income
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|
58.3 |
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|
110.0 |
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|
333.8 |
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337.9 |
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Equity in
earnings of affiliates
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1.2 |
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1.4 |
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3.4 |
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4.7 |
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Interest
income
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3.1 |
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2.1 |
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6.5 |
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5.9 |
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Interest
expense
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(16.7) |
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(15.2) |
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(48.9) |
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(44.7) |
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Other
financial items, net
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1.3 |
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(3.3) |
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0.5 |
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(6.8) |
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Income
before income taxes
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47.2 |
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95.0 |
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295.3 |
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297.0 |
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Income
taxes
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(13.2) |
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(29.8) |
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(85.2) |
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(96.5) |
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Minority
interests in subsidiaries
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(2.8) |
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|
(2.0) |
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(7.0) |
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|
(6.6) |
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Net
income
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$31.2 |
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$63.2 |
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$203.1 |
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$193.9 |
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Earnings
per share – basic
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$0.44 |
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$0.82 |
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$2.81 |
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|
$2.46 |
|
Earnings
per share – diluted
|
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$0.44 |
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|
$0.81 |
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$2.80 |
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$2.45 |
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|
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|
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Weighted
average number of shares outstanding, net of treasury shares (in
millions)
|
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71.3 |
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|
77.4 |
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72.4 |
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78.9 |
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Weighted
average number of shares outstanding, assuming dilution and net of
treasury shares (in millions)
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71.5 |
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77.8 |
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72.6 |
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79.2 |
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Number
of shares outstanding, excluding dilution and net of treasury shares (in
millions)
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70.3 |
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|
75.9 |
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|
70.3 |
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75.9 |
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|
|
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|
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Cash
dividend per share – declared
|
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|
$0.41 |
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|
$0.39 |
|
|
|
$1.21 |
|
|
|
$1.17 |
|
Cash
dividend per share – paid
|
|
|
$0.41 |
|
|
|
$0.39 |
|
|
|
$1.19 |
|
|
|
$1.15 |
|
See “Notes to
unaudited consolidated financial statements.”
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars
in millions)
|
|
September
30,
2008
|
|
|
December
31,
2007
|
|
|
|
(unaudited)
|
|
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|
|
Assets
|
|
|
|
|
|
|
Cash &
cash equivalents
|
|
|
$213.6 |
|
|
|
$153.8 |
|
Receivables
|
|
|
1,226.5 |
|
|
|
1,230.7 |
|
Inventories
|
|
|
653.8 |
|
|
|
561.3 |
|
Other
current assets
|
|
|
155.7 |
|
|
|
149.4 |
|
Total
current assets
|
|
|
2,249.6 |
|
|
|
2,095.2 |
|
|
|
|
|
|
|
|
|
|
Property,
plant & equipment, net
|
|
|
1,222.4 |
|
|
|
1,259.8 |
|
Investments
and other non-current assets
|
|
|
192.0 |
|
|
|
190.9 |
|
Goodwill
|
|
|
1,623.0 |
|
|
|
1,613.4 |
|
Intangible
assets, net
|
|
|
138.9 |
|
|
|
146.1 |
|
Total
assets
|
|
|
$5,425.9 |
|
|
|
$5,305.4 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders’ equity
|
|
|
|
|
|
|
|
|
Short-term
debt
|
|
|
$377.3 |
|
|
|
$311.9 |
|
Accounts
payable
|
|
|
777.2 |
|
|
|
834.0 |
|
Accrued
expenses
|
|
|
417.6 |
|
|
|
315.4 |
|
Other
current liabilities
|
|
|
222.0 |
|
|
|
202.0 |
|
Total
current liabilities
|
|
|
1,794.1 |
|
|
|
1,663.3 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
1,121.7 |
|
|
|
1,040.3 |
|
Pension
liability
|
|
|
52.3 |
|
|
|
63.3 |
|
Other
non-current liabilities
|
|
|
136.1 |
|
|
|
137.2 |
|
Minority
interests in subsidiaries
|
|
|
56.4 |
|
|
|
52.2 |
|
Shareholders’
equity
|
|
|
2,265,3 |
|
|
|
2,349.1 |
|
Total
liabilities and shareholders’ equity
|
|
|
$5,425.9 |
|
|
|
$5,305.4 |
|
See “Notes to
unaudited consolidated financial statements.”
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars
in millions)
|
|
Quarter
July-September
|
|
|
First
nine months
January
- September
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
$31.2 |
|
|
|
$63.2 |
|
|
|
$203.1 |
|
|
|
$193.9 |
|
Depreciation
and amortization
|
|
|
86.1 |
|
|
|
77.4 |
|
|
|
256.5 |
|
|
|
236.3 |
|
Other
|
|
|
(8.1) |
|
|
|
(6.4) |
|
|
|
(11.2) |
|
|
|
11.8 |
|
Changes in
operating assets and liabilities
|
|
|
(7.0) |
|
|
|
13.9 |
|
|
|
(22.7) |
|
|
|
107.2 |
|
Net
cash provided by operating activities
|
|
|
102.2 |
|
|
|
148.1 |
|
|
|
425.7 |
|
|
|
549.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(73.9) |
|
|
|
(75.4) |
|
|
|
(212.6) |
|
|
|
(235.6) |
|
Proceeds
from sale of property, plant and equipment
|
|
|
2.8 |
|
|
|
3.2 |
|
|
|
10.2 |
|
|
|
7.8 |
|
Acquisitions
of businesses and other, net
|
|
|
(42.5) |
|
|
|
1.8 |
|
|
|
(47.6) |
|
|
|
(76.3) |
|
Net
cash used in investing activities
|
|
|
(113.6) |
|
|
|
(70.4) |
|
|
|
(250.0) |
|
|
|
(304.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in short-term debt
|
|
|
(187.8) |
|
|
|
14.9 |
|
|
|
59.2 |
|
|
|
23.7 |
|
Issuance of
long-term debt
|
|
|
392.1 |
|
|
|
174.7 |
|
|
|
411.1 |
|
|
|
248.4 |
|
Repayments
and other changes in long-term debt
|
|
|
- |
|
|
|
(56.0) |
|
|
|
(322.5) |
|
|
|
(193.7) |
|
Dividends
paid
|
|
|
(29.3) |
|
|
|
(30.6) |
|
|
|
(86.4) |
|
|
|
(91.2) |
|
Shares
repurchased
|
|
|
(65.2) |
|
|
|
(160.4) |
|
|
|
(173.5) |
|
|
|
(257.0) |
|
Stock
options exercised
|
|
|
1.1 |
|
|
|
0.9 |
|
|
|
4.7 |
|
|
|
8.5 |
|
Other,
net
|
|
|
(3.2) |
|
|
|
(2.8) |
|
|
|
(3.6) |
|
|
|
(1.3) |
|
Net
cash provided by (used in) financing activities
|
|
|
107.7 |
|
|
|
(59.3) |
|
|
|
(111.0) |
|
|
|
(262.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash
|
|
|
(9.8) |
|
|
|
5.6 |
|
|
|
(4.9) |
|
|
|
9.5 |
|
Increase
(decrease) in cash and cash equivalents
|
|
|
86.5 |
|
|
|
24.0 |
|
|
|
59.8 |
|
|
|
(8.0) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents at period-start
|
|
|
127.1 |
|
|
|
136.1 |
|
|
|
153.8 |
|
|
|
168.1 |
|
Cash
and cash equivalents at period-end
|
|
|
$213.6 |
|
|
|
$160.1 |
|
|
|
$213.6 |
|
|
|
$160.1 |
|
See “Notes to
unaudited consolidated financial statements.”
KEY
RATIOS (UNAUDITED)
(Dollars
in millions, except per share data)
|
|
Quarter
July-September
or
as of Sept. 30
|
|
|
Nine
months
January
– September
or
as of Sept. 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share – basic 1)
|
|
|
$0.44 |
|
|
|
$0.82 |
|
|
|
$2.81 |
|
|
|
$2.46 |
|
Earnings per
share – diluted 1)
|
|
|
$0.44 |
|
|
|
$0.81 |
|
|
|
$2.80 |
|
|
|
$2.45 |
|
Equity per
share
|
|
|
$32.22 |
|
|
|
$30.88 |
|
|
|
$32.22 |
|
|
|
$30.88 |
|
Cash
dividend per share - declared
|
|
|
$0.41 |
|
|
|
$0.39 |
|
|
|
$1.21 |
|
|
|
$1.17 |
|
Cash
dividend per share – paid
|
|
|
$0.41 |
|
|
|
$0.39 |
|
|
|
$1.19 |
|
|
|
$1.15 |
|
Operating
working capital 3)
|
|
|
$647 |
|
|
|
$666 |
|
|
|
$647 |
|
|
|
$666 |
|
Capital
employed 10)
|
|
|
$3,544 |
|
|
|
$3,482 |
|
|
|
$3,544 |
|
|
|
$3,482 |
|
Net debt
3)
|
|
|
$1,279 |
|
|
|
$1,138 |
|
|
|
$1,279 |
|
|
|
$1,138 |
|
Net debt to
capitalization, %3)4)
|
|
|
36 |
|
|
|
32 |
|
|
|
36 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin, % 5)
|
|
|
16.9 |
|
|
|
19.4 |
|
|
|
18.6 |
|
|
|
19.7 |
|
Operating
margin, % 6)
|
|
|
3.8 |
|
|
|
7.1 |
|
|
|
6.3 |
|
|
|
6.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on shareholders’ equity, %
|
|
|
5.3 |
|
|
|
10.6 |
|
|
|
11.5 |
|
|
|
10.8 |
|
Return on
capital employed, %
|
|
|
6.7 |
|
|
|
12.9 |
|
|
|
12.6 |
|
|
|
13.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average no. of shares in millions 1)2)
|
|
|
71.5 |
|
|
|
77.8 |
|
|
|
72.6 |
|
|
|
79.2 |
|
No. of
shares at period-end in millions 7)
|
|
|
70.3 |
|
|
|
75.9 |
|
|
|
70.3 |
|
|
|
75.9 |
|
No. of
employees at period-end 11)
|
|
|
35,800 |
|
|
|
35,000 |
|
|
|
35,800 |
|
|
|
35,000 |
|
Headcount at
period-end 12)
|
|
|
41,300 |
|
|
|
41,500 |
|
|
|
41,300 |
|
|
|
41,500 |
|
Days
receivables outstanding 8)
|
|
|
74 |
|
|
|
75 |
|
|
|
66 |
|
|
|
69 |
|
Days
inventory outstanding 9)
|
|
|
44 |
|
|
|
36 |
|
|
|
39 |
|
|
|
33 |
|
1)
Net of treasury shares
2)
Assuming dilution
3)
See
tabular presentation reconciling this non-GAAP measure to GAAP in the
Management’s Discussion & Analysis of Financial Condition and Results of
Operations
4)
Net debt in relation to net debt, minority and equity
5)
Gross profit relative to sales
6)
Operating income relative to sales
7)
Net of treasury shares and excluding dilution
8)
Outstanding receivables relative to average daily sales
9)
Outstanding inventory relative to average daily sales
10)
Total shareholders’ equity and net debt
11)
Employees with a continuous employment agreement, recalculated to full time
equivalent heads
12) Employees
plus temporary, hourly workers
See “Notes to
unaudited consolidated financial statements”.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless
otherwise noted, all amounts are presented in millions of dollars, except for
per share amounts)
September
30, 2008
1.1
Basis of Presentation
The accompanying
interim unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included in the financial statements. All such
adjustments are of a normal recurring nature.
The condensed
consolidated balance sheet at December 31, 2007 has been derived from the
audited financial statements at that date, but does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
Statements in this
report that are not of historical fact are forward-looking statements that
involve risks and uncertainties that could affect the actual results of the
Company. A description of the important factors that could cause Autoliv's
actual results to differ materially from the forward-looking statements
contained in this report may be found in Autoliv's reports filed with the
Securities and Exchange Commission (the “SEC”). For further information, refer
to the consolidated financial statements, footnotes and definitions thereto
included in the Company’s Annual Report on Form 10-K/A for the year ended
December 31, 2007, filed on February 25, 2008.
The Company’s
filings with the SEC, including annual reports on Form 10-K, quarterly reports
on Form 10-Q, proxy statements, management certifications, current reports
on Form 8-K and other documents, can be obtained free of charge from Autoliv at
the Company’s address. These documents are also available at the SEC’s
web site at www.sec.gov and at the Company's corporate website at
www.autoliv.com.
1.2
Receivables
During the third
quarter of 2008, the Company sold receivables related to selected customers with
high credit worthiness as a means of saving interest cost, net of discounts. The
receivables were sold to various external financial institutions without
recourse. Since the Company uses the cash received to repay debt, these
factoring agreements have the effect of reducing debt and accounts receivable.
At September 30, 2008 and December 31, 2007 receivables would have been higher
by $83 million and $124 million, respectively, if these agreements had not been
entered into. The discount cost is recognized in “Other financial items, net” in
the Income Statement.
1.3
Inventories
Inventories are
stated at the lower of cost (principally FIFO) or market. The components of
inventories were as follows, net of reserve:
|
|
September
30, 2008
|
|
|
December
31, 2007
|
|
Raw
materials
|
|
|
$245.1 |
|
|
|
$214.9 |
|
Work in
progress
|
|
|
262.6 |
|
|
|
227.6 |
|
Finished
products
|
|
|
146.1 |
|
|
|
118.8 |
|
Total
|
|
|
$653.8 |
|
|
|
$561.3 |
|
The Company
defines restructuring expense to include costs directly associated with exit or
disposal activities accounted for in accordance with FAS-146, Accounting for Costs Associated with
Exit or Disposal Activities and employee severance costs incurred as a
result of an exit or disposal activity accounted for in accordance with FAS-88
and FAS-112. Impairment charges directly associated with exit or disposal
activities are accounted for in accordance with FAS-144, Accounting for the Impairment or
Disposal of Long-Lived Assets.
Estimates of
restructuring charges are based on information available at the time such
charges are recorded. In general, management anticipates that restructuring
activities will be completed within a timeframe such that significant changes to
the exit plan are not likely. Due to inherent uncertainty involved in estimating
restructuring expenses, actual amounts paid for such activities may differ from
amounts initially estimated.
The Company
expects to finance these restructuring programs over the next several years
through cash generated from its ongoing operations or through cash available
under existing credit facilities. The Company does not expect that the execution
of these programs will have a material adverse impact on its liquidity
position.
The tables below
summarize the change in the balance sheet position of the restructuring reserves
from December 31, 2006 to September 30, 2008.
2007
In 2007, the
employee-related restructuring provisions mainly related to headcount reductions
in high-cost countries throughout North America and Europe, and in Australia.
The cash payments mainly related to North America, Europe and Australia plant
consolidation initiated in 2007, 2006 and 2005. The provision has been charged
against “Other income (expense), net” in the income statement. The table below
summarizes the change in the balance sheet position of the restructuring
reserves from December 31, 2006 to December 31, 2007.
|
|
Dec.
31,
2006
|
|
|
Provisions
|
|
|
Cash
payments
|
|
|
Non-
Cash
|
|
|
Translation
difference
|
|
|
December
31,
2007
|
|
Restructuring
-
employee
related
|
|
|
$6.4 |
|
|
|
$23.7 |
|
|
|
$(14.4) |
|
|
|
$- |
|
|
|
$1.1 |
|
|
|
$16.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset
impairments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$6.4 |
|
|
|
$23.7 |
|
|
|
$(14.4) |
|
|
|
$- |
|
|
|
$1.1 |
|
|
|
$16.8 |
|
During 2007, 647
employees covered by the restructuring reserves left the Company. As of December
31, 2007, 584 employees remained who were covered by the restructuring
reserves.
2008
Q1
The decrease in
the employee-related restructuring liability in the quarter mainly relates to
cash payments in Europe and North America for restructuring activities initiated
in 2007. The provision has been charged against “Other income (expense), net” in
the income statement. The table below summarizes the change in the balance sheet
position of the restructuring reserves from December 31, 2007 to March 31,
2008.
|
|
Dec.
31,
2007
|
|
|
Provisions
|
|
|
Cash
payments
|
|
|
Non-
Cash
|
|
|
Translation
difference
|
|
|
March
31,
2008
|
|
Restructuring
-
employee
related
|
|
|
$16.8 |
|
|
|
$0.3 |
|
|
|
$(3.0) |
|
|
|
$- |
|
|
|
$0.9 |
|
|
|
$15.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset
impairments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$16.8 |
|
|
|
$0.3 |
|
|
|
$(3.0) |
|
|
|
$- |
|
|
|
$0.9 |
|
|
|
$15.0 |
|
During the
quarter, 122 employees covered by the reserves left the Company. As of
March 31, 2008, 473 employees remained who were covered by the restructuring
reserves.
Q2
The increase in
the employee-related restructuring provisions in the second quarter mainly
relate to headcount reductions in high cost countries in Europe. Cash payments
mainly relate to restructuring activities in Europe and North America initiated
in 2007. The provision has been charged against “Other income (expense), net” in
the income statement. The table below summarizes the change in the balance sheet
position of the restructuring reserves from March 31, 2008 to June 30,
2008.
|
|
March
31, 2008
|
|
|
Provisions
|
|
|
Cash
payments
|
|
|
Non-
Cash
|
|
|
Translation
difference
|
|
|
June
30,
2008
|
|
Restructuring
-
employee
related
|
|
|
$15.0 |
|
|
|
$6.0 |
|
|
|
$(1.6) |
|
|
|
$- |
|
|
|
$- |
|
|
|
$19.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset
impairments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$15.0 |
|
|
|
$6.0 |
|
|
|
$(1.6) |
|
|
|
$- |
|
|
|
$- |
|
|
|
$19.4 |
|
During the
quarter, 50 employees covered by the reserves left the Company. As of June
30, 2008, 506 employees remained who were covered by the restructuring
reserves.
Q3
The increase in
the employee-related restructuring provisions in the third quarter mainly relate
to headcount reductions in North America, Europe and Australia. The
employee-related restructuring provisions have been charged against “Other
income (expense), net” in the income statement. The fixed asset impairment
charges recorded relate to restructuring activities in North America and Europe
to write down certain machinery and equipment, buildings, and building
improvements to fair value based on estimated future cash flows. The fixed asset
impairments have been charged against “Cost of sales” in the income statement.
Cash payments mainly relate to restructuring activities in North America, Europe
and Australia. The table below summarizes the change in the balance sheet
position of the restructuring reserves from June 30, 2008 to September 30,
2008.
|
|
June
30,
2008
|
|
|
Provisions
|
|
|
Cash
payments
|
|
|
Non-
Cash
|
|
|
Translation
difference
|
|
|
September
30,
2008
|
|
Restructuring
-
employee
related
|
|
|
$19.4 |
|
|
|
$27.6 |
|
|
|
$(8.4) |
|
|
|
$- |
|
|
|
$(1.6) |
|
|
|
$37.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset
impairments
|
|
|
- |
|
|
|
4.2 |
|
|
|
- |
|
|
|
(4.2 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$19.4 |
|
|
|
$31.8 |
|
|
|
$(8.4) |
|
|
|
$(4.2) |
|
|
|
$(1.6) |
|
|
|
$37.0 |
|
During the third
quarter, 199 employees covered by the reserves left the Company. As of September
30, 2008, 1,257 employees remained who were covered by the restructuring
reserves.
Action
Program 2008
In July 2008 the
Company announced that it was developing an action program to mitigate the
effects of both accelerating production cuts by customers and accelerating costs
for raw materials. The program is estimated to generate annual pre-tax savings
of approximately $120 million. The savings is expected to be realized gradually,
with full effect in 2010. The main items in the program are:
1.
|
Adjustment
of manufacturing capacity, including plant closures, due to lower expected
vehicle production.
|
2.
|
Accelerated
move of sourcing to low-cost countries, consolidation of supplier base and
standardization of products.
|
3.
|
Reductions
in overhead costs, including consolidation of tech
centers.
|
The program is
expected to affect 3,000 employees, both temporaries and permanent. The pre-tax
cost for this program is estimated to be $75 million. The Company continues to
evaluate individual components of this program, and will accrue these components
as plans are finalized.
Included in the
table above, the changes in the reserves associated with activities executed
under “Action Program 2008” are as follows:
|
|
June
30,
2008
|
|
|
Provisions
|
|
|
Cash
payments
|
|
|
Non-
Cash
|
|
|
Translation
difference
|
|
|
September
30,
2008
|
|
Restructuring
-
employee
related
|
|
|
$- |
|
|
|
$25.1 |
|
|
|
$(3.4) |
|
|
|
$- |
|
|
|
$- |
|
|
|
$21.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset
impairment
|
|
|
- |
|
|
|
4.2 |
|
|
|
- |
|
|
|
(4.2 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$- |
|
|
|
$29.3 |
|
|
|
$(3.4) |
|
|
|
$(4.2) |
|
|
|
$- |
|
|
|
$21.7 |
|
The
employee-related restructuring provision and fixed asset impairment charges in
the third quarter for “Action Program 2008” mainly relate to activities in North
America and Europe. Cash payments mainly relate to restructuring activities in
Europe initiated in third quarter 2008. The major part of the $21.7 million in
the employee-related restructuring reserve, related to the “Action Program
2008”, accrued as of September 30, 2008, is expected to be paid before the end
of 2009.
Restructuring
charges and asset impairments related to the “Action Program 2008”
are:
|
|
Total
expected
costs
|
|
|
Costs
incurred
July-Sept
2008
|
|
|
Estimated
additional charges
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring charges and
asset
impairments (in millions)
|
|
|
$75 |
|
|
|
$29 |
|
|
|
$46 |
|
The major part of
the estimated additional charges of $46 million is expected to be incurred
before the end of 2009.
1.5 Product-Related
Liabilities
The Company
maintains reserves for product risks. Such reserves relate to product
performance issues, including recall, product liability and warranty issues. The
Company records liabilities for product-related risks when probable claims are
identified and it is possible to reasonably estimate costs. Provisions for
warranty claims are estimated based on prior experience, likely changes in
performance of newer products and the mix and volume of the products sold. Cash
payments have been made, in the past, for recall and warranty-related issues in
connection with a variety of different products and customers. For further
explanation, see Note 1.12 Contingent Liabilities below.
The table below
summarizes the change in the balance sheet position of the product-related
liabilities for the quarter. The provision recorded for the nine month period
ended September 30, 2008 mainly relates to recalls.
|
|
Quarter
July-September
|
|
|
First
nine months
January
- September
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Reserve
at beginning of the period
|
|
|
$22.1 |
|
|
|
$21.7 |
|
|
|
$18.8 |
|
|
|
$22.8 |
|
Provision
|
|
|
(0.4) |
|
|
|
(0.2) |
|
|
|
6.2 |
|
|
|
4.3 |
|
Cash
payments
|
|
|
(3.7) |
|
|
|
(2.8) |
|
|
|
(8.1) |
|
|
|
(8.7) |
|
Translation
difference
|
|
|
(1.2) |
|
|
|
0.8 |
|
|
|
(0.1) |
|
|
|
1.1 |
|
Reserve
at end of the period
|
|
|
$16.8 |
|
|
|
$19.5 |
|
|
|
$16.8 |
|
|
|
$19.5 |
|
Comprehensive
income includes net income for the year and items charged directly to
equity.
|
|
Quarter
July-September
|
|
|
First
nine months
January
– September
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net
income
|
|
|
$31.2 |
|
|
|
$63.2 |
|
|
|
$203.1 |
|
|
|
$193.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
liability
|
|
|
0.5 |
|
|
|
0.2 |
|
|
|
- |
|
|
|
0.3 |
|
Fair value
of derivatives
|
|
|
(0.1) |
|
|
|
(0.1) |
|
|
|
0.1 |
|
|
|
- |
|
Translation
of foreign operations
|
|
|
(90.4) |
|
|
|
41.3 |
|
|
|
(34.9) |
|
|
|
72.1 |
|
Other
comprehensive income
|
|
|
(90.0) |
|
|
|
41.4 |
|
|
|
(34.8) |
|
|
|
72.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
$(58.8) |
|
|
|
$104.6 |
|
|
|
$168.3 |
|
|
|
$266.3 |
|
1.7
Business Acquisitions
As of September
29, 2008, Autoliv acquired the automotive radar sensors business of Tyco
Electronics Ltd. This radar sensor business was a "carve-out" of the Radio
Frequency and Subsystems business unit within Tyco Electronics. The transaction
included a preliminary amount of $10 million for technology and intellectual
property for short-, medium- and long-range radar products. The purchase price
and the preliminary goodwill in connection with this acquisition were $42
million and $25 million, respectively. The results of the operations of the
acquired business will be included in the consolidated financial statements from
October 1, 2008.
1.8
New Accounting Pronouncements
The following
accounting pronouncements have been issued and will be effective for the Company
in or after fiscal year 2008:
Statement No. 157,
Fair Value Measurements (“FAS-157”), establishes a framework for measuring fair
value under generally accepted accounting principles in the United States,
clarifies the definition of fair value within that framework, and expands
disclosures about the use of fair value measurements. FAS-157 was issued in
September 2006 and is effective for fiscal years beginning after November 15,
2007. For non-financial assets and liabilities which are not periodically
recognized or disclosed at fair value, FAS-157 has been deferred one year. The
Company adopted FAS-157 for all financial assets and liabilities required to be
measured at fair value on a recurring basis, prospectively from January 1, 2008.
The application of FAS-157 for financial instruments which are periodically
measured at fair value did not have a significant impact on earnings nor the
financial position.
Statement No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities
(“FAS-159”), provides companies with an option to report selected financial
assets and liabilities at fair value. The objective of FAS-159 is to reduce both
complexity in accounting for financial instruments and the volatility in
earnings caused by measuring related assets and liabilities differently. FAS-159
was issued in February 2007 and is effective for fiscal years beginning after
November 15, 2007. The application of FAS-159 did not have any impact on
earnings nor the financial position, because the Company did not elect to use
the fair value option.
Statement No. 141
(Revised), Business Combinations (“FAS-141(R)”), replaces FASB Statement No.
141. FAS-141(R) applies the acquisition method to all transactions and other
events in which an entity obtains control over one or more other businesses,
requires the acquirer to recognize the fair value of all assets and liabilities
acquired, even if less than one hundred percent ownership is acquired, and
establishes the acquisition date fair value as measurement date for all assets
and liabilities assumed. The Statement was issued in December 2007 and is
effective prospectively for any acquisitions made after fiscal years beginning
after December 15, 2008.
Statement No. 160,
Noncontrolling Interests in Consolidated Financial Statements (“FAS-160”),
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated financial statements. The Statement was
issued in December 2007, and is effective for fiscal years beginning after
December 15, 2008. The application of FAS-160 is not expected to have a
significant impact on earnings nor the financial position.
Statement No. 161,
Disclosures about Derivative Instruments and Hedging Activities, an amendment of
FASB Statement No. 133 (“FAS-161”), requires enhanced disclosures about an
entity’s derivative and hedging activities and thereby improves the transparency
of financial reporting. The Statement was issued in March 2008 and is effective
prospectively for fiscal years beginning after November 15, 2008. The
application of FAS-161 will expand the disclosures in regards to the Company’s
derivative and hedging activities.
FASB Staff
Position (FSP), Determination of the Useful Life of Intangible Assets (“FAS
142-3”), amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset under FASB Statement No. 142, Goodwill and Other Intangible
Assets. The Statement was issued in April 2008, and is effective for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal
years. The guidance in this FSP for determining the useful life of a recognized
intangible shall be applied prospectively to intangible assets acquired after
the effective date.
1.9
Income Taxes
The effective tax
rate for the first nine months of 2008 was 28.9%, compared with 32.5% in the
first nine months of 2007. The net impact of discrete tax items in both the
first nine months of 2008 and also the first nine months of 2007 was not
material. The tax rate for the full year 2007 was 33.7%, which included discrete
tax costs of 1.8%. During the first quarter of 2008, several subsidiaries
recorded adjustments to their estimates of prior year income tax provisions.
These catch up effects in the first quarter caused a 2% reduction to the
effective tax rate in the first quarter of 2008. During the second quarter of
2008, the Company accrued additional adjustments to unrecognized tax benefits
related to on-going tax audits of various non-US subsidiaries. In addition, in
the second quarter, several subsidiaries recorded adjustments to their estimates
of prior year income tax provisions. The adjustments recorded in the second
quarter caused a 3% increase to the effective tax rate in the second quarter
2008. In the third quarter, the company recorded adjustments to unrecognized tax
benefits due to the resolution of a tax audit. In addition, in the third
quarter, several subsidiaries recorded adjustments to their estimates of prior
year income tax provisions. The adjustments recorded in the third quarter caused
a 3.6% decrease to the effective tax rate for the third quarter 2008. Excluding
discrete items, the projected 2008 effective tax rate compared to 2007 has been
positively impacted by higher R&D tax credits in France and a lower German
tax rate due to new tax laws, as well as a lower level of losses in start-up
companies.
The Company files
income tax returns in the United States federal jurisdiction, and various states
and foreign jurisdictions. The Company is no longer subject to income tax
examination by the U.S. federal tax authorities for years prior to 2003. With
few exceptions, the Company is also no longer subject to income tax examination
by U.S. state or local tax authorities for tax years prior to 2003. In addition,
with few exceptions, the Company is no longer subject to income tax examinations
by non-U.S. tax authorities for years before 2001. The Internal Revenue Service
(“IRS”) began an examination of the Company’s 2003-2005 U.S. income tax returns
in the second quarter of 2006 that is anticipated to be completed in 2008. In
addition, the Company is undergoing tax audits in several non-U.S. jurisdictions
covering multiple years. As of September 30, 2008, as a result of those tax
examinations, the Company currently is not aware of any material proposed income
tax adjustments. The Company expects the completion of certain tax audits in the
near term. It is reasonably possible that the amount of unrecognized benefits
with respect to certain of our unrecognized tax positions could significantly
increase or decrease in some future period or periods. However, at this time, an
estimate of the range of the reasonably possible outcomes is not
possible.
During the third
quarter 2008, the Company recorded an increase of $0.9 million to income tax
reserves for unrecognized tax benefits based on tax positions related to the
current and prior years, including accruing additional interest in 2008 related
to unrecognized tax benefits of prior years. In addition, during the third
quarter 2008, the Company recorded a decrease of $1.8 million to income tax
reserves for unrecognized tax benefits for prior years related to agreed upon
settlements with tax authorities in various jurisdictions. During the
second quarter 2008, the Company recorded an increase of $4.8 million to income
tax reserves for unrecognized tax benefits based on tax positions related to the
current and prior years, including accruing additional interest in 2008 related
to unrecognized tax benefits of prior years. During the first quarter 2008, the
Company recorded an increase of $1.2 million to income tax reserves for
unrecognized tax benefits based on tax positions related to the current and
prior years, including accruing additional interest in 2008 related to
unrecognized tax benefits of prior years. In addition, during the first quarter
2008, the Company recorded a decrease of $1.2 million to income tax reserves for
unrecognized tax benefits based on settlements with taxing authorities. Of the
total unrecognized tax benefits of $52.1 million recorded at September 30, 2008,
$27.3 million is classified as current tax payable and $24.8 million is
classified as non-current tax payable on the balance sheet.
1.10
Retirement Plans
The Company has
non-contributory defined benefit pension plans covering employees at most
operations in the United States. Benefits are based on an average of the
employee’s earnings in the years preceding retirement and on credited service.
Certain supplemental unfunded plan arrangements also provide retirement benefits
to specified groups of participants.
The Company has
frozen participation in the U.S. pension plans to include only those employees
hired as of December 31, 2003. The U.K. defined benefit plan is the most
significant non-U.S pension plan and participation was frozen for all employees
hired after April 30, 2003.
The Net Periodic
Benefit Costs related to Other Post-retirement Benefits were not significant to
the Consolidated Financial Statements of the Company for the nine month periods
ended September 30, 2008 or 2007.
The Net Periodic
Benefit Cost increased by $2.1 million (excluding payroll tax) during the first
quarter 2007 due to pension benefits that became fully accrued when Mr. Lars
Westerberg retired as President and Chief Executive Officer of Autoliv Inc. on
April 1, 2007, instead of June 2008 as originally planned. These pension costs
are reported as Special Termination Benefit Cost for the nine month period 2007
presented in the table below.
For the nine
months ended September 30, 2008, the Company has contributed $14.5 million to
the U.S. pension plans.
For further
information on Pension Plans and Other Post-retirement Benefits, see Note 18 to
the Consolidated Financial Statements of the Company included in the Company’s
Annual Report on Form 10-K/A for the year ended December 31, 2007, filed with
the SEC on February 25, 2008.
The components of
the total Net Periodic Benefit Cost associated with the Company’s defined
benefit retirement plans are as follows:
|
|
Quarter
July
- September
|
|
|
First
nine months
January
- September
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service
cost
|
|
|
$3.7 |
|
|
|
$3.8 |
|
|
|
$11.3 |
|
|
|
$11.6 |
|
Interest
cost
|
|
|
3.6 |
|
|
|
3.5 |
|
|
|
11.0 |
|
|
|
10.4 |
|
Expected
return on plan assets
|
|
|
(3.3) |
|
|
|
(2.9) |
|
|
|
(9.9) |
|
|
|
(8.7) |
|
Amortization
prior service cost (credit)
|
|
|
(0.2) |
|
|
|
- |
|
|
|
(0.6) |
|
|
|
0.1 |
|
Amortization
of net loss
|
|
|
0.1 |
|
|
|
0.4 |
|
|
|
0.1 |
|
|
|
1.3 |
|
Special
termination benefit
|
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Periodic Benefit Cost
|
|
|
$3.9 |
|
|
|
$4.9 |
|
|
|
$11.9 |
|
|
|
$16.9 |
|
1.11
Fair Value Financial Instruments
The Company
records derivatives at fair value. Any gains and losses on derivatives recorded
at fair value are reflected in the consolidated statement of income with the
exception of cash flow hedges where an immaterial portion of the fair value is
reflected in other comprehensive income in the balance sheet The
degree of judgment utilized in measuring the fair value of the instruments
generally correlates to the level of pricing observability. Pricing
observability is impacted by a number of factors, including the type of asset or
liability, whether the asset or liability has an established market and the
characteristics specific to the transaction. Derivatives with readily active
quoted prices or for which fair value can be measured from actively quoted
prices generally will have a higher degree of pricing observability and a lesser
degree of judgment utilized in measuring fair value. Conversely, assets
rarely traded or not quoted will generally have less, or no, pricing
observability and a higher degree of judgment utilized in measuring fair
value.
Under FAS-157,
there is a hierarchal disclosure framework associated with the level of pricing
observability utilized in measuring assets and liabilities at fair
value. The three broad levels defined by the FAS-157 hierarchy are as
follows:
Level 1 - Quoted
prices are available in active markets for identical assets or liabilities as of
the reported date.
Level 2 - Pricing
inputs are other than quoted prices in active markets, which are either directly
or indirectly observable as of the reported date. The nature of these asset and
liabilities include items for which quoted prices are available but traded less
frequently, and items that are fair valued using other financial instruments,
the parameters of which can be directly observed.
Level 3 - Assets
and liabilities that have little to no pricing observability as of reported
date. These items do not have two-way markets and are measured using
management’s best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or
estimation.
There were no
changes in the Company’s valuation techniques during the nine months ended
September 30, 2008.
The following
table summarizes the valuation of the Company’s derivatives by the above FAS-157
pricing observability levels:
|
|
|
|
|
Fair
Value Measurements at September 30, 2008
|
|
|
|
|
|
|
|
|
Description
|
|
Total
Carrying Amount in Statement of Financial Position
September
30, 2008
|
|
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
|
|
Using Significant
Other Observable Inputs
(Level
2)
|
|
|
Significant
Unobservable Inputs
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
$10.7 |
|
|
|
- |
|
|
|
$10.7 |
|
|
|
- |
|
Total
Assets
|
|
|
$10.7 |
|
|
|
- |
|
|
|
$10.7 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
$4.1 |
|
|
|
- |
|
|
|
$4.1 |
|
|
|
- |
|
Total
Liabilities
|
|
|
$4.1 |
|
|
|
- |
|
|
|
$4.1 |
|
|
|
- |
|
1.12
Contingent Liabilities
Product
Warranty and Recalls
Autoliv is exposed
to various claims for damages and compensation if products fail to perform as
expected. Such claims can be made, and result in costs and other losses to the
Company, even where the product is eventually found to have functioned properly.
Where a product (actually or allegedly) fails to perform as expected we face
warranty and recall claims. Where such (actual or alleged) failure results, or
is alleged to result, in bodily injury and/or property damage, we may also face
product-liability claims. There can be no assurance that the Company will not
experience material warranty, recall or product (or other) liability claims or
losses in the future, or that the Company will not incur significant costs to
defend against such claims. The Company may be required to participate in a
recall involving its products. Each vehicle manufacturer has its own practices
regarding product recalls and other product liability actions relating to its
suppliers. As suppliers become more integrally involved in the vehicle design
process and assume more of the vehicle assembly functions, vehicle manufacturers
are increasingly looking to their suppliers for contribution when faced with
recalls and product liability claims. A warranty, recall or product-liability
claim brought against the Company in excess of its insurance may have a material
adverse effect on the Company’s business. Vehicle manufacturers are also
increasingly requiring their outside suppliers to guarantee or warrant their
products and bear the costs of repair and replacement of such products under new
vehicle warranties. A vehicle manufacturer may attempt to hold the Company
responsible for some, or all, of the repair or replacement costs of defective
products under new vehicle warranties, when the product supplied did not perform
as represented. Accordingly, the future costs of warranty claims by the
customers may be material. However, we believe our established reserves are
adequate to cover potential warranty settlements. Autoliv’s warranty reserves
are based upon the Company’s best estimates of amounts necessary to settle
future and existing claims. The Company regularly evaluates the appropriateness
of these reserves, and adjusts them when appropriate. However, the final amounts
determined to be due related to these matters could differ materially from the
Company’s recorded estimates.
The Company
believes that it is currently reasonably insured against significant warranty,
recall and product liability risks, at levels sufficient to cover potential
claims that are reasonably likely to arise in our businesses. Autoliv cannot be
assured that the level of coverage will be sufficient to cover every possible
claim that can arise in our businesses, now or in the future, or that such
coverage always will be available on our current market should we, now or in the
future, wish to extend or increase insurance.
In its products,
the Company utilizes technologies which may be subject to intellectual property
rights of third parties. While the Company does seek to identify the
intellectual property rights of relevance to its products, and to procure the
necessary rights to utilize such intellectual property rights, we may fail to do
so. Where we so fail, we may be exposed to material claims from the
owners of such rights. Where the Company has sold products which
infringe upon such rights, our customers may be entitled to be indemnified by us
for the claims they suffer as a result thereof. Also such claims could be
material.
The table in Note
1.5 Product-Related Liabilities above summarizes the change in the balance sheet
position of the product related liabilities for the three and nine month periods
ended September 30, 2008 and September 30, 2007.
Legal
Proceedings
Various claims,
lawsuits and proceedings are pending or threatened against the Company or its
subsidiaries, covering a range of matters that arise in the ordinary course of
its business activities with respect to commercial, product liability and other
matters.
Litigation is
subject to many uncertainties, and the outcome of any litigation cannot be
assured. After discussions with counsel, it is the opinion of management that
the various lawsuits to which the Company currently is a party will not have a
material adverse impact on the consolidated financial position of Autoliv, but
the Company cannot provide assurance that Autoliv will not experience material
litigation, product liability or other losses in the future.
Litigation
in France (Autoliv Holding Limited)
In 1997, Autoliv
AB (a wholly-owned subsidiary of Autoliv, Inc.) acquired Marling Industries plc
(“Marling”). At that time, Marling was involved in a lawsuit relating to the
sale in 1992 of a French subsidiary. In May 2006, a French court ruled that
Marling (now named Autoliv Holding Limited) and another entity, then part of the
Marling group, had failed to disclose certain facts in connection with the 1992
sale, and appointed an expert to assess the losses suffered by the plaintiff.
The acquirer of the French subsidiary has made claims for damages of
approximately €40 million (approximately $58 million) but has not yet provided
the court appointed expert with the materials needed to evaluate the claims.
Autoliv has appealed against the May 2006 court decision and believes it has
meritorious grounds for such appeal. In the opinion of the Company’s management,
it is not possible to give any meaningful estimate of any financial impact that
may arise from the claim. While management does not believe it is probable, the
final outcome of this litigation may result in a loss that will have to be
recorded by Autoliv, Inc. No reserves have been accrued for this
dispute.
Litigation
in United States (Autoliv ASP, Inc.)
In December 2003,
a U.S. Federal District Court awarded a former supplier of Autoliv ASP Inc. (a
wholly-owned subsidiary of Autoliv Inc.), approximately $27 million plus
pre-judgment interest of approximately $7 million in connection with a
commercial dispute that relates to purchase commitments made in 1995. As a
result of a final court ruling in 2007, after multiple appeals, Autoliv ASP was
held liable to the former supplier and deposited a total of $36.4 million with
the District Court in fulfillment of the award. The incremental cost of the
legal settlement in 2007 of $30.4 million was charged to “Other income
(expense), net” in the income statement. On November 14, 2007, the District
Court issued an order to the effect that Autoliv ASP had fully and completely
satisfied the judgment.
There remains an
open issue as to the calculation of the pre-judgment interest. The former
supplier has sought an additional $4.9 million that it attributes to
pre-judgment interest and on November 15, 2007, filed a notice of appeal from
the District Court’s decision. On July 10, 2008, the Court of Appeals affirmed
the District Court’s decision. On October 8, 2008, the former supplier filed a
petition for writ of certiorari (i.e. an appeal) with the United States Supreme
Court. Management believes that the risk that the former supplier will be
successful with its appeal is remote.
1.13
Subsequent Events
On October 17,
Autoliv, Inc. secured close to the equivalent of $200 million in additional
long-term financing. This financing is without financial covenants and consists
of three parts:
·
|
A 2-year SEK
1 billion ($135 million equivalent) loan commitment from a bank on terms
very similar to the revolving credit facility
(“RCF”).
|
·
|
Two new
notes on terms very similar to the Swedish medium term note program. Both
notes have been swapped to U.S dollars and carry floating interest
rates.
|
o
|
A SEK 150
million ($20 million equivalent) 2-year
note.
|
o
|
A SEK 300
million ($40 million equivalent) 3-year
note.
|
The facility
agreement and the terms and conditions of the notes are attached as exhibits
below.
On October 3, the
Company also withdrew an additional $500 million from its RCF. This withdrawal
is for six months. After this withdrawal, Autoliv has $450 million dollars in
availability remaining under its RCF.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with our Consolidated
Financial Statements and accompanying Notes thereto included elsewhere herein
and with our 2007 Annual Report on Form 10-K/A filed with the SEC on February
25, 2008. Unless otherwise noted, all dollar amounts are in
millions.
Autoliv is the
world's largest automotive safety system supplier with sales to all the leading
vehicle manufacturers in the world. Autoliv develops, markets and manufactures
airbags, seatbelts, safety electronics, steering wheels, anti-whiplash systems,
child safety as well as night vision systems and other active safety systems.
Autoliv accounts for more than one third of its market. Autoliv has
manufacturing facilities in 29 vehicle-producing countries.
Autoliv is a
Delaware holding corporation with principal executive offices in Stockholm,
Sweden, which owns two principal subsidiaries, Autoliv AB ("AAB") and Autoliv
ASP, Inc. ("ASP"). AAB, a Swedish corporation, is a leading
developer, manufacturer and supplier to the automotive industry of car occupant
restraint systems. Starting with seat belts in 1956, AAB expanded its product
lines to include seat belt pretensioners (1989), frontal airbags (1991),
side-impact airbags (1994), steering wheels (1995) and seat sub-systems (1996).
ASP, an Indiana corporation, pioneered airbag technology in 1968 and has since
grown into one of the world's leading producers of airbag modules and inflators.
ASP designs, develops and manufactures airbag inflators, modules and airbag
cushions, seat belts and steering wheels. It sells inflators and modules for use
in driver, passenger, side-impact and knee bolster airbag systems for worldwide
automotive markets.
Shares of Autoliv
common stock are traded on the New York Stock Exchange under the symbol "ALV"
and Swedish Depositary Receipts representing shares of Autoliv common stock
trade on the OMX Nordic Exchange in Stockholm under the symbol "ALIV". Options
in Autoliv shares are traded in Philadelphia and AMSE under the symbol
"ALV".
Non-GAAP financial
measures
Some of the
following discussions refer to non-GAAP financial measures: see "Organic sales",
"Operating working capital", "Net debt", "Leverage ratio" and "Interest coverage
ratio". Management believes that these non-GAAP financial measures assist
investors in analyzing trends in the Company's business. Investors should
consider these non-GAAP financial measures in addition to, rather than as a
substitute for, financial reporting measures prepared in accordance with GAAP.
These non-GAAP financial measures have been identified as applicable in each
section of this report with a tabular presentation reconciling them to GAAP. It
should be noted that these measures, as defined, may not be comparable to
similarly titled measures used by other companies.
RESULTS
OF OPERATIONS
THREE
MONTHS ENDED SEPTEMBER 30, 2008 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30,
2007
Market
overview
During the third
quarter 2008, global light vehicle production is estimated by CSM and J.D.
Power to have decreased by slightly more than 1% compared to the same quarter
2007. However, light vehicle production in the Triad, where Autoliv generates
close to 90% of its sales, is estimated to have declined by more than
4%.
In Europe
(including Eastern Europe), where Autoliv derives more than half of its
revenues, light vehicle production is estimated to have reached almost the
same level as in the third quarter 2007. Light vehicle production in the
dominant West European market declined by nearly 7%. Most of this decline was
offset by a 16% increase in Eastern Europe. Average European
light vehicle production was more than 2 percentage points weaker than
expected.
In North
America, which
accounts for approximately one fifth of consolidated revenues, light vehicle
production dropped by more than 16% which was 4 percentage points worse than
expected. Production of light trucks decreased by 32%. GM cut their production
by 12%, Chrysler their production by 31% and Ford their production by 33%. The
Asian and European vehicle manufacturers reduced their North American production
by 6%.
In Japan,
which accounts for about one tenth of Autoliv’s consolidated sales, light
vehicle production grew by 5%.
In the Rest of the World
(RoW), which
accounts for slightly more than one tenth of sales, light vehicle production
grew by 6%, which was 9 percentage points less than expected. This was mainly
due to a swing in Korean production from an expected increase of 10% to a
decline of 11%. This swing particularly affected export vehicles with higher
safety content for North America and Western Europe.
Autoliv’s market
is driven not only by vehicle production but also by the fact that vehicles are
being equipped with more safety systems in response to new crash test programs
and regulations. For instance, both NHTSA in the U.S. and the EuroNCAP are in
the process of changing their crash-test rating programs which could help drive
increased safety content in new vehicle models.
Consolidated
Sales
The Company has
substantial operations outside the United States and currently more than 80% of
its sales are denominated in currencies other than the U.S. dollar. This makes
the Company and its performance in regions outside the United States sensitive
to changes in U.S dollar exchange rates. The measure “Organic sales” presents
the increase or decrease in the Company’s overall U.S. dollar net sales on a
comparative basis, allowing separate discussion of the impacts of
acquisitions/divestments and exchange rate fluctuations. The tabular
reconciliation below presents the change in “Organic sales” reconciled to the
change in the total net sales as can be derived from our unaudited financial
statements.
|
|
Reconciliation
of the change in “Organic sales” to GAAP financial measure
|
|
|
|
Components
of net sales increase (decrease)
Quarter
July-September, 2008
(Dollars
in millions)
|
|
|
|
Europe
|
|
|
North
America
|
|
|
Japan
|
|
|
RoW
|
|
|
Total
|
|
|
|
%
|
|
|
$
|
|
|
|
%
|
|
|
$
|
|
|
|
%
|
|
|
$
|
|
|
|
%
|
|
|
$
|
|
|
|
%
|
|
|
|
$
|
|
Organic
sales
change
|
|
|
(9.8) |
|
|
|
(79.7) |
|
|
|
(11.2) |
|
|
|
(45.8) |
|
|
|
10.1 |
|
|
|
15.5 |
|
|
|
(2.4) |
|
|
|
(4.3) |
|
|
|
(7.3) |
|
|
|
(114.3) |
|
Effect
of
exchange
rates
|
|
|
8.1 |
|
|
|
66.2 |
|
|
|
1.1 |
|
|
|
4.4 |
|
|
|
9.6 |
|
|
|
14.6 |
|
|
|
2.0 |
|
|
|
3.6 |
|
|
|
5.7 |
|
|
|
88.8 |
|
Impact of
acquisitions/
divestments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7.1 |
|
|
|
13.0 |
|
|
|
0.8 |
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
net
sales
change
|
|
|
(1.7) |
|
|
|
(13.5) |
|
|
|
(10.1) |
|
|
|
(41.4) |
|
|
|
19.7 |
|
|
|
30.1 |
|
|
|
6.7 |
|
|
|
12.3 |
|
|
|
(0.8) |
|
|
|
(12.5) |
|
Consolidated net
sales of $1,545 million for the quarter was approximately 1% lower than during
the same quarter 2007. Currency translation effects boosted sales by nearly 6%,
while the AIN-acquisition in November 2007 in India (“AIN-acquisition”)
added nearly 1% to consolidated sales. Excluding these effects, organic sales
(i.e. sales excluding translation currency effects, and acquisitions/
divestitures) declined by 7%. At the beginning of the quarter, organic sales
were expected to decrease by 3%. However, global vehicle production has dropped
5% percentage points more than anticipated at the beginning of the
quarter.
Autoliv’s lower organic sales reflect
primarily the 7% decline in Western Europe and the 16% drop in North American
light vehicle production. Since these vehicles have high safety content, changes
in vehicle production levels in these regions have significant impact on
Autoliv’s sales and virtually all of our product lines were affected. As a
result, only sales of side curtain airbags grew organically in the third quarter
due to growing penetration rates.
Sales
by Product
Sales of airbag products (including
steering wheels and electronics) decreased by 2% to $979 million. Excluding
currency translation effects of 5%, organic sales declined by 7%, mainly due to
lower light vehicle production in Autoliv’s most important markets.
Sales of seatbelt products (including
seat sub-systems) increased by 2% to $566 million. Excluding currency
translation effects of 7% and the AIN-acquisition of 2%, organic sales declined
by 7%, primarily due to lower light vehicle production in Autoliv’s most
important markets and a 43% sales decline of Seat Sub-Systems.
Sales
by Region
Sales from
Autoliv’s European
companies declined by 2% to $797 million due to a 10% lower organic
sales, partially offset by favorable currency translation effects of 8%. The
organic sales change reflects mainly the 7% drop in Western vehicle production
and an unfavorable model mix in Europe’s light vehicle production, exacerbated
by upcoming model change-overs for platforms such as the Renault Mégane. Organic
sales were also affected by the sudden drop in sales of the non-core Seat
Sub-System business. These effects were partially offset by strong demand for
certain small cars, such as BMW’s 1-series and Mini, and Ford’s
Kuga.
Sales from
Autoliv’s North American
companies declined by 10% to $368 million despite a 1% positive effect
from the stronger Mexican peso. Organic sales decline of 11% was less than the
16% drop in the region’s light vehicle production due to Autoliv’s
relatively low exposure to SUVs and other light trucks. Instead, Autoliv
benefited from healthy demand for smaller and mid-size vehicles such as
Chevrolet’s Malibu, Impala and Traverse; Buick’s Enclave; GMC’s Acadia and
Saturn’s Aura.
Sales from
Autoliv’s companies in Japan
rose by 20% to $183 million which includes favorable currency translation
effects of 10%. Organic growth of 10% was twice as strong as the 5% increase in
Japanese light vehicle production. Autoliv’s strong performance is due to
continued growth in the installation rates for side curtain airbags in addition
to a favorable vehicle model mix with strong demand for such vehicles as Honda’s
Accord and Freed; Mitsubishi’s Outlander, Mazda’s Axela and Demio and Toyota’s
Alphard, Land Cruiser Prado and Vitz.
Sales from
Autoliv’s companies in the Rest of the
World (RoW) rose
by nearly 7% to $197 million. Excluding the AIN-acquisition and currency
translation effects of slightly more than 7% and 2%, respectively, organic sales
declined by 2%, primarily due to the sudden drop in production in Korea which
had a 4 percentage point negative effect on sales in the region. However,
production of low-end vehicles for the local markets in Asia continued to be
strong. This resulted in continued strong performance for Autoliv’s seatbelt
sales with a 22% organic sales increase to $118 million. Sales were driven by
new business for Chrysler’s Sebring; Ford’s Mondeo; Honda’s
CRV; Hyundai’s i10; Nissan’s Qashqai and Teana; Renault’s Koleos/QM5;
and Volkswagen’s Lavida.
Earnings
for the Three-Month Period Ended September 30, 2008
Gross profit
amounted to $261 million compared to $302 million in the third quarter 2007 and
gross margin to 16.9% compared to 19.4%. This year’s quarter has been charged
with $4 million for an asset impairment recognized as part of the action program
as announced in July. In addition to the impact from lower sales, gross profit
was negatively impacted by $31 million in higher costs for raw materials,
freight and utility costs. Currency transaction effects had a positive effect of
$9 million.
Operating income
amounted to $58 million compared to $110 million in the same quarter 2007 and
operating margin to 3.8% compared to 7.1%. Operating income and margins were
affected by the lower gross profit as well as by higher severance and
restructuring costs of $26 million. Currency effects caused reported selling,
general and administrative expense (S,G&A) to increase. However, adjusted
for currency effects, the underlying S,G&A expense has started to decline.
In addition, net expense for R,D&E declined by $12 million primarily as a
result of higher engineering income.
Income before
taxes amounted to $47 million compared to $95 million in the third quarter 2007.
This $48 million decline was due to lower operating income of $52 million,
partially offset by a $4 million favorable effect in Other financial items
resulting from currency transaction effects.
Net income
amounted to $31 million compared to $63 million in the third quarter 2007. The
effective tax rate declined to 28% from 31%.
Earnings per share
was $0.44 compared to $0.81 for the same quarter 2007. Lower pre-tax income had
34 cents negative impact and higher severance and restructuring costs were
negative by 26 cents, while currency effects had a positive effect of 18 cents,
the stock repurchase program of 3 cents and lower effective tax rate of 2 cent.
The average number of shares outstanding decreased by 8% to 71.5
million.
Return on capital
employed was 7% and return on equity 5%. Severance and restructuring costs
reduced return on capital employed by 3.6 percentage units and return on equity
by 3.9 percentage units.
NINE
MONTHS ENDED SEPTEMBER 30, 2008 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30,
2007
Market
overview
During the
nine-month period January - September 2008, global light vehicle production grew
by 2%, whereas production in the Triad declined by slightly more than one
percent.
In Europe,
light vehicle production increased by 4%, due to a 19% increase in Eastern
Europe. In Western Europe light vehicle production declined by 2%.
In North
America, light vehicle production decreased by 13%. GM, Ford and Chrysler
cut back their production by 19%, and Asian and European vehicle manufacturers
reduced their production in North America by 3%.
In Japan,
light vehicle production increased by 5% in the nine-month period.
In the Rest of the
World (RoW)
light vehicle production rose by 10%.
Consolidated
Sales
The Company has
substantial operations outside the United States and currently, approximately
80% of the sales are denominated in currencies other than the U.S. dollar. This
makes the Company and its performance in regions outside the United States
sensitive to changes in the U.S dollar exchange rates. The measure “Organic
sales” presents the increase or decrease in our overall U.S. dollar net sales on
a comparative basis, allowing separate discussion of the impacts of
acquisitions/divestments and exchange rate fluctuations. The tabular
reconciliation below presents the change in “Organic sales” reconciled to the
change in the total net sales as can be derived from our unaudited financial
statements.
|
|
Reconciliation
of the change in “Organic sales” to GAAP financial measure
|
|
|
|
Components
of net sales increase (decrease)
First
nine months, 2008
(Dollars
in millions)
|
|
|
|
Europe
|
|
|
North
America
|
|
|
Japan
|
|
|
RoW
|
|
|
Total
|
|
|
|
%
|
|
|
$ |
|
|
|
% |
|
|
$ |
|
|
|
% |
|
|
$ |
|
|
|
% |
|
|
$ |
|
|
|
% |
|
|
|
$ |
|
Organic
sales
change
|
|
|
(4.4) |
|
|
|
(117.3) |
|
|
|
(11.5) |
|
|
|
(150.2) |
|
|
|
14.3 |
|
|
|
63.6 |
|
|
|
5.5 |
|
|
|
30.2 |
|
|
|
(3.5) |
|
|
|
(173.7) |
|
Effect
of
exchange
rates
|
|
|
12.8 |
|
|
|
342.4 |
|
|
|
0.6 |
|
|
|
8.7 |
|
|
|
12.7 |
|
|
|
56.7 |
|
|
|
3.6 |
|
|
|
19.9 |
|
|
|
8.6 |
|
|
|
427.7 |
|
Impact
of
acquisitions/
divestments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7.5 |
|
|
|
41.4 |
|
|
|
0.8 |
|
|
|
41.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
net
sales
change
|
|
|
8.4 |
|
|
|
225.1 |
|
|
|
(10.9) |
|
|
|
(141.5) |
|
|
|
27.0 |
|
|
|
120.3 |
|
|
|
16.6 |
|
|
|
91.5 |
|
|
|
5.9 |
|
|
|
295.4 |
|
For the year’s
first nine months, sales increased by 6% to $5,280 million due to currency
translation effects of 9% and the AIN-acquisition that added nearly 1%. An
organic sales decrease of less than 4% was due to lower light vehicle production
in North America and Western Europe. The sales outcome also reflects upcoming
model change-overs for the Renault Mégane, the Volkswagen Golf and other
important vehicle models for Autoliv.
Sales
by Product
Sales of airbag
products increased by 4% to $3,346 million. Excluding currency effects of
8%, organic sales declined by 4% mainly due to the North American
market.
Sales of seatbelt
products increased by 10% to $1,934 million including 10% from currency
effects and 2% from the AIN-acquisition. The 2% organic sales decline
is primarily due to lower light vehicle production in Autoliv’s most
important markets.
Sales
by Region
Sales from
Autoliv’s European
companies increased by 8% to $2,910 million due to currency effects of
less than 13%. The organic sales decline of 4% was due to weak West European
light vehicle production and an overall negative vehicle model mix in European
light vehicle production.
Sales from
Autoliv’s North American
companies decreased by 11% to $1,162 million. Organic sales declined by
12% virtually in line with light vehicle production, while the stronger Mexican
peso had a slightly positive impact. Organic growth in seatbelt sales continued
even in the current tough market environment.
Sales from Autoliv
companies in Japan
jumped by 27% to $566 million due to organic growth and currency effects of
slightly more than 14% and 13%, respectively. Organic growth was nearly three
times stronger than Japanese light vehicle production. This was mainly due to
increased sales of Inflatable Curtains to such vehicles as Toyota’s Alphard,
Land Cruiser Prado and Vitz.
Sales from Autoliv
companies in the RoW rose by 17% to $641
million including 4% from currency effects and nearly 8% from the
AIN-acquisition. Organic growth of slightly more than 5% was driven by strong
seatbelt sales, primarily in China and Brazil and especially with Chery, FAW,
Ford, Haima, Honda, Hyundai, Nissan, Peugeot, Suzuki, and
Volkswagen.
Earnings
for the Nine-Month Period Ended September 30, 2008
Gross profit was
virtually unchanged at $982 million compared to the same period in 2007, but
gross margin decreased to 18.6% from 19.7% primarily due to higher raw material
prices and other direct cost.
Operating income
amounted to $334 million compared to $338 million for the same period 2007 and
operating margin to 6.3% compared to 6.8%. Last year’s period was affected by a
$30 million increase in legal reserves. So far this year, total severance and
restructuring cost of $40 million has been $27 million higher than for the same
period 2007.
Income before
taxes was $295 million compared to $297 million during the same period 2007. The
cost for Other financial items was reduced by $7 million thanks to lower
negative effects from loans in foreign currencies. This favorable impact was
partially offset by a $4 million higher interest expense, resulting from a
higher average net debt.
Net income
amounted to $203 million compared to $194 million for the same period 2007. The
effective tax rate was 29% compared to 33% for the nine-month period
2007.
Earnings per share
amounted to $2.80 compared to $2.45 for the same period 2007. Earnings per share
was favorably impacted by 27 cents from currencies, last years accrual for a
legal reserve by 26 cents, 17 cents from the stock repurchase program and 16
cents from a lower effective tax rate. The increased severance and restructuring
was negative by 28 cents and the lower pre-tax income had a 23 cent negative
effect. The average number of shares outstanding decreased by 8% to 72.6
million.
LIQUIDITY
AND SOURCES OF CAPITAL
Cash flow for the
third quarter continued to be strong despite the market headwinds. Operating
cash flow during the quarter amounted to $102 million and to $657 million during
the last twelve months. During the quarter, cash flow was favorably impacted by
a $116 million reduction in accounts receivables from customers.
Operations
generated $426 million in cash and $176 million before financing compared to
$549 million and $245 million during the first nine months
2007.
Due to
acquisitions for $43 million, cash flow before financing was negative by $11
million for the third quarter. Capital expenditures, net of $71 million were $15
million less than depreciation and amortization during the third quarter. During
the first nine months Capital expenditures, net amounted to $202 million
and depreciation and amortization to $257 million compared to $228 million and
$236 million, respectively, last year.
The Company uses
the non-GAAP measure “Operating working capital” as defined in the table below
in its communication with investors and for management review of the development
of the working capital cash generation from operations. The reconciling items
used to derive this measure are by contrast managed as part of the Company’s
overall debt management.
Reconciliation
of “Operating working capital” to GAAP financial measure
(Dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept
30,
2008
|
|
|
June
30,
2008
|
|
|
December
31, 2007
|
|
|
Sept
30,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
$2,249.6 |
|
|
|
$2,350.6 |
|
|
|
$2,095.2 |
|
|
|
$2,183.4 |
|
Total
current liabilities
|
|
|
(1,794.1) |
|
|
|
(2,165.9) |
|
|
|
(1,663.3) |
|
|
|
(1,716.5) |
|
Working
capital
|
|
|
455.5 |
|
|
|
184.7 |
|
|
|
431.9 |
|
|
|
466.9 |
|
Cash and
cash equivalents
|
|
|
(213.6) |
|
|
|
(127.1) |
|
|
|
(153.8) |
|
|
|
(160.1) |
|
Short-term
debt
|
|
|
377.3 |
|
|
|
583.6 |
|
|
|
311.9 |
|
|
|
330.4 |
|
Derivative
asset and liability, current
|
|
|
(1.0) |
|
|
|
(4.2) |
|
|
|
(4.4) |
|
|
|
(1.5) |
|
Dividends
payable
|
|
|
29.0 |
|
|
|
32.8 |
|
|
|
28.8 |
|
|
|
29.8 |
|
Operating
working capital
|
|
|
$647.2 |
|
|
|
$669.8 |
|
|
|
$614.4 |
|
|
|
$665.5 |
|
Autoliv has a
target that working capital should not exceed 10% of annual sales. During the
quarter, this ratio declined to 9.2% from 9.5% and from 10.1% a year
ago.
In relation to
days sales outstanding, receivables decreased to 74 days from 75 days a year ago
but increased seasonally during the quarter from 68. Days inventory on-hand
increased to 44 from 36 days a year ago and from 34 days during the
quarter.
The Company uses
the non-GAAP measure “Net debt” as defined in the table below in its
communication with investors regarding its capital structure and as the relevant
metric monitoring its overall debt management. The reconciling items used to
derive this measure are managed as part of overall debt management. This
non-GAAP measure is a supplemental measure to the GAAP measure of total
debt.
Reconciliation
of “Net debt” to GAAP financial measure
(Dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept
30,
2008
|
|
|
June
30,
2008
|
|
|
December
31, 2007
|
|
|
Sept
30,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
debt
|
|
|
$377.3 |
|
|
|
$583.6 |
|
|
|
$311.9 |
|
|
|
$330.4 |
|
Long-term
debt
|
|
|
1,121.7 |
|
|
|
752.4 |
|
|
|
1,040.3 |
|
|
|
975.7 |
|
Total
debt
|
|
|
1,499.0 |
|
|
|
1,336.0 |
|
|
|
1,352.2 |
|
|
|
1,306.1 |
|
Cash and
cash equivalents
|
|
|
(213.6) |
|
|
|
(127.1) |
|
|
|
(153.8) |
|
|
|
(160.1) |
|
Debt-related
derivatives
|
|
|
(6.4) |
|
|
|
(14.1) |
|
|
|
(16.5) |
|
|
|
(7.9) |
|
Net
debt
|
|
|
$1,279.0 |
|
|
|
$1,194.8 |
|
|
|
$1,181.9 |
|
|
|
$1,138.1 |
|
Thanks to the
strong cash flow, net debt increased by only $84 million to $1,279 million,
during the third quarter, despite cash outlays of $137 million for stock
buybacks, dividends and acquisitions. Gross interest-bearing debt increased by
$163 million to $1,499 million. Cash and cash equivalents of $214 million was
$87 million more than at the end of June due to a withdrawal of $150 million
from the Company’s revolving credit facility.
Net debt increased
by $97 million since the beginning of the year due to cash outlays of $308
million for stock buybacks, dividends and acquisitions. Gross interest-bearing
debt increased by $147 million to $1,499 million. Net debt to capitalization
increased to 36% from 33% at the beginning of the year.
The non-GAAP
measure net debt is also used in the non-GAAP measure “Leverage ratio” which
together with the “Interest coverage ratio” constitute the Company’s debt
limitation policy. This policy provides guidance to credit and equity investors
regarding the extent to which the Company would be prepared to leverage its
operations. These measures corresponded, until December 2004, to the financial
covenants in the Company’s Revolving Credit Facility. Although these covenants
no longer exist, the Company believes investors remain interested in these
measures. For details on leverage ratio and interest coverage ratio, refer to
the tables below that reconcile these two non-GAAP measures to GAAP
measures.
Autoliv’s policy
is to maintain a leverage ratio significantly below 3.0 times and an
interest-coverage ratio significantly above 2.75 times. On September 30, these
ratios were 1.6 and 9.1, respectively. Leverage ratio is measured as net debt
(including pension liabilities) in relation to EBITDA (Earnings Before Interest,
Taxes, Depreciation and Amortization) and interest coverage as Operating income
(excluding amortization of intangibles) in relation to interest expense, net.
The net debt to capitalization ratio rose to 36% from 33% at the end of previous
quarter.
Reconciliation
of “Leverage ratio” to GAAP financial measure
(Dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
Sept
30, 2008
|
|
|
Sept
30, 2007
|
|
|
|
|
|
|
|
|
Net debt
2)
|
|
|
$1,279.0 |
|
|
|
$1,138.1 |
|
Pension
liabilities
|
|
|
52.3 |
|
|
|
96.6 |
|
Net
debt per the policy
|
|
|
$1,331.3 |
|
|
|
$1,234.7 |
|
|
|
|
|
|
|
|
|
|
Income
before income taxes 3)
|
|
|
$444.5 |
|
|
|
$421.1 |
|
Plus:
Interest expense, net 1)
3)
|
|
|
57.1 |
|
|
|
49.7 |
|
Depreciation
and amortization of
intangibles
(incl. impairment write-
offs) 3)
|
|
|
341.0 |
|
|
|
316.1 |
|
|
|
|
|
|
|
|
|
|
EBITDA
per the Policy 3)
|
|
|
$842.6 |
|
|
|
$786.9 |
|
|
|
|
|
|
|
|
|
|
Net
debt to EBITDA ratio
|
|
|
1.6 |
|
|
|
1.6 |
|
|
1)
Interest expense, net, is interest expense less interest
income.
|
|
2)
Net debt is short- and long-term debt and debt-related derivatives less
cash and cash equivalents.
|
Reconciliation
of “Interest coverage ratio” to GAAP financial measure
(Dollars
in millions)
|
|
|
|
|
|
|
|
Sept
30, 2008
|
|
|
Sept
30, 2007
|
|
Operating
income 2)
|
|
|
$497.9 |
|
|
|
$474.1 |
|
|
|
|
|
|
|
|
|
|
Amortization
of intangibles (incl.
impairment
write-offs) 2)
|
|
|
23.5 |
|
|
|
18.3 |
|
Operating
profit per the Policy2)
|
|
|
$521.4 |
|
|
|
$492.4 |
|
|
|
|
|
|
|
|
|
|
Interest
expense, net 1)
2)
|
|
|
57.1 |
|
|
|
49.7 |
|
|
|
|
|
|
|
|
|
|
Interest
coverage ratio
|
|
|
9.1 |
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
|
1)
Interest expense, net, is interest expense less interest
income.
|
During the third quarter, equity
decreased by $151 million to $2,265 million or to $32.22 per share due to share repurchases for $65
million, dividends for $29 million and $90 million from currency effects. Equity
was favorably impacted by $31 million from net income and by $2 million from the
exercise of stock options.
Equity decreased
by $84 million due to stock repurchases of $174 million, dividends of $86
million and currency effects of $35 million since the beginning of the year.
Equity was favorably impacted by $203 million from net income and $8
million from the exercise of stock options. Return on equity amounted to 12% and
return on capital employed to 13%.
OFF-BALANCE
SHEET ARRANGEMENTS
The Company does
not have any off-balance sheet arrangements that have, or are reasonably likely
to have, a material current or future effect on its financial position, results
of operations or cash flows.
Headcount
During the
quarter, total headcount (permanent and temporary employees) was reduced by more
than 1,700 to 41,300. In addition, the Company identified close to 900 positions
that will become redundant as part of the action program. Of the reductions that
took effect already during the third quarter, 1,100 were in high-cost countries
and 600 were permanent employees. At the end of the quarter, 55% of total
headcount were in low-cost countries compared to 49% a year ago and 13% of total
headcount were temporary employees.
2008
Action Program
To mitigate the
effects of both accelerating production cuts by customers and accelerating costs
for raw materials, the Company in July announced an action program. Already
during the third quarter, actions taken in response to the market development
are estimated to have generated cost savings of approximately $5 million. The
full improvement effect of the 2008 Action Program, which should be realized in
2010, is expected to total approximately $120 million. The cost for the program
could total $75 million and potentially affect up to 3,000 jobs, but the
ultimate number of jobs will be determined by the market conditions and the
customers’ production plans.
Outlook
The latest
forecasts from J D Powers and CSM indicate a decline of 7% in global light
vehicle production for the fourth quarter. This includes production cuts in
North America and Western Europe, where Autoliv derives 70% of revenues, of 19%
and 13%, respectively. However, all these forecasts could have already become
outdated given the current financial turmoil. Currency exchange rates have also
become more volatile lately.
Based on these
uncertain assumptions, the indication for the fourth quarter is an organic sales
decline in the order of 12% which is better than the forecasted average change
in vehicle production in North America and Western Europe. Acquisitions and
currency effects are expected to have a favorable impact on consolidated sales
of close to 1% each, based on exchange rates as of September 30,
2008.
For the full year,
these assumptions imply that organic sales would decline by 6% while
consolidated sales would increase by only 2% compared to previous guidance of an
organic sales decline of 1% and a consolidated sales increase of 8%. As a
consequence, the previous guidance of an operating margin in the range of 7.0%
to 7.5% for the full year has to be revised. The current uncertain
assumptions indicate an operating margin before severance and restructuring
costs of around 6.5% for the full year and of approximately 5% for the fourth
quarter. Consequently, Autoliv expects to be able to continue to offset a
significant portion of the negative effects caused by the latest round of
production cuts by customers thanks to the Company’s action program and other
internal measures.
The effective tax
rate is projected to amount to 28%.
OTHER
RECENT EVENTS
Launches
in the 3rd quarter 2008
•
BMW’s new 7 series;
Frontal airbags, knee driver airbag, seatbelts with pretensioners, steering
wheel, safety electronics and night vision system
•
Chevrolet’s Traverse;
Passenger airbag, inflatable curtains, seatbelts with pretensioners and safety
electronics
•
Ford’s New F-Series;
Side airbags, inflatable curtains and safety electronics
•
Great Wall’s Florid;
Frontal airbags, steering wheel, seatbelts with pretensioners and safety
electronics
•
Renault’s new Mégane;
Frontal airbags, steering wheel, anti-sliding airbag, side airbags, inflatable
curtains and seatbelts with pretensioners
•
Volvo’s new XC60;
Passenger airbag, side airbags, inflatable curtains, anti-whiplash system,
seatbelts with pretensioners and telematics
•
Volkswagen’s new Golf;
Passenger airbag, Inflatable Curtains and seatbelts with
pretensioners
Other
Significant Events
· During the
quarter, Autoliv repurchased 1,667,000 shares for $65 million at an average cost
of $39.08 per share and during the first nine months 3,709,460 shares for $173
million at an average cost of $46.77 per share. Under the existing
authorization, an additional 3.2 million shares can be repurchased.
· At the end of the
quarter, Autoliv acquired the automotive radar sensor business of Tyco
Electronics Ltd for $42 million. This small – but strategic – acquisition is not
expected to materially impact Autoliv's earnings short-term.
· In October,
Autoliv secured close to the equivalent of $200 million in additional long-term
financing. The financing is without financial covenants. The credit is
intended to be used primarily to repay commercial papers totaling $150 million
that becomes due in November. In October, the Company also withdrew an
additional $500 million from its revolving credit facility (RCF). This
withdrawal is for six months. Even if Autoliv does not have any direct need for
additional cash, we believe it is prudent to have cash on hand in the current
financial turmoil. After this withdrawal, Autoliv has close to half a billion
dollars in availability remaining under its RCF and expects to continue to
generate a positive cash flow.
Dividend
and Next Report
The Company has
declared a dividend for the fourth quarter of 41 cents per share which will be
paid on December 4 to shareholders of record as of November 6, 2008. The
ex-date, when the stock trades without the right to the dividend is November 4,
2008.
Autoliv intends to
publish the quarterly report for the fourth quarter on Thursday January 29,
2009.
CONTRACTUAL
OBLIGATIONS AND COMMITMENTS
As of September
30, 2008, the Company’s future contractual obligations, have not changed
significantly from the amounts reported in the 2007 Annual Report on Form 10-K/A
filed with the SEC on February 25, 2008.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September
30, 2008, there have been no material changes to the information related to
quantitative and qualitative disclosures about market risk that was provided in
the Company’s 2007 Annual Report on Form 10-K/A filed with the SEC on February
25, 2008.
ITEM
4. CONTROLS AND PROCEDURES
(a) Evaluation
of Disclosure Controls and Procedures
An evaluation has
been carried out, under the supervision and with the participation of the
Company's management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of the end of the period covered by this report. Based on such
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
have concluded that, as of the end of such period, the Company's disclosure
controls and procedures are effective in recording, processing, summarizing and
reporting, on a timely basis, information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act.
(b) Changes
in Internal Control over Financial Reporting
There have not
been any changes in the Company’s internal control over financial reporting (as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the fiscal quarter to which this report relates that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
ITEM
4T. CONTROLS AND PROCEDURES
Not
applicable.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
Various claims,
lawsuits and proceedings are pending or threatened against the Company or its
subsidiaries, covering a range of matters that arise in the ordinary course of
its business activities with respect to commercial, product liability and other
matters.
Litigation is
subject to many uncertainties, and the outcome of any litigation cannot be
assured. After discussions with counsel, it is the opinion of management that
the litigation to which the Company is currently a party will not have a
material adverse impact on the consolidated financial position of Autoliv. The
Company may, however, experience material product liability or other losses in
the future.
The Company
believes that it is currently adequately insured against product and other
liability risks at levels sufficient to cover potential claims. The level of
coverage may, however, be insufficient in the future or unavailable on the
market.
As of September
30, 2008, there has been no material changes in the information that was
provided in the Company’s 2007 Annual Report on Form 10-K/A filed with the SEC
on February 25, 2008. However, the following should be noted.
Impact
of Global Financial Crisis
Autoliv’s two
commercial paper programs (one in Sweden and one in the United States) have been
negatively affected in terms of price, available volume and available maturity
as a result of the current credit market conditions. Through utilization of its
revolving credit facility (“RCF”) and successful procurement of alternative
funding (see Note 1.13 above), Autoliv has so far successfully procured the
funding necessary for its operations. However; further deterioration
in the credit markets, such as large bank failures or significant strains on
liquidity in the Swedish or US banking systems and especially in combination
with significant customer bankruptcies (should any such occur) would increase
the risk that Autoliv could not raise the capital necessary to fund its
operations. Where Autoliv continues to be successful in raising such
capital, the costs thereof may increase significantly.
As a result of
this precautionary utilization of its RCF, Autoliv is currently in an investment
position. So far, excess funds resulting from primarily the precautionary
utilization of its RCF have to a large extent been invested in primarily United
States and Swedish government paper to mitigate the risks of depositing
significant sums of cash with banking institutions. The availability of such
government paper can not be assured in the future and Autoliv may therefore, or
for other reasons, be exposed to a greater counterparty risk than historically.
Should any entity to which Autoliv is exposed to fail to honor its obligations,
Autoliv could incur material losses as a result thereof.
Changes
in Global Auto Industry
The auto industry
is experiencing deteriorating sales and margins in many markets. As a
result, there is an increased risk for bankruptcies, or similar, among our
customer base. Should such occur, we may incur losses on our
receivables. Should this happen to several manufacturers, the losses
could be material.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
Stock
repurchase program
During the third
quarter of 2008, Autoliv repurchased 1,667,000 of its shares for $65 million at
an average price of $39.02. Since the repurchasing program was adopted in 2000,
Autoliv has bought back 34 million shares at an average price of $42.86 per
share. Under the existing authorizations, another 3 million shares may be
repurchased. Below is a summary of Autoliv's common stock repurchases by month
for the quarter ended September 30, 2008:
|
|
Stockholm
Stock Exchange
("SSE")
|
|
|
New
York Stock Exchange
("NYSE")
|
|
|
SSE
+ NYSE
Total
Number of Shares
|
|
|
|
|
|
|
|
Date
|
|
Total
Number
of Shares
Purchased
|
|
|
Average
Price
in
USD
Paid
per
Share
|
|
|
Total
Number
of Shares
Purchased
|
|
|
Average
Price
in
USD
Paid
per
Share
|
|
|
Purchased
as Part of Publicly
Announced
Plans
or Programs
|
|
|
Average
Price
in
USD
Paid
per
hare
|
|
|
Maximum
Number
of
Shares
That
May Yet Be Purchased
Under
the
Plans
or Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
1-
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,700 |
|
|
|
38.0284 |
|
|
|
15,200 |
|
|
|
37.6934 |
|
|
|
22,900 |
|
|
|
37.8060 |
|
|
|
4,832,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August
1-31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
249,000 |
|
|
|
39.7248 |
|
|
|
784,900 |
|
|
|
39.4991 |
|
|
|
1,033,900 |
|
|
|
39.5535 |
|
|
|
3,798,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
1-30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
171,600 |
|
|
|
38.0536 |
|
|
|
438,600 |
|
|
|
38.2207 |
|
|
|
610,200 |
|
|
|
38.1737 |
|
|
|
3,188,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
428,300 |
|
|
|
39.0248 |
|
|
|
1,238,700 |
|
|
|
39.0243 |
|
|
|
1,667,000 |
|
|
|
39.0244 |
|
|
|
3,188,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Announcement
of share buyback program with authorization to buy back 10 million shares
made on May 9, 2000.
|
2)
|
Announcement
of expansion of existing share buyback program from 10 million shares to
20 million shares made on April 30, 2003.
|
3)
|
Announcement
of expansion of existing share buyback program from 20 million shares to
30 million shares made on December 15, 2005.
|
4)
|
Announcement
of expansion of existing share buyback program from 30 million shares to
37.5 million shares made on November 8, 2007.
|
5)
|
The
share buyback program does not have an expiration
date.
|
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
Not
applicable.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not
applicable.
ITEM
5. OTHER INFORMATION
Not
applicable.
ITEM
6. EXHIBITS
Exhibit
No.
|
Description
|
|
|
3.1
|
Autoliv's
Restated Certificate of Incorporation incorporated herein by reference to
Exhibit 3.1 to the Registration Statement on Form S-4 (File No. 333-23813,
filing date June 13, 1997) (the "Registration
Statement")
|
|
|
3.2
|
Autoliv's
Restated By-Laws incorporated herein by reference to Exhibit 3.2 to the
Registration Statement.
|
|
|
4.1
|
Rights
Agreement, dated as of December 4, 1997, between Autoliv and First Chicago
Trust Company of New York incorporated herein by reference to Exhibit 3 to
Autoliv's Registration Statement on Form 8-A (File No. 1-12933, filing
date December 4, 1997)
|
|
|
10.1
|
Facilities
Agreement, dated November 13, 2000, among Autoliv, Inc. and the lenders
named therein, as amended by amendment dated November 5, 2001, as further
amended by amendment dated December 12, 2001, and as further amended by
amendment dated June 6, 2002, is incorporated herein by reference to
Exhibit 10.1 on Form 10-K/A (File No. 1-12933, filing date July 2,
2002)
|
|
|
10.2
|
Autoliv,
Inc. 1997 Stock Incentive Plan, incorporated herein by reference to
Autoliv's Registration Statement on Form S-8 (File No. 333-26299, filing
date May 1, 1997)
|
|
|
10.3
|
Amendment
No. 1 to Autoliv, Inc. Stock Incentive Plan, is incorporated herein by
reference to Exhibit 10.3 on Form 10-K/A (File No. 1-12933, filing date
July 2, 2002)
|
|
|
10.4
|
Form of
Employment Agreement between Autoliv, Inc. and its executive officers, is
incorporated herein by reference to Exhibit 10.4 on Form 10-K/A (File No.
1-12933, filing date July 2, 2002)
|
|
|
10.5
|
Form of
Supplementary Agreement to the Employment Agreement between Autoliv and
certain of its executive officers, is incorporated herein by reference to
Exhibit 10.5 on Form 10-K/A (File No. 1-12933, filing date July 2,
2002)
|
|
|
10.6
|
Employment
Agreement, dated November 11, 1998, between Autoliv, Inc. and Lars
Westerberg, is incorporated herein by reference to Exhibit 10.6 on Form
10-K/A (File No. 1-12933, filing date July 2, 2002)
|
|
|
10.7
|
Form of
Severance Agreement between Autoliv and its executive officers, is
incorporated herein by reference to Exhibit 10.7 on Form 10-K/A (File No.
1-12933, filing date July 2, 2002)
|
|
|
10.8
|
Pension
Agreement, dated November 26, 1999, between Autoliv AB and Lars
Westerberg, is incorporated herein by reference to Exhibit 10.8 on Form
10-K/A (File No. 1-12933, filing date July 2, 2002)
|
|
|
10.9
|
Form of
Amendment to Employment Agreement – notice, is incorporated herein by
reference to Exhibit 10.9 on Form 10-K (File No. 1-12933, filing date
March 14, 2003)
|
|
|
10.10
|
Form of
Amendment to Employment Agreement – pension, is incorporated herein by
reference to Exhibit 10.10 on Form 10-K (File No. 1-12933, filing date
March 14, 2003)
|
|
|
10.11
|
Form of
Agreement - additional pension, is incorporated herein by reference to
Exhibit 10.11 on Form 10-K (File No. 1-12933, filing date March 14,
2003)
|
|
|
10.12
|
Amendment
No.2 to the Autoliv, Inc. 1997 Stock Incentive Plan, is incorporated
herein by reference to Exhibit 10.12 on Form 10-K (File No. 1-12933,
filing date March 11, 2004)
|
|
|
10.13
|
Employment
Agreement, dated March 31, 2007, between Autoliv, Inc. and Jan Carlson, is
incorporated herein by reference to Exhibit 10.13 on Form 10-Q (File No.
1-12933, filing date October 25,
2007)
|
10.14
|
Retirement
Benefits Agreement, dated August 14, 2007, between Autoliv AB and Jan
Carlson, is incorporated herein by reference to Exhibit 10.14 on Form 10-Q
(File No. 1-12933, filing date October 25, 2007)
|
|
|
10.15*
|
Settlement
Agreement, dated August 26, 2008, between Autoliv France, SNC and Autoliv,
Inc. and Mr. Benoît Marsaud.
|
|
|
10.16*
|
Terms and
conditions for Autoliv, Inc.’s issue of SEK 150 million Floating Rate
Bonds due 2010, dated October 17, 2008.
|
|
|
10.17*
|
Terms and
conditions for Autoliv, Inc.’s issue of SEK 300 million Floating Rate
Bonds due 2011, dated October 17, 2008.
|
|
|
10.18*
|
Facility
Agreement, dated October 16, 2008, between Autoliv, Inc. and Skandinaviska
Enskilda Banken for SEK 1 billion facility.
|
|
|
11
|
Information
concerning the calculation of Autoliv’s earnings per share is included in
Note 1 of the Consolidated Notes to Financial Statements contained in the
Company's Annual Report on Form 10-K/A (File No. 1-12933, filing date
February 25, 2008) and is incorporated herein by
reference.
|
31.1
*
|
Certification
of the Chief Executive Officer of Autoliv, Inc. pursuant to Rules
13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
31.2
*
|
Certification
of the Chief Financial Officer of Autoliv, Inc. pursuant to Rules
13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
32.1*
|
Certification
of the Chief Executive Officer of Autoliv, Inc. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
32.2*
|
Certification
of the Chief Financial Officer of Autoliv, Inc. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
* Filed herewith.
SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: October 22,
2008
AUTOLIV,
INC.
(Registrant)
By:
|
/s/ Marika
Fredriksson
|
|
|
|
Marika
Fredriksson
|
|
Chief
Financial Officer
|
|
|
|
|
|
(Duly
Authorized Officer and Principal Financial
Officer)
|