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Form 10-Q
Table of Contents

 

 

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 June 30, 2012

Commission File No.: 001-12933

 

 

AUTOLIV, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   51-0378542

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

Vasagatan 11, 7th floor, SE-111 20,

Box 70381,

SE-107 24 Stockholm, Sweden

  N/A
(Address of principal executive offices)   (Zip Code)

+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.    Yes:  x    No:  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes:  x    No:  ¨

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   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes:  ¨    No:  x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of July 16, 2012, there were 95,414,029 shares of common stock of Autoliv, Inc., par value $1.00 per share, outstanding.

 

 

 


Table of Contents

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 and on-going 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, including without limitation, management’s examination of historical operating trends and data, are based upon our current expectations, various assumptions and data available from third parties and apply only as of the date of this report. Our expectations and assumptions 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 as these assumptions are inherently subject to risks and uncertainties and contingencies which are difficult or impossible to predict and are beyond our control.

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 of reasons, including without limitation, changes in and the successful execution of our restructuring and cost reduction initiatives discussed herein and the market reaction thereto, changes in general industry and market conditions, increased competition, higher raw material, fuel and energy costs, changes in consumer and customer preferences for end products, customer losses, customer bankruptcies, consolidations or restructuring, divestiture of customer brands, fluctuation in currencies or interest rates, fluctuation in vehicle production schedules for which the Company is a supplier, component shortages, market acceptance of our new products, costs or difficulties related to the integration of any new or acquired businesses and technologies, continued uncertainty in program awards and performance, the financial results of companies in which Autoliv has made technology investments or joint venture arrangements, pricing negotiations with customers, our ability to be awarded new business, increased costs, supply issues, product liability, warranty and recall claims and other litigation and customer reactions thereto, possible adverse results of pending or future litigation or infringement claims, negative impacts of governmental investigations and litigation relating to the conduct of our business, tax assessments by governmental authorities, dependence on key personnel, legislative or regulatory

 

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Table of Contents

changes, political conditions, dependence on customers and suppliers, as well as the risks identified in Item 1A “Risk Factors” in this quarterly report and the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 23, 2012, as amended by our Form 10-K/A filed with the SEC on March 7, 2012. Except for the Company’s ongoing obligation to disclose information under the U.S. federal securities laws, the Company undertakes no obligation to update publicly or revise 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, and we assume no obligation to update any such statement.

 

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Table of Contents

INDEX

 

PART I – FINANCIAL INFORMATION

  

ITEM 1. FINANCIAL STATEMENTS

  
1.1   

Basis of Presentation

     9   
1.2   

New Accounting Pronouncements

     9   
1.3   

Fair Value Measurement

     10   
1.4   

Income Taxes

     16   
1.5   

Inventories

     16   
1.6   

Restructuring

     16   
1.7   

Product-Related Liabilities

     17   
1.8   

Retirement Plans

     17   
1.9   

Equity and Equity Units Offering

     18   
1.10   

Non-Controlling Interest

     19   
1.11   

Contingent Liabilities

     19   
1.12   

Earnings Per Share

     21   
1.13   

Subsequent Events

     22   

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     22   

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     27   

ITEM 4. CONTROLS AND PROCEDURES

     27   

PART II – OTHER INFORMATION

     28   

ITEM 1. LEGAL PROCEEDINGS

     28   

ITEM 1A. RISK FACTORS

     28   

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     29   

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     29   

ITEM 4. MINE SAFETY DISCLOSURES

     29   

ITEM 5. OTHER INFORMATION

     29   

ITEM 6. EXHIBITS

     30   

 

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Table of Contents

CONSOLIDATED STATEMENTS OF NET INCOME (UNAUDITED)

(Dollars in millions, except per share data)

 

     Three months ended     Six months ended  
     June 30,
2012
    June 30,
2011
    June 30,
2012
    June 30,
2011
 

Net sales

   $ 2,088.8      $ 2,061.5      $ 4,267.7      $ 4,170.1   

Cost of sales

     (1,666.7     (1,639.9     (3,404.5     (3,282.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     422.1        421.6        863.2        887.6   

Selling, general & administrative expenses

     (93.9     (95.1     (187.5     (186.0

Research, development & engineering expenses, net

     (126.9     (117.5     (253.2     (232.0

Amortization of intangibles

     (5.1     (5.6     (9.7     (9.3

Other income (expense), net

     (5.8     2.0        (69.1     (0.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     190.4        205.4        343.7        460.2   

Equity in earnings of affiliates, net of tax

     1.4        1.9        3.5        3.2   

Interest income

     0.7        1.1        1.5        2.0   

Interest expense

     (9.2     (15.5     (21.7     (30.9

Loss on extinguishment of debt

     —          (6.3     —          (6.3

Other financial items, net

     (0.9     (1.6     (3.5     (3.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     182.4        185.0        323.5        424.8   

Income tax expense

     (56.2     (39.3     (95.9     (96.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 126.2      $ 145.7      $ 227.6      $ 328.2   

Less: net income attributable to non-controlling interests

     (0.2     0.7        0.7        1.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to controlling interest

   $ 126.4      $ 145.0      $ 226.9      $ 326.5   

Net earnings per share – basic

   $ 1.35      $ 1.62      $ 2.48      $ 3.66   

Net earnings per share – diluted

   $ 1.33      $ 1.54      $ 2.40      $ 3.47   

Weighted average number of shares outstanding, net of treasury shares (in millions)

     93.5        89.2        91.4        89.1   

Weighted average number of shares outstanding, assuming dilution and net of treasury shares (in millions)

     95.1        94.0        94.4        94.0   

Number of shares outstanding, excluding dilution and net of treasury shares (in millions)

     95.4        89.3        95.4        89.3   

Cash dividend per share – declared

   $ 0.47      $ 0.45      $ 0.94      $ 0.88   

Cash dividend per share – paid

   $ 0.47      $ 0.43      $ 0.92      $ 0.83   

See “Notes to unaudited condensed consolidated financial statements”.

 

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(Dollars in millions)

 

     Three months ended     Six months ended  
     June 30,
2012
    June 30,
2011
    June 30,
2012
    June 30,
2011
 

Net income

   $ 126.2      $ 145.7      $ 227.6      $ 328.2   

Foreign currency translation adjustments

     (48.4     36.2        (21.2     59.4   

Defined benefit pension plan

     1.6        0.7        3.6        0.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income, before tax

     (46.8     36.9        (17.6     60.1   

Income tax expense related to defined benefit pension plan

     (0.6     (0.2     (1.3     (0.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income, net of tax

     (47.4     36.7        (18.9     59.9   

Comprehensive income

   $ 78.8      $ 182.4      $ 208.7      $ 388.1   

Less: comprehensive income attributable to non-controlling interest

     (0.5     0.9        0.5        2.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to controlling interest

   $ 79.3      $ 181.5      $ 208.2      $ 386.1   

See “Notes to unaudited condensed consolidated financial statements”.

 

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Table of Contents

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

 

     As of  
     June 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash & cash equivalents

   $ 917.3       $ 739.2   

Receivables, net

     1,570.0         1,457.8   

Inventories, net

     595.7         623.3   

Other current assets

     199.6         180.0   
  

 

 

    

 

 

 

Total current assets

     3,282.6         3,000.3   

Property, plant & equipment, net

     1,133.4         1,121.2   

Investments and other non-current assets

     281.9         279.6   

Goodwill

     1,604.1         1,607.0   

Intangible assets, net

     105.2         109.2   
  

 

 

    

 

 

 

Total assets

   $ 6,407.2       $ 6,117.3   

Liabilities and equity

     

Short-term debt

   $ 171.3       $ 302.8   

Accounts payable

     1,074.8         1,083.9   

Accrued expenses

     572.5         465.9   

Other current liabilities

     214.8         233.3   
  

 

 

    

 

 

 

Total current liabilities

     2,033.4         2,085.9   

Long-term debt

     472.9         363.5   

Pension liability

     195.7         193.1   

Other non-current liabilities

     124.3         125.8   
  

 

 

    

 

 

 

Total non-current liabilities

     792.9         682.4   

Total parent shareholders’ equity

     3,565.6         3,333.4   

Non-controlling interests

     15.3         15.6   
  

 

 

    

 

 

 

Total equity

     3,580.9         3,349.0   

Total liabilities and equity

   $ 6,407.2       $ 6,117.3   

See “Notes to unaudited condensed consolidated financial statements”.

 

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

(Dollars in millions)

 

     Six months ended  
     June 30, 2012     June 30, 2011  

Operating activities

    

Net income

   $ 227.6      $ 328.2   

Depreciation and amortization

     135.7        131.4   

Other, net

     24.4        16.7   

Changes in operating assets and liabilities

     (71.1     (203.0
  

 

 

   

 

 

 

Net cash provided by operating activities

     316.6        273.3   

Investing activities

    

Expenditures for property, plant and equipment

     (166.0     (175.5

Proceeds from sale of property, plant and equipment

     2.4        4.9   

Acquisitions and divestitures of businesses and other, net

     4.2        0.5   
  

 

 

   

 

 

 

Net cash used in investing activities

     (159.4     (170.1

Financing activities

    

Net (decrease) increase in short-term debt

     (6.7     124.5   

Issuance of long-term debt

     6.4        47.1   

Repayments and other changes in long-term debt

     (8.4     (208.1

Dividends paid

     (85.0     (74.0

Cash paid for extinguishment of debt

     —          (6.3

Common stock issue, net

Common stock options exercised

    

 

106.3

9.8

  

  

   

 

—  

12.0

  

  

Other

     (1.7     (5.1
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     20.7        (109.9

Effect of exchange rate changes on cash and cash equivalents

     0.2        (21.3
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     178.1        (28.0

Cash and cash equivalents at beginning of period

     739.2        587.7   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 917.3      $ 559.7   

See “Notes to unaudited condensed consolidated financial statements”.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)

June 30, 2012

1.1 Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) 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 GAAP for complete financial statements. In the opinion of management, unaudited condensed consolidated financial statements have been prepared on the same basis as the prior year audited financial statements and 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 result for the interim period is not necessarily indicative of the results to be expected for any future period or for the fiscal year ending December 31, 2012. Certain prior-year amounts have been reclassified to conform to current year presentation.

The condensed consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP 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 this report and Autoliv’s other 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 for the year ended December 31, 2011, filed with the SEC on February 23, 2012, as amended by our Form 10-K/A filed with the SEC on March 7, 2012.

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 New Accounting Pronouncements

The following accounting guidance has been issued and will be effective for the Company in or after fiscal year 2012:

In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05”, which defers the requirement in ASU 2011-05 that companies present reclassification adjustments for each component of accumulated other comprehensive income (AOCI) in both net income and other comprehensive income (OCI) on the face of the financial statements. The effective dates of ASU 2011-12 are consistent with the effective dates of ASU 2011-05, which is effective for fiscal years and interim periods beginning after December 15, 2011, with early adoption permitted. ASU No. 2011-12 will have no impact on the Company’s consolidated financial statements, other than presentation of comprehensive income.

In December 2011, the FASB issued ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities”, which requires disclosure of financial instruments and derivatives that are either offset on the balance sheet in accordance with ASC 210-20-45 or ASC 815-10-45, or subject to a master netting arrangement, irrespective of whether they are offset on the balance sheet. ASU No. 2011-11 is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. Entities should provide the disclosures required by this ASU retrospectively for all comparative periods presented. The adoption of ASU 2011-11 will have an impact on the Company’s disclosures about its financial instruments to the consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income,” which updates Accounting Standards Codification (“ASC”) Topic 220. The adoption of ASU No. 2011-05 eliminates the ability of reporting entities to present changes in other comprehensive income as a component of stockholder’s equity, and requires that changes in other comprehensive income be shown either in a continuous statement of comprehensive income or as a statement immediately following the statement of earnings. ASU No. 2011-05 is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU No. 2011-05 had no impact on the Company’s consolidated financial statements, other than presentation of comprehensive income.

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which updates ASC Topic 820. ASU No. 2011-04 clarifies the intent of ASC 820 around the highest and best use concept being relevant only to nonfinancial assets, the fair value of instruments

 

9


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in shareholders’ equity should be measured from the perspective of a market participant holding the instrument as an asset, and the appropriate usage of premiums and discounts in a fair value measurement. ASU No. 2011-04 is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU No. 2011-04 did not have an impact on the Company’s consolidated financial statements, other than disclosures related to fair value measurements.

1.3 Fair Value Measurement

Assets and liabilities measured at fair value on a recurring basis

The Company uses derivative financial instruments, “derivatives”, as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial policy. The derivatives outstanding at June 30, 2012 are either interest rate swaps or foreign exchange swaps. All swaps principally match the terms and maturity of the underlying debt and no swaps have a maturity beyond 2019. All derivatives are recognized in the consolidated financial statements at fair value. Certain derivatives are from time to time designated either as fair value hedges or cash flow hedges in line with the hedge accounting criteria. For certain other derivatives hedge accounting is not applied either because non hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest and foreign exchange rates.

When a hedge is classified as a fair value hedge, the change in the fair value of the hedge is recognized in the Consolidated Statement of Income along with the off-setting change in the fair value of the hedged item. When a hedge is classified as a cash flow hedge, any change in the fair value of the hedge is initially recorded in equity as a component of Other Comprehensive Income, (OCI), and reclassified into the Consolidated Statement of Income when the hedge transaction affects net earnings. There were no material reclassifications from OCI to the Consolidated Statement of Income during the three and six months ended June 30, 2012 and, likewise, no material reclassifications are expected for the next twelve months. Any ineffectiveness has been immaterial.

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. 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 existing GAAP, 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 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 assets 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 the 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.

 

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The following tables summarize the valuation of the Company’s derivatives by the above noted pricing observability levels:

 

            Fair Value Measurements at June 30, 2012  
            Using  

Description

   Total carrying
amount in
Consolidated
Balance Sheet

June 30, 2012
     Level 1      Level 2      Level 3  

Assets

           

Derivatives

   $ 22.1         —         $ 22.1         —     

Total Assets

   $ 22.1         —         $ 22.1         —     

Liabilities

           

Derivatives

   $ 12.0         —         $ 12.0         —     

Total Liabilities

   $ 12.0         —         $ 12.0         —     

 

            Fair Value Measurements at December 31, 2011  
            Using  

Description

   Total carrying
amount in
Consolidated
Balance Sheet

December 31,
2011
     Level 1      Level 2      Level 3  

Assets

           

Derivatives

   $ 19.7         —         $ 19.7         —     

Total Assets

   $ 19.7         —         $ 19.7         —     

Liabilities

           

Derivatives

   $ 0.6         —         $ 0.6         —     

Total Liabilities

   $ 0.6         —         $ 0.6         —     

The tables below present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011. Although the Company is party to close-out netting agreements with most derivative counterparties, the fair values in the tables below and in the Consolidated Balance Sheets at June 30, 2012 and December 31, 2011, have been presented on a gross basis.

 

            Fair Value Measurements
at June 30, 2012
      

Description

   Nominal
volume
     Derivative asset      Derivative liability      Balance sheet location

Derivatives designated as hedging instruments

           

Interest rate swaps, less than 8 years (fair value hedge)

   $ 60.0       $ 16.1       $ —         Other non-current

asset

Total derivatives designated as hedging instruments

   $ 60.0       $ 16.1       $ —        

Derivatives not designated as hedging instruments

           

Foreign exchange swaps, less than 6 months

   $ 1,449.0       $ 6.0       $ 12.0       Other current assets/
liabilities

Total derivatives not designated as hedging instruments

   $ 1,449.0       $ 6.0       $ 12.0      

Total derivatives

   $ 1,509.0       $ 22.1       $ 12.0      

 

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           Fair Value Measurements
at December 31, 2011
      

Description

   Nominal
volume
    Derivative asset      Derivative liability      Balance sheet location

Derivatives designated as hedging instruments

          

Interest rate swaps, less than 8 years (fair value hedge)

   $ 60.0      $ 15.1       $ —         Other non-current
asset

Total derivatives designated as hedging instruments

   $ 60.0      $ 15.1       $ —        

Derivatives not designated as hedging instruments

          

Foreign exchange swaps, less than 6 months

   $ 845.2 1)    $ 4.6       $ 0.6       Other current assets/
liabilities

Total derivatives not designated as hedging instruments

   $ 845.2      $ 4.6       $ 0.6      

Total derivatives

   $ 905.2      $ 19.7       $ 0.6      

 

1) 

The nominal value is netted for offsetting swaps with a counterpart with which Autoliv has a master netting agreement. The gross nominal value is $1,241.9 million.

 

            Amount of gain (loss) recognized in
Consolidated Statement of Income
Three months ended June 30, 2012
               

Description

   Nominal
Volume
     Other
Financial
Items, net
     Interest
Expense
    Interest
Income
     Amount of gain
(loss)
recognized in
OCI on
derivative
effective
portion
     Amount of
gain (loss)
reclassified
from
accumulated
OCI into
interest
expense
 

Derivatives designated as hedging instruments

                

Interest rate swap, less than 8 years (fair value hedge)

   $ 60.0       $ —         $ 1.5      $ —         $ —         $ —     

Hedged item (fair value hedge)

                

Fixed rate private placement debt due 2019

   $ 60.0       $ —         $ (1.5   $ —         $ —         $ —     

Total gain(loss) in Consolidated Statement of Income

         $ 0.0           

 

12


Table of Contents
            Amount of gain (loss) recognized in
Consolidated Statement of Income
Six months ended June 30, 2012
               

Description

   Nominal
Volume
     Other
Financial
Items, net
     Interest
Expense
    Interest
Income
     Amount of gain
(loss)
recognized in
OCI on
derivative
effective
portion
     Amount of
gain (loss)
reclassified
from
accumulated
OCI into
interest
expense
 

Derivatives designated as hedging instruments

                

Interest rate swap, less than 8 years (fair value hedge)

   $ 60.0       $ —         $ 0.9      $ —         $ —         $ —     

Hedged item (fair value hedge)

                

Fixed rate private placement debt due 2019

   $ 60.0       $ —         $ (0.9   $ —         $ —         $ —     

Total gain(loss) in Consolidated Statement of Income

         $ 0.0           

 

            Amount of gain (loss) recognized in
Consolidated Statement of Income
Three months ended June 30, 2011
               

Description

   Nominal
volume
     Other
financial
items, net
     Interest
expense
    Interest
income
     Amount of gain
(loss)
recognized in
OCI on
derivative
effective
portion
     Amount of
gain (loss)
reclassified
from
accumulated
OCI into
interest
expense
 

Derivatives designated as hedging instruments

                

Interest rate swap, less than 9 years (fair value hedge)

   $ 60.0         —         $ 2.0        —           —           —     

Total derivatives designated as hedging instruments

   $ 60.0                 

Hedged item (fair value hedge)

                

Fixed rate private placement debt due 2019

   $ 60.0       $ —         $ (2.0   $ —         $ —         $ —     

Total gain(loss) in Consolidated Statement of Income

         $ 0.0           

 

            Amount of gain (loss) recognized in
Consolidated Statement of Income
Six months ended June 30, 2011
               

Description

   Nominal
volume
     Other
financial
items, net
     Interest
expense
    Interest
income
     Amount of gain
(loss)
recognized in
OCI on
derivative
effective
portion
     Amount of
gain (loss)
reclassified
from
accumulated
OCI into
interest
expense
 

Derivatives designated as hedging instruments

                

Interest rate swap, less than 9 years (fair value hedge)

   $ 60.0         —         $ 1.0        —           —           —     

Total derivatives designated as hedging instruments

   $ 60.0                 

Hedged item (fair value hedge)

                

Fixed rate private placement debt due 2019

   $ 60.0       $ —         $ (1.0   $ —         $ —         $ —     

Total gain(loss) in Consolidated Statement of Income

         $ 0.0           

 

13


Table of Contents
            Amount of gain (loss) recognized in
Consolidated Statement of Income
Three months ended June 30, 2012
 

Description

   Nominal
Volume
     Other
Financial
Items, net
    Interest Expense     Interest Income  

Derivatives not designated as hedging instruments

         

Foreign exchange swaps

   $ 1,449.0       $ (4.4   $ (0.1   $ —     

Total derivatives not designated as hedging instruments

   $ 1,449.0          

 

            Amount of gain (loss) recognized in
Consolidated Statement of Income
Six months ended June 30, 2012
 

Description

   Nominal
Volume
     Other
Financial
Items, net
    Interest Expense      Interest Income  

Derivatives not designated as hedging instruments

          

Foreign exchange swaps

   $ 1,449.0       $ (9.9   $ 0.1       $ —     

Total derivatives not designated as hedging instruments

   $ 1,449.0           

 

            Amount of gain (loss) recognized in
Consolidated Statement of Income
Three months ended June 30, 2011
 

Description

   Nominal
Volume
     Other
Financial
Items, net
    Interest Expense      Interest Income  

Derivatives not designated as hedging instruments

          

Cross currency interest rate swaps, less than 1 year

   $ 40.3       $ 0.2      $ 0.1       $ —     

Foreign exchange swaps

   $ 1,172.3       $ (13.0   $ 0.7         —     

Total derivatives not designated as hedging instruments

   $ 1,212.6           

 

            Amount of gain (loss) recognized in
Consolidated Statement of Income
Six months ended June 30, 2011
 

Description

   Nominal
Volume
     Other
Financial
Items, net
    Interest Expense      Interest Income  

Derivatives not designated as hedging instruments

          

Cross currency interest rate swaps, less than 1 year

   $ 40.3       $ 3.5      $ 0.1       $ —     

Foreign exchange swaps

   $ 1,172.3       $ (13.0   $ 0.7         —     

Total derivatives not designated as hedging instruments

   $ 1,212.6           

 

14


Table of Contents

All amounts recognized in the Consolidated Statement of Income related to derivatives, not designated as hedging instruments, relate to economic hedges and thus have been materially off-set by an opposite Consolidated Statement of Income effect of the related financial liabilities or financial assets.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities and short-term debt approximate their fair value because of the short term maturity of these instruments. The fair value of long-term debt is determined either from quoted market prices as provided by participants in the secondary market or for long-term debt without quoted market prices, estimated using a discounted cash flow method based on the Company’s current borrowing rates for similar types of financing. The fair value of derivatives is estimated using a discounted cash flow method based on quoted market prices. The fair value and carrying value of debt is summarized in the table below. The Company has determined that each of these fair value measurements of debt reside within Level 2 of the fair value hierarchy. The discount rates for all derivative contracts are based on bank deposit or swap interest rates. Credit risk has been considered when determining the discount rates used for the derivative contracts, which when aggregated by counterparty, are in a liability position.

Fair Value of Debt

 

Long-term debt

   June  30,
2012
Carrying
value1)
     June 30,
2012
Fair
value
     December 31,
2011
Carrying
value1)
     December  31,
2011

Fair
value
 

U.S. Private placement

   $ 306.1       $ 332.2       $ 305.1       $ 331.9   

Medium-term notes

     43.1         41.7         43.3         40.6   

Notes

     108.1         109.1         —           —     

Other long-term debt

     15.6         15.6         15.1         15.1   

Total

   $ 472.9       $ 498.6       $ 363.5       $ 387.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term debt

                           

Overdrafts and other short-term debt

   $ 42.8       $ 42.8       $ 63.2       $ 63.2   

Short-term portion of long-term debt

     128.5         130.7         132.4         136.5   

Notes

     —           —           107.2         109.9   

Total

   $ 171.3       $ 173.5       $ 302.8       $ 309.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1) Debt as reported in balance sheet.

Assets and liabilities measured at fair value on a non-recurring basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a non-recurring basis. Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, including investments in affiliates, and restructuring liabilities (see Note 1.6).

The Company has determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets and settlements of liabilities, as observable inputs are not available. The Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. To determine the fair value of long-lived assets, the Company utilizes the projected cash flows expected to be generated by the long-lived assets, then discounts the future cash flows over the expected life of the long-lived assets. For restructuring obligations, the amount recorded represents the fair value of the payments expected to be made, and such provisions are discounted if the payments are expected to extend beyond one year.

As of June 30, 2012 the Company had $67.4 million of restructuring reserves which were measured at fair value upon initial recognition of the associated liability (see Note 1.6). For the three and six months ended June 30, 2012, the Company did not record any impairment charges on its long-lived assets.

 

15


Table of Contents

1.4 Income Taxes

For the first six months of 2012, the effective tax rate was 29.6%, compared with an effective tax rate of 22.7% in the first six months of 2011. In the first six months of 2012, the impact of discrete tax items caused a 0.1% increase to the effective tax rate. The net impact of discrete tax items in the first six months of 2011 caused a 5.0 percentage point decrease to the effective tax rate.

The Company files income tax returns in the United States federal jurisdiction, various state jurisdictions and foreign jurisdictions. At any given time, the Company is undergoing tax audits in several tax jurisdictions covering multiple years. The Company is effectively no longer subject to income tax examination by the U.S. Federal tax authorities for years prior to 2009. In addition, with few exceptions, the Company is also no longer subject to income tax examination by U.S. state and local and non-U.S. tax authorities for years prior to 2003.

The Company is undergoing tax audits in several non-U.S. jurisdictions covering multiple years. As of June 30, 2012, as a result of those tax examinations, the Company is not aware of any proposed income tax adjustments that would have a material impact on the Company’s financial statements. The conclusion of such audits could result in additional increases or decreases to unrecognized tax benefits in some future period or periods.

During the second quarter of 2012, the Company recorded a net increase of $0.2 million to income tax reserves for unrecognized tax benefits based on tax positions related to the current and prior years, including accruing additional interest related to unrecognized tax benefits of prior years. Of the total unrecognized tax benefits of $16.5 million recorded at June 30, 2012, $2.0 million is classified as current tax payable and $14.5 million is classified as non-current tax payable on the Condensed Consolidated Balance Sheet.

1.5 Inventories

Inventories are stated at the lower of cost (principally FIFO) or market. The components of inventories were as follows:

 

     As of  
     June 30, 2012     December 31, 2011  

Raw materials

   $ 277.4      $ 295.5   

Work in progress

     216.1        219.9   

Finished products

     182.3        184.0   
  

 

 

   

 

 

 

Inventories

     675.8        699.4   

Inventory valuation reserve

     (80.1     (76.1
  

 

 

   

 

 

 

Total inventories, net of reserve

   $ 595.7      $ 623.3   

1.6 Restructuring

Restructuring provisions are made on a case-by-case basis and primarily include severance costs incurred in connection with headcount reductions and plant consolidations. The Company expects to finance 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 activities will have a material adverse impact on its liquidity position.

Second quarter of 2012

The cash payments in the second quarter mainly relate to high-cost countries in Europe. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from March 31, 2012 to June 30, 2012.

 

     March 31,
2012
     Provision/
Charge
     Provision/
Reversal
    Cash
payments
    Translation
difference
    June 30,
2012
 

Restructuring employee-related

   $ 78.1       $ 0.1       $ (0.1   $ (7.8   $ (3.7   $ 66.6   

Other

     0.9         —           —          (0.1     0        0.8   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total reserve

   $ 79.0       $ 0.1       $ (0.1   $ (7.9   $ (3.7   $ 67.4   

First quarter of 2012

The employee-related restructuring provisions in the first quarter of 2012 mainly relate to headcount reductions in Europe. The cash payments mainly relate to high-cost countries in Europe. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2011 to March 31, 2012.

 

16


Table of Contents
     December 31,
2011
     Provision/
Charge
     Provision/
Reversal
    Cash
payments
    Translation
difference
     March 31,
2012
 

Restructuring employee-related

   $ 31.4       $ 48.1       $ (0.1   $ (3.1   $ 1.8       $ 78.1   

Other

     0.9         —           —          —          0         0.9   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total reserve

   $ 32.3       $ 48.1       $ (0.1   $ (3.1   $ 1.8       $ 79.0   

2011

In 2011, the employee-related restructuring provisions relate mainly to headcount reductions throughout Europe and North America. Reversals in 2011 mainly relate to restructuring reserves in Europe and were due to capacity reduction that was not as severe as originally planned and communicated. The cash payments mainly relate to high-cost countries in Europe and in Australia. The changes in the employee-related reserves have been charged against Other income (expense), net in the Consolidated Statements of Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2010 to December 31, 2011.

 

     December 31,
2010
     Provision/
Charge
     Provision/
Reversal
    Cash
payments
    Translation
difference
    December 31,
2011
 

Restructuring employee-related

   $ 48.4       $ 10.1       $ (4.9   $ (22.2   $ (0   $ 31.4   

Other

   &nbs

XFRA:LIVS Autoliv Inc DR Quarterly Report 10-Q Filling

Autoliv Inc DR XFRA:LIVS Stock - Get Quarterly Report SEC Filing of Autoliv Inc DR XFRA:LIVS stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XFRA:LIVS Autoliv Inc DR Quarterly Report 10-Q Filing - 6/30/2012
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