NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)
March 31, 2016
1 Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally
accepted accounting principles (U.S. 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 U.S. 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, 2016.
The Condensed Consolidated Balance Sheet at December 31, 2015 has been derived from the audited financial
statements at that date, but does not include all the information and footnotes required by U.S. 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 Autolivs actual
results to differ materially from the forward-looking statements contained in this report may be found in this report and Autolivs 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 Companys Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 19, 2016.
2 Recently Issued Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (FASB), issued Accounting Standards Update (ASU) 2016-09, Compensation - Stock
Compensation (Topic 718), which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For
public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period.
If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the
same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a
cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the
minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be
applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. The Company is
currently evaluating the impact of adopting this standard on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases
(Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters
into a lease, with some specified scope exceptions. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those
annual periods. Early application is permitted for all entities. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements, which will require right of use assets and lease liabilities be
recorded in the consolidated balance sheet for operating leases.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred
Taxes (Topic 740), which simplifies the presentation of deferred income taxes. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments
in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not
affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual
periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in this Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively
to all periods presented. The Company early adopted the standard prospectively in its interim reporting for March 31, 2016. The impact of the change on the consolidated condensed balance sheet was approximately $70 million reclassified from current
deferred tax assets to non-current deferred tax assets and approximately $20 million reclassified from current deferred tax liabilities to non-current deferred tax liabilities.
8
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede
nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to
which the company expects to be entitled in exchange for those goods or services. The standard was originally to be effective for public entities for annual and interim periods beginning after December 15, 2016. In August 2015, the FASB issued ASU
2015-14, Revenue from Contracts with Customers (Topic 606), that defers the effective date of ASU 2014-09 for all entities by one year. Public business entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after
December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting
period. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing, which is an amendment that clarifies the following two aspects of Topic 606: identifying
performance obligations and the licensing implementation guidance. The effective date and transition requirements for the amendments in this Update are the same as in Topic 606. The potential impact of this Update is still being assessed. The
Company is currently in the process of evaluating which adoption method to use and assessing the potential impact the new standard and the related Updates will have on its operations and consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), which requires an entity to measure inventory at the lower of cost and net realizable value.
Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the
retail inventory method. For public business entities, this update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments in this update should be applied prospectively
with earlier application permitted as of the beginning of an interim or annual reporting period. The Company plans to adopt this standard as of January 1, 2017. The adoption of this standard is not expected to have a material impact for any periods
presented.
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt
Issuance Costs, that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and
measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15,
2015, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted for financial statements that have not been previously issued. An entity should apply the new guidance on a retrospective basis,
wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an
accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the
change on the financial statement line items (that is, debt issuance cost asset and the debt liability). The Company adopted the standard in its interim reporting for March 31, 2016. The effect of the change on the financial statement was $1.7
million reclassified from debt issuance cost asset to the debt liability. Since the adoption of ASU 2015-03 had no material impact on the Companys consolidated financial statements for any period presented the prior-period information have not
been retrospectively adjusted.
9
3 Business Combinations
Autoliv-Nissin Brake Systems
On March
31, 2016, the Company acquired a 51% interest in the entities that formed Autoliv-Nissin Brake Systems (ANBS) for approximately $264 million in cash. ANBS designs, manufactures and sells products in the brake control and actuation systems business.
Nissin Kogyo retained a 49% interest in the entities that formed ANBS. The Company has management and operational control and will consolidate the results of operations and balance sheet of ANBS. The transaction has been accounted for as a business
combination.
The acquisition combines Nissin Kogyos world leading expertise and technology in brake control and actuation systems with
Autolivs global reach and customer base to create a global competitive offering in the growing global brake control systems market. ANBS will also further strengthen the Companys role as a leading system supplier of products and systems
for autonomous driving vehicles. The business was acquired on March 31, 2016 and therefore no operating results of ANBS have been included in the Companys Consolidated Statements of Net Income. ANBS is included in the Electronics segment. The
total purchase accounting inventory fair value step-up adjustments included in the balance sheet at the acquisition date were $2.8 million.
Total ANBS
acquisition related costs were approximately $3.5 million for the year ended December 31, 2015 and approximately $2.7 million for the three months ended March 31, 2016 and were reflected in Selling, general and administrative expenses in the
Consolidated Statements of Net Income.
The pro forma effects of this acquisition would not materially impact the Companys reported results for any
period presented.
The acquisition date fair value of the consideration transferred for the Companys 51% interest in the entities that formed ANBS
was $263.9 million in a cash transaction.
The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities
assumed reflected in the Companys March 31, 2016, Consolidated Balance Sheet:
|
|
|
|
|
Amounts recognized as of acquisition date (in millions)
|
|
March 31, 2016
|
|
|
Assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
37.7
|
|
Receivables
|
|
|
1.5
|
|
Inventories
|
|
|
34.1
|
|
Other current assets
|
|
|
7.4
|
|
Property, plant and equipment
|
|
|
161.0
|
|
Other non-current assets
|
|
|
0.7
|
|
Intangibles
|
|
|
131.8
|
|
Goodwill
|
|
|
168.4
|
|
|
|
|
|
|
Total assets
|
|
$
|
542.6
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
5.8
|
|
Other current liabilities
|
|
|
9.0
|
|
Pension liabilities
|
|
|
10.1
|
|
Other non-current liabilities
|
|
|
0.2
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
25.1
|
|
Net assets acquired
|
|
$
|
517.5
|
|
Less: Non-controlling interest
|
|
$
|
(253.6
|
)
|
|
|
|
|
|
Controlling interest
|
|
$
|
263.9
|
|
Acquired Intangibles primarily consist of the fair value of customer contracts of $64.9 million and certain technology of
$59.6 million. The customer contracts will be amortized straight-line over 7 years and the technology will be amortized straight-line over 10 years.
The
recognized goodwill of $168.4 million reflects expected synergies from combining Autolivs global reach and customer base with Nissin Kogyos world leading expertise (including workforce) and technology in brake control and actuation
systems. A significant portion of the goodwill is deductible for tax purposes.
The fair values recognized for the acquired assets, assumed liabilities
and goodwill are preliminary pending finalization of valuation process.
4 Fair Value Measurement
Assets and liabilities measured at fair value on a recurring basis
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 the contingent consideration relating to the M/A-COM acquisition in
August 2015 is re-measured on a recurring basis (for further information, see the Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 19, 2016). As of March 31, 2016, there was no material change in the
fair value of this contingent consideration.
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 Companys use of derivatives is in
accordance with the strategies contained in the Companys overall financial policy. The derivatives outstanding at March 31, 2016 were foreign exchange swaps and forward contracts. All swaps principally match the terms and maturity of the
underlying debt and no swaps have a maturity beyond six months. The forward contracts are designated as cash flow hedges of certain external purchases. 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.
10
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 Net 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 Net Income when the hedge transaction affects net earnings. The Company uses the forward rate with respect to the measurement of changes in fair value of cash flow
hedges when revaluing foreign exchange forward contracts. There were no material reclassifications from OCI to the Consolidated Statement of Net Income during the first quarter of 2016. Any ineffectiveness in the first quarter of 2016 was not
material.
The Companys derivatives are all classified as Level 2 of the fair value hierarchy and there have been no transfers between the levels
during this or comparable periods.
The tables below present information about the Companys financial assets and liabilities measured at fair value
on a recurring basis as of March 31, 2016 and December 31, 2015. The carrying value is the same as the fair value as these instruments are recognized in the consolidated financial statements at fair value. Although the Company is party to close-out
netting agreements (ISDA agreements) with all derivative counterparties, the fair values in the tables below and in the Condensed Consolidated Balance Sheet at March 31, 2016 and in the Consolidated Balance Sheet at December 31, 2015, have been
presented on a gross basis. The amounts subject to netting agreements that the Company chose not to offset are presented below. According to the close-out netting agreements, transaction amounts payable to a counterparty on the same date and in the
same currency can be netted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
Fair Value
Measurements
|
|
|
|
Description
|
|
Nominal
volume
|
|
|
Derivative
asset
|
|
|
Derivative
liability
|
|
|
Balance sheet location
|
|
|
|
|
|
Derivatives designated as hedging instruments
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts, less than 1 year (cash flow hedge)
|
|
$
|
53.2
|
|
|
$
|
0.0
|
|
|
$
|
1.3
|
|
|
Other current assets/ Other current liabilities
|
|
|
|
|
|
Foreign exchange forward contracts, less than 2 year (cash flow hedge)
|
|
|
5.1
|
|
|
|
0.0
|
|
|
|
0.1
|
|
|
Other non-current assets/ Other non-current liabilities
|
|
|
|
|
|
Total derivatives designated as hedging instruments
|
|
$
|
58.3
|
|
|
$
|
0.0
|
|
|
$
|
1.4
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange swaps, less than 6 months
|
|
$
|
314.9
|
2)
|
|
$
|
0.9
|
3)
|
|
$
|
0.2
|
4)
|
|
Other current assets/ Other current liabilities
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
|
$
|
314.9
|
|
|
$
|
0.9
|
|
|
$
|
0.2
|
|
|
|
1)
|
There is no netting since there are no offsetting contracts.
|
2)
|
Net nominal amount after deducting for offsetting swaps under ISDA agreements is $279.1 million.
|
3)
|
Net amount after deducting for offsetting swaps under ISDA agreements is $0.8 million.
|
4)
|
Net amount after deducting for offsetting swaps under ISDA agreements is $0.2 million.
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Fair Value
Measurements
|
|
|
|
Description
|
|
Nominal
volume
|
|
|
Derivative
asset
|
|
|
Derivative
liability
|
|
|
Balance sheet location
|
|
|
|
|
|
Derivatives designated as hedging instruments
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts, less than 1 year (cash flow hedge)
|
|
$
|
58.0
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
Other current assets/ Other current liabilities
|
|
|
|
|
|
Foreign exchange forward contracts, less than 2 year (cash flow hedge)
|
|
|
11.3
|
|
|
|
0.0
|
|
|
|
0.1
|
|
|
Other non-current assets/ Other non-current liabilities
|
|
|
|
|
|
Total derivatives designated as hedging instruments
|
|
$
|
69.3
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange swaps, less than 6 months
|
|
$
|
482.4
|
2)
|
|
$
|
2.5
|
3)
|
|
$
|
5.1
|
4)
|
|
Other current assets/ Other current liabilities
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
|
$
|
482.4
|
|
|
$
|
2.5
|
|
|
$
|
5.1
|
|
|
|
1)
|
There is no netting since there are no offsetting contracts.
|
2)
|
Net nominal amount after deducting for offsetting swaps under ISDA agreements is $435.8 million.
|
3)
|
Net amount after deducting for offsetting swaps under ISDA agreements is $2.4 million.
|
4)
|
Net amount after deducting for offsetting swaps under ISDA agreements is $4.9 million.
|
Derivatives
designated as hedging instruments
The derivatives designated as hedging instruments outstanding at March 31, 2016 were foreign exchange forward
contracts, classified as cash flow hedges. For the three months ended March 31, 2016, the cumulative gains and losses recognized in OCI on the cash flow hedges were a loss of $1.0 million (net of taxes). There were no derivatives designated as
hedging instruments outstanding as of March 31, 2015.
For the three months ended March 31, 2016, the gains and losses reclassified from OCI and
recognized in the Consolidated Statement of Net Income were a gain of $0.3 million (net of taxes). Gains and losses recognized and remaining in OCI as of March 31, 2016 are a loss of $1.3 million (net of taxes). Any ineffectiveness in the first
quarter of 2016 was not material. During the first quarter of 2015, there were no derivative instruments designated as hedging instruments and therefore there were no gains or losses recognized in OCI or in the Consolidated Statement of Net Income.
Derivatives not designated as hedging instruments
Derivatives not designated as hedging instruments relate to economic hedges and are marked to market with all amounts recognized in the Consolidated Statement
of Net Income. The derivatives not designated as hedging instruments outstanding at March 31, 2016 were foreign exchange swaps. During the quarter, the Company entered into foreign exchange option contracts with the purpose to hedge foreign exchange
risk related to the ANBS Joint Venture acquisition. The foreign exchange option contracts are no longer outstanding as of March 31, 2016.
For the three
months ended March 31, 2016, the gains and losses recognized in other non-operating items, net were a gain of $0.8 million for derivative instruments not designated as hedging instruments. For the three months ended March 31, 2015, the gains
and losses recognized in other non-operating items, net were a loss of $2.3 million for derivative instruments not designated as hedging instruments. For the three months ended March 31, 2016 and March 31, 2015, the gains and losses recognized as
interest expense were immaterial.
12
Fair Value of Debt
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 Companys current borrowing rates for similar types of financing. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2016
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
December 31,
2015
|
|
Long-term debt
|
|
Carrying
value
1)
|
|
|
Fair
value
|
|
|
Carrying
value
1)
|
|
|
Fair
value
|
|
U.S. Private placement
|
|
$
|
1,419.1
|
|
|
$
|
1,532.1
|
|
|
$
|
1,421.5
|
|
|
$
|
1,472.6
|
|
Medium-term notes
|
|
|
80.0
|
|
|
|
81.8
|
|
|
|
77.8
|
|
|
|
79.6
|
|
Other long-term debt
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,499.4
|
|
|
$
|
1,614.2
|
|
|
$
|
1,499.4
|
|
|
$
|
1,552.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdrafts and other short-term debt
|
|
$
|
28.7
|
|
|
$
|
28.7
|
|
|
$
|
39.4
|
|
|
$
|
39.4
|
|
Short-term portion of long-term debt
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
28.8
|
|
|
$
|
28.8
|
|
|
$
|
39.6
|
|
|
$
|
39.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 equity method investments.
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
Companys 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 the three month period ended March 31, 2016, the Company did not record any material impairment charges on its long-lived assets.
5 Income Taxes
The effective tax rate in the first quarter of 2016 was 29.9% compared to 44.6% in the same quarter of 2015. In the first quarter of
2016, discrete tax items, net had an unfavorable impact of 1.7%. In the first quarter of 2015, discrete tax items, net increased the tax rate by 10.1%.
For the three month period ended March 31, 2016, the tax rate has been favorably impacted by the mix of earnings and tax rates by various jurisdictions
compared to the same period in the prior year.
The Company files income tax returns in the U.S. 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 no longer subject to income tax examination by the U.S. federal tax authorities for years prior to
2009. With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax authorities for years before 2009.
13
As of March 31, 2016 the Company is not aware of any proposed income tax adjustments resulting from tax
examinations that would have a material impact on the Companys condensed consolidated 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 first quarter of 2016, the Company recorded a net increase of $3.4 million to income tax reserves for unrecognized tax benefits based
on tax positions related to the current year, including accruing additional interest related to unrecognized tax benefits of prior years. During the quarter, the Company recorded a net decrease of $0.5 million to income tax reserves for unrecognized
tax benefits of prior years due to the lapse of the applicable statute of limitations. Of the total unrecognized tax benefits of $31.2 million recorded at March 31, 2016, $10.7 million is classified as current tax payable and $20.5 million is
classified as non-current tax payable on the Condensed Consolidated Balance Sheet.
6 Inventories
Inventories are stated at the lower of cost (principally FIFO) or market. The components of inventories were as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Raw materials
|
|
$
|
375.2
|
|
|
$
|
339.9
|
|
Work in progress
|
|
|
249.3
|
|
|
|
243.4
|
|
Finished products
|
|
|
240.4
|
|
|
|
217.9
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
864.9
|
|
|
|
801.2
|
|
Inventory valuation reserve
|
|
|
(98.2
|
)
|
|
|
(89.8
|
)
|
|
|
|
|
|
|
|
|
|
Total inventories, net of reserve
|
|
$
|
766.7
|
|
|
$
|
711.4
|
|
7 Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passive Safety
Segment
|
|
|
Electronics
Segment
|
|
|
Total
|
|
Carrying amount December 31, 2015
|
|
$
|
1,388.3
|
|
|
$
|
278.0
|
|
|
$
|
1,666.3
|
|
Acquisition
|
|
|
|
|
|
|
168.4
|
|
|
|
168.4
|
|
Effect of currency translation
|
|
|
3.8
|
|
|
|
0.2
|
|
|
|
4.0
|
|
Carrying amount March 31, 2016
|
|
$
|
1,392.1
|
|
|
$
|
446.6
|
|
|
$
|
1,838.7
|
|
The goodwill recognized in the first quarter of 2016 is related to the ANBS acquisition (see Note 3).
8 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. All restructuring activities relate to the Passive Safety Segment. The changes in the employee-related reserves have been charged
against Other income (expense), net in the Consolidated Statements of Net Income.
First quarter of 2016
The employee-related restructuring provisions and cash payments in the first quarter of 2016 mainly related to headcount reductions in high-cost countries in
Europe and Asia. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2015 to March 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
Provision/
Charge
|
|
|
Provision/
Reversal
|
|
|
Cash
payments
|
|
|
Translation
difference
|
|
|
March 31,
2016
|
|
Restructuring employee-related
|
|
$
|
87.7
|
|
|
$
|
13.5
|
|
|
$
|
(0.3
|
)
|
|
$
|
(17.6
|
)
|
|
$
|
3.5
|
|
|
$
|
86.8
|
|
Other
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reserve
|
|
$
|
87.9
|
|
|
$
|
13.5
|
|
|
$
|
(0.3
|
)
|
|
$
|
(17.6
|
)
|
|
$
|
3.5
|
|
|
$
|
87.0
|
|
14
First quarter of 2015
The employee-related restructuring provisions and cash payments in the first quarter of 2015 mainly related to headcount reductions in high-cost countries in
Europe. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2014 to March 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2014
|
|
|
Provision/
Charge
|
|
|
Provision/
Reversal
|
|
|
Cash
payments
|
|
|
Translation
difference
|
|
|
March 31,
2015
|
|
Restructuring employee-related
|
|
$
|
79.6
|
|
|
$
|
35.5
|
|
|
$
|
(0.9
|
)
|
|
$
|
(25.9
|
)
|
|
$
|
(9.0
|
)
|
|
$
|
79.3
|
|
Other
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reserve
|
|
$
|
79.8
|
|
|
$
|
35.6
|
|
|
$
|
(0.9
|
)
|
|
$
|
(26.2
|
)
|
|
$
|
(9.0
|
)
|
|
$
|
79.3
|
|
9 Product-Related Liabilities
The Company has reserves for product risks. Such reserves are related to product performance issues including recall, product liability and
warranty issues. For further explanation, see Note 12 Contingent Liabilities below.
The table below summarizes the change in the balance sheet position
of the product-related liabilities. The provisions and cash paid for the three months ended March 31, 2016 and March 31, 2015 mainly related to warranty related issues.
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
Reserve at beginning of the period
|
|
$
|
60.8
|
|
|
$
|
51.3
|
|
Change in reserve
|
|
|
4.0
|
|
|
|
1.8
|
|
Cash payments
|
|
|
(3.6
|
)
|
|
|
(4.5
|
)
|
Translation difference
|
|
|
0.6
|
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
Reserve at end of the period
|
|
$
|
61.8
|
|
|
$
|
47.2
|
|
1
0 Retirement Plans
The Company has contributory and non-contributory defined benefit pension plans covering employees at most operations in the U.S. and in
certain other countries. The main plan is the U.S. plan for which the benefits are based on an average of the employees earnings in the years preceding retirement and on credited service. Certain supplemental funded and 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 individual non-U.S. pension plan and the Company has frozen participation to include only those employees hired as of April 30, 2003.
The Net Periodic Benefit Costs related to Other Post-retirement Benefits were not significant to the condensed consolidated financial statements of the
Company for the three month period ended March 31, 2016 and March 31, 2015 and are not included in the table below.
The components of total Net Periodic
Benefit Cost associated with the Companys defined benefit retirement plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
Service cost
|
|
$
|
5.3
|
|
|
$
|
5.8
|
|
Interest cost
|
|
|
5.3
|
|
|
|
5.3
|
|
Expected return on plan assets
|
|
|
(5.1
|
)
|
|
|
(5.3
|
)
|
Amortization prior service credit
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
Amortization of actuarial loss
|
|
|
1.5
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost
|
|
$
|
6.8
|
|
|
$
|
8.1
|
|
15
11 Controlling and Non-Controlling Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
|
Equity attributable to
|
|
|
Equity attributable to
|
|
|
|
Controlling
interest
|
|
|
Non-controlling
interest
|
|
|
Total
|
|
|
Controlling
interest
|
|
|
Non-controlling
interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
3,455.6
|
|
|
$
|
12.5
|
|
|
$
|
3,468.1
|
|
|
$
|
3,427.1
|
|
|
$
|
15.0
|
|
|
$
|
3,442.1
|
|
|
|
|
|
|
|
|
Total Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
133.2
|
|
|
|
0.3
|
|
|
|
133.5
|
|
|
|
35.7
|
|
|
|
0.0
|
|
|
|
35.7
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
59.6
|
|
|
|
0.0
|
|
|
|
59.6
|
|
|
|
(110.8
|
)
|
|
|
(0.0
|
)
|
|
|
(110.8
|
)
|
Net change in cash flow hedges
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plan
|
|
|
0.8
|
|
|
|
|
|
|
|
0.8
|
|
|
|
1.5
|
|
|
|
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income
|
|
|
192.4
|
|
|
|
0.3
|
|
|
|
192.7
|
|
|
|
(73.6
|
)
|
|
|
0.0
|
|
|
|
(73.6
|
)
|
Common Stock incentives
|
|
|
3.3
|
|
|
|
|
|
|
|
3.3
|
|
|
|
10.9
|
|
|
|
|
|
|
|
10.9
|
|
Cash dividends declared
|
|
|
(51.1
|
)
|
|
|
|
|
|
|
(51.1
|
)
|
|
|
(49.4
|
)
|
|
|
|
|
|
|
(49.4
|
)
|
Repurchased shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(104.4
|
)
|
|
|
|
|
|
|
(104.4
|
)
|
Dividends paid to non-controlling interest on subsidiary shares
|
|
|
|
|
|
|
(1.7
|
)
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiary by non-controlling interest
|
|
|
|
|
|
|
253.9
|
|
|
|
253.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
3,600.2
|
|
|
$
|
265.0
|
|
|
$
|
3,865.2
|
|
|
$
|
3,210.6
|
|
|
$
|
15.0
|
|
|
$
|
3,225.6
|
|
1
2 Contingent Liabilities
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, and with the exception of losses resulting from the antitrust proceedings described below, it is the opinion of
management that the various legal proceedings and investigations 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.
In October 2014, one of the Companys Brazilian
subsidiaries received a notice of deficiency from the state tax authorities from the state of São Paulo, Brazil which, primarily, alleged violations of ICMS (VAT) payments and improper warehousing documentation. The aggregate assessment for
all alleged violations was R$64.5 million (approximately $18 million), inclusive of fines, penalties and interest. The Company believes the full amount assessed is baseless and that it has reasonable legal and factual defenses to the assessment and,
consequently, plans to defend its interests vigorously. However, the Company believes that a loss is probable with respect to at least a portion of the assessed amount and has accrued an amount that is not material to the Companys results of
operations for the period ended December 31, 2015. However, the Company cannot predict or estimate the duration or ultimate outcome of this matter.
In
March 2015, the Company was informed of an investigation being conducted in Turkey by the Directorate of Kocaeli Customs Custody, Smuggling and Enquiry into the Companys import and customs payment structure and the associated
16
import taxes and fees for the period of 20062012. The Company cannot predict the duration, scope or ultimate outcome of this investigation and is unable to estimate the financial impact it
may have, or predict the reporting periods in which any such financial impacts may be recorded. Consequently, the Company has made no provision for any expenses as of March 31, 2016 with respect to this investigation.
ANTITRUST MATTERS
Authorities in several jurisdictions
are currently conducting broad, and in some cases, long-running investigations of suspected anti-competitive behavior among parts suppliers in the global automotive vehicle industry. These investigations include, but are not limited to, segments in
which the Company operates. In addition to pending matters, authorities of other countries with significant light vehicle manufacturing or sales may initiate similar investigations. It is the Companys policy to cooperate with governmental
investigations.
On June 7-9, 2011, representatives of the European Commission (EC), the European antitrust authority, visited two
facilities of a Company subsidiary in Germany to gather information for an investigation of anti-competitive behavior among suppliers of occupant safety systems. The investigation is still pending and the Company remains unable to estimate the
financial impact such investigation will have or predict the reporting periods in which such financial impact may be recorded and has consequently not recorded a provision for loss as of March 31, 2016. However, management has concluded that it
is probable that the Companys operating results and cash flows will be materially adversely impacted for the reporting periods in which the EC investigation is resolved or becomes estimable.
In August 2014, the Competition Commission of South Africa (the CCSA) contacted the Company regarding an investigation into the Companys
sales of occupant safety systems in South Africa. The Company is cooperating with the CCSA. The Company cannot predict the duration, scope, or ultimate outcome of this investigation and is unable to estimate the loss or a range of loss, or predict
the reporting periods in which any such loss may be recorded. Consequently, the Company has not recorded a provision for loss as of March 31, 2016 with respect to this investigation.
On July 6, 2015, the Company learned that the General Superintendence of the Administrative Council for Economic Defense (CADE) in Brazil had
initiated an investigation of an alleged cartel involving sales in Brazil of seatbelts, airbags, and steering wheels by the Companys Brazilian subsidiary and the Brazilian subsidiary of a competitor. The Company believes that a loss in the
form of a civil penalty is probable with respect to this matter and accrued an initial amount for the period ended December 31, 2015. Due to recent developments with CADEs investigation the Company has accrued an additional amount during the
period ended March 31, 2016. The aggregate accrued amount remains not material to the Companys results of operations. However, the Company cannot predict or estimate the duration or ultimate outcome of this matter.
The Company is also subject to civil litigation alleging anti-competitive conduct in the U.S. and Canada. Specifically, the Company, several of its
subsidiaries and its competitors were named as defendants in a total of nineteen purported antitrust class action lawsuits filed between June 2012 and June 2015. Fifteen of these lawsuits were filed in the U.S. and were consolidated in the Occupant
Safety Systems (OSS) segment of the Automobile Parts Antitrust Litigation, a Multi-District Litigation (MDL) proceeding in the United States District Court for the Eastern District of Michigan. Plaintiffs in the U.S. cases sought to represent
four purported classes - direct purchasers, auto dealers, end-payors, and, as of the filing of the last class action in June 2015, truck and equipment dealers - who purchased occupant safety systems or components directly from a defendant,
indirectly through purchases or leases of new vehicles containing such systems, or through purchases of replacement parts.
In May 2014, the Company,
without admitting any liability, entered into separate settlement agreements with representatives of the three classes of plaintiffs then pending in the MDL. Pursuant to the settlement agreements, the Company agreed to pay $40 million to the direct
purchaser settlement class, $6 million to the auto dealer settlement class, and $19 million to the end-payor settlement class, for a total of $65 million. This amount was expensed during the second quarter of 2014. In exchange, the plaintiffs agreed
that the plaintiffs and the settlement classes would release Autoliv from all claims regarding their U.S. purchases that were or could have been asserted on behalf of the three classes in the MDL. In January 2015, the MDL court granted final
approval of the direct purchaser class settlement, which had been reduced to approximately $35.5 million because of opt-outs, and in December 2015, the MDL court granted final approval of the auto dealer class settlement. A final fairness hearing
for the end-payor class settlement is scheduled for May 11, 2016. Two individuals and one insurer have opted-out of all of the pending end-payor class settlements, including the Companys settlement. The insurer has informed the settling
defendants that it intends to pursue claims as an indirect purchaser of replacement parts. The class settlements do not resolve any claims of settlement class members who opt-out of the settlements or the unasserted claims of any purchasers of
occupant safety systems who are not otherwise included in a settlement class, such as states and municipalities.
17
In March 2015, the Company, without admitting any liability, reached agreements regarding additional settlements
to resolve certain direct purchasers global (including U.S.) or non-U.S. antitrust claims that were not covered by the direct purchaser class settlement described above. The total amount of these additional settlements was $81 million. Autoliv
expensed during the first quarter of 2015 approximately $77 million as a result of these additional settlements, net of existing amounts that had been accrued in 2014.
In April 2016, the Company reached an agreement to settle with the truck and equipment dealers class for a non-material amount. The settlement is subject
to court approval following notice to the class and the opportunity for class members to object to or opt out of the settlement.
The remaining four
antitrust class action lawsuits are pending in Canada (Sheridan Chevrolet Cadillac Ltd. et al. v. Autoliv, Inc. et al., filed in the Ontario Superior Court of Justice on January 18, 2013; M. Serge Asselin v. Autoliv, Inc. et al., filed in the
Superior Court of Quebec on March 14, 2013; Ewert v. Autoliv, Inc. et al., filed in the Supreme Court of British Columbia on July 18, 2013; and Cindy Retallick and Jagjeet Singh Rajput v. Autoliv ASP, Inc. et al., filed in the Queens
Bench of the Judicial Center of Regina in the province of Saskatchewan on May 14, 2014). The Canadian cases assert claims on behalf of putative classes of both direct and indirect purchasers of occupant safety systems. The Company believes that
a loss is probable with respect to these Canadian antitrust cases and accrued an amount for the period ended March 31, 2016 related to these claims that is not material to the Companys results of operations. There is currently no timeline for
class certification or discovery in the Canadian occupant safety systems class actions. These actions have been stayed pending proceedings in certain earlier-filed auto parts cases. The Company cannot predict or estimate the duration or ultimate
outcome of Canadian antitrust cases.
PRODUCT WARRANTY, RECALLS AND INTELLECTUAL PROPERTY
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, the Company faces warranty and recall claims. Where such (actual or alleged)
failure results, or is alleged to result, in bodily injury and/or property damage, the Company 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. Government safety regulators may also play a role in warranty and recall practices. A warranty, recall or product-liability claim
brought against the Company in excess of its insurance may have a material adverse effect on the Companys 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 products when the product supplied did not
perform as represented by us or expected by the customer. Accordingly, the future costs of warranty claims by the customers may be material. However, the Company believes its established reserves are adequate. Autolivs warranty reserves are
based upon the Companys best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the adequacy 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 Companys recorded estimates.
In addition, the global platforms and procedures used by
vehicle manufacturers have led to quality performance evaluations being conducted on an increasingly global basis. Any one or more quality, warranty or other recall issue(s) (including those affecting few units and/or having a small financial
impact) may cause a vehicle manufacturer to implement measures such as a temporary or prolonged suspension of new orders, which may have a material impact on the Companys results of operations.
The Company carries insurance for potential recall and product liability claims at coverage levels based on our prior claims experience. Autoliv cannot assure
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 should we, now or in the future, wish to extend, increase or otherwise
adjust our insurance.
The Company has been notified by one of its customers of five confirmed incidents where a side curtain airbag has partially
inflated without a deployment signal being given by the airbag control unit. A possible sixth incident is being investigated. The incidents have all occurred in a specific version of one vehicle model. The vehicles were parked and unoccupied and no
personal injuries have been reported. The Company has informed NHTSA about the confirmed incidents, and is, together with its customer, investigating the cause of the incidents and evaluating whether the incidents evidence a risk requiring
remediation.
The Company has determined pursuant to ASC 450 under U.S. GAAP that a loss is reasonably possible. If a safety recall were to occur, the
Company estimates a range of loss of approximately $10 million to $40 million, net of expected insurance recoveries. However, the ultimate costs of a recall, should one occur, could be significantly different. The main variables affecting the
possible costs are the number of vehicles ultimately determined to be affected by the issue, the cost per vehicle associated with a recall, the determination of proportionate responsibility among the customer, the Company, and any relevant
sub-suppliers, as well as the actual insurance recoveries. The Companys insurance policies generally cover the costs of a recall, although costs related to the replacement parts are not covered under its insurance policies.
In its products, the Company utilizes technologies which may be subject to intellectual property rights of third parties. While the Company does seek to
procure the necessary rights to utilize intellectual property rights associated with its products, it may fail to do so. Where the Company so fails, the Company may be exposed to material claims from the owners of such rights. Where the Company has
sold products which infringe upon such rights, its customers may be entitled to be indemnified by the Company for the claims they suffer as a result thereof. Such claims could be material.
The table in Note 9 Product-Related Liabilities above summarizes the change in the balance sheet position of the product related liabilities for the three
month period ended March 31, 2016.
18
13
Stock Incentive Plan
As a result of an initiative to more closely link the Companys stock incentive program to the Companys financial performance,
the Compensation Committee approved a new long-term equity incentive program, pursuant to which performance shares will replace stock options. The first grants under the new long-term incentive (LTI) program were made in February 2016. On February
15, 2016, the Compensation Committee of the Board of Directors granted shares under the LTI program pursuant to which certain employees received 50% of their LTI grant value in the form of performance shares and 50% in the form of restricted stock
units. The restricted stock units granted on February 15, 2016, will vest in three approximately equal annual installments beginning on the first anniversary of the grant date, subject to the grantees continued employment with the Company on
each vesting date. Additionally, the grantee may earn 0%-200% of the target number of performance shares based on the Companys achievement of specified targets for the Companys compound annual growth rate (CAGR) for sales and the
Companys CAGR in earnings per share relative to an established benchmark growth rate. Each performance target is weighted 50% and results are measured at the end of the three-year performance period.
The fair value of the restricted stock units and performance shares granted under the LTI are calculated as the grant date fair value of the shares expected
to be issued. The grant date fair value for the restricted stock units at February 15, 2016 was $7.0 million. This cost will be amortized straight line over the vesting periods. The grant date fair value of the performance shares at February 15,
2016 was $6.9 million, and is based upon the market value of the Autoliv share at the grant date. The performance conditions are not considered in the determination of the grant date fair value for these awards. Compensation expense is recognized
over the performance period based on managements estimate of the number of units expected to vest. Management evaluates its estimate of the actual number of shares expected to be issued at the end of the program on a quarterly basis. The
cumulative effect of the change in estimate is recognized in the period of change as an adjustment to compensation expense, if necessary.
1
4 Earnings per share
The Company calculates basic earnings per share (EPS) by dividing net income attributable to controlling interest by the weighted-average
number of shares of common stock outstanding for the period (net of treasury shares). When it would not be antidilutive (such as during periods of net loss), the diluted EPS also reflects the potential dilution that could occur if common stock were
issued for awards under the Companys Stock Incentive Plan.
For the three months ended March 31, 2016, approximately 0.2 million shares of common
stock were not included in the computation of the diluted EPS, which could potentially dilute basic EPS in the future. For the three months ended March 31, 2015, approximately 0.2 million shares of common stock were not included in the computation
of the diluted EPS, which could potentially dilute basic EPS in the future.
During the three months ended March 31, 2016 and March 31, 2015 approximately
0.1 million and 0.2 million shares of common stock, respectively, from the treasury stock have been utilized by the Companys Stock Incentive Plan.
Actual weighted average shares used in calculating earnings per share were:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Three months ended
|
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Weighted average shares basic
|
|
|
88.1
|
|
|
|
88.4
|
|
Effect of dilutive securities: - stock options/share awards
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares diluted
|
|
|
88.3
|
|
|
|
88.6
|
|
15 Segment Information
As of January 1, 2015 the Company changed its operating structure and currently reports two operating segments, Passive Safety and
Electronics. Passive Safety includes the Companys airbag seatbelt and steering wheel businesses, while Electronics combines all of
19
the Companys electronics resources and expertise in both passive safety electronics and active safety electronics. The fair value of the net assets acquired related to ANBS (acquired as of
March 31, 2016) is included in the Electronics Segment.
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Net sales, including Intersegment Sales
|
|
March 31,
|
|
|
March 31,
|
|
(Dollars in millions)
|
|
2016
|
|
|
2015
|
|
Passive Safety
|
|
$
|
1,988.7
|
|
|
$
|
1,830.4
|
|
Electronics
|
|
|
456.4
|
|
|
|
351.2
|
|
Total segment sales
|
|
$
|
2,445.1
|
|
|
$
|
2,181.6
|
|
Corporate and other
|
|
|
0.3
|
|
|
|
4.2
|
|
Intersegment sales
|
|
|
(15.4
|
)
|
|
|
(11.7
|
)
|
Total net sales
|
|
$
|
2,430.0
|
|
|
$
|
2,174.1
|
|
|
|
|
|
Three months ended
|
|
Income before Income Taxes
|
|
March 31,
|
|
|
March 31,
|
|
(Dollars in millions)
|
|
2016
|
|
|
2015
|
|
Passive Safety
|
|
$
|
191.5
|
|
|
$
|
63.2
|
|
Electronics
|
|
|
11.8
|
|
|
|
9.0
|
|
Segment operating income
|
|
$
|
203.3
|
|
|
$
|
72.2
|
|
Corporate and other
|
|
|
1.9
|
|
|
|
7.8
|
|
Interest and other non-operating expenses, net
|
|
|
(15.5
|
)
|
|
|
(16.8
|
)
|
Income from equity method investments
|
|
|
0.6
|
|
|
|
1.3
|
|
Income before income taxes
|
|
$
|
190.3
|
|
|
$
|
64.5
|
|
|
|
|
|
Three months ended
|
|
Capital Expenditures
|
|
March 31,
|
|
|
March 31,
|
|
(Dollars in millions)
|
|
2016
|
|
|
2015
|
|
Passive Safety
|
|
$
|
72.8
|
|
|
$
|
121.2
|
|
Electronics
|
|
|
16.3
|
|
|
|
11.6
|
|
Corporate and other
|
|
|
2.7
|
|
|
|
2.0
|
|
Total capital expenditures
|
|
$
|
91.8
|
|
|
$
|
134.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Depreciation and Amortization
|
|
March 31,
|
|
|
March 31,
|
|
(Dollars in millions)
|
|
2016
|
|
|
2015
|
|
Passive Safety
|
|
$
|
68.3
|
|
|
$
|
61.8
|
|
Electronics
|
|
|
14.7
|
|
|
|
10.7
|
|
Corporate and other
|
|
|
2.1
|
|
|
|
1.2
|
|
Total depreciation and amortization
|
|
$
|
85.1
|
|
|
$
|
73.7
|
|
|
|
|
|
As of
|
|
Segment Assets
|
|
March 31,
|
|
|
December 31,
|
|
(Dollars in millions)
|
|
2016
|
|
|
2015
|
|
Passive Safety
|
|
$
|
5,827.7
|
|
|
$
|
5,539.3
|
|
Electronics
|
|
|
1,589.1
|
|
|
|
966.5
|
|
Segment assets
|
|
$
|
7,416.8
|
|
|
$
|
6,505.8
|
|
Corporate and other
1)
|
|
|
727.5
|
|
|
|
1,019.7
|
|
Total assets
|
|
$
|
8,144.3
|
|
|
$
|
7,525.5
|
|
1)
|
Corporate and other assets mainly consist of cash and cash equivalents, income tax and deferred tax assets and equity method investments.
|
16 Subsequent Events
There were no reportable events subsequent to March 31, 2016.
20