ALV 10-Q
Autoliv Inc (ALV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to |
Commission File No.:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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 requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes:
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 12, 2021, there were
FORWARD-LOOKING STATEMENTS
This Quarterly Report on 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 include 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. All forward-looking statements are based upon our current expectations, various assumptions and/or data available from third parties. 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 forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements.
In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “would,” “should,” “could,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words.
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: general economic conditions; the impacts of the coronavirus (COVID-19) pandemic on the Company’s financial condition, business operations, operating costs, liquidity, competition and the global economy; changes in light vehicle production; fluctuation in vehicle production schedules for which the Company is a supplier; supply chain disruptions and component shortages impacting the Company or the automotive industry; changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignment: restructuring and cost reduction and efficiency initiatives and the market reaction thereto; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies, consolidations or restructuring or divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; 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 pricing negotiations with customers; successful integration of acquisitions and operations of joint ventures; successful implementation of strategic partnerships and collaborations; our ability to be awarded new business; product liability, warranty and recall claims and investigations and other litigation and customer reactions thereto; higher expenses for our pension and other postretirement benefits, including higher funding needs for our pension plans; work stoppages or other labor issues; possible adverse results of pending or future litigation or infringement claims; our ability to protect our intellectual property rights; negative impacts of antitrust investigations or other governmental investigations and associated litigation relating to the conduct of our business; tax assessments by governmental authorities and changes in our effective tax rate; dependence on key personnel; legislative or regulatory changes impacting or limiting our business; political conditions; dependence on and relationships with customers and suppliers; and other risks and uncertainties identified in Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 19, 2021.
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 publicly or revise any forward-looking statements in light of new information or future events, except as required by law.
2
INDEX |
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4 |
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4 |
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1. |
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9 |
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2. |
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9 |
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3. |
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10 |
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4. |
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12 |
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5. |
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12 |
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6. |
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12 |
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7. |
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13 |
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8. |
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14 |
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9. |
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14 |
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10. |
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16 |
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11. |
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16 |
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12. |
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16 |
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13. |
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17 |
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14. |
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17 |
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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18 |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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30 |
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30 |
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31 |
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31 |
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31 |
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
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31 |
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31 |
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31 |
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32 |
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3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in millions, except per share data)
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Three months ended June 30 |
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Six months ended June 30 |
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2021 |
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2020 |
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2021 |
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2020 |
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$ |
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$ |
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$ |
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$ |
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( |
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( |
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( |
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( |
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Gross profit |
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Selling, general and administrative expenses |
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( |
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( |
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( |
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( |
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Research, development and engineering expenses, net |
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( |
) |
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( |
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( |
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( |
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Amortization of intangibles |
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( |
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( |
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( |
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( |
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Other income (expense), net |
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( |
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( |
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( |
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Operating income (loss) |
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( |
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( |
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Income from equity method investment |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Other non-operating items, net |
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( |
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( |
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Income (loss) before income taxes |
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( |
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( |
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Income tax (expense) benefit |
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( |
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( |
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Net income (loss) |
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( |
) |
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( |
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Less: Net income attributable to non-controlling interest |
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Net income (loss) attributable to controlling interest |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Net earnings (loss) per share – basic 1) |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Net earnings (loss) per share – diluted 1) |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Weighted average number of shares outstanding, net of |
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Weighted average number of shares outstanding, |
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Cash dividend per share – declared 2), 3) |
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$ |
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$ |
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$ |
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$ |
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Cash dividend per share – paid 3) |
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$ |
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$ |
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$ |
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$ |
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1)
2)
3)
See Notes to the unaudited Condensed Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in millions)
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Three months ended June 30 |
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Six months ended June 30 |
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2021 |
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2020 |
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2021 |
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2020 |
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Net income (loss) |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Other comprehensive income (loss) before tax: |
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Change in cumulative translation adjustments |
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( |
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( |
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Net change in unrealized components of defined benefit plans |
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Other comprehensive income (loss), before tax |
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( |
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( |
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Tax effect allocated to other comprehensive loss |
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( |
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( |
) |
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( |
) |
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( |
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Other comprehensive income (loss), net of tax |
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( |
) |
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( |
) |
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Comprehensive income (loss) |
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( |
) |
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( |
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Less: Comprehensive income attributable to |
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Comprehensive income (loss) attributable to |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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See Notes to the unaudited Condensed Consolidated Financial Statements.
5
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in millions)
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As of |
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June 30, 2021 |
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December 31, 2020 |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Inventories, net |
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Prepaid expenses and accrued income |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Goodwill |
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Intangible assets, net |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and equity |
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Short-term debt |
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$ |
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$ |
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Accounts payable |
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Accrued expenses |
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Operating lease liabilities - current |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Pension liability |
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Operating lease liabilities - non-current |
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Other non-current liabilities |
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Total non-current liabilities |
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Common stock |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Treasury stock |
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( |
) |
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( |
) |
Total controlling interest's equity |
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Non-controlling interest |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See Notes to the unaudited condensed consolidated financial statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
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Six months ended June 30 |
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2021 |
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2020 |
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Operating activities |
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Net income (loss) |
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$ |
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$ |
( |
) |
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Adjustments to reconcile net income (loss) to cash provided by operating activities: |
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Depreciation and amortization |
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Deferred income taxes |
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( |
) |
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Other, net |
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( |
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Net change in operating assets and liabilities |
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( |
) |
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Net cash provided by operating activities |
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Investing activities |
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Expenditures for property, plant and equipment |
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( |
) |
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( |
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Proceeds from sale of property, plant and equipment |
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Net cash used in investing activities |
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( |
) |
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( |
) |
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Financing activities |
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Net decrease in short-term debt |
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( |
) |
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( |
) |
Increase in long-term debt |
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Decrease in long-term debt |
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( |
) |
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Dividends paid |
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( |
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( |
) |
Common stock options exercised |
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Net cash (used in) provided by financing activities |
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( |
) |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
) |
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(Decrease) increase in cash and cash equivalents |
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( |
) |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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See Notes to unaudited condensed consolidated financial statements.
7
CONSOLIDATED STATEMENTS OF TOTAL EQUITY (UNAUDITED)
(Dollars in millions)
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Total |
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Non- |
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Total |
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Balances at December 31, 2020 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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$ |
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||||||
Comprehensive Income: |
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Net income |
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Foreign currency translation |
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( |
) |
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( |
) |
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( |
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Pension liability |
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— |
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|||||||
Total Comprehensive Income |
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— |
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— |
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( |
) |
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— |
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Stock-based compensation |
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Balances at March 31, 2021 |
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( |
) |
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( |
) |
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Comprehensive Income: |
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Net income |
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Foreign currency translation |
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Pension liability |
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— |
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Total Comprehensive Income |
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— |
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— |
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Stock-based compensation |
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Cash dividends declared1) |
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( |
) |
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( |
) |
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( |
) |
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Balances at June 30, 2021 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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$ |
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||||||
1)
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Total |
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Non- |
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Total |
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||||||||
Balances at December 31, 2019 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
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|
$ |
|
|
$ |
|
||||||
Comprehensive Loss: |
|
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||||||||
Net income |
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||||||||
Foreign currency translation |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
||||
Pension liability |
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||||||||
Total Comprehensive Loss |
|
— |
|
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|
— |
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|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
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|
( |
) |
|
Stock-based compensation |
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||||||||
Cash dividends declared 1) |
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( |
) |
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( |
) |
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( |
) |
|||||
Balances at March 31, 2020 |
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( |
) |
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( |
) |
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||||||
Comprehensive Loss: |
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Net (loss) income |
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( |
) |
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( |
) |
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( |
) |
|||||
Foreign currency translation |
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( |
) |
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|||||||
Pension liability |
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||||||||
Total Comprehensive Loss |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Stock-based compensation |
|
|
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|
|
|
|
|
|
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|
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|
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|
|
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|
||||||||
Cash dividends declared1) |
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|
|
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|
|
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|
|
|
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|
||||||||
Balances at June 30, 2020 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
1)
See Notes to the unaudited Condensed Consolidated Financial Statements.
8
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)
June 30, 2021
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 consolidated financial statements. The unaudited condensed consolidated financial statements have been prepared on the same basis as the prior year audited consolidated financial statements and all adjustments considered necessary for a fair presentation have been included in the consolidated financial statements. All such adjustments are of a normal recurring nature. The results for the interim period are not necessarily indicative of the results to be expected for any future period or for the fiscal year ending December 31, 2021.
The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by U.S. GAAP for complete consolidated financial statements.
The Company has
Certain amounts in the condensed consolidated financial statements and associated notes may not reconcile due to rounding. All percentages have been calculated using unrounded amounts. Certain amounts in prior periods have been reclassified to conform to current year presentation.
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, 2020, filed with the SEC on February 19, 2021.
2. NEW ACCOUNTING STANDARDS
Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of accounting standards updates ("ASUs") to the FASB’s Accounting Standards Codification ("ASC").
The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial statements.
Adoption of new accounting standards
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes. ASU 2019-12 is effective for public business entities for annual periods beginning after December 15, 2020, and early adoption is permitted. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted ASU 2019-12 prospectively as of January 1, 2021, and the adoption did not have a material impact on the Company’s consolidated financial statements.
Accounting standards issued but not yet adopted
None that are expected to have an impact on the Company.
9
3. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, short-term debt and other current financial assets and liabilities approximate their fair value because of the short-term maturity of these instruments.
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 rates 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. All derivatives are recognized in the consolidated financial statements at fair value. For certain 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 each hedge is entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest rates and foreign exchange rates.
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 several factors, including the type of asset or liability, whether the asset or liability has an established market and the characteristics specific to the transaction. Instruments 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.
All the Company’s derivatives are classified as Level 2 financial instruments in the fair value hierarchy. 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.
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 Sheets at June 30, 2021 and December 31, 2020 have been presented on a gross basis. According to the ISDA agreements, transaction amounts payable to a counterparty on the same date and in the same currency can be netted. The amounts subject to netting agreements that the Company chose not to offset are presented below.
Derivatives designated as hedging instruments
There were
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 Statements of Income. The derivatives not designated as hedging instruments outstanding at June 30, 2021 and December 31, 2020 were foreign exchange swaps.
For the three month periods ended June 30, 2021 and June 30, 2020, the gains and losses recognized in other non-operating items, net were a gain of $
10
For the three and six month periods ended June 30, 2021 and June 30, 2020, the gains and losses recognized as interest expense were immaterial.
The tables below present information about the Company’s derivative financial assets and liabilities measured at fair value on a recurring basis (dollars in millions).
|
|
June 30, 2021 |
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December 31, 2020 |
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|
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Fair Value Measurements |
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Fair Value Measurements |
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Description |
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Nominal |
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Derivative |
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Derivative |
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Nominal |
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Derivative |
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Derivative |
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||||||
Derivatives not designated as hedging |
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|
||||||
Foreign exchange swaps, less |
|
$ |
|
1) |
$ |
|
2) |
$ |
|
3) |
|
$ |
|
4) |
$ |
|
5) |
$ |
|
6) |
||||||
Total derivatives not designated |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||
1)
2)
3)
4)
5)
6)
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 Company’s current borrowing rates for similar types of financing. The Company has determined that each of these fair value measurements of debt reside within Level 2 of the fair value hierarchy.
The fair value and carrying value of debt is summarized in the table below (dollars in millions).
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
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Fair |
|
||||
Long-term debt |
|
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|
|
|
|
|
|
|
||||
Bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Loans |
|
|
|
|
|
|
|
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|
|
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|
||||
Other long-term debt |
|
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|
||||
Total long-term debt |
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|
||||
|
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|
||||
Short-term debt |
|
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|
||||
Short-term portion of long-term debt |
|
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|
||||
Overdrafts and other short-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total short-term debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
1)
Assets and liabilities measured at fair value on a nonrecurring 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 nonrecurring basis, including certain long-lived assets, including equity method investments, goodwill and other intangible assets, typically as it relates to impairment.
11
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 the three and six month periods ended June 30, 2021 and June 30, 2020, the Company did
4. INCOME TAXES
The effective tax rate for the three months period ended June 30, 2021 was
The effective tax rate for the six months period ended June 30, 2021 was
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. states and non-U.S. 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 income tax authorities for years prior to 2015. 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 2010.
As of June 30, 2021, the Company is not aware of any proposed income tax adjustments resulting from tax examinations that would have a material impact on the Company’s 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 six months period ended June 30, 2021, the Company recorded a net increase of $
5. INVENTORIES
Inventories are stated at the lower of cost ("FIFO") and net realizable value. The components of inventories were as follows (dollars in millions):
|
|
As of |
|
|||||
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
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|
||
Finished products |
|
|
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|
||
Inventories |
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|
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|
||
Inventory valuation reserve |
|
|
( |
) |
|
|
( |
) |
Total inventories, net of reserve |
|
$ |
|
|
$ |
|
||
6. RESTRUCTURING
As of June 30, 2021, approximately $
12
The table below summarizes the change in the balance sheet position of the employee related restructuring reserves (dollars in millions). The restructuring reserve balance is included within Accrued expenses in the Condensed Consolidated Balance Sheet. The changes in the employee-related reserves have been charged against Other income (expense), net in the Consolidated Statements of Income. Restructuring costs other than employee related costs are immaterial for all periods presented.
|
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Reserve at beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision - charge |
|
|
|
|
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|
|
|
|
|
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|
||||
Provision - reversal |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Translation difference |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Reserve at end of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company is exposed to product liability and warranty claims in the event that the Company’s products fail to perform as represented and such failure results, or is alleged to result, in bodily injury, and/or property damage or other loss. The Company has reserves for product risks. Such reserves are related to product performance issues, including recalls, product liability and warranty issues. For further explanation, see Note 9. Contingent Liabilities below.
For the three and six month periods ended June 30, 2021, provisions primarily related to recall related issues. Cash payments in the three and six month periods ended June 30, 2021 mainly related to the “Toyota Recall” that was settled in April 2021. For the three and six month periods ended June 30, 2020, provisions and cash paid primarily related to recall and warranty related issues. As of June 30, 2021, the reserve for product related liabilities mainly related to recall related issues.
Pursuant to the agreements entered into in connection with the spin-off of Veoneer, Inc. on June 29, 2018 (collectively, the “Spin-off Agreements”), Autoliv is required to indemnify Veoneer for recalls related to certain qualified Electronics products. As of June 30, 2021, the indemnification liabilities are approximately $
|
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
||||
Reserve at beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Change in reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Translation difference |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reserve at end of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
13
8. RETIREMENT PLANS
The components of total Net Periodic Benefit Cost associated with the Company’s defined benefit retirement plans are as follows (dollars in millions):
U.S. Plans |
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service (credit) cost |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Amortization of actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Periodic Benefit Cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-U.S. Plans |
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service (credit) cost |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Amortization of actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Periodic Benefit Cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Service cost and Amortization of prior service cost components in the tables above are reported in Operating Income in the Consolidated Statements of Income. The remaining components - Interest cost, Expected return on plan assets, Amortization of actuarial loss and Settlement loss - are reported as Other non-operating items, net in the Consolidated Statements of Income.
9. 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, 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.
ANTITRUST MATTERS
Authorities in several jurisdictions have conducted broad, and in some cases, long-running investigations of suspected anti-competitive behavior among parts suppliers in the global automotive vehicle industry. These investigations included, but are not limited to, the products that the Company sells. In addition to concluded matters, authorities of other countries with significant light vehicle manufacturing or sales may initiate similar investigations.
PRODUCT WARRANTY, RECALLS AND INTELLECTUAL PROPERTY
Autoliv is exposed to various claims for damages and compensation if its 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 or is defective, the Company may face warranty and recall claims. Where such (actual or alleged) failure or defect results, or is alleged to result, in bodily injury and/or property damage or other loss, the Company may also face product liability and other 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
14
brought against the Company in excess of its insurance may have a material adverse effect on the Company’s business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the repair or replacement costs of 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 customers may be material. However, the Company believes its established reserves are adequate.
In addition, as vehicle manufacturers increasingly use global platforms and procedures, quality performance evaluations are also conducted on a 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 Company’s results of operations.
The Company maintains a program of insurance, which may include commercial insurance, self-insurance, or a combination of both approaches, for potential recall and product liability claims in amounts and on terms that it believes are reasonable and prudent based on our prior claims experience. The Company’s insurance policies generally include coverage of the costs of a recall, although costs related to replacement parts are generally not covered. In addition, a number of the agreements entered into by the Company, including the Spin-off Agreements, require Autoliv to indemnify the other parties for certain claims. Autoliv cannot assure that the level of coverage will be sufficient to cover every possible claim that can arise in our businesses or with respect to other obligations, 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.
Specific Recalls:
On June 29, 2016, the Company announced that it was cooperating with Toyota Motor Corp. in its recall of approximately
Additionally, in the fourth quarter of 2020, the Company was made aware of a potential recall by one of its customers (the “Unannounced Recall”). The Company continues to evaluate this matter with its customer. The Company has determined pursuant to ASC 450 that a loss with respect to the Unannounced Recall is probable and has accrued an amount that is reflected in the total product liability accrual in the fourth quarter of 2020. The amount by which the product liability accrual exceeds the product liability insurance receivable with respect to the Unannounced Recall is $
Intellectual Property:
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 7. Product-Related Liabilities above summarizes the change in the balance sheet position of the product-related liabilities.
15
10. STOCK INCENTIVE PLAN
Eligible employees and non-employee directors of the Company participate in the Autoliv, Inc.1997 Stock Incentive Plan, as amended and received Autoliv stock-based awards which include stock options ("SOs"), restricted stock units ("RSUs") and performance stock units ("PSUs").
For the three and six month periods ended June 30, 2021, the Company recorded approximately $
The computation of basic and diluted EPS under the two-class method is set forth in the table below. Anti-dilutive shares outstanding were immaterial for all periods presented below. For the three and six month periods ended June 30, 2020, shares in the diluted loss per share calculation represent basic shares due to the net loss.
|
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
||||||||||
(In millions, except per share amounts) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to controlling interest |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Participating share awards with dividend |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) applicable to common |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Earnings allocated to participating |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to common |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Denominator: 1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic: Weighted average common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Weighted average stock options/ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings (loss) per share - basic |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings (loss) per share - diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
1)
The Company purchases finished goods from Veoneer. For the three and six month periods ended June 30, 2021, related party purchases from Veoneer amounted to $
Amounts due to and due from related party as of June 30, 2021 and December 31, 2020 were as follows:
|
|
As of |
|
|||||
(Dollars in millions) |
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
Related party receivables1) |
|
$ |
|
|
$ |
|
||
Related party payables2) |
|
|
|
|
|
|
||
Related party accrued expenses3) |
|
|
|
|
|
|
||
1)
16
2)
3)
13. REVENUE DISAGGREGATION
The Company’s disaggregated revenue for the three and six month periods ended June 30, 2021 and June 30, 2020 were as follows.
Net Sales by Products |
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
||||||||||
(Dollars in millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Airbag Products and Other1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Seatbelt Products1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales by Region |
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
||||||||||
(Dollars in millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Asia |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Whereof: China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Japan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rest of Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contract Balances
Contract assets relate to the Company's rights to consideration for work completed but not billed (generally in conjunction with contracts for which revenue is recognized over time) at the reporting date on production parts and is included in Other current assets in the Condensed Consolidated Balance Sheet. The contract assets are reclassified into the receivables balance when the rights to receive payments become unconditional. The net change in the contract assets balance, reflecting the adjustments needed to align revenue recognition for work completed but not billed, for the three and six month periods ended June 30, 2021 and for the three and six month periods ended June 30, 2020 were not material in any period.
14. SUBSEQUENT EVENTS
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the United States Securities and Exchange Commission (the “SEC”) on February 19, 2021. Unless otherwise noted, all dollar amounts are in millions.
Autoliv, Inc. (“Autoliv” or the “Company”) is a Delaware corporation with its principal executive offices in Stockholm, Sweden. The Company functions as a holding corporation and owns two principal operating subsidiaries, Autoliv AB and Autoliv ASP, Inc.
Through its operating subsidiaries, Autoliv is a supplier of automotive safety systems with a broad range of product offerings, including modules and components for passenger and driver airbags, side airbags, curtain airbags, seatbelts, steering wheels and pedestrian protection systems.
Autoliv’s filings with the SEC, including this Quarterly Report on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, proxy statements and all of our other reports and statements, and amendments thereto, are available free of charge on our corporate website at www.autoliv.com as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC (generally the same day as the filing).
The primary exchange market for Autoliv’s securities is the New York Stock Exchange ("NYSE") where Autoliv’s common stock trades under the symbol “ALV”. Autoliv’s Swedish Depositary Receipts ("SDRs") are traded on Nasdaq Stockholm’s list for large market cap companies under the symbol “ALIV SDB”. Options in SDRs trade on Nasdaq Stockholm under the name “Autoliv SDB”. Options in Autoliv shares are traded on Nasdaq OMX PHLX and on NYSE Amex Options under the symbol “ALV”.
Autoliv’s fiscal year ends on December 31.
EXECUTIVE OVERVIEW
The COVID-19 pandemic continues to affect the Company in several ways. Supply shortage of semiconductors resulted in a Q2 global LVP that was 8% lower than what was expected at the beginning of the quarter, and 8% lower than the first quarter (according to IHS Markit June 2021). The lower than anticipated LVP, along with the material changes in customer call-offs with short notice, negatively impacted the Company's sales and profitability in the quarter. The low visibility of these changes prevented the Company from using furloughs effectively to mitigate the effects of the lower customer demand. Although the situation improved towards the end of the quarter, the Company still expects supply disruptions to impact LVP negatively in the third quarter with some improvement in the fourth quarter.
The Company is satisfied with its strong sales growth and outperformance versus LVP in the second quarter, and the level of the Company's order intake for the first half of the year. The Company is also satisfied with its leverage ratio (Non-U.S. GAAP measure) coming down to 1.1x. The Company also reinstated a quarterly dividend during the second quarter.
The Company took an important sustainability step in the quarter when it announced ambitious climate targets. This includes plans to become carbon neutral in the Company's own operations by 2030, aiming for net-zero emissions across its supply chain by 2040, and committing to the Science Based Targets initiative.
Raw material prices have continued to increase, with some key commodities increasing by more than 20% in the past three months, and despite significant mitigation actions, the Company now expects raw material cost for the full year to amount to around 130 basis points operating margin headwind.
The Company continues to be diligent in its cost control to manage demand volatility. However, as a result of continued demand and supply chain uncertainty, the Company is adjusting its full year indications. Based on an assumption of 9-11% global LVP growth for the full year 2021, the Company expects an organic sales growth of around 16-18%, and an adjusted operating margin of around 9-9.5%.
The Company also continues to drive forward with its strategic initiatives, such as increased digitalization and automation of the value chain, which are yielding good results. The Company's internal progress and a light vehicle market outlook with a production recovery in the next few years makes management confident of the Company's 2022-24 targets of average annual 4-5% growth over LVP and 12% adjusted operating margin. The Company will elaborate on this and its long-term opportunities at the Company's virtual CMD on November 16, 2021.
18
Financial highlights in the second quarter of 2021
$2,022 million net sales
85% organic sales growth (Non-U.S. GAAP measure, see reconciliation table below)
8.1% operating margin
8.2% adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below)
$1.19 EPS - an increase of $3.19
$1.20 adjusted EPS (Non-U.S. GAAP measure, see reconciliation table below) - an increase of $2.60
Key business developments in the second quarter of 2021
COVID-19 pandemic related business update
The COVID-19 pandemic continued to impact the Company's business in the second quarter 2021 both directly through several weeks long lock-downs in India and indirectly through limited LVP by its customers caused by semiconductor and other industry supply chain disruptions, especially in North America and Europe. Second quarter 2021 global LVP was around 8% lower than expected at the beginning of the quarter (according to IHS Markit June 20211)). Although the Company has fulfilled its delivery commitments, the lower than anticipated LVP has negatively impacted the Company's sales and profitability. Supply chain disruptions leading to low customer demand visibility and material changes to call-offs with short notice also negatively impacted the Company's production efficiency and profitability in the quarter.
Direct COVID-19 related costs, such as personal protective equipment, quarantine costs, premium freight and other items were around $3 million in Q2 2021. Governmental support in connection with furloughing, short-term work weeks, and other similar activities was not material to the Company's financial results in Q2 2021.
The current industry-wide semiconductor shortage will continue to negatively impact LVP, and hence the Company's sales and profitability, in the second half of the year, and a stabilization of supply may not emerge until the fourth quarter. The Company expects adverse cost development from rising raw material prices through the remainder of 2021.
1) This report includes content supplied by IHS Markit Automotive; Copyright © Light Vehicle Production Forecast, June, 2021. All rights reserved.
Non-U.S. GAAP financial measures
Some of the following discussions refer to non-U.S. GAAP financial measures: see reconciliations for "Organic sales", "Trade working capital", "Net debt", “Leverage ratio”, “Adjusted operating income”, “Adjusted operating margin” and “Adjusted EPS” provided below. Management believes that these non-U.S. GAAP financial measures provide supplemental information to investors regarding the performance of the Company’s business and assist investors in analyzing trends in the Company's business. Additional descriptions regarding management’s use of these financial measures are included below. Investors should consider these non-U.S. GAAP financial measures in addition to, rather than as substitutes for, financial reporting measures prepared in accordance with U.S. GAAP. These historical non-U.S. GAAP financial measures have been identified as applicable in each section of this report with a
19
tabular presentation reconciling them to the most directly comparable U.S. GAAP financial measures. It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.
RESULTS OF OPERATIONS
Overview
The following table shows some of the key ratios management uses internally to analyze the Company's current and future financial performance and core operations as well as to identify trends in the Company’s financial conditions and results of operations. We have provided this information to investors to assist in meaningful comparisons of past and present operating results and to assist in highlighting the results of ongoing core operations. These ratios are more fully explained below and should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K and the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
KEY RATIOS
(Dollars in millions, except per share data)
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
or as of June 30 |
|
|
or as of June 30 |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Total parent shareholders’ equity per share |
|
$ |
29.72 |
|
|
$ |
22.24 |
|
|
$ |
29.72 |
|
|
$ |
22.24 |
|
Capital employed 1) |
|
|
3,815 |
|
|
|
3,793 |
|
|
|
3,815 |
|
|
|
3,793 |
|
Net debt 2) |
|
|
1,200 |
|
|
|
1,838 |
|
|
|
1,200 |
|
|
|
1,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trade working capital8) |
|
|
1,495 |
|
|
|
1,322 |
|
|
|
1,495 |
|
|
|
1,322 |
|
Trade working capital relative to sales, %9) |
|
|
18.5 |
|
|
|
31.5 |
|
|
|
18.5 |
|
|
|
31.5 |
|
Receivables outstanding relative to sales, %10) |
|
|
21.3 |
|
|
|
28.1 |
|
|
|
21.3 |
|
|
|
28.1 |
|
Inventory outstanding relative to sales, %11) |
|
|
11.1 |
|
|
|
18.1 |
|
|
|
11.1 |
|
|
|
18.1 |
|
Payables outstanding relative to sales, %12) |
|
|
13.9 |
|
|
|
14.7 |
|
|
|
13.9 |
|
|
|
14.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin, % 3) |
|
|
19.0 |
|
|
|
1.4 |
|
|
|
19.8 |
|
|
|
11.9 |
|
Operating margin, % 4) |
|
|
8.1 |
|
|
|
(22.3 |
) |
|
|
9.4 |
|
|
|
(3.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Return on total equity, % 5) |
|
|
16.3 |
|
|
|
(34.9 |
) |
|
|
20.8 |
|
|
|
(9.7 |
) |
Return on capital employed, % 6) |
|
|
17.7 |
|
|
|
(25.0 |
) |
|
|
21.8 |
|
|
|
(5.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Headcount at period-end 7) |
|
|
64,500 |
|
|
|
61,800 |
|
|
|
64,500 |
|
|
|
61,800 |
|
1) Total equity and net debt.
2) Net debt adjusted for pension liabilities in relation to EBITDA. See tabular presentation reconciling this non-U.S. GAAP measure to U.S. GAAP below.
3) Gross profit relative to sales.
4) Operating income relative to sales.
5) Net income relative to average total equity.
6) Operating income and income from equity method investments, relative to average capital employed.
7) Employees plus temporary, hourly personnel.
8) See calculation of this non-U.S. GAAP measure in the table below.
9) Outstanding working capital relative to annualized sales.
10) Outstanding receivables relative to annualized quarterly sales.
11) Outstanding inventory relative to annualized quarterly sales.
12) Outstanding payables relative to annualized quarterly sales.
20
THREE MONTHS ENDED JUNE 30, 2021 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2020
Consolidated Sales
(dollars in millions)
|
|
Three months ended June 30 |
|
|
|
|
|
Components of change in net sales |
|
|||||||||||
|
|
2021 |
|
|
2020 |
|
|
Reported |
|
|
Currency |
|
|
Organic 3) |
|
|||||
Airbag products and Other2) |
|
$ |
1,310 |
|
|
$ |
654 |
|
|
|
100 |
% |
|
|
7.5 |
% |
|
|
92.9 |
% |
Seatbelt products 2) |
|
|
712 |
|
|
|
394 |
|
|
|
80.9 |
% |
|
|
9.1 |
% |
|
|
71.7 |
% |
Total |
|
$ |
2,022 |
|
|
$ |
1,048 |
|
|
|
93.0 |
% |
|
|
8.1 |
% |
|
|
84.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Asia |
|
$ |
794 |
|
|
$ |
588 |
|
|
|
35.1 |
% |
|
|
6.6 |
% |
|
|
28.5 |
% |
Whereof: China |
|
|
399 |
|
|
|
366 |
|
|
|
9.0 |
% |
|
|
9.3 |
% |
|
|
(0.3 |
)% |
Japan |
|
|
175 |
|
|
|
105 |
|
|
|
67.4 |
% |
|
|
(3.9 |
)% |
|
|
71.3 |
% |
Rest of Asia |
|
|
219 |
|
|
|
117 |
|
|
|
87.9 |
% |
|
|
7.4 |
% |
|
|
80.4 |
% |
Americas |
|
|
621 |
|
|
|
213 |
|
|
|
191 |
% |
|
|
9.7 |
% |
|
|
181 |
% |
Europe |
|
|
608 |
|
|
|
246 |
|
|
|
147 |
% |
|
|
10.4 |
% |
|
|
136 |
% |
Total |
|
$ |
2,022 |
|
|
$ |
1,048 |
|
|
|
93.0 |
% |
|
|
8.1 |
% |
|
|
84.9 |
% |
1) Effects from currency translations.
2) Including Corporate and Other sales.
3) Non-U.S. GAAP measure.
Sales by product - Airbags
All major product categories within airbags grew strongly organically (Non-U.S. GAAP measure) in the quarter. The largest contributor to growth was inflatable curtains and steering wheels, followed by passenger airbags, driver airbags and side airbags. The highest growth rate was in knee airbags and steering wheels, with both growing by more than 100%.
Sales by product - Seatbelts
The main contributor to seatbelt products organic growth (Non-U.S. GAAP measure) was Europe and Americas. Seatbelt products grew organically in all major regions except China.
Sales by region
The Company's global organic sales (Non-U.S. GAAP measure, see reconciliation table above) grew by 85% compared to the LVP growth of 52% (according to IHS Markit June 2021). The more than 33pp outperformance was largely due to product launches and positive geographical mix effects as LVP in higher content per vehicle markets such as Europe and North America grew more than lower CPV markets such as China and Rest of Asia. The Company also saw positive vehicle mix effects within several regions. All regions except Rest of Asia outperformed LVP by 4-38pp. LVP grew in all regions except China, which declined by 4.6% as domestic OEMs grew by 9% and global OEMs declined by 14%.
Q2 2021 organic growth1)
|
|
Americas |
|
|
Europe |
|
|
China |
|
|
Japan |
|
|
Rest of |
|
|
Global |
|
||||||
Autoliv |
|
|
181 |
% |
|
|
136 |
% |
|
|
(0.3 |
)% |
|
|
71 |
% |
|
|
80 |
% |
|
|
85 |
% |
Main growth drivers |
|
Stellantis, Honda, Nissan |
|
|
VW, Stellantis, Daimler |
|
|
GM, Geely, Xpeng |
|
|
Toyota, Mitsubishi, Mazda |
|
|
Hyundai/Kia, Suzuki, Mitsubishi |
|
|
Stellantis, Toyota, VW |
|
||||||
Main decline drivers |
|
n/a |
|
|
n/a |
|
|
VW, Nissan, Hyundai/Kia |
|
|
Honda |
|
|
SsangYong, Renault |
|
|
SsangYong |
|
||||||
1) Non-U.S. GAAP measure.
21
Light Vehicle Production Development
Change second quarter of 2021 vs. second quarter of 2020
|
|
Americas |
|
|
Europe |
|
|
China |
|
|
Japan |
|
|
Rest of Asia |
|
|
Global |
|
||||||
LVP1) |
|
|
159 |
% |
|
|
98 |
% |
|
|
(4.6 |
)% |
|
|
52 |
% |
|
|
99 |
% |
|
|
52 |
% |
1) Source: IHS Markit June 2021. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earnings
|
|
Three months ended June 30 |
|
|
|
|
||||||
(Dollars in millions, except per share data) |
|
|
|
|
2020 |
|
|
Change |
|
|||
Net Sales |
|
$ |
2,022 |
|
|
$ |
1,048 |
|
|
|
93.0 |
% |
Gross profit |
|
|
384 |
|
|
|
14 |
|
|
|
2,568 |
% |
% of sales |
|
|
19.0 |
% |
|
|
1.4 |
% |
|
|
17.6 |
pp |
S, G&A |
|
|
(111 |
) |
|
|
(98 |
) |
|
|
12.8 |
% |
% of sales |
|
|
(5.5 |
)% |
|
|
(9.4 |
)% |
|
|
(3.9)pp |
|
R, D&E, net |
|
|
(107 |
) |
|
|
(88 |
) |
|
|
21.3 |
% |
% of sales |
|
|
(5.3 |
)% |
|
|
(8.4 |
)% |
|
|
(3.1)pp |
|
Amortization of Intangibles |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
5.4 |
% |
Other income (expense), net |
|
|
0 |
|
|
|
(59 |
) |
|
n/a |
|
|
Operating income (loss) |
|
|
164 |
|
|
|
(234 |
) |
|
n/a |
|
|
% of sales |
|
|
8.1 |
% |
|
|
(22.3 |
)% |
|
|
30.4 |
pp |
Adjusted operating income (loss)1) |
|
|
166 |
|
|
|
(172 |
) |
|
n/a |
|
|
% of sales |
|
|
8.2 |
% |
|
|
(16.4 |
)% |
|
|
24.6 |
pp |
Financial and non-operating items, net |
|
|
(12 |
) |
|
|
(13 |
) |
|
|
(10.0 |
)% |
Income (loss) before taxes |
|
|
152 |
|
|
|
(247 |
) |
|
n/a |
|
|
Tax rate |
|
|
31.3 |
% |
|
|
29.3 |
% |
|
|
2.0 |
pp |
Net income (loss) |
|
|
105 |
|
|
|
(174 |
) |
|
n/a |
|
|
Earnings (loss) per share, diluted2) |
|
|
1.19 |
|
|
|
(2.00 |
) |
|
n/a |
|
|
Adjusted earnings (loss) per share, diluted1),2) |
|
|
1.20 |
|
|
|
(1.40 |
) |
|
n/a |
|
|
1) Non-U.S. GAAP measure, excluding costs for capacity alignment.
2) Assuming dilution, when applicable, and net of treasury shares. Participating share awards with right to receive dividend equivalents are under the two-class method excluded from the EPS calculation.
Second quarter 2021 development
Gross profit increased by $370 million and the gross margin increased by 17.6pp compared to the same quarter 2020. The gross margin increase was primarily driven by the higher sales and direct material and labor productivity.
S,G&A costs increased by $13 million compared to the prior year, mainly relating to higher personnel costs due to extensive furloughing the prior year. In relation to sales, S,G&A costs decreased from 9.4% to 5.5%.
R,D&E, net costs increased by $19 million compared to the prior year, mainly relating to higher personnel costs due to extensive furloughing the prior year, and adverse foreign currency effects. In relation to sales, R,D&E costs declined from 8.4% to 5.3%.
Other income (expense), net improved by $59 million compared to prior year, mainly due to $61 million lower capacity alignment accruals.
Operating income (loss) improved by $398 million compared to the same period in 2020, mainly as a consequence of the higher gross profit and lower capacity alignment accruals, partially offset by higher costs for S,G&A and R,D&E, net.
Adjusted operating income (loss) (Non-U.S. GAAP measure) improved by $337 million compared to the prior year, mainly due to higher gross profit partially offset by higher costs for S,G&A and R,D&E, net.
Financial and non-operating items, net, were close to unchanged versus the prior year.
22
Income (loss) before taxes increased by $399 million compared to the prior year, mainly due to the higher operating income.
Tax rate was 31.3%, compared to 29.3% in the same quarter last year, mainly due to unfavorable country mix.
Earnings per share, diluted increased by $3.19 compared to a year earlier, where the main drivers were $2.90 from higher adjusted operating income (Non-U.S. GAAP measure) and $0.59 from lower capacity alignment costs partially offset by $0.31 from higher tax.
SIX MONTHS ENDED JUNE 30, 2021 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2020
Consolidated Sales
(dollars in millions)
|
|
Six months ended June 30 |
|
|
|
|
|
Components of change in net sales |
|
|||||||||||
|
|
2021 |
|
|
2020 |
|
|
Reported |
|
|
Currency |
|
|
Organic 3) |
|
|||||
Airbag products and Other 2) |
|
$ |
2,773 |
|
|
$ |
1,856 |
|
|
|
49.4 |
% |
|
|
4.6 |
% |
|
|
44.8 |
% |
Seatbelt products 2) |
|
|
1,491 |
|
|
|
1,037 |
|
|
|
43.8 |
% |
|
|
6.3 |
% |
|
|
37.4 |
% |
Total |
|
$ |
4,265 |
|
|
$ |
2,893 |
|
|
|
47.4 |
% |
|
|
5.2 |
% |
|
|
42.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Asia |
|
$ |
1,671 |
|
|
$ |
1,185 |
|
|
|
41.0 |
% |
|
|
5.7 |
% |
|
|
35.3 |
% |
Whereof: China |
|
|
814 |
|
|
|
564 |
|
|
|
44.3 |
% |
|
|
8.7 |
% |
|
|
35.5 |
% |
Japan |
|
|
386 |
|
|
|
308 |
|
|
|
25.5 |
% |
|
|
0.6 |
% |
|
|
25.0 |
% |
Rest of Asia |
|
|
471 |
|
|
|
314 |
|
|
|
50.3 |
% |
|
|
5.1 |
% |
|
|
45.2 |
% |
Americas |
|
|
1,307 |
|
|
|
886 |
|
|
|
47.6 |
% |
|
|
1.2 |
% |
|
|
46.5 |
% |
Europe |
|
|
1,287 |
|
|
|
823 |
|
|
|
56.4 |
% |
|
|
8.9 |
% |
|
|
47.5 |
% |
Total |
|
$ |
4,265 |
|
|
$ |
2,893 |
|
|
|
47.4 |
% |
|
|
5.2 |
% |
|
|
42.2 |
% |
1) Effects from currency translations.
2) Including Corporate and Other sales.
3) Non-U.S. GAAP measure.
Sales by product - Airbags
All major product categories within airbags grew strongly organically (Non-U.S. GAAP measure) in the first half of the year. The largest contributor to growth was inflatable curtains and steering wheels, followed by passenger airbags, driver airbags and side airbags.
Sales by product - Seatbelts
All regions except Japan, which was close to unchanged, showed a strong organic (Non-U.S. GAAP measure) seatbelt sales growth between 34% and 45%.
Sales by region
The global organic sales growth (Non-U.S. GAAP measure, see reconciliation table above) of 42% was 12pp better than LVP (according to IHS Markit June 2021). Sales increased organically in all regions. The largest organic sales increase drivers were Americas and Europe, followed by China, Rest of Asia and Japan. Our organic sales development outperformed LVP in all regions - by 15pp in Europe, by 10pp in China and Japan, by 9pp in Americas, and by 5pp in Rest of Asia.
First six months 2021 Organic growth1)
|
|
Americas |
|
|
Europe |
|
|
China |
|
|
Japan |
|
|
Rest of Asia |
|
|
Global |
|
||||||
Autoliv |
|
|
46 |
% |
|
|
47 |
% |
|
|
36 |
% |
|
|
25 |
% |
|
|
45 |
% |
|
|
42 |
% |
Main growth drivers |
|
Stellantis, |
|
|
VW, Stellantis, BMW |
|
|
GM, Great Wall, Honda |
|
|
Toyota, Nissan, Mitsubishi |
|
|
Hyundai/Kia, Suzuki, Mitsubishi |
|
|
Stellantis, |
|
||||||
Main decline drivers |
|
n/a |
|
|
n/a |
|
|
Hyundai/Kia, Daimler, Mazda |
|
|
Honda |
|
|
SsangYong, Renault |
|
|
SsangYong |
|
||||||
23
1) Non-U.S. GAAP measure.
Light Vehicle Production Development
Change vs. same period last year
|
|
Americas |
|
|
Europe |
|
|
China |
|
|
Japan |
|
|
Rest of Asia |
|
|
Global |
|
||||||
LVP1) |
|
|
37 |
% |
|
|
32 |
% |
|
|
25 |
% |
|
|
15 |
% |
|
|
40 |
% |
|
|
30 |
% |
1) Source: IHS Markit June 2021. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earnings
|
|
Six months ended June 30 |
|
|
|
|
||||||
(Dollars in millions, except per share data) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
Net Sales |
|
$ |
4,265 |
|
|
$ |
2,893 |
|
|
|
47.4 |
% |
Gross profit |
|
|
843 |
|
|
|
345 |
|
|
|
144 |
% |
% of sales |
|
|
19.8 |
% |
|
|
11.9 |
% |
|
|
7.9 |
pp |
S, G&A |
|
|
(219 |
) |
|
|
(192 |
) |
|
|
13.9 |
% |
% of sales |
|
|
(5.1 |
)% |
|
|
(6.6 |
)% |
|
|
(1.5)pp |
|
R, D&E, net |
|
|
(213 |
) |
|
|
(191 |
) |
|
|
12.0 |
% |
% of sales |
|
|
(5.0 |
)% |
|
|
(6.6 |
)% |
|
|
(1.6)pp |
|
Amortization of Intangibles |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
0.3 |
% |
Other income (expense), net |
|
|
(4 |
) |
|
|
(57 |
) |
|
|
(92.6 |
)% |
Operating income (loss) |
|
|
401 |
|
|
|
(99 |
) |
|
n/a |
|
|
% of sales |
|
|
9.4 |
% |
|
|
(3.4 |
)% |
|
|
12.8 |
pp |
Adjusted operating income (loss)1) |
|
|
403 |
|
|
|
(36 |
) |
|
n/a |
|
|
% of sales |
|
|
9.4 |
% |
|
|
(1.2 |
)% |
|
|
10.6 |
pp |
Financial and non-operating items, net |
|
|
(32 |
) |
|
|
(36 |
) |
|
|
(12.2 |
)% |
Income (loss) before taxes |
|
|
370 |
|
|
|
(135 |
) |
|
n/a |
|
|
Tax rate |
|
|
29.2 |
% |
|
|
26.5 |
% |
|
|
2.7 |
pp |
Net income (loss) |
|
|
262 |
|
|
|
(99 |
) |
|
n/a |
|
|
Earnings (loss) per share, diluted2) |
|
|
2.98 |
|
|
|
(1.14 |
) |
|
n/a |
|
|
Adjusted earnings (loss) per share, diluted1),2) |
|
|
2.99 |
|
|
|
(0.53 |
) |
|
n/a |
|
|
1) Non-U.S. GAAP measure, excluding costs for capacity alignment.
2) Assuming dilution, when applicable, and net of treasury shares. Participating share awards with right to receive dividend equivalents are under the two-class method excluded from the EPS calculation.
First six months 2021 development
Gross profit increased by $497 million and the gross margin increased by 7.9pp compared to the same period 2020. The gross margin increase was primarily driven by higher sales and direct material and labor productivity.
S,G&A increased by $27 million, mainly relating to higher personnel costs due to extensive furloughing the prior year, and adverse foreign currency effects. In relation to sales, S,G&A costs decreased from 6.6% to 5.1%.
R,D&E, net increased by $23 million mainly due to higher personnel costs due to extensive furloughing the prior year, and adverse foreign currency effects. In relation to sales, R,D&E costs declined from 6.6% to 5.0%.
Other income (expense), net improved by $53 million compared to a year earlier, mainly due to $63 million in lower capacity alignment accruals, partly offset by adverse effects from foreign currency effects and lower government income.
Operating income (loss) improved by $500 million, mainly as a consequence of the increase in gross profit and other income (expense), net, partly offset by higher costs for S,G&A and R,D&E, net.
Adjusted operating income (loss) (Non-U.S. GAAP measure) improved by $438 million, mainly due to the higher gross profit, partly offset by higher costs for S,G&A and R,D&E, net.
24
Financial and non-operating items, net improved by around $4 million to $32 million, mainly due to higher income from equity method investments and foreign currency effects.
Income (loss) before taxes improved by $505 million, mainly as a consequence of higher operating income.
Tax rate was 29.2%, compared to 26.5% the prior year, impacted by unfavorable country mix.
Earnings per share, diluted increased by $4.12 where the main drivers were $4.06 from higher adjusted operating income (Non-U.S. GAAP measure) and $0.60 from lower capacity alignment costs partly mitigated by $0.57 from higher tax.
LIQUIDITY AND CAPITAL RESOURCES
Second quarter 2021 development
Trade working capital (Non-U.S. GAAP measure, see calculation below) increased by $173 million compared to the same period last year, mainly related to increased inventories as a consequence of higher sales, the low demand visibility and supply chain challenges. Compared to the first quarter of 2021, trade working capital increased by $8 million.
Operating cash flow increased by $191 million to $63 million. The improvement was mainly due to positive effects from higher net income and deferred income taxes. Operating cash flow in the quarter was impacted negatively by effects from changes in operating working capital, mainly relating to tax, recalls and insurance while effects from trade working capital was limited.
Capital expenditures, net increased by 51%, supporting the organic growth. Capital expenditures, net in relation to sales was 4.8% vs. 6.1% a year earlier.
Cash flow from operations less capital expenditures, net amounted to negative $33 million, compared to negative $192 million a year earlier. The improvement was due to the higher operating cash flow, partially offset by the higher capital expenditures, net.
Net debt (Non-U.S. GAAP measure, see reconciliation table below) was $1,200 million as of June 30, 2021, which was $638 million lower than a year earlier and $85 million higher compared to March 31, 2021.
Liquidity position. At June 30, 2021, the cash balance was $0.9 billion, and including committed, unused loan facilities, the Company's liquidity position was $2.0 billion.
Leverage ratio (Non-U.S. GAAP measure, see calculation below). As of June 30, 2021, the Company had a leverage ratio of 1.1x, compared to 2.8x at June 30, 2020 as the net debt decreased substantially and the 12 months trailing adjusted EBITDA (Non-U.S. GAAP measure) increased substantially.
Total equity increased by $660 million compared to June 30, 2020 mainly due to $550 million from net income and $146 million from currency translation effects partially offset by dividend payments of $55 million.
First six months 2021 development
Operating cash flow was $249 million compared to $28 million a year earlier. The increase of $221 million was primarily due to positive effects of the higher net income and deferred income taxes, partly offset by negative effects from changes in operating working capital.
Capital expenditure, net of $189 million was 24% higher than a year earlier, reflecting our efforts to reduce capital expenditure to support cash flow in the first half of 2020. Capital expenditure, net in relation to sales was 4.4% compared to 5.3% in the same period 2020.
Cash flow from operations less capital expenditures, net amounted to $60 million compared to negative $124 million a year earlier, driven by the improvement in operating cash flow, partially offset by a higher capital expenditure, net.
25
NON-U.S. GAAP MEASURES
Reconciliation of U.S. GAAP financial measures to “Adjusted operating income”, “Adjusted operating margin” and “Adjusted EPS”
(Dollars in millions, except per share data)
|
|
Three months ended June 30, 2021 |
|
|
Three months ended June 30, 2020 |
|
||||||||||||||||||
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
||||||
Operating income (loss) |
|
$ |
164 |
|
|
$ |
1 |
|
|
$ |
166 |
|
|
$ |
(234 |
) |
|
$ |
62 |
|
|
$ |
(172 |
) |
Operating margin, % |
|
|
8.1 |
|
|
|
0.1 |
|
|
|
8.2 |
|
|
|
(22.3 |
) |
|
|
5.9 |
|
|
|
(16.4 |
) |
Earnings (loss) per share, diluted |
|
|
1.19 |
|
|
|
0.01 |
|
|
|
1.20 |
|
|
|
(2.00 |
) |
|
|
0.60 |
|
|
|
(1.40 |
) |
1) Including costs for capacity alignment.
|
|
Six months ended June 30, 2021 |
|
|
Six months ended June 30, 2020 |
|
||||||||||||||||||
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
||||||
Operating income (loss) |
|
$ |
401 |
|
|
$ |
1 |
|
|
$ |
403 |
|
|
$ |
(99 |
) |
|
$ |
64 |
|
|
$ |
(36 |
) |
Operating margin, % |
|
|
9.4 |
|
|
|
0.0 |
|
|
|
9.4 |
|
|
|
(3.4 |
) |
|
|
2.2 |
|
|
|
(1.2 |
) |
Earnings (loss) per share, diluted |
|
|
2.98 |
|
|
|
0.01 |
|
|
|
2.99 |
|
|
|
(1.14 |
) |
|
|
0.61 |
|
|
|
(0.53 |
) |
1) Including costs for capacity alignment.
Items included in Non-U.S. GAAP adjustments
(Dollars in millions, except per share data)
|
|
Three months ended |
|
|
Three months ended |
|
||||||||||
|
|
Millions |
|
|
Per share |
|
|
Millions |
|
|
Per share |
|
||||
Capacity alignment |
|
$ |
1 |
|
|
$ |
0.02 |
|
|
$ |
62 |
|
|
$ |
0.71 |
|
Total adjustments to operating income |
|
|
1 |
|
|
|
0.02 |
|
|
|
62 |
|
|
|
0.71 |
|
Tax on non-U.S. GAAP adjustments1) |
|
|
0 |
|
|
|
0.00 |
|
|
|
(10 |
) |
|
|
(0.11 |
) |
Total adjustments to net income |
|
$ |
1 |
|
|
$ |
0.01 |
|
|
$ |
52 |
|
|
$ |
0.60 |
|
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
|
|
Six months ended |
|
|
Six months ended |
|
||||||||||
|
|
Millions |
|
|
Per share |
|
|
Millions |
|
|
Per share |
|
||||
Capacity alignment |
|
$ |
1 |
|
|
$ |
0.02 |
|
|
$ |
64 |
|
|
$ |
0.73 |
|
Total adjustments to operating income |
|
|
1 |
|
|
|
0.02 |
|
|
|
64 |
|
|
|
0.73 |
|
Tax on non-U.S. GAAP adjustments1) |
|
|
0 |
|
|
|
0.00 |
|
|
|
(10 |
) |
|
|
(0.12 |
) |
Total adjustments to net income |
|
$ |
1 |
|
|
$ |
0.01 |
|
|
$ |
54 |
|
|
$ |
0.61 |
|
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
26
The Company uses the non-U.S. GAAP measure “Trade working capital,” as defined in the table below, in its communications with investors and for management’s review of the development of the trade working capital cash generation from operations. The reconciling items used to derive this measure are, by contrast, managed as part of the Company’s overall cash and debt management, but they are not part of the responsibilities of day-to-day operations’ management.
Calculation of “Trade working capital”
(Dollars in millions)
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
|
June 30 2020 |
|
|||
Receivables, net |
|
$ |
1,719 |
|
|
$ |
1,822 |
|
|
$ |
1,180 |
|
Inventories, net |
|
|
901 |
|
|
|
798 |
|
|
|
758 |
|
Accounts payable |
|
|
(1,125 |
) |
|
|
(1,254 |
) |
|
|
(616 |
) |
Trade working capital |
|
$ |
1,495 |
|
|
$ |
1,366 |
|
|
$ |
1,322 |
|
The non-U.S. GAAP measure net debt is also used in the non-U.S. GAAP measure “Leverage ratio”. Management uses this measure to analyze the amount of debt the Company can incur under its debt policy. Management believes that this policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage its operations. For details on leverage ratio refer to the table below.
Reconciliation of U.S. GAAP financial measure to “Net debt”
(Dollars in millions)
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
|
June 30, 2020 |
|
|||
Short-term debt |
|
$ |
363 |
|
|
$ |
302 |
|
|
$ |
493 |
|
Long-term debt |
|
|
1,712 |
|
|
|
2,110 |
|
|
|
2,567 |
|
Total debt |
|
|
2,075 |
|
|
|
2,411 |
|
|
|
3,060 |
|
Cash and cash equivalents |
|
|
(893 |
) |
|
|
(1,178 |
) |
|
|
(1,223 |
) |
Debt issuance cost/Debt-related derivatives, net |
|
|
18 |
|
|
|
(19 |
) |
|
|
1 |
|
Net debt |
|
$ |
1,200 |
|
|
$ |
1,214 |
|
|
$ |
1,838 |
|
In 2021, the EBITDA calculation was redefined to exclude other non-operating items and income from equity method investments. EBITDA and Leverage ratio in prior periods have been recalculated resulting in minor adjustments. The Company's policy is to maintain a leverage ratio commensurate with a strong investment grade credit rating. The Company measures its leverage ratio as net debt adjusted for pension liabilities in relation to adjusted EBITDA. The long-term target is to maintain a leverage ratio of around 1.0x within a range of 0.5x to 1.5x.
Calculation of “Leverage ratio”
(Dollars in millions)
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
|
June 30, 2020 |
|
|||
Net debt1) |
|
$ |
1,200 |
|
|
$ |
1,214 |
|
|
$ |
1,838 |
|
Pension liabilities |
|
|
239 |
|
|
|
248 |
|
|
|
236 |
|
Debt per the Policy |
|
|
1,438 |
|
|
|
1,462 |
|
|
|
2,074 |
|
|
|
|
|
|
|
|
|
|
|
|||
Net income2) |
|
|
550 |
|
|
|
188 |
|
|
|
142 |
|
Income taxes 2) |
|
|
247 |
|
|
|
103 |
|
|
|
66 |
|
Interest expense, net2,3) |
|
|
69 |
|
|
|
68 |
|
|
|
62 |
|
Other non-operating items, net2) |
|
|
22 |
|
|
|
25 |
|
|
|
14 |
|
Income from equity method investments2) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
Depreciation and amortization of intangibles2) |
|
|
394 |
|
|
|
371 |
|
|
|
350 |
|
Capacity alignments and separation costs2), 4) |
|
|
37 |
|
|
|
99 |
|
|
|
105 |
|
EBITDA per the Policy (Adjusted EBITDA) |
|
$ |
1,313 |
|
|
$ |
852 |
|
|
$ |
739 |
|
Leverage ratio |
|
|
1.1 |
|
|
|
1.7 |
|
|
|
2.8 |
|
1) Net debt (non-U.S. GAAP measure) is short- and long-term debt and debt-related derivatives, less cash and cash equivalents.
2) Latest 12-months.
3) Interest expense, net including cost for extinguishment of debt, if any, less interest income.
27
4) No separation costs included in latest 12-months as of June 30, 2021 and December 31, 2020. In latest 12-months as of June 30, 2020, separation costs amounted to $1 million.
Headcount
|
|
June 30, 2021 |
|
|
March 31, 2021 |
|
|
June 30, 2020 |
|
|||
Total headcount |
|
|
64,500 |
|
|
|
66,600 |
|
|
|
61,800 |
|
Whereof: |
|
|
|
|
|
|
|
|
|
|||
Direct personnel in manufacturing |
|
|
46,400 |
|
|
|
48,700 |
|
|
|
43,400 |
|
Indirect personnel |
|
|
18,000 |
|
|
|
17,900 |
|
|
|
18,400 |
|
Temporary personnel |
|
|
9 |
% |
|
|
10 |
% |
|
|
6 |
% |
By June 30, 2021, total headcount increased by 2,700 compared to a year earlier, reflecting a significant increase in production. The direct workforce increased by around 7% while the indirect workforce declined by around 2%. Compared to March 31, 2021, total headcount decreased by around 3.1%. This was driven by a decrease of around 4.6% of the direct workforce reflecting a lower LVP, while the indirect workforce increased by 0.8%.
Full year 2021 indications
The Company's outlook indications for 2021 reflect continuing uncertainty in the automotive markets and are mainly based on our customer call-offs and global LVP outlook according to IHS Markit, indicating a full year 2021 global LVP growth of 9-11%.
Financial measure |
|
Full year indication |
Net sales growth |
|
Around 20-22% |
Organic sales growth |
|
Around 16-18% |
Adjusted operating margin 1) |
|
Around 9-9.5% |
R,D&E, net % of sales |
|
Around 4.5% |
Tax rate 2) |
|
Around 30% |
Operating cash flow 3) |
|
Similar level as 2020 |
Capex, net % of sales |
|
Below 6% |
Organic growth vs LVP growth |
|
Around +7pp |
1) Excluding costs for capacity alignments and antitrust related matters. |
||
2) Excluding unusual tax items. |
||
3) Excluding unusual items. |
||
The forward-looking non-U.S. GAAP financial measures above are provided on a non-U.S. GAAP basis. The Company has not provided a U.S. GAAP reconciliation of these measures because items that impact these measures, such as costs related to capacity alignments and antitrust matters, cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and the Company is unable to determine the probable significance of the unavailable information.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on its financial position, results of operations or cash flows.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Company’s future contractual obligations have not changed materially from the amounts reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 19, 2021.
28
OTHER RECENT EVENTS
Key launches in the second quarter of 2021
Toyota Land Cruiser 300: Side Airbags, Head/Inflatable Curtain Airbags and Seatbelts.
Nissan Pathfinder: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Front Center Airbag and Knee Airbag.
Skoda Fabia: Side Airbags, Head/Inflatable Curtain Airbags and Seatbelts.
Mercedes EQS: Steering Wheel, Driver/Passenger Airbags and Bag-in-Belt.
Zeekr 001: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts and Front Center Airbag.
Chevrolet Bolt EUV: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags and Seatbelts
WEY Macchiato: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts, Hood Lifter, Front Center Airbag and Knee Airbag.
Citroën C5X: Steering Wheel, Driver/Passenger Airbags, Head/Inflatable Curtain Airbags, Seatbelts and Hood Lifter.
Renault Kangoo: Side Airbags, Head/Inflatable Curtain Airbags and Seatbelts.
Other Items
29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2021, there have been no material changes to the information related to quantitative and qualitative disclosures about market risk that was provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 19, 2021.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation has been carried out, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective.
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
30
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of our business, we are subject to legal proceedings brought by or against us and our subsidiaries.
See Part I, Item 1, "Financial Statements, Note 9 Contingent Liabilities" of this Quarterly Report on Form 10-Q for a summary of certain ongoing legal proceedings. Such information is incorporated into this Part II, Item 1—"Legal Proceedings" by reference.
ITEM 1A. RISK FACTORS
Except as set forth below, as of June 30, 2021, there have been no material changes to the risk factors that were previously disclosed in Item 1A in the Company’s Form 10-K for the year ended December 31, 2020 filed with the SEC on February 19, 2021.
You should not anticipate or expect the payment of cash dividends on our common stock
Our dividend policy is subject to the discretion of our Board of Directors and depends upon a number of factors, including our earnings, financial condition, cash and capital needs, indebtedness and leverage, and general economic or business conditions. On April 2, 2020, our Board of Directors suspended our quarterly dividend after determining that a suspension was necessary in light of the evolving global COVID-19 pandemic, decline in global LVP, the uncertainty surrounding the recession at that time and the inherent risk of customer defaults. On May 12, 2021, we announced that our Board of Directors reinstated our quarterly dividend for the second quarter of 2021. There can be no assurance that our Board of Directors will declare dividends in the future.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Stock repurchase program
During the six months ended June 30, 2021, the Company made no stock repurchases. The Company is authorized to purchase up to 47.5 million shares of common stock under its stock repurchase program, which was first approved by the Board of Directors of the Company on May 9, 2000. Under the existing authorization, 2,986,288 shares may be repurchased. The stock repurchase program does not have an expiration date.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
31
ITEM 6. EXHIBITS
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
4.1 |
|
|
|
|
|
4.2 |
|
|
|
|
|
4.3 |
|
|
|
|
|
4.4 |
|
|
|
|
|
4.5 |
|
|
|
|
|
4.6 |
|
|
|
|
|
4.7 |
|
|
|
|
|
4.8 |
|
|
|
|
|
4.9 |
|
|
|
|
|
4.10 |
|
|
|
|
|
4.11 |
|
|
|
|
|
10.1*+ |
|
|
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1* |
|
32
|
|
|
32.2* |
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document – The instance document does not appear in the Interactive Date File because its XBRL tags are embedded within the inline XBRL document. |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104* |
|
Cover Page Interactive Data File (embedded within the inline XBRL document). |
|
|
|
* Filed herewith.
+ Management contract or compensatory plan.
33
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: July 16, 2021
AUTOLIV, INC.
(Registrant)
By: |
|
/s/ Fredrik Westin |
|
|
Fredrik Westin |
|
|
Chief Financial Officer |
|
|
(Duly Authorized Officer and Principal Financial Officer) |
34