8-K
AUTOLIV INC (ALV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 21, 2022
Autoliv, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-12933 | 51-0378542 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission<br><br><br>File Number) | (IRS Employer<br><br><br>Identification No.) |
| Klarabergsviadukten 70, Section B, 7^th^ Floor, | ||
| --- | --- | |
| Box 70381, Stockholm, Sweden | SE-107 24 | |
| (Address of principal executive offices) | (Zip code) |
+46 8 587 206 00
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which<br><br><br>registered |
|---|---|---|
| Common Stock (par value $1.00 per share) | ALV | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
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. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On October 21, 2022, Autoliv, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter of 2022. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference. This press release contains certain references to financial measures identified as “organic sales,” “adjusted operating income,” “adjusted operating margin,” “trade working capital,” “adjusted earnings per share,” “net debt,” “adjusted EBITDA,” “net cash before financing,” “operating cash flow,” “free cash flow,” “cash conversion,” “leverage ratio,” and “adjusted return on capital employed,” all of which are adjustments from comparable measures calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP). These financial measures, as used herein, differ from financial measures reported under GAAP, and management believes that these financial presentations provide useful supplemental information, which is important to a proper understanding by investors of the Company’s core business results. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies. For an explanation of the reasons why management uses these figures, see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 22, 2022, and the Press Release regarding its financial results for the third quarter of 2022. A copy of the press release is furnished as Exhibit 99.1 to this report.
| Item 7.01 | Regulation FD Disclosure. |
|---|
On October 21, 2022, the Company issued a press release announcing its financial results for the third quarter of 2022. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.
The information in Items 2.02 and 7.01 of this Form 8-K and the exhibit attached hereto as Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) EXHIBITS
| 99.1 | Press Release of Autoliv, Inc. dated October 21, 2022. |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
2(4)
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release of Autoliv, Inc. dated October 21, 2022. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
3(4)
SIGNATURES
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 hereunto duly authorized.
| AUTOLIV, INC | |
|---|---|
| By: | /s/ Anthony J. Nellis |
| Name: | Anthony J. Nellis |
| Title: | Executive Vice President, Legal Affairs and General Counsel |
Date: October 21, 2022
4(4)
alv-ex991_24.htm
Exhibit 99.1
Financial Report
July – September 2022
Stockholm, Sweden, October 21, 2022 (NYSE: ALV and SSE: ALIV.sdb)
Q3 2022: Actions yielding results
| Financial highlights Q3 2022<br><br><br>$2,302 net sales<br><br><br>25% net sales increase<br><br><br>32% organic sales increase*<br><br><br>7.4% operating margin<br><br><br>7.5% adjusted operating margin*<br><br><br>$1.21 EPS - 78% increase<br><br><br>$1.23 adjusted EPS* - 68% increase | Full year 2022 indications<br><br><br>Around 15% organic sales growth<br><br><br>Around 6% negative FX effect on net sales<br><br><br>Upper end of around 6.0%-7.0% adjusted operating margin<br><br><br>Around $700-750 million operating cash flow |
|---|
All change figures in this release compare to the same period of the previous year except when stated otherwise.
Key business developments in the third quarter of 2022
| • | Sales increased organically* by 32.5%, which was 3.7pp better than global LVP growth of 28.8% (S&P Global Oct 2022). We outperformed in all regions except Rest of Asia, mainly due to price increases and new product launches. Net sales of $2,302 million was a new third quarter record for our passive safety business. |
|---|---|
| • | Profitability improved significantly, driven by successful execution of price increase negotiations, LVP recovery and our cost reduction activities. Operating income improved by 72% and operating margin improved to 7.4% from 5.4% with adjusted operating margin* improving to 7.5%, despite continued adverse market conditions including inflationary pressure, volatile LVP and adverse currency effects. Return on capital employed was 18.0% and adjusted return on capital employed* was 18.4%. |
| --- | --- |
| • | Operating cash flow increased to $232 million, driven by higher net income and positive working capital effects while free cash flow* decreased to $68 million, impacted by higher capex. Leverage ratio improved to 1.6x from 1.7x in the second quarter. A dividend of $0.64 per share was paid and 0.26 million shares were repurchased in the quarter. |
| --- | --- |
*For non-U.S. GAAP measures see enclosed reconciliation tables.
Key Figures
| (Dollars in millions, except per share data) | Q3 2022 | Q3 2021 | Change | 9 M 2022 | 9 M 2021 | Change |
|---|---|---|---|---|---|---|
| Net sales | $2,302 | $1,847 | 25% | $6,507 | $6,111 | 6.5% |
| Operating income | 171 | 99 | 72% | 429 | 500 | (14)% |
| Adjusted operating income^1)^ | 173 | 103 | 67% | 365 | 506 | (28)% |
| Operating margin | 7.4% | 5.4% | 2.1pp | 6.6% | 8.2% | (1.6)pp |
| Adjusted operating margin^1)^ | 7.5% | 5.6% | 1.9pp | 5.6% | 8.3% | (2.7)pp |
| Earnings per share^2, 3)^ | 1.21 | 0.68 | 78% | 3.06 | 3.65 | (16)% |
| Adjusted earnings per share^1, 2, 3)^ | 1.23 | 0.73 | 68% | 2.58 | 3.72 | (31)% |
| Operating cash flow | $232 | $188 | 23% | $251 | $437 | (43)% |
| Return on capital employed^4)^ | 18.0% | 10.5% | 7.5pp | 15.3% | 18.1% | (2.8)pp |
| Adjusted return on capital employed^1,^^^^4^^)^ | 18.4% | 10.9% | 7.5pp | 13.1% | 18.3% | (5.2)pp |
| 1) Excluding costs and gains from capacity alignments. Non-U.S. GAAP measure, see reconciliation table. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 4) Annualized operating income and income from equity method investments, relative to average capital employed. | ||||||
| Comments from Mikael Bratt, President & CEO | ||||||
| --- | --- | --- | ||||
 |
As the market leader, we are building resilience and strength in turbulent times. We believe these actions enable us to build an even more competitive position. Despite the challenging macro environment, our third quarter performance enables us to update our full year 2022 adjusted operating margin indication towards the upper end of the 6.0-7.0% range. | During the quarter, we retained a strong balance sheet, our operating cash flow recovered compared to recent quarters and our leverage ratio improved compared to the previous quarter. We have reached agreements in more than 90% of the raw material related price adjustment discussions that we initiated earlier this year. Price adjustment discussions with our customers for cost increases related to labor, logistics and utilities are progressing. | ||||
| Our actions initiated earlier in the year are now delivering results, especially our price adjustments to compensate for the inflationary pressures and our cost reduction activities. | We expect continued sequential margin improvement in the fourth quarter, due to positive seasonal effects, price increases, cost and headcount activities and somewhat lower volatility in customer call-offs. The gradual improvement in our performance throughout the year underlines our confidence in reaching our medium-term targets. In addition, we expect that our balance sheet and positive cash flow trend will allow for increasing shareholder returns. | |||||
| I am pleased that we achieved a strong recovery in the third quarter, delivering record sales for a third quarter and increasing the adjusted operating margin to 7.5% despite adverse FX effects of almost 2pp and challenges from inflationary pressure and high call-off volatility. This is an important step towards our medium-term targets. We also achieved another strong organic sales outperformance vs. LVP, despite an unfavorable regional LVP mix development. |
Full year 2022 indications
Our outlook indications for 2022 reflect continuing uncertainty in the automotive markets and are mainly based on our customer call-offs, a full year 2022 global LVP growth of around 6%, that we achieve our targeted cost compensation effects and some market stabilization.
| Full Year Indication | Full Year Indication | ||
|---|---|---|---|
| Organic sales growth | Around 15% | Tax rate^2)^ | Around 30% |
| FX impact on net sales | Around 6% negative | Operating cash flow^3)^ | Around $700-750 million |
| Adjusted operating margin^1)^ | Upper end of around 6.0%-7.0% | Capex, net, of sales | Around 5.5% |
1) Excluding costs for capacity alignments, antitrust related matters and other discrete items. 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. Autoliv 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 Autoliv is unable to determine the probable significance of the unavailable information.
Conference call and webcast
An earnings conference call will be held at 2:00 p.m. CET today, October 21, 2022. Information regarding how to participate is available on www.autoliv.com. The presentation slides for the conference call will be available on our website shortly after the publication of this financial report.
Business update relating to COVID-19, the war in Ukraine and other market conditions
COVID-19
The COVID-19 pandemic continued to impact our business in the third quarter of 2022 through limited LVP by our customers caused by global semiconductor shortage and other industry supply chain disruptions. Third quarter of 2022 saw global LVP growth year over year by around 29% (according to S&P Global October 2022). Supply chain disruptions that led to low customer demand visibility and material changes to customer call-offs with short notice negatively impacted our production efficiency and profitability in the quarter. Rising raw material costs amounted to more than 4pp in operating margin headwind in the third quarter, of which a large part was offset by commercial customer recoveries, including retroactive compensations.
Direct COVID-19 related costs, such as personal protective equipment, quarantine costs and similar items, were around $1 million in the third quarter of 2022. Governmental support in connection with furloughing, short-term work weeks, and other similar activities were less than $1 million in the quarter.
We expect the current industry-wide semiconductor supply shortage to be a limiting factor for the global LVP recovery in 2022. We also expect that the current price environment could lead to raw material costs of up to 5pp in operating margin headwind for the full year of 2022. We have reached agreements in more than 90% of the raw material related price adjustment discussions that we initiated earlier this year. Price adjustment discussions with our customers for cost increases related to labor, logistics and utilities are progressing. We believe product price increases will continue to gradually offset raw material cost inflation.
In response to the increased challenging market conditions, we continue with strict hiring and cost control measures, and accelerated cost savings and footprint activities. The situation is monitored closely, and further actions are being evaluated.
The war in Ukraine
The direct impact of the war in Ukraine on our business has been relatively limited. In 2021, sales in Russia were less than 1.0% of total sales. Autoliv has one facility with fewer than 100 employees in Russia. The operations are currently idled. Autoliv net assets in Russia, mainly USD cash items, amount to around $11 million. Autoliv has no operations in Ukraine.
This report includes content supplied by S&P Global; Copyright © Light Vehicle Production Forecast, October, 2022. All rights reserved.
Key Performance Trends
| Net Sales Development by region | Operating and adjusted operating income and margins |
|---|---|
| Capex and D&A | Operating and adjusted operating Cash Flow |
| --- | --- |
| Return on Capital Employed | Cash Conversion* |
| --- | --- |
Key definitions ---------------------------------------------------------------------------------------------------------
Capex,net: Capital Expenditure, net.
D&A: Depreciation and Amortization.
Adj. operating income and margin*: Operating income adjusted for capacity alignments, antitrust related matters and separation of our business segments in 2018. Capacity alignments include non-recurring costs related to our structural efficiency and business cycle management programs.
Operating cash flow excluding EC antitrust payment*: Management estimate for Continuing Operations derived from cash flow including Discontinued Operations 2018. Adjusted for EC antitrust payment of $203 million in 2019.
Cash conversion*: Free cash flow* in relation to net income adjusted for EC antitrust accrual in 2018 and payment in 2019. Free cash flow defined as operating cash flow less capital expenditure, net.
5
Consolidated sales development
Third quarter 2022
| Consolidated sales | Third quarter | Reported <br>change (U.S. <br>GAAP) | Currency<br>effects^1)^ | Organic<br>change* | ||
|---|---|---|---|---|---|---|
| (Dollars in millions) | 2022 | 2021 | ||||
| Airbags, Steering Wheels and Other^2)^ | $1,510 | $1,199 | 26% | (7.6)% | 33% | |
| Seatbelt Products^2)^ | 792 | $647 | 22% | (8.2)% | 31% | |
| Total | $2,302 | $1,847 | 25% | (7.8)% | 32% | |
| Asia | $955 | $778 | 23% | (9.7)% | 33% | |
| Whereof: | China | 537 | 414 | 30% | (5.7)% | 35% |
| Japan | 175 | 160 | 10% | (20)% | 30% | |
| RoA | 243 | 204 | 19% | (9.7)% | 29% | |
| Americas | 794 | 596 | 33% | (0.3)% | 34% | |
| Europe | 552 | 473 | 17% | (14)% | 31% | |
| Total | $2,302 | $1,847 | 25% | (7.8)% | 32% | |
| 1) Effects from currency translations. 2) Including Corporate and other sales. |
Sales by product – Airbags, Steering Wheels and Other
All major product categories increased organically* in the quarter. The largest contributor to the increase was inflatable curtains and steering wheels, followed by passenger airbags and side airbags.
Sales by product - Seatbelts
The main contributor to Seatbelt products organic growth* was China, followed by Europe and Americas.
Sales by region
Our global organic sales* increased by 32.5% compared to the global LVP increase of 28.8% (according to S&P Global, Oct 2022). The 3.7pp outperformance was driven by price increases and new product launches, partly offset by negative
geographical mix effects. Autoliv outperformed LVP by around 11pp in Europe, by around 7pp in Americas, by around 6pp in Japan and by around 1pp in China. We underperformed by around 2pp in Rest of Asia.
| Q3 2022 organic growth* | Americas | Europe | China | Japan | Rest of Asia | Global |
|---|---|---|---|---|---|---|
| Autoliv | 34% | 31% | 35% | 30% | 29% | 32% |
| Main growth drivers | GM, Honda, Stellantis | VW, Stellantis, Toyota | VW, Honda, Toyota | Toyota, Subaru, Mazda | Hyundai, Suzuki, Tata | VW, Toyota, Stellantis |
| Main decline drivers | BMW, Traton | Mitsubishi, Nissan | Mazda, Hyundai, Ford | Nissan, Mitsubishi, Ssangyong | Ssangyong |
Light vehicle production development
Change vs same period last year according to S&P Global
| Q3 2022 | Americas | Europe | China | Japan | Rest of Asia | Global |
|---|---|---|---|---|---|---|
| LVP (Oct 2022) | 27% | 20% | 34% | 23% | 31% | 29% |
| LVP (Jul 2022) | 28% | 31% | 12% | 36% | 19% | 22% |
6
Consolidated sales development
First nine months 2022
| Consolidated sales | First 9 months | Reported change<br>(U.S. GAAP) | Currency<br>effects^1)^ | Organic<br>change* | ||
|---|---|---|---|---|---|---|
| (Dollars in millions) | 2022 | 2021 | ||||
| Airbag, Steering Wheels and Other^2)^ | $4,226 | $3,973 | 6.4% | (5.4)% | 12% | |
| Seatbelt Products^2)^ | 2,281 | 2,139 | 6.6% | (6.0)% | 13% | |
| Total | $6,507 | $6,111 | 6.5% | (5.6)% | 12% | |
| Asia | $2,544 | $2,449 | 3.9% | (6.4)% | 10% | |
| Whereof: | China | 1,347 | 1,228 | 9.7% | (2.0)% | 12% |
| Japan | 496 | 546 | (9.2)% | (14)% | 5.1% | |
| RoA | 701 | 675 | 4.0% | (8.1)% | 12% | |
| Americas | 2,225 | 1,903 | 17% | 0.0% | 17% | |
| Europe | 1,738 | 1,760 | (1.2)% | (11)% | 9.4% | |
| Total | $6,507 | $6,111 | 6.5% | (5.6)% | 12% | |
| 1) Effects from currency translations. 2) Including Corporate and other sales. |
Sales by product – Airbags, Steering Wheels and Other
The largest contributors to the organic growth* was steering wheels and inflatable curtains, followed by passenger airbags and side airbags.
Sales by product - Seatbelts
The main contributors to Seatbelt products organic growth* was China and Europe, followed by Rest of Asia and Americas.
Sales by region
Our global organic sales* increased by around 12% compared to the LVP increase of around 8% (according to S&P Global, Oct 2022). The 3.8pp outperformance was driven by new
product launches and price increases partly offset by negative geographical mix. Autoliv outperformed LVP by around 13pp in Europe, by around 8pp in Japan, and by around 6pp in Americas. We underperformed by around 2pp in China and by around 5pp in Rest of Asia.
| 9M 2022 organic growth* | Americas | Europe | China | Japan | Rest of Asia | Global |
|---|---|---|---|---|---|---|
| Autoliv | 17% | 9.4% | 12% | 5.1% | 12% | 12% |
| Main growth drivers | Stellantis, Ford, GM | Stellantis, VW, Toyota | Toyota, Geely, Mercedes | Mitsubishi, Subaru, Honda | Tata, Suzuki, Honda | Stellantis, Ford, Toyota |
| Main decline drivers | Nissan, Traton | Volvo, Nissan | Great Wall, Hyundai, Mazda | Toyota, Nissan | Nissan, Mitsubishi | Nissan, Great Wall, Volvo |
Light vehicle production development
Change vs same period last year according to S&P Global
| First nine months 2022 | Americas | Europe | China | Japan | Rest of Asia | Global |
|---|---|---|---|---|---|---|
| LVP (Oct 2022) | 11% | (3.4)% | 14% | (3.3)% | 17% | 8.3% |
| LVP (Jan 2022) | 17% | 15% | 5.0% | 8.4% | 5.0% | 9.9% |
7
Key launches in the third quarter 2022
| Ford Lightning | BMW 7-series/i7 | Haval A08 |
|---|---|---|
| Xpeng G9 | Toyota Sequoia | Nio ET5 |
| Hyundai IONIQ 6 | Hyundai Stargazer | Honda CR-V |
| Driver/Passenger Airbags | Seatbelts | Side Airbags |
| --- | --- | --- |
| Head/Inflatable Curtain Airbags | Steering Wheel | Knee Airbag |
| Front Center Airbag | Bag-in-Belt | Pyrotechnical Safety Switch |
| Pedestrian Airbag | Hood Lifter | Available as EV/PHEV |
8
Financial development
Selected income statement items
| Condensed income statement | Third quarter | First 9 months | ||||
|---|---|---|---|---|---|---|
| (Dollars in millions, except per share data) | 2022 | 2021 | Change | 2022 | 2021 | Change |
| Net sales | $2,302 | $1,847 | 25% | $6,507 | $6,111 | 6.5% |
| Cost of sales | (1,918) | (1,546) | 24% | (5,510) | (4,968) | 11% |
| Gross profit | $383 | $301 | 28% | $998 | $1,143 | (13)% |
| S,G&A | (105) | (101) | 4.3% | (333) | (319) | 4.1% |
| R,D&E, net | (106) | (98) | 8.4% | (325) | (311) | 4.5% |
| Amortization of intangibles | (0) | (2) | (83)% | (2) | (8) | (71)% |
| Other income (expense), net | (1) | (1) | 73% | 91 | (5) | n/a |
| Operating income | $171 | $99 | 72% | $429 | $500 | (14)% |
| Adjusted operating income^1)^ | $173 | $103 | 67% | $365 | $506 | (28)% |
| Financial and non-operating items, net | (18) | (12) | 47% | (40) | (44) | (9)% |
| Income before taxes | $153 | $87 | 76% | $389 | $456 | (15)% |
| Income taxes | (47) | (27) | 75% | (121) | (135) | (10)% |
| Net income | $106 | $60 | 76% | $268 | $322 | (17)% |
| Earnings per share^2, 3)^ | 1.21 | 0.68 | 78% | 3.06 | $3.65 | (16)% |
| Adjusted earnings per share^1, 2, 3)^ | $1.23 | $0.73 | 68% | $2.58 | $3.72 | (31)% |
| Gross margin | 16.7% | 16.3% | 0.4pp | 15.3% | 18.7% | (3.4)pp |
| S,G&A, in relation to sales | (4.6)% | (5.5)% | 0.9pp | (5.1)% | (5.2)% | 0.1pp |
| R,D&E, net in relation to sales | (4.6)% | (5.3)% | 0.7pp | (5.0)% | (5.1)% | 0.1pp |
| Operating margin | 7.4% | 5.4% | 2.1pp | 6.6% | 8.2% | (1.6)pp |
| Adjusted operating margin^1)^ | 7.5% | 5.6% | 1.9pp | 5.6% | 8.3% | (2.7)pp |
| Tax Rate | 30.8% | 30.9% | (0.1)pp | 31.1% | 29.5% | 1.6pp |
| Other data | ||||||
| No. of shares at period-end in millions^4)^ | 86.8 | 87.5 | (0.7)% | 86.8 | 87.5 | (0.7)% |
| Weighted average no. of shares in millions^4^^)^ | 87.0 | 87.4 | (0.5)% | 87.2 | 87.4 | (0.2)% |
| Weighted average no. of shares in millions, diluted^5)^ | 87.2 | 87.7 | (0.6)% | 87.4 | 87.7 | (0.3)% |
| 1) Non-U.S. GAAP measure, excluding costs and gains from capacity alignments. See reconciliation table. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 4) Excluding dilution and net of treasury shares. 5) Net of treasury shares. |
Third quarter 2022 development
Gross profit increased by $83 million and the gross margin increased by 0.4pp compared to the same quarter 2021. The gross profit increase was primarily driven by price increases and volume growth, partly offset by higher costs for raw materials, unfavorable FX translation effects and higher costs for premium freight.
S,G&A costs increased by $4 million compared to the prior year, mainly due to increased costs for personnel and IT expenses partly offset by positive currency translation effects. S,G&A costs in relation to sales decreased from 5.5% to 4.6%.
R,D&E, net costs increased by around $8 million compared to the prior year, mainly due to higher costs for personnel, prototypes and tools partly offset by higher engineering income. R,D&E, net, in relation to sales decreased from 5.3% to 4.6%.
Other income (expense), net was unchanged compared to the prior year.
Operating income increased by $72 million compared to the same period in 2021, mainly as a consequence of the higher gross profit, partly offset by the higher costs for S,G&A and R,D&E, net.
Adjusted operating income* increased by $70 million compared to the prior year, mainly due to higher gross profit, partly offset by the higher costs for S,G&A and R,D&E, net.
Financial and non-operating items, net, was $6 million more negative compared to a year earlier, mainly due to adverse currency translation effects.
Income before taxes increased by $66 million compared to the prior year, mainly due to the higher operating income partly offset by higher costs for financial and non-operating items, net.
Tax rate was 30.8%, almost unchanged compared to 30.9% in the same period last year. Discrete tax items, net, increased the tax rate this quarter by 1.4pp. Discrete tax items increased the tax rate by 5.6pp in the same period last year.
Earnings per share, diluted increased by $0.53 compared to a year earlier, where the main driver was $0.59 from higher adjusted operating income* partly offset by $0.06 from financial and non-operating items.
9
First nine months 2022 development
Gross profit decreased by $146 million, and the gross margin decreased by 3.4pp compared to the same period 2021. The gross profit decrease was primarily driven by adverse effects from higher costs for raw material and premium freight, adverse currency translation effects partly offset by price increases.
S,G&A costs increased by $13 million compared to the prior year, mainly relating to investments in personnel and IT and improvement projects partly offset by positive currency translation effects.
R,D&E, net costs increased by $14 million, mainly due to lower engineering income. R,D&E, net, in relation to sales was close to unchanged at 5.0%.
Other income (expense), net improved by $96 million compared to the prior year, mainly due to around $80 million gain from the sale of a property in Japan and around $20 million from a patent litigation settlement partly offset by around $10 million in capacity alignment provision for the closure of a plant in South Korea.
Operating income decreased by $71 million compared to the same period in 2021, mainly as a consequence of the lower gross profit, partly offset by the improved Other income (expense).
Adjusted operating income* decreased by $141 million compared to the prior year, mainly due to lower gross profit.
Financial and non-operating items, net, improved by $4 million, mainly due to lower interest expenses due to lower debt in 2022 compared to 2021.
Income before taxes decreased by $67 million compared to the prior year, mainly due to the lower operating income partly offset by improved financial and non-operating items, net.
Tax rate was 31.1%, compared to 29.5% in the same period last year, mainly due to unfavorable country mix. In addition, discrete tax items, net, increased the tax rate this year by 1.2pp. Discrete tax items, net increased the tax rate by 1.0pp in the same period last year.
Earnings per share, diluted decreased by $0.60 compared to a year earlier, where the main driver was $1.15 from lower adjusted operating income* partly mitigated by $0.53 from capacity alignment.
10
Selected Balance Sheet and Cash Flow items
| Selected Balance Sheet items | Third quarter | |||||
|---|---|---|---|---|---|---|
| (Dollars in millions) | 2022 | 2021 | Change | |||
| Trade working capital ^1)^ | $1,314 | $1,421 | (7.5)% | |||
| Trade working capital in relation to sales ^2)^ | 14.3% | 19.2% | (5.0)pp | |||
| - Receivables outstanding in relation to sales ^3)^ | 20.6% | 21.3% | (0.8)pp | |||
| - Inventory outstanding in relation to sales ^4)^ | 10.0% | 12.5% | (2.5)pp | |||
| - Payables outstanding in relation to sales ^5)^ | 16.3% | 14.6% | 1.8pp | |||
| Cash & cash equivalents | 483 | 903 | (46)% | |||
| Gross Debt ^6)^ | 1,729 | 2,051 | (16)% | |||
| Net Debt ^7)^ | 1,288 | 1,165 | 11% | |||
| Capital employed ^8)^ | 3,779 | 3,738 | 1.1% | |||
| Return on capital employed ^9)^ | 18.0% | 10.5% | 7.5pp | |||
| Total equity | $2,491 | $2,573 | (3.2)% | |||
| Return on total equity ^10)^ | 16.8% | 9.3% | 7.5pp | |||
| Leverage ratio ^11)^ | 1.6 | 1.1 | 37% | |||
| 1) Outstanding receivables and outstanding inventory less outstanding payables. 2) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized quarterly sales. 3) Outstanding receivables relative to annualized quarterly sales. 4) Outstanding inventory relative to annualized quarterly sales. 5) Outstanding payables relative to annualized quarterly sales. 6) Short- and long-term interest-bearing debt. 7) Short- and long-term debt less cash and cash equivalents and debt-related derivatives. Non-U.S. GAAP measure. See reconciliation table. 8) Total equity and net debt. 9) Annualized operating income and income from equity method investments, relative to average capital employed. 10) Annualized net income relative to average total equity. 11) Net debt adjusted for pension liabilities in relation to EBITDA. Non-U.S. GAAP measure. See reconciliation table. | ||||||
| Selected Cash Flow items | Third quarter | First 9 months | ||||
| --- | --- | --- | --- | --- | --- | --- |
| (Dollars in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change |
| Net income | $106 | $60 | 76% | $268 | $322 | (17)% |
| Changes in operating working capital | 89 | 35 | 155% | (168) | (179) | (6)% |
| Depreciation and amortization | 87 | 98 | (11)% | 273 | 297 | (8.0)% |
| Gain on divestiture of property | - | - | n/a | (80) | - | n/a |
| Other, net | (51) | (5) | n/a | (44) | (3) | n/a |
| Operating cash flow | $232 | $188 | 23% | $251 | $437 | (43)% |
| Capital expenditure, net | (164) | (112) | 47% | (319) | (301) | 6% |
| Free cash flow^1)^ | $68 | $77 | (12)% | $(69) | $136 | (151)% |
| Cash conversion^2)^ | 64% | 128% | (64)pp | n/a | 42% | n/a |
| Shareholder returns | ||||||
| - Dividends paid | (56) | (54) | 2.5% | (167) | (109) | 54% |
| - Share repurchases | (20) | - | n/a | (60) | - | n/a |
| Cash dividend paid per share | $(0.64) | $(0.62) | 3.2% | $(1.92) | $(1.24) | 55% |
| Capital expenditures, net in relation to sales | 7.1% | 6.0% | 1.1pp | 4.9% | 4.9% | (0.0)pp |
| 1) Operating cash flow less Capital expenditure, net. Non-U.S. GAAP measure. See enclosed reconciliation table. 2) Free cash flow relative to Net income. Non-U.S. GAAP measure. See reconciliation table. |
Third quarter 2022 development
Trade working capital* was reduced by $107 million compared to the same period last year, where the main driver was related to $427 million in higher accounts payables, partly offset by $318 million in higher receivables.
Operating cash flow increased by $43 million to $232 million compared to the same period last year, mainly due to higher net income and positive working capital effects, partly offset by adverse effects from changes in deferred income taxes.
Capital expenditure, net increased by $52 million, which mainly is due to investments related to footprint and capacity expansions. The higher level reflects a temporary catch up of investments that were delayed during the pandemic. Capital expenditure, net in relation to sales was 7.1% vs. 6.0% a year earlier.
Free cash flow* was $68 million, compared to $77 million a year earlier. The decline was due to the higher capital expenditure, net, partly offset by the higher operating cash flow.
Cash conversion* defined as free cash flow* in relation to net income, was 64% compared to 128% in the same period the prior year. The decrease was due to the increase in net income while free cash flow decreased.
Net debt* was $1,288 million as of September 30, 2022, which was $123 million higher than a year earlier.
Liquidity position. As of September 30, 2022, our cash balance was around $0.5 billion, and including committed, unused loan facilities, our liquidity position was around $1.6 billion.
Leverage ratio*. As of September 30, 2022, the Company had a leverage ratio of 1.6x, compared to 1.1x as of September 30, 2021, as the net debt* increased and the 12 months trailing adjusted EBITDA* decreased.
Total equity decreased by $82 million compared to September 30, 2021. This is mainly due to $225 million in adverse currency translation effects, dividends paid of $224 million and $60 million from share repurchases partly offset by $384 million from net income.
First nine months 2022 development
Operating cash flow decreased by $186 million to $251 million compared to the same period last year, mainly due to lower net income and adverse effects from changes in deferred income taxes.
Capital expenditure, net increased by $19 million, which mainly reflects increased investments related to footprint and capacity expansions partly offset by $95 million in proceeds from the sale of property, plant and equipment. Capital expenditure, net in relation to sales was unchanged at 4.9%.
Free cash flow* was negative $69 million, compared to positive $136 million a year earlier. The decline was due to the lower operating cash flow and higher capital expenditure, net.
Cash conversion* defined as free cash flow* in relation to net income, was not meaningful in the period as free cash flow was negative.
Headcount
| Sep 30 | Jun 30 | Sep 30 | |
|---|---|---|---|
| 2022 | 2022 | 2021 | |
| Headcount | 67,800 | 64,700 | 62,000 |
| Whereof: Direct headcount in manufacturing | 49,600 | 46,500 | 44,200 |
| Indirect headcount | 18,300 | 18,200 | 17,900 |
| Temporary personnel | 10.5% | 9.6% | 7.7% |
By September 30, 2022, total headcount increased by 5,800 compared to a year earlier. The indirect workforce increased by 2.2% while the direct workforce increased by 12.2%, as sales grew organically by 32% compared to a year earlier. The increase also reflects preparations for the expected
strong sales growth in the fourth quarter. Compared to June 30, 2022, total headcount increased by around 3,100, direct workforce increased by almost 3,100 and the indirect workforce increased by around 50.
Other Items
| • | On August 18, 2022, Autoliv announced the appointment of Gustav Lundgren to its Board of Directors, pursuant to the previously disclosed agreement with Cevian Capital II GP Limited. Gustav Lundgren is a partner of Cevian Capital. Mr. Lundgren replaced Min Liu, Cevian’s previously designated director, who resigned from the Board on August 18, 2022. The Board determined that Gustav Lundgren is an independent director and appointed him as a member of the Audit and Risk Committee. |
|---|---|
| • | Under Autoliv’s 2022-2024 stock purchase program, purchases of common stock and SDRs may be made in open market purchases, privately negotiated transactions, block purchase techniques, 10b5-1 trading plans or a combination of the foregoing in accordance with applicable law and the rules and regulations of both the NYSE and Nasdaq Stockholm. During the third quarter 2022, Autoliv repurchased 0.26 million shares of common stock at an average price of $78.04 per share. |
| --- | --- |
Next Report
Autoliv intends to publish the quarterly earnings report for the fourth quarter of 2022 on Friday, January 27, 2023.
Inquiries: Investors and Analysts
Anders Trapp
Vice President Investor Relations
Tel +46 (0)8 5872 0671
Henrik Kaar
Director Investor Relations
Tel +46 (0)8 5872 0614
Inquiries: Media
Gabriella Ekelund
Senior Vice President Communications
Tel +46 (0)70 612 6424
Autoliv, Inc. is obliged to make this information public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the VP of Investor Relations set out above, at 12.00 CET on October 21, 2022.
Footnotes
*Non-U.S. GAAP measure, see enclosed reconciliation tables.
Definitions and SEC Filings
Please refer to www.autoliv.com or to our Annual Report for definitions of terms used in this report. Autoliv’s annual report to stockholders, annual report on Form 10-K, quarterly reports on Form 10Q, proxy statements, management certifications, press releases, current reports on Form 8-K and other documents filed with the SEC can be obtained free of charge from Autoliv at the Company’s address. These documents are also available at the SEC’s website www.sec.gov and at Autoliv’s corporate website www.autoliv.com.
This report includes content supplied by S&P Global; Copyright © Light Vehicle Production Forecast, January, July and October 2022. All rights reserved. S&P Global is a global supplier of independent industry information. The permission to use S&P Global copyrighted reports, data and information does not constitute an endorsement or approval by S&P Global of the manner, format, context, content, conclusion, opinion or viewpoint in which S&P Global reports, data and information or its derivations are used or referenced herein.
“Safe Harbor Statement”
This report 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. 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, including inflation; the impacts of the coronavirus (COVID-19) pandemic on the Company’s financial condition, business operations, operating costs, liquidity and competition and on the global economy; changes in light vehicle production; fluctuation in vehicle production schedules for which the Company is a supplier; global supply chain disruptions, including port, transportation and distribution delays or interruptions; supply chain disruptions and component shortages specific to the automotive industry or the Company; disruptions and impacts relating to the ongoing war between Russia and Ukraine; changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignment, restructuring, 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; 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 and other 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, civil judgements or financial penalties 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 and the availability of insurance with respect to such matters; 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; our ability to meet our sustainability targets, goals and commitments; political conditions; dependence on and relationships with customers and suppliers; and other risks and uncertainties identified under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Reports and Quarterly Reports on Forms 10-K and 10-Q and any amendments thereto. 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.
Consolidated Statements of Net Income
| (Dollars in millions, except per share data, unaudited) | Third quarter | First 9 months | Latest 12 | Full Year | ||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | months | 2021 | |
| Airbag, Steering Wheels and Other^1)^ | $1,510 | $1,199 | $4,226 | $3,973 | $5,633 | $5,380 |
| Seatbelt products^1)^ | 792 | 647 | 2,281 | 2,139 | 2,992 | 2,850 |
| Total net sales | $2,302 | $1,847 | $6,507 | $6,111 | $8,626 | $8,230 |
| Cost of sales | (1,918) | (1,546) | (5,510) | (4,968) | (7,261) | (6,719) |
| Gross profit | $383 | $301 | $998 | $1,143 | $1,366 | $1,511 |
| Selling, general & administrative expenses | (105) | (101) | (333) | (319) | (445) | (432) |
| Research, development & engineering expenses, net | (106) | (98) | (325) | (311) | (405) | (391) |
| Amortization of intangibles | (0) | (2) | (2) | (8) | (5) | (10) |
| Other income (expense), net | (1) | (1) | 91 | (5) | 93 | (3) |
| Operating income | $171 | $99 | $429 | $500 | $604 | $675 |
| Income from equity method investments | 1 | (0) | 3 | 2 | 4 | 3 |
| Interest income | 2 | 1 | 4 | 3 | 5 | 4 |
| Interest expense | (15) | (14) | (41) | (46) | (55) | (60) |
| Other non-operating items, net | (6) | 1 | (5) | (3) | (9) | (7) |
| Income before income taxes | $153 | $87 | $389 | $456 | $547 | $614 |
| Income taxes | (47) | (27) | (121) | (135) | (163) | (177) |
| Net income | $106 | $60 | $268 | $322 | $384 | $437 |
| Less: Net income attributable to non-controlling interest | 1 | 0 | 1 | 1 | 2 | 2 |
| Net income attributable to controlling interest | $105 | $60 | $267 | $320 | $382 | $435 |
| Earnings per share^2, 3)^ | $1.21 | $0.68 | $3.06 | $3.65 | $4.37 | $4.96 |
| 1) Including Corporate and other sales. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from EPS calculation. |
Consolidated Balance Sheets
| Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | |
|---|---|---|---|---|---|
| (Dollars in millions, unaudited) | 2022 | 2022 | 2022 | 2021 | 2021 |
| Assets | |||||
| Cash & cash equivalents | $483 | $327 | $938 | $969 | $903 |
| Receivables, net | 1,893 | 1,779 | 1,824 | 1,699 | 1,575 |
| Inventories, net | 924 | 903 | 913 | 777 | 922 |
| Prepaid expenses | 218 | 195 | 170 | 164 | 242 |
| Other current assets | 69 | 81 | 79 | 65 | 68 |
| Total current assets | $3,587 | $3,285 | $3,923 | $3,675 | $3,710 |
| Property, plant & equipment, net | 1,795 | 1,806 | 1,853 | 1,855 | 1,813 |
| Operating leases right-of-use assets | 116 | 120 | 126 | 132 | 123 |
| Goodwill | 1,364 | 1,373 | 1,384 | 1,387 | 1,389 |
| Intangible assets, net | 5 | 6 | 7 | 8 | 9 |
| Investments and other non-current assets | 467 | 439 | 476 | 481 | 467 |
| Total assets | $7,334 | $7,030 | $7,769 | $7,537 | $7,511 |
| Liabilities and equity | |||||
| Short-term debt | $692 | $559 | $347 | $346 | $364 |
| Accounts payable | 1,503 | 1,303 | 1,385 | 1,144 | 1,076 |
| Accrued expenses | 965 | 944 | 1,050 | 996 | 1,096 |
| Operating lease liabilities - current | 35 | 37 | 38 | 38 | 38 |
| Other current liabilities | 263 | 218 | 253 | 297 | 237 |
| Total current liabilities | $3,458 | $3,061 | $3,073 | $2,821 | $2,811 |
| Long-term debt | 1,037 | 1,060 | 1,647 | 1,662 | 1,687 |
| Pension liability | 149 | 155 | 172 | 197 | 231 |
| Operating lease liabilities - non-current | 81 | 83 | 87 | 94 | 85 |
| Other non-current liabilities | 118 | 113 | 116 | 115 | 125 |
| Total non-current liabilities | $1,385 | $1,410 | $2,022 | $2,067 | $2,127 |
| Total parent shareholders’ equity | 2,478 | 2,544 | 2,659 | 2,633 | 2,558 |
| Non-controlling interest | 13 | 15 | 15 | 15 | 15 |
| Total equity | $2,491 | $2,558 | $2,674 | $2,648 | $2,573 |
| Total liabilities and equity | $7,334 | $7,030 | $7,769 | $7,537 | $7,511 |
Consolidated Statements of Cash Flow
| Third quarter | First 9 months | Latest 12 | Full Year | |||
|---|---|---|---|---|---|---|
| (Dollars in millions, unaudited) | 2022 | 2021 | 2022 | 2021 | months | 2021 |
| Net income | $106 | $60 | $268 | $322 | $384 | $437 |
| Depreciation and amortization | 87 | 98 | 273 | 297 | 370 | 394 |
| Gain on divestiture of property | - | - | (80) | - | (80) | - |
| Other, net | (51) | (5) | (44) | (3) | (55) | (15) |
| Changes in operating working capital, net | 89 | 35 | (168) | (179) | (52) | (63) |
| Net cash provided by operating activities | $232 | $188 | $251 | $437 | $567 | $754 |
| Expenditures for property, plant and equipment | (164) | (113) | (418) | (303) | (572) | (458) |
| Proceeds from sale of property, plant and equipment | (0) | 1 | 98 | 3 | 99 | 4 |
| Net cash used in investing activities | $(164) | $(112) | $(319) | $(301) | $(473) | $(454) |
| Net cash before financing^1)^ | $68 | $77 | $(69) | $136 | $95 | $300 |
| Increase (decrease) in short term debt | 167 | 14 | (110) | (278) | (119) | (286) |
| Decrease long-term debt | (17) | (14) | (51) | (1) | (70) | (20) |
| Dividends paid | (56) | (54) | (167) | (109) | (223) | (165) |
| Share repurchases | (20) | - | (60) | - | (60) | - |
| Common stock options exercised | 0 | 0 | 0 | 2 | 1 | 3 |
| Dividend paid to non-controlling interests | (1) | (1) | (1) | (1) | (1) | (1) |
| Net cash provided by (used in) financing activities | $73 | $(56) | $(389) | $(386) | $(473) | $(469) |
| Effect of exchange rate changes on cash | 15 | (10) | (28) | (25) | (42) | (39) |
| Increase (decrease) in cash and cash equivalents | $156 | $11 | $(486) | $(275) | $(420) | $(209) |
| Cash and cash equivalents at period-start | 327 | 893 | 969 | 1,178 | 903 | 1,178 |
| Cash and cash equivalents at period-end | $483 | $903 | $483 | $903 | $483 | $969 |
1) Non-U.S. GAAP measure comprised of "Net cash provided by operating activities" and "Net cash used in investing activities". See reconciliation table.
RECONCILIATION OF U.S. GAAP TO NON-U.S. GAAP MEASURES
In this report we sometimes refer to non-U.S. GAAP measures that we and securities analysts use in measuring Autoliv's performance. We believe that these measures assist investors and management in analyzing trends in the Company's business for the reasons given below. Investors should not consider these non-U.S. GAAP measures as substitutes, but rather as additions, to financial reporting measures prepared in accordance with U.S. GAAP. It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.
Components in Sales Increase/Decrease
Since the Company historically generates approximately 75% of sales in currencies other than in the reporting currency (i.e. U.S. dollars) and currency rates have been volatile, we analyze the Company's sales trends and performance as changes in organic sales growth. This presents the increase or decrease in the overall U.S. dollar net sales on a comparable basis, allowing separate discussions of the impact of acquisitions/divestitures and exchange rates. The tables on pages 6 and 7 present changes in organic sales growth as reconciled to the change in the total U.S. GAAP net sales.
Trade Working Capital
Due to the need to optimize cash generation to create value for shareholders, management focuses on operationally derived trade working capital as defined in the table below. The reconciling items used to derive this measure are, by contrast, managed as part of our overall management of cash and debt, but they are not part of the responsibilities of day-to-day operations' management.
| Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | |
|---|---|---|---|---|---|
| (Dollars in millions) | 2022 | 2022 | 2022 | 2021 | 2021 |
| Receivables, net | $1,893 | $1,779 | $1,824 | $1,699 | $1,575 |
| Inventories, net | 924 | 903 | 913 | 777 | 922 |
| Accounts payable | (1,503) | (1,303) | (1,385) | (1,144) | (1,076) |
| Trade Working capital | $1,314 | $1,379 | $1,352 | $1,332 | $1,421 |
Net Debt
Autoliv from time to time enters into “debt-related derivatives” (DRDs) as a part of its debt management and as part of efficiently managing the Company’s overall cost of funds. Creditors and credit rating agencies use net debt adjusted for DRDs in their analyses of the Company’s debt, therefore we provide this non-U.S. GAAP measure. DRDs are fair value adjustments to the carrying value of the underlying debt. Also included in the DRDs is the unamortized fair value adjustment related to a discontinued fair value hedge that will be amortized over the remaining life of the debt. By adjusting for DRDs, the total financial liability of net debt is disclosed without grossing debt up with currency or interest fair values.
| Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | |
|---|---|---|---|---|---|
| (Dollars in millions) | 2022 | 2022 | 2022 | 2021 | 2021 |
| Short-term debt | $692 | $559 | $347 | $346 | $364 |
| Long-term debt | 1,037 | 1,060 | 1,647 | 1,662 | 1,687 |
| Total debt | $1,729 | $1,619 | $1,994 | $2,008 | $2,051 |
| Cash & cash equivalents | (483) | (327) | (938) | (969) | (903) |
| Debt issuance cost/Debt-related derivatives, net | 42 | 26 | 1 | 13 | 18 |
| Net debt | $1,288 | $1,318 | $1,057 | $1,052 | $1,165 |
| Dec 31 | Dec 31 | Dec 31 | Dec 31 | ||
| --- | --- | --- | --- | --- | |
| (Dollars in millions) | 2020 | 2019 | 2018 | 2017 | |
| Short-term debt | $302 | $368 | $621 | $20 | |
| Long-term debt | 2,110 | 1,726 | 1,609 | 1,311 | |
| Total debt | $2,411 | $2,094 | $2,230 | $1,330 | |
| Cash & cash equivalents | (1,178) | (445) | (616) | (960) | |
| Debt issuance cost/Debt-related derivatives, net | (19) | 0 | 5 | (3) | |
| Net debt | $1,214 | $1,650 | $1,619 | $368 |
Leverage ratio
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. In 2021, EBITDA calculation was redefined to exclude other non-operating items and income from equity method investments. Historic EBITDA and leverage ratio have been recalculated resulting in minor adjustments. Autoliv’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.
| Sep 30 | Dec 31 | Sep 30 | |
|---|---|---|---|
| (Dollars in millions) | 2022 | 2021 | 2021 |
| Net debt^1)^ | $1,288 | $1,052 | $1,165 |
| Pension liabilities | 149 | 197 | 231 |
| Debt per the Policy | $1,437 | $1,248 | $1,396 |
| Net income^2)^ | $384 | $437 | $511 |
| Income taxes^2)^ | 163 | 177 | 224 |
| Interest expense, net^2, 3)^ | 51 | 57 | 62 |
| Other non-operating items, net^2)^ | 9 | 7 | 14 |
| Income from equity method investments^2)^ | (4) | (3) | (3) |
| Depreciation and amortization of intangibles^2)^ | 370 | 394 | 400 |
| Capacity alignments and antitrust related matters^2)^ | (61) | 8 | 10 |
| EBITDA per the Policy (Adjusted EBITDA) | $912 | $1,077 | $1,217 |
| Leverage ratio | 1.6 | 1.2 | 1.1 |
| 1) Short- and long-term debt less cash and cash equivalents and debt-related derivatives. 2) Latest 12 months. 3) Interest expense including cost for extinguishment of debt, if any, less interest income. |
Free Cash Flow, Net Cash Before Financing and Cash Conversion
Management uses the non-U.S. GAAP measure “free cash flow” to analyze the amount of cash flow being generated by the Company’s operations after capital expenditure, net. This measure indicates the Company’s cash flow generation level that enables strategic value creation options such as dividends or acquisitions. For details on free cash flow, see the reconciliation table below. Management uses the non-U.S. GAAP measure “net cash before financing” to analyze and disclose the cash flow generation available for servicing external stakeholders such as shareholders and debt stakeholders. For details on net cash before financing, see the reconciliation table below. Management uses the non-U.S. GAAP measure “cash conversion” to analyze the proportion of net income that is converted into free cash flow. The measure is a tool to evaluate how efficient the Company utilizes its resources. For details on cash conversion, see the reconciliation table below.
| Third quarter | First 9 months | Latest 12 | Full Year | |||
|---|---|---|---|---|---|---|
| (Dollars in millions) | 2022 | 2021 | 2022 | 2021 | months | 2021 |
| Net income | $106 | $60 | $268 | $322 | $384 | $437 |
| Changes in operating working capital | 89 | 35 | (168) | (179) | (52) | (63) |
| Depreciation and amortization | 87 | 98 | 273 | 297 | 370 | 394 |
| Gain on divestiture of property | - | - | (80) | - | (80) | - |
| Other, net | (51) | (5) | (44) | (3) | (55) | (15) |
| Operating cash flow | $232 | $188 | $251 | $437 | $567 | $754 |
| Capital expenditure, net | (164) | (112) | (319) | (301) | (473) | (454) |
| Free cash flow^1)^ | $68 | $77 | $(69) | $136 | $95 | $300 |
| Net cash before financing | $68 | $77 | $(69) | $136 | $95 | $300 |
| Cash conversion^2)^ | 64% | 128% | n/a | 42% | 25% | 69% |
| 1) Operating cash flow less Capital expenditures, net. 2) Free cash flow relative to Net income. | ||||||
| Full year | Full year | Full year | Full year | |||
| --- | --- | --- | --- | --- | ||
| (Dollars in millions) | 2020 | 2019 | 2018^1)^ | 2017^1)^ | ||
| Net income | $188 | $463 | $184 | $303 | ||
| Changes in operating assets and liabilities | 277 | 47 | (229) | (0) | ||
| Depreciation and amortization | 371 | 351 | 397 | 426 | ||
| Goodwill impairment charges | - | - | - | 234 | ||
| Other, net^2)^ | 13 | (220) | 239 | (27) | ||
| Operating cash flow | $849 | $641 | $591 | $936 | ||
| EC antitrust payment | - | (203) | - | - | ||
| Operating cash flow excl antitrust | $849 | $844 | $591 | $936 | ||
| Capital expenditure, net | (340) | (476) | (555) | (570) | ||
| Free cash flow^3)^ | $509 | $165 | $36 | $366 | ||
| Free cash flow excl antitrust payment^4)^ | $509 | $368 | $36 | $366 | ||
| Acquisitions of businesses and other, net | - | - | (73) | (128) | ||
| Net cash before financing | $509 | $165 | $(37) | $239 | ||
| Cash conversion^5)^ | 270% | 36% | 19% | 121% | ||
| Cash conversion excl antitrust^6)^ | 270% | 79% | 19% | 121% | ||
| 1) Including Discontinued Operations. 2) Including EC antitrust non-cash provision 2018 and EC antitrust payment 2019. 3) Operating cash flow less Capital expenditure, net. 4) For 2019, Operating cashflow excluding EC antitrust payment less Capital expenditure, net. 5) Free cash flow relative to Net income. 6) For 2019, Free cash flow excluding EC antitrust payment relative to Net income. |
Items Affecting Comparability
We believe that comparability between periods is improved through the exclusion of certain items. To assist investors in understanding the operating performance of Autoliv's business, it is useful to consider certain U.S. GAAP measures exclusive of these items.
The following table reconciles Income before income taxes, Net income attributable to controlling interest, capital employed, which are inputs utilized to calculate Return on Capital Employed (“ROCE”), adjusted ROCE and Return on Total Equity (“ROE”). The Company believes this presentation may be useful to investors and industry analysts who utilize these adjusted non-U.S. GAAP measures in their ROCE and ROE calculations to exclude certain items for comparison purposes across periods. Autoliv’s management uses the ROCE, adjusted ROCE and ROE measures for purposes of comparing its financial performance with the financial performance of other companies in the industry and providing useful information regarding the factors and trends affecting the Company’s business.
As used by the Company, ROCE is annualized operating income and income from equity method investments, relative to average capital employed. Adjusted ROCE is annualized operating income and income from equity method investments, relative to average capital employed as adjusted to exclude certain non-recurring items. The Company believes ROCE and adjusted ROCE are useful indicators of long-term performance both absolute and relative to the Company's peers as it allows for a comparison of the profitability of the Company’s capital employed in its business relative to that of its peers.
ROE is the ratio of annualized income (loss) relative to average total equity for the periods presented. The Company’s management believes that ROE is a useful indicator of how well management creates value for its shareholders through its operating activities and its capital management.
Accordingly, the tables below reconcile from U.S. GAAP to the equivalent non-U.S. GAAP measure.
| Third quarter 2022 | Third quarter 2021 | |||||
|---|---|---|---|---|---|---|
| (Dollars in millions, except per share data) | Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP |
| Operating income | $171 | $2 | $173 | $99 | $4 | $103 |
| Operating margin | 7.4% | 0.1% | 7.5% | 5.4% | 0.2% | 5.6% |
| Income before taxes | 153 | 2 | 155 | 87 | 4 | 91 |
| Net income attributable to controlling interest | 105 | 2 | 107 | 60 | 4 | 64 |
| Return on capital employed^2)^ | 18.0% | 0.4% | 18.4% | 10.5% | 0.4% | 10.9% |
| Return on total equity^3)^ | 16.8% | 0.6% | 17.3% | 9.3% | 0.6% | 9.9% |
| Earnings per share^4, 5)^ | $1.21 | $0.02 | $1.23 | $0.68 | $0.05 | $0.73 |
| 1) Costs for capacity alignments. 2) Annualized operating income and income from equity method investments, relative to average capital employed. 3) Annualized income relative to average total equity. 4) Assuming dilution when applicable and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. | ||||||
| First 9 months 2022 | First 9 months 2021 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | |
| Operating income | $429 | $(64) | $365 | $500 | $6 | $506 |
| Operating margin | 6.6% | (1.0)% | 5.6% | 8.2% | 0.1% | 8.3% |
| Income before taxes | 389 | (64) | 325 | 456 | 6 | 462 |
| Net income attributable to controlling interest | 267 | (41) | 226 | 320 | 6 | 326 |
| Capital employed | 3,779 | (41) | 3,738 | 3,738 | 6 | 3,744 |
| Return on capital employed^2)^ | 15.3% | (2.2)% | 13.1% | 18.1% | 0.2% | 18.3% |
| Return on total equity^3)^ | 13.8% | (2.0)% | 11.8% | 16.9% | 0.3% | 17.2% |
| Earnings per share^4, 5)^ | $3.06 | $(0.47) | $2.58 | $3.65 | $0.06 | $3.72 |
| 1) Costs and gains from capacity alignments. 2) Annualized operating income and income from equity method investments, relative to average capital employed. 3) Annualized income relative to average total equity. 4) Assuming dilution when applicable and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. |
| Latest 12 months | Full year 2021 | |||||
|---|---|---|---|---|---|---|
| Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | |
| Operating income | $604 | $(61) | $542 | $675 | $8 | $683 |
| Operating margin | 7.0% | (0.7)% | 6.3% | 8.2% | 0.1% | 8.3% |
| 1) Costs and gains from capacity alignments. | ||||||
| Full year 2020 | Full year 2019 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | |
| Operating income | $382 | $99 | $482 | $726 | $49 | $774 |
| Operating margin | 5.1% | 1.4% | 6.5% | 8.5% | 0.6% | 9.1% |
| 1) Costs for capacity alignments and antitrust related matters. | ||||||
| Full year 2018 | Full year 2017 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | Reported<br>U.S. GAAP | Adjust-ments^1)^ | Non-U.S.<br>GAAP | |
| Operating income | $686 | $222 | $908 | $860 | $40 | $899 |
| Operating margin | 7.9% | 2.6% | 10.5% | 10.6% | 0.5% | 11.1% |
| 1) Costs for capacity alignments, antitrust related matters and separation of our business segments |
| Items included in non-U.S. GAAP adjustments | Third quarter 2022 | Third quarter 2021 |
|---|---|---|
| AdjustmentMillion | AdjustmentMillion | |
| Capacity alignments | 2 | 4 |
| Total adjustments to operating income | 2 | 4 |
| Tax on non-U.S. GAAP adjustments^1)^ | (0) | 0 |
| Total adjustments to net income | 2 | 4 |
| Average number of shares outstanding - diluted^2)^ | ||
| Annualized adjustment on return on capital employed | 9 | 17 |
| Adjustment on return on capital employed | 0.4% | 0.4% |
| Annualized adjustment on Return on total equity | 7 | 18 |
| Adjustment on return on total equity | 0.6% | 0.6% |
| 1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) Annualized average number of outstanding shares |
All values are in US Dollars.
| Items included in non-U.S. GAAP adjustments | First 9 months 2022 | First 9 months 2021 |
|---|---|---|
| AdjustmentMillion | AdjustmentMillion | |
| Capacity alignments | (64) | 6 |
| Total adjustments to operating income | (64) | 6 |
| Tax on non-U.S. GAAP adjustments^1)^ | 23 | (0) |
| Total adjustments to net income | (41) | 6 |
| Average number of shares outstanding - diluted^2)^ | ||
| Annualized adjustment on Return on capital employed | (85) | 8 |
| Adjustment on return on capital employed | (2.2)% | 0.2% |
| Annualized adjustment on Return on total equity | (55) | 7 |
| Adjustment on return on total equity | (2.0)% | 0.3% |
| 1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) Annualized average number of outstanding shares |
All values are in US Dollars.
Multi-year Summary
Continuing Operations unless noted
| (Dollars in millions, unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|
| Sales and Income | |||||
| Net sales | $8,230 | $7,447 | $8,548 | $8,678 | $8,137 |
| Airbag sales^1)^ | 5,380 | 4,824 | 5,676 | 5,699 | 5,342 |
| Seatbelt sales | 2,850 | 2,623 | 2,871 | 2,980 | 2,794 |
| Operating income | 675 | 382 | 726 | 686 | 860 |
| Net income attributable to controlling interest | 435 | 187 | 462 | 376 | 586 |
| Earnings per share (US$) – basic^2)^ | 4.97 | 2.14 | 5.29 | 4.32 | 6.70 |
| Earnings per share (US$) – assuming dilution^2, 3)^ | 4.96 | 2.14 | 5.29 | 4.31 | 6.68 |
| Gross margin^4)^ | 18.4% | 16.7% | 18.5% | 19.7% | 20.6% |
| R,D&E net in relation to sales | (4.7)% | (5.0)% | (4.7)% | (4.8)% | (4.6)% |
| S,G&A in relation to sales | (5.3)% | (5.2)% | (4.7)% | (4.5)% | (5.0)% |
| Operating margin^5)^ | 8.2% | 5.1% | 8.5% | 7.9% | 10.6% |
| Adjusted operating margin^6, 7)^ | 8.3% | 6.5% | 9.1% | 10.5% | 11.1% |
| Balance Sheet | |||||
| Trade working capital^8)^ | 1,332 | 1,366 | 1,417 | 1,396 | 1,444 |
| Trade working capital in relation to sales^9)^ | 15.7% | 13.6% | 16.2% | 15.9% | 16.7% |
| Receivables outstanding in relation to sales^10)^ | 20.0% | 18.1% | 18.6% | 19.0% | 19.6% |
| Inventory outstanding in relation to sales^11)^ | 9.2% | 7.9% | 8.5% | 8.6% | 8.2% |
| Payables outstanding in relation to sales^12)^ | 13.5% | 12.5% | 10.8% | 11.7% | 11.1% |
| Total equity | 2,648 | 2,423 | 2,122 | 1,897 | 4,169 |
| Total parent shareholders’ equity per share (US$) | 30.10 | 27.56 | 24.19 | 21.63 | 46.38 |
| Current assets excluding cash | 2,705 | 3,091 | 2,557 | 2,670 | 2,598 |
| Property, plant and equipment, net | 1,855 | 1,869 | 1,816 | 1,690 | 1,609 |
| Intangible assets (primarily goodwill) | 1,395 | 1,412 | 1,410 | 1,423 | 1,440 |
| Capital employed | 3,700 | 3,637 | 3,772 | 3,516 | 4,538 |
| Net debt^7)^ | 1,052 | 1,214 | 1,650 | 1,619 | 368 |
| Total assets | 7,537 | 8,157 | 6,771 | 6,722 | 6,947 |
| Long-term debt | 1,662 | 2,110 | 1,726 | 1,609 | 1,311 |
| Return on capital employed^13, 14)^ | 18% | 10% | 20% | 17% | n/a |
| Return on total equity^14, 15)^ | 17% | 9% | 23% | 13% | n/a |
| Total equity ratio | 35% | 30% | 31% | 28% | 49% |
| Cash flow and other data | |||||
| Operating Cash flow^16)^ | 754 | 849 | 641 | 591 | 936 |
| Depreciation and amortization^16)^ | 394 | 371 | 351 | 397 | 426 |
| Capital expenditures, net^16)^ | 454 | 340 | 476 | 555 | 570 |
| Capital expenditures, net in relation to sales^16)^ | 5.5% | 4.6% | 5.6% | 5.7% | 5.5% |
| Free Cash flow^7, 16, 17)^ | 300 | 509 | 165 | 36 | 366 |
| Cash conversion^7, 16, 18)^ | 68.6% | 270% | 35.6% | 19.5% | 121% |
| Direct shareholder return^16, 19)^ | 165 | 54 | 217 | 214 | 366 |
| Cash dividends paid per share (US$) | 1.88 | 0.62 | 2.48 | 2.46 | 2.38 |
| Number of shares outstanding (millions)^20)^ | 87.5 | 87.4 | 87.2 | 87.1 | 87.0 |
| Number of employees, December 31 | 55,900 | 61,000 | 58,900 | 57,700 | 56,700 |
| 1) Including steering wheels, inflators and initiators. 2) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 3) Assuming dilution and net of treasury shares. 4) Gross profit relative to sales. 5) Operating income relative to sales. 6) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. 7) Non-US GAAP measure, for reconciliation see tables above. 8) Outstanding receivables and outstanding inventory less outstanding payables. 9) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized fourth quarter sales. 10) Outstanding receivables relative to annualized fourth quarter sales. 11) Outstanding inventory relative to annualized fourth quarter sales. 12) Outstanding payables relative to annualized fourth quarter sales. 13) Operating income and income from equity method investments, relative to average capital employed. 14) The Company has decided not to recalculate prior periods since the distribution of Veoneer had a significant impact on total equity and capital employed making the comparison less meaningful. 15) Income relative to average total equity. 16) Including Discontinued Operations in 2017 and 2018. 17) Operating cash flow less Capital expenditures, net. 18) Free cash flow relative to Net income. 19) Dividends paid and Shares repurchased. 20) At year end, excluding dilution and net of treasury shares. |
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