Autoliv Inc.
Autoliv Inc.
10/18/2024 | Press release | Distributed by Public on 10/18/2024 07:24
Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
☒ |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2024
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.: 001-12933
AUTOLIV, INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
51-0378542 |
|
|
(State or other jurisdiction of |
(I.R.S. Employer |
|
|
incorporation or organization) |
Identification No.) |
|
|
Klarabergsviadukten 70, Section B7 |
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Box 70381, |
||
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Stockholm, Sweden |
SE-107 24 |
|
|
(Address of principal executive offices) |
(Zip Code) |
+46 8 587 20 600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
||
|
Common Stock (par value $1.00 per share) |
ALV |
New York Stock Exchange |
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. Yes: ☒ No: ☐
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). Yes: ☒ No: ☐
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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Large accelerated filer |
☒ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
|
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: ☐ No: ☒
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of October 14, 2024, there were 78,751,746shares of common stock of Autoliv, Inc., par value $1.00 per share, outstanding.
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, including inflation; 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 and hostilities in the Middle East; changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignments: 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 judgments 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; the conditions necessary to hit our financial targets; 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, 2023 filed with the SEC on February 20, 2024.
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 |
||
|
PART I - FINANCIAL INFORMATION |
4 |
|
|
ITEM 1. FINANCIAL STATEMENTS |
4 |
|
|
1. |
Basis of Presentation |
10 |
|
2. |
New Accounting Standards |
11 |
|
3. |
Fair Value Measurements |
12 |
|
4. |
Income Taxes |
15 |
|
5. |
Inventories |
15 |
|
6. |
Restructuring |
16 |
|
7. |
Product-Related Liabilities |
16 |
|
8. |
Retirement Plans |
17 |
|
9. |
Contingent Liabilities |
18 |
|
10. |
Stock Incentive Plan |
20 |
|
11. |
Earnings Per Share |
20 |
|
12. |
Revenue Disaggregation |
20 |
|
13. |
Subsequent Events |
21 |
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
22 |
|
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
36 |
|
|
ITEM 4. CONTROLS AND PROCEDURES |
36 |
|
|
PART II - OTHER INFORMATION |
37 |
|
|
ITEM 1. LEGAL PROCEEDINGS |
37 |
|
|
ITEM 1A. RISK FACTORS |
37 |
|
|
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
37 |
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
37 |
|
|
ITEM 4. MINE SAFETY DISCLOSURES |
37 |
|
|
ITEM 5. OTHER INFORMATION |
37 |
|
|
ITEM 6. EXHIBITS |
38 |
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in millions, except per share data)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Net sales |
$ |
2,555 |
$ |
2,596 |
$ |
7,774 |
$ |
7,724 |
||||||||
|
Cost of sales |
(2,095 |
) |
(2,131 |
) |
(6,398 |
) |
(6,432 |
) |
||||||||
|
Gross profit |
459 |
465 |
1,377 |
1,291 |
||||||||||||
|
Selling, general and administrative expenses |
(129 |
) |
(119 |
) |
(399 |
) |
(380 |
) |
||||||||
|
Research, development and engineering expenses, net |
(96 |
) |
(107 |
) |
(325 |
) |
(343 |
) |
||||||||
|
Other income (expense), net |
(9 |
) |
(8 |
) |
(27 |
) |
(115 |
) |
||||||||
|
Operating income |
226 |
232 |
626 |
453 |
||||||||||||
|
Income from equity method investment |
2 |
1 |
5 |
4 |
||||||||||||
|
Interest income |
3 |
3 |
10 |
10 |
||||||||||||
|
Interest expense |
(27 |
) |
(24 |
) |
(81 |
) |
(68 |
) |
||||||||
|
Other non-operating items, net |
(7 |
) |
(11 |
) |
(7 |
) |
(6 |
) |
||||||||
|
Income before income taxes |
197 |
201 |
554 |
393 |
||||||||||||
|
Income tax expense |
(58 |
) |
(67 |
) |
(149 |
) |
(131 |
) |
||||||||
|
Net income1) |
139 |
134 |
404 |
262 |
||||||||||||
|
Less: Net income attributable to non-controlling interest |
0 |
1 |
1 |
1 |
||||||||||||
|
Net income attributable to controlling interest |
$ |
138 |
$ |
134 |
$ |
403 |
$ |
261 |
||||||||
|
Net earnings per share - basic |
$ |
1.75 |
$ |
1.58 |
$ |
4.99 |
$ |
3.05 |
||||||||
|
Net earnings per share - diluted |
$ |
1.74 |
$ |
1.57 |
$ |
4.98 |
$ |
3.04 |
||||||||
|
Weighted average number of shares outstanding, net of |
79.2 |
84.9 |
80.7 |
85.5 |
||||||||||||
|
Weighted average number of shares outstanding, |
79.3 |
85.0 |
80.9 |
85.7 |
||||||||||||
|
Cash dividend per share - declared |
$ |
0.68 |
$ |
0.66 |
$ |
2.04 |
$ |
1.98 |
||||||||
|
Cash dividend per share - paid |
$ |
0.68 |
$ |
0.66 |
$ |
2.04 |
$ |
1.98 |
1) For the three months periods ended September 30, 2024 and 2023, the aggregate transaction gain (loss) included in net income for the period were a loss of $5million and a loss of $16million, respectively. For the nine months periods ended September 30, 2024 and 2023, the aggregate transaction gain (loss) included in net income for the period were a loss of $7million and a loss of $31million, respectively.
See Notes to the unaudited Condensed Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in millions)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Net income |
$ |
139 |
$ |
134 |
$ |
404 |
$ |
262 |
||||||||
|
Other comprehensive income (loss) before tax: |
||||||||||||||||
|
Change in cumulative translation adjustments |
36 |
(33 |
) |
(70 |
) |
(43 |
) |
|||||||||
|
Net change in unrealized components of defined benefit plans |
(1 |
) |
1 |
8 |
6 |
|||||||||||
|
Other comprehensive (loss), before tax |
34 |
(32 |
) |
(62 |
) |
(37 |
) |
|||||||||
|
Tax effect allocated to other comprehensive income (loss) |
0 |
(0 |
) |
(2 |
) |
(1 |
) |
|||||||||
|
Other comprehensive (loss), net of tax |
35 |
(32 |
) |
(63 |
) |
(38 |
) |
|||||||||
|
Comprehensive income |
173 |
102 |
341 |
223 |
||||||||||||
|
Less: Comprehensive income (loss) attributable to |
1 |
0 |
1 |
0 |
||||||||||||
|
Comprehensive income attributable to |
$ |
173 |
$ |
101 |
$ |
340 |
$ |
223 |
See Notes to the unaudited Condensed Consolidated Financial Statements.
5
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in millions)
|
As of |
||||||||
|
September 30, 2024 |
December 31, 2023 |
|||||||
|
Assets |
||||||||
|
Cash and cash equivalents |
$ |
415 |
$ |
498 |
||||
|
Receivables, net |
2,192 |
2,198 |
||||||
|
Inventories, net |
997 |
1,012 |
||||||
|
Prepaid expenses and accrued income |
172 |
173 |
||||||
|
Other current assets |
90 |
93 |
||||||
|
Total current assets |
3,865 |
3,974 |
||||||
|
Property, plant and equipment, net |
2,317 |
2,192 |
||||||
|
Operating lease right-of-use assets |
173 |
176 |
||||||
|
Goodwill and intangible assets, net |
1,386 |
1,385 |
||||||
|
Other non-current assets |
565 |
606 |
||||||
|
Total assets |
8,306 |
8,332 |
||||||
|
Liabilities and equity |
||||||||
|
Short-term debt |
624 |
538 |
||||||
|
Accounts payable1) |
1,881 |
1,978 |
||||||
|
Accrued expenses |
1,189 |
1,135 |
||||||
|
Operating lease liabilities - current |
44 |
39 |
||||||
|
Other current liabilities |
297 |
345 |
||||||
|
Total current liabilities |
4,034 |
4,035 |
||||||
|
Long-term debt |
1,586 |
1,324 |
||||||
|
Pension liability |
147 |
159 |
||||||
|
Operating lease liabilities - non-current |
130 |
135 |
||||||
|
Other non-current liabilities |
110 |
109 |
||||||
|
Total non-current liabilities |
1,974 |
1,728 |
||||||
|
Common stock |
84 |
88 |
||||||
|
Additional paid-in capital |
968 |
1,044 |
||||||
|
Retained earnings |
2,154 |
2,293 |
||||||
|
Accumulated other comprehensive loss2) |
(559 |
) |
(496 |
) |
||||
|
Treasury stock |
(358 |
) |
(371 |
) |
||||
|
Total controlling interest's equity |
2,288 |
2,557 |
||||||
|
Non-controlling interest |
10 |
13 |
||||||
|
Total equity |
2,298 |
2,570 |
||||||
|
Total liabilities and equity |
$ |
8,306 |
$ |
8,332 |
1)Amount of obligations confirmed under the Company's Supplier Finance Program that remains unpaid is reported as Accounts Payable in the Condensed Consolidated Balance Sheets. Amount of obligations outstanding as of September 30, 2024 and December 31, 2023 are $334million and $333million, respectively.
2) Including cumulative translation adjustment as of September 30, 2024 and December 31, 2023 to the amount of $(514)million and $(449)million, respectively.
See Notes to the unaudited Condensed Consolidated Financial Statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
|
Nine Months Ended September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Operating activities |
||||||||
|
Net income |
$ |
404 |
$ |
262 |
||||
|
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
|
Depreciation and amortization |
289 |
281 |
||||||
|
Other, net |
1 |
1 |
||||||
|
Net change in operating assets and liabilities |
(54 |
) |
(8 |
) |
||||
|
Net cash provided by operating activities |
639 |
535 |
||||||
|
Investing activities |
||||||||
|
Expenditures for property, plant and equipment |
(440 |
) |
(420 |
) |
||||
|
Proceeds from sale of property, plant and equipment |
9 |
1 |
||||||
|
Net cash used in investing activities |
(431 |
) |
(419 |
) |
||||
|
Financing activities |
||||||||
|
Net (decrease) increase in short-term debt |
85 |
115 |
||||||
|
Proceeds from issuance of long-term debt |
581 |
557 |
||||||
|
Repayment of long-term debt |
(306 |
) |
(533 |
) |
||||
|
Dividends paid |
(164 |
) |
(169 |
) |
||||
|
Stock repurchased |
(450 |
) |
(202 |
) |
||||
|
Common stock options exercised |
0 |
1 |
||||||
|
Dividends paid to non-controlling interest |
(5 |
) |
(1 |
) |
||||
|
Net cash used in financing activities |
(259 |
) |
(232 |
) |
||||
|
Effect of exchange rate changes on cash and cash equivalents |
(33 |
) |
(3 |
) |
||||
|
Net decrease in cash and cash equivalents |
(84 |
) |
(119 |
) |
||||
|
Cash and cash equivalents at beginning of period |
498 |
594 |
||||||
|
Cash and cash equivalents at end of period |
$ |
415 |
$ |
475 |
See Notes to unaudited Condensed Consolidated Financial Statements.
7
CONSOLIDATED STATEMENTS OF TOTAL EQUITY (UNAUDITED) (Dollars in millions)
|
Common |
Additional |
Retained |
Accumulated |
Treasury |
Total |
Non- |
Total |
||||||||||||||||||||||||
|
Balances at December 31, 2023 |
$ |
88 |
$ |
1,044 |
$ |
2,289 |
$ |
(496 |
) |
$ |
(368 |
) |
$ |
2,557 |
$ |
13 |
$ |
2,570 |
|||||||||||||
|
Comprehensive Loss: |
|||||||||||||||||||||||||||||||
|
Net income |
126 |
126 |
0 |
127 |
|||||||||||||||||||||||||||
|
Foreign currency translation |
(46 |
) |
(46 |
) |
(0 |
) |
(47 |
) |
|||||||||||||||||||||||
|
Pension liability |
5 |
5 |
5 |
||||||||||||||||||||||||||||
|
Total Comprehensive Income |
- |
- |
126 |
(41 |
) |
- |
85 |
0 |
85 |
||||||||||||||||||||||
|
Retired and repurchased shared |
(1 |
) |
(26 |
) |
(134 |
) |
(161 |
) |
(161 |
) |
|||||||||||||||||||||
|
Stock-based compensation |
4 |
4 |
4 |
||||||||||||||||||||||||||||
|
Cash dividends declared |
(56 |
) |
(56 |
) |
(56 |
) |
|||||||||||||||||||||||||
|
Balances at March 31, 2024 |
$ |
86 |
$ |
1,018 |
$ |
2,226 |
$ |
(537 |
) |
$ |
(364 |
) |
$ |
2,429 |
$ |
13 |
$ |
2,442 |
|||||||||||||
|
Comprehensive Loss: |
|||||||||||||||||||||||||||||||
|
Net income |
138 |
138 |
0 |
139 |
|||||||||||||||||||||||||||
|
Foreign currency translation |
(59 |
) |
(59 |
) |
(0 |
) |
(59 |
) |
|||||||||||||||||||||||
|
Pension liability |
2 |
2 |
2 |
||||||||||||||||||||||||||||
|
Total Comprehensive Loss |
- |
- |
138 |
(56 |
) |
- |
82 |
0 |
83 |
||||||||||||||||||||||
|
Retired and repurchased shared |
(1 |
) |
(25 |
) |
(136 |
) |
(162 |
) |
(162 |
) |
|||||||||||||||||||||
|
Stock-based compensation |
4 |
4 |
4 |
||||||||||||||||||||||||||||
|
Dividends paid to non-controlling interest |
0 |
(1 |
) |
(1 |
) |
||||||||||||||||||||||||||
|
Cash dividends declared |
(55 |
) |
(55 |
) |
(55 |
) |
|||||||||||||||||||||||||
|
Balances at June 30, 2024 |
$ |
85 |
$ |
993 |
$ |
2,174 |
$ |
(593 |
) |
$ |
(360 |
) |
$ |
2,298 |
$ |
13 |
$ |
2,311 |
|||||||||||||
|
Comprehensive Income: |
|||||||||||||||||||||||||||||||
|
Net income |
138 |
138 |
0 |
139 |
|||||||||||||||||||||||||||
|
Foreign currency translation |
35 |
35 |
0 |
36 |
|||||||||||||||||||||||||||
|
Pension liability |
(1 |
) |
(1 |
) |
(1 |
) |
|||||||||||||||||||||||||
|
Total Comprehensive Income (loss) |
- |
- |
138 |
34 |
- |
173 |
1 |
173 |
|||||||||||||||||||||||
|
Retired and repurchased shared |
(1 |
) |
(25 |
) |
(105 |
) |
(131 |
) |
(131 |
) |
|||||||||||||||||||||
|
Stock-based compensation |
2 |
2 |
2 |
||||||||||||||||||||||||||||
|
Dividends paid to non-controlling |
(4 |
) |
(4 |
) |
|||||||||||||||||||||||||||
|
Cash dividends declared |
(54 |
) |
(54 |
) |
(54 |
) |
|||||||||||||||||||||||||
|
Balances at September 30, 2024 |
$ |
84 |
$ |
968 |
$ |
2,154 |
$ |
(559 |
) |
$ |
(358 |
) |
$ |
2,288 |
$ |
10 |
$ |
2,298 |
8
|
Common |
Additional |
Retained |
Accumulated |
Treasury |
Total |
Non- |
Total |
||||||||||||||||||||||||
|
Balances at December 31, 2022 |
$ |
91 |
$ |
1,113 |
$ |
2,310 |
$ |
(522 |
) |
$ |
(379 |
) |
$ |
2,613 |
$ |
13 |
$ |
2,626 |
|||||||||||||
|
Comprehensive Income: |
|||||||||||||||||||||||||||||||
|
Net income |
74 |
74 |
0 |
74 |
|||||||||||||||||||||||||||
|
Foreign currency translation |
36 |
36 |
0 |
36 |
|||||||||||||||||||||||||||
|
Pension liability |
(0 |
) |
(0 |
) |
(0 |
) |
|||||||||||||||||||||||||
|
Total Comprehensive Income |
- |
- |
74 |
35 |
- |
110 |
0 |
110 |
|||||||||||||||||||||||
|
Stock repurchased and retired |
(0 |
) |
(9 |
) |
(33 |
) |
(42 |
) |
(42 |
) |
|||||||||||||||||||||
|
Stock-based compensation |
3 |
3 |
3 |
||||||||||||||||||||||||||||
|
Cash dividends declared |
(57 |
) |
(57 |
) |
(57 |
) |
|||||||||||||||||||||||||
|
Balances at March 31, 2023 |
$ |
91 |
$ |
1,105 |
$ |
2,295 |
$ |
(487 |
) |
$ |
(376 |
) |
$ |
2,627 |
$ |
14 |
$ |
2,641 |
|||||||||||||
|
Comprehensive Income: |
|||||||||||||||||||||||||||||||
|
Net income |
53 |
53 |
0 |
53 |
|||||||||||||||||||||||||||
|
Foreign currency translation |
(45 |
) |
(45 |
) |
(1 |
) |
(46 |
) |
|||||||||||||||||||||||
|
Pension liability |
4 |
4 |
4 |
||||||||||||||||||||||||||||
|
Total Comprehensive Income |
- |
- |
53 |
(41 |
) |
- |
12 |
(0 |
) |
12 |
|||||||||||||||||||||
|
Stock repurchased and retired |
(0 |
) |
(9 |
) |
(31 |
) |
(41 |
) |
(41 |
) |
|||||||||||||||||||||
|
Stock-based compensation |
3 |
3 |
3 |
||||||||||||||||||||||||||||
|
Dividends paid to non-controlling interest |
0 |
(1 |
) |
(1 |
) |
||||||||||||||||||||||||||
|
Cash dividends declared |
(56 |
) |
(56 |
) |
(56 |
) |
|||||||||||||||||||||||||
|
Balances at June 30, 2023 |
$ |
90 |
$ |
1,096 |
$ |
2,260 |
$ |
(527 |
) |
$ |
(374 |
) |
$ |
2,545 |
$ |
13 |
$ |
2,557 |
|||||||||||||
|
Comprehensive Income: |
|||||||||||||||||||||||||||||||
|
Net income |
134 |
134 |
1 |
134 |
|||||||||||||||||||||||||||
|
Foreign currency translation |
(33 |
) |
(33 |
) |
(0 |
) |
(33 |
) |
|||||||||||||||||||||||
|
Pension liability |
1 |
1 |
1 |
||||||||||||||||||||||||||||
|
Total Comprehensive Income |
- |
- |
134 |
(32 |
) |
- |
101 |
0 |
102 |
||||||||||||||||||||||
|
Stock repurchased and retired |
(1 |
) |
(23 |
) |
(95 |
) |
(120 |
) |
(120 |
) |
|||||||||||||||||||||
|
Stock-based compensation |
3 |
3 |
3 |
||||||||||||||||||||||||||||
|
Dividends paid to non-controlling interest |
- |
- |
|||||||||||||||||||||||||||||
|
Cash dividends declared |
(56 |
) |
(56 |
) |
(56 |
) |
|||||||||||||||||||||||||
|
Balances at September 30, 2023 |
$ |
89 |
$ |
1,072 |
$ |
2,242 |
$ |
(560 |
) |
$ |
(371 |
) |
$ |
2,473 |
$ |
13 |
$ |
2,486 |
See Notes to the unaudited Condensed Consolidated Financial Statements.
9
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)
September 30, 2024
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, 2024.
The Condensed Consolidated Balance Sheet as of December 31, 2023 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 onereportable segment, which includes Autoliv's airbag and seatbelt products and components.
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, 2023 filed with the SEC on February 20, 2024.
10
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").
Adoption of new accounting standards
None.
Accounting standards issued but not yet adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require that a public entity make additional disclosures related to segments if it has them. A public entity that has a single reportable segment would be required to provide all the disclosures required by the amendments in this update and all existing segment disclosures in Topic 280. The amendments in this update are affective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in this update should be applied retrospectively to all prior periods presented in the financial statements. The Company has concluded that the pending adoption of ASU 2023-07 will not have a material impact on the Company's consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures as well as improve the effectiveness of income tax disclosures. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The amendments in this update also require that all entities disclose on an annual basis certain detailed information about income taxes paid. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity's worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The amendments in this update are affective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company is currently assessing the impact that ASU 2023-09 will have on its financial statements and will adopt the amendments in this update prospectively upon the effective date.
In March 2024, the SEC adopted final rules requiring registrants to disclose climate-related information in their annual reports. The final rules require information about a registrant's climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition. In addition, under the final rules, certain disclosures related to severe weather events and other natural conditions will be required in a registrant's audited financial statements. The new requirements are required on a prospective basis and a phased-in compliance period becomes effective for the Company beginning with its Annual Report on Form 10-K for the year ending December 31, 2025. However, pending the resolution of legal challenges that were subsequently filed against these rules, in April 2024, the SEC stayed the effectiveness of the rules. Therefore, the disclosure requirements of these rules and the timing of their effectiveness is uncertain. The Company is currently assessing the anticipated impact that the rules will have on its financial statements if and when effective and will implement disclosures upon any such effective dates.
11
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 includes 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 of its derivative counterparties, the fair values in the tables below and in the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 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 noderivatives designated as hedging instruments as of September 30, 2024 or December 31, 2023 related to the Company's operations.
12
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 as of September 30, 2024 and December 31, 2023 were foreign exchange swaps.
For the three months periods ended September 30, 2024 and 2023, the gains (losses) recognized in other non-operating items, net were a gain of $1million and a gain of $12million, respectively, for derivative instruments not designated as hedging instruments. For the nine months periods ended September 30, 2024 and 2023, the gains (losses) recognized in other non-operating items, net were a gain of $11million and a gain of $21million, respectively. The realized part of the losses referred to above is reported under financing activities in the statement of cash flows.
For the three and nine months periods ended September 30, 2024, the gains (losses) recognized as interest expense were a loss of $5million and a gain of $1million,respectively. For the three and nine months periods ended September 30, 2023, the gains (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).
|
As of |
||||||||||||||||||||||||||
|
September 30, 2024 |
December 31, 2023 |
|||||||||||||||||||||||||
|
Fair Value Measurements |
Fair Value Measurements |
|||||||||||||||||||||||||
|
Description |
Nominal |
Derivative |
Derivative |
Nominal |
Derivative |
Derivative |
||||||||||||||||||||
|
Derivatives not designated as hedging |
||||||||||||||||||||||||||
|
Foreign exchange swaps, less |
$ |
1,798 |
1) |
$ |
19 |
2) |
$ |
21 |
3) |
$ |
1,895 |
4) |
$ |
22 |
5) |
$ |
12 |
6) |
||||||||
|
Total derivatives not designated |
$ |
1,798 |
$ |
19 |
$ |
21 |
$ |
1,895 |
$ |
22 |
$ |
12 |
1) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,798million.
2) Net amount after deducting for offsetting swaps under ISDA agreements is $19million.
3) Net amount after deducting for offsetting swaps under ISDA agreements is $21million.
4) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,895million.
5) Net amount after deducting for offsetting swaps under ISDA agreements is $22million.
6) Net amount after deducting for offsetting swaps under ISDA agreements is $12million.
13
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.
In February 2024, the Company issued 5.5-year notes for a total of €500million in the Eurobond market. The notes carry a coupon of 3.625% and mature in August 2029. In April 2024, the Company repaid $297million of US Private Placement debt.
The fair value and carrying value of debt is summarized in the table below (dollars in millions).
|
As of |
||||||||||||||||
|
September 30, 2024 |
December 31, 2023 |
|||||||||||||||
|
Carrying |
Fair |
Carrying |
Fair |
|||||||||||||
|
Long-term debt |
||||||||||||||||
|
Bonds |
$ |
1,586 |
$ |
1,612 |
$ |
1,023 |
$ |
1,022 |
||||||||
|
Loans |
- |
- |
301 |
306 |
||||||||||||
|
Total long-term debt |
1,586 |
1,612 |
1,324 |
1,328 |
||||||||||||
|
Short-term debt |
||||||||||||||||
|
Short-term portion of long-term debt |
297 |
302 |
297 |
297 |
||||||||||||
|
Overdrafts and other short-term debt |
327 |
327 |
241 |
241 |
||||||||||||
|
Total short-term debt |
$ |
624 |
$ |
630 |
$ |
538 |
$ |
538 |
1) Debt as reported in balance sheet.
Assets and liabilities measured at fair value on a non-recurring basis
In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a nonrecurring basis, including certain long-lived assets, including equity method investments, goodwill and other intangible assets, typically as it relates to impairment.
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 nine months periods ended September 30, 2024 and September 30, 2023, the Companydid not record any material impairment charges on its long-lived assets for its operations.
14
4. INCOME TAXES
The effective tax rate for the three months period ended September 30, 2024 was 29.6%compared to 33.4%for the three months period ended September 30, 2023. Discrete tax items, net for the three months period ended September 30, 2024 had a favorable impact of 1.2%. Discrete tax items, net for the three months period ended September 30, 2023 had an unfavorable impact of 0.2%.
The effective tax rate for the nine months period ended September 30, 2024 was 27.0%compared to 33.4%for the nine months period ended September 30, 2023. Discrete tax items, net for the nine months period ended September 30, 2024 had a favorable impact of 2.8%. Discrete tax items, net for the nine months period ended September 30, 2023 had a favorable impact of 0.6%.
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 2012.
As of September 30, 2024, 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 nine months period ended September 30, 2024, the Company recorded a net increase of $6million to income tax reserves for unrecognized tax benefits based on tax positions related to the current year, including accruing additional interest related to unrecognized tax benefits from prior years.In addition, during the nine month period ended September 30, 2024, the Company recorded a net decrease of $17million to income tax reserves for unrecognized tax benefits based on tax positions taken in prior years, mainly due to conclusion of tax audits and expiration of the statute of limitations in various jurisdictions.
Of the total unrecognized tax benefits of $53million recorded as of September 30, 2024, $14million is classified as current tax payable within Other current liabilities and $39million is classified as non-current tax payable within Other non-current liabilities on the Condensed Consolidated Balance Sheet.
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 |
||||||||
|
September 30, 2024 |
December 31, 2023 |
|||||||
|
Raw materials |
$ |
447 |
$ |
457 |
||||
|
Work in progress |
332 |
347 |
||||||
|
Finished products |
309 |
296 |
||||||
|
Inventories |
1,088 |
1,100 |
||||||
|
Inventory valuation reserve |
(91 |
) |
(89 |
) |
||||
|
Total inventories, net of reserve |
$ |
997 |
$ |
1,012 |
15
6. RESTRUCTURING
As of September 30, 2024, the majority of the restructuring reserve balance of $187million is attributed to global structural cost reduction program activities initiated in Europe in 2023. These activities are expected to be concluded during 2024 and 2025.
Provisions for the three months period ended September 30, 2024 mainly related to restructuring activities in Americas. Provisions for the nine months period ended September 2024 mainly related to restructuring activities in Europe and Americas. Cash payments for the three and nine months periods ended September 30, 2024 related to the restructuring activities in Europe. The provision charges for the three and nine months periods ended September 30, 2023 mainly related to restructuring activities in Germany and UK. The cash payments for the three and nine months periods ended September 30, 2023 relate to restructuring activities in Europe
The table below summarizes the change in the balance sheet position of the employee-related restructuring reserves (dollars in millions). The restructuring reserve balances are included within Accrued expenses in the Condensed Consolidated Balance Sheets. 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 September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Reserve at beginning of the period |
$ |
189 |
$ |
127 |
$ |
213 |
$ |
32 |
||||||||
|
Provision - charge |
9 |
8 |
22 |
118 |
||||||||||||
|
Provision - reversal |
(1 |
) |
(1 |
) |
(1 |
) |
(1 |
) |
||||||||
|
Cash payments |
(19 |
) |
(9 |
) |
(49 |
) |
(24 |
) |
||||||||
|
Translation difference |
8 |
(3 |
) |
1 |
(2 |
) |
||||||||||
|
Reserve at end of the period |
$ |
187 |
$ |
122 |
$ |
187 |
$ |
122 |
7. PRODUCT-RELATED LIABILITIES
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 months period ended September 30, 2024, cash payments mainly related to warranty- and recall-related issues. For the nine months period ended September 30, 2024, provision reversals and cash payments primarily related to recall-related issues. For the three and nine months periods ended September 30, 2023, provisions primarily related to warranty-related issues and cash payments mainly related to the Andrews litigation settlement. As of September 30, 2024, the reserve for product-related liabilities mainly consisted of recall-related issues.
The table below summarizes the change in the balance sheet position of the product-related liabilities (dollars in millions). The reserve for product-related liabilities is included in accrued expenses and other non-current liabilities on the Condensed Consolidated Balance Sheets. A majority of the Company's product-related liabilities as of September 30, 2024 are covered by insurance. Insurance receivables are included within other current assets and other non-current assets on the Condensed Consolidated Balance Sheets. As of September 30, 2024, the Company had total insurance receivables of $58million.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Reserve at beginning of the period |
$ |
73 |
$ |
178 |
$ |
96 |
$ |
145 |
||||||||
|
Change in reserve |
6 |
3 |
(2 |
) |
46 |
|||||||||||
|
Cash payments |
(3 |
) |
(61 |
) |
(17 |
) |
(71 |
) |
||||||||
|
Translation difference |
1 |
(0 |
) |
0 |
(1 |
) |
||||||||||
|
Reserve at end of the period |
$ |
77 |
$ |
120 |
$ |
77 |
$ |
120 |
16
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 September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Interest cost |
$ |
3 |
$ |
3 |
$ |
8 |
$ |
9 |
||||||||
|
Expected return on plan assets |
(3 |
) |
(3 |
) |
(9 |
) |
(8 |
) |
||||||||
|
Settlement loss |
0 |
1 |
1 |
1 |
||||||||||||
|
Net periodic benefit (gain) cost |
$ |
0 |
$ |
1 |
$ |
0 |
$ |
2 |
||||||||
|
Non-U.S. Plans |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Service cost |
$ |
2 |
$ |
2 |
$ |
7 |
$ |
7 |
||||||||
|
Interest cost |
3 |
2 |
8 |
7 |
||||||||||||
|
Expected return on plan assets |
(1 |
) |
(1 |
) |
(3 |
) |
(2 |
) |
||||||||
|
Amortization of actuarial loss |
0 |
1 |
1 |
1 |
||||||||||||
|
Net periodic benefit cost |
$ |
5 |
$ |
4 |
$ |
14 |
$ |
13 |
The Service cost component in the table above is reported among other employee compensation costs in the Consolidated Statements of Income. The remaining components - Interest cost, Expected return on plan assets, Amortization of actuarial loss, Settlement loss (gain) and Curtailment gain - are reported as Other non-operating items, net in the Consolidated Statements of Income.
The Company triggered settlement accounting for the primary U.S. pension plan in the third quarter of 2024 because the lump-sum payments made during the quarter exceeded the sum of Service cost and Interest cost for this U.S. plan. Due to the settlement accounting, the obligation and plan assets for the primary U.S. plan have been re-measured as of September 30, 2024, which resulted in an immaterial change in the net pension liability compared to December 31, 2023. The discount rate used to determine the U.S. net periodic benefit cost because of the re-measurement was changed from 5.57% to 4.95% in the third quarter of 2024. The expected long-term rate of return on plan asset is unchanged at 6.21%.
17
9. CONTINGENT LIABILITIES
Legal Proceedings
Various claims, lawsuits, and proceedings are pending or threatened against the Company and/or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability, and other matters. Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, and with the exception of potential future losses resulting from the antitrust proceedings described below, it is the opinion of management that the various legal proceedings and investigations to which the Company currently is a party will not have a material adverse impact on the consolidated financial position of Autoliv, but the Company cannot provide assurance that Autoliv will not experience material litigation, product liability, or other losses in the future.
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. As a result of the outcome of the European Commission investigation of anti-competitive behavior among suppliers of occupant safety systems that the Company resolved in 2019 (the "EC investigation"), the Company is subject to multiple subsequent civil disputes with non-governmental third parties stemming from the same facts and circumstances underlying the EC investigation. The Company is also involved in civil litigation in the UK with respect to alleged anti-competitive behavior that occurred over a decade ago. The Company believes these allegations are unfounded and are vigorously contesting them. These disputes could result in significant expenses as well as unfavorable outcomes that could have a material adverse impact on our customer relationships, business prospects, reputation, operating results, cash flows or financial condition, and our insurance would likely not mitigate such impact. The Company cannot predict the duration, scope, or ultimate outcome of any such disputes and is unable to estimate the loss or a range of loss, or predict the reporting periods in which any such loss may be recorded.
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, 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. Recall decisions regarding the Company's products may require a significant amount of judgment by us, our customers and safety regulators and are influenced by a variety of factors. Once a recall has been made, the cost of a recall is also subject to a significant amount of judgment and discussions between the Company and its customers. A warranty, recall or product-liability claim brought against the Company in excess of its insurance may have a material adverse effect on the Company's business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the repair or replacement costs of products when the product supplied did not perform as represented by us or expected by the customer in either a warranty or a recall situation. Accordingly, the future costs of warranty or recall claims by the customers may be material. However, the Company believes its established reserves are adequate. Autoliv's warranty reserves are based upon the Company's best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the adequacy of these reserves and adjusts them when appropriate. However, the final amounts actually due related to these matters could differ materially from the Company's recorded estimates.
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.
18
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.
As noted in Note 7 above, as of September 30, 2024, the Company has accrued $77million for total product related liabilities. The majority of the total product liability accrual as of September 30, 2024, relates to recalls, which are generally covered by insurance. Insurance receivables for such recall related liabilities total $58million as of September 30, 2024.
Product Liability:
Autoliv and some of its subsidiaries have been named as one of several defendants in a consolidated class action lawsuit in a multi-district litigation (In Re: ARC Airbag Inflators Products Liability Litigation MDL, No. 3051) in the Northern District of Georgia. The plaintiffs in the multi-district litigation (the "ARC Inflator Class Action") brought claims for fraud, breach of warranty, and violations of consumer protection and trade practices stemming from ARC inflators included in airbag modules that Autoliv or its subsidiaries allegedly supplied after Autoliv acquired certain Delphi assets (the "Delphi Acquisition") in December 2009. The Company denies these allegations. Autoliv is not aware of any performance issues regarding ARC inflators included with its airbags at the directions of its customers that it shipped following the Delphi Acquisition. The proceedings remain ongoing. The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the ARC Inflator Class Action. However, the Company continues to evaluate this matter, no accrual has been made, and no estimated range of potential loss can be determined at this time. The Company cannot predict the ultimate outcome of the ARC Inflator Class Action.
On September 5, 2023, the National Highway Traffic Safety Administration ("NHTSA") issued an initial decision to recall approximately 52million frontal driver and passenger airbag inflators manufactured by ARC and Delphi Automotive Systems because NHTSA determined that the airbag inflators contain a safety defect resulting in field ruptures. Some of the ARC inflators included in the airbag modules that Autoliv or its subsidiaries supplied after the Delphi Acquisition were included in such initial decision. NHTSA has yet to release its final decision. If NHTSA's final decision results in a recall, it is anticipated that such decision will be challenged in US federal court. The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the NHTSA ARC recall. However, the Company continues to evaluate this matter, no accrual has been made, and no estimated range of potential loss can be determined at this time. The Company cannot predict the ultimate outcome of the NHTSA ARC recall.
Specific Recalls:
In the fourth quarter of 2020, the Company was made aware of a potential recall by American Honda Motor Co. and the recall of approximately 449,000vehicles relating to the malfunction of front seat belt buckles was announced on March 9, 2023 (the "Honda Buckle Recall"). The Company determined pursuant to ASC 450 that a loss with respect to the Honda Buckle Recall is probable and accrued an amount that is reflected in the total product liability accrual in the fourth quarter of 2020, increased the accrual in the fourth quarter of 2021 and reduced the accrual in the fourth quarter of 2023 based on vehicle repair cost data. Following the accrual reduction in the fourth quarter of 2023, the amount by which the product liability accrual exceeds the product liability insurance receivable with respect to the Honda Buckle Recall is $10million and includes self-insurance retention costs and deductibles. The ultimate loss to the Company of the Honda Buckle Recall could be materially different from the amount the Company has accrued.
Volvo Car USA, LLC (together with its affiliates, "Volvo") has recalled approximately 762,000vehicles relating to the malfunction of inflators produced by ZF (the "ZF Inflator Recall"). The recalled ZF inflators were included in airbag modules supplied by the Company only to Volvo. The recall commenced in November 2020 and later expanded in September 2021. Because the Company's airbags were involved with the ZF Inflator Recall, the Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the ZF Inflator Recall. The Company continues to evaluate this matter with Volvo and ZF and noaccrual has been made. Although the Company currently estimates a range of $0to $43million with respect to this potential loss, the Company anticipates that any losses net of insurance claims and claims against ZF will be immaterial.
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 above summarizes the change in the balance sheet position of the product-related liabilities.
19
10. STOCK INCENTIVE PLAN
Eligible employees and non-employee directors of the Company participate in the Autoliv, Inc.1997 Stock Incentive Plan, as amended, ("the Plan"), and receive Autoliv stock-based awards which include restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") and, in the past, included stock options.
For the three and nine months periods ended September 30, 2024, the Company recorded approximately $2million and $10million, respectively, in stock-based compensation expense related to RSUs and PSUs. For the three and nine months periods ended September 30, 2023, the Company recorded approximately $3million and $8million, respectively, in stock-based compensation expense related to RSUs and PSUs.
During the three and nine months periods ended September 30, 2024, approximately 0thousand and 118thousand shares of common stock from the treasury stock were utilized by the Plan. During the three and nine months periods ended September 30, 2023, approximately 8thousand and 120thousand shares, respectively, of common stock from the treasury stock were utilized by the Plan.
11. EARNINGS PER SHARE
The computation of basic and diluted earnings per share is set forth in the table below. Anti-dilutive shares outstanding were immaterial for all periods presented below.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
(In millions, except per share amounts) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Numerator: |
||||||||||||||||
|
Basic and diluted: |
||||||||||||||||
|
Net income attributable to controlling interest |
$ |
138 |
$ |
134 |
$ |
403 |
$ |
261 |
||||||||
|
Denominator: |
||||||||||||||||
|
Basic: Weighted average common stock |
79.2 |
84.9 |
80.7 |
85.5 |
||||||||||||
|
Add: Weighted average stock options/share awards |
0.1 |
0.2 |
0.2 |
0.2 |
||||||||||||
|
Diluted weighted average common stock: |
79.3 |
85.0 |
80.9 |
85.7 |
||||||||||||
|
Net earnings per share - basic |
$ |
1.75 |
$ |
1.58 |
$ |
4.99 |
$ |
3.05 |
||||||||
|
Net earnings per share - diluted |
$ |
1.74 |
$ |
1.57 |
$ |
4.98 |
$ |
3.04 |
12. REVENUE DISAGGREGATION
The Company's disaggregated revenue for the three and nine months periods ended September 30, 2024 and September 30, 2023 were as follows (dollars in millions).
|
Net Sales by Products |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Airbags, Steering Wheels and Other1) |
$ |
1,736 |
$ |
1,761 |
$ |
5,264 |
$ |
5,191 |
||||||||
|
Seatbelt Products and Other1) |
819 |
835 |
2,511 |
2,533 |
||||||||||||
|
Total net sales |
$ |
2,555 |
$ |
2,596 |
$ |
7,774 |
$ |
7,724 |
||||||||
|
Net Sales by Region |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Americas |
$ |
851 |
$ |
918 |
$ |
2,637 |
$ |
2,665 |
||||||||
|
Europe |
700 |
646 |
2,231 |
2,122 |
||||||||||||
|
China |
495 |
538 |
1,423 |
1,488 |
||||||||||||
|
Asia excl. China |
508 |
495 |
1,483 |
1,449 |
||||||||||||
|
Total net sales |
$ |
2,555 |
$ |
2,596 |
$ |
7,774 |
$ |
7,724 |
1) Including Corporate 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 nine months periods ended September 30, 2024 and September 30, 2023, were not material in any period.
20
13. SUBSEQUENT EVENTS
There were no reportable events subsequent to September 30, 2024.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL 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, 2023 filed with the United States Securities and Exchange Commission (the "SEC") on February 20, 2024. 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.
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", "Free cash flow", "Net debt", "Leverage ratio", "Adjusted operating income", "Adjusted operating margin" and "Adjusted earnings per share, diluted" 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 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.
22
EXECUTIVE OVERVIEW
Light vehicle production was weak in the third quarter, declining by close to 5% globally. This was driven by a combination of inventory reductions, especially in the Americas and a high comparison base, especially in China. In this tough environment, Autoliv managed to outgrow LVP by 4pp, enabling almost unchanged sales and operating income. This is despite a $14 million cost item related to a supplier settlement. We were able to achieve these results mainly due to our cost control, including a continued reduction of our indirect workforce. We accelerated our efficiency improvements contributing to a reduction of direct headcount by 3,100 compared to a year earlier, which is a reduction of 6%.
We are pleased that we outgrew LVP on a global basis following substantial outperformance in Europe and Asia excl. China. Our sales underperformed LVP in China due to a substantial negative market mix, however, our position with Chinese OEMs continue to improve. Based on sales trends and order intake in recent years, we expect further market share gains with domestic Chinese OEMs in the coming years.
Excess inflation compensation negotiations with our customers have developed in line with our expectations with a few negotiations still outstanding.
With the seasonally strong fourth quarter remaining of the year, we reaffirm our guidance of around 9.5-10.0% adjusted operating margin (Non-U.S. GAAP measure) for 2024. We expect to be at the low end of this range, as we now expect full year 2024 organic growth (Non-U.S. GAAP measure) to be 1% instead of previously expected 2% due to the unfavorable market mix development.
Our operating cash flow is on track towards the full year guidance of $1.1 billion and our balance sheet remains strong with a debt leverage of 1.4x (Non-U.S. GAAP measure), which supports our continued commitment to a high level of shareholder returns and our financial targets.
Financial highlights in the three months period ended September 30, 2024
Change figures below compare to the same period of the previous year, except when stated otherwise.
$2,555million net sales
1.6%net sales decrease
0.8% organic sales decline (Non-U.S. GAAP measure, see reconciliation table below)
8.9%operating margin
9.3%adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below)
$1.74EPS, 13% increase
$1.84 adjusted EPS (Non-U.S. GAAP measure, see reconciliation table below), 12% increase
23
Key business developments in the three months period ended September 30, 2024
Change figures below compare to the same period of the previous year, except when stated otherwise.
•
Third quarter sales decreased organically (Non-U.S. GAAP measure, see reconciliation table below)by 0.8%, which was 4pp better than global LVP decline of 4.8% (S&P Global Oct 2024). We outperformed in Europe and Asia excl. China, mainly due to high level of product launches and positive pricing. Our sales to domestic Chinese OEMs grew by 18%, which is twice as much as their LVP growth of 8.5%. Despite this, we underperformed in China, due to a substantial negative LVP mix as lower safety content models grew strongly while higher content models declined.
•
Profitability was unchangeddespite a slight net sales decline. This was mainly due to successful execution of cost reductions and commercial recoveries and despite inflationary cost increases and a $14 million cost related to a supplier settlement. Both direct and indirect headcount continued to decrease. Operating income was $226 million and operating margin was 8.9%. Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) was $237 million and adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below) was 9.3%. Return on capital employed was 22.9% and adjusted return on capital employed (Non-U.S. GAAP measure, see reconciliation table below) was 23.9%.
•
Operating cash flow was $177 million, as expected, and we are on track towards $1.1 billion for 2024. Free cash flow (Non-U.S. GAAP measure, see reconciliation table below) was $32 million compared to $50 million last year. At 1.4x, the leverage ratio (Non-U.S. GAAP measure, see reconciliation table below) remained within our target range. In the quarter, a dividend of $0.68 per share was paid, and 1.33 million shares were repurchased and retired.
Business and market condition update for the third quarter 2024
Supply Chain
In the third quarter, global light vehicle production declined by 4.8% year-over-year (according to S&P Global Oct 2024). Call-off volatility was unchanged compared to a year earlier but improved slightly compared to the second quarter 2024, and it remains at higher than pre-pandemic levels. Low customer demand visibility and changes to customer call-offs with short notice had a negative impact on our production efficiency and profitability in the quarter. We expect call-off volatility in 2024 on average to be slightly lower than it was in 2023 but still remain higher than the pre-pandemic level.
Inflation
In the third quarter, cost pressure from labor and other items had a negative impact on our profitability, although most of the inflationary cost pressure was offset by price increases and other customer compensations in the quarter. Raw material price changes had a negligible impact on our profitability during the third quarter. We continue to expect raw material prices in 2024 to increase slightly for the full year. We expect continued cost pressure from inflation relating mainly to labor, especially in Europe and the Americas. We continue to execute on productivity and cost reduction activities to offset these cost pressures, and have successfully received inflation compensation from almost all of our customers, with only a few negotiations still outstanding.
24
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. The Company has 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 the Company's Annual Report on Form 10-K and the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
The Company's management uses the Return on capital employed (ROCE) and Return on total equity (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. The Company believes ROCE is a useful indicator 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.
KEY RATIOS
(Dollars in millions, except per share data)
|
Three Months Ended |
||||||||
|
or As of September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Trade working capital1) |
1,307 |
1,303 |
||||||
|
Trade working capital relative to sales, %2) |
12.8 |
% |
12.5 |
% |
||||
|
Receivables outstanding relative to sales, %3) |
21.5 |
% |
21.0 |
% |
||||
|
Inventory outstanding relative to sales, %4) |
9.8 |
% |
9.5 |
% |
||||
|
Payables outstanding relative to sales, %5) |
18.4 |
% |
17.9 |
% |
||||
|
Gross margin, %6) |
18.0 |
% |
17.9 |
% |
||||
|
Operating margin, %7) |
8.9 |
% |
8.9 |
% |
||||
|
Capital employed8) |
4,085 |
3,861 |
||||||
|
Net debt9) |
1,787 |
1,375 |
||||||
|
Return on total equity, %10) |
24.1 |
% |
21.3 |
% |
||||
|
Return on capital employed, %11) |
22.9 |
% |
24.2 |
% |
||||
|
Headcount at period-end12) |
67,200 |
71,200 |
1) Outstanding receivables and outstanding inventory less outstanding payables. See calculation of this non-U.S. GAAP measure in the table below.
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) Gross profit relative to sales.
7) Operating income relative to sales.
8) Total equity and net debt.
9) 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.
10) Net income relative to average total equity.
11) Operating income and income from equity method investments, relative to average capital employed.
12) Employees plus temporary, hourly personnel.
25
three months period ended September 30, 2024COMPARED WITH three months period ended September 30, 2023
Consolidated Sales Development
(dollars in millions)
|
Three Months Ended September 30, |
Components of change in net sales |
|||||||||||||||||||
|
2024 |
2023 |
Reported |
Currency |
Organic 3) |
||||||||||||||||
|
Airbags, Steering Wheels and Other2) |
$ |
1,736 |
$ |
1,761 |
(1.4 |
)% |
(0.7 |
)% |
(0.7 |
)% |
||||||||||
|
Seatbelt products and Other2) |
819 |
835 |
(2.0 |
)% |
(1.0 |
)% |
(1.0 |
)% |
||||||||||||
|
Total |
$ |
2,555 |
$ |
2,596 |
(1.6 |
)% |
(0.8 |
)% |
(0.8 |
)% |
||||||||||
|
Americas |
$ |
851 |
$ |
918 |
(7.2 |
)% |
(3.5 |
)% |
(3.8 |
)% |
||||||||||
|
Europe |
700 |
646 |
8.4 |
% |
2.2 |
% |
6.3 |
% |
||||||||||||
|
China |
495 |
538 |
(8.1 |
)% |
1.3 |
% |
(9.3 |
)% |
||||||||||||
|
Asia excl. China |
508 |
495 |
2.7 |
% |
(2.1 |
)% |
4.8 |
% |
||||||||||||
|
Total |
$ |
2,555 |
$ |
2,596 |
(1.6 |
)% |
(0.8 |
)% |
(0.8 |
)% |
1) Effects from currency translations.
2) Including Corporate sales.
3) Non-U.S. GAAP measure.
Sales by product - Airbags, Steering Wheels and Other
Sales declined organically (Non-U.S. GAAP measure, see reconciliation table above) by 0.7% in the quarter. The largest contributor to the decrease was passenger airbags, inflatable curtains, knee airbags and driver airbags, partly offset by growth in steering wheels, inflators and center airbags.
Sales by product - Seatbelts and Other
Sales for Seatbelt Products and Other declined organically (Non-U.S. GAAP measure, see reconciliation table above) by 1.0% in the quarter. Sales declined organically in China, while it increased in Asia excluding China and the Americas with Europe being virtually unchanged.
Sales by region
Our global organic sales (Non-U.S. GAAP measure, see reconciliation table above) decreased by 0.8% compared to the global LVP decrease of 4.8% (according to S&P Global, October 2024). The outperformance was mainly driven by new product launches and higher prices, partly offset by negative customer and model mix. Our organic sales growth outperformed LVP growth by 12pp in Europe and by 10pp in Asia excluding China while we underperformed by 0.6pp in the Americas and by 6.4pp in China. LVP growth in China was heavily tilted to domestic OEMs with typically lower safety content. LVP for global OEMs declined by 15% while it increased by 8.5% for domestic OEMs. Autoliv's sales to domestic OEMs increased by 18% in the quarter following a strong order intake with domestic OEMs in recent years. In India, we grew organically by around 17%, while LVP was close to unchanged.
Third quarter of 2024 organic growth1)
|
Americas |
Europe |
China |
Asia excl. China |
Global |
||||||
|
Autoliv |
(3.8)% |
6.3% |
(9.3)% |
4.8% |
(0.8)% |
|||||
|
Main growth drivers |
GM, Renault, VW |
Mercedes, Renault, Ford |
Geely, Chery, BMW |
Hyundai, Suzuki, Tata |
Geely, Mercedes, Renault |
|||||
|
Main decline drivers |
Stellantis, EV OEM, Nissan |
Stellantis, Volvo, Fisker |
Lixiang Auto, VW, Honda |
Nissan, Mazda |
Stellantis, EV OEM, GM |
1) Non-U.S. GAAP measure.
Light Vehicle Production Development
Change third quarter of 2024 versus third quarter of 2023
|
Americas |
Europe |
China |
Asia excl. China |
Global |
||||||
|
LVP1) |
(3.2)% |
(6.1)% |
(2.9)% |
(5.3)% |
(4.8)% |
1)Source: S&P Global, October 2024.
26
Earnings
|
Three Months Ended September 30, |
||||||||||||
|
(Dollars in millions, except per share data) |
2024 |
2023 |
Change |
|||||||||
|
Net Sales |
$ |
2,555 |
$ |
2,596 |
(1.6 |
)% |
||||||
|
Gross profit |
459 |
465 |
(1.3 |
)% |
||||||||
|
% of sales |
18.0 |
% |
17.9 |
% |
0.1 |
pp |
||||||
|
S, G&A |
(129 |
) |
(119 |
) |
8.4 |
% |
||||||
|
% of sales |
(5.0 |
)% |
(4.6 |
)% |
(0.5 |
)pp |
||||||
|
R, D&E, net |
(96 |
) |
(107 |
) |
(10 |
)% |
||||||
|
% of sales |
(3.7 |
)% |
(4.1 |
)% |
0.4 |
pp |
||||||
|
Other income (expense), net |
(9 |
) |
(8 |
) |
11 |
% |
||||||
|
Operating income |
226 |
232 |
(2.4 |
)% |
||||||||
|
% of sales |
8.9 |
% |
8.9 |
% |
(0.1 |
)pp |
||||||
|
Adjusted operating income1) |
237 |
243 |
(2.3 |
)% |
||||||||
|
% of sales |
9.3 |
% |
9.4 |
% |
(0.1 |
)pp |
||||||
|
Financial and non-operating items, net |
(29 |
) |
(30 |
) |
(3.7 |
)% |
||||||
|
Income before taxes |
197 |
201 |
(2.2 |
)% |
||||||||
|
Income taxes |
(58 |
) |
(67 |
) |
(13 |
)% |
||||||
|
Tax rate |
29.6 |
% |
33.4 |
% |
(3.8 |
)pp |
||||||
|
Net income |
139 |
134 |
3.4 |
% |
||||||||
|
Earnings per share, diluted2) |
1.74 |
1.57 |
11 |
% |
||||||||
|
Adjusted earnings per share, diluted1,2) |
1.84 |
1.66 |
11 |
% |
1) Non-U.S. GAAP measure, excluding effects from capacity alignments, antitrust related matters and for fiscal year 2023 the Andrews litigation settlement.
2) Net of treasury shares.
Third quarter of 2024 financial development
Gross profitdecreased by $6 million, and the gross margin increased by 0.1pp compared to the same quarter 2023. The gross profit decrease was primarily driven by a $14 million cost increase in direct material related to a settlement and to a lesser extent the lower net sales. This was partly offset by lower costs for mainly premium freight and labor, partly due to improved customer call-off accuracy.
S,G&A costs increased by $10 million compared to the prior year, mainly due to higher costs for personnel due to wage inflation while headcount was unchanged. Costs for digitalization, IT projects and licenses also increased, impacted by inflation. S,G&A costs in relation to sales increased from 4.6% to 5.0%.
R,D&E, netcosts decreased by $11 million compared to the prior year, mainly due to $6 million in higher engineering income. The decrease was also supported to a smaller extent from several items, mainly positive FX translation effects, lower personnel costs and lower costs for samples and prototypes. R,D&E, net, in relation to sales decreased from 4.1% to 3.7%.
Other income (expense), net was close to unchanged at negative $9 million, compared to negative $8 million in the same period last year.
Operating incomedecreased by $6 million compared to the same period in 2023, due to the lower gross profit, higher S,G&A costs and other income (expenses) partly offset by lower costs for R,D&E, net, as outlined above.
Adjusted operating income(Non-U.S. GAAP measure, see reconciliation table below) decreased by $6 million compared to the prior year, due to the lower gross profit, higher S,G&A costs and other income (expenses) partly offset by lower costs for R,D&E, net, as outlined above.
Financial and non-operating items, net, was negative $29 million compared to negative $30 million a year earlier.
Income before taxesdecreased by $4 million compared to the prior year, mainly due to the lower operating income.
Tax ratewas 29.6% compared to 33.4% in the same period last year. The lower tax rate was impacted by a favorable country mix compared to the same quarter last year. Discrete tax items, net, decreased the tax rate this quarter by 1.2pp. Discrete tax items, net, increased the tax rate by 0.2pp in the same period last year.
Earnings per share, dilutedincreased by $0.17 compared to a year earlier. The main drivers were $0.12 from lower number of shares and $0.10 from lower taxes, partly offset by $0.05 from lower operating income.
27
nine months period ended September 30, 2024COMPARED WITH nine months period ended September 30, 2023
Consolidated Sales Development
(dollars in millions)
|
Nine Months Ended September 30, |
Components of change in net sales |
|||||||||||||||||||
|
2024 |
2023 |
Reported |
Currency |
Organic 3) |
||||||||||||||||
|
Airbags, Steering Wheels and Other2) |
$ |
5,264 |
$ |
5,191 |
1.4 |
% |
(1.0 |
)% |
2.4 |
% |
||||||||||
|
Seatbelt products and Other2) |
2,511 |
2,533 |
(0.9 |
)% |
(1.2 |
)% |
0.3 |
% |
||||||||||||
|
Total |
$ |
7,774 |
$ |
7,724 |
0.7 |
% |
(1.1 |
)% |
1.7 |
% |
||||||||||
|
Americas |
$ |
2,637 |
$ |
2,665 |
(1.0 |
)% |
(0.2 |
)% |
(0.8 |
)% |
||||||||||
|
Europe |
2,231 |
2,122 |
5.2 |
% |
1.4 |
% |
3.7 |
% |
||||||||||||
|
China |
1,423 |
1,488 |
(4.4 |
)% |
(2.0 |
)% |
(2.3 |
)% |
||||||||||||
|
Asia excl. China |
1,483 |
1,449 |
2.3 |
% |
(5.3 |
)% |
7.7 |
% |
||||||||||||
|
Total |
$ |
7,774 |
$ |
7,724 |
0.7 |
% |
(1.1 |
)% |
1.7 |
% |
1) Effects from currency translations.
2) Including Corporate sales.
3) Non-U.S. GAAP measure.
Sales by product - Airbags, Steering Wheels and Other
Sales grew organically (Non-U.S. GAAP measure, see reconciliation table above) by 2.4% in the period. The largest contributor to the increase was steering wheels, followed by center airbags, inflatable curtains, side airbags and inflators, partly offset by decreases for passenger airbags and knee airbags.
Sales by product - Seatbelts and Other
Sales for Seatbelt Products and Other grew organically (Non-U.S. GAAP measure, see reconciliation table above) by 0.3% in the period. Sales increased organically in Asia excluding China, the Americas and Europe while it declined in China.
Sales by region
Our global organic sales (Non-U.S. GAAP measure, see reconciliation table above) increased by 1.7% compared to the global LVP decrease of 1.8% (according to S&P Global, October 2024). The 3.5pp outperformance was mainly driven by new product launches and higher prices, partly offset by negative customer and model mix. Our organic sales growth outperformed LVP growth by 12pp in Asia excluding China, by 7.3pp in Europe and by 0.8pp in the Americas, while it underperformed by 4.6pp in China. LVP growth in China was tilted to domestic OEMs with typically lower safety content. Domestic OEM LVP in China grew by 15% while LVP declined by 10% for global OEMs in the first nine months
First nine months 2024 organic growth1)
|
Americas |
Europe |
China |
Asia excl. China |
Global |
||||||
|
Autoliv |
(0.8)% |
3.7% |
(2.3)% |
7.7% |
1.7% |
|||||
|
Main growth drivers |
VW, Toyota, Hyundai |
Mercedes, Renault, BMW |
Geely, BMW, Chery |
Hyundai, Tata, Suzuki |
Mercedes, Hyundai, Geely |
|||||
|
Main decline drivers |
Stellantis, EV OEM, Nissan |
Stellantis, VW, Volvo |
EV OEM, Honda, GM |
Nissan, Renault |
Stellantis, EV OEM, GM |
1) Non-U.S. GAAP measure.
Light Vehicle Production Development
Change first nine months of 2024 versus first nine months of 2023
|
Americas |
Europe |
China |
Asia excl. China |
Global |
||||||
|
LVP1) |
(1.6)% |
(3.6)% |
2.3 % |
(4.8)% |
(1.8)% |
1)Source: S&P Global, October 2024.
28
Earnings
|
Nine Months Ended September 30, |
|||||||||||
|
(Dollars in millions, except per share data) |
2024 |
2023 |
Change |
||||||||
|
Net Sales |
$ |
7,774 |
$ |
7,724 |
0.7 |
% |
|||||
|
Gross profit |
1,377 |
1,291 |
6.6 |
% |
|||||||
|
% of sales |
17.7 |
% |
16.7 |
% |
1.0 |
pp |
|||||
|
S, G&A |
(399 |
) |
(380 |
) |
4.9 |
% |
|||||
|
% of sales |
(5.1 |
)% |
(4.9 |
)% |
(0.2 |
)pp |
|||||
|
R, D&E, net |
(325 |
) |
(343 |
) |
(5.5 |
)% |
|||||
|
% of sales |
(4.2 |
)% |
(4.4 |
)% |
0.3 |
pp |
|||||
|
Other income (expense), net |
(27 |
) |
(115 |
) |
(76 |
)% |
|||||
|
Operating income |
626 |
453 |
38 |
% |
|||||||
|
% of sales |
8.1 |
% |
5.9 |
% |
2.2 |
pp |
|||||
|
Adjusted operating income1) |
657 |
586 |
12 |
% |
|||||||
|
% of sales |
8.5 |
% |
7.6 |
% |
0.9 |
pp |
|||||
|
Financial and non-operating items, net |
(73 |
) |
(60 |
) |
21 |
% |
|||||
|
Income before taxes |
554 |
393 |
41 |
% |
|||||||
|
Income taxes |
(149 |
) |
(131 |
) |
14 |
% |
|||||
|
Tax rate |
27.0 |
% |
33.4 |
% |
(6.4 |
)pp |
|||||
|
Net income |
404 |
262 |
55 |
% |
|||||||
|
Earnings per share, diluted2) |
4.98 |
3.04 |
64 |
% |
|||||||
|
Adjusted earnings per share, diluted1,2) |
5.30 |
4.48 |
18 |
% |
1) Non-U.S. GAAP measure, excluding effects from capacity alignments, antitrust related matters and for fiscal year 2023 the Andrews litigation settlement.
2) Net of treasury shares.
First nine months 2024 financial development
Gross profit increased by $85 million, and the gross margin increased by 1.0pp compared to the same period 2023. More than half of the improvement in gross profit was driven by the increase in net sales, but lower costs for labor and premium freight also contributed to the improvement following more stable customer call-offs and headcount reductions.
S,G&A costs increased by $18 million compared to the prior year. The main reason for the cost increase was higher costs for personnel, due to the high wage inflation. S,G&A costs in relation to sales increased from 4.9% to 5.1%.
R,D&E, netcosts decreased by $19 million compared to the prior year. Higher engineering income explain almost the entire improvement. R,D&E, net, in relation to sales decreased from 4.4% to 4.2%.
Other income (expense), netwas negative $27 million compared to negative $115 million in the same period last year, almost entirely due to lower capacity alignment accruals compared to the same period previous year.
Operating incomeincreased by $173 million compared to the same period in 2023, mainly due to the increase in gross profit, and lower capacity alignment accruals, as outlined above.
Adjusted operating income(Non-U.S. GAAP measure, see reconciliation table below) increased by $71 million compared to the prior year, mainly due to higher gross profit and lower R,D&E, net partly offset by higher costs for S,G&A, as outlined above.
Financial and non-operating items, net, was negative $73 million compared to negative $60 million a year earlier. The change was mainly due to increased interest expense as the result of higher debt and higher interest rates.
Income before taxesincreased by $161 million compared to the prior year, mainly due to the increase in operating income and financial and non-operating items, net, as outlined above.
Tax ratewas 27.0% compared to 33.4% in the same period last year. The lower tax rate was impacted by favorable country mix compared to the prior year. Discrete tax items, net, decreased the tax rate this period by 2.8pp. Discrete tax items, net, decreased the tax rate by 0.6pp in the same period last year.
Earnings per share, dilutedincreased by $1.94 compared to a year earlier. The main drivers were $1.67 from higher operating income, $0.29 from lower number of shares and $0.09 from taxes, partly offset by $0.11 from higher financial and non-operating items, net.
29
LIQUIDITY AND CAPITAL RESOURCES
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. 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, 2023 filed with the SEC on February 20, 2024.
Third quarter of 2024 development
Changes in operating working capital impacted operating cash flow by $68 million negative, compared to an impact of $36 million negative in the same period the prior year. Almost all of the $68 million impact in the quarter came from increases in inventories due to high customer call off volatility at the end of the quarter and higher receivables, mainly as a result of seasonally higher sales in September.
Other, net was $10 million positive compared to $9 million positive in the same period the prior year.
Operating cash flowdecreased by $25 million to $177 million compared to the same period last year, mainly due to that operating working capital increased by $34 million more than it increased the same period last year, as outlined above.
Capital expenditure, net decreased by $6 million compared to the same period the previous year. The level of Capital expenditure, net, in relation to sales was relatively stable at 5.7% versus 5.8% a year earlier. The level is currently above what we expect for the longer term, due to investments in capacity, mainly in Asia, and in footprint optimization, mainly in Europe and the Americas.
Free cash flow (Non-U.S. GAAP measure, see calculation table below) was positive $32 million compared to positive $50 million in the same period the prior year. The decrease was due to the lower operating cash flow partly offset by the lower capital expenditure, net.
Cash conversion (Non-U.S. GAAP measure, see calculation table below) defined as free cash flow (Non-U.S. GAAP measure) in relation to net income, was 23% in the quarter.
Trade working capital (Non-U.S. GAAP measure, see calculation table below) increased by $4 million compared to the same period last year, where the main drivers were $13 million in higher accounts receivables, $24 million in higher accounts payable and $15 million in higher inventories. In relation to sales, trade working capital increased from 12.5% to 12.8%.
Cash and cash equivalents as of September 30, 2024 was around $0.4 billion, while committed, unused loan facilities, was around $1.2 billion.
Net debt (Non-U.S. GAAP measure, see reconciliation table below) was $1,787 million as of September 30, 2024, which was $412 million higher than a year earlier.
Total equity as of September 30, 2024, decreased by $188 million compared to September 30, 2023. This was mainly due to $221 million in dividend payments and stock repurchases including taxes of $608 million, partly offset by $632 million from net income.
Leverage ratio (Non-U.S. GAAP measure, see calculation table below). On September 30, 2024, the Company had a leverage ratio of 1.4x compared to 1.3x on September 30, 2023, as the 12 months trailing adjusted EBITDA (Non-U.S. GAAP measure, see reconciliation table below) increased by around $187 million while the net debt per the policy (Non-U.S. GAAP measure, see reconciliation table below) increased by around $407 million.
First nine months of 2024 development
Operating cash flowincreased by $104 million compared to the same period last year, to $639 million, mainly due to higher net income, partly offset by more negative effects from increased operating working capital.
Capital expenditure, net increased by $12 million. Capital expenditure, net in relation to sales was relatively stable at 5.5% versus 5.4% the prior year period. The level is currently slightly above what we expect for the longer term, due to investments in capacity, mainly in Asia, and in footprint optimization, mainly in Europe and the Americas.
Free cash flow (Non-U.S. GAAP measure, see calculation table below) was positive $208 million, compared to positive $117 million in the same period last year. The improvement was due to the higher operating cash flow partly offset by higher capital expenditure, net.
Cash conversion (Non-U.S. GAAP measure, see calculation table below) defined as free cash flow (Non-U.S. GAAP measure) in relation to net income, was 52% in the period.
30
NON-U.S. GAAP MEASURES
The Company believes 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.
With respect to the Andrews litigation settlement, the Company has treated this specific settlement as a non-recurring charge because of the unique nature of the lawsuit, including the facts and legal issues involved.
Accordingly, the tables below reconcile from U.S. GAAP to the equivalent non-U.S. GAAP measure.
Reconciliation of U.S. GAAP financial measures to "Adjusted operating income", "Adjusted operating margin" and "Adjusted Earnings per share, diluted"
(Dollars in millions, except per share data)
|
Three Months Ended September 30, 2024 |
Three Months Ended September 30, 2023 |
|||||||||||||||||||||||
|
Reported |
Adjustments1) |
Non-U.S. |
Reported |
Adjustments1) |
Non-U.S. |
|||||||||||||||||||
|
Operating income |
$ |
226 |
$ |
11 |
$ |
237 |
$ |
232 |
$ |
11 |
$ |
243 |
||||||||||||
|
Operating margin, % |
8.9 |
% |
0.4 |
% |
9.3 |
% |
8.9 |
% |
0.4 |
% |
9.4 |
% |
||||||||||||
|
Earnings per share, diluted |
$ |
1.74 |
$ |
0.10 |
$ |
1.84 |
$ |
1.57 |
$ |
0.09 |
$ |
1.66 |
1) Effects from capacity alignments, antitrust related matters and for fiscal year 2023 the Andrews litigation settlement.
|
Nine Months Ended September 30, 2024 |
Nine Months Ended September 30, 2023 |
|||||||||||||||||||||||
|
Reported |
Adjustments1) |
Non-U.S. |
Reported |
Adjustments1) |
Non-U.S. |
|||||||||||||||||||
|
Operating income |
$ |
626 |
$ |
31 |
$ |
657 |
$ |
453 |
$ |
133 |
$ |
586 |
||||||||||||
|
Operating margin, % |
8.1 |
% |
0.4 |
% |
8.5 |
% |
5.9 |
% |
1.7 |
% |
7.6 |
% |
||||||||||||
|
Earnings per share, diluted |
$ |
4.98 |
$ |
0.32 |
$ |
5.30 |
$ |
3.04 |
$ |
1.44 |
$ |
4.48 |
1) Effects from capacity alignments, antitrust related matters and for fiscal year 2023 the Andrews litigation settlement.
Items included in Non-U.S. GAAP adjustments
(Dollars in millions, except per share data)
|
Three Months Ended September 30, 2024 |
Three Months Ended September 30, 2023 |
|||||||||||||||
|
Millions |
Per share |
Millions |
Per share |
|||||||||||||
|
Capacity alignments |
$ |
9 |
$ |
0.12 |
$ |
10 |
$ |
0.12 |
||||||||
|
Andrews litigation settlement |
- |
- |
- |
- |
||||||||||||
|
Antitrust related matters |
2 |
0.02 |
1 |
0.01 |
||||||||||||
|
Total adjustments to operating income |
11 |
0.14 |
11 |
0.13 |
||||||||||||
|
Tax on non-U.S. GAAP adjustments1) |
(3 |
) |
(0.04 |
) |
(3 |
) |
(0.04 |
) |
||||||||
|
Total adjustments to net income |
$ |
8 |
$ |
0.10 |
$ |
8 |
$ |
0.09 |
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
|
Nine Months Ended September 30, 2024 |
Nine Months Ended September 30, 2023 |
|||||||||||||||
|
Millions |
Per share |
Millions |
Per share |
|||||||||||||
|
Capacity alignments |
$ |
25 |
$ |
0.31 |
$ |
122 |
$ |
1.42 |
||||||||
|
The Andrews litigation settlement |
- |
- |
8 |
0.09 |
||||||||||||
|
Antitrust related matters |
6 |
0.07 |
3 |
0.04 |
||||||||||||
|
Total adjustments to operating income |
31 |
0.39 |
133 |
1.55 |
||||||||||||
|
Tax on non-U.S. GAAP adjustments1) |
(5 |
) |
(0.06 |
) |
(10 |
) |
(0.11 |
) |
||||||||
|
Total adjustments to net income |
$ |
26 |
$ |
0.32 |
$ |
123 |
$ |
1.44 |
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
31
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.
Reconciliation of "Trade working capital"
(Dollars in millions)
|
September 30, 2024 |
June 30, 2024 |
September 30, 2023 |
||||||||||
|
Total current assets |
$ |
3,865 |
$ |
3,703 |
$ |
3,879 |
||||||
|
Total current liabilities |
(4,034 |
) |
(3,785 |
) |
(3,851 |
) |
||||||
|
Working capital (U.S. GAAP) |
(169 |
) |
(83 |
) |
28 |
|||||||
|
Less: Cash and cash equivalents |
(415 |
) |
(408 |
) |
(475 |
) |
||||||
|
Prepaid expenses |
(172 |
) |
(193 |
) |
(180 |
) |
||||||
|
Other current assets |
(90 |
) |
(76 |
) |
(63 |
) |
||||||
|
Less: Short-term debt |
624 |
455 |
590 |
|||||||||
|
Accrued expenses |
1,189 |
1,120 |
1,093 |
|||||||||
|
Operating lease liabilities - current |
44 |
41 |
37 |
|||||||||
|
Other current liabilities |
297 |
312 |
274 |
|||||||||
|
Trade working capital (non-U.S. GAAP) |
$ |
1,307 |
$ |
1,169 |
$ |
1,303 |
||||||
|
September 30, 2024 |
June 30, 2024 |
September 30, 2023 |
||||||||||
|
Receivables, net |
$ |
2,192 |
$ |
2,090 |
$ |
2,179 |
||||||
|
Inventories, net |
997 |
936 |
982 |
|||||||||
|
Accounts payable |
(1,881 |
) |
(1,858 |
) |
(1,858 |
) |
||||||
|
Trade working capital (non-U.S. GAAP) |
$ |
1,307 |
$ |
1,169 |
$ |
1,303 |
Management uses the non-U.S GAAP measure "Net debt" 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. The Company, 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 the Company provides 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.
Reconciliation of U.S. GAAP financial measure to "Net debt"
(Dollars in millions)
|
September 30, 2024 |
June 30, 2024 |
September 30, 2023 |
||||||||||
|
Short-term debt |
$ |
624 |
$ |
455 |
$ |
590 |
||||||
|
Long-term debt |
1,586 |
1,540 |
1,277 |
|||||||||
|
Total debt |
2,210 |
1,996 |
1,867 |
|||||||||
|
Cash and cash equivalents |
(415 |
) |
(408 |
) |
(475 |
) |
||||||
|
Debt issuance cost/Debt-related derivatives, net |
(9 |
) |
(8 |
) |
(17 |
) |
||||||
|
Net debt |
$ |
1,787 |
$ |
1,579 |
$ |
1,375 |
The non-U.S. GAAP measure "Net debt" is also used in the non-U.S. GAAP measure "Leverage ratio". Management uses the non-U.S. GAAP measure "Leverage Ratio" 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. The Company's long-term target for the leverage ratio (sum of net debt plus pension liabilities divided by EBITDA) is 1.0x with the aim to operate within the range of 0.5x to 1.5x. For details and calculation of leverage ratio, refer to the table below.
32
Calculation of "Leverage ratio"
(Dollars in millions)
|
September 30, 2024 |
June 30, 2024 |
September 30, 2023 |
||||||||||
|
Net debt1) |
$ |
1,787 |
$ |
1,579 |
$ |
1,375 |
||||||
|
Pension liabilities |
147 |
140 |
152 |
|||||||||
|
Debt per the Policy |
1,934 |
1,720 |
1,527 |
|||||||||
|
Net income2) |
632 |
627 |
418 |
|||||||||
|
Income taxes2) |
141 |
150 |
188 |
|||||||||
|
Interest expense, net2,3) |
93 |
89 |
75 |
|||||||||
|
Other non-operating items, net2) |
4 |
8 |
5 |
|||||||||
|
Income from equity method investments2) |
(6 |
) |
(6 |
) |
(4 |
) |
||||||
|
Depreciation and amortization of intangibles2) |
385 |
384 |
371 |
|||||||||
|
Capacity alignments, antitrust related matters and the Andrews litigation settlement2) |
128 |
128 |
136 |
|||||||||
|
EBITDA per the Policy (Adjusted EBITDA) |
$ |
1,376 |
$ |
1,380 |
$ |
1,189 |
||||||
|
Leverage ratio |
1.4 |
1.2 |
1.3 |
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.
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 the calculation of free cash flow, see the 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 efficiently the Company utilizes its resources. For details on cash conversion, see the table below.
Calculation of "Free Cash Flow"
(Dollars in millions)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Net income |
$ |
139 |
$ |
134 |
$ |
404 |
$ |
262 |
||||||||
|
Changes in operating working capital |
(68 |
) |
(36 |
) |
(54 |
) |
(8 |
) |
||||||||
|
Depreciation and amortization |
97 |
95 |
289 |
281 |
||||||||||||
|
Other, net |
10 |
9 |
1 |
1 |
||||||||||||
|
Operating cash flow |
177 |
202 |
639 |
535 |
||||||||||||
|
Capital expenditure, net |
(145 |
) |
(151 |
) |
(431 |
) |
(419 |
) |
||||||||
|
Free cash flow1) |
$ |
32 |
$ |
50 |
$ |
208 |
$ |
117 |
||||||||
|
Cash conversion2) |
23 |
% |
37 |
% |
52 |
% |
45 |
% |
||||||||
|
1) Operating cash flow less Capital expenditures, net. |
||||||||||||||||
|
2)Free cash flow relative to Net income. |
Headcount
|
September 30, 2024 |
June 30, 2024 |
September 30, 2023 |
||||||||||
|
Total headcount |
67,200 |
68,700 |
71,200 |
|||||||||
|
Whereof: |
||||||||||||
|
Direct personnel in manufacturing |
49,800 |
51,100 |
52,900 |
|||||||||
|
Indirect personnel |
17,400 |
17,500 |
18,200 |
|||||||||
|
Temporary personnel |
9 |
% |
9 |
% |
11 |
% |
As of September 30, 2024, total headcount (Full Time Equivalent) decreased by around 4,000, or by 5.6%, compared to a year earlier, despite almost unchanged sales. The indirect workforce decreased by around 800, or by 4.4%, mainly reflecting our structural reduction initiatives. The direct workforce decreased by approximately 3,100, or by 5.9%, partly due to that an improvement in customer call-off accuracy in the third quarter has enabled us to accelerate operating efficiency improvements.
Compared to June 30, 2024, total headcount (FTE) decreased by around 1,500, or by 2.2%. Indirect headcount decreased by around 100, or by 0.6%, while direct headcount decreased by approximately 1,300, or by 2.5%.
33
Full year 2024 guidance
Our 2024 guidance is mainly based on our customer call-offs, a full year 2024 global LVP decline of around 3% and the achievement of our targeted cost compensation effects.
|
Financial measure |
Full year indication |
|
|
Organic sales growth |
Around 1% |
|
|
Foreign currency impact on net sales |
Around 1% negative |
|
|
Adjusted operating margin 1) |
Around 9.5-10.0% |
|
|
Tax rate 2) |
Around 28% |
|
|
Operating cash flow 3) |
Around $1.1 billion |
|
|
Capital expenditures, net % of sales |
Around 5.5% |
|
|
1)Excluding effects from capacity alignments, antitrust related matters and other discrete items. |
||
|
2)Excluding unusual tax items. |
||
|
3)Excluding unusual items. |
This report includes content supplied by S&P Global; Copyright © Light Vehicle Production Forecast, October 2024. All rights reserved.
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 and gains 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.
34
Other recent events
Key launches in the three months period ended September 30, 2024
•
Nio Onvo L60: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.
•
BMX X3: Driver/Passenger Airbags, Steering Wheel.
•
Zeekr 7X: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.
•
Nissan Patrol & Armada: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Knee Airbag, Front Center Airbag, Seatbelts.
•
Alfa Romeo Junior:Driver/Passenger Airbags, Side Airbags, Steering Wheel, Seatbelts.
•
Audi A6 e-tron:Side Airbags, Front Center Airbag, Seatbelts.
•
Changan Avatr 15: Side Airbags, Head/Inflatable Curtain Airbags, Front Center Airbag, Seatbelts.
•
Audi A5: Side Airbags, Front Center Airbag, Seatbelts.
•
Tata Curvv: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.
•
Ford Capri: Driver/Passenger Airbags, Steering Wheel, Front Center Airbag.
•
Chery Luxeed R7: Side Airbags, Front Center Airbag, Seatbelts.
•
Mahindra Thar (ROXX): Driver/Passenger Airbags, Side Airbags, Seatbelts.
Other Items
•
On September 13, 2024, the Autoliv Board of Directors appointed Ms. Adriana Karaboutis as an independent director to the Autoliv Board of Directors effective immediately. With the addition of Ms. Karaboutis, Autoliv has expanded its Board size from eleven to twelve directors. Ms. Karaboutis most recently served as Group Chief Information and Digital Officer of National Grid PLC, one of the world's largest public utility companies. She previously served as EVP Technology, Business Solutions and Corporate Affairs at Biogen Inc., as well as VP and Global CIO of Dell, Inc. Ms. Karaboutis also has more than 20 years at General Motors and Ford in various international leadership positions. Ms. Karaboutis is appointed for a term expiring at the 2025 Annual General Meeting of Stockholders at which time the Board is expected to contract to eleven members with the retirement of Mr. Hasse Johansson.
•
On September 17, 2024, Autoliv announced the appointment of Mr. Fabien Dumont as Executive Vice President & Chief Technology Officer and a member of the Autoliv Executive Management Team. Fabien Dumont previously served as Vice President Engineering in Autoliv China and has been with Autoliv since 1998. In leading the Autoliv China Engineering team, Fabien Dumont has played a vital role in developing innovations and technologies that support the fast-moving Chinese market.
•
In Q3 2024, Autoliv repurchased and retired 1.33 million shares of common stock at an average price of $97.80 per share under the Autoliv 2022-2024 stock repurchase program.
35
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2024, there have been no material changes to the information related to quantitative and qualitative disclosures about market risk that were provided in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 20, 2024.
ITEM 4. CONTROLSAND PROCEDURES
(a)
Evaluation of Disclosure Controls and Procedures
An evaluation has been carried out, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective.
(b)
Changes in Internal Control over Financial Reporting
There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
36
PART II - OTHER INFORMATION
ITEM 1. LEGALPROCEEDINGS
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 for below, as of September 30, 2024, 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, 2023 filed with the SEC on February 20, 2024.
We may be subject to civil antitrust litigation that could negatively impact our business
The Company may be subject to civil antitrust lawsuits in the future in countries that permit such civil claims, including lawsuits or other actions by our customers. The Company was previously the subject of an investigation by the European Commission ("EC") regarding possible anti-competitive behavior among certain suppliers to the automotive vehicle industry. The Company paid a fine to resolve these matters in 2019. As a result of the outcome of the EC investigation, we are and we could be, subject to subsequent civil disputes with non-governmental third parties and civil or stockholder litigation stemming from the same facts and circumstances underlying the EC investigation. The Company is currently involved in civil litigation in the UK with respect to alleged anticompetitive behavior that occurred over a decade ago. The ultimate resolution of any dispute, litigation or proceeding through settlement, mediation, judgment or other means requires significant management time and attention and could result in significant expenses as well as unfavorable outcomes that could have a material adverse impact on our customer relationships, business prospects, reputation, operating results, cash flows or financial condition, and our insurance may not mitigate such impact. See Note 17, Contingent Liabilities, to the Consolidated Financial Statements in this Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Stock repurchase program
The following table provides information with respect to common stock repurchases by the Company during the three months period ended September 30, 2024.
|
New York Stock Exchange (NYSE) |
||||||||||||||||
|
Period |
Total Number of Shares Purchased (1) |
Average Price Paid per Share (USD) (2) |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) |
Maximum Number of Shares that Yet May Be Purchased Under the Plans or Programs (3) |
||||||||||||
|
July 1-31, 2024 |
608,534 |
$ |
98.60 |
8,400,021 |
8,599,979 |
|||||||||||
|
August 1-31, 2024 |
720,788 |
$ |
97.12 |
9,120,809 |
7,879,191 |
|||||||||||
|
September 1-30, 2024 |
- |
$ |
- |
9,120,809 |
7,879,191 |
(1) The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. For accounting purposes, shares repurchased under our stock repurchase programs are recorded based upon the settlement date of the applicable trade.
(2) The average price paid per share in U.S. dollars exclude brokerage commissions and other costs of execution.
(3) On November 16, 2021, the Company announced that its Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $1.5 billion or up to 17 million common shares, whichever comes first, between January 2022 and the end of 2024.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHERINFORMATION
During the three months period ended September 30, 2024, no director or officer of the Company adoptedor terminateda "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
37
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 |
||
|
10.1* |
Revolving Credit Facility Agreement, dated July 17, 2024, among Autoliv, Inc., Autoliv ASP, and Standard Chartered Bank. |
|
|
10.2*+ |
Employment Agreement, dated September 13, 2024, by and between Autoliv (Shanghai) Management Co. Ltd. and Fabien Dumont. |
|
|
31.1* |
Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
31.2* |
Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
32.1* |
Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2* |
Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
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. |
|
|
104* |
Cover Page Interactive Data File (embedded within the inline XBRL document). |
|
38
* Filed herewith.
+ Management contract or compensatory plan.
39
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: October 18, 2024
AUTOLIV, INC.
(Registrant)
|
By: |
/s/ Fredrik Westin |
|
|
Fredrik Westin |
||
|
Chief Financial Officer |
||
|
(Duly Authorized Officer and Principal Financial Officer) |
40