UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to |
Commission File No.:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: ☐ 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 July 16, 2024, there were
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events or developments that Autoliv, Inc. (“Autoliv,” the “Company” or “we”) or its management believes or anticipates may occur in the future. All forward-looking statements are based upon our current expectations, various assumptions and/or data available from third parties. Our expectations and assumptions are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements.
In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “would,” “should,” “could,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words.
Because these forward-looking statements involve risks and uncertainties, the outcome could differ materially from those set out in the forward-looking statements for a variety of reasons, including without limitation: general economic conditions, 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 |
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4 |
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4 |
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1. |
9 |
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2. |
10 |
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3. |
11 |
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4. |
14 |
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5. |
14 |
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6. |
15 |
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7. |
15 |
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8. |
16 |
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9. |
17 |
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10. |
19 |
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11. |
19 |
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12. |
19 |
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13. |
20 |
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
21 |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
35 |
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35 |
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36 |
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36 |
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36 |
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
36 |
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36 |
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36 |
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36 |
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37 |
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3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in millions, except per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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$ |
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$ |
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$ |
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$ |
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( |
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( |
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Gross profit |
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Selling, general and administrative expenses |
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( |
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( |
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( |
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( |
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Research, development and engineering expenses, net |
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( |
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( |
) |
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( |
) |
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( |
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Other income (expense), net |
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( |
) |
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( |
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( |
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( |
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Operating income |
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Income from equity method investment |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Other non-operating items, net |
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( |
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Income before income taxes |
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Income tax expense |
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( |
) |
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( |
) |
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( |
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( |
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Net income1) |
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Less: Net income attributable to non-controlling interest |
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Net income attributable to controlling interest |
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$ |
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$ |
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$ |
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$ |
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Net earnings per share – basic |
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$ |
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$ |
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$ |
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$ |
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Net earnings per share – diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares outstanding, net of |
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Weighted average number of shares outstanding, |
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Cash dividend per share – declared |
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$ |
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$ |
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$ |
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$ |
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Cash dividend per share – paid |
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$ |
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$ |
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$ |
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$ |
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1)
See Notes to the unaudited Condensed Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in millions)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss) before tax: |
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Change in cumulative translation adjustments |
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( |
) |
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( |
) |
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( |
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( |
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Net change in unrealized components of defined benefit plans |
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Other comprehensive (loss), before tax |
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( |
) |
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( |
) |
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( |
) |
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( |
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Tax effect allocated to other comprehensive income (loss) |
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( |
) |
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( |
) |
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( |
) |
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( |
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Other comprehensive (loss), net of tax |
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( |
) |
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( |
) |
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( |
) |
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( |
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Comprehensive income |
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Less: Comprehensive income (loss) attributable to |
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( |
) |
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Comprehensive income attributable to |
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$ |
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$ |
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$ |
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$ |
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See Notes to the unaudited Condensed Consolidated Financial Statements.
5
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in millions)
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As of |
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June 30, 2024 |
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December 31, 2023 |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Inventories, net |
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Prepaid expenses and accrued income |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Goodwill and intangible assets, net |
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Other non-current assets |
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Total assets |
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Liabilities and equity |
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Short-term debt |
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Accounts payable1) |
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Accrued expenses |
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Operating lease liabilities - current |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Pension liability |
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Operating lease liabilities - non-current |
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Other non-current liabilities |
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Total non-current liabilities |
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Common stock |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss2) |
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( |
) |
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( |
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Treasury stock |
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( |
) |
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( |
) |
Total controlling interest's equity |
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Non-controlling interest |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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1)
2)
See Notes to the unaudited Condensed Consolidated Financial Statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
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Six Months Ended June 30, |
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2024 |
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2023 |
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Operating activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to cash provided by operating activities: |
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Depreciation and amortization |
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Other, net |
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( |
) |
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( |
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Net change in operating assets and liabilities |
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Net cash provided by operating activities |
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Investing activities |
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Expenditures for property, plant and equipment |
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( |
) |
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( |
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Proceeds from sale of property, plant and equipment |
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Net cash used in investing activities |
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( |
) |
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( |
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Financing activities |
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Net (decrease) increase in short-term debt |
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( |
) |
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Proceeds from long-term debt |
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Repayment of long-term debt |
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( |
) |
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( |
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Dividends paid |
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( |
) |
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( |
) |
Stock repurchased |
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( |
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( |
) |
Common stock options exercised |
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Dividends paid to non-controlling interest |
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( |
) |
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( |
) |
Net cash used in financing activities |
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( |
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( |
) |
Effect of exchange rate changes on cash and cash equivalents |
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( |
) |
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Net decrease in cash and cash equivalents |
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( |
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( |
) |
Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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See Notes to unaudited Condensed Consolidated Financial Statements.
7
CONSOLIDATED STATEMENTS OF TOTAL EQUITY (UNAUDITED) (Dollars in millions)
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Total |
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Non- |
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Total |
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Balances at December 31, 2023 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Comprehensive Loss: |
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Net income |
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0 |
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Foreign currency translation |
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( |
) |
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( |
) |
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( |
) |
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( |
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Pension liability |
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||||||||
Total Comprehensive Income |
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— |
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— |
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( |
) |
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— |
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Retired and repurchased shared |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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Stock-based compensation |
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Cash dividends declared |
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( |
) |
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( |
) |
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( |
) |
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Balances at March 31, 2024 |
$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
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$ |
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$ |
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||||||
Comprehensive Loss: |
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Net income |
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Foreign currency translation |
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( |
) |
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( |
) |
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( |
) |
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( |
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Pension liability |
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Total Comprehensive Loss |
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— |
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— |
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( |
) |
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— |
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Retired and repurchased shared |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
|||
Stock-based compensation |
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Dividends paid to non-controlling interest |
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( |
) |
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( |
) |
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Cash dividends declared |
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( |
) |
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( |
) |
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( |
) |
|||||
Balances at June 30, 2024 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
Common |
|
|
Additional |
|
|
Retained |
|
|
Accumulated |
|
|
Treasury |
|
|
Total |
|
|
Non- |
|
|
Total |
|
||||||||
Balances at December 31, 2022 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pension liability |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Total Comprehensive Income |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Stock repurchased and retired |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Balances at March 31, 2023 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||||
Pension liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Comprehensive Income |
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Stock repurchased and retired |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Dividends paid to non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
Cash dividends declared |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Balances at June 30, 2023 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
See Notes to the unaudited Condensed Consolidated Financial Statements.
8
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)
June 30, 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
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.
9
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 is currently assessing the impact that ASU 2023-07 will have on its financial statements and will adopt the amendments in this update upon the effective date.
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.
10
3. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, short-term debt and other current financial assets and liabilities approximate their fair value because of the short-term maturity of these instruments.
The Company uses derivative financial instruments (“derivatives”) as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest rates and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial policy. All derivatives are recognized in the consolidated financial statements at fair value. For certain derivatives, hedge accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although each hedge is entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest rates and foreign exchange rates.
The degree of judgment utilized in measuring the fair value of the instruments generally correlates to the level of pricing observability. Pricing observability is impacted by several factors, including the type of asset or liability, whether the asset or liability has an established market and the characteristics specific to the transaction. Instruments with readily active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, assets rarely traded or not quoted will generally have less, or no, pricing observability and a higher degree of judgment utilized in measuring fair value.
All the Company’s derivatives are classified as Level 2 financial instruments in the fair value hierarchy. Level 2 pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
The carrying value is the same as the fair value as these instruments are recognized in the consolidated financial statements at fair value. Although the Company is party to close-out netting agreements (“ISDA agreements”) with all of its derivative counterparties, the fair values in the tables below and in the Condensed Consolidated Balance Sheets as of June 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
11
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
For the three months periods ended June 30, 2024 and 2023, the gains (losses) recognized in other non-operating items, net were a loss of $
For the three and six months periods ended June 30, 2024, the gains (losses) recognized as interest expense were a gain of $
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 |
|
|
||||||||||||||||||||||
|
|
June 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) |
$ |
|
2) |
$ |
|
3) |
|
$ |
|
4) |
$ |
|
5) |
$ |
|
6) |
||||||
Total derivatives not designated |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||
1)
2)
3)
4)
5)
6)
12
Fair Value of Debt
The fair value of long-term debt is determined either from quoted market prices as provided by participants in the secondary market or for long-term debt without quoted market prices, estimated using a discounted cash flow method based on the 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 €
The fair value and carrying value of debt is summarized in the table below (dollars in millions).
|
|
As of |
|
|||||||||||||
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term portion of long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Overdrafts and other short-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total short-term debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
1)
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 six months periods ended June 30, 2024 and June 30, 2023, the Company did
13
4. INCOME TAXES
The effective tax rate for the three months period ended June 30, 2024 was
The effective tax rate for the six months period ended June 30, 2024 was
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. states, and non-U.S. jurisdictions. At any given time, the Company is undergoing tax audits in several tax jurisdictions covering multiple years. The Company is no longer subject to income tax examination by the U.S. federal income tax authorities for years prior to 2015. With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax authorities for years before 2012.
As of June 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 six months period ended June 30, 2024, the Company recorded a net increase of $
Of the total unrecognized tax benefits of $
5. INVENTORIES
Inventories are stated at the lower of cost (“FIFO”) and net realizable value. The components of inventories were as follows (dollars in millions):
|
|
As of |
|
|||||
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Finished products |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Inventory valuation reserve |
|
|
( |
) |
|
|
( |
) |
Total inventories, net of reserve |
|
$ |
|
|
$ |
|
||
14
6. RESTRUCTURING
As of June 30, 2024, the majority of the restructuring reserve balance of $
Provisions and cash payments for the three and six months periods ended June 30, 2024 relate to the restructuring activities in Europe. The provision charges for the three and six months periods ended June 30, 2023 mainly relate to restructuring activities in Germany and UK.
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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Reserve at beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision - charge |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision - reversal |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Translation difference |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Reserve at end of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company is exposed to product liability and warranty claims in the event that the Company’s products fail to perform as represented and such failure results, or is alleged to result, in bodily injury, and/or property damage or other loss. The Company has reserves for product risks. Such reserves are related to product performance issues, including recalls, product liability, and warranty issues. For further explanation, see Note 9. Contingent Liabilities below.
For the three months period ended June 30, 2024, cash payments mainly relate to warranty related issues. For the six months period ended June 30, 2024, provision reversals and cash payments primarily relate to recall related issues. For the three and six months periods ended June 30, 2023, provisions and cash payments primarily related to warranty related issues. As of June 30, 2024, the reserve for product related liabilities mainly relates to 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 June 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 June 30, 2024, the Company had total insurance receivables of $
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Reserve at beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Change in reserve |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Translation difference |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reserve at end of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
8. RETIREMENT PLANS
The components of total Net Periodic Benefit Cost associated with the Company’s defined benefit retirement plans are as follows (dollars in millions):
U.S. Plans |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Interest cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Settlement loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net periodic benefit (gain) cost |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-U.S. Plans |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net periodic benefit cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 second 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 June 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
16
9. CONTINGENT LIABILITIES
Legal Proceedings
Various claims, lawsuits, and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability, and other matters. Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, 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. 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.
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.
17
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 June 30, 2024, the Company has accrued $
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
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
Volvo Car USA, LLC (together with its affiliates, “Volvo”) has recalled approximately
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.
18
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 six months periods ended June 30, 2024, the Company recorded approximately $
During the three and six months periods ended June 30, 2024, approximately
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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In millions, except per share amounts) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to controlling interest |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic: Weighted average common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Weighted average stock options/share awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings per share - basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings per share - diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12. REVENUE DISAGGREGATION
The Company’s disaggregated revenue for the three and six months periods ended June 30, 2024 and June 30, 2023 were as follows (dollars in millions).
Net Sales by Products |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Airbags, Steering Wheels and Other1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Seatbelt Products and Other1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales by Region |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Americas |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia excl. China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
1)
Contract Balances
Contract assets relate to the Company's rights to consideration for work completed but not billed (generally in conjunction with contracts for which revenue is recognized over time) at the reporting date on production parts and is included in Other current assets in the Condensed Consolidated Balance Sheet. The contract assets are reclassified into the receivables balance when the rights to receive payments become unconditional. The net change in the contract assets balance, reflecting the adjustments needed to align revenue recognition for work completed but not billed, for the three and six months periods ended June 30, 2024 and June 30, 2023, were not material in any period.
19
13. SUBSEQUENT EVENTS
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with our Annual Report on Form 10-K for the year ended December 31, 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.
21
EXECUTIVE OVERVIEW
In the second quarter, profitability continued to improve despite a slight decline in net sales. The improvement was driven by better pricing and successful execution of cost reductions, with indirect headcount reduced by 1,100 since the start of the program. We have settled cost compensation claims with a majority of customers and target to close most of the remaining claims in the third quarter. Return on capital employed was good and cash flow continued to be strong, supporting a high level of shareholder returns and an improvement of the leverage ratio to 1.2x.
We remain on track with our strategic and structural initiatives to sustainably strengthen our footprint and operations. However, light vehicle production with certain key customers following weaker sales and inventory adjustments were lower than expected in the quarter, especially in June. The lower than expected sales impacted our profitability with an operating leverage at the high end of our normal 20%-30% range.
It is encouraging that customer production plans for the third quarter are normalizing, indicating that the June weakness should be temporary.
We continued to outperform LVP significantly in Asia excluding China and in Europe, fueled by product launches and better pricing. In Americas, we underperformed slightly, as some key customers reduced production.
We continue to expand our business with domestic Chinese OEMs, positioning us well to benefit from the new structure of the Chinese market. Domestic Chinese OEMs accounted for 38% of our China sales in the second quarter. We grew sales to this group by 39% in the second quarter versus a year ago, and by 25% versus the previous quarter. However, the market developed unfavorably in the second quarter, with sales for certain brands and models with low Autoliv content growing strongly, while some of our key global customers production declined significantly, leading to 7pp underperformance in China.
We remain fully focused on delivering on the around 12% adjusted operating margin (Non-U.S. GAAP measure) target, although we are adjusting our full year 2024 guidance slightly, reflecting changes in LVP and adverse customer mix. We continue to expect a significant increase in profitability in the second half year with an adjusted operating margin (Non-U.S. GAAP measure) of around 11-12% compared to the first half year's 8.0%. The positive development of our cash flow and balance sheet supports our continued commitment to a high level of shareholder returns.
Financial highlights in the three months period ended June 30, 2024
Change figures below compare to the same period of the previous year, except when stated otherwise.
$2,605 million net sales
1.1% net sales decrease
0.7% organic sales growth (Non-U.S. GAAP measure, see reconciliation table below)
7.9% operating margin
8.5% adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below)
$1.71 EPS, 178% increase
$1.87 adjusted EPS (Non-U.S. GAAP measure, see reconciliation table below), 3% decrease
22
Key business developments in the three months period ended June 30, 2024
Change figures below compare to the same period of the previous year, except when stated otherwise.
Business and market condition update for the second quarter 2024
Supply Chain
In the second quarter, global light vehicle production declined by 0.7% year-over-year (according to S&P Global July 2024). Call-off volatility was lower compared to a year earlier, as supply chains are less strained than they were a year ago. However, volatility did not improve compared to the first quarter 2024, and is still 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 continue to expect call-off volatility in 2024 on average to be lower than it was in 2023 but remain higher than the pre-pandemic level.
Inflation
In the second quarter, cost pressure from labor and other items had a negative impact on our profitability. 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 second quarter. We now 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 will continue to seek inflation compensation from our customers.
23
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 |
|
|
Six Months Ended |
|
||||||||||
|
|
or As of June 30, |
|
|
or As of June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Trade working capital1) |
|
|
1,169 |
|
|
|
1,292 |
|
|
|
1,169 |
|
|
|
1,292 |
|
Trade working capital relative to sales, %2) |
|
|
11.2 |
% |
|
|
12.3 |
% |
|
|
11.2 |
% |
|
|
12.3 |
% |
Receivables outstanding relative to sales, %3) |
|
|
20.1 |
% |
|
|
20.8 |
% |
|
|
20.1 |
% |
|
|
20.8 |
% |
Inventory outstanding relative to sales, %4) |
|
|
9.0 |
% |
|
|
9.0 |
% |
|
|
9.0 |
% |
|
|
9.0 |
% |
Payables outstanding relative to sales, %5) |
|
|
17.8 |
% |
|
|
17.5 |
% |
|
|
17.8 |
% |
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin, %6) |
|
|
18.2 |
% |
|
|
17.0 |
% |
|
|
17.6 |
% |
|
|
16.1 |
% |
Operating margin, %7) |
|
|
7.9 |
% |
|
|
3.6 |
% |
|
|
7.7 |
% |
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital employed8) |
|
|
3,890 |
|
|
|
3,856 |
|
|
|
3,890 |
|
|
|
3,856 |
|
Net debt9) |
|
|
1,579 |
|
|
|
1,299 |
|
|
|
1,579 |
|
|
|
1,299 |
|
Return on total equity, %10) |
|
|
23.4 |
% |
|
|
8.2 |
% |
|
|
21.8 |
% |
|
|
9.8 |
% |
Return on capital employed, %11) |
|
|
21.0 |
% |
|
|
9.5 |
% |
|
|
20.4 |
% |
|
|
11.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Headcount at period-end12) |
|
|
68,700 |
|
|
|
71,200 |
|
|
|
68,700 |
|
|
|
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.
24
three months period ended June 30, 2024 COMPARED WITH three months period ended June 30, 2023
Consolidated Sales Development
(dollars in millions)
|
|
Three Months Ended June 30, |
|
|
|
|
|
Components of change in net sales |
|
|||||||||||
|
|
2024 |
|
|
2023 |
|
|
Reported |
|
|
Currency |
|
|
Organic 3) |
|
|||||
Airbags, Steering Wheels and Other2) |
|
$ |
1,747 |
|
|
$ |
1,757 |
|
|
|
(0.6 |
)% |
|
|
(1.8 |
)% |
|
|
1.2 |
% |
Seatbelt products and Other2) |
|
|
858 |
|
|
|
878 |
|
|
|
(2.2 |
)% |
|
|
(1.9 |
)% |
|
|
(0.3 |
)% |
Total |
|
$ |
2,605 |
|
|
$ |
2,635 |
|
|
|
(1.1 |
)% |
|
|
(1.9 |
)% |
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Americas |
|
$ |
893 |
|
|
$ |
916 |
|
|
|
(2.6 |
)% |
|
|
0.3 |
% |
|
|
(2.8 |
)% |
Europe |
|
|
761 |
|
|
|
751 |
|
|
|
1.4 |
% |
|
|
(0.2 |
)% |
|
|
1.6 |
% |
China |
|
|
468 |
|
|
|
497 |
|
|
|
(5.9 |
)% |
|
|
(3.1 |
)% |
|
|
(2.8 |
)% |
Asia excl. China |
|
|
483 |
|
|
|
471 |
|
|
|
2.6 |
% |
|
|
(7.4 |
)% |
|
|
10 |
% |
Total |
|
$ |
2,605 |
|
|
$ |
2,635 |
|
|
|
(1.1 |
)% |
|
|
(1.9 |
)% |
|
|
0.7 |
% |
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 1.2% in the quarter. The largest contributor to the increase was steering wheels, followed by center airbags, inflatable curtains, side airbags, and driver airbags, partly offset by decreases for passenger airbags and knee airbags.
Sales by product - Seatbelts and Other
Sales for Seatbelt Products and Other decreased organically (Non-U.S. GAAP measure, see reconciliation table above) by 0.3% in the quarter. Sales declined organically in China and the Americas, while it increased in Asia excluding China with Europe being virtually unchanged.
Sales by region
Our global organic sales (Non-U.S. GAAP measure, see reconciliation table above) increased by 0.7% compared to the global LVP decrease of 0.7% (according to S&P Global, July 2024). The outperformance was mainly driven by new product launches and higher prices carried over from last year, partly offset by negative customer and model mix.
Our organic sales growth outperformed LVP growth by 13pp in Asia excluding China and by 7.7pp in Europe, while it underperformed by 2.3pp in the Americas, and by 7.3pp in China. LVP growth in China was heavily tilted to domestic OEMs with typically lower safety content. In addition, certain models with low Autoliv content grew very fast in the quarter. Domestic OEM LVP in China grew by 20% while LVP declined by 10% for global OEMs in the second quarter.
Second quarter of 2024 organic growth1)
|
|
Americas |
|
Europe |
|
China |
|
Asia excl. China |
|
Global |
Autoliv |
|
(2.8)% |
|
1.6% |
|
(2.8)% |
|
10% |
|
0.7% |
Main growth drivers |
|
VW, Hyundai, |
|
Mercedes, Renault, Hyundai |
|
Geely, BMW, |
|
Hyundai, Suzuki, |
|
Geely, Mercedes, Hyundai |
Main decline drivers |
|
Stellantis, |
|
Stellantis, VW |
|
EV OEM, |
|
KG Mobility, Stellantis |
|
Stellantis, |
1) Non-U.S. GAAP measure.
Light Vehicle Production Development
Change second quarter of 2024 versus second quarter of 2023
|
|
Americas |
|
Europe |
|
China |
|
Asia excl. China |
|
Global |
LVP1) |
|
(0.5)% |
|
(6.1)% |
|
4.5 % |
|
(2.6)% |
|
(0.7)% |
1) Source: S&P Global, July 2024.
25
Earnings
|
|
Three Months Ended June 30, |
|
|
|
|
||||||
(Dollars in millions, except per share data) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Net Sales |
|
$ |
2,605 |
|
|
$ |
2,635 |
|
|
|
(1.1 |
)% |
Gross profit |
|
|
475 |
|
|
|
447 |
|
|
|
6.2 |
% |
% of sales |
|
|
18.2 |
% |
|
|
17.0 |
% |
|
|
1.3 |
pp |
S, G&A |
|
|
(138 |
) |
|
|
(130 |
) |
|
|
6.5 |
% |
% of sales |
|
|
(5.3 |
)% |
|
|
(4.9 |
)% |
|
|
(0.4 |
)pp |
R, D&E, net |
|
|
(116 |
) |
|
|
(120 |
) |
|
|
(3.4 |
)% |
% of sales |
|
|
(4.5 |
)% |
|
|
(4.6 |
)% |
|
|
0.1 |
pp |
Other income (expense), net |
|
|
(14 |
) |
|
|
(103 |
) |
|
|
(86 |
)% |
Operating income |
|
|
206 |
|
|
|
94 |
|
|
|
120 |
% |
% of sales |
|
|
7.9 |
% |
|
|
3.6 |
% |
|
|
4.4 |
pp |
Adjusted operating income1) |
|
|
221 |
|
|
|
212 |
|
|
|
4.4 |
% |
% of sales |
|
|
8.5 |
% |
|
|
8.0 |
% |
|
|
0.5 |
pp |
Financial and non-operating items, net |
|
|
(23 |
) |
|
|
(11 |
) |
|
|
108 |
% |
Income before taxes |
|
|
183 |
|
|
|
83 |
|
|
|
121 |
% |
Income taxes |
|
|
(44 |
) |
|
|
(30 |
) |
|
|
49 |
% |
Tax rate |
|
|
24.1 |
% |
|
|
35.8 |
% |
|
|
(11.7 |
)pp |
Net income |
|
|
139 |
|
|
|
53 |
|
|
|
162 |
% |
Earnings per share, diluted2) |
|
|
1.71 |
|
|
|
0.61 |
|
|
|
178 |
% |
Adjusted earnings per share, diluted1,2) |
|
|
1.87 |
|
|
|
1.93 |
|
|
|
(2.9 |
)% |
1) Non-U.S. GAAP measure, excluding effects from capacity alignments, antitrust related matters and for fiscal year 2023 the Andrews litigation settlement.
2) Assuming dilution, when applicable, and net of treasury shares.
Second quarter of 2024 financial development
Gross profit increased by $28 million, and the gross margin increased by 1.3pp compared to the same quarter 2023. The gross profit increase was primarily driven by lower costs for labor and production overhead, as well as customer compensations and positive foreign currency effects. This was partly offset by higher material costs.
S,G&A costs increased by $8 million compared to the prior year, impacted by higher personnel and IT costs as well as higher legal costs. S,G&A costs in relation to sales increased from 4.9% to 5.3%.
R,D&E, net costs decreased by $4 million compared to the prior year, mainly due to higher engineering income. R,D&E, net, in relation to sales decreased from 4.6% to 4.5%.
Other income (expense), net was negative $14 million mainly due to capacity alignment accruals, compared to negative $103 million in the same period last year. Q2 2023 was negatively impacted by around $109 million in accruals for capacity alignments.
Operating income increased by $112 million compared to the same period in 2023, mainly due to lower capacity alignment accruals and the increase in gross profit.
Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) increased by $9 million compared to the prior year, mainly due to higher gross profit, partly offset by higher S,G&A costs.
Financial and non-operating items, net, was negative $23 million compared to negative $11 million a year earlier. The difference was mainly due to increased interest expense as the result of higher debt and higher interest rates.
Income before taxes increased by $100 million compared to the prior year, mainly due to the increase in operating income.
Tax rate was 24.1% compared to 35.8% in the same period last year. Discrete tax items, net, decreased the tax rate this quarter by 4.9pp. Discrete tax items, net, decreased the tax rate by 4.5pp in the same period last year.
Earnings per share, diluted increased by $1.09 compared to a year earlier. The main drivers were $1.21 from higher operating income and $0.09 from lower number of shares, partly offset by $0.13 from higher income taxes and $0.09 from higher financial and non-operating items, net.
26
six months period ended June 30, 2024 COMPARED WITH six months period ended June 30, 2023
Consolidated Sales Development
(dollars in millions)
|
|
Six Months Ended June 30, |
|
|
|
|
|
Components of change in net sales |
|
|||||||||||
|
|
2024 |
|
|
2023 |
|
|
Reported |
|
|
Currency |
|
|
Organic 3) |
|
|||||
Airbags, Steering Wheels and Other2) |
|
$ |
3,528 |
|
|
$ |
3,430 |
|
|
|
2.9 |
% |
|
|
(1.2 |
)% |
|
|
4.0 |
% |
Seatbelt products and Other2) |
|
|
1,692 |
|
|
|
1,698 |
|
|
|
(0.3 |
)% |
|
|
(1.2 |
)% |
|
|
0.9 |
% |
Total |
|
$ |
5,220 |
|
|
$ |
5,127 |
|
|
|
1.8 |
% |
|
|
(1.2 |
)% |
|
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Americas |
|
$ |
1,786 |
|
|
$ |
1,747 |
|
|
|
2.2 |
% |
|
|
1.5 |
% |
|
|
0.7 |
% |
Europe |
|
|
1,531 |
|
|
|
1,476 |
|
|
|
3.7 |
% |
|
|
1.1 |
% |
|
|
2.6 |
% |
China |
|
|
928 |
|
|
|
950 |
|
|
|
(2.3 |
)% |
|
|
(3.9 |
)% |
|
|
1.6 |
% |
Asia |
|
|
975 |
|
|
|
954 |
|
|
|
2.1 |
% |
|
|
(7.0 |
)% |
|
|
9.1 |
% |
Total |
|
$ |
5,220 |
|
|
$ |
5,127 |
|
|
|
1.8 |
% |
|
|
(1.2 |
)% |
|
|
3.0 |
% |
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 4.0% in the period. The largest contributor to the increase was steering wheels, followed by center airbags, inflatable curtains, side airbags, and driver airbags, partly offset by decreases for knee airbags and passenger airbags.
Sales by product - Seatbelts and Other
Sales for Seatbelt Products and Other increased organically (Non-U.S. GAAP measure, see reconciliation table above) by 0.9% 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 3.0% compared to the global LVP decrease of 0.3% (according to S&P Global, July 2024). The outperformance was mainly driven by new product launches and higher prices carried over from last year, partly offset by negative customer and model mix.
Our organic sales growth outperformed LVP growth by 14pp in Asia excluding China, by 6.0pp in Europe and by 1.0pp in the Americas, while it underperformed by 4.0pp in China. LVP growth in China was heavily tilted to domestic OEMs with typically lower safety content. In addition, certain models with low Autoliv content grew strongly. Domestic OEM LVP in China grew by 19% while LVP declined by 7% for global OEMs in the first half year.
First six months 2024 organic growth1)
|
|
Americas |
|
Europe |
|
China |
|
Asia excl. China |
|
Global |
Autoliv |
|
0.7% |
|
2.6% |
|
1.6% |
|
9.1% |
|
3.0% |
Main growth drivers |
|
VW, Mercedes, |
|
Mercedes, Renault, BMW |
|
Geely, BMW, |
|
Hyundai, Tata, |
|
Mercedes, Hyundai, Geely |
Main decline drivers |
|
Stellantis, |
|
Stellantis, |
|
EV OEM, |
|
Nissan, Renault |
|
Stellantis, |
1) Non-U.S. GAAP measure.
Light Vehicle Production Development
Change first six months of 2023 versus first six months of 2022
|
|
Americas |
|
Europe |
|
China |
|
Asia excl. China |
|
Global |
LVP1) |
|
(0.3)% |
|
(3.4)% |
|
5.6 % |
|
(4.6)% |
|
(0.3)% |
1) Source: S&P Global, July 2024.
27
Earnings
|
Six Months Ended June 30, |
|
|
|
|
||||||
(Dollars in millions, except per share data) |
2024 |
|
|
2023 |
|
|
Change |
|
|||
Net Sales |
$ |
5,220 |
|
|
$ |
5,127 |
|
|
|
1.8 |
% |
Gross profit |
|
917 |
|
|
|
826 |
|
|
|
11 |
% |
% of sales |
|
17.6 |
% |
|
|
16.1 |
% |
|
|
1.5 |
pp |
S, G&A |
|
(270 |
) |
|
|
(262 |
) |
|
|
3.2 |
% |
% of sales |
|
(5.2 |
)% |
|
|
(5.1 |
)% |
|
|
(0.1 |
)pp |
R, D&E, net |
|
(229 |
) |
|
|
(237 |
) |
|
|
(3.3 |
)% |
% of sales |
|
(4.4 |
)% |
|
|
(4.6 |
)% |
|
|
0.2 |
pp |
Other income (expense), net |
|
(18 |
) |
|
|
(107 |
) |
|
n/a |
|
|
Operating income |
|
400 |
|
|
|
221 |
|
|
|
81 |
% |
% of sales |
|
7.7 |
% |
|
|
4.3 |
% |
|
|
3.4 |
pp |
Adjusted operating income1) |
|
420 |
|
|
|
343 |
|
|
|
22 |
% |
% of sales |
|
8.0 |
% |
|
|
6.7 |
% |
|
|
1.4 |
pp |
Financial and non-operating items, net |
|
(43 |
) |
|
|
(29 |
) |
|
|
47 |
% |
Income before taxes |
|
356 |
|
|
|
191 |
|
|
|
86 |
% |
Income taxes |
|
(91 |
) |
|
|
(64 |
) |
|
|
42 |
% |
Tax rate |
|
25.5 |
% |
|
|
33.4 |
% |
|
|
(7.9 |
)pp |
Net income |
|
266 |
|
|
|
127 |
|
|
|
108 |
% |
Earnings per share, diluted2) |
|
3.23 |
|
|
|
1.47 |
|
|
|
119 |
% |
Adjusted earnings per share, diluted1,2) |
|
3.45 |
|
|
|
2.82 |
|
|
|
22 |
% |
1) Non-U.S. GAAP measure, excluding effects from capacity alignments, antitrust related matters and for fiscal year 2023 the Andrews litigation settlement.
2) Assuming dilution, when applicable, and net of treasury shares.
First six months 2024 financial development
Gross profit increased by $91 million, and the gross margin increased by 1.5pp compared to the same period 2023. The gross profit increase was primarily driven by volume growth, customer compensations and lower costs for labor, material, production overhead and premium freight.
S,G&A costs increased by $8 million compared to the prior year, mainly due to higher personnel costs and legal fees, partly offset by lower costs for professional service. S,G&A costs in relation to sales increased from 5.1% to 5.2%.
R,D&E, net costs decreased by $8 million compared to the prior year, mainly due to higher engineering income. R,D&E, net, in relation to sales decreased from 4.6% to 4.4%.
Other income (expense), net was negative $18 million mainly due to capacity alignment accruals, compared to negative $107 million in the same period last year, mainly due to $112 million in capacity alignment accruals.
Operating income increased by $179 million compared to the same period in 2023, mainly due to the increase in gross profit and lower capacity alignment accruals.
Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) increased by $77 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.
Financial and non-operating items, net, was negative $43 million compared to negative $29 million a year earlier. The difference was mainly due to increased interest expense as the result of higher debt and higher interest rates.
Income before taxes increased by $165 million compared to the prior year, mainly due to the increase in operating income.
Tax rate was 25.5% compared to 33.4% in the same period last year. Discrete tax items, net, decreased the tax rate this quarter by 3.7pp. Discrete tax items, net, decreased the tax rate by 1.5pp in the same period last year.
Earnings per share, diluted increased by $1.75 compared to a year earlier. The main drivers were $1.71 from higher operating income and $0.15 from lower number of shares, partly offset by $0.11 from higher financial and non-operating items, net.
28
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.
Second quarter of 2024 development
Changes in operating working capital was $128 million positive, compared to $230 million positive in the same period the prior year. The $102 million decrease was mainly due to the positive effects from accounts payable and accrued expenses were smaller, partly offset by more positive effects from receivables and other assets.
Other, net was $23 million negative compared to $2 million positive in the same period the prior year. The difference relates mainly to deferred income taxes and other, net.
Operating cash flow decreased by $39 million to $340 million compared to the same period last year, mainly due to less positive effects from operating working capital changes.
Capital expenditure, net increased by $22 million compared to the same period the previous year. Capital expenditure, net in relation to sales was 5.6% versus 4.7% a year earlier.
Free cash flow (Non-U.S. GAAP measure, see calculation table below) was positive $194 million compared to positive $255 million in the same period the prior year. The decrease was due to the lower operating cash flow and 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 140% in the quarter.
Trade working capital (Non-U.S. GAAP measure, see calculation table below) decreased by $123 million compared to the same period last year, where the main drivers were $99 million in lower accounts receivables, $14 million in higher accounts payable and $11 million in lower inventories. In relation to sales, trade working capital decreased from 12.3% to 11.2%.
Liquidity position. As of June 30, 2024, our cash balance was around $0.4 billion, and including committed, unused loan facilities, our liquidity position was around $1.5 billion.
Net debt (Non-U.S. GAAP measure, see reconciliation table below) was $1,579 million as of June 30, 2024, which was $280 million higher than a year earlier
Total equity. As of June 30, 2024, decreased by $246 million compared to June 30, 2023. This was mainly due to $223 million in dividend payments and stock repurchases including taxes of $597 million, as well as $76 million in negative currency translation effects, partly offset by $627 million from net income.
Leverage ratio (Non-U.S. GAAP measure, see calculation table below). As of June 30, 2024, the Company had a leverage ratio of 1.2x compared to 1.3x as of June 30, 2023, both the 12 months trailing adjusted EBITDA (Non-U.S. GAAP measure, see calculation table below) and the net debt (Non-U.S. GAAP measure) increased by around $270 million.
First six months of 2024 development
Operating cash flow increased by $129 million compared to the same period last year, to $462 million, mainly due to higher net income.
Capital expenditure, net increased by $19 million. Capital expenditure, net in relation to sales was 5.5% versus 5.2% the prior year period.
Free cash flow (Non-U.S. GAAP measure, see calculation table below) was positive $176 million, compared to positive $66 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 66% in the period.
29
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 June 30, 2024 |
|
|
Three Months Ended June 30, 2023 |
|
||||||||||||||||||
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
||||||
Operating income |
|
$ |
206 |
|
|
$ |
15 |
|
|
$ |
221 |
|
|
$ |
94 |
|
|
$ |
118 |
|
|
$ |
212 |
|
Operating margin, % |
|
|
7.9 |
% |
|
|
0.6 |
% |
|
|
8.5 |
% |
|
|
3.6 |
% |
|
|
4.5 |
% |
|
|
8.0 |
% |
Earnings per share, diluted |
|
$ |
1.71 |
|
|
$ |
0.17 |
|
|
$ |
1.87 |
|
|
$ |
0.61 |
|
|
$ |
1.31 |
|
|
$ |
1.93 |
|
1) Effects from capacity alignments, antitrust related matters and for fiscal year 2023 the Andrews litigation settlement.
|
|
Six Months Ended June 30, 2024 |
|
|
Six Months Ended June 30, 2023 |
|
||||||||||||||||||
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
|
Reported |
|
|
Adjustments1) |
|
|
Non-U.S. |
|
||||||
Operating income |
|
$ |
400 |
|
|
$ |
20 |
|
|
$ |
420 |
|
|
$ |
221 |
|
|
$ |
122 |
|
|
$ |
343 |
|
Operating margin, % |
|
|
7.7 |
% |
|
|
0.4 |
% |
|
|
8.0 |
% |
|
|
4.3 |
% |
|
|
2.4 |
% |
|
|
6.7 |
% |
Earnings per share, diluted |
|
$ |
3.23 |
|
|
$ |
0.22 |
|
|
$ |
3.45 |
|
|
$ |
1.47 |
|
|
$ |
1.35 |
|
|
$ |
2.82 |
|
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 June 30, 2024 |
|
|
Three Months Ended June 30, 2023 |
|
||||||||||
|
|
Millions |
|
|
Per share |
|
|
Millions |
|
|
Per share |
|
||||
Capacity alignments |
|
$ |
14 |
|
|
$ |
0.17 |
|
|
$ |
109 |
|
|
$ |
1.26 |
|
Andrews litigation settlement |
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
0.09 |
|
Antitrust related matters |
|
|
1 |
|
|
|
0.01 |
|
|
|
1 |
|
|
|
0.01 |
|
Total adjustments to operating income |
|
|
15 |
|
|
|
0.18 |
|
|
|
118 |
|
|
|
1.36 |
|
Tax on non-U.S. GAAP adjustments1) |
|
|
(1 |
) |
|
|
(0.02 |
) |
|
|
(5 |
) |
|
|
(0.06 |
) |
Total adjustments to net income |
|
$ |
14 |
|
|
$ |
0.16 |
|
|
$ |
113 |
|
|
$ |
1.30 |
|
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
|
|
Six Months Ended June 30, 2024 |
|
|
Six Months Ended June 30, 2023 |
|
||||||||||
|
|
Millions |
|
|
Per share |
|
|
Millions |
|
|
Per share |
|
||||
Capacity alignments |
|
$ |
16 |
|
|
$ |
0.19 |
|
|
$ |
112 |
|
|
$ |
1.29 |
|
The Andrews litigation settlement |
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
0.09 |
|
Antitrust related matters |
|
|
4 |
|
|
|
0.05 |
|
|
|
2 |
|
|
|
0.02 |
|
Total adjustments to operating income |
|
|
20 |
|
|
|
0.24 |
|
|
|
122 |
|
|
|
1.41 |
|
Tax on non-U.S. GAAP adjustments1) |
|
|
(2 |
) |
|
|
(0.02 |
) |
|
|
(6 |
) |
|
|
(0.07 |
) |
Total adjustments to net income |
|
$ |
18 |
|
|
$ |
0.22 |
|
|
$ |
116 |
|
|
$ |
1.34 |
|
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
30
The Company uses the non-U.S. GAAP measure “Trade working capital,” as defined in the table below, in its communications with investors and for management’s review of the development of the trade working capital cash generation from operations. The reconciling items used to derive this measure are, by contrast, managed as part of the Company’s overall cash and debt management, but they are not part of the responsibilities of day-to-day operations’ management.
Calculation of “Trade working capital”
(Dollars in millions)
|
|
June 30, 2024 |
|
|
March 31, 2024 |
|
|
June 30, 2023 |
|
|||
Receivables, net |
|
$ |
2,090 |
|
|
$ |
2,194 |
|
|
$ |
2,189 |
|
Inventories, net |
|
|
936 |
|
|
|
997 |
|
|
|
947 |
|
Accounts payable |
|
|
(1,858 |
) |
|
|
(1,855 |
) |
|
|
(1,844 |
) |
Trade working capital |
|
$ |
1,169 |
|
|
$ |
1,336 |
|
|
$ |
1,292 |
|
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)
|
|
June 30, 2024 |
|
|
March 31, 2024 |
|
|
June 30, 2023 |
|
|||
Short-term debt |
|
$ |
455 |
|
|
$ |
310 |
|
|
$ |
481 |
|
Long-term debt |
|
|
1,540 |
|
|
|
1,830 |
|
|
|
1,290 |
|
Total debt |
|
|
1,996 |
|
|
|
2,140 |
|
|
|
1,771 |
|
Cash and cash equivalents |
|
|
(408 |
) |
|
|
(569 |
) |
|
|
(475 |
) |
Debt issuance cost/Debt-related derivatives, net |
|
|
(8 |
) |
|
|
(9 |
) |
|
|
4 |
|
Net debt |
|
$ |
1,579 |
|
|
$ |
1,562 |
|
|
$ |
1,299 |
|
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.
Calculation of “Leverage ratio”
(Dollars in millions)
|
|
June 30, 2024 |
|
|
March 31, 2024 |
|
|
June 30, 2023 |
|
|||
Net debt1) |
|
$ |
1,579 |
|
|
$ |
1,562 |
|
|
$ |
1,299 |
|
Pension liabilities |
|
|
140 |
|
|
|
149 |
|
|
|
152 |
|
Debt per the Policy |
|
|
1,720 |
|
|
|
1,711 |
|
|
|
1,451 |
|
|
|
|
|
|
|
|
|
|
|
|||
Net income2) |
|
|
627 |
|
|
|
541 |
|
|
|
390 |
|
Income taxes 2) |
|
|
150 |
|
|
|
136 |
|
|
|
168 |
|
Interest expense, net2,3) |
|
|
89 |
|
|
|
83 |
|
|
|
67 |
|
Other non-operating items, net2) |
|
|
8 |
|
|
|
1 |
|
|
|
1 |
|
Income from equity method investments2) |
|
|
(6 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
Depreciation and amortization of intangibles2) |
|
|
384 |
|
|
|
381 |
|
|
|
363 |
|
Capacity alignments, antitrust related matters and the Andrews litigation settlement2) |
|
|
128 |
|
|
|
231 |
|
|
|
127 |
|
EBITDA per the Policy (Adjusted EBITDA) |
|
$ |
1,380 |
|
|
$ |
1,369 |
|
|
$ |
1,112 |
|
Leverage ratio |
|
|
1.2 |
|
|
|
1.3 |
|
|
|
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.
31
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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
|
$ |
139 |
|
|
$ |
53 |
|
|
$ |
266 |
|
|
$ |
127 |
|
Changes in operating working capital |
|
|
128 |
|
|
|
230 |
|
|
|
14 |
|
|
|
28 |
|
Depreciation and amortization |
|
|
96 |
|
|
|
94 |
|
|
|
192 |
|
|
|
186 |
|
Other, net |
|
|
(23 |
) |
|
|
2 |
|
|
|
(9 |
) |
|
|
(8 |
) |
Operating cash flow |
|
|
340 |
|
|
|
379 |
|
|
|
462 |
|
|
|
334 |
|
Capital expenditure, net |
|
|
(146 |
) |
|
|
(124 |
) |
|
|
(286 |
) |
|
|
(267 |
) |
Free cash flow1) |
|
$ |
194 |
|
|
$ |
255 |
|
|
$ |
176 |
|
|
$ |
66 |
|
Cash conversion2) |
|
|
140 |
% |
|
|
481 |
% |
|
|
66 |
% |
|
|
52 |
% |
1) Operating cash flow less Capital expenditures, net. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2) Free cash flow relative to Net income. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Headcount
|
|
June 30, 2024 |
|
|
March 31, 2024 |
|
|
June 30, 2023 |
|
|||
Total headcount |
|
|
68,700 |
|
|
|
70,100 |
|
|
|
71,200 |
|
Whereof: |
|
|
|
|
|
|
|
|
|
|||
Direct personnel in manufacturing |
|
|
51,100 |
|
|
|
52,500 |
|
|
|
52,600 |
|
Indirect personnel |
|
|
17,500 |
|
|
|
17,600 |
|
|
|
18,600 |
|
Temporary personnel |
|
|
9 |
% |
|
|
10 |
% |
|
|
11 |
% |
As of June 30, 2024, total headcount (Full Time Equivalent) decreased by 2,500, or by 3.5%, compared to a year earlier. The indirect workforce decreased by 1,100, or by 5.9%, mainly reflecting our structural reduction initiatives. The direct workforce decreased by 1,400, or by 2.7%.
Compared to March 31, 2024, total headcount (FTE) decreased by 1,500, or by 2.1%. Indirect headcount decreased by 100, or by 0.6%, while direct headcount decreased by 1,400, or by 2.7%.
32
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%, the achievement of our targeted cost compensation effects, and a sustained reduction in customer call-off volatility.
Financial measure |
|
Full year indication |
Organic sales growth |
|
Around 2% |
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, July 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.
33
Other recent events
Key launches in the six months period ended June 30, 2024
Other Items
34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 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. CONTROLS AND PROCEDURES
An evaluation has been carried out, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective.
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
35
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of our business, we are subject to legal proceedings brought by or against us and our subsidiaries.
See Part I, Item 1, "Financial Statements, Note 9 Contingent Liabilities" of this Quarterly Report on Form 10-Q for a summary of certain ongoing legal proceedings. Such information is incorporated into this Part II, Item 1—"Legal Proceedings" by reference.
ITEM 1A. RISK FACTORS
As of June 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.
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 June 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) |
|
||||
April 1-30, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
6,481,881 |
|
|
|
10,518,119 |
|
May 1-31, 2024 |
|
|
779,394 |
|
|
$ |
124.67 |
|
|
|
7,261,275 |
|
|
|
9,738,725 |
|
June 1-30, 2024 |
|
|
530,212 |
|
|
$ |
118.56 |
|
|
|
7,791,487 |
|
|
|
9,208,513 |
|
(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. OTHER INFORMATION
During the three months period ended June 30, 2024, no director or officer of the Company
36
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*+ |
|
Autoliv, Inc. Non-Employee Director Compensation Policy effective May 1, 2024. |
|
|
|
10.2*+ |
|
Employment Agreement, effective June 1, 2024, by and between Autoliv Inc. and Staffan Olsson. |
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1* |
|
|
|
|
|
32.2* |
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document – The instance document does not appear in the Interactive Date File because its XBRL tags are embedded within the inline XBRL document. |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
37
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104* |
|
Cover Page Interactive Data File (embedded within the inline XBRL document). |
|
|
|
* Filed herewith.
+ Management contract or compensatory plan.
38
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: July 19, 2024
AUTOLIV, INC.
(Registrant)
By: |
|
/s/ Fredrik Westin |
|
|
Fredrik Westin |
|
|
Chief Financial Officer |
|
|
(Duly Authorized Officer and Principal Financial Officer) |
39