10-Q 1 alv-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2024

or

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from  to

 

Commission File No.: 001-12933

 

AUTOLIV, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

51-0378542

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

Klarabergsviadukten 70, Section B7

 

 

Box 70381,

 

 

Stockholm, Sweden

 

SE-107 24

(Address of principal executive offices)

 

(Zip Code)

+46 8 587 20 600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock (par value $1.00 per share)

 

ALV

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes: ☐ No:

 

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of April 18, 2024, there were 81,374,584 shares of common stock of Autoliv, Inc., par value $1.00 per share, outstanding.

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events or developments that Autoliv, Inc. (“Autoliv,” the “Company” or “we”) or its management believes or anticipates may occur in the future. All forward-looking statements are based upon our current expectations, various assumptions and/or data available from third parties. Our expectations and assumptions are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements.

In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “would,” “should,” “could,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words.

Because these forward-looking statements involve risks and uncertainties, the outcome could differ materially from those set out in the forward-looking statements for a variety of reasons, including without limitation: general economic conditions, including inflation; changes in light vehicle production; fluctuation in vehicle production schedules for which the Company is a supplier; global supply chain disruptions, including port, transportation and distribution delays or interruptions; supply chain disruptions and component shortages specific to the automotive industry or the Company; disruptions and impacts relating to the ongoing war between Russia and Ukraine and hostilities in the Middle East; changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignment: restructuring, cost reduction and efficiency initiatives and the market reaction thereto; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies, consolidations or restructuring or divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; market acceptance of our new products; costs or difficulties related to the integration of any new or acquired businesses and technologies; continued uncertainty in pricing and other negotiations with customers; successful integration of acquisitions and operations of joint ventures; successful implementation of strategic partnerships and collaborations; our ability to be awarded new business; product liability, warranty and recall claims and investigations and other litigation, civil judgments or financial penalties and customer reactions thereto; higher expenses for our pension and other postretirement benefits, including higher funding needs for our pension plans; work stoppages or other labor issues; possible adverse results of pending or future litigation or infringement claims and the availability of insurance with respect to such matters; our ability to protect our intellectual property rights; negative impacts of antitrust investigations or other governmental investigations and associated litigation relating to the conduct of our business; tax assessments by governmental authorities and changes in our effective tax rate; dependence on key personnel; legislative or regulatory changes impacting or limiting our business; our ability to meet our sustainability targets, goals and commitments; political conditions; dependence on and relationships with customers and suppliers; the conditions necessary to hit our financial targets; and other risks and uncertainties identified in Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024.

For any forward-looking statements contained in this or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to update publicly or revise any forward-looking statements in light of new information or future events, except as required by law.

2


 

 

INDEX

 

 

 

 

PART I - FINANCIAL INFORMATION

4

 

 

 

ITEM 1. FINANCIAL STATEMENTS

4

 

 

 

1.

Basis of Presentation

9

2.

New Accounting Standards

10

3.

Fair Value Measurements

11

4.

Income Taxes

14

5.

Inventories

14

6.

Restructuring

14

7.

Product-Related Liabilities

15

8.

Retirement Plans

15

9.

Contingent Liabilities

16

10.

Stock Incentive Plan

18

11.

Earnings Per Share

18

12.

Revenue Disaggregation

18

13.

Subsequent Events

18

 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

30

ITEM 4. CONTROLS AND PROCEDURES

30

PART II - OTHER INFORMATION

31

ITEM 1. LEGAL PROCEEDINGS

31

ITEM 1A. RISK FACTORS

31

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

31

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

31

ITEM 4. MINE SAFETY DISCLOSURES

31

ITEM 5. OTHER INFORMATION

31

ITEM 6. EXHIBITS

32

 

3


 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in millions, except per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net sales

 

$

2,615

 

 

$

2,493

 

Cost of sales

 

 

(2,172

)

 

 

(2,113

)

Gross profit

 

 

443

 

 

 

379

 

Selling, general and administrative expenses

 

 

(132

)

 

 

(132

)

Research, development and engineering expenses, net

 

 

(113

)

 

 

(116

)

Other income (expense), net

 

 

(4

)

 

 

(4

)

Operating income

 

 

194

 

 

 

127

 

Income from equity method investment

 

 

2

 

 

 

2

 

Interest income

 

 

5

 

 

 

2

 

Interest expense

 

 

(26

)

 

 

(19

)

Other non-operating items, net

 

 

(1

)

 

 

(2

)

Income before income taxes

 

 

174

 

 

 

109

 

Income tax expense

 

 

(47

)

 

 

(34

)

Net income1)

 

 

127

 

 

 

74

 

Less: Net income attributable to non-controlling interest

 

 

0

 

 

 

0

 

Net income attributable to controlling interest

 

$

126

 

 

$

74

 

 

 

 

 

 

 

 

Net earnings per share – basic

 

$

1.53

 

 

$

0.86

 

Net earnings per share – diluted

 

$

1.52

 

 

$

0.86

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, net of
   treasury shares (in millions)

 

 

82.3

 

 

 

86.1

 

Weighted average number of shares outstanding,
   assuming dilution and net of treasury
   shares (in millions)

 

 

83.0

 

 

 

86.3

 

 

 

 

 

 

 

 

Cash dividend per share – declared

 

$

0.68

 

 

$

0.66

 

Cash dividend per share – paid

 

$

0.68

 

 

$

0.66

 

1) For the three months periods ended March 31, 2024 and 2023, the aggregate transaction gain (loss) included in net income for the period were $(6) million and $(5) million, respectively.

 

 

 

 

 

 

 

See Notes to the unaudited Condensed Consolidated Financial Statements.

4


 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in millions)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net income

 

$

127

 

 

$

74

 

Other comprehensive income (loss) before tax:

 

 

 

 

 

 

Change in cumulative translation adjustments

 

 

(47

)

 

 

36

 

Net change in unrealized components of defined benefit plans

 

 

6

 

 

 

(0

)

Other comprehensive (loss), before tax

 

 

(40

)

 

 

35

 

Tax effect allocated to other comprehensive income (loss)

 

 

(1

)

 

 

0

 

Other comprehensive (loss), net of tax

 

 

(42

)

 

 

35

 

Comprehensive income

 

 

85

 

 

 

110

 

Less: Comprehensive income (loss) attributable to
   non-controlling interest

 

 

0

 

 

 

0

 

Comprehensive income attributable to
   controlling interest

 

$

85

 

 

$

110

 

 

 

See Notes to the unaudited Condensed Consolidated Financial Statements.

5


 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in millions)

 

 

 

As of

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

569

 

 

$

498

 

Receivables, net

 

 

2,194

 

 

 

2,198

 

Inventories, net

 

 

997

 

 

 

1,012

 

Prepaid expenses and accrued income

 

 

180

 

 

 

173

 

Other current assets

 

 

71

 

 

 

93

 

Total current assets

 

 

4,011

 

 

 

3,974

 

Property, plant and equipment, net

 

 

2,192

 

 

 

2,192

 

Operating lease right-of-use assets

 

 

177

 

 

 

176

 

Goodwill and intangible assets, net

 

 

1,381

 

 

 

1,385

 

Other non-current assets

 

 

564

 

 

 

606

 

Total assets

 

 

8,324

 

 

 

8,332

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

Short-term debt

 

 

310

 

 

 

538

 

Accounts payable1)

 

 

1,855

 

 

 

1,978

 

Accrued expenses

 

 

1,129

 

 

 

1,135

 

Operating lease liabilities - current

 

 

41

 

 

 

39

 

Other current liabilities

 

 

323

 

 

 

345

 

Total current liabilities

 

 

3,658

 

 

 

4,035

 

Long-term debt

 

 

1,830

 

 

 

1,324

 

Pension liability

 

 

149

 

 

 

159

 

Operating lease liabilities - non-current

 

 

134

 

 

 

135

 

Other non-current liabilities

 

 

111

 

 

 

109

 

Total non-current liabilities

 

 

2,224

 

 

 

1,728

 

Common stock

 

 

86

 

 

 

88

 

Additional paid-in capital

 

 

1,018

 

 

 

1,044

 

Retained earnings

 

 

2,226

 

 

 

2,289

 

Accumulated other comprehensive loss

 

 

(537

)

 

 

(496

)

Treasury stock

 

 

(364

)

 

 

(368

)

Total controlling interest's equity

 

 

2,428

 

 

 

2,557

 

Non-controlling interest

 

 

13

 

 

 

13

 

Total equity

 

 

2,442

 

 

 

2,570

 

Total liabilities and equity

 

$

8,324

 

 

$

8,332

 

1) Amount of obligations confirmed under the Company's Supplier Finance Program that remains unpaid is reported as Accounts Payable in the Condensed Consolidated Balance Sheets. Amount of obligations outstanding as of March 31, 2024 and December 31, 2023 are $324 million and $333 million, respectively.

 

 

 

See Notes to the unaudited Condensed Consolidated Financial Statements.

6


 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in millions)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net income

 

$

127

 

 

$

74

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

96

 

 

 

92

 

Other, net

 

 

14

 

 

 

(10

)

Net change in operating assets and liabilities

 

 

(114

)

 

 

(202

)

Net cash provided by (used in) operating activities

 

 

122

 

 

 

(46

)

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Expenditures for property, plant and equipment

 

 

(140

)

 

 

(144

)

Proceeds from sale of property, plant and equipment

 

 

0

 

 

 

0

 

Net cash used in investing activities

 

 

(140

)

 

 

(143

)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Net decrease in short-term debt

 

 

(227

)

 

 

(135

)

Proceeds from long-term debt

 

 

534

 

 

 

533

 

Dividends paid

 

 

(56

)

 

 

(57

)

Stock repurchased

 

 

(160

)

 

 

(42

)

Common stock options exercised

 

 

0

 

 

 

0

 

Net cash provided by financing activities

 

 

92

 

 

 

300

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(3

)

 

 

7

 

Net increase in cash and cash equivalents

 

 

71

 

 

 

119

 

Cash and cash equivalents at beginning of period

 

 

498

 

 

 

594

 

Cash and cash equivalents at end of period

 

$

569

 

 

$

713

 

 

See Notes to unaudited Condensed Consolidated Financial Statements.

7


 

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (UNAUDITED) (Dollars in millions)

 

 

 

 

 

 

Common
stock

 

 

Additional
paid-in
capital

 

 

Retained
earnings

 

 

Accumulated
other
comprehensive
loss

 

 

Treasury
stock

 

 

Total
controlling
interest's
equity

 

 

Non-
controlling
interest

 

 

Total
equity

 

Balances at December 31, 2023

$

88

 

 

$

1,044

 

 

$

2,289

 

 

$

(496

)

 

$

(368

)

 

$

2,557

 

 

$

13

 

 

$

2,570

 

Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

126

 

 

 

 

 

 

 

 

 

126

 

 

 

0

 

 

 

127

 

Foreign currency translation
  adjustment

 

 

 

 

 

 

 

 

 

 

(46

)

 

 

 

 

 

(46

)

 

 

(0

)

 

 

(47

)

Pension liability

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Total Comprehensive Income

 

 

 

 

 

 

 

126

 

 

 

(41

)

 

 

 

 

 

85

 

 

 

0

 

 

 

85

 

Retired and repurchased shared

 

(1

)

 

 

(26

)

 

 

(134

)

 

 

 

 

 

 

 

 

(161

)

 

 

 

 

 

(161

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

 

 

 

 

 

4

 

Cash dividends declared

 

 

 

 

 

 

 

(56

)

 

 

 

 

 

 

 

 

(56

)

 

 

 

 

 

(56

)

Balances at March 31, 2024

$

86

 

 

$

1,018

 

 

$

2,226

 

 

$

(537

)

 

$

(364

)

 

$

2,429

 

 

$

13

 

 

$

2,442

 

 

 

Common
stock

 

 

Additional
paid-in
capital

 

 

Retained
earnings

 

 

Accumulated
other
comprehensive
loss

 

 

Treasury
stock

 

 

Total
controlling
interest's
equity

 

 

Non-
controlling
interest

 

 

Total
equity

 

Balances at December 31, 2022

$

91

 

 

$

1,113

 

 

$

2,310

 

 

$

(522

)

 

$

(379

)

 

$

2,613

 

 

$

13

 

 

$

2,626

 

Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

 

74

 

 

 

0

 

 

 

74

 

Foreign currency translation
   adjustment

 

 

 

 

 

 

 

 

 

 

36

 

 

 

 

 

 

36

 

 

 

0

 

 

 

36

 

Pension liability

 

 

 

 

 

 

 

 

 

 

(0

)

 

 

 

 

 

(0

)

 

 

 

 

 

(0

)

Total Comprehensive Income

 

 

 

 

 

 

 

74

 

 

 

35

 

 

 

 

 

 

110

 

 

 

0

 

 

 

110

 

Stock repurchased and retired

 

(0

)

 

 

(9

)

 

 

(33

)

 

 

 

 

 

 

 

 

(42

)

 

 

 

 

 

(42

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

 

 

 

 

 

3

 

Cash dividends declared

 

 

 

 

 

 

 

(57

)

 

 

 

 

 

 

 

 

(57

)

 

 

 

 

 

(57

)

Balances at March 31, 2023

$

91

 

 

$

1,105

 

 

$

2,295

 

 

$

(487

)

 

$

(376

)

 

$

2,627

 

 

$

14

 

 

$

2,641

 

 

 

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)

March 31, 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 one reportable segment, which includes Autoliv’s airbag and seatbelt products and components.

Certain amounts in the condensed consolidated financial statements and associated notes may not reconcile due to rounding. All percentages have been calculated using unrounded amounts. Certain amounts in prior periods have been reclassified to conform to current year presentation.

Statements in this report that are not of historical fact are forward-looking statements that involve risks and uncertainties that could affect the actual results of the Company. A description of the important factors that could cause Autoliv’s actual results to differ materially from the forward-looking statements contained in this report may be found in this report and Autoliv’s other reports filed with the Securities and Exchange Commission (the “SEC”). For further information, refer to the consolidated financial statements, footnotes and definitions thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024.

 

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 includes items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

The carrying value is the same as the fair value as these instruments are recognized in the consolidated financial statements at fair value. Although the Company is party to close-out netting agreements (“ISDA agreements”) with its derivative counterparties, the fair values in the tables below and in the Condensed Consolidated Balance Sheets as of March 31, 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 no derivatives designated as hedging instruments as of March 31, 2024 or December 31, 2023 related to the Company's operations.

 

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 not designated as hedging instruments outstanding as of March 31, 2024 and December 31, 2023 were foreign exchange swaps.

For the three months periods ended March 31, 2024 and 2023, the gains (losses) recognized in other non-operating items, net were $10 million and $(5) million, respectively, for derivative instruments not designated as hedging instruments. The realized part of the gains (losses) referred to above is reported under financing activities in the statement of cash flows.

For the three months periods ended March 31, 2024 and 2023, the gains (losses) recognized as interest expense were immaterial.

The tables below present information about the Company’s derivative financial assets and liabilities measured at fair value on a recurring basis (dollars in millions).

 

 

 

As of

 

 

 

 

March 31, 2024

 

 

 

December 31, 2023

 

 

 

 

 

 

 

Fair Value Measurements

 

 

 

 

 

 

Fair Value Measurements

 

 

Description

 

Nominal
volume

 

 

Derivative
asset
(Other
current assets)

 

 

Derivative
liability
(Other
current
liabilities)

 

 

 

Nominal
volume

 

 

Derivative
asset
(Other
current assets)

 

 

Derivative
liability
(Other
current
liabilities)

 

 

Derivatives not designated as hedging
   instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange swaps, less
   than 6 months

 

$

2,043

 

1)

$

8

 

2)

$

14

 

3)

 

$

1,895

 

4)

$

22

 

5)

$

12

 

6)

Total derivatives not designated
   as hedging instruments

 

$

2,043

 

 

$

8

 

 

$

14

 

 

 

$

1,895

 

 

$

22

 

 

$

12

 

 

1) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $2,043 million.

2) Net amount after deducting for offsetting swaps under ISDA agreements is $8 million.

3) Net amount after deducting for offsetting swaps under ISDA agreements is $14 million.

4) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,895 million.

5) Net amount after deducting for offsetting swaps under ISDA agreements is $22 million.

6) Net amount after deducting for offsetting swaps under ISDA agreements is $12 million.

 

 

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 €500 million in the Eurobond market. The notes carry a coupon of 3.625% and mature in August 2029.

The fair value and carrying value of debt is summarized in the table below (dollars in millions).

 

 

 

As of

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Carrying
value
1)

 

 

Fair
value

 

 

Carrying
value
1)

 

 

Fair
value

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

 

Bonds

 

$

1,549

 

 

$

1,555

 

 

$

1,023

 

 

$

1,022

 

Loans

 

 

281

 

 

 

285

 

 

 

301

 

 

 

306

 

Total long-term debt

 

 

1,830

 

 

 

1,840

 

 

 

1,324

 

 

 

1,328

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

 

 

 

 

 

 

 

 

 

 

 

Short-term portion of long-term debt

 

 

297

 

 

 

302

 

 

 

297

 

 

 

297

 

Overdrafts and other short-term debt

 

 

13

 

 

 

13

 

 

 

241

 

 

 

241

 

Total short-term debt

 

$

310

 

 

$

315

 

 

$

538

 

 

$

538

 

1) Debt as reported in balance sheet.

Assets and liabilities measured at fair value on a nonrecurring basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a nonrecurring basis, including certain long-lived assets, including equity method investments, goodwill and other intangible assets, typically as it relates to impairment.

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 and then discounts the future cash flows over the expected life of the long-lived assets.

For the three months period ended March 31, 2024, the Company did not record any material impairment charges on its long-lived assets for its operations.

 

 

13


 

 

4. INCOME TAXES

The effective tax rate for the three months period ended March 31, 2024 was 27.0% compared to 31.6% for the three months period ended March 31, 2023. Discrete tax items, net for the three months period ended March 31, 2024 had a favorable impact of 2.5%. Discrete tax items, net for the three months period ended March 31, 2023 had an unfavorable impact of 0.8%.

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 March 31, 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 three months period ended March 31, 2024, the Company recorded a net increase of $2 million to income tax reserves for unrecognized tax benefits based on tax positions related to the current year, including accruing additional interest related to unrecognized tax benefits from prior years. Also, during the first quarter of 2024, the Company recorded a net decrease of $13 million to income tax reserves for unrecognized tax benefits based on tax positions taken in prior years, mainly due to the conclusion of tax audits and the expiration of statute of limitations in various jurisdictions. Of the total unrecognized tax benefits of $53 million recorded as of March 31, 2024, $14 million is classified as current tax payable within Other current liabilities and $39 million is classified as non-current tax payable within Other non-current liabilities in the Condensed Consolidated Balance Sheet.

5. INVENTORIES

Inventories are stated at the lower of cost (“FIFO”) and net realizable value. The components of inventories were as follows (dollars in millions):

 

 

 

As of

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Raw materials

 

$

453

 

 

$

457

 

Work in progress

 

 

328

 

 

 

347

 

Finished products

 

 

304

 

 

 

296

 

Inventories

 

 

1,085

 

 

 

1,100

 

Inventory valuation reserve

 

 

(87

)

 

 

(89

)

Total inventories, net of reserve

 

$

997

 

 

$

1,012

 

 

 

6. RESTRUCTURING

As of March 31, 2024, the majority of the restructuring reserve balance is attributed to global structural cost reduction program activities initiated in Europe in 2023. These activities are expected to be concluded during 2024 and 2025.

The cash payments for the three months periods ended March 31, 2024 and 2023 relate to restructuring activities in Europe.

The table below summarizes the change in the balance sheet position of the employee-related restructuring reserves (dollars in millions). The restructuring reserve balances are included within Accrued expenses in the Condensed Consolidated Balance Sheets. The changes in the employee-related reserves have been charged against Other income (expense), net in the Consolidated Statements of Income. Restructuring costs other than employee related costs are immaterial for all periods presented.

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Reserve at beginning of the period

 

$

213

 

 

$

32

 

Provision - charge

 

 

1

 

 

 

2

 

Provision - reversal

 

 

0

 

 

 

(0

)

Cash payments

 

 

(16

)

 

 

(5

)

Translation difference

 

 

(6

)

 

 

1

 

Reserve at end of the period

 

$

193

 

 

$

29

 

 

14


 

7. PRODUCT-RELATED LIABILITIES

The Company is exposed to product liability and warranty claims in the event that the Company’s products fail to perform as represented and such failure results, or is alleged to result, in bodily injury, and/or property damage or other loss. The Company has reserves for product risks. Such reserves are related to product performance issues, including recalls, product liability and warranty issues. For further explanation, see Note 9. Contingent Liabilities below.

For the three months ended March 31, 2024, provisions mainly relate to warranty related issues and cash payments mainly relate to recall related issues. For the three months ended March 31, 2023, provisions and cash payments primarily related to warranty related issues. As of March 31, 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 in the Condensed Consolidated Balance Sheets. The Company’s product-related liabilities as of March 31, 2024 are partly covered by insurance. Insurance receivables are included within Other current assets and Other non-current assets in the Condensed Consolidated Balance Sheets. As of March 31, 2024, the Company had total insurance receivables of $58 million.

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Reserve at beginning of the period

 

$

96

 

 

$

145

 

Change in reserve

 

 

(8

)

 

 

1

 

Cash payments

 

 

(10

)

 

 

(5

)

Translation difference

 

 

(1

)

 

 

0

 

Reserve at end of the period

 

$

78

 

 

$

141

 

 

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 March 31,

 

 

 

2024

 

 

2023

 

Interest cost

 

$

3

 

 

$

3

 

Expected return on plan assets

 

 

(3

)

 

 

(2

)

Amortization of actuarial (gain) loss

 

 

0

 

 

 

0

 

Settlement loss

 

 

0

 

 

 

0

 

Net periodic benefit cost

 

$

(0

)

 

$

1

 

 

 

 

 

 

 

 

Non-U.S. Plans

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Service cost

 

$

2

 

 

$

2

 

Interest cost

 

 

3

 

 

 

2

 

Expected return on plan assets

 

 

(1

)

 

 

(1

)

Amortization of actuarial loss

 

 

0

 

 

 

0

 

Settlement/curtailment gain

 

 

 

 

 

 

Net periodic benefit cost (gain)

 

$

5

 

 

$

3

 

 

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 closed U.S. pension plans in the first quarter of 2024 because the lump-sum payments made during the quarter exceeded the sum of Service cost and Interest cost. Due to the settlement accounting, the obligation and plan assets for the U.S. plans have been re-measured as of March 31, 2024, which resulted in an immaterial change in the net pension liability compared to December 31, 2023. The discount rate used to determine the U.S. net periodic benefit cost because of the re-measurement was changed from 5.13% to 5.35% in the first quarter of 2024. The expected long-term rate of return on plan assets remained unchanged at 6.21%.

 

15


 

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 EC investigation that the Company resolved in 2019, the Company is subject to subsequent civil disputes with non-governmental third parties stemming from the same facts and circumstances underlying the EC investigation.

PRODUCT WARRANTY, RECALLS AND INTELLECTUAL PROPERTY

Autoliv is exposed to various claims for damages and compensation if its products fail to perform as expected. Such claims can be made, and result in costs and other losses to the Company, even where the product is eventually found to have functioned properly. Where a product (actually or allegedly) fails to perform as expected or is defective, the Company may face warranty and recall claims. Where such (actual or alleged) failure or defect results, or is alleged to result, in bodily injury and/or property damage, the Company may also face product liability and other claims. There can be no assurance that the Company will not experience material warranty, recall or product (or other) liability claims or losses in the future, or that the Company will not incur significant costs to defend against such claims. The Company may be required to participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. Government safety regulators may also play a role in warranty and recall practices. Recall decisions regarding the Company’s products may require a significant amount of judgment by us, our customers and safety regulators and are influenced by a variety of factors. Once a recall has been made, the cost of a recall is also subject to a significant amount of judgment and discussions between the Company and its customers. A warranty, recall or product-liability claim brought against the Company in excess of its insurance may have a material adverse effect on the Company’s business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the repair or replacement costs of products when the product supplied did not perform as represented by us or expected by the customer in either a warranty or a recall situation. Accordingly, the future costs of warranty or recall claims by the customers may be material. However, the Company believes its established reserves are adequate. Autoliv’s warranty reserves are based upon the Company’s best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the adequacy of these reserves and adjusts them when appropriate. However, the final amounts actually due related to these matters could differ materially from the Company’s recorded estimates.

In addition, as vehicle manufacturers increasingly use global platforms and procedures, quality performance evaluations are also conducted on a global basis. Any one or more quality, warranty or other recall issue(s) (including those affecting few units and/or having a small financial impact) may cause a vehicle manufacturer to implement measures such as a temporary or prolonged suspension of new orders, which may have a material impact on the Company’s results of operations.

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 March 31, 2024, the Company has accrued $78 million for total product related liabilities. The majority of the total product liability accrual as of March 31, 2024, relates to recalls, which are generally covered by insurance. Insurance receivables for such recall related liabilities total $58 million as of March 31, 2024.

16


 

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 MDL (the "ARC Inflator Class Action") bring claims for fraud, breach of warranty, and violation 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 (the “NHTSA”) issued an initial decision to recall approximately 52 million frontal driver and passenger airbag inflators manufactured by ARC and Delphi Automotive Systems because the NHTSA determined that the airbag inflators contain a safety defect resulting in field ruptures. Some of the ARC inflators included in the airbag modules that Autoliv or its subsidiaries supplied after the Delphi Acquisition were included in such initial decision. The NHTSA has yet to release its final decision. If NHTSA final decision results in a recall, it is anticipated that such decision will be challenged in US federal court. The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the NHTSA ARC recall. However, the Company continues to evaluate this matter, no accrual has been made, and no estimated range of potential loss can be determined at this time. The Company cannot predict the ultimate outcome of the NHTSA ARC recall.

Specific Recalls:

In the fourth quarter of 2020, the Company was made aware of a potential recall by American Honda Motor Co. and the recall of approximately 449,000 vehicles relating to the malfunction of front seat belt buckles was announced on March 9, 2023 (the “Honda Buckle Recall”). The Company determined pursuant to ASC 450 that a loss with respect to the Honda Buckle Recall is probable and accrued an amount that is reflected in the total product liability accrual in the fourth quarter of 2020, increased the accrual in the fourth quarter of 2021 and reduced the accrual in the fourth quarter of 2023 based on vehicle repair cost data. Following the accrual reduction in the fourth quarter of 2023, the amount by which the product liability accrual exceeds the product liability insurance receivable with respect to the Honda Buckle Recall is $10 million and includes self-insurance retention costs and deductibles. The ultimate loss to the Company of the Honda Buckle Recall could be materially different from the amount the Company has accrued.

Volvo Car USA, LLC (together with its affiliates, “Volvo”) has recalled approximately 762,000 vehicles relating to the malfunction of inflators produced by ZF (the “ZF Inflator Recall”). The recalled ZF inflators were included in airbag modules supplied by the Company only to Volvo. The recall commenced in November 2020 and later expanded in September 2021. Because the Company’s airbags were involved with the ZF Inflator Recall, the Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the ZF Inflator Recall. The Company continues to evaluate this matter with Volvo and ZF and no accrual has been made. Although the Company currently estimates a range of $0 to $43 million with respect to this potential loss, the Company anticipates that any losses net of insurance claims and claims against ZF will be immaterial.

Intellectual Property:

In its products, the Company utilizes technologies which may be subject to intellectual property rights of third parties. While the Company does seek to procure the necessary rights to utilize intellectual property rights associated with its products, it may fail to do so. Where the Company so fails, the Company may be exposed to material claims from the owners of such rights. Where the Company has sold products which infringe upon such rights, its customers may be entitled to be indemnified by the Company for the claims they suffer as a result thereof. Such claims could be material.

The table in Note 7 above summarizes the change in the balance sheet position of the product-related liabilities.

 

17


 

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 stock units (“PSUs”) and in the past included stock options.

For the three months ended March 31, 2024, the Company recorded approximately $3 million in stock-based compensation expense related to RSUs and PSUs. For the three months ended March 31, 2023, the Company recorded approximately $3 million in stock-based compensation expense related to RSUs and PSUs.

During the three months ended March 31, 2024, approximately 102 thousand shares of common stock from the treasury stock were utilized by the Plan. During the three months ended March 31, 2023, approximately 92 thousand shares of common stock from the treasury stock were utilized by the Plan.

11. EARNINGS PER SHARE

 

The computation of basic and diluted earnings per share is set forth in the table below.

 

 

 

Three Months Ended March 31,

 

(In millions, except per share amounts)

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

Basic and diluted:

 

 

 

 

 

 

Net income attributable to controlling interest

 

$

126

 

 

$

74

 

Denominator:

 

 

 

 

 

 

Basic: Weighted average common stock

 

 

82.3

 

 

 

86.1

 

Add: Weighted average stock options/share awards

 

 

0.7

 

 

 

0.2

 

Diluted weighted average common stock:

 

 

83.0

 

 

 

86.3

 

 

 

 

 

 

 

 

Net earnings per share - basic

 

$

1.53

 

 

$

0.86

 

 

 

 

 

 

 

 

Net earnings per share - diluted

 

$

1.52

 

 

$

0.86

 

 

12. REVENUE DISAGGREGATION

 

The Company’s disaggregated revenue for the three months periods ended March 31, 2024 and 2023 were as follows (dollars in millions).

 

Net Sales by Products

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Airbags, Steering Wheels and Other1)

 

$

1,781

 

 

$

1,673

 

Seatbelt Products and Other1)

 

 

834

 

 

 

820

 

Total net sales

 

$

2,615

 

 

$

2,493

 

 

 

 

 

 

 

 

Net Sales by Region

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Americas

 

$

893

 

 

$

831

 

Europe

 

 

770

 

 

 

725

 

China

 

 

460

 

 

 

453

 

Asia excl. China

 

 

491

 

 

 

483

 

Total net sales

 

$

2,615

 

 

$

2,493

 

1) Including Corporate sales.

Contract Balances

Contract assets relate to the Company's rights to consideration for work completed but not billed (generally in conjunction with contracts for which revenue is recognized over time) at the reporting date on production parts and is included in Other current assets in the Condensed Consolidated Balance Sheet. The contract assets are reclassified into the receivables balance when the rights to receive payments become unconditional. The net change in the contract assets balance, reflecting the adjustments needed to align revenue recognition for work completed but not billed, for the three months period ended March 31, 2024 were not material in any period.

 

13. SUBSEQUENT EVENTS

There were no reportable events subsequent to March 31, 2024.

18


 

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.

 

 

19


 

EXECUTIVE OVERVIEW

We delivered record first quarter sales, outperforming global light vehicle production (LVP) growth by 6pp. We outperformed in all regions, including China despite a negative LVP mix development with domestic Chinese OEMs growing by 17% and global OEMs declining by 5%. It is encouraging that our sales in India grew organically by 27%. Sales in India are now larger than in South Korea, accounting for more than 4% of our global sales.

We delivered results in line with what we previously communicated, despite LVP being 1pp below what was expected three months ago, and we are on track to deliver on our full year outlook. We expect a record number of product launches in 2024, despite some OEMs changing certain vehicle model launch plans, mainly for EV platforms.

Profitability continued to improve significantly, driven mainly by volume growth and cost reductions. Restructuring activities are yielding results with indirect headcount declining by around 1,000, or by more than 5%, in the past 12 months.

Our continued focus on balance sheet efficiency is supporting our strong performance for cash flow, cash conversion, and return on capital employed.

We are particularly pleased with our leverage ratio of 1.3x, which declined significantly compared to a year ago, despite returning $0.7 billion to shareholders and investing in footprint optimization and growth.

 

To support future growth, we are currently investing in increased capacity in Vietnam, China and India.

We are facing inflationary pressure again this year and we continue to expect compensation for what is in excess of what we can offset through normal productivity measures. The discussions with our customers are progressing according to plan.

As we have previously communicated, we expect the seasonality of past years to likely continue in 2024, with a gradual improvement throughout the year, leading to a full year adjusted operating margin (Non-U.S. GAAP measure) of around 10.5%. Key drivers for the full year margin progression are organic growth, our structural and strategic cost reduction initiatives, and a lower call-off volatility.

The 2024 development we expect should set up a solid base towards a continued high level of shareholder returns and our target of around 12% adjusted operating margin (Non-U.S. GAAP measure).

Financial highlights in the three months period ended March 31, 2024

Change figures below compare to the same period of the previous year, except when stated otherwise.

 

$2,615 million net sales

5% net sales increase

5% organic sales growth (Non-U.S. GAAP measure, see reconciliation table below)

7.4% operating margin

7.6% adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below)

$1.52 earnings per share, 77% increase

$1.58 adjusted earnings per share (Non-U.S. GAAP measure, see reconciliation table below), 76% increase

 

 

 

20


 

Key business developments in the three months period ended March 31, 2024

Change figures below compare to the same period of the previous year, except when stated otherwise.

Record first quarter sales, increased organically by 5% (Non-U.S. GAAP measure, see reconciliation table below), which was 6pp better than global LVP decline of 1% (S&P Global April 2024). We outperformed in all regions, mainly due to new product launches and higher prices carried over from last year.
Profitability improved substantially, driven mainly by organic growth and cost reduction activities. Operating income was $194 million and operating margin was 7.4%. Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) improved from $131 million to $199 million and adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below) increased from 5.3% to 7.6%. Return on capital employed was 19.7%.
Strong cash flow improvement. Operating cash flow improved by $168 million and free cash flow (Non-U.S. GAAP measure, see reconciliation table below) improved by $171 million. The leverage ratio (Non-U.S. GAAP measure, see reconciliation table below) of 1.3x was close to unchanged compared to three months earlier and 0.3x lower than a year earlier despite returning $0.7 billion to shareholders as dividends and share repurchases in the last 12 months. In the quarter, a dividend of $0.68 per share was paid, and 1.37 million shares were repurchased and retired.

 

Business and market condition update for the first quarter 2024

Supply Chain

In the first quarter, global light vehicle production declined year-over-year by around 1% (according to S&P Global April 2024). Call-off volatility was lower compared to a year earlier, as supply chains are less strained compared to a year ago. However, volatility did not improve compared to the fourth quarter 2023, and is still higher than pre-pandemic levels, and low customer demand visibility and changes to customer call-offs with short notice still had a negative impact on our production efficiency and profitability in the quarter. We 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 first quarter 2024, 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 in the first quarter 2024. We expect the effects of raw material price changes in 2024 to be negligible 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.

21


 

RESULTS OF OPERATIONS

Overview

The following table shows some of the key ratios management uses internally to analyze the Company's current and future financial performance and core operations as well as to identify trends in the Company’s financial conditions and results of operations. The Company has provided this information to investors to assist in meaningful comparisons of past and present operating results and to assist in highlighting the results of ongoing core operations. These ratios are more fully explained below and should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K and the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

The Company's management uses the Return on capital employed (ROCE) and Return on total equity (ROE) measures for purposes of comparing its financial performance with the financial performance of other companies in the industry and providing useful information regarding the factors and trends affecting the Company’s business. As used by the Company, ROCE is annualized operating income and income from equity method investments relative to average capital employed. The Company believes ROCE is a useful indicator of long-term performance both absolute and relative to the Company's peers as it allows for a comparison of the profitability of the Company’s capital employed in its business relative to that of its peers.

ROE is the ratio of annualized income (loss) relative to average total equity for the periods presented. The Company’s management believes that ROE is a useful indicator of how well management creates value for its shareholders through its operating activities and its capital management.

KEY RATIOS

(Dollars in millions, except per share data)

 

 

Three Months Ended

 

 

 

or As of March 31,

 

 

 

2024

 

 

2023

 

Trade working capital1)

 

1,336

 

 

 

1,409

 

Trade working capital relative to sales, %2)

 

 

12.8

%

 

 

14.1

%

Receivables outstanding relative to sales, %3)

 

21.0

%

 

 

21.1

%

Inventory outstanding relative to sales, %4)

 

9.5

%

 

 

9.9

%

Payables outstanding relative to sales, %5)

 

 

17.7

%

 

 

16.9

%