AUTOLIV, INC. 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 endedDecember 31, 2021 filed with theUnited States Securities and Exchange Commission (the "SEC") onFebruary 22, 2022 . Unless otherwise noted, all dollar amounts are in millions.Autoliv, Inc. ("Autoliv" or the "Company") is aDelaware corporation with its principal executive offices inStockholm, Sweden . The Company functions as a holding corporation and owns two principal operating subsidiaries,Autoliv AB andAutoliv ASP, Inc.
Through its operating subsidiaries,
Autoliv's filings with theSEC , 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 theSEC (generally the same day as the filing). The primary exchange market forAutoliv's securities is theNew York Stock Exchange ("NYSE") whereAutoliv'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 inAutoliv shares are traded onNasdaq OMX PHLX and on NYSE Amex Options under the symbol "ALV".
Non-
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 withU.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 comparableU.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
The Company managed good execution in a challenging environment in the second quarter, leading to better-than-expected results.
A strong performance in June, with some LVP recovery and progress in the customer price discussions, including some retroactive compensations, means that the Company is reporting a second quarter adjusted operating margin (Non-U.S. GAAP measure) that is better than in the first quarter. Supply chains remained distressed in the quarter, aggravated by lockdowns inChina . Raw material cost increases, currency movements and a lower-than-expected and volatile LVP were also major challenges in the quarter. Cash flow was negative in the quarter, mainly due to volatility and timing effects on working capital. The Company expects to recover most of these effects in the second half of the year.
In a quarter where the Company saw continued low and volatile LVP,
It is encouraging that the Company is making progress in compensation from its customers in the form of sustainable price increases. Discussions continue where the Company aims for prices that reflect changes in the cost environment and a contract structure that is flexible and allows for broader and faster adjustments to future changes in the business environment. Recent developments in supply chains, customer production plans, raw material prices and the Company's cost recovery discussions are encouraging and the Company believes it is well prepared for an improved market development. However, the Company is also making sure it is agile and prepared for more adverse market development should that be necessary. Therefore, the Company continues to step up its cost control measures. Cost reductions and footprint initiatives are on plan and include capacity alignments and footprint optimizations. The Company is adjusting its full year 2022 indication to a narrower range, reflecting the Company's actions and the shorter time span remaining of the year. Although the leverage ratio (Non-U.S. GAAP measure) currently is above the Company's target range, the Company remains committed to its share repurchase ambitions over time.
The Company remains confident in its medium-term adjusted operating margin
(Non-
Financial highlights in the second quarter of 2022
$2,081m net sales 2.9% net sales increase 8.0% organic sales increase (Non-U.S. GAAP measure) 6.0% operating margin 6.0% adjusted operating margin (Non-U.S. GAAP measure)$0.91 EPS - a decrease of 24%$0.90 adjusted EPS (Non-U.S. GAAP measure) - a decrease of 25% 20
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Key business developments in the second quarter of 2022
•
Sales increased organically (Non-U.S. GAAP measure) by 8%, which was around 7pp better than global LVP which increased by around 1% (IHS MarkitJuly 2022 ). The outperformance was mainly due to price increases and new product launches.
•
Stronger than expected performance in June driven by price increases, LVP recovery and a patent litigation settlement led to a better-than-expected operating profit for the quarter. However, profitability declined due to higher raw material costs, currency movements, low and volatile LVP and lockdowns inChina . Operating margin and adjusted operating margin (Non-U.S. GAAP measure) declined by 2.2pp. Commercial recoveries relating to periods prior to second quarter 2022 and the patent litigation settlement combined amounted to around$50 million in the quarter. Return on capital employed was 13.1%.
•
Negative Q2 operating cash flow, expected to recover in the second half. Operating cash flow was negative$51 million and free cash flow (Non-U.S. GAAP measure) was negative$190 million impacted by adverse effects from working capital. Net debt (Non-U.S. GAAP measure) increased and EBITDA declined versus a year earlier, leading to a leverage ratio of 1.7x. A dividend of$0.64 per share was paid and 0.30 million shares were repurchased in the quarter.
Business update relating to COVID-19, the war in
COVID-19
The COVID-19 pandemic continued to impact the Company's business in the second quarter of 2022 through limited LVP by its customers caused by global semiconductor shortage and other industry supply chain disruptions. The second quarter of 2022 saw global LVP growth year over year by around 1% (according to IHS MarkitJuly 2022 ). Supply chain disruptions that led to low customer demand visibility and material changes to customer call-offs with short notice negatively impacted our production efficiency and profitability in the quarter. Rising raw material costs amounted to almost 6pp in operating margin headwind in the second quarter, of which a large part was offset by commercial customer recoveries, including retroactive compensations. Direct COVID-19 related costs, such as personal protective equipment, quarantine costs and similar items, were around$8 million in the second quarter of 2022. Governmental support in connection with furloughing, short-term work weeks, and other similar activities was around$0.5 million in the quarter. Pandemic related lockdowns inChina in April resulted in significant loss of production and adversely impacted sales and profitability. June was not impacted by lockdowns. The Company expects the current industry-wide semiconductor supply shortage to be a limiting factor for the global LVP recovery in 2022. The Company also expects that the current price environment could lead to raw material costs of up to 5.5pp in operating margin headwind for the full year of 2022, with similar year over year impact in all quarters. The Company is currently in discussions with its customers regarding price increases and the Company believes product price increases should gradually offset the cost inflation. The Company achieved significant price increases in the second quarter and expect further positive results in the second half of 2022. In response to the increased challenging market conditions, the Company continues with strict cost control measures, a hiring freeze and accelerated cost savings and footprint activities. The situation is monitored closely, and further actions are being evaluated. The war inUkraine The direct impact of the war inUkraine on the Company's business has been relatively limited. In 2021, sales inRussia were less than 1.0% of total sales. The Company has one facility with less than 200 employees inRussia . The Company's net assets inRussia , mainly USD cash items, amount to around$14 million . The Company has no operations inUkraine . The Company has identified four sub-suppliers inUkraine and the Company is supporting its suppliers in relocating that sourcing. The Company has been able to fulfill its delivery commitments to its customers. The war initially impacted European LVP negatively due to component shortages. The actions undertaken by the impacted suppliers to relocate sourcing are either activated or could be immediately activated in emergency cases. The shortage situation has improved and is not currently materially impacting LVP. 21
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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,
2022 2021 2022 2021
Total parent shareholders' equity per
share $ 29.20 $ 29.72 $ 29.20 $ 29.72
Capital employed 1) 3,876 3,815 3,876 3,815
Net debt 2) 1,318 1,200 1,318 1,200
Trade working capital8) 1,379 1,495 1,379 1,495
Trade working capital relative to
sales, %9) 16.6 % 18.5 % 16.6 % 18.5 %
Receivables outstanding relative to
sales, %10) 21.4 % 21.3 % 21.4 % 21.3 %
Inventory outstanding relative to
sales, %11) 10.8 % 11.1 % 10.8 % 11.1 %
Payables outstanding relative to sales,
%12) 15.7 % 13.9 % 15.7 % 13.9 %
Gross margin, % 3) 15.7 % 19.0 % 14.6 % 19.8 %
Operating margin, % 4) 6.0 % 8.1 % 6.1 % 9.4 %
Return on total equity, % 5) 12.1 % 16.3 % 12.4 % 20.8 %
Return on capital employed, % 6) 13.1 % 17.6 % 13.8 % 21.8 %
Headcount at period-end 7) 64,700 64,500
64,700 64,500
1) Total equity and net debt. 2) Net debt adjusted for pension liabilities in relation to EBITDA. See tabular presentation reconciling this non-U.S. GAAP measure toU.S. GAAP below. 3) Gross profit relative to sales. 4) Operating income relative to sales. 5) Net income relative to average total equity. 6) Operating income and income from equity method investments, relative to average capital employed. 7) Employees plus temporary, hourly personnel. 8) Outstanding receivables and outstanding inventory less outstanding payables. See calculation of this non-U.S. GAAP measure in the table below. 9) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized quarterly sales. 10) Outstanding receivables relative to annualized quarterly sales. 11) Outstanding inventory relative to annualized quarterly sales. 12) Outstanding payables relative to annualized quarterly sales. 22 --------------------------------------------------------------------------------
three months period ended
Consolidated Sales Development
(dollars in millions)
Three Months Ended June 30, Components of change in net sales
Reported Currency
2022 2021 change effects 1) Organic 3)
Airbag products and
Other2) $ 1,336 $ 1,310 2.0 % (4.9 )% 6.8 %
Seatbelt products 2) 746 712 4.7 % (5.5 )% 10.2 %
Total $ 2,081 $ 2,022 2.9 % (5.1 )% 8.0 %
Asia $ 732 $ 794 (7.8 )% (6.1 )% (1.7 )%
Whereof: China 363 399 (9.2 )% (2.3 )% (6.9 )%
Japan 142 175 (18.8 )% (13.5 )% (5.3 )%
Rest of Asia 227 219 3.3 % (7.2 )% 10.5 %
Americas 738 621 19.0 % 0.3 % 18.6 %
Europe 611 608 0.6 % (9.3 )% 9.9 %
Total $ 2,081 $ 2,022 2.9 % (5.1 )% 8.0 %
1) Effects from currency translations.
2) Including Corporate and Other sales.
3) Non-U.S. GAAP measure.
Sales by product - Airbags, Steering Wheels and Other
All major product categories increased organically (Non-U.S. GAAP measure) in
the quarter. The largest contributor to the increase was steering wheels and
inflatable curtains, followed by passenger airbags and side airbags.
Sales by product - Seatbelts
The main contributor to Seatbelt products organic growth (Non-U.S. GAAP measure)
was Europe and Americas , partly offset by a small decline in China .
Sales by region
The Company's global organic sales (Non-U.S. GAAP measure) increased by 8%
compared to the global LVP increase of around 1% (according to IHS Markit July
2022 ). The 7pp outperformance was driven by price increases and new product
launches, partly offset by negative geographical mix effects. Autoliv
outperformed LVP by around 15pp in Europe , by around 10pp in Japan and by around
8pp in Americas . The Company underperformed by around 4pp in China reflecting
that lower-end vehicles production grew while higher-end vehicle production
declined. The Company underperformed by around 3pp in Rest of Asia .
Second quarter of 2022 organic growth1)
Rest of
Americas Europe China Japan Asia Global
Autoliv 19 % 10 % (6.9 )% (5.3 )% 11 % 8.0 %
Main growth Ford, Stellantis Stellantis, Toyota,
Subaru, Tata, Suzuki Ford, Stellantis
drivers Ford, VW Mercedes Nissan
Main decline Honda Volvo, Honda, Great Toyota, Nissan, Mitsubishi Honda, Great
drivers Mitsubishi Wall, GM Mazda, Honda Wall, Volvo
1) Non-U.S. GAAP measure.
Change second quarter of 2022 versus second quarter of 2021
Global
LVP1) 11 % (5.0 )% (3.1 )% (15 )% 14 % 0.6 %
23--------------------------------------------------------------------------------
1) Source: IHS Markit
Earnings
Three Months Ended June 30,
(Dollars in millions, except per share data) 2022 2021 Change Net Sales$ 2,081 $ 2,022 2.9 % Gross profit 326 384 (15.2 )% % of sales 15.7 % 19.0 % (3.3)pp S, G&A (112 ) (111 ) 0.9 % % of sales (5.4 )% (5.5 )% 0.1 pp R, D&E, net (112 ) (107 ) 5.0 % % of sales (5.4 )% (5.3 )% (0.1)pp Amortization of Intangibles (0 ) (3 ) (85.5 )% Other income (expense), net 22 0 n/a Operating income 124 164 (24.5 )% % of sales 6.0 % 8.1 % (2.2)pp Adjusted operating income1) 124 166 (25.1 )% % of sales 6.0 % 8.2 % (2.2)pp Financial and non-operating items, net (7 ) (12 ) (43.0 )% Income before taxes 117 152 (23.1 )% Income taxes (38 ) (48 ) (20.8 )% Tax rate 32.2 % 31.3 % 0.9 pp Net income 79 105 (24.1 )% Earnings per share, diluted2) 0.91 1.19 (23.8 )% Adjusted earnings per share, diluted1),2) 0.90 1.20 (25.2 )% 1) Non-U.S. GAAP measure, excluding costs for capacity alignment and gain on sale of property. 2) Assuming dilution, when applicable, and net of treasury shares. Participating share awards with right to receive dividend equivalents are under the two-class method excluded from the EPS calculation.
Second quarter of 2022 development
Gross profit decreased by$58 million , and the gross margin decreased by 3.3pp compared to the same quarter 2021. The gross margin decrease was primarily driven by adverse effects from higher raw material costs, partly offset by price increases.
S,G&A costs were close to unchanged compared to the prior year, as increased IT expenses were offset by positive foreign currency translation effects.
R,D&E, net costs increased by around
Other income (expense), net improved by around
Operating income decreased by$40 million compared to the same period in 2021, mainly as a consequence of the lower gross profit, partly offset by the improved Other income (expense).
Adjusted operating income (Non-
Financial and non-operating items, net, improved by
Income before taxes decreased by
24
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Tax rate was 32.2%, compared to 31.3% in the same period last year, mainly due
to unfavorable country mix. In addition, discrete tax items, net, increased the
tax rate this quarter by 1.5%. Discrete tax items were not material last year.
Earnings per share, diluted decreased by $0.28 compared to a year earlier, where
the main drivers were $0.33 from lower adjusted operating income (Non-U.S. GAAP
measure) partly mitigated by $0.04 from financial items.
six months period ended
Consolidated Sales Development
(dollars in millions)
Six Months Ended June 30, Components of change in net sales
Reported Currency
2022 2021 change effects 1) Organic 3)
Airbag products and
Other 2) $ 2,716 $ 2,773 (2.1 )% (4.4 )% 2.4 %
Seatbelt products 2) 1,489 1,491 (0.2 )% (5.0 )% 4.8 %
Total $ 4,206 $ 4,265 (1.4 )% (4.6 )% 3.2 %
Asia $ 1,589 $ 1,671 (4.9 )% (4.8 )% (0.1 )%
Whereof: China 810 814 (0.5 )% (0.0 )% (0.4 )%
Japan 320 386 (17.0 )% (11.9 )% (5.1 )%
Rest of Asia 459 471 (2.7 )% (7.4 )% 4.7 %
Americas 1,431 1,307 9.4 % 0.2 % 9.2 %
Europe 1,186 1,287 (7.8 )% (9.3 )% 1.5 %
Total $ 4,206 $ 4,265 (1.4 )% (4.6 )% 3.2 %
1) Effects from currency translations.
2) Including Corporate and Other sales.
3) Non-U.S. GAAP measure.
Sales by product - Airbags, Steering Wheels and Other
The largest contributor to the organic growth (Non-
Sales by product - Seatbelts The main contributor to Seatbelt products organic growth (Non-U.S. GAAP measure) wasAmericas followed by Rest ofAsia andEurope , partly offset by a decline inChina . Sales by region The Company's global organic sales (Non-U.S. GAAP measure) increased by around 3% compared to the LVP decline of around 1% (according to IHS MarkitJuly 2022 ). The 4.4pp outperformance was driven by new product launches and price increases. The Company outperformed LVP by around 14pp inEurope , by around 9pp inJapan , and by around 5pp inAmericas . The Company underperformed by around 3pp inChina and Rest ofAsia .
First six months 2022 organic growth1)
Rest of
Americas Europe China Japan Asia Global
Autoliv 9.2 % 1.5 % (0.4 )% (5.1 )% 4.7 % 3.2 %
Main growth Ford, Stellantis Stellantis, Toyota, Mercedes Mitsubishi, Tata, Honda, Suzuki Stellantis, Ford
drivers Toyota, Ford Honda, Subaru
Main decline Honda, Nissan Volvo, BMW Great Wall, GM, VW Toyota, Nissan, Hyundai/Kia, Nissan, Great
drivers Mazda Nissan, Mitsubishi Wall, Honda
1) Non-U.S. GAAP measure.
25--------------------------------------------------------------------------------Light Vehicle Production Development Change First six months 2022 versus first six months 2021 Americas Europe China Japan Rest of Asia Global LVP1) 3.8 % (12 )% 3.0 % (14 )% 8.0 % (1.2 )%
1) Source: IHS Markit
Earnings
Six Months Ended June 30,
(Dollars in millions, except per share data) 2022 2021 Change Net Sales$ 4,206 $ 4,265 (1.4 )% Gross profit 614 843 (27.1 )% % of sales 14.6 % 19.8 % (5.2)pp S, G&A (227 ) (219 ) 4.0 % % of sales (5.4 )% (5.1 )% (0.3)pp R, D&E, net (219 ) (213 ) 2.7 % % of sales (5.2 )% (5.0 )% (0.2)pp Amortization of Intangibles (2 ) (5 ) (65.1 )% Other income (expense), net 92 (4 ) n/a Operating income 258 401 (35.6 )% % of sales 6.1 % 9.4 % (3.3)pp Adjusted operating income1) 192 403 (52.3 )% % of sales 4.6 % 9.4 % (4.9)pp Financial and non-operating items, net (22 ) (32 ) (31.2 )% Income before taxes 237 370 (36.0 )% Income taxes (74 ) (108 ) (31.5 )% Tax rate 31.3 % 29.2 % 2.1 pp Net income 163 262 (37.9 )% Earnings per share, diluted2) 1.85 2.98 (37.8 )% Adjusted earnings per share, diluted1),2) 1.36 2.99 (54.5 )% 1) Non-U.S. GAAP measure, excluding costs for capacity alignment and gain on sale of property. 2) Assuming dilution, when applicable, and net of treasury shares. Participating share awards with right to receive dividend equivalents are under the two-class method excluded from the EPS calculation.
First six months 2022 development
Gross profit decreased by$228 million and the gross margin decreased by 5.2pp compared to the same period 2021. The gross margin decrease was primarily driven by adverse effects from higher raw material costs and higher costs for premium freight, partly offset by price increases. S,G&A costs increased by$9 million compared to the prior year, mainly relating to investments in personnel and IT and improvement projects partly offset by positive foreign currency translation effects.
R,D&E, net costs increased by
Other income (expense), net improved by$96 million compared to the prior year, mainly due to around$80 million gain from the sale of a property inJapan and around$20 million from a patent litigation settlement partly offset by around$10 million in capacity alignment provision for the closure of a plant inSouth Korea . Operating income decreased by$143 million compared to the same period in 2021, mainly as a consequence of the lower gross profit, partly offset by the improved Other income (expense).
Adjusted operating income (Non-
26
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Financial and non-operating items, net, improved by
Income before taxes decreased by
Tax rate was 31.3%, compared to 29.2% in the same period last year, mainly due to unfavorable country mix. In addition, discrete tax items, net, increased the tax rate this year by 1.0%. Discrete tax items were not material last year. Earnings per share, diluted decreased by$1.13 compared to a year earlier, where the main drivers were$1.70 from lower adjusted operating income (Non-U.S. GAAP measure) partly mitigated by$0.50 from capacity alignment and$0.08 from financial items.
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 endedDecember 31, 2021 filed with theSEC onFebruary 22, 2022 .
Second quarter of 2022 development
Trade working capital (Non-U.S. GAAP measure, see calculation table below) was reduced by$116 million compared to the same period last year, where the main drivers were related to$178 million higher accounts payables, partly offset by$60 million in higher receivables. Operating cash flow decreased by$114 million to negative$51 million compared to the same period last year, mainly due to unfavorable changes in operating working capital related mainly to sales volatility and timing effects.
Capital expenditure, net increased by
Free cash flow (Non-U.S. GAAP measure, see calculation table below) was negative$190 million , compared to negative$33 million a year earlier. The decline was due to the lower operating cash flow and higher capital expenditure, net.
Net debt (Non-
Liquidity position. As ofJune 30, 2022 , the Company's cash balance was around$0.3 billion , and including committed, unused loan facilities, the Company's liquidity position was around$1.4 billion . Leverage ratio (Non-U.S. GAAP measure, see calculation table below). As ofJune 30, 2022 , the Company had a leverage ratio of 1.7x, compared to 1.1x as ofJune 30, 2021 , as both the net debt (Non-U.S. GAAP measure) decreased and the 12 months trailing adjusted EBITDA (Non-U.S. GAAP measure) decreased. Total equity decreased by$56 million compared toJune 30, 2021 , mainly due to dividends paid of$222 million , adverse currency translation effects of$176 million , and$40 million from share repurchases partly offset by$338 million from net income.
First six months 2022 development
Operating cash flow decreased by$230 million to$19 million compared to the same period last year, mainly due to lower net income and changes in operating working capital. Capital expenditure, net decreased by$34 million , which mainly reflects$95 million in proceeds from the sale of property, plant and equipment partly offset by increased investments related to footprint and capacity expansions. Capital expenditure, net in relation to sales was 3.7% versus 4.4% a year earlier. Free cash flow (Non-U.S. GAAP measure, see calculation table below) was negative$137 million , compared to positive$60 million a year earlier. The decline was due to the lower operating cash flow, partly offset by the property sale inJapan . 27 --------------------------------------------------------------------------------
NON-
The Company believes that comparability between periods is improved through the exclusion of certain items. To assist investors in understanding the operating performance ofAutoliv's business, it is useful to consider certainU.S. GAAP measures exclusive of these items. Accordingly, the tables below reconcile fromU.S. GAAP to the equivalent non-U.S. GAAP measure.
Reconciliation of
"Adjusted operating margin" and "Adjusted Earnings per share, diluted"
(Dollars in millions, except per share data)
Three Months Ended June 30, 2022 Three Months Ended June 30, 2021
Reported Reported
U.S. Non-U.S. U.S. Non-U.S.
GAAP Adjustments1) GAAP GAAP Adjustments1) GAAPOperating income$ 124 $ 0$ 124 $ 164 $ 1$ 166 Operating margin, % 6.0 % 0.0 % 6.0 % 8.1 % 0.1 % 8.2 % Earnings per share, diluted$ 0.91 $ (0.01 )$ 0.90 $ 1.19 $ 0.01$ 1.20
1) Including costs for capacity alignment.
Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
Reported Reported
U.S. Non-U.S. U.S. Non-U.S.
GAAP Adjustments1) GAAP GAAP Adjustments1) GAAP
Operating income $ 258 $ (66 ) $ 192 $ 401 $ 1 $ 403
Operating margin, % 6.1 % (1.6 )% 4.6 % 9.4 % 0.0 % 9.4 %
Earnings per share, diluted $ 1.85 $ (0.49 ) $ 1.36 $ 2.98 $ 0.01 $ 2.99
1) Including costs for capacity alignment and gain on sale of property in Japan
in 2022.
Items included in Non-U.S. GAAP adjustments
(Dollars in millions, except per share data)
Three Months Ended June 30, 2022 Three Months Ended June 30, 2021
Millions Per share Millions Per share
Capacity alignment $ 0 $ 0.00 $ 1 $ 0.02
Total adjustments to operating income 0 0.00 1 0.02
Tax on non-U.S. GAAP adjustments1) 0 0.00 (0 ) (0.00 )
Total adjustments to net income $ 0 $
0.00 $ 1
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
Six Months Ended June 30, 2022 Six Months Ended
Millions Per share Millions Per share
Capacity alignment1) $ (66 ) $ (0.76 ) $ 1 $ 0.02
Total adjustments to operating income (66 ) (0.76 ) 1 0.02
Tax on non-U.S. GAAP adjustments2) 23 0.27 (0 ) (0.00 )
Total adjustments to net income $ (43 ) $ (0.49
) $ 1
1) Whereof gain on sale of property in
28
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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, 2022 December 31, 2021 June 30, 2021
Receivables, net $ 1,779 $ 1,699 $ 1,719
Inventories, net 903 777 901
Accounts payable (1,303 ) (1,144 ) (1,125 )
Trade working capital $ 1,379 $ 1,332 $ 1,495
The non-U.S. GAAP measure "Net debt" is also used in the non-U.S. GAAP measure
"Leverage ratio". Management uses this measure to analyze the amount of debt the
Company can incur under its debt policy. Management believes that this policy
also provides guidance to credit and equity investors regarding the extent to
which the Company would be prepared to leverage its operations. For details on
leverage ratio refer to the table below.
Reconciliation of U.S. GAAP financial measure to "Net debt"
(Dollars in millions)
June 30, 2022 December 31, 2021 June 30, 2021
Short-term debt $ 559 $ 346 $ 363
Long-term debt 1,060 1,662 1,712
Total debt 1,619 2,008 2,075
Cash and cash equivalents (327 ) (969 ) (893 )
Debt issuance cost/Debt-related
derivatives, net 26 13 18
Net debt $ 1,318 $ 1,052 $ 1,200
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)
December 31,
June 30, 2022 2021 June 30, 2021
Net debt1) $ 1,318 $ 1,052 $ 1,200
Pension liabilities 155 197 239
Debt per the Policy 1,473 1,248 1,438
Net income2) 338 437 550
Income taxes 2) 143 177 247
Interest expense, net2,3) 51 57 69
Other non-operating items, net2) 2 7 22
Income from equity method investments2) (3 ) (3 ) (4 )
Depreciation and amortization of
intangibles2) 381 394 394
Capacity alignments and antitrust related
matters2) (59 ) 8 37
EBITDA per the Policy (Adjusted EBITDA) $ 854 $ 1,077 $ 1,313
Leverage ratio 1.7 1.2 1.1
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.
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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.
Calculation of "Free Cash Flow"
(Dollars in millions)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income $ 79 $ 105 $ 163 $ 262
Changes in operating working capital (239 ) (125 ) (257 ) (214 )
Depreciation and amortization 90 100 186 199
Gain on divestiture of property - - (80 ) -
Other, net 19 (16 ) 7 2
Operating cash flow (51 ) 63 19 249
Capital expenditure, net (139 ) (96 ) (156 ) (189 )
Free cash flow1) $ (190 ) $ (33 ) $ (137 ) $ 60
1) Operating cash flow less Capital
expenditures, net.
Headcount
June 30, 2022 December 31, 2021 June 30, 2021
Total headcount 64,700 60,600 64,500
Whereof:
Direct personnel in manufacturing 46,500 43,000 46,400
Indirect personnel 18,200 17,600 18,000
Temporary personnel 9.6 % 7.8 % 9.1 %
By June 30, 2022 , total headcount increased by 200 compared to a year earlier.
The indirect workforce increased by 1.1% while the direct workforce increased by
0.2%. Compared to March 31, 2022 , total headcount decreased by 100, direct
workforce decreased by 500 and the indirect workforce increased by 400.
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--------------------------------------------------------------------------------Full year 2022 indications
The Company's outlook indications for 2022 reflect continuing uncertainty in the automotive markets and are mainly based on the Company's customer call-offs and global LVP outlook of a full year 2022 global LVP growth of 2-5% and that the Company achieves its targeted cost compensation effects along with some market stabilization. Financial measure Full year indication Organic sales growth Around 13%-16% FX impact on net sales Around 5% negative Adjusted operating margin 1) Around 6.0%-7.0% Tax rate 2) Around 30% Operating cash flow 3) Around$750-$850 million Capex, net % of sales Around 5.5% 1) Excluding costs for capacity alignments, antitrust related matters and other discrete items. 2) Excluding unusual tax items. 3) Excluding unusual items.
This report includes content supplied by
The forward-looking non-U.S. GAAP financial measures above are provided on a non-U.S. GAAP basis. The Company has not provided aU.S. GAAP reconciliation of these measures because items that impact these measures, such as costs related to capacity alignments and antitrust matters, cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and the Company is unable to determine the probable significance of the unavailable information.
Other recent events
Key launches in the second quarter of 2022
VW ID.Buzz: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Seatbelts Mercedes-Benz GLC: Steering Wheel, Driver/Passenger Airbags Mercedes-Benz EQE Steering Wheel, Driver/Passenger Airbags Mercedes-Benz EQS SUV: Steering Wheel, Driver/Passenger Airbags Great Wall ORABallet Cat : Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts, Pyrotechnical Safety SwitchLi Xiang L9: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts Range Rover Sport: Driver/Passenger Airbags, Side Airbags, Seatbelts Opel Astra Sports Tourer: Steering Wheel,Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts Honda HR-V/ZR-V: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags
Other Items
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UnderAutoliv's 2022-2024 stock purchase program, purchases of common stock and SDRs may be made in open market purchases, privately negotiated transactions, block purchase techniques, 10b5-1 trading plans or a combination of the foregoing in accordance with applicable law and the rules and regulations of both the NYSE and Nasdaq Stockholm. During the second quarter 2022,Autoliv repurchased 0.30 million shares of common stock at an average price of$73.68 . 31
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