SEC Info - Autoliv Inc. - ‘10-Q’ for 9/30/23

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		Alternative Formats (Word, et al.) Basis of Presentation Contingent Liabilities Controls and Procedures Defaults Upon Senior Securities Earnings Per Share Exhibits Fair Value Measurements Financial Information Financial Statements Income Taxes Inventories Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures New Accounting Standards Other Information Part I -- Financial Information Part Ii -- Other Information Product-Related Liabilities Quantitative and Qualitative Disclosures About Market Risk Restructuring Retirement Plans Revenue Disaggregation Risk Factors Stock Incentive Plan Subsequent Events Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Part I -- Financial Information
"	Item 1. Financial Statements
"	Basis of Presentation
"	New Accounting Standards
"	Fair Value Measurements
"	Income Taxes
"	Inventories
"	Restructuring
"	Product-Related Liabilities
"	Retirement Plans
"	Contingent Liabilities
"	Stock Incentive Plan
"	Earnings Per Share
"	Revenue Disaggregation
"	Subsequent Events
"	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3. Quantitative and Qualitative Disclosures About Market Risk
"	Item 4. Controls and Procedures
"	Part Ii -- Other Information
"	Item 1. Legal Proceedings
"	Item 1A. Risk Factors
"	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
"	Item 3. Defaults Upon Senior Securities
"	Item 4. Mine Safety Disclosures
"	Item 6. Exhibits

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; changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignments: restructuring, cost reduction and efficiency initiatives and the market reaction thereto; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies, consolidations or restructuring or divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; component shortages; market acceptance of our new products; costs or difficulties related to the integration of any new or acquired businesses and technologies; continued uncertainty in pricing and other negotiations with customers; successful integration of acquisitions and operations of joint ventures; successful implementation of strategic partnerships and collaborations; our ability to be awarded new business; product liability, warranty and recall claims and investigations and other litigation, civil judgements or financial penalties and customer reactions thereto; higher expenses for our pension and other postretirement benefits, including higher funding needs for our pension plans; work stoppages or other labor issues; possible adverse results of pending or future litigation or infringement claims and the availability of insurance with respect to such matters; our ability to protect our intellectual property rights; negative impacts of antitrust investigations or other governmental investigations and associated litigation relating to the conduct of our business; tax assessments by governmental authorities and changes in our effective tax rate; dependence on key personnel; legislative or regulatory changes impacting or limiting our business; our ability to meet our sustainability targets, goals and commitments; political conditions; dependence on and relationships with customers and suppliers; and other risks and uncertainties identified 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, 2022 filed with the SEC on February 16, 2023.

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.


INDEX

PART I - FINANCIAL INFORMATION		4

ITEM 1. FINANCIAL STATEMENTS		4

1.	Basis of Presentation	10
2.	New Accounting Standards	11
3.	Fair Value Measurements	12
4.	Income Taxes	15
5.	Inventories	15
6.	Restructuring	16
7.	Product-Related Liabilities	16
8.	Retirement Plans	17
9.	Contingent Liabilities	18
10.	Stock Incentive Plan	19
11.	Earnings Per Share	20
12.	Revenue Disaggregation	20
13.	Subsequent Events	20

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		34
ITEM 4. CONTROLS AND PROCEDURES		34
PART II - OTHER INFORMATION		35
ITEM 1. LEGAL PROCEEDINGS		35
ITEM 1A. RISK FACTORS		35
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		35
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		35
ITEM 4. MINE SAFETY DISCLOSURES		35
ITEM 5. OTHER INFORMATION		35
ITEM 6. EXHIBITS		36

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in millions, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

Net sales

i 2,596

i 2,302

i 7,724

i 6,507

Cost of sales

( i 2,131

)

( i 1,918

)

( i 6,432

)

( i 5,510

)

Gross profit

i 465

i 383

i 1,291

i 998

Selling, general and administrative expenses

( i 118

)

( i 105

)

( i 379

)

( i 333

)

Research, development and engineering expenses, net

( i 107

)

( i 106

)

( i 343

)

( i 325

)

Amortization of intangibles

( i 1

)

( i 0

)

( i 1

)

( i 2

)

Other income (expense), net1)

( i 8

)

( i 1

)

( i 115

)

i 91

Operating income

i 232

i 171

i 453

i 429

Income from equity method investment

i 1

i 4

i 3

Interest income

i 3

i 2

i 10

i 4

Interest expense

( i 24

)

( i 15

)

( i 68

)

( i 41

)

Other non-operating items, net

( i 11

)

( i 6

)

( i 6

)

( i 5

)

Income before income taxes

i 201

i 153

i 393

i 389

Income tax expense

( i 67

)

( i 47

)

( i 131

)

( i 121

)

Net income2)

i 134

i 106

i 262

i 268

Less: Net income attributable to non-controlling interest

i 1

Net income attributable to controlling interest

i 134

i 105

i 261

i 267

Net earnings per share – basic

i 1.58

i 1.21

i 3.05

i 3.06

Net earnings per share – diluted

i 1.57

i 1.21

i 3.04

i 3.06

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

i 84.9

i 87.0

i 85.5

i 87.2

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

i 85.0

i 87.2

i 85.7

i 87.4

Cash dividend per share – declared

i 0.66

i 0.64

i 1.98

i 1.92

Cash dividend per share – paid

i 0.66

i 0.64

i 1.98

i 1.92

1) The nine months period ending September 30, 2022, includes a gain on sale of property of $ i 80 million in Japan and a gain of $ i 21 million from a patent litigation settlement.

2) For the three months periods ended September 30, 2023 and 2022, the aggregate transaction gain (loss) included in net income for the period were $( i 16) million and $( i 11) million, respectively. For the nine months periods ended September 30, 2023 and 2022, the aggregate transaction gain (loss) included in net income for the period were $( i 31) million and $( i 26) million, respectively.

See Notes to the unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

Net income

i 134

i 106

i 262

i 268

Other comprehensive income (loss) before tax:

Change in cumulative translation adjustments

( i 33

)

( i 98

)

( i 43

)

( i 214

)

Net change in unrealized components of defined benefit plans

i 1

( i 1

)

i 6

i 14

Other comprehensive (loss), before tax

( i 32

)

( i 99

)

( i 37

)

( i 200

)

Tax effect allocated to other comprehensive income (loss)

( i 0

)

i 0

( i 1

)

( i 4

)

Other comprehensive (loss), net of tax

( i 32

)

( i 99

)

( i 38

)

( i 203

)

Comprehensive income

i 102

i 7

i 223

i 65

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

i 0

( i 0

)

Comprehensive income attributable to
controlling interest

i 101

i 7

i 223

i 65

See Notes to the unaudited Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in millions)


	As of
	September 30, 2023			December 31, 2022
Assets
Cash and cash equivalents	$	i 475		$	i 594
Receivables, net		i 2,179			i 1,907
Inventories, net		i 982			i 969
Prepaid expenses and accrued income		i 180			i 160
Other current assets		i 63			i 84
Total current assets		i 3,879			i 3,714
Property, plant and equipment, net		i 2,067			i 1,960
Operating lease right-of-use assets		i 162			i 160
Goodwill		i 1,372			i 1,375
Intangible assets, net		i 6			i 7
Other non-current assets		i 500			i 502
Total assets		i 7,987			i 7,717

Liabilities and equity
Short-term debt		i 590			i 711
Accounts payable		i 1,858			i 1,693
Accrued expenses		i 1,093			i 915
Operating lease liabilities - current		i 37			i 39
Other current liabilities		i 274			i 283
Total current liabilities		i 3,851			i 3,642
Long-term debt		i 1,277			i 1,054
Pension liability		i 152			i 154
Operating lease liabilities - non-current		i 125			i 119
Other non-current liabilities		i 96			i 121
Total non-current liabilities		i 1,649			i 1,450
Common stock		i 89			i 91
Additional paid-in capital		i 1,072			i 1,113
Retained earnings		i 2,242			i 2,310
Accumulated other comprehensive loss		( i 560	)		( i 522	)
Treasury stock		( i 371	)		( i 379	)
Total controlling interest's equity		i 2,473			i 2,613
Non-controlling interest		i 13			i 13
Total equity		i 2,486			i 2,626
Total liabilities and equity	$	i 7,987		$	i 7,717

See Notes to the unaudited Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in millions)


	Nine Months Ended September 30,
	2023			2022
Operating activities
Net income	$	i 262		$	i 268
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		i 281			i 273
Gain on divestiture of property		i —			( i 80	)
Other, net		i 1			( i 44	)
Net change in operating assets and liabilities		( i 8	)		( i 168	)
Net cash provided by operating activities		i 535			i 251

Investing activities
Expenditures for property, plant and equipment		( i 420	)		( i 418	)
Proceeds from sale of property, plant and equipment		i 1			i 98
Net cash used in investing activities		( i 419	)		( i 319	)

Financing activities
Net increase (decrease) in short-term debt		i 115			( i 110	)
Proceeds from long-term debt		i 557			i 251
Repayment of long-term debt		( i 533	)		( i 302	)
Dividends paid		( i 169	)		( i 167	)
Stock repurchased		( i 202	)		( i 60	)
Common stock options exercised		i 1			i 0
Dividend paid to non-controlling interest		( i 1	)		( i 1	)
Net cash used in financing activities		( i 232	)		( i 389	)
Effect of exchange rate changes on cash and cash equivalents		( i 3	)		( i 28	)
Net decrease in cash and cash equivalents		( i 119	)		( i 486	)
Cash and cash equivalents at beginning of period		i 594			i 969
Cash and cash equivalents at end of period	$	i 475		$	i 483

See Notes to unaudited Condensed Consolidated Financial Statements.

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, 2022

i 91

i 1,113

i 2,310

( i 522

)

( i 379

)

i 2,613

i 13

i 2,626

Comprehensive Income:

Net income

i 74

i 0

i 74

Foreign currency translation
adjustment

i 36

i 0

i 36

Pension liability

( i 0

)

( i 0

)

( i 0

)

Total Comprehensive Income

—

i 74

i 35

—

i 110

i 0

i 110

Stock repurchased and retired

( i 0

)

( i 9

)

( i 33

)

( i 42

)

( i 42

)

Stock-based compensation

i 3

Cash dividends declared

( i 57

)

( i 57

)

( i 57

)

Balances at March 31, 2023

i 91

i 1,105

i 2,295

( i 487

)

( i 376

)

i 2,627

i 14

i 2,641

Comprehensive Income:

Net income

i 53

i 0

i 53

Foreign currency translation
adjustment

( i 45

)

( i 45

)

( i 1

)

( i 46

)

Pension liability

i 4

Total Comprehensive Income

—

i 53

( i 41

)

—

i 12

( i 0

)

i 12

Stock repurchased and retired

( i 0

)

( i 9

)

( i 31

)

( i 41

)

( i 41

)

Stock-based compensation

i 3

Dividends paid to non-controlling interest
on subsidiary shares

i 0

( i 1

)

( i 1

)

Cash dividends declared

( i 56

)

( i 56

)

( i 56

)

Balances at June 30, 2023

i 90

i 1,096

i 2,260

( i 527

)

( i 374

)

i 2,545

i 13

i 2,557

Comprehensive Income:

Net income

i 134

i 1

i 134

Foreign currency translation
adjustment

( i 33

)

( i 33

)

( i 0

)

( i 33

)

Pension liability

i 1

Total Comprehensive Income

—

i 134

( i 32

)

—

i 101

i 0

i 102

Stock repurchased and retired

( i 1

)

( i 23

)

( i 95

)

( i 120

)

( i 120

)

Stock-based compensation

i 3

Dividends paid to non-controlling interest
on subsidiary shares

—

Cash dividends declared

( i 56

)

( i 56

)

( i 56

)

Balances at September 30, 2023

i 89

i 1,072

i 2,242

( i 560

)

( i 371

)

i 2,473

i 13

i 2,486

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, 2021

i 103

i 1,329

i 2,742

( i 408

)

( i 1,133

)

i 2,633

i 15

i 2,648

Comprehensive Loss:

Net income

i 83

i 0

i 83

Foreign currency translation
adjustment

i 6

i 0

i 6

Pension liability

i 8

Total Comprehensive Income

—

i 83

i 14

—

i 97

i 0

i 98

Retired and repurchased shared

( i 0

)

( i 4

)

( i 13

)

( i 18

)

( i 18

)

Stock-based compensation

i 2

Cash dividends declared

( i 56

)

( i 56

)

( i 56

)

Balances at March 31, 2022

i 103

i 1,325

i 2,755

( i 393

)

( i 1,131

)

i 2,659

i 15

i 2,674

Comprehensive Loss:

Net income

i 79

i 0

i 79

Foreign currency translation
adjustment

( i 121

)

( i 121

)

( i 1

)

( i 122

)

Pension liability

i 3

Total Comprehensive Loss

—

i 79

( i 119

)

i —

( i 40

)

( i 1

)

( i 40

)

Retired and repurchased shared

( i 0

)

( i 6

)

( i 16

)

( i 22

)

( i 22

)

Stock-based compensation

i 2

Cash dividends declared

( i 56

)

( i 56

)

( i 56

)

Balances at June 30, 2022

i 102

i 1,319

i 2,762

( i 512

)

( i 1,128

)

i 2,544

i 15

i 2,558

Comprehensive Income:

Net income

i 105

i 1

i 106

Foreign currency translation
adjustment

( i 98

)

( i 98

)

( i 1

)

( i 99

)

Pension liability

( i 1

)

( i 1

)

( i 1

)

Total Comprehensive Income (loss)

—

i 105

( i 98

)

—

i 7

i 0

i 7

Retired and repurchased shared

( i 0

)

( i 4

)

( i 15

)

( i 20

)

( i 20

)

Stock-based compensation

i 3

Dividends paid to non-controlling
interest on subsidiary shares

( i 1

)

( i 1

)

Cash dividends declared

( i 56

)

( i 56

)

( i 56

)

Balances at September 30, 2022

i 102

i 1,315

i 2,797

( i 610

)

( i 1,125

)

i 2,478

i 13

i 2,491

See Notes to the unaudited Condensed Consolidated Financial Statements.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)

September 30, 2023

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, 2023.

The Condensed Consolidated Balance Sheet as of December 31, 2022 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 i 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, 2022 filed with the SEC on February 16, 2023.

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

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50), Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude. During the fiscal year of adoption, the information on the key terms of the programs and the balance sheet presentation of the program obligations, which are annual disclosure requirements, should be disclosed in each interim period. The amendments in this update should be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on roll-forward information, which should be applied prospectively.

The Company adopted ASU 2022-04 as of January 1, 2023. The Company has an agreement with an external payment service provider to facilitate the payments to certain suppliers. The outstanding obligations confirmed towards the external payment service provider are recorded in Accounts Payable in the Condensed Consolidated Balance Sheet until payment has been effected. The Company has undertaken to make sure the payment is effected on the original invoice maturity date. The payment terms range between 30 days and 165 days, with a weighted average of 127 days.

The roll-forward of the Company's outstanding obligations confirmed as valid under its supplier finance program for the nine months period ended September 30, 2023 is as follows (dollars in millions):


	Nine Months Ended
	September 30, 2023
Confirmed obligations outstanding at beginning of the period	$	i 314
Invoices confirmed during the period		i 1,046
Confirmed invoices paid during the period		( i 1,030	)
Confirmed obligations outstanding at end of the period1)	$	i 330

1) Amount of obligations confirmed under the program that remains unpaid by the Company is reported as Accounts Payable in the Condensed Consolidated Balance Sheet.

Accounting standards issued but not yet adopted

None.

3. FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, short-term debt and other current financial assets and liabilities approximate their fair value because of the short-term maturity of these instruments.

The Company uses derivative financial instruments (“derivatives”) as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest rates and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial policy. All derivatives are recognized in the consolidated financial statements at fair value. For certain derivatives, hedge accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although each hedge is entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest rates and foreign exchange rates.

The degree of judgment utilized in measuring the fair value of the instruments generally correlates to the level of pricing observability. Pricing observability is impacted by several factors, including the type of asset or liability, whether the asset or liability has an established market and the characteristics specific to the transaction. Instruments with readily active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, assets rarely traded or not quoted will generally have less, or no, pricing observability and a higher degree of judgment utilized in measuring fair value.

All the Company’s derivatives are classified as Level 2 financial instruments in the fair value hierarchy. Level 2 pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

The carrying value is the same as the fair value as these instruments are recognized in the consolidated financial statements at fair value. Although the Company is party to close-out netting agreements (“ISDA agreements”) with all derivative counterparties, the fair values in the tables below and in the Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 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 i i no / derivatives designated as hedging instruments as of September 30, 2023 or December 31, 2022 related to the Company's operations.

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 i i no / t designated as hedging instruments outstanding as of September 30, 2023 and December 31, 2022 were foreign exchange swaps.

For the three months periods ended September 30, 2023 and 2022, the gains (losses) recognized in other non-operating items, net were $ i 12 million and $( i 9) million, respectively, for derivative instruments not designated as hedging instruments. For the nine months periods ended September 30, 2023 and 2022, the gains (losses) recognized in other non-operating items, net were $ i 21 million and $( i 24) million, respectively. The realized part of the losses referred to above is reported under financing activities in the statement of cash flows.

For the three and nine months periods ended September 30, 2023 and September 30, 2022, the gains (losses) recognized as interest expense were immaterial.

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


	As of
	September 30, 2023									December 31, 2022
				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	$	i 2,016	1)	$	i 13	2)	$	i 25	3)	$	i 2,616	4)	$	i 22	5)	$	i 15	6)
Total derivatives not designated as hedging instruments	$	i 2,016		$	i 13		$	i 25		$	i 2,616		$	i 22		$	i 15

1) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $ i 2,016 million.

2) Net amount after deducting for offsetting swaps under ISDA agreements is $ i 13 million.

3) Net amount after deducting for offsetting swaps under ISDA agreements is $ i 25 million.

4) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $ i 2,616 million.

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

6) Net amount after deducting for offsetting swaps under ISDA agreements is $ i 15 million.

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.

During the first quarter of 2023, the Company issued a five-year € i 500 million Eurobond. These notes were issued as green bonds. In the second quarter of 2023, the Company repaid the € i 500 million for the five-year Eurobond that matured in June 2023.

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

As of

September 30, 2023

December 31, 2022

Carrying
value1)

Fair
value

Carrying
value1)

Fair
value

Long-term debt

Bonds

i 1,000

i 980

i 767

i 735

Loans

i 277

i 282

i 287

i 292

Total long-term debt

i 1,277

i 1,262

i 1,054

i 1,027

Short-term debt

Short-term portion of long-term debt

i 297

i 295

i 533

i 527

Overdrafts and other short-term debt

i 293

i 178

Total short-term debt

i 590

i 588

i 711

i 705

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

For the three and nine months periods ended September 30, 2023 and September 30, 2022, the Company did i i i i no / / / t record any material impairment charges on its long-lived assets for its operations.

4. INCOME TAXES

The effective tax rate for the three months period ended September 30, 2023 was i 33.4% compared to i 30.8% for the three months period ended September 30, 2022. Discrete tax items, net for the three months period ended September 30, 2023 had an unfavorable impact of i 0.2%. Discrete tax items, net for the three months period ended September 30, 2022 had an unfavorable impact of i 1.4%.

The effective tax rate for the nine months period ended September 30, 2023 was i 33.4% compared to i 31.1% for the nine months period ended September 30, 2022. Discrete tax items, net for the nine months period ended September 30, 2023 had a favorable impact of i 0.6%. Discrete tax items, net for the nine months period ended September 30, 2022 had an unfavorable impact of i 1.2%.

The Company files income tax returns in the U.S. federal jurisdiction, various U.S. states and non-U.S. jurisdictions. At any given time, the Company is undergoing tax audits in several tax jurisdictions covering multiple years. The Company is no longer subject to income tax examination by the U.S. federal income tax authorities for years prior to 2015. With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax authorities for years before 2012.

As of September 30, 2023, the Company is not aware of any proposed income tax adjustments resulting from tax examinations that would have a material impact on the Company’s condensed consolidated financial statements. The conclusion of such audits could result in additional increases or decreases to unrecognized tax benefits in some future period or periods.

During the nine months period ended September 30, 2023, the Company recorded a net increase of $ i 7 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. Of the total unrecognized tax benefits of $ i 53 million recorded as of September 30, 2023, $ i 16 million is classified as current tax payable within Other current liabilities and $ i 37 million is classified as non-current tax payable within Other non-current liabilities on the Condensed Consolidated Balance Sheet.

5. INVENTORIES

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


	As of
	September 30, 2023			December 31, 2022
Raw materials	$	i 454		$	i 445
Work in progress		i 325			i 350
Finished products		i 289			i 265
Inventories		i 1,068			i 1,060
Inventory valuation reserve		( i 87	)		( i 91	)
Total inventories, net of reserve	$	i 982		$	i 969

6. RESTRUCTURING

As of September 30, 2023, approximately $ i 105 million of the $ i 122 million in total reserve balance can be attributed to footprint optimization activities in Europe, mainly Germany and the United Kingdom (UK) amounting to $ i 89 million. These activities are expected to be concluded during 2024 and 2025.

The provision charges for the three and nine months periods ended September 30, 2023 mainly relate to restructuring activities in Germany and UK. The cash payments for the three and nine months periods ended September 30, 2023 relate to restructuring activities in Europe. The majority of the cash payments for the nine months period ended September 30, 2022 mainly related to footprint optimization activities in Asia.

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Reserve at beginning of the period	$	i 127		$	i 45		$	i 32		$	i 88
Provision - charge		i 8			i 2			i 118			i 14
Provision - reversal		( i 1	)		( i 1	)		( i 1	)		( i 1	)
Cash payments		( i 9	)		( i 9	)		( i 24	)		( i 59	)
Translation difference		( i 3	)		( i 3	)		( i 2	)		( i 8	)
Reserve at end of the period	$	i 122		$	i 34		$	i 122		$	i 34

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 and nine months periods ended September 30, 2023, provisions primarily relate to warranty related issues and cash payments mainly relate to the Andrews litigation settlement. For the three and nine months periods ended September 30, 2022, provisions and cash payments primarily related to warranty related issues. As of September 30, 2023, the reserve for product related liabilities mainly relate to recall related issues.

The table below summarizes the change in the balance sheet position of the product-related liabilities (dollars in millions). The reserve for product related liabilities is included in accrued expenses and other non-current liabilities on the Condensed Consolidated Balance Sheets. A majority of the Company’s product-related liabilities as of September 30, 2023 are covered by insurance. Insurance receivables are included within other current assets and other non-current assets on the Condensed Consolidated Balance Sheets. As of September 30, 2023, the Company had total insurance receivables of $ i 120 million.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Reserve at beginning of the period	$	i 178		$	i 145		$	i 145		$	i 144
Change in reserve		i 3			i 5			i 46			i 17
Cash payments		( i 61	)		( i 3	)		( i 71	)		( i 12	)
Translation difference		( i 0	)		( i 2	)		( i 1	)		( i 3	)
Reserve at end of the period	$	i 120		$	i 146		$	i 120		$	i 146

8. RETIREMENT PLANS

The components of total Net Periodic Benefit Cost associated with the Company’s defined benefit retirement plans are as follows (dollars in millions):

U.S. Plans

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

Interest cost

i 3

i 9

Expected return on plan assets

( i 3

)

( i 7

)

( i 8

)

( i 11

)

Settlement loss

i 1

i 2

i 1

i 3

Net periodic benefit cost

i 1

( i 2

)

i 2

i 1

Non-U.S. Plans

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

Service cost

i 2

i 7

Interest cost

i 2

i 1

i 7

i 4

Expected return on plan assets

( i 1

)

( i 0

)

( i 2

)

( i 1

)

Amortization of actuarial loss

i 1

Settlement/curtailment gain

i 0

( i 0

)

i 0

( i 5

)

Net periodic benefit cost (gain)

i 4

i 13

i 6

The Service cost component in the table above is reported among other employee compensation costs in the Consolidated Statements of Income. The remaining components - Interest cost, Expected return on plan assets, Amortization of actuarial loss, Settlement loss (gain) and Curtailment gain - are reported as Other non-operating items, net in the Consolidated Statements of Income.

The Company triggered settlement accounting for the primary U.S. pension plan in the third quarter of 2023 because the lump-sum payments made during the quarter exceeded the sum of Service cost and Interest cost for this U.S. plan. Due to the settlement accounting, the obligation and plan assets for the primary U.S. plan have been re-measured as of September 30, 2023, which resulted in an immaterial change in the net pension liability compared to December 31, 2022. The discount rate used to determine the U.S. net periodic benefit cost because of the re-measurement was changed from i 5.32% to i 5.98% in the third quarter of 2023. The expected long-term rate of return on plan asset is unchanged at i 5.05%.

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 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.

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. i 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.

Product Liability:

In June 2023, several Autoliv subsidiaries were named as defendants in a class action lawsuit filed in the United States District Court for the Eastern District of Michigan by David Anderson, et al. These subsidiaries were also named defendants in a class action filed in the Western District of Tennessee in September 2022. The plaintiffs in these lawsuits (the "ARC Inflator Class Action") generally allege that the defendants have violated various state competition, warranty, and trade practice laws relating to ARC inflators included in airbag modules that the defendants 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 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.

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 i 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 and increased the accrual in the fourth quarter of 2021. The amount by which the product liability accrual exceeds the product liability insurance receivable with respect to the Honda Buckle Recall is $ i 27 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 i 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 i no accrual has been made. Although the Company currently estimates a range of $ i 0 to $ i 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.

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 and nine months periods ended September 30, 2023, the Company recorded approximately $ i 3 million and $ i 8 million, respectively, in stock-based compensation expense related to RSUs and PSUs. For the three and nine months periods ended September 30, 2022, the Company recorded approximately $ i 3 million and $ i 7 million, respectively, in stock-based compensation expense related to RSUs and PSUs.

During the three and nine months periods ended September 30, 2023, approximately i 8 thousand and i 120 thousand shares of common stock from the treasury stock were utilized by the Plan. During the three and nine months periods ended September 30, 2022, approximately i 5 thousand and i 144 thousand shares, respectively, of common stock from the treasury stock were utilized by the Plan.

11. EARNINGS PER SHARE

The computation of basic and diluted earnings per share is set forth in the table below. Anti-dilutive shares outstanding were immaterial for all periods presented below.

Three Months Ended September 30,

Nine Months Ended September 30,

(In millions, except per share amounts)

2023

2022

2023

2022

Numerator:

Basic and diluted:

Net income attributable to controlling interest

i 134

i 105

i 261

i 267

Denominator:

Basic: Weighted average common stock

i 84.9

i 87.0

i 85.5

i 87.2

Add: Weighted average stock options/share awards

i 0.2

Diluted weighted average common stock:

i 85.0

i 87.2

i 85.7

i 87.4

Net earnings per share - basic

i 1.58

i 1.21

i 3.05

i 3.06

Net earnings per share - diluted

i 1.57

i 1.21

i 3.04

i 3.06

12. REVENUE DISAGGREGATION

The Company’s disaggregated revenue for the three and nine months periods ended September 30, 2023 and September 30, 2022 were as follows (dollars in millions).

Net Sales by Products

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

Airbags, Steering Wheels and Other1)

i 1,761

i 1,510

i 5,191

i 4,226

Seatbelt Products and Other1)

i 835

i 792

i 2,533

i 2,281

Total net sales

i 2,596

i 2,302

i 7,724

i 6,507

Net Sales by Region

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

China

i 538

i 537

i 1,488

i 1,347

Asia, excl. China

i 495

i 418

i 1,449

i 1,197

Americas

i 918

i 794

i 2,665

i 2,225

Europe

i 646

i 552

i 2,122

i 1,738

Total net sales

i 2,596

i 2,302

i 7,724

i 6,507

1) Including Corporate sales.

Contract Balances

Contract assets relate to the Company's rights to consideration for work completed but not billed (generally in conjunction with contracts for which revenue is recognized over time) at the reporting date on production parts and is included in Other current assets in the Condensed Consolidated Balance Sheet. The contract assets are reclassified into the receivables balance when the rights to receive payments become unconditional. The net change in the contract assets balance, reflecting the adjustments needed to align revenue recognition for work completed but not billed, for the three and nine months periods ended September 30, 2023 and September 30, 2022, were not material in any period.

13. SUBSEQUENT EVENTS

There were no reportable events subsequent to September 30, 2023.

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, 2022 filed with the United States Securities and Exchange Commission (the “SEC”) on February 16, 2023. 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.

EXECUTIVE OVERVIEW

Our performance in the third quarter was very encouraging. Our organic sales growth continued to significantly outperform LVP and the adjusted operating income was a new third quarter record since the spin-off in 2018.

We are pleased that our strong performance in the third quarter was broad based, with improvements in several key areas - both year-over-year and sequentially - including gross and operating margin, labor efficiency and SG&A and RD&E costs in relation to sales. Cash flow was strong, and the debt leverage remained well within our target range while maintaining our dividend and almost tripling the number of shares repurchased compared to the second quarter.

We continue to work hard to secure a strong medium- and long-term competitive position. In the quarter, we detailed a large part of our structural cost reduction intentions of reducing our indirect workforce by up to 2,000. In addition, the ongoing reorganization of our global functions and European operations is expected to lead to a reduced normalized tax rate. It is also encouraging for our medium- and long-term potential that we continue to improve our position in China with the fast-growing domestic OEMs. In the first nine months, we increased our sales to this group by more than 50% year over year.

We increase our full year sales indication to reflect that LVP has developed better than expected, even with the UAW strike in the U.S. We have continued to see an improvement of supply chain stability throughout the year, with reduced customer call off volatility. However, the improvement is slower than we had expected, as it deteriorated somewhat in Europe in the third quarter. This, together with the higher sales and adverse foreign currency exchange development, means that we expect a fourth quarter adjusted operating margin (Non-U.S. GAAP measure) improvement year-over-year of around 1.5-2pp, in line with the previously communicated improvement pattern of around 2pp each quarter throughout 2023.

Our performance in the first nine months and the outlook for the final quarter of the year makes us confident that we will deliver a substantial full year increase in sales, operating cash flow and adjusted operating income. Together with the advancement of our structural cost reduction activities, the improving position with fast growing OEMs, the continued gradual improvement of supply chain stability, and the development of inflation compensation, we have a solid foundation for a continued strong development in the years to come, that support our medium-term targets.

Financial highlights in the three months period ended September 30, 2023

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

$2,596 million net sales

13% net sales increase

11% organic sales growth (Non-U.S. GAAP measure, see reconciliation table below)

8.9% operating margin

9.4% adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below)

$1.57 EPS, 30% increase

$1.66 adjusted EPS (Non-U.S. GAAP measure, see reconciliation table below), 35% increase

Key business developments in the three months period ended September 30, 2023

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

•

Sales increased organically (Non-U.S. GAAP measure, see reconciliation table below) by 11%, which was 7pp better than global LVP growth of 3.8% (S&P Global October 2023). We outperformed in all regions, mainly due to new product launches and higher prices.

•

Profitability improved substantially, positively impacted by price increases, organic growth, and our cost reduction activities. Operating income was $232 million and operating margin was 8.9%. Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) improved from $173 million to $243 million and adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below) increased from 7.5% to 9.4%, despite inflationary pressure and adverse foreign currency translation effects. Return on capital employed was 24% and adjusted return on capital employed (Non-U.S. GAAP measure, see reconciliation table below) was 25%.

•

Operating cash flow remained strong, albeit declining from $232 million to $202 million, mainly due to temporary negative working capital effects. Free cash flow (Non-U.S. GAAP measure, see reconciliation table below) decreased to $50 million from $68 million. The leverage ratio (Non-U.S. GAAP measure, see reconciliation table below) was unchanged at 1.3x compared to the second quarter of 2023. A dividend of $0.66 per share was paid, and 1.23 million shares were repurchased and retired in the quarter.

Business and market condition update for the third quarter 2023

Supply Chain

Global light vehicle production growth year-over-year was 3.8% (according to S&P Global October 2023) in the third quarter, with all major regions growing except China. We saw continued gradual improvement in call-off volatility as supply chains are less strained compared to a year earlier. However, volatility is still significantly 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 the current industry-wide supply chain disruptions to continue to fade in the fourth quarter of 2023, but not enough to return to pre-pandemic levels of efficiency by year-end.

Inflation

In Q3 2023, cost pressures from labor, logistics, utilities, and other items had a negative impact on our profitability. Most of the inflationary cost pressure was offset by customer price and other compensations in the quarter. Raw material cost inflation and its impact on our profitability was negligible in Q3 2023. We expect the raw material price changes in 2023 to be largely reflected in price changes in our products, albeit with delays of several months. We also expect continued cost pressure from broad based inflation relating to labor, logistics, utilities and other items, especially in Europe. We continue to execute on productivity and cost reduction activities to offset these cost pressures, and we continue to have challenging discussions with our customers on non-raw material cost inflation.

Other matters

Autoliv expects its tax rate for full year 2023 to be lower than previously anticipated. The full year tax rate is now projected to be around 20% for full year 2023. This is due to the ongoing reorganization of our global functions and European operations, which is expected to lead to a reduced tax rate for 2023. These changes are also expected to reduce the normalized tax rate to be within a range of around 25-30% from 2024 onward.

The UAW strike has had negligible impact on our sales and profitability in the third quarter, with around $2 million in lost sales. We estimate that the current strike actions, as known as of October 19, 2023 by UAW are currently negatively impacting our weekly sales by around $6 million.

In June 2023, Autoliv communicated a cost reduction framework which included the intention of reducing our indirect headcount by up to 2,000. We announced more details on these initiatives on July 13, 2023 and followed up with another announcement with details on October 5, 2023. Based on the intended work force reductions in these announcements, we estimate that the annual cost reductions will amount to around $35 million in 2024, $65 million in 2025 and reaching $85 million when fully implemented. We expect to announce further details, as plans materialize further.

We expect 2024 to be an important step towards our medium-term target of 12% adjusted operating margin (Non-U.S. GAAP measure). We intend, as usual, to come back with a full year indication in connection with our fourth quarter earnings release in January next year.

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						Nine Months Ended
	or As of September 30,						or As of September 30,
	2023			2022			2023			2022
Trade working capital1)		1,303			1,314			1,303			1,314
Trade working capital relative to sales, %2)		12.5	%		14.3	%		12.5	%		14.3	%
Receivables outstanding relative to sales, %3)		21.0	%		20.6	%		21.0	%		20.6	%
Inventory outstanding relative to sales, %4)		9.5	%		10.0	%		9.5	%		10.0	%
Payables outstanding relative to sales, %5)		17.9	%		16.3	%		17.9	%		16.3	%

Gross margin, %6)		17.9	%		16.7	%		16.7	%		15.3	%
Operating margin, %7)		8.9	%		7.4	%		5.9	%		6.6	%

Capital employed8)		3,861			3,779			3,861			3,779
Net debt9)		1,375			1,288			1,375			1,288
Return on total equity, %10)		21.3	%		16.8	%		13.5	%		13.8	%
Return on capital employed, %11)		24.2	%		18.0	%		15.6	%		15.3	%

Headcount at period-end12)		71,200			67,800			71,200			67,800

1) Outstanding receivables and outstanding inventory less outstanding payables. See calculation of this non-U.S. GAAP measure in the table below.

2) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized quarterly sales.

3) Outstanding receivables relative to annualized quarterly sales.

4) Outstanding inventory relative to annualized quarterly sales.

5) Outstanding payables relative to annualized quarterly sales.

6) Gross profit relative to sales.

7) Operating income relative to sales.

8) Total equity and net debt.

9) Net debt adjusted for pension liabilities in relation to EBITDA. See tabular presentation reconciling this non-U.S. GAAP measure to U.S. GAAP below.

10) Net income relative to average total equity.

11) Operating income and income from equity method investments, relative to average capital employed.

12) Employees plus temporary, hourly personnel.

three months period ended September 30, 2023 COMPARED WITH three months period ended September 30, 2022

Consolidated Sales Development

(dollars in millions)


	Three Months Ended September 30,							Components of change in net sales
	2023		2022		Reported change			Currency effects 1)			Organic 3)
Airbags, Steering Wheels and Other2)	$	1,761	$	1,510		17	%		1.9	%		15	%
Seatbelt products and Other2)		835		792		5.5	%		2.9	%		2.6	%
Total	$	2,596	$	2,302		13	%		2.2	%		11	%

Asia	$	1,033	$	955		8.1	%		(3.7	)%		12	%
Whereof: China		538		537		0.1	%		(5.4	)%		5.6	%
Asia excl. China		495		418		18	%		(1.5	)%		20	%
Americas		918		794		16	%		5.0	%		11	%
Europe		646		552		17	%		8.4	%		8.5	%
Total	$	2,596	$	2,302		13	%		2.2	%		11	%

1) Effects from currency translations.

2) Including Corporate sales.

3) Non-U.S. GAAP measure.

Sales by product - Airbags, Steering Wheels and Other

Sales for all major product categories increased organically (Non-U.S. GAAP measure) in the quarter. The largest contributor to the increase was steering wheels, followed by inflatable curtains, side airbags, and passenger airbags.

Sales by product - Seatbelts and Other

The main contributor to Seatbelt Products organic sales growth (Non-U.S. GAAP measure) was Asia excl. China and Europe, followed by Americas.

Sales by region

Our global organic sales (Non-U.S. GAAP measure, see reconciliation table below) increased by 11% compared to the global LVP increase of 3.8% (according to S&P Global, October 2023). The 7pp outperformance was mainly driven by price increases and new product launches.

Autoliv organic sales growth outperformed LVP growth by 15pp in Asia excl. China, by 6pp in China, by 3pp in Americas and by 2pp in Europe.

Third quarter of 2023 organic growth1)


	Americas	Europe	China	Asia excl. China	Global
Autoliv	11%	8.5%	5.6%	20%	11%
Main growth drivers	Mercedes, Nissan, Honda	Mercedes, BMW	Lixiang, GWM, Chery	Toyota, Hyundai, Subaru	Honda, Toyota, Mercedes
Main decline drivers	BMW, Ford, Stellantis	Volvo, Ford, VW	VW, Nissan, GM	Renault, Bodrin, Stellantis	VW, Renault, Ford

1) Non-U.S. GAAP measure.

Light Vehicle Production Development

Change third quarter of 2023 versus third quarter of 2022


	Americas	Europe	China	Asia excl. China	Global
LVP1)	7.9 %	6.5 %	(0.6)%	4.5 %	3.8 %

1) Source: S&P Global, October 2023.

Earnings


	Three Months Ended September 30,
(Dollars in millions, except per share data)	2023			2022			Change
Net Sales	$	2,596		$	2,302			13	%
Gross profit		465			383			21	%
% of sales		17.9	%		16.7	%		1.3	pp
S, G&A		(118	)		(105	)		12	%
% of sales		(4.6	)%		(4.6	)%		0.0	pp
R, D&E, net		(107	)		(106	)		1.0	%
% of sales		(4.1	)%		(4.6	)%		0.5	pp
Amortization of Intangibles		(1	)		(0	)		28	%
Other income (expense), net		(8	)		(1	)		756	%
Operating income		232			171			36	%
% of sales		8.9	%		7.4	%		1.5	pp
Adjusted operating income1)		243			173			40	%
% of sales		9.4	%		7.5	%		1.8	pp
Financial and non-operating items, net		(30	)		(18	)		68	%
Income before taxes		201			153			32	%
Income taxes		(67	)		(47	)		43	%
Tax rate		33.4	%		30.8	%		2.6	pp
Net income		134			106			27	%
Earnings per share, diluted2)		1.57			1.21			30	%
Adjusted earnings per share, diluted1,2)		1.66			1.23			35	%

1) Non-U.S. GAAP measure, excluding effects from capacity alignments, antitrust related matters and the Andrews litigation settlement.

2) Assuming dilution, when applicable, and net of treasury shares.

Third quarter of 2023 financial development

Gross profit increased by $82 million, and the gross margin increased by 1.3pp compared to the same quarter 2022. The gross profit increase was primarily driven by price increases, volume growth, lower costs for material and premium freight. This was partly offset by increased costs for personnel related to volume growth and wage inflation.

S,G&A costs increased by $13 million compared to the prior year, mainly due to increased costs for personnel as well as adverse foreign currency translation effects. S,G&A costs in relation to sales was unchanged at 4.6%.

R,D&E, net costs was almost unchanged compared to the prior year, as higher costs for personnel and adverse foreign currency translation effects were almost offset by higher engineering income. R,D&E, net, in relation to sales decreased from 4.6% to 4.1%.

Other income (expense), net was negative $8 million compared to negative $1 million in the same period last year. The difference was mainly related to higher capacity alignment accruals in the third quarter of 2023.

Operating income increased by $61 million compared to the same period in 2022, mainly due to the increase in gross profit, partly offset by higher costs for S,G&A.

Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) increased by $70 million compared to the prior year, mainly due to higher gross profit, partly offset by the higher costs for S,G&A.

Financial and non-operating items, net, was negative $30 million compared to negative $18 million a year earlier. The difference was mainly due to increased interest expense as an effect of higher debt and higher interest rates and foreign currency revaluation effects.

Income before taxes increased by $49 million compared to the prior year, mainly due to the increase in operating income, partly offset by a larger Financial and non-operating items, net.

Tax rate was 33.4% compared to 30.8% in the same period last year. Discrete tax items, net, increased the tax rate this quarter by 0.2pp. Discrete tax items increased the tax rate by 1.4pp in the same period last year.

Earnings per share, diluted increased by $0.36 compared to a year earlier. The main drivers were $0.49 from operating income partly offset by $0.10 from financial items.

nine months period ended September 30, 2023 COMPARED WITH nine months period ended September 30, 2022

Consolidated Sales Development

(dollars in millions)


	Nine Months Ended September 30,							Components of change in net sales
	2023		2022		Reported change			Currency effects 1)			Organic 3)
Airbags, Steering Wheels and Other2)	$	5,191	$	4,226		23	%		(0.6	)%		23	%
Seatbelt products and Other2)		2,533		2,281		11	%		(0.0	)%		11	%
Total	$	7,724	$	6,507		19	%		(0.4	)%		19	%

Asia	$	2,937	$	2,544		15	%		(5.5	)%		21	%
Whereof: China		1,488		1,347		10	%		(6.1	)%		17	%
Asia excl. China		1,449		1,197		21	%		(4.7	)%		26	%
Americas		2,665		2,225		20	%		3.6	%		16	%
Europe		2,122		1,738		22	%		2.0	%		20	%
Total	$	7,724	$	6,507		19	%		(0.4	)%		19	%

1) Effects from currency translations.

2) Including Corporate sales.

3) Non-U.S. GAAP measure.

Sales by product - Airbags, Steering Wheels and Other

Sales for all major product categories increased organically (Non-U.S. GAAP measure) in the first nine months. The largest contributor to the increase was inflatable curtains and steering wheels, followed by side airbags and passenger airbags.

Sales by product - Seatbelts and Other

The main contributor to Seatbelt Products organic sales growth (Non-U.S. GAAP measure) was Europe, followed by Americas, Asia excl. China, and China.

Sales by region

Our global organic sales (Non-U.S. GAAP measure, see reconciliation table below) increased by 19% compared to the global LVP increase of 9.1% (according to S&P Global, October 2023). The 10pp outperformance was mainly driven by new product launches and price increases.

Autoliv outperformed LVP by around 15pp in Asia excl. China, by 12pp in China, by 6pp in Europe and in Americas.

First nine months 2023 organic growth1)


	Americas	Europe	China	Asia excl. China	Global
Autoliv	16%	20%	17%	26%	19%
Main growth drivers	Honda, GM, Nissan	VW, Stellantis, Renault	Honda, Lixiang, BYD	Toyota, Hyundai, Subaru	Honda, Toyota, Hyundai
Main decline drivers	Ford, BMW	Mitsubishi	Nissan, VW, Renault	Renault, KG Mobility, Stellantis	Ford

1) Non-U.S. GAAP measure.

Light Vehicle Production Development

Change first nine months of 2023 versus first nine months of 2022


	Americas	Europe	China	Asia excl. China	Global
LVP1)	11 %	14 %	4.5 %	11 %	9.1 %

1) Source: S&P Global, October 2023.

Earnings


	Nine Months Ended September 30,
(Dollars in millions, except per share data)	2023			2022			Change
Net Sales	$	7,724		$	6,507			19	%
Gross profit		1,291			998			29	%
% of sales		16.7	%		15.3	%		1.4	pp
S, G&A		(379	)		(333	)		14	%
% of sales		(4.9	)%		(5.1	)%		0.2	pp
R, D&E, net		(343	)		(325	)		5.7	%
% of sales		(4.4	)%		(5.0	)%		0.5	pp
Amortization of Intangibles		(1	)		(2	)		(36	)%
Other income (expense), net		(115	)		91		n/a
Operating income		453			429			5.5	%
% of sales		5.9	%		6.6	%		(0.7)pp
Adjusted operating income1)		586			365			60	%
% of sales		7.6	%		5.6	%		2.0	pp
Financial and non-operating items, net		(60	)		(40	)		50	%
Income before taxes		393			389			0.9	%
Income taxes		(131	)		(121	)		8.5	%
Tax rate		33.4	%		31.1	%		2.3	pp
Net income		262			268			(2.5	)%
Earnings per share, diluted2)		3.04			3.06			(0.5	)%
Adjusted earnings per share, diluted1,2)		4.48			2.58			73	%

1) Non-U.S. GAAP measure, excluding effects from capacity alignments, antitrust related matters, the Andrews litigation settlement, and gain on sale of property in the first quarter of 2022.

2) Assuming dilution, when applicable, and net of treasury shares.

First nine months 2023 financial development

Gross profit increased by $294 million, and the gross margin increased by 1.4pp compared to the same period in 2022. The gross profit increase was primarily driven by price increases, volume growth and lower costs for premium freight. This was partly offset by increased costs for personnel related to higher volumes and wage inflation as well as adverse effects from foreign currency translation and higher costs for energy.

S,G&A costs increased by $46 million compared to the prior year, mainly due to increased costs for personnel projects. S,G&A costs in relation to sales decreased from 5.1% to 4.9%.

R,D&E, net costs increased by around $19 million compared to the prior year, mainly due to higher costs for personnel. R,D&E, net, in relation to sales decreased from 5.0% to 4.4%.

Other income (expense), net was negative $115 million compared to positive $91 million in the prior year. The prior year was positively impacted by around an $80 million gain from the sale of a property in Japan and around $20 million from a patent litigation settlement, partly offset by around $10 million in capacity alignment provisions for the closure of a plant in South Korea while the first nine months of 2023 was negatively impacted by around $105 million in accruals for capacity alignments.

Operating income increased by $24 million compared to the same period in 2022, mainly due to higher gross profit, partly offset by the changes in Other income (expense), net and the higher costs for S,G&A and R,D&E, net.

Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) increased by $221 million compared to the prior year, mainly due to higher gross profit, partly offset by the higher costs for S,G&A and R,D&E, net.

Financial and non-operating items, net, was negative $60 million compared to negative $40 million a year earlier, mainly due to increased interest expense as an effect of higher debt and higher interest rates.

Income before taxes increased by $3 million compared to the prior year, mainly due to the higher operating income partly offset by the increased interest expense.

Tax rate was 33.4% compared to 31.1% in the same period last year. Discrete tax items, net, decreased the tax rate this year by 0.6pp. Discrete tax items increased the tax rate by 1.2pp in the same period last year.

Earnings per share, diluted decreased by $0.02 compared to a year earlier. The main drivers behind the decrease were $0.17 from financial items and $0.14 from lower operating income, partly offset by $0.23 from taxes.

LIQUIDITY AND CAPITAL RESOURCES

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on its financial position, results of operations or cash flows. The Company’s future contractual obligations have not changed materially from the amounts reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 16, 2023.

Third quarter of 2023 development

Trade working capital (Non-U.S. GAAP measure, see calculation table below) decreased by $11 million compared to the same period last year, where the main drivers were $354 million in higher accounts payable partly offset by $286 million in higher receivables and $58 million in higher inventories. Compared to the second quarter of 2023, trade working capital increased by $11 million, driven by $35 million in higher inventories, partly offset by $14 million in higher accounts payable and $10 million in lower receivables.

Operating cash flow decreased by $30 million to $202 million compared to the same period last year, mainly due to less favorable working capital effects partly offset by higher net income.

Capital expenditure, net decreased by $12 million compared to the same period the previous year. Capital expenditure, net in relation to sales was 5.8% vs. 7.1% a year earlier.

Free cash flow (Non-U.S. GAAP measure, see calculation table below) was $50 million compared to $68 million in the same period prior year. The decrease was mainly due to the lower operating cash flow partly offset by lower capital expenditure, net.

Cash conversion (Non-U.S. GAAP measure) defined as free cash flow (Non-U.S. GAAP measure, see calculation table below) in relation to net income, was 37% in the period.

Net debt (Non-U.S. GAAP measure, see reconciliation table below) was $1,375 million as of September 30, 2023, which was $87 million higher than a year earlier.

Liquidity position. As of September 30, 2023, our cash balance was around $0.5 billion, and including committed, unused loan facilities, our liquidity position was around $1.6 billion.

Leverage ratio (Non-U.S. GAAP measure, see calculation table below). As of September 30, 2023, the Company had a leverage ratio of 1.3x compared to 1.6x as of September 30, 2022, as the 12 months trailing adjusted EBITDA (Non-U.S. GAAP measure) increased more than the net debt (Non-U.S. GAAP measure) increased.

Total equity decreased by $5 million compared to September 30, 2022. This was mainly due to $226 million in dividend payment and stock repurchases of $257 million partly offset by $418 million from net income and $36 million in positive currency translation effects.

First nine months of 2023 development

Operating cash flow increased by $285 million compared to the same period last year to $535 million, mainly due to higher adjusted operating income and less negative working capital effects.

Capital expenditure, net increased by $99 million, mainly due to the impact on the prior year of $95 million from the sale of property, plant and equipment. Capital expenditure, net in relation to sales was 5.4% vs. 4.9% the prior year period.

Free cash flow (Non-U.S. GAAP measure, see reconciliation table below) was $117 million, compared to negative $69 million in the same period last year. The improvement was due to the higher operating cash flow partly offset by higher capital expenditure, net.

Cash conversion (Non-U.S. GAAP measure, see reconciliation table below) defined as free cash flow (Non-U.S. GAAP measure, see reconciliation table below) in relation to net income, was 45% in the period.

NON-U.S. GAAP MEASURES

The Company believes that comparability between periods is improved through the exclusion of certain items. To assist investors in understanding the operating performance of Autoliv's business, it is useful to consider certain U.S. GAAP measures exclusive of these items.

With respect to the Andrews litigation settlement, the Company has treated this specific settlement as a non-recurring charge because of the unique nature of the lawsuit, including the facts and legal issues involved.

Accordingly, the tables below reconcile from U.S. GAAP to the equivalent non-U.S. GAAP measure.

Reconciliation of U.S. GAAP financial measures to “Adjusted operating income”, “Adjusted operating margin” and “Adjusted Earnings per share, diluted”

(Dollars in millions, except per share data)


	Three Months Ended September 30, 2023									Three Months Ended September 30, 2022
	Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP			Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP
Operating income	$	232		$	11		$	243		$	171		$	2		$	173
Operating margin, %		8.9	%		0.4	%		9.4	%		7.4	%		0.1	%		7.5	%
Earnings per share, diluted	$	1.57		$	0.09		$	1.66		$	1.21		$	0.02		$	1.23

1) Effects from capacity alignments, antitrust related matters and the Andrews litigation settlement.


	Nine Months Ended September 30, 2023									Nine Months Ended September 30, 2022
	Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP			Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP
Operating income	$	453		$	133		$	586		$	429		$	(64	)	$	365
Operating margin, %		5.9	%		1.7	%		7.6	%		6.6	%		(1.0	)%		5.6	%
Earnings per share, diluted	$	3.04		$	1.44		$	4.48		$	3.06		$	(0.47	)	$	2.58

1) Effects from capacity alignments, antitrust related matters and the Andrews litigation settlement, including gain on sale of property in the first quarter of 2022.

Items included in Non-U.S. GAAP adjustments

(Dollars in millions, except per share data)


	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
	Millions			Per share			Millions			Per share
Capacity alignments	$	10		$	0.12		$	2		$	0.02
The Andrews litigation settlement		(0	)		(0.00	)		—			—
Antitrust related matters		1			0.01			—			—
Total adjustments to operating income		11			0.13			2			0.02
Tax on non-U.S. GAAP adjustments1)		(3	)		(0.04	)		(0	)		(0.01	)
Total adjustments to net income	$	8		$	0.09		$	2		$	0.02

1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).


	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
	Millions			Per share			Millions			Per share
Capacity alignments1)	$	122		$	1.42		$	(64	)	$	(0.73	)
The Andrews litigation settlement		8			0.09			—			—
Antitrust related matters		3			0.04			—			—
Total adjustments to operating income		133			1.55			(64	)		(0.73	)
Tax on non-U.S. GAAP adjustments2)		(10	)		(0.11	)		23			0.26
Total adjustments to net income	$	123		$	1.44		$	(41	)	$	(0.47	)

1) Whereof gain on sale of property of $80 million in first quarter of 2022.

2) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).

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)


	September 30, 2023			June 30, 2023			September 30, 2022
Receivables, net	$	2,179		$	2,189		$	1,893
Inventories, net		982			947			924
Accounts payable		(1,858	)		(1,844	)		(1,503	)
Trade working capital	$	1,303		$	1,292		$	1,314

Management uses the non-U.S GAAP measure "Net debt" to analyze the amount of debt the Company can incur under its debt policy. Management believes that this policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage its operations. The Company, from time to time enters into “debt-related derivatives” (DRDs) as a part of its debt management and as part of efficiently managing the Company’s overall cost of funds. Creditors and credit rating agencies use net debt adjusted for DRDs in their analyses of the Company’s debt, therefore the Company provides this non-U.S. GAAP measure. DRDs are fair value adjustments to the carrying value of the underlying debt. Also included in the DRDs is the unamortized fair value adjustment related to a discontinued fair value hedge that will be amortized over the remaining life of the debt. By adjusting for DRDs, the total financial liability of net debt is disclosed without grossing debt up with currency or interest fair values.

Reconciliation of U.S. GAAP financial measure to “Net debt”

(Dollars in millions)


	September 30, 2023			June 30, 2023			September 30, 2022
Short-term debt	$	590		$	481		$	692
Long-term debt		1,277			1,290			1,037
Total debt		1,867			1,771			1,729
Cash and cash equivalents		(475	)		(475	)		(483	)
Debt issuance cost/Debt-related derivatives, net		(17	)		4			42
Net debt	$	1,375		$	1,299		$	1,288

The non-U.S. GAAP measure “Net debt” is also used in the non-U.S. GAAP measure “Leverage ratio”. Management uses the non-U.S. GAAP measure “Leverage Ratio” to analyze the amount of debt the Company can incur under its debt policy. Management believes that this policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage its operations. The Company's long-term target for the leverage ratio (sum of net debt plus pension liabilities divided by EBITDA) is 1.0x with the aim to operate within the range of 0.5x to 1.5x. For details and calculation of leverage ratio, refer to the table below.

Calculation of “Leverage ratio”

(Dollars in millions)


	September 30, 2023			June 30, 2023			September 30, 2022
Net debt1)	$	1,375		$	1,299		$	1,477
Pension liabilities		152			152			159
Debt per the Policy		1,527			1,451			1,636

Net income2)		418			390			416
Income taxes 2)		188			168			176
Interest expense, net2,3)		75			67			60
Other non-operating items, net2)		5			1			4
Income from equity method investments2)		(4	)		(4	)		(4	)
Depreciation and amortization of intangibles2)		371			363			359
Capacity alignments, antitrust related matters and the Andrews litigation settlement2)		136			127			10
EBITDA per the Policy (Adjusted EBITDA)	$	1,189		$	1,112		$	1,021
Leverage ratio		1.3			1.3			1.6

1) Net debt (non-U.S. GAAP measure) is short- and long-term debt and debt-related derivatives, less cash and cash equivalents.

2) Latest 12-months.

3) Interest expense, net including cost for extinguishment of debt, if any, less interest income.

Management uses the non-U.S. GAAP measure “free cash flow” to analyze the amount of cash flow being generated by the Company’s operations after capital expenditure, net. This measure indicates the Company’s cash flow generation level that enables strategic value creation options such as dividends or acquisitions. For details on the calculation of free cash flow, see the table below. Management uses the non-U.S. GAAP measure “cash conversion” to analyze the proportion of net income that is converted into free cash flow. The measure is a tool to evaluate how efficiently the Company utilizes its resources. For details on cash conversion, see the table below.

Calculation of “Free Cash Flow”

(Dollars in millions)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net income	$	134		$	106		$	262		$	268
Changes in operating working capital		(36	)		89			(8	)		(168	)
Depreciation and amortization		95			87			281			273
Gain on divestiture of property		—			—			—			(80	)
Other, net		9			(51	)		1			(44	)
Operating cash flow		202			232			535			251
Capital expenditure, net		(151	)		(164	)		(419	)		(319	)
Free cash flow1)	$	50		$	68		$	117		$	(69	)
Cash conversion2)		37	%		64	%		45	%	n/a
1) Operating cash flow less Capital expenditures, net.
2) Free cash flow relative to Net income.

Headcount


	September 30, 2023			June 30, 2023			September 30, 2022
Total headcount		71,200			71,200			67,800
Whereof:
Direct personnel in manufacturing		52,900			52,600			49,600
Indirect personnel		18,200			18,600			18,300
Temporary personnel		11	%		11	%		11	%

At September 30, 2023, total headcount increased by 3,400 compared to a year earlier. The indirect workforce decreased by 1% while the direct workforce increased by 7%, reflecting that sales grew organically by 11% in the third quarter compared to a year earlier.

Compared to June 30, 2023, total headcount was unchanged, with a 1% increase in direct headcount and 2% decrease in indirect headcount.

Full year 2023 indications

Our outlook indications for 2023 are mainly based on our customer call-offs, a full year 2023 global LVP growth of around 7%, achievement of our targeted cost compensation effects, and a reduction of customer call-off volatility. Our full year 2023 indications are also based on the assumption that the UAW strike is not prolonged beyond what is included in the S&P Global October outlook.


Financial measure		Full year indication
Organic sales growth		Around 17%
Foreign currency impact on net sales		Around 1% positive
Adjusted operating margin 1)		Around 8.5%-9%
Tax rate 2)		Around 20%
Operating cash flow 3)		Around $900 million
Capital expenditures, net % of sales		Around 6%
1) Excluding effects from capacity alignments, antitrust related matters, the Andrews litigation settlement and other discrete items.
2) Excluding unusual tax items.
3) Excluding unusual items.

The forward-looking non-U.S. GAAP financial measures above are provided on a non-U.S. GAAP basis. The Company has not provided a U.S. GAAP reconciliation of these measures because items that impact these measures, such as costs and gains related to capacity alignments and antitrust matters, cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and the Company is unable to determine the probable significance of the unavailable information.

Other recent events

Key launches in the nine months period ended September 30, 2023

•

BMW 5-series/i5: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Front Center Airbag, Seatbelts.

•

Honda Elevate: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts.

•

Dodge RAM Rampage: Driver/Passenger Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.

•

Changan A07: Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts.

•

WEY High Mountain: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.

•

Volvo EX30: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.

•

Peugeot e-308: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.

•

Rolls Royce Spectre: Side Airbags, Seatbelts.

•

Haval H5: Driver/Passenger Airbags, Side Airbags.

Other Items

•

On September 22, 2023, Autoliv China and Great Wall Motor announced their intention to collaborate to address opportunities in the rapidly evolving global automotive landscape. The strategic cooperation aims to drive innovation through collaboration around advanced technologies with a special quality focus such as overhead passenger airbags and airbags for zero gravity seats with integrated seatbelts.

•

On September 28, 2023, Autoliv announced that Klaus Kompass, former VP Vehicle Safety at BMW Group, and Seigo Kuzumaki, former Fellow of Advanced R&D and Engineering, Toyota Motor Corporation, joined the Autoliv Research Advisory Board.

•

On October 5, 2023, Autoliv announced an update on its ongoing initiatives to reduce its global headcount, including a downsizing of 300 employees in China, Japan, Sweden, the United States and the closure of an office in the Netherlands.

•

In Q3 2023, Autoliv repurchased and retired 1.23 million shares of common stock at an average price of $97.23 per share under the Autoliv 2022-2024 stock repurchase program.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2023, there have been no material changes to the information related to quantitative and qualitative disclosures about market risk that were provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 16, 2023.

ITEM 4. CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures

An evaluation has been carried out, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective.

(b)

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of our business, we are subject to legal proceedings brought by or against us and our subsidiaries.

See Part I, Item 1, "Financial Statements, Note 9 Contingent Liabilities" of this Quarterly Report on Form 10-Q for a summary of certain ongoing legal proceedings. Such information is incorporated into this Part II, Item 1—"Legal Proceedings" by reference.

ITEM 1A. RISK FACTORS

As of September 30, 2023, there have been no material changes to the risk factors that were previously disclosed in Item 1A in the Company’s Form 10-K for the year ended December 31, 2022 filed with the SEC on February 16, 2023.

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

Stock repurchase program

The following table provides information with respect to common stock repurchases by the Company during the three months period ended September 30, 2023.


	New York Stock Exchange (NYSE)
Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (USD) (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)		Maximum Number of Shares that Yet May Be Purchased Under the Plans or Programs (3)
July 1-31, 2023		96,900	$	100.42		2,462,923		14,537,077
August 1-31, 2023		773,175	$	96.45		3,236,098		13,763,902
September 1-30, 2023		363,793	$	98.12		3,599,891		13,400,109

(1) The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. For accounting purposes, shares repurchased under our stock repurchase programs are recorded based upon the settlement date of the applicable trade.

(2) Average price paid per share includes costs associated with the repurchases.

(3) On November 16, 2021, the Company announced that its Board of Directors approved a new stock repurchase program that authorizes the Company to repurchase up to $1.5 billion or up to 17 million common shares, whichever comes first, between January 2022 and the end of 2024.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months period ended September 30, 2023, no director or officer of the Company adopted or i i terminated / a “ i Rule 10b5-1 trading arrangement” or “ i non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS


Exhibit No.		Description

3.1		Autoliv’s Restated Certificate of Incorporation, as amended, incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 22, 2015).

3.2		Autoliv’s Third Restated By-Laws, incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-12933, filing date December 18, 2015).

4.1		Indenture, dated March 30, 2009, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 to Autoliv’s Registration Statement on Form 8-A (File No. 001-12933, filing date March 30, 2009).

4.2		Second Supplemental Indenture (including Form of Global Note), dated March 15, 2012, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-12933, filing date March 15, 2012).

4.3		Form of Note Purchase and Guaranty Agreement dated April 23, 2014, among Autoliv ASP, Inc., Autoliv, Inc. and the purchasers named therein, incorporated herein by reference to Exhibit 4.6 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 25, 2014).

4.4		Amendment and Waiver 2014 Note Purchase and Guaranty Agreement, dated May 24, 2018, among Autoliv, Inc., Autoliv ASP, Inc. and the noteholders named therein, incorporated herein by reference to Exhibit 4.4 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date July 27, 2018).

4.5		General Terms and Conditions for Swedish Depository Receipts in Autoliv, Inc. representing common shares in Autoliv, Inc., effective as of May 30, 2018, with Skandinaviska Enskilda Banken AB (publ) serving as a custodian, incorporated herein by reference to Exhibit 4.5 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date July 27, 2018).

4.6		Agency Agreement dated June 26, 2018 among Autoliv, Inc., Autoliv ASP, Inc. and HSBC Bank PLC, incorporated herein by reference to Exhibit 4.6 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date July 27, 2018).

4.7		Amended and Restated Agency Agreement, dated February 22, 2022, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.14 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 22, 2022).

4.8		Base Listing Particulars Agreement, dated February 17, 2023, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-12933, filing date March 16, 2023).

4.9		Amended and Restated Programme Agreement, dated February 17, 2023, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No. 001-12933, filing date March 16, 2023).

10.1+*		Amendment No. 1 to Employment Agreement, dated October 1, 2023, by and between Autoliv, Inc. and Colin Naughton.

31.1*		Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*		Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1*		Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		Inline XBRL Instance Document – The instance document does not appear in the Interactive Date File because its XBRL tags are embedded within the inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.


101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*		Cover Page Interactive Data File (embedded within the inline XBRL document).

* Filed herewith.

+ Management contract or compensatory plan.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 20, 2023

AUTOLIV, INC.

(Registrant)


By:		/s/ *Fredrik Westin*
		Fredrik Westin
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)


i Delaware		i 51-0378542
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

i Klarabergsviadukten 70, Section B7
i Box 70381,
i Stockholm, i Sweden		i SE-107 24
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
i Common Stock (par value $1.00 per share)	i ALV	i New York Stock Exchange


i Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	i ☐
Emerging growth company	i ☐

This ‘10-Q’ Filing	Date	Other Filings

	12/31/23
Filed on:	10/20/23	8-K
	10/19/23
	10/16/23
	10/5/23
For Period end:	9/30/23
	9/28/23
	9/22/23	4
	7/13/23	8-K
	6/30/23	10-Q
	3/31/23	10-Q
	3/9/23
	2/16/23	10-K, 8-K, ARS
	1/1/23
	12/31/22	10-K, ARS, SD
	9/30/22	10-Q
	6/30/22	10-Q
	3/31/22	10-Q
	12/31/21	10-K, SD
	11/16/21	8-K
		List all Filings

Autoliv Inc. – ‘10-Q’ for 9/30/23

On: Friday, 10/20/23, at 9:52am ET · For: 9/30/23 · Accession #: 950170-23-54255 · File #: 1-12933

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Autoliv Inc. – ‘10-Q’ for 9/30/23

On: Friday, 10/20/23, at 9:52am ET · For: 9/30/23 · Accession #: 950170-23-54255 · File #: 1-12933

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