Autoliv(ALV) - 2025 Q3 - Quarterly Report

FORM 10-Q Filing Information Registrant Information This section provides essential identification details for Autoliv, Inc.'s Form 10-Q filing for the quarter ended September 30, 2025 - Autoliv, Inc. is a Delaware corporation, with its common stock (par value $1.00 per share) traded on the New York Stock Exchange under the symbol ALV[2][3] - The registrant is a large accelerated filer and has filed all required reports and interactive data files during the preceding 12 months[3][4] Shares Outstanding as of October 13, 2025 | Class of Stock | Shares Outstanding | | :--------------- | :----------------- | | Common Stock | 75,965,348 | Forward-Looking Statements Nature and Risks of Forward-Looking Statements This section clarifies that the report contains forward-looking statements subject to risks and uncertainties, with no obligation to update - Forward-looking statements are based on current expectations, assumptions, and third-party data, but are subject to known and unknown risks and uncertainties[7] - Key risks include general economic conditions (e.g., inflation), changes in light vehicle production, global supply chain disruptions, geopolitical instability, increased competition, higher raw material costs, regulatory changes, currency fluctuations, product liability claims, and tax assessments[9] - The company claims safe harbor protection for forward-looking statements under the Private Securities Litigation Reform Act of 1995 and does not assume an obligation to update them, except as required by law[10] PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents Autoliv's unaudited condensed consolidated financial statements and related notes for the reporting periods Consolidated Statements of Income (unaudited) This section presents Autoliv's unaudited consolidated statements of income for the three and nine months ended September 30, 2025 and 2024 Consolidated Statements of Income (Unaudited) - Key Figures (Dollars in millions, except per share data) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $2,706 | $2,555 | $7,998 | $7,774 | | Gross profit | $522 | $459 | $1,502 | $1,377 | | Operating income | $267 | $226 | $769 | $626 | | Income before income taxes | $240 | $197 | $693 | $554 | | Net income | $175 | $139 | $510 | $404 | | Net earnings per share – basic | $2.29 | $1.75 | $6.61 | $4.99 | | Net earnings per share – diluted| $2.28 | $1.74 | $6.59 | $4.98 | | Cash dividend per share – paid | $0.85 | $0.68 | $2.25 | $2.04 | - Net sales increased by 5.9% for the three months ended September 30, 2025, and by 2.9% for the nine months ended September 30, 2025, compared to the prior year periods[15] - Diluted EPS increased by 31% to $2.28 for the three months ended September 30, 2025, and by 32% to $6.59 for the nine months ended September 30, 2025[15] Consolidated Statements of Comprehensive Income (unaudited) This section presents Autoliv's unaudited consolidated statements of comprehensive income for the three and nine months ended September 30, 2025 and 2024 Consolidated Statements of Comprehensive Income (Unaudited) - Key Figures (Dollars in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $175 | $139 | $510 | $404 | | Other comprehensive income (loss), net of tax | $3 | $35 | $129 | $(63) | | Comprehensive income attributable to controlling interest | $178 | $173 | $638 | $340 | - Comprehensive income attributable to controlling interest increased to $178 million for the three months ended September 30, 2025, from $173 million in the prior year, and significantly increased to $638 million for the nine months ended September 30, 2025, from $340 million in the prior year[21] - A cumulative translation gain of $11 million related to the sale of the Russian entity in Q1 2025 was recycled and reported as part of the net change of cumulative translation adjustment in the Comprehensive Income Statement[21] Condensed Consolidated Balance Sheets (unaudited) This section presents Autoliv's unaudited condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024 Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (Dollars in millions) | Metric | As of Sep 30, 2025 | As of Dec 31, 2024 | | :-------------------------------- | :----------------- | :----------------- | | Total current assets | $3,946 | $3,483 | | Total assets | $8,463 | $7,804 | | Total current liabilities | $4,141 | $3,633 | | Total non-current liabilities | $1,763 | $1,885 | | Total controlling interest's equity | $2,549 | $2,276 | | Total liabilities and equity | $8,463 | $7,804 | - Total assets increased to $8,463 million as of September 30, 2025, from $7,804 million at December 31, 2024[24] - Total controlling interest's equity increased to $2,549 million as of September 30, 2025, from $2,276 million at December 31, 2024[24] Consolidated Statements of Cash Flows (unaudited) This section presents Autoliv's unaudited consolidated statements of cash flows for the nine months ended September 30, 2025 and 2024 Consolidated Statements of Cash Flows (Unaudited) - Key Figures (Dollars in millions) | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $613 | $639 | | Net cash used in investing activities | $(313) | $(431) | | Net cash used in financing activities | $(316) | $(259) | | Decrease in cash and cash equivalents | $(105) | $(84) | | Cash and cash equivalents at end of period | $225 | $415 | - Net cash provided by operating activities decreased slightly to $613 million for the nine months ended September 30, 2025, from $639 million in the prior year[28] - Net cash used in investing activities improved to $(313) million for the nine months ended September 30, 2025, from $(431) million in the prior year, primarily due to lower capital expenditures[28] Consolidated Statements of Total Equity (unaudited) This section presents Autoliv's unaudited consolidated statements of total equity as of September 30, 2025 and December 31, 2024 Consolidated Statements of Total Equity (Unaudited) - Key Figures (Dollars in millions) | Metric | As of Sep 30, 2025 | As of Dec 31, 2024 | | :----------------------------------- | :----------------- | :----------------- | | Total controlling interest's equity | $2,549 | $2,276 | | Total equity | $2,559 | $2,285 | - Total controlling interest's equity increased by $273 million from December 31, 2024, to September 30, 2025, driven by net income and foreign currency translation adjustments, partly offset by share repurchases and cash dividends[29] - Accumulated other comprehensive loss improved from $(659) million at December 31, 2024, to $(530) million at September 30, 2025, mainly due to positive foreign currency translation adjustments[29] Notes to the Condensed Consolidated Financial Statements (unaudited) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining accounting policies and specific financial items Note 1. Basis of Presentation This note outlines the basis for preparing the interim unaudited condensed consolidated financial statements in accordance with U.S. GAAP - The interim unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, not including all footnotes required for complete annual statements[32] - Autoliv has one reportable segment, encompassing airbag, seatbelt products, and components[33] Note 2. New Accounting Standards This note details recently issued accounting pronouncements and their potential impact on the company's financial reporting - ASU 2023-09 (Income Taxes) will significantly increase income tax disclosures, effective for annual periods after December 15, 2024, and will be adopted prospectively[39] - ASU 2024-03 (Expense Disaggregation) requires additional disclosures for specific expense categories (inventory purchase, employee compensation, depreciation, intangible asset amortization), effective for annual periods after December 1, 2026[40] - ASU 2025-06 (Internal-Use Software) modernizes accounting for software costs, requiring capitalization when authorized, funded, and probable of completion, effective for annual periods after December 15, 2027[41] Note 3. Fair Value Measurements This note describes the company's use of derivative financial instruments and fair value measurements for financial assets and liabilities - The Company uses derivative financial instruments (foreign exchange swaps) to mitigate market risk from interest rates and foreign exchange rates, not for speculative purposes[43][48] - All derivatives are classified as Level 2 financial instruments, meaning their fair value is measured using directly or indirectly observable inputs other than quoted prices in active markets[45] Fair Value of Debt (Dollars in millions) | Debt Type | As of Sep 30, 2025 (Carrying Value) | As of Sep 30, 2025 (Fair Value) | As of Dec 31, 2024 (Carrying Value) | As of Dec 31, 2024 (Fair Value) | | :------------------------- | :---------------------------------- | :------------------------------ | :---------------------------------- | :------------------------------ | | Long-term debt | $1,374 | $1,403 | $1,522 | $1,537 | | Short-term debt | $654 | $658 | $387 | $389 | | Total Debt | $2,028 | $2,061 | $1,909 | $1,926 | Note 4. Income Taxes This note provides information on the company's effective tax rates and unrecognized tax benefits for the reporting periods - The effective tax rate for the three months ended September 30, 2025, was 26.9%, down from 29.6% in the prior year, with discrete tax items having a favorable impact of 1.3%[61] - For the nine months ended September 30, 2025, the effective tax rate was 26.4%, down from 27.0% in the prior year, with discrete tax items having a favorable impact of 1.8%[62] - As of September 30, 2025, total unrecognized tax benefits were $39 million, with $11 million classified as current and $27 million as non-current[66] Note 5. Inventories This note presents a breakdown of the company's inventories, net of valuation reserves, as of the reporting dates Inventories, Net of Reserve (Dollars in millions) | Inventory Component | As of Sep 30, 2025 | As of Dec 31, 2024 | | :---------------------- | :----------------- | :----------------- | | Raw materials | $481 | $418 | | Work in progress | $314 | $295 | | Finished products | $326 | $290 | | Inventories (Gross) | $1,122 | $1,003 | | Inventory valuation reserve | $(85) | $(82) | | Total inventories, net | $1,036 | $921 | - Total inventories, net, increased to $1,036 million as of September 30, 2025, from $921 million at December 31, 2024, primarily driven by increases in raw materials, work in progress, and finished products[67] Note 6. Restructuring This note details the company's restructuring reserves and related activities, primarily for cost reduction programs - As of September 30, 2025, the restructuring reserve balance was $101 million, mainly attributed to structural cost reduction programs initiated in Europe in 2023, expected to conclude in 2026[68] - No material restructuring initiatives were entered into during the three and nine months ended September 30, 2025[69] Employee-Related Restructuring Reserves (Dollars in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Reserve at beginning of period | $117 | $189 | $151 | $213 | | Provision - charge | $2 | $9 | $4 | $22 | | Cash payments | $(17) | $(19) | $(67) | $(49) | | Reserve at end of period | $101 | $187 | $101 | $187 | Note 7. Product-Related Liabilities This note outlines the company's reserves for product liability and warranty claims, including recall-related issues - The Company is exposed to product liability and warranty claims, maintaining reserves for product risks related to performance issues, including recalls and warranty issues[72] - As of September 30, 2025, the reserve for product-related liabilities was $85 million, mainly for recall-related issues, partly covered by $15 million in insurance receivables[74][75] Product-Related Liabilities (Dollars in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Reserve at beginning of period | $69 | $73 | $65 | $96 | | Net change in reserve | $25 | $6 | $40 | $(2) | | Cash payments | $(9) | $(3) | $(23) | $(17) | | Reserve at end of period | $85 | $77 | $85 | $77 | Note 8. Contingent Liabilities This note describes significant contingent liabilities, including ongoing civil litigation and product recall-related matters - The Company is involved in civil litigation in Germany, including a BMW complaint for €63 million plus interest related to anti-competitive behavior, with a potential loss range of €0 to €95 million[79] - Autoliv is a defendant in the ARC Airbag Inflators Products Liability Litigation, with NHTSA issuing an initial decision to recall approximately 52 million inflators; no accrual has been made, and no estimated range of potential loss can be determined[85][87] - Stellantis initiated a recall of approximately 250,000 vehicles for side curtain airbags, with Autoliv estimating a potential loss range of $0 to $385 million, expecting a substantial portion to be covered by insurance[88] - The Honda Buckle Recall, announced in March 2023, has an accrual exceeding insurance receivables by approximately $12 million as of September 30, 2025[89] Note 9. Earnings Per Share This note provides the calculation of basic and diluted earnings per share for the reporting periods Earnings Per Share (In millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to controlling interest | $175 | $138 | $509 | $403 | | Basic: Weighted average common stock | 76.4 | 79.2 | 77.0 | 80.7 | | Diluted weighted average common stock | 76.7 | 79.3 | 77.3 | 80.9 | | Net earnings per share - basic | $2.29 | $1.75 | $6.61 | $4.99 | | Net earnings per share - diluted | $2.28 | $1.74 | $6.59 | $4.98 | - Diluted EPS increased by 31% to $2.28 for the three months ended September 30, 2025, and by 32% to $6.59 for the nine months ended September 30, 2025, compared to the prior year periods[95] Note 10. Revenue Disaggregation This note disaggregates net sales by product category and geographic region for the reporting periods Net Sales by Products (Dollars in millions) | Product Category | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Airbags, Steering Wheels and Other | $1,830 | $1,736 | $5,395 | $5,264 | | Seatbelt Products and Other | $875 | $819 | $2,603 | $2,511 | | Total net sales | $2,706 | $2,555 | $7,998 | $7,774 | Net Sales by Region (Dollars in millions) | Region | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Americas | $897 | $851 | $2,639 | $2,637 | | Europe | $745 | $700 | $2,337 | $2,231 | | China | $526 | $495 | $1,450 | $1,423 | | Asia excl. China | $538 | $508 | $1,572 | $1,483 | | Total net sales | $2,706 | $2,555 | $7,998 | $7,774 | - Airbags, Steering Wheels and Other products generated $1,830 million in net sales for the three months ended September 30, 2025, and $5,395 million for the nine months, showing consistent growth[97] Note 11. Segment Information This note confirms Autoliv operates as a single reportable segment and provides related financial information - Autoliv operates as a single operating and reportable segment, encompassing airbag, steering wheel, and seatbelt products and components[98] Significant Segment Expenses (Dollars in millions) | Expense Category | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of sales | $(2,184) | $(2,095) | $(6,496) | $(6,398) | | Research, development and engineering expenses, net | $(117) | $(96) | $(319) | $(325) | Segment Assets and Expenditures for Long-Lived Assets (Dollars in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Expenditures for long-lived assets | $(106) | $(146) | $(323) | $(440) | | Total assets | $8,463 | $8,306 | $8,463 | $8,306 | Note 12. Subsequent Events This note reports on any significant events occurring after the balance sheet date but before the financial statements were issued - There were no reportable events subsequent to September 30, 2025[104] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's analysis of Autoliv's financial condition and results of operations, highlighting key performance drivers and market factors Executive Overview This section provides a high-level summary of Autoliv's financial performance and strategic initiatives for the reporting period - Autoliv achieved a record-breaking third quarter for sales, operating income, and EPS, driven by better-than-expected sales in Americas and Europe, successful cost reductions, and tariff compensation[113] - The company is investing in China with a second R&D Center, a strategic agreement with CATARC to advance safety standards, and a planned joint venture with HSAE for advanced safety electronics[114] Financial Highlights (Three Months Ended September 30, 2025) | Metric | Value | Change YoY | | :-------------------------- | :---------- | :--------- | | Net sales | $2,706 million | 5.9% | | Organic sales growth | 3.9% | - | | Operating margin | 9.9% | +1.0 pp | | Adjusted operating margin | 10.0% | +0.7 pp | | Diluted EPS | $2.28 | 31% | | Adjusted diluted EPS | $2.32 | 26% | Business and Market Condition Update This section provides an update on global light vehicle production, cost pressures, and tariff recovery efforts - Global Light Vehicle Production (LVP) increased by 4.6% year-over-year in Q3 2025, with call-off volatility improving slightly but remaining higher than pre-pandemic levels[120] - Cost pressure from labor and other items negatively impacted profitability in Q3, but most inflationary costs were offset by price increases and customer compensations[121] - Autoliv recovered approximately 75% of tariff costs in Q3 2025, with an ambition to pass on most remaining costs; the unrecovered tariff impact on operating income was around $5 million negative in the quarter[122] Results of Operations This section analyzes the company's financial performance, including sales, gross profit, and operating income, for the reporting periods Overview (Key Ratios) This section provides a summary of key financial ratios for the three months ended or as of September 30 Key Ratios (Three Months Ended or As of September 30) | Metric | 2025 | 2024 | | :-------------------------------------- | :-------- | :-------- | | Receivables outstanding relative to sales, % | 21.8% | 21.5% | | Inventory outstanding relative to sales, % | 9.6% | 9.8% | | Payables outstanding relative to sales, % | 17.5% | 18.4% | | Gross margin, % | 19.3% | 18.0% | | Operating margin, % | 9.9% | 8.9% | | Capital employed | $4,331 | $4,085 |\ | Net debt | $1,772 | $1,787 |\ | Return on total equity, % | 27.9% | 24.1% |\ | Return on capital employed, % | 25.1% | 22.9% |\ | Headcount at period-end | 65,200 | 67,200 | - Gross margin improved by 1.3 percentage points to 19.3% and operating margin improved by 1.0 percentage point to 9.9% for the three months ended September 30, 2025[127] - Return on capital employed (ROCE) increased to 25.1% and Return on total equity (ROE) increased to 27.9% for the three months ended September 30, 2025[127] Three Months Ended September 30, 2025 vs. 2024 This section compares Autoliv's financial performance for the three months ended September 30, 2025, against the prior year Consolidated Sales Development (Three Months Ended September 30) | Category | 2025 Sales ($M) | 2024 Sales ($M) | Reported Change (%) | Currency Effects (%) | Organic Growth (%) | | :-------------------------------- | :-------------- | :-------------- | :------------------ | :------------------- | :----------------- | | Airbags, Steering Wheels and Other | $1,830 | $1,736 | 5.4% | 1.8% | 3.6% | | Seatbelt products and Other | $875 | $819 | 6.9% | 2.4% | 4.5% | | Total | $2,706 | $2,555 | 5.9% | 2.0% | 3.9% | Sales by Region (Three Months Ended September 30) | Region | 2025 Sales ($M) | 2024 Sales ($M) | Reported Change (%) | Currency Effects (%) | Organic Growth (%) | | :--------------- | :-------------- | :-------------- | :------------------ | :------------------- | :----------------- | | Americas | $897 | $851 | 5.3% | 0.6% | 4.7% | | Europe | $745 | $700 | 6.4% | 6.3% | 0.1% | | China | $526 | $495 | 6.3% | 0.1% | 6.2% | | Asia excl. China | $538 | $508 | 5.8% | 0.3% | 5.5% | | Total | $2,706 | $2,555 | 5.9% | 2.0% | 3.9% | - Global organic sales grew by 3.9%, underperforming global LVP growth of 4.6% due to negative regional and model LVP mix, particularly in China, where sales to domestic OEMs grew by 23% while sales to global OEMs decreased by 5%[135][136] Earnings Performance (Three Months Ended September 30) | Metric | 2025 ($M) | 2024 ($M) | Change (%) | | :-------------------------- | :-------- | :-------- | :--------- | | Net Sales | $2,706 | $2,555 | 5.9% | | Gross profit | $522 | $459 | 13.7% | | Operating income | $267 | $226 | 18.1% | | Adjusted operating income | $271 | $237 | 14.2% | | Net income | $175 | $139 | 26.4% | | Earnings per share, diluted | $2.28 | $1.74 | 31% | - Gross profit increased by $63 million, and gross margin improved by 1.3 percentage points, driven by higher sales, improved operational efficiency, and supplier compensation[143] - Operating income increased by $41 million (18.1%) and adjusted operating income increased by $34 million (14.2%) compared to the prior year[145][146] Nine Months Ended September 30, 2025 vs. 2024 This section compares Autoliv's financial performance for the nine months ended September 30, 2025, against the prior year Consolidated Sales Development (Nine Months Ended September 30) | Category | 2025 Sales ($M) | 2024 Sales ($M) | Reported Change (%) | Currency Effects (%) | Organic Growth (%) | | :-------------------------------- | :-------------- | :-------------- | :------------------ | :------------------- | :----------------- | | Airbags, Steering Wheels and Other | $5,395 | $5,264 | 2.5% | (0.3)% | 2.8% | | Seatbelt products and Other | $2,603 | $2,511 | 3.7% | (0.2)% | 3.9% | | Total | $7,998 | $7,774 | 2.9% | (0.3)% | 3.1% | Sales by Region (Nine Months Ended September 30) | Region | 2025 Sales ($M) | 2024 Sales ($M) | Reported Change (%) | Currency Effects (%) | Organic Growth (%) | | :--------------- | :-------------- | :-------------- | :------------------ | :------------------- | :----------------- | | Americas | $2,639 | $2,637 | 0.1% | (3.3)% | 3.4% | | Europe | $2,337 | $2,231 | 4.7% | 2.9% | 1.8% | | China | $1,450 | $1,423 | 1.9% | (0.3)% | 2.2% | | Asia excl. China | $1,572 | $1,483 | 6.0% | 0.3% | 5.7% | | Total | $7,998 | $7,774 | 2.9% | (0.3)% | 3.1% | - Global organic sales increased by 3.1%, underperforming global LVP growth of 3.9%, primarily due to a negative regional and model LVP mix, especially in China where sales to domestic OEMs increased by 16% but to global OEMs decreased by 5.7%[153][154] Earnings Performance (Nine Months Ended September 30) | Metric | 2025 ($M) | 2024 ($M) | Change (%) | | :-------------------------- | :-------- | :-------- | :--------- | | Net Sales | $7,998 | $7,774 | 2.9% | | Gross profit | $1,502 | $1,377 | 9.1% | | Operating income | $769 | $626 | 23% | | Adjusted operating income | $777 | $657 | 18% | | Net income | $510 | $404 | 26% | | Earnings per share, diluted | $6.59 | $4.98 | 32% | - Gross profit increased by $125 million (9.1%), and gross margin improved by 1.1 percentage points, driven by improved operational efficiency and organic sales growth[160] - Operating income increased by $143 million (23%) and adjusted operating income increased by $120 million (18%) compared to the prior year[164][165] Liquidity and Capital Resources This section discusses Autoliv's cash flow, capital expenditures, and debt position, highlighting its financial flexibility - Operating cash flow increased by $81 million to $258 million in Q3 2025, driven by higher net income and more positive non-cash items[170] - Capital expenditure, net, decreased by $40 million in Q3 2025, leading to a substantial increase in free operating cash flow to $153 million from $32 million in the prior year[171][172] - Net debt was $1,772 million as of September 30, 2025, a $15 million decrease from a year earlier, and the leverage ratio was 1.3x, below the target limit of 1.5x[174][176] Commitments This section outlines the company's significant contractual obligations, including future software subscription payments - The Company has a 5-year Enterprise Subscription Agreement (EAS) for software licenses, with future undiscounted payments totaling approximately $50 million[181] Future Software Subscription Payments (Undiscounted) | Period | Amount (Millions) | | :---------- | :---------------- | | Less than 1 year | $12 | | 1-3 years | $25 | | 3-5 years | $13 | Non-U.S. GAAP Measures This section defines and reconciles non-U.S. GAAP financial measures used by management to assess business performance - Management uses non-U.S. GAAP measures like 'Organic sales,' 'Free operating cash flow,' 'Cash conversion,' 'Net debt,' 'Leverage ratio,' 'Adjusted net income,' 'Adjusted operating income,' 'Adjusted operating margin,' 'Adjusted earnings per share, diluted,' 'Adjusted return on capital employed,' and 'Adjusted return on total equity' to provide supplemental information and analyze business trends[111] Adjusted Operating Income and Margin (Dollars in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating income (GAAP) | $267 | $226 | $769 | $626 | | Adjusted Operating income (Non-GAAP) | $271 | $237 | $777 | $657 | | Operating margin (GAAP) | 9.9% | 8.9% | 9.6% | 8.1% | | Adjusted Operating margin (Non-GAAP) | 10.0% | 9.3% | 9.7% | 8.5% | Net Debt and Leverage Ratio (Dollars in millions) | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :-------------------------------------- | :----------- | :----------- | :----------- | | Net debt | $1,772 | $1,752 | $1,787 | | Pension liabilities | $167 | $167 | $147 | | Net debt per the Policy | $1,939 | $1,919 | $1,934 | | EBITDA per the Policy (Adjusted EBITDA) | $1,524 | $1,483 | $1,376 | | Leverage ratio | 1.3 | 1.3 | 1.4 | Free Operating Cash Flow and Cash Conversion (Dollars in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating cash flow | $258 | $177 | $613 | $639 | | Capital expenditure, net | $(106) | $(145) | $(313) | $(431) | | Free operating cash flow | $153 | $32 | $300 | $208 | | Cash conversion | 87% | 23% | 59% | 52% | Headcount This section provides a breakdown of the company's total headcount, including direct and indirect personnel Total Headcount (FTE) | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :----------------------------------- | :----------- | :----------- | :----------- | | Total headcount | 65,200 | 65,100 | 67,200 | | Direct personnel in manufacturing | 47,900 | 48,000 | 49,800 | | Indirect personnel | 17,300 | 17,100 | 17,400 | | Temporary personnel (% of total) | 9% | 9% | 9% | - Total headcount decreased by approximately 2,000 (3.0%) year-over-year despite organic sales growth, supported by improved customer call-off accuracy and operational efficiency[199] Full Year 2025 Guidance This section provides Autoliv's financial guidance and underlying assumptions for the full year 2025 Full Year 2025 Guidance and Assumptions | Metric | Guidance | | :----------------------------------- | :-------------- | | Organic sales growth | Around 3% | | Adjusted operating margin | Around 10-10.5% |\ | Operating cash flow | Around $1.2 billion |\ | Capital expenditures, net % of sales | Around 4.5% |\ | LVP growth | Around 1.5% |\ | Foreign currency impact on net sales | Around 1% |\ | Tax rate | Around 28% | - The guidance assumes no further material changes to tariffs or trade restrictions, no significant changes in the macro-economic environment, customer call-off volatility, or supply chain disruptions[201] Other Recent Events This section highlights significant corporate developments and strategic initiatives that occurred recently - Autoliv announced a strategic agreement with CATARC (China Automotive Technology and Research Center Co) to jointly advance automotive safety standards and innovation in China and globally[114][207] - The company intends to form a new joint venture with Hangsheng Electric Co., Ltd. (HSAE) to develop and manufacture advanced safety electronics for the Chinese automotive market, focusing on features like Hands-On Detection and Pre-Pretensioner Mechatronic Integration[114][207] - Autoliv China broke ground on a new R&D center in Wuhan, China, scheduled to begin operations in Q3 2026, to support the global growth of Chinese OEMs and advance safety technologies[114][207] - In Q3 2025, Autoliv repurchased and retired 0.84 million shares of common stock for $100 million under its $2.5 billion stock repurchase program[116][207] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that there have been no material changes to the quantitative and qualitative disclosures about market risk since the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to market risk disclosures have occurred as of September 30, 2025, compared to the previous Annual Report on Form 10-K[208] ITEM 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of Autoliv's disclosure controls and procedures as of September 30, 2025, and reports no material changes in internal control over financial reporting during the fiscal quarter - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of September 30, 2025[209] - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter[209] PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section refers to Note 8, 'Contingent Liabilities,' in Part I, Item 1 for a summary of ongoing legal proceedings, indicating that the Company is subject to various claims and lawsuits in the ordinary course of business - The Company is subject to legal proceedings in the ordinary course of business, with details summarized in Note 8, 'Contingent Liabilities,' of the financial statements[210] ITEM 1A. RISK FACTORS This section highlights risks related to international operations, including exposure to local economic conditions, changes in laws, trade policies, tariffs, and geopolitical uncertainties - The Company's international operations expose it to risks such as local economic conditions, unexpected changes in laws, regulations, trade, monetary or fiscal policy, foreign tax consequences, and geopolitical instability[212] - Changes in trade policies, tariffs (e.g., U.S. tariffs on imports from China), and related retaliatory measures could depress economic activity, restrict access to suppliers or customers, and materially affect cash flows, operating results, and financial condition[214][215][216] - Increasing manufacturing footprint and business relationships in growth markets amplify exposure to risks like political upheaval and reliability of local infrastructure[215][216] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details the Company's stock repurchase activities during the three months ended September 30, 2025, under its publicly announced stock repurchase program Common Stock Repurchases (Three Months Ended September 30, 2025) | Period | Total Shares Purchased | Average Price Paid per Share (USD) | Approximate Dollar Value Remaining Under Program (USD) | | :----------------- | :--------------------- | :--------------------------------- | :----------------------------------------------------- | | July 1-31, 2025 | 160,980 | $115.16 | $2,481,461,150 | | August 1-31, 2025 | 474,018 | $117.20 | $2,425,906,610 | | September 1-30, 2025 | 207,131 | $125.07 | $2,400,000,029 | | Total Q3 2025 | 842,129 | $118.75 (approx) | $2,400,000,029 | - On June 4, 2025, the Board approved a new stock repurchase program authorizing up to $2.5 billion in common share repurchases from July 1, 2025, through December 31, 2029[219] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item is marked as 'Not applicable,' indicating no defaults upon senior securities during the reporting period - This item is not applicable for the reporting period, indicating no defaults upon senior securities[220] ITEM 4. MINE SAFETY DISCLOSURES This item is marked as 'Not applicable,' indicating no mine safety disclosures are required for the reporting period - This item is not applicable for the reporting period, indicating no mine safety disclosures are required[221] ITEM 5. OTHER INFORMATION This item is marked as 'Not applicable,' indicating no other information requiring disclosure under this section for the reporting period - This item is not applicable for the reporting period, indicating no other information requiring disclosure[222] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including organizational documents, indentures, agreements, and certifications, providing references to previous filings where applicable - The exhibits include Autoliv's Restated Certificate of Incorporation, Third Restated By-Laws, various Indentures and Agreements related to debt, and certifications from the CEO and CFO[223] Signature Filing Signature This section formally concludes the Form 10-Q filing, with the signature of Autoliv, Inc.'s Chief Financial Officer, Fredrik Westin, on October 17, 2025 - The report was signed by Fredrik Westin, Chief Financial Officer of Autoliv, Inc., on October 17, 2025[226][227]