Autoliv(ALV) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents Autoliv's unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022, including key financial statements and detailed accounting notes Consolidated Financial Statements This section provides the unaudited consolidated statements of income, balance sheets, and cash flows, highlighting key financial performance metrics for the periods presented Consolidated Statements of Income (Unaudited) | (Dollars in millions, except per share data) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,302 | $1,847 | $6,507 | $6,111 | | Gross profit | $383 | $301 | $998 | $1,143 | | Operating income | $171 | $99 | $429 | $500 | | Net income attributable to controlling interest | $105 | $60 | $267 | $320 | | Net earnings per share – diluted | $1.21 | $0.68 | $3.06 | $3.65 | Condensed Consolidated Balance Sheets (Unaudited) | (Dollars in millions) | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Total current assets | $3,587 | $3,675 | | Total assets | $7,334 | $7,537 | | Total current liabilities | $3,458 | $2,821 | | Total liabilities | $4,843 | $4,888 | | Total equity | $2,491 | $2,648 | Condensed Consolidated Statements of Cash Flows (Unaudited) | (Dollars in millions) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $251 | $437 | | Net cash used in investing activities | ($319) | ($301) | | Net cash used in financing activities | ($389) | ($386) | | Decrease in cash and cash equivalents | ($486) | ($275) | Notes to the Financial Statements This section provides detailed notes on the basis of financial statement preparation, significant accounting policies, fair value measurements, tax provisions, and contingent liabilities - The company's derivative financial instruments, primarily foreign exchange swaps, are classified as Level 2 in the fair value hierarchy. The fair value of long-term debt was $1,011 million, slightly below its carrying value of $1,037 million as of September 30, 2022[28][34][35] - The effective tax rate for Q3 2022 was 30.8%, nearly unchanged from 30.9% in Q3 2021, with the Inflation Reduction Act of 2022 not expected to materially affect results[37] - The company is appealing a product liability judgment including $100 million in punitive damages, having accrued $19 million for compensatory damages and pre-judgment interest, with a probable loss and recognized insurance receivables[57][58][59] Revenue Disaggregation by Product and Region (Q3 2022) | (Dollars in millions) | Q3 2022 Net Sales | | :--- | :--- | | By Product | | | Airbag Products and Other | $1,510 | | Seatbelt Products | $792 | | By Region | | | Americas | $794 | | China | $537 | | Europe | $552 | | Japan | $175 | | Rest of Asia | $243 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses the company's financial condition and results of operations, highlighting strong Q3 2022 recovery driven by record sales, improved margins, and organic growth despite ongoing macroeconomic challenges Financial Highlights Q3 2022 (YoY Change) | Metric | Value | YoY Change | | :--- | :--- | :--- | | Net Sales | $2,302M | +25% | | Organic Sales (Non-U.S. GAAP) | - | +32% | | Operating Margin | 7.4% | +2.0 pp | | Adjusted Operating Margin (Non-U.S. GAAP) | 7.5% | +1.9 pp | | EPS | $1.21 | +78% | - The company's organic sales growth of 32.5% in Q3 2022 outperformed global Light Vehicle Production (LVP) growth of 28.8% by 3.7 percentage points, driven by price increases and new product launches[83][98] - The company is updating its full-year 2022 adjusted operating margin indication towards the upper end of the 6.0-7.0% range, reflecting successful price adjustments and cost control measures[82] Full Year 2022 Indications | Financial Measure | Full Year Indication | | :--- | :--- | | Organic sales growth | Around 15% | | Adjusted operating margin | Upper end of around 6%-7% | | Operating cash flow | Around $700-750 million | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company confirms that there have been no material changes to the quantitative and qualitative disclosures about market risk since its Annual Report on Form 10-K for the year ended December 31, 2021 - As of September 30, 2022, there were no material changes to the market risk information previously disclosed in the company's 2021 Form 10-K[144] ITEM 4. CONTROLS AND PROCEDURES Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were concluded to be effective as of September 30, 2022 - The CEO and CFO have concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[145] - There were no changes in the company's internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[145] PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section cross-references Note 9 of the financial statements for a summary of ongoing legal proceedings - For a summary of certain ongoing legal proceedings, the report refers to Part I, Item 1, "Financial Statements, Note 9 Contingent Liabilities"[147] ITEM 1A. RISK FACTORS The company highlights that while risk factors are materially unchanged from its 2021 Form 10-K, significant macroeconomic uncertainty, including supply chain disruptions and inflationary pressures, poses heightened risks - The company is currently operating in a period of significant macroeconomic uncertainty, with risks including supply-chain disruptions, COVID-related lockdowns, inflationary pressures, and the war in Ukraine[148] - The company has experienced exacerbated increases in costs for raw materials, transportation, energy, and commodities, and unsuccessful commercial negotiations to offset these could materially impact business and results of operations[148] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details the company's stock repurchase activities for the third quarter of 2022 Stock Repurchases in Q3 2022 | Period | Total Number of Shares Purchased | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | July 1-31, 2022 | 23,895 | $83.71 | | August 1-31, 2022 | 96,980 | $82.50 | | September 1-30, 2022 | 135,463 | $73.85 | - The Board of Directors approved a new stock repurchase program on November 16, 2021, authorizing the company to repurchase up to $1.5 billion or 17 million common shares between January 2022 and the end of 2024[152] Other Items (Items 3, 4, 5, 6) This section confirms that there were no defaults on senior securities, no mine safety disclosures, and no other material information to report under Item 5, concluding with a list of exhibits filed with the Form 10-Q - Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information) are noted as not applicable for this reporting period[152] - Item 6 lists the exhibits filed with the report, including corporate governance documents, debt agreements, and required officer certifications[154][155]