Autoliv(ALV) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section details the company's unaudited financial statements, management's analysis, market risk, and internal controls Financial Statements This section presents Autoliv's unaudited condensed consolidated financial statements, including income, balance sheets, cash flows, and detailed notes Consolidated Statements of Income This section provides the unaudited consolidated statements of income for the three months ended March 31, 2023 and 2022 Consolidated Statements of Income (Unaudited) | (Dollars in millions, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net sales | $2,493 | $2,124 | | Gross profit | $379 | $288 | | Operating income | $127 | $134 | | Income before income taxes | $109 | $119 | | Net income attributable to controlling interest | $74 | $83 | | Net earnings per share – diluted | $0.86 | $0.94 | | Cash dividend per share – declared | $0.66 | $0.64 | Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (Unaudited) | (Dollars in millions) | As of March 31, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $4,061 | $3,714 | | Total assets | $8,185 | $7,717 | | Total current liabilities | $3,529 | $3,642 | | Long-term debt | $1,601 | $1,054 | | Total liabilities | $5,544 | $5,092 | | Total equity | $2,641 | $2,626 | | Total liabilities and equity | $8,185 | $7,717 | Condensed Consolidated Statements of Cash Flows This section provides the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Unaudited) | (Dollars in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($46) | $70 | | Net cash used in investing activities | ($143) | ($17) | | Net cash provided by (used in) financing activities | $300 | ($74) | | Net increase (decrease) in cash and cash equivalents | $119 | ($31) | | Cash and cash equivalents at end of period | $713 | $938 | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed notes explaining the basis of presentation, accounting policies, and specifics on various financial items - The Company adopted ASU 2022-04 regarding supplier finance programs as of January 1, 2023. Obligations under this program are recorded in Accounts Payable. As of March 31, 2023, confirmed obligations outstanding were $287 million[25][26] - The effective tax rate for Q1 2023 was 31.6%, compared to 30.3% for Q1 2022. Total unrecognized tax benefits as of March 31, 2023, were $48 million[38] - The Company is involved in a product liability lawsuit (Andrews case) and has accrued $14 million for the probable loss in Q4 2021 and an additional $5 million for pre-judgment interest in Q3 2022. The total potential loss ranges from $18 million to $118 million, excluding punitive damages[58][60] - A recall by American Honda Motor Co. was announced on March 9, 2023, for approximately 449,000 vehicles related to front seat belt buckles. The Company's product liability accrual for this recall, net of insurance, is $27 million[62] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2023 financial results, highlighting strong organic sales growth, margin impacts, negative operating cash flow, and a confident full-year outlook Executive Overview This section provides an executive summary of the company's financial performance and key highlights for the first quarter of 2023 Q1 2023 Financial Highlights | Metric | Q1 2023 | Change vs. Q1 2022 | | :--- | :--- | :--- | | Net Sales ($M) | $2,493 | +17% | | Organic Sales (Non-GAAP) | N/A | +21% | | Operating Margin | 5.1% | -1.2pp | | Adjusted Operating Margin (Non-GAAP) | 5.3% | +2.1pp | | EPS (Diluted) | $0.86 | -9% | | Adjusted EPS (Non-GAAP) | $0.90 | +99% | - Sales increased organically by 21%, outperforming global Light Vehicle Production (LVP) growth of 6.1% by 15 percentage points, driven by new product launches and higher prices[79] - Operating cash flow decreased to negative $46 million from $70 million in the prior year, mainly due to negative working capital effects from high sales growth[81] Results of Operations This section details the company's operational performance, including sales development by product and region, gross profit, and operating income Sales Development by Product & Region (Q1 2023 vs Q1 2022) | Category | Q1 2023 Sales ($M) | Reported Change | Organic Change (Non-GAAP) | | :--- | :--- | :--- | :--- | | By Product | | | | | Airbags, Steering Wheels, etc. | $1,673 | +21% | +25% | | Seatbelt products | $820 | +10% | +14% | | By Region | | | | | Asia | $936 | +9.2% | +17% | | Americas | $831 | +20% | +18% | | Europe | $725 | +26% | +31% | | Total | $2,493 | +17% | +21% | - Gross profit increased by $91 million to $379 million, and gross margin improved by 1.6 percentage points to 15.2%, driven by price increases and volume growth[99] - Operating income decreased by $7 million to $127 million, mainly because a prior-year gain of $80 million from a property sale in Japan was not repeated. Adjusted operating income (Non-GAAP) increased by $63 million to $131 million[99] Liquidity and Capital Resources This section analyzes the company's liquidity position, cash flow generation, and capital structure, including debt and leverage - Operating cash flow decreased by $116 million to negative $46 million compared to Q1 2022, primarily due to negative working capital effects[101] - Free cash flow (Non-GAAP) was negative $189 million, a significant decline from positive $53 million in the prior-year period, driven by lower operating cash flow and higher capital expenditures[101] - Net debt (Non-GAAP) increased to $1,477 million as of March 31, 2023, up $420 million from a year earlier. The leverage ratio (Non-GAAP) was 1.6x[101] Full Year 2023 Indications This section provides the company's financial outlook and key indications for the full year 2023, including sales growth and margins Full Year 2023 Outlook | Financial Measure | Full Year Indication | | :--- | :--- | | Organic sales growth | Around 15% | | Foreign currency impact on net sales | Around 1% negative | | Adjusted operating margin | Around 8.5%-9% | | Tax rate | Around 32% | | Operating cash flow ($ million) | Around $900 | | Capital expenditures, net (% of sales) | Around 6% | - The outlook is based on customer call-offs, an assumed global LVP growth of around 3%, and achieving targeted cost compensation effects[115] Quantitative and Qualitative Disclosures about Market Risk The company states that as of March 31, 2023, there have been no material changes to the information regarding quantitative and qualitative disclosures about market risk since its Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to market risk disclosures were reported for the quarter ended March 31, 2023, compared to the 2022 year-end report[122] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2023. Additionally, no changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the period[123] - There were no changes in internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal controls[123] PART II - OTHER INFORMATION This section covers other essential information, including legal proceedings, risk factors, equity sales, and exhibits filed with the report Legal Proceedings This section refers to the detailed disclosure on contingent liabilities and legal proceedings found in Note 9 of the financial statements. It confirms that the company is subject to various legal proceedings in the ordinary course of business - Information regarding ongoing legal proceedings is incorporated by reference from Part I, Item 1, Note 9 'Contingent Liabilities'[125] Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - As of March 31, 2023, there have been no material changes to the risk factors disclosed in the Company's 2022 Form 10-K[126] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity during the first quarter of 2023, including the number of shares repurchased and the average price paid Common Stock Repurchases (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | January 1-31, 2023 | — | — | | February 1-28, 2023 | 219,866 | $90.98 | | March 1-31, 2023 | 230,293 | $93.38 | - The repurchases are part of a program approved on November 16, 2021, authorizing up to $1.5 billion or 17 million common shares to be repurchased between January 2022 and the end of 2024[128] Exhibits This section lists the exhibits filed with the Form 10-Q, including various agreements, certifications, and Interactive Data Files (XBRL) - The filing includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[131] - Interactive Data Files (Inline XBRL) are included as part of the submission[133]