Q3 Report—2019

Financial highlights Q3 2019

Full Year 2019 indications

$2,028m net sales

Around (2)% net sales growth

1.2% organic sales growth*

Around 1% organic sales growth

7.6% operating margin

Around 9% adj. operating margin

9.0% adj. operating margin*

$0.98 EPS - a decline of 27%

$1.30 adj. EPS* - a decline of 4%

•

Organic growth outperformed global light vehicle production by 4.6pp mainly due to China and Americas.

•

Profitability still impacted by global LVP decline and high raw material costs, although less than previous quarter, partly offset by total workforce decline of 800 vs. a quarter ago, or of 1,600 vs. a year ago.

•

Established new customer collaborations; a North American road safety center with Great Wall Motor and presented next generation passenger airbag in cooperation with Honda.

(Dollars in millions, except per share data)

Q3 2019

Q3 2018

Change

9M 2019

9M 2018

Change

Net sales

$2,028

$2,033

(0.3)%

$6,356

$6,485

(2.0)%

Operating income

$154

$193

(20)%

$497

$665

(25)%

Adjusted operating income¹⁾

$183

$194

(5.7)%

$532

$668

(20)%

Adjusted operating margin¹⁾

9.0%

9.5%

(0.5)pp

8.4%

10.3%

(1.9)pp

Earnings per share, diluted^{2, 3)}

$0.98

$1.34

(27)%

$3.50

$5.37

(35)%

Adjusted earnings per share, diluted^{1, 2, 3)}

$1.30

$1.35

(3.7)%

$3.87

$5.40

(28)%

Operating cash flow⁴⁾

$195

$238

(18)%

$328

$520

(37)%

Return on capital employed⁵⁾

16.2%

20.4%

(4.2)pp

18.0%

20.9%

(2.9)pp

1) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. 2) Assuming dilution and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 4) For first 9 months 2018 management estimate for Continuing Operations derived from cash flow including Discontinued Operations. 5) Operating income and income from equity method investments, relative to average capital employed.

Comments from Mikael Bratt,

President & CEO

We experienced continued challenging market conditions in the quarter. Although the rate of decline in light vehicle production slowed down slightly, uncertainty remains high, market outlook by IHS continues to be

The cost improvement actions which enabled this performance will continue relentlessly.

We reduced our workforce by an additional 800 in the quarter, or by 1,600 compared to a year ago, despite growing our sales organically* by 1.2%. Our program to reduce indirect labor costs by 5% is developing as planned and we expect it to impact our costs meaningfully as of the fourth quarter 2019.

In addition to LVP and raw material headwinds, the strike at General Motors in North America is also affecting our sales.

Being close to our customers supports our short- and long-term business opportunities and this quarter we announced two new customer collaborations - the North American road safety research lab together with Great Wall Motor and the next generation passenger airbag in cooperation with Honda. Our order intake share remained on a good level in the quarter, supporting a prolonged sales growth outperformance.

As always, it is of utmost importance to focus on quality and execution to secure a strong long-term performance for our company.

revised down and we do not see a turnaround in LVP in the near term.

We continued to outperform light vehicle production, growing organically* about 4.6pp more than LVP in the third quarter, driven mainly by strong development in China and Americas.

Our business cycle management actions are taking effect and the adjusted operating margin* decline year over year was substantially less than in recent quarters, and it improved sequentially. LVP has continued to slide however, and we now assume 6-7% global LVP decline for 2019, which moderates our outlook to around 1% for organic sales growth and to around 9% for adjusted operating margin.

Although I am not pleased with this profit level, we achieved it in the context of LVP expectations declining by 7-8pp in just 9 months.

Q3 Report—2019

Full Year Indication

Full Year Indication

Net sales growth

Around (2)%

Tax rate²⁾

Around 28%

Organic sales growth

Around 1%

Operating cash flow excl. EC antitrust payment²⁾

$700-800 million

Adjusted operating margin¹⁾

Around 9%

Capital expenditure, net % of sales

Around 2018 level

R,D&E, net % of sales

Around 2018 level

Leverage ratio at year end

Around 1.7x

Q3 Report—2019

Sales Development by region

Capex and D&A

Adj. operating income and margin*

Operating Cash Flow*

Return on Capital Employed

Cash Conversion*

Q3 Report—2019

Consolidated sales

Third quarter

Reported
(U.S. GAAP)

Currency
effects¹⁾

Organic
change*

(Dollars in millions)

2019

2018

Airbag Products and Other²⁾

$1,349.3

$1,357.4

(0.6)%

(1.2)%

0.6%

Seatbelt Products²⁾

$678.4

$675.6

0.4%

(1.9)%

2.3%

Total

$2,027.7

$2,033.0

(0.3)%

(1.5)%

1.2%

Asia

$777.7

$749.1

3.8%

(0.4)%

4.2%

Whereof:

China

$381.7

$351.9

8.5%

(2.7)%

11.2%

Japan

$202.4

$196.3

3.1%

4.2%

(1.1)%

RoA

$193.6

$200.9

(3.6)%

(0.7)%

(2.9)%

Americas

$713.1

$684.8

4.1%

(0.7)%

4.8%

Europe

$536.9

$599.1

(10.4)%

(3.7)%

(6.7)%

Total

$2,027.7

$2,033.0

(0.3)%

(1.5)%

1.2%

1) Effects from currency translations. 2) Including Corporate and other sales.

Consolidated sales

First 9 months

Reported
(U.S. GAAP)

Currency
effects¹⁾

Organic
change*

(Dollars in millions)

2019

2018

Airbag Products and Other²⁾

$4,232.7

$4,234.9

(0.1)%

(3.2)%

3.1%

Seatbelt Products²⁾

$2,123.7

$2,250.5

(5.6)%

(4.2)%

(1.4)%

Total

$6,356.4

$6,485.4

(2.0)%

(3.5)%

1.5%

Asia

$2,286.1

$2,333.5

(2.0)%

(3.2)%

1.2%

Whereof:

China

$1,061.7

$1,103.5

(3.8)%

(5.1)%

1.3%

Japan

$601.6

$606.4

(0.8)%

0.4%

(1.2)%

RoA

$622.8

$623.6

(0.1)%

(3.3)%

3.2%

Americas

$2,214.2

$2,034.3

8.8%

(0.8)%

9.6%

Europe

$1,856.1

$2,117.6

(12.4)%

(6.4)%

(6.0)%

Total

$6,356.4

$6,485.4

(2.0)%

(3.5)%

1.5%

1) Effects from currency translations. 2) Including Corporate and other sales.

Q3 Report—2019

Q3 Organic growth*

Americas

Europe

China

Japan

Rest of Asia

Global

Autoliv

4.8%

(6.7)%

11.2%

(1.1)%

(2.9)%

1.2%

Main growth drivers

Honda, GM, Nissan, BMW, Tesla

VW, Renault

Honda, VW, GM

Mazda, Honda, Subaru

Mitsubishi, Renault, Nissan

Honda, VW, GM

Main decline drivers

Daimler, Hyundai/Kia

Daimler, JLR, BMW, Toyota

Geely, Ford, PSA

Mitsubishi, Toyota, Inflators

Hyundai/Kia, Isuzu, Tata, Toyota

Daimler, Hyundai/ Kia, Toyota

Americas

Europe

China

Japan

Rest of Asia

Global

Third quarter 2019

IHS LVP (Oct 2019)

(1.6)%

0.8%

(5.6)%

6.8%

(10.5)%

(3.4)%

IHS LVP (Jul 2019)

2.5%

2.7%

(4.5)%

11.1%

(3.2)%

(0.1)%

First nine months 2019

IHS LVP (Oct 2019)

(2.8)%

(3.8)%

(12.1)%

4.0%

(5.3)%

(6.0)%

Q3 Report—2019

Subaru Legacy

Land Rover Defender

BMW 1-Series

Peugeot 208

Chevrolet Trailblazer

Cadillac CT5

Ford Puma

BYD Song Pro

Subaru Outback

Driver and/or Passenger airbags

Seatbelts

Side airbags

Knee airbag

Head/Inflatable Curtain airbags

Pyrotechnical Safety Switch

Pedestrian Airbag

Steering Wheel

Q3 Report—2019

Condensed income statement

Third quarter

First 9 months

(Dollars in millions, except per share data)

2019

2018

Change

2019

2018

Change

Net sales

$2,027.7

$2,033.0

(0.3)%

$6,356.4

$6,485.4

(2.0)%

Cost of sales

$(1,648.6)

$(1,646.9)

0.1%

$(5,198.8)

$(5,199.3)

(0.0)%

Gross profit

$379.1

$386.1

(1.8)%

$1,157.6

$1,286.1

(10.0)%

S,G&A

$(97.7)

$(90.0)

8.6%

$(300.2)

$(290.9)

3.2%

R,D&E, net

$(99.1)

$(101.9)

(2.7)%

$(323.5)

$(327.9)

(1.3)%

Amortization of intangibles

$(2.9)

$(2.8)

3.6%

$(8.6)

$(8.5)

1.2%

Other (expense) income, net

$(25.6)

$1.1

n/a

$(28.8)

$6.2

564.5%

Operating income

$153.8

$192.5

(20.1)%

$496.5

$665.0

(25.3)%

Adjusted operating income¹⁾

$182.5

$193.6

(5.7)%

$532.1

$668.3

(20.4)%

Financial and non-operating items, net

$(19.4)

$(21.2)

(8.5)%

$(57.7)

$(54.7)

5.5%

Income before taxes

$134.4

$171.3

(21.5)%

$438.8

$610.3

(28.1)%

Tax rate

36.0%

31.1%

4.9pp

30.1%

23.0%

7.1pp

Net income

$86.0

$118.0

(27.1)%

$306.9

$470.3

(34.7)%

Earnings per share^{2, 3)}

$0.98

$1.34

(26.9)%

$3.50

$5.37

(34.8)%

Adjusted earnings per share^{1, 2, 3)}

$1.30

$1.35

(3.7)%

$3.87

$5.40

(28.3)%

Gross margin

18.7%

19.0%

(0.3)pp

18.2%

19.8%

(1.6)pp

S,G&A % of sales

(4.8)%

(4.4)%

0.4pp

(4.7)%

(4.5)%

0.2pp

R,D&E, net % of sales

(4.9)%

(5.0)%

(0.1)pp

(5.1)%

(5.1)%

0.0pp

Operating margin

7.6%

9.5%

(1.9)pp

7.8%

10.3%

(2.5)pp

Adjusted operating margin¹⁾

9.0%

9.5%

(0.5)pp

8.4%

10.3%

(1.9)pp

1) Non-U.S. GAAP measure, excluding costs for capacity alignment, antitrust related matters and separation of our business segments. See reconciliation table. 2) Assuming dilution and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.

Q3 Report—2019

Selected Balance Sheet items

Third quarter

(Dollars in millions)

2019

2018

Change

Operating working capital

$619.5

$759.4

(18.4)%

Operating working capital % of sales¹⁾

7.2%

8.8%

(1.6)pp

Cash & cash equivalents

$334.4

$533.7

(37.3)%

Gross Debt²⁾

$2,105.0

$2,250.5

(6.5)%

Net Debt³⁾

$1,781.3

$1,724.4

3.3%

Total equity

$1,999.3

$2,053.4

(2.6)%

Leverage ratio

1.8

1.5

20.0%

1) Latest 12 months of net sales. 2) Short- and long-term interest-bearing debt. 3) Short- and long-term debt adjusted for cash and cash equivalents and debt-related derivatives. Non-U.S. GAAP measure. See reconciliation table.

Selected Cash Flow items

Third quarter

First 9 months

(Dollars in millions)

2019

2018

Change

2019

2018¹⁾

Change

Net income

$86.0

$118.0

(27.1)%

$306.9

$470.3

(34.7)%

Changes in operating assets and liabilities²⁾

$16.4

$28.0

(41.4)%

$(37.8)

$(220.2)

(82.8)%

Depreciation and amortization

$84.1

$85.1

(1.2)%

$260.1

$253.1

2.8%

Other, net³⁾

$8.8

$7.1

23.9%

$(200.8)

$17.0

n/a

Operating cash flow

$195.3

$238.2

(18.0)%

$328.4

$520.2

(36.9)%

Capital expenditure, net

$(122.3)

$(117.4)

4.2%

$(358.1)

$(352.7)

1.5%

Free cash flow⁴⁾

$73.0

$120.8

(39.6)%

$(29.7)

$167.5

(117.7)%

Cash conversion⁵⁾

84.9%

102.4%

(17.5)pp

(9.7)%

35.6%

(45.3)pp

Dividends paid

$(54.2)

$(54.1)

0.2%

$(162.7)

$(160.7)

1.2%

1) Management estimate for Continuing Operations derived from cash flow including Discontinued Operations. 2) 2018 including separation costs. 3) First 9 months 2019 including EC antitrust payment. 4) Operating cash flow less Capital expenditure, net. Non-U.S. GAAP measure. See reconciliation table. 5) Free cash flow relative to Net income. Non-U.S. GAAP measure, see reconciliation table.

Q3 Report—2019

September 30, 2019

June 30, 2019

September 30, 2018

Headcount

64,868

65,670

66,479

Whereof:  Direct workers in manufacturing

71%

71%

71%

Best cost countries

80%

80%

80%

Temporary personnel

9%

10%

14%

Q3 Report—2019

Third quarter

First 9 months

Latest 12 months

Full Year

2019

2018

2019

2018

2018

Income statement

Earnings per share, basic¹⁾

$0.98

$1.35

$3.51

$5.38

$2.44

$4.32

Earnings per share, diluted^{1, 2)}

$0.98

$1.34

$3.50

$5.37

$2.44

$4.31

Gross margin, %³⁾

18.7

19.0

18.2

19.8

18.5

19.7

Adjusted operating margin, %⁴⁾

9.0

9.5

8.4

10.3

9.0

10.5

R,D&E net in relation to sales, %

(4.9)

(5.0)

(5.1)

(5.1)

(4.8)

(4.8)

Balance Sheet

Operating working capital in relation to sales,  %⁵⁾

7.2

8.8

7.2

8.8

7.2

7.9

Capital employed, $ in millions⁶⁾

3,781

3,778

3,781

3,778

3,781

3,516

Return on total equity, %⁷⁾

17.1

23.2

20.7

20.0

10.8

13.0

Return on capital employed, %⁸⁾

16.2

20.4

18.0

20.9

14.0

16.8

Cash dividend paid per share

$0.62

$0.62

$1.86

$1.84

$2.48

$2.46

Net debt, $ in millions⁹⁾

1,781

1,724

1,781

1,724

1,781

1,619

Leverage ratio¹⁰⁾

1.8

1.5

1.8

1.5

1.8

1.5

Days receivables outstanding¹¹⁾

75

80

72

76

71

71

Days inventory outstanding¹²⁾

37

38

35

35

35

35

Cash flow

Operating Cash flow, $ in millions¹³⁾

195.3

238.2

328.4

301.2

617.8

590.6

Depreciation and amortization, $ in millions ¹³⁾

84.1

85.1

260.1

308.4

348.8

397.1

Capital expenditures, net in relation to sales, %¹³⁾

(6.0)

(5.8)

(5.6)

(6.5)

(5.7)

(6.4)

Free Cash flow, $ in millions ^{13, 14)}

73.0

120.8

(29.7)

(120.2)

126.3

35.8

Cash conversion, %^{13, 15)}

84.9

102.4

(9.7)

(43.8)

58.4

19.5

Direct shareholder return, $ in millions ¹⁶⁾

(54.2)

(54.1)

(162.7)

(160.7)

(216.3)

(214.3)

Other

No. of shares at period-end in millions¹⁷⁾

87.2

87.1

87.2

87.1

87.2

87.1

Average no. of shares in millions²⁾

87.3

87.4

87.4

87.3

87.4

87.3

1) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 2) Assuming dilution and net of treasury shares. 3) Gross profit relative to sales. 4) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. Non-U.S. GAAP measure, see reconciliation table. 5) Latest 12 months of net sales. Full year 2018 excluding antitrust provision accrual. 6) Total equity and net debt. 7) Net income relative to average total equity. 8) Operating income and income from equity method investments, relative to average capital employed. 9) Non-U.S. GAAP measure, see reconciliation table. 10) Net debt adjusted for pension liabilities in relation to EBITDA. Non-U.S. GAAP measure, see reconciliation table. 11) Outstanding receivables relative to average daily sales. 12) Outstanding inventory relative to average daily sales. 13) Including Discontinued Operations, which had a significant impact through YTD 2018. 14) Operating cash flow less Capital expenditures, net. Non-U.S. GAAP measure, see reconciliation table. 15) Free cash flow relative to Net income. Non-U.S. GAAP measure, see reconciliation table. 16) Dividends paid and Shares repurchased. 17) Excluding dilution and net of treasury shares.

Q3 Report—2019

Q3 Report—2019

Q3 Report—2019

(Dollars in millions, except per share data)

Third quarter

First 9 months

Latest 12 months

Full Year

(Unaudited)

2019

2018

2019

2018

2018

Airbag and Other products¹⁾

$1,349.3

$1,357.4

$4,232.7

$4,234.9

$5,696.4

$5,698.6

Seatbelt products¹⁾

678.4

675.6

2,123.7

2,250.5

2,852.8

2,979.6

Total net sales

$2,027.7

$2,033.0

$6,356.4

$6,485.4

$8,549.2

$8,678.2

Cost of sales

(1,648.6)

(1,646.9)

(5,198.8)

(5,199.3)

(6,966.4)

(6,966.9)

Gross profit

$379.1

$386.1

$1,157.6

$1,286.1

$1,582.8

$1,711.3

Selling, general & administrative expenses

(97.7)

(90.0)

(300.2)

(290.9)

(399.6)

(390.3)

Research, development & engineering expenses, net

(99.1)

(101.9)

(323.5)

(327.9)

(408.2)

(412.6)

Amortization of intangibles

(2.9)

(2.8)

(8.6)

(8.5)

(11.4)

(11.3)

Other (expense) income, net

(25.6)

1.1

(28.8)

6.2

(246.1)

(211.1)

Operating income

$153.8

$192.5

$496.5

$665.0

$517.5

$686.0

Income from equity method investments

0.4

0.2

1.6

2.8

2.4

3.6

Interest income

0.7

1.3

2.7

4.1

5.5

6.9

Interest expense

(17.1)

(18.9)

(52.6)

(46.2)

(72.5)

(66.1)

Other non-operating items, net

(3.4)

(3.8)

(9.4)

(15.4)

(12.0)

(18.0)

Income from Continuing Operations before income taxes

$134.4

$171.3

$438.8

$610.3

$440.9

$612.4

Income taxes

(48.4)

(53.3)

(131.9)

(140.0)

(226.8)

(234.9)

Net income from Continuing Operations

$86.0

$118.0

$306.9

$470.3

$214.1

$377.5

Loss from Discontinued Operations, net of income taxes

–

–

–

(195.8)

2.0

(193.8)

Net income

$86.0

$118.0

$306.9

$274.5

$216.1

$183.7

Less; Net income from Continuing Operations attributable to non-controlling interest

0.6

0.5

1.0

1.4

1.2

1.6

Less; Net loss from Discontinued Operations attributable to non-controlling interest

–

–

–

(8.3)

–

(8.3)

Net income attributable to controlling interest

$85.4

$117.5

$305.9

$281.4

$214.9

$190.4

Amounts attributable to controlling interest:

Net Income from Continuing Operations

$85.4

$117.5

$305.9

$468.9

$212.9

$375.9

Net Loss from Discontinued Operations, net of income taxes

–

–

–

(187.5)

2.0

(185.5)

Net income attributable to controlling interest

$85.4

$117.5

$305.9

$281.4

$214.9

$190.4

Earnings per share Continuing Operations^{2, 3)}

$0.98

$1.34

$3.50

$5.37

$2.44

$4.31

Earnings per share Discontinued Operations^{2, 3)}

$ -

$ -

$ -

$(2.15)

$0.02

$(2.13)

Earnings per share^{2, 3)}

$0.98

$1.34

$3.50

$3.22

$2.46

$2.18

1) Including Corporate and other sales. 2) Assuming dilution and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from EPS calculation.

Q3 Report—2019

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

(Dollars in millions, unaudited)

2019

2019

2019

2018

2018

Assets

Cash & cash equivalents

$334.4

$406.4

$436.6

$615.8

$533.7

Receivables, net

1,656.2

1,695.5

1,749.6

1,667.1

1,784.5

Inventories, net

731.8

736.1

741.1

757.9

758.7

Other current assets

186.4

214.2

183.8

244.6

271.2

Total current assets

$2,908.8

$3,052.2

$3,111.1

$3,285.4

$3,348.1

Property, plant & equipment, net

1,747.9

1,765.0

1,710.9

1,690.1

1,654.8

Investments and other non-current assets

371.1

386.7

384.3

323.5

331.3

Right-of-use assets - operating leases

154.1

165.0

147.3

–

–

Goodwill assets

1,383.3

1,388.8

1,388.3

1,389.9

1,391.0

Intangible assets, net

24.3

27.8

30.7

32.7

35.3

Total assets

$6,589.5

$6,785.5

$6,772.6

$6,721.6

$6,760.5

Liabilities and equity

Short-term debt

$289.9

$366.8

$437.6

$620.7

$573.0

Accounts payable

900.2

956.6

981.7

1,029.0

992.4

Other current liabilities

1,077.0

1,055.4

1,282.2

1,215.8

1,118.4

Operating lease liabilities - current

37.7

39.6

37.0

–

–

Total current liabilities

$2,304.8

$2,418.4

$2,738.5

$2,865.5

$2,683.8

Long-term debt

1,815.1

1,850.2

1,598.1

1,609.0

1,677.5

Pension liability

199.9

202.8

200.4

198.2

204.3

Other non-current liabilities

153.4

150.5

151.1

152.1

141.5

Operating lease liabilities - non-current

117.0

125.9

110.5

–

–

Total non-current liabilities

$2,285.4

$2,329.4

$2,060.1

$1,959.3

$2,023.3

Total parent shareholders’ equity

1,986.7

2,024.1

1,960.5

1,883.7

2,040.4

Non-controlling interest

12.6

13.6

13.5

13.1

13.0

Total equity

$1,999.3

$2,037.7

$1,974.0

$1,896.8

$2,053.4

Total liabilities and equity

$6,589.5

$6,785.5

$6,772.6

$6,721.6

$6,760.5

Q3 Report—2019

   Third quarter

      First 9 months

Latest 12 months

Full Year

(Dollars in millions, unaudited)

2019

2018

2019

2018¹⁾

2018¹⁾

Net income Continuing Operations

$86.0

$118.0

$306.9

$470.3

$214.1

$377.5

Net loss Discontinued Operations

–

–

–

(195.8)

2.0

(193.8)

Depreciation and amortization

84.1

85.1

260.1

308.4

348.8

397.1

Legal provision²⁾

–

–

–

–

–

210.0

Other, net³⁾

8.8

7.1

(200.8)

19.7

18.6

29.1

Changes in operating assets and liabilities⁴⁾

16.4

28.0

(37.8)

(301.4)

34.3

(229.3)

Net cash provided by operating activities

$195.3

$238.2

$328.4

$301.2

$617.8

$590.6

Capital expenditures, net

(122.3)

(117.4)

(358.1)

(421.4)

(491.5)

(554.8)

Acquisitions of businesses and other, net

–

–

–

(72.9)

-

(72.9)

Net cash used in investing activities

$(122.3)

$(117.4)

$(358.1)

$(494.3)

$(491.5)

$(627.7)

Net cash before financing⁵⁾

$73.0

$120.8

$(29.7)

$(193.1)

$126.3

$(37.1)

Net (decrease) increase in short-term debt

(58.6)

(35.1)

(309.4)

374.9

(328.9)

355.4

Issuance of long-term debt⁶⁾

(1.7)

–

243.5

582.2

243.5

582.2

Debt issuance costs

–

–

(0.3)

(2.6)

(0.3)

(2.6)

Dividends paid

(54.2)

(54.1)

(162.7)

(160.7)

(216.3)

(214.3)

Common stock options exercised

0.1

0.6

0.3

8.2

0.3

8.2

Dividend paid to non-controlling interests

(1.1)

–

(1.1)

(2.0)

(1.2)

(2.1)

Capital contribution to Veoneer

–

7.9

–

(971.8)

–

(971.8)

Net cash used in financing activities

$(115.5)

$(80.7)

$(229.7)

$(171.8)

$(302.9)

$(245.0)

Effect of exchange rate changes on cash

(29.5)

(13.9)

(22.0)

(60.9)

(22.7)

(61.6)

(Decrease) increase in cash and cash equivalents

$(72.0)

$26.2

$(281.4)

$(425.8)

$(199.3)

$(343.7)

Cash and cash equivalents at period-start

406.4

507.5

615.8

959.5

533.7

959.5

Cash and cash equivalents at period-end

$334.4

$533.7

$334.4

$533.7

$334.4

$615.8

1) Including Discontinued Operations. 2) EC antitrust non-cash provision. 3) First nine months 2019 including EC antitrust payment. 4) 2018 including separation costs. 5) Non-U.S. GAAP measure comprised of "Net cash provided by operating activities" and "Net cash used in investing activities". See reconciliation table 6) Reclassification of long term debt.

Q3 Report—2019

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

(Dollars in millions)

2019

2019

2019

2018

2018

Total current assets

$2,908.8

$3,052.2

$3,111.1

$3,285.4

$3,348.1

Total current liabilities¹⁾

(2,304.8)

(2,418.4)

(2,535.3)

(2,655.5)

(2,683.8)

Working capital

$604.0

$633.8

$575.8

$629.9

$664.3

Cash and cash equivalents

(334.4)

(406.4)

(436.6)

(615.8)

(533.7)

Short-term debt

289.9

366.8

437.6

620.7

573.0

Derivative asset and liability, current

5.9

(3.5)

2.4

(0.8)

1.8

Dividends payable

54.1

54.1

54.0

54.0

54.0

Operating working capital

$619.5

$644.8

$633.2

$688.0

$759.4

1) March 2019 and December 2018 excluding the EC antitrust accrual.

Q3 Report—2019

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

(Dollars in millions)

2019

2019

2019

2018

2018

Short-term debt

$289.9

$366.8

$437.6

$620.7

$573.0

Long-term debt

1,815.1

1,850.2

1,598.1

1,609.0

1,677.5

Total debt

$2,105.0

$2,217.0

$2,035.7

$2,229.7

$2,250.5

Cash & cash equivalents

(334.4)

(406.4)

(436.6)

(615.8)

(533.7)

Debt issuance cost/Debt-related derivatives, net

10.7

0.3

8.1

4.9

7.6

Net debt

$1,781.3

$1,810.9

$1,607.2

$1,618.8

$1,724.4

Dec 31

Dec 31

Dec 31

(Dollars in millions)

2017

2016

2015

Short-term debt

$19.7

$216.3

$39.6

Long-term debt

1,310.7

1,312.5

1,499.4

Total debt

$1,330.4

$1,528.8

$1,539.0

Cash & cash equivalents

(959.5)

(1,226.7)

(1,333.5)

Debt issuance cost/Debt-related derivatives, net

(2.5)

(3.4)

(3.9)

Net debt

$368.4

$298.7

$201.6

Q3 Report—2019

Sep 30

Dec 31

Sep 30

(Dollars in millions)

2019

2018

2018

Net debt¹⁾

$1,781.3

$1,618.8

$1,724.4

Pension liabilities

199.9

198.2

204.3

Debt per the Policy

$1,981.2

$1,817.0

$1,928.7

Net income²⁾

216.1

183.7

218.9

Less; Net loss, Discontinued Operations²⁾

(2.0)

193.8

448.8

Net income, Continuing Operations²⁾

$214.1

$377.5

$667.7

Income taxes²⁾

226.8

234.9

183.4

Interest expense, net^{2, 3)}

67.0

59.2

54.8

Depreciation and amortization of intangibles²⁾

348.8

342.0

332.6

Antitrust related matters, capacity alignments and separation costs²⁾

254.5

216.5

6.7

EBITDA per the Policy

$1,111.2

$1,230.1

$1,245.2

Leverage ratio

1.8

1.5

1.5

1) Short- and long-term debt less cash and cash equivalents and debt-related derivatives. 2) Latest 12 months. 3) Interest expense including cost for extinguishment of debt, if any, less interest income.

Q3 Report—2019

Third quarter

First 9 months

First 9 months

(Dollars in millions)

2019

2018

2019

2018¹⁾

2018²⁾

Net income

$86.0

$118.0

$306.9

$274.5

$470.3

Changes in operating assets and liabilities³⁾

16.4

28.0

(37.8)

(301.4)

(220.2)

Depreciation and amortization

84.1

85.1

260.1

308.4

253.1

Other, net⁴⁾

8.8

7.1

(200.8)

19.7

17.0

Operating cash flow

$195.3

$238.2

$328.4

$301.2

$520.2

Capital expenditure, net

(122.3)

(117.4)

(358.1)

(421.4)

(352.7)

Free cash flow⁵⁾

$73.0

$120.8

$(29.7)

$(120.2)

$167.5

Acquisitions of businesses and other, net

-

-

-

(72.9)

-

Net cash before financing

$73.0

$120.8

$(29.7)

$(193.1)

$167.5

Cash conversion⁶⁾

84.9%

102.4%

(9.7)%

(43.8)%

35.6%

Latest 12

Full year

Full year

Full year

Full year

(Dollars in millions)

months¹⁾

2018¹⁾

2017¹⁾

2016¹⁾

2015¹⁾

Net income

$216.1

$183.7

$303.0

$561.6

$457.5

Changes in operating assets and liabilities²⁾

34.3

(229.3)

(0.3)

(77.8)

(26.1)

Depreciation and amortization

348.8

397.1

425.8

383.0

319.1

Goodwill impairment charges

-

-

234.2

-

-

Other, net³⁾

18.6

239.1

(26.8)

1.6

(0.0)

Operating cash flow

$617.8

$590.6

$935.9

$868.4

$750.5

Capital expenditure, net

(491.5)

(554.8)

(569.6)

(498.6)

(449.6)

Free cash flow⁴⁾

$126.3

$35.8

$366.3

$369.8

$300.9

Acquisitions of businesses and other, net

-

(72.9)

(127.7)

(227.4)

(141.5)

Net cash before financing

$126.3

$(37.1)

$238.6

$142.4

$159.4

Cash conversion⁵⁾

58.4%

19.5%

120.9%

65.8%

65.8%

1) Including Discontinued Operations. 2) 2018 including separation cost. 3) 2019 and 2018 including EC antitrust non-cash provision and payment. 4) Operating cash flow less Capital expenditures, net. 5) Free cash flow relative to Net income.

Q3 Report—2019

Third quarter 2019

Third quarter 2018

(Dollars in millions, except per share data)

Reported
U.S. GAAP

Adjust-

ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-

ments¹⁾

Non-U.S.
GAAP

Operating income

$153.8

$28.7

$182.5

$192.5

$1.1

$193.6

Operating margin, %

7.6

1.4

9.0

9.5

0.0

9.5

Income before taxes from Continuing Operations

$134.4

$28.7

$163.1

$171.3

$1.1

$172.4

Net income attributable to controlling interest from Continuing Operations

$85.4

$28.3

$113.7

$117.5

$0.8

$118.3

Return on capital employed, %²⁾

16.2

2.9

19.1

20.4

0.1

20.5

Return on total equity, %³⁾

17.1

5.4

22.5

23.2

0.2

23.4

Earnings per share, Continuing Operations^{4, 5)}

$0.98

$0.32

$1.30

$1.34

$0.01

$1.35

1) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. 2) Operating income and income from equity method investments, relative to average capital employed. 3) Net income relative to average total equity. 4) Assuming dilution and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.

First 9 months 2019

First 9 months 2018

(Dollars in millions, except per share data)

Reported
U.S. GAAP

Adjust-

ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-

ments¹⁾

Non-U.S.
GAAP

Operating income

$496.5

$35.6

$532.1

$665.0

$3.3

$668.3

Operating margin, %

7.8

0.6

8.4

10.3

0.0

10.3

Income before taxes from Continuing operations

$438.8

$35.6

$474.4

$610.3

$3.3

$613.6

Net income attributable to controlling interest from Continuing operations

$305.9

$32.6

$338.5

$468.9

$2.6

$471.5

Capital employed

$3,781

$32

$3,813

$3,778

$2.0

$3,780

Return on capital employed, %²⁾

18.0

1.3

19.3

20.9

0.1

21.0

Return on total equity, % ³⁾

20.7

2.1

22.8

20.0

0.1

20.1

Earnings per share continuing operations, diluted^{4, 5)}

$3.50

$0.37

$3.87

$5.37

$0.03

$5.40

Total parent shareholders' equity per share

$22.78

$0.37

$23.15

$23.42

$0.03

$23.45

1) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. 2) Operating income and income from equity method investments continuing operations, relative to average capital employed. 3) Income from continuing operations relative to average total equity. 4) Assuming dilution and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.

Q3 Report—2019

Latest 12 months

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$517.5

$254.5

$772.0

Operating margin, %

6.1

2.9

9.0

1) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments.

Full year 2018

Full year 2017

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$686.0

$222.2

$908.2

$859.6

$39.7

$899.3

Operating margin, %

7.9

2.6

10.5

10.6

0.5

11.1

1) Excluding costs for capacity alignment and antitrust related matters in 2017 and 2018, and separation of our business segments in 2018.

Full year 2016

Full year 2015

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$831.0

$34.5

$865.5

$707.7

$166.4

$874.1

Operating margin, %

10.5

0.4

10.9

9.3

2.2

11.5

1) Excluding costs for capacity alignment and antitrust related matters.

Items included in Non-U.S. GAAP adjustments

Third quarter 2019

Third quarter 2018

Adjustment
Millions

Adjustment
Per share

Adjustment
Millions

Adjustment
Per share

Capacity alignment

$27.4

$0.31

$(0.2)

$(0.00)

Antitrust related matters

0.1

0.00

0.2

0.00

Separations costs

1.2

0.01

1.1

0.01

Total adjustments to operating income

$28.7

$0.32

$1.1

$0.01

Tax on non-U.S. GAAP adjustments¹⁾

(0.4)

0.00

(0.3)

(0.00)

Total adjustments to net income

$28.3

$0.32

$0.8

$0.01

Weighted average number of shares outstanding - diluted

87.3

87.4

Return on capital employed^{2, 3)}

$114.8

$4.4

Adjustment return on capital employed

  2.9%

  0.1%

Return on total equity^{4, 5)}

$113.2

$3.2

Adjustment return on total equity

  5.4%

  0.2%

1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) After adjustment for annualized Q3 non-U.S. GAAP EBIT adjustment. 3) Operating income and income from equity method investments, relative to average capital employed. 4) Income relative to average total equity. 5) After adjustment for annualized Q3 non-U.S. GAAP Net income adjustment.

Q3 Report—2019

Items included in Non-GAAP adjustments

First 9 months 2019

First 9 months 2018

Adjustment
Millions

Adjustment
Per share

Adjustment
Millions

Adjustment
Per share

Capacity alignment

$40.5

$0.46

$1.0

$0.01

Antitrust related matters

(6.1)

(0.07)

1.2

0.01

Separation costs

1.2

0.01

1.1

0.01

Total adjustments to operating income

$35.6

$0.40

$3.3

$0.03

Tax on non-U.S. GAAP adjustments¹⁾

(3.0)

(0.03)

(0.7)

(0.00)

Total adjustments to Income from Continuing operations

$32.6

$0.37

$2.6

$0.03

Weighted average number of shares outstanding - diluted

                  87.4

                  87.3

Return on capital employed^{2, 3)}

$47.5

$4.4

Adjustment return on capital employed

  1.3%

  0.1%

Return on total equity^{4, 5)}

$43.5

$3.5

Adjustment return on total equity

  2.1%

  0.1%

1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) After adjustment for annualized non-U.S. GAAP EBIT adjustment. 3) Operating income and income from equity method investments Continuing Operations, relative to average capital employed. 4) Income from Continuing Operations relative to average total equity. 5) After adjustment for annualized non-U.S. GAAP Net income adjustment.

Q3 Report—2019

(Dollars in millions, except per share data)

2018

2017

2016

2015

Sales and Income    

Net sales

$8,678

$8,137

$7,922

$7,636

Airbag sales¹⁾

5,699

5,342

5,256

5,036

Seatbelt sales

2,980

2,794

2,665

2,599

Operating income

686

860

831

708

Net income attributable to controlling interest

376

586

558

443

Earnings per share (US$) – basic²⁾

4.32

6.70

6.33

5.03

Earnings per share (US$) – assuming dilution^{2, 3)}

4.31

6.68

6.32

5.02

Gross margin, %⁴⁾

19.7

20.6

20.6

20.5

R,D&E net in relation to sales, %

(4.8)

(4.6)

(4.5)

(4.1)

S,G&A net in relation to sales, %

(4.5)

(5.0)

(5.0)

(4.8)

Operating margin, %⁵⁾

7.9

10.6

10.5

9.3

Adjusted operating margin, %^{6, 7)}

10.5

11.1

10.9

11.5

Balance Sheet

Operating working capital

478

581

488

525

Days receivables outstanding⁸⁾

71

76

70

71

Days inventory outstanding⁹⁾

35

35

32

31

Total equity

1,897

4,169

3,926

3,468

Total parent shareholders’ equity per share (US$)

21.63

46.38

41.69

39.22

Current assets excluding cash

2,670

2,598

2,269

2,259

Property, plant and equipment, net

1,690

1,609

1,329

1,265

Intangible assets (primarily goodwill)

1,423

1,440

1,430

1,445

Capital employed

3,516

4,538

4,225

3,670

Net debt⁷⁾

1,619

368

299

202

Total assets

6,722

6,947

6,565

6,518

Long-term debt

1,609

1,311

1,313

1,499

Operating working capital in relation to sales,  %

5.5

7.1

6.2

6.9

Return on capital employed, %^{10, 11)}

17

n/a

n/a

n/a

Return on total equity, %^{11, 12)}

13

n/a

n/a

n/a

Total equity ratio, %

28

49

48

46

Cash flow

Operating cash flow¹³⁾

591

936

868

751

Depreciation and amortization¹³⁾

397

426

383

319

Capital expenditures, net¹³⁾

555

570

499

450

Capital expenditures, net in relation to sales, %¹³⁾

5.7

5.5

4.9

4.9

Free cash flow^{7, 13, 14)}

36

366

369

301

Cash conversion, %^{7, 13, 15)}

19.5

120.8

65.7

65.8

Direct shareholder return^{13, 16)}

(214)

(366)

(203)

(300)

Cash dividends paid per share (US$)

2.46

2.38

2.30

2.22

Other data

Number of shares outstanding (million)¹⁷⁾

87.1

87.0

88.2

88.1

Number of employees, December 31

57,700

56,700

55,800

51,300

1) Including steering wheels, inflators and initiators. 2) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 3) Assuming dilution and net of treasury shares. 4) Gross profit relative to sales. 5) Operating income relative to sales. 6) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. Non-U.S. GAAP measure, see reconciliation table. 7) Non-US GAAP measure, for reconciliation see tables above. 8) Outstanding receivables relative to average daily sales. 9) Outstanding inventory relative to average daily sales. 10) Operating income and income from equity method investments, relative to average capital employed. 11) The Company has decided not to recalculate prior periods since the distribution of Veoneer had a significant impact on total equity and capital employed making the comparison less meaningful. 12) Income relative to average total equity. 13) Including Discontinued Operations. 14) Operating cash flow less Capital expenditures, net. Non-U.S. GAAP measure, see reconciliation table. 15) Free cash flow relative to Net income. Non-U.S. GAAP measure, see reconciliation table. 16) Dividends paid and Shares repurchased. 17) At year end, excluding dilution and net of treasury shares.