10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2022

☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                     to                    

Commission File No.: 001-12933

AUTOLIV, INC.

(Exact name of registrant as specified in its charter)


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

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

+46 8 587 20 600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes: ☐ No: ☒

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of July 18, 2022, there were 87,089,697 shares of common stock of Autoliv, Inc., par value $1.00 per share, outstanding.

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; the impacts of the coronavirus (COVID-19) pandemic on the Company’s financial condition, business operations, operating costs, liquidity, competition and the global economy; disruptions and impacts relating to the ongoing conflict between Russia and Ukraine; 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 impacting the Company or the automotive industry; changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignment: restructuring and 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 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, 2021 filed with the SEC on February 22, 2022.

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	9
2.	New Accounting Standards	9
3.	Fair Value Measurements	10
4.	Income Taxes	12
5.	Inventories	13
6.	Restructuring	13
7.	Product-Related Liabilities	13
8.	Retirement Plans	14
9.	Contingent Liabilities	15
10.	Stock Incentive Plan	17
11.	Earnings Per Share	17
12.	Related Party Transactions	18
13.	Revenue Disaggregation	18
14.	Subsequent Events	18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		32

ITEM 4. CONTROLS AND PROCEDURES		32

PART II - OTHER INFORMATION		33

ITEM 1. LEGAL PROCEEDINGS		33

ITEM 1A. RISK FACTORS		33

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		33

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		34

ITEM 4. MINE SAFETY DISCLOSURES		34

ITEM 5. OTHER INFORMATION		34

ITEM 6. EXHIBITS		35

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in millions, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net sales	$	2,081		$	2,022		$	4,206		$	4,265
Cost of sales		(1,755	)		(1,638	)		(3,591	)		(3,422	)
Gross profit		326			384			614			843
Selling, general and administrative expenses		(112	)		(111	)		(227	)		(219	)
Research, development and engineering expenses, net		(112	)		(107	)		(219	)		(213	)
Amortization of intangibles		(0	)		(3	)		(2	)		(5	)
Other income (expense), net1)		22			0			92			(4	)
Operating income		124			164			258			401
Income from equity method investment		1			0			2			2
Interest income		1			2			2			2
Interest expense		(13	)		(16	)		(26	)		(32	)
Other non-operating items, net		5			2			1			(4	)
Income before income taxes		117			152			237			370
Income tax expense		(38	)		(48	)		(74	)		(108	)
Net income		79			105			163			262
Less: Net income attributable to non-controlling interest		0			0			1			1
Net income attributable to controlling interest	$	79		$	104		$	162		$	261

Net earnings per share – basic2)	$	0.91		$	1.19		$	1.86		$	2.98
Net earnings per share – diluted2)	$	0.91		$	1.19		$	1.85		$	2.98

Weighted average number of shares outstanding, net of treasury shares (in millions)		87.2			87.4			87.2			87.4
Weighted average number of shares outstanding, assuming dilution and net of treasury shares (in millions)		87.3			87.7			87.4			87.7

Cash dividend per share – declared	$	0.64		$	0.62		$	1.28		$	0.62
Cash dividend per share – paid	$	0.64		$	0.62		$	1.28		$	0.62

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

2) Participating share awards with the right to receive dividend equivalents are (under the two-class method) excluded from the earnings per share calculation

(see Note 11 to the unaudited condensed consolidated financial statements).

See Notes to the unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in millions)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net income	$	79		$	105		$	163		$	262
Other comprehensive (loss) income before tax:
Change in cumulative translation adjustments		(121	)		37			(115	)		(27	)
Net change in unrealized components of defined benefit plans		3			1			15			3
Other comprehensive (loss) income, before tax		(118	)		38			(100	)		(24	)
Tax effect allocated to other comprehensive loss		(1	)		(0	)		(5	)		(1	)
Other comprehensive (loss) income, net of tax		(118	)		38			(104	)		(25	)
Comprehensive income		(40	)		143			58			237
Less: Comprehensive income attributable to non-controlling interest		(1	)		1			(0	)		1
Comprehensive (loss) income attributable to controlling interest	$	(40	)	$	142		$	58		$	236

See Notes to the unaudited Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in millions)


	As of
	June 30, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	327		$	969
Receivables, net		1,779			1,699
Inventories, net		903			777
Prepaid expenses and accrued income		195			164
Other current assets		81			65
Total current assets		3,285			3,675
Property, plant and equipment, net		1,806			1,855
Operating lease right-of-use assets		120			132
Goodwill		1,373			1,387
Intangible assets, net		6			8
Other non-current assets		439			481
Total assets		7,030			7,537

Liabilities and equity
Short-term debt		559			346
Accounts payable		1,303			1,144
Accrued expenses		944			996
Operating lease liabilities - current		37			38
Other current liabilities		218			297
Total current liabilities		3,061			2,821
Long-term debt		1,060			1,662
Pension liability		155			197
Operating lease liabilities - non-current		83			94
Other non-current liabilities		113			115
Total non-current liabilities		1,410			2,067
Common stock		102			103
Additional paid-in capital		1,319			1,329
Retained earnings		2,762			2,742
Accumulated other comprehensive loss		(512	)		(408	)
Treasury stock		(1,128	)		(1,133	)
Total controlling interest's equity		2,544			2,633
Non-controlling interest		15			15
Total equity		2,558			2,648
Total liabilities and equity	$	7,030		$	7,537

See Notes to the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in millions)


	Six Months Ended June 30,
	2022			2021
Operating activities
Net income	$	163		$	262
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		186			199
Gain on divestiture of property		(80	)		—
Deferred income taxes		17			3
Other, net		(9	)		(1	)
Net change in operating assets and liabilities		(257	)		(214	)
Net cash provided by operating activities		19			249

Investing activities
Expenditures for property, plant and equipment		(254	)		(191	)
Proceeds from sale of property, plant and equipment		98			1
Net cash used in investing activities		(156	)		(189	)

Financing activities
Net decrease in short-term debt		(277	)		(291	)
Increase in long-term debt		0			14
Decrease in long-term debt		(33	)		0
Dividends paid		(112	)		(54	)
Stock repurchased		(40	)		—
Common stock options exercised		0			2
Net cash used in financing activities		(462	)		(329	)
Effect of exchange rate changes on cash and cash equivalents		(43	)		(16	)
Decrease in cash and cash equivalents		(642	)		(285	)
Cash and cash equivalents at beginning of period		969			1,178
Cash and cash equivalents at end of period	$	327		$	893

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, 2021	$	103		$	1,329		$	2,742		$	(408	)	$	(1,133	)	$	2,633		$	15		$	2,648
Comprehensive Income:
Net income								83									83			0			83
Foreign currency translation adjustment											6						6			0			6
Pension liability											8						8						8
Total Comprehensive Income		—			—			83			14			—			97			0			98
Stock repurchased and retired		(0	)		(4	)		(13	)								(18	)					(18	)
Stock-based compensation														2			2						2
Cash Dividends								(56	)								(56	)					(56	)
Balances at March 31, 2022	$	103		$	1,325		$	2,755		$	(393	)	$	(1,131	)	$	2,659		$	15		$	2,674
Comprehensive Income:
Net income								79									79			0			79
Foreign currency translation adjustment											(121	)					(121	)		(1	)		(122	)
Pension liability											3						3						3
Total Comprehensive Income		—			—			79			(119	)		—			(40	)		(1	)		(40	)
Stock repurchased and retired		(0	)		(6	)		(16	)								(22	)					(22	)
Stock-based compensation														2			2						2
Cash dividends declared								(56	)								(56	)					(56	)
Balances at June 30, 2022	$	102		$	1,319		$	2,762		$	(512	)	$	(1,128	)	$	2,544		$	15		$	2,558


	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, 2020	$	103	$	1,329	$	2,471		$	(347	)	$	(1,147	)	$	2,409		$	14		$	2,423
Comprehensive Loss:
Net income						157									157			0			157
Foreign currency translation adjustment									(64	)					(64	)		(0	)		(64	)
Pension liability									1						1						1
Total Comprehensive Income		—		—		157			(63	)		—			94			0			94
Stock-based compensation												4			4						4
Balances at March 31, 2021	$	103	$	1,329	$	2,628		$	(410	)	$	(1,143	)	$	2,507		$	14		$	2,521
Comprehensive Loss:
Net income						104									104			1			105
Foreign currency translation adjustment									37						37			(0	)		37
Pension liability									1						1						1
Total Comprehensive Loss		—		—		104			38			—			142			1			143
Stock-based compensation												5			5						5
Cash dividends declared						(54	)								(54	)					(54	)
Balances at June 30, 2021	$	103	$	1,329	$	2,678		$	(372	)	$	(1,138	)	$	2,600		$	15		$	2,615

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)

June 30, 2022

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, 2022.

The Condensed Consolidated Balance Sheet as of December 31, 2021 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 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, 2021 filed with the SEC on February 22, 2022.

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”).

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial statements.

Adoption of new accounting standards

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance, which increases the transparency of government assistance, including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. ASU 2021-10 is effective for business entities for annual periods beginning after December 15, 2021, and early adoption is permitted. The amendments in this Update should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. The Company adopted this standard prospectively on January 1, 2022 and the adoption of this standard did not have a material impact on our Consolidated Financial Statements or related disclosures.

Accounting standards issued but not yet adopted

None that is expected to have a material impact on the Company.

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 June 30, 2022 and December 31, 2021 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 no derivatives designated as hedging instruments as of June 30, 2022 or December 31, 2021 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 not designated as hedging instruments outstanding as of June 30, 2022 and December 31, 2021 were foreign exchange swaps.

For the three months period ended June 30, 2022 and 2021, the gains (losses) recognized in other non-operating items, net were $(23) million and $20 million, respectively, for derivative instruments not designated as hedging instruments. For the six months period ended June 30, 2022 and 2021, the gains (losses) recognized in other non-operating items, net were $(14) million and $(38) million. The realized part of the losses referred to above is reported under financing activities in the statement of cash flows.

For the three and six months periods ended June 30, 2022 and June 30, 2021, 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
	June 30, 2022									December 31, 2021
				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	$	1,422	1)	$	4	2)	$	28	3)	$	1,348	4)	$	5	5)	$	16	6)
Total derivatives not designated as hedging instruments	$	1,422		$	4		$	28		$	1,348		$	5		$	16

1) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,422 million.

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

3) Net amount after deducting for offsetting swaps under ISDA agreements is $28 million.

4) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,326 million.

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

6) Net amount after deducting for offsetting swaps under ISDA agreements is $16 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.

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


	As of
	June 30, 2022				December 31, 2021
	Carrying value1)		Fair value		Carrying value1)		Fair value
Long-term debt
Bonds	$	767	$	753	$	1,330	$	1,400
Loans		294		300		332		347
Total long-term debt		1,060		1,052		1,662		1,747

Short-term debt
Short-term portion of long-term debt		522		514		332		333
Overdrafts and other short-term debt		37		37		14		14
Total short-term debt	$	559	$	551	$	346	$	348

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 six months periods ended June 30, 2022 and June 30, 2021, the Company did not 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 June 30, 2022 was 32.2% compared to 31.3% for the three months period ended June 30, 2021. Discrete tax items, net for the three months period ended June 30, 2022 had an unfavorable impact of 1.5%. Discrete tax items, net for the three months period ended June 30, 2021 had an unfavorable impact of 0.2%.

The effective tax rate for the six months period ended June 30, 2022 was 31.3% compared to 29.2% for the six months period ended June 30, 2021. Discrete tax items, net for the six months period ended June 30, 2022 had an unfavorable impact of 1.0%. Discrete tax items, net for the six months period ended June 30, 2021 had a favorable impact of 0.1%.

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 2010.

As of June 30, 2022, 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 six months period ended June 30, 2022, the Company recorded a net increase of $4 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 $53 million recorded as of June 30, 2022, $16 million is classified as current tax payable within Other current liabilities and $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
	June 30, 2022			December 31, 2021
Raw materials	$	420		$	395
Work in progress		332			283
Finished products		242			190
Inventories		994			868
Inventory valuation reserve		(92	)		(91	)
Total inventories, net of reserve	$	903		$	777

6. RESTRUCTURING

As of June 30, 2022, approximately $11 million out of the $45 million in total reserve balance can be attributed to the structural efficiency program initiated in the second quarter of 2020 and mainly relates to Europe. This program is expected to be concluded in 2022. Approximately $21 million of the total reserve balance can be attributed to footprint optimization activities in Europe initiated in the third quarter of 2020. These activities are expected to be concluded in 2023. The cash payments for the three months period ended June 30, 2022 relate to restructuring activities in Europe and Asia. The majority of the cash payments for the six months period ended June 30, 2022 relate 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 June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Reserve at beginning of the period	$	58		$	113		$	88		$	126
Provision - charge		0			1			12			2
Provision - reversal		(0	)		(0	)		(0	)		(0	)
Cash payments		(9	)		(8	)		(50	)		(17	)
Translation difference		(4	)		1			(5	)		(4	)
Reserve at end of the period	$	45		$	107		$	45		$	107

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 six months periods ended June 30, 2022, provisions and cash payments primarily relate to warranty related issues. For the three and six months periods ended June 30, 2021, provisions and cash paid primarily related to warranty related issues. As of June 30, 2022, the reserve for product related liabilities mainly relates to recall related issues.

The table below summarizes the change in the balance sheet position of the product-related liabilities (dollars in millions). A majority of the Company’s product-related liabilities as of June 30, 2022 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 June 30, 2022, the Company had total insurance receivables of $149 million.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Reserve at beginning of the period	$	150		$	328		$	144		$	341
Change in reserve		3			1			12			5
Cash payments		(5	)		(237	)		(8	)		(243	)
Translation difference		(2	)		11			(2	)		(0	)
Reserve at end of the period	$	145		$	103		$	145		$	103

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 June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Service cost	$	0		$	2		$	0		$	4
Interest cost		4			2			6			5
Expected return on plan assets		0			(5	)		(4	)		(9	)
Amortization of prior service cost		—			1			—			0
Amortization of actuarial loss		0			1			0			1
Settlement loss		0			—			1			—
Net Periodic Benefit Cost	$	4		$	1		$	3		$	1

Non-U.S. Plans	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Service cost	$	2		$	3		$	5		$	6
Interest cost		2			2			3			3
Expected return on plan assets		(1	)		(1	)		(1	)		(1	)
Amortization of actuarial loss		0			1			0			1
Curtailment gain		(2	)		—			(2	)		—
Settlement gain		(2	)		—			(3	)		—
Net Periodic Benefit (Gain) Cost	$	(1	)	$	5		$	2		$	9

The Service cost and Amortization of prior service cost components in the tables above are 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.

Settlement accounting has been triggered for the U.S. pension plans because the lump-sum payments made during the second quarter exceeded the sum of service cost and interest cost for these U.S. plans. Due to the settlement accounting, the obligation and plan assets for these U.S. plans have been re-measured as of June 30, 2022, which resulted in a lower net pension liability of $3 million compared to March 31, 2022. The discount rate used to determine the U.S. net periodic benefit cost because of the re-measurement was changed from previously 3.76% to 4.76% in the second quarter. The expected long-term rate of return on plan asset is unchanged at 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, 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 or other loss, 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. 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. Accordingly, the future costs of warranty claims by customers may be material. However, the Company believes its established reserves are adequate. Autoliv’s warranty reserves are based upon the Company’s best estimates of amounts necessary to settle existing and future 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 adverse 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:

On September 18, 2014, Jamie Andrews filed a wrongful death products liability suit against several Autoliv entities stemming from a fatal car accident in 2013 where the plaintiff’s husband was fatally injured. The lawsuit alleges that Autoliv should be liable for a defectively-designed driver seatbelt. The case was removed to the United States District Court for the Northern District of Georgia. The suit originally included Bosch and Mazda entities as well, but these entities were dismissed pursuant to confidential settlement agreements with the plaintiff, and all of the Autoliv entities except Autoliv Japan Ltd. were also dismissed. On January 10, 2017, the District Court entered an order granting summary judgment in favor of Autoliv, concluding that Autoliv was not actively involved in the design of Mr. Andrews’s seatbelt and, therefore, should not be liable for plaintiff’s claims as a matter of law. However, on appeal, the Eleventh Circuit Court of Appeals reversed the decision, holding that, under Georgia’s products liability statute, Autoliv could be liable for a design defect associated with the seatbelt, regardless of its level of involvement in the seatbelt’s ultimate design, because Autoliv manufactured it. On October 4, 2021, the case proceeded to a bench trial before the United States District Court for the Northern District of Georgia. On December 31, 2021, the District Court entered a Final Order and Judgment concluding that Mr. Andrews’s seatbelt was defectively designed and Autoliv was strictly liable for the design. In doing so, the District Court concluded that Mr. Andrews had incurred $27,019,343 in compensatory damages, but only ordered Autoliv to pay 50 percent of that amount, $13,509,671 after finding that 50 percent of the fault for Mr. Andrews’s damages should be apportioned to Mazda. The Court declined to apportion any fault for Mr. Andrews’s damages to Mr. Andrews or Bosch. The District Court also entered an award of punitive damages against Autoliv in the amount of $100,000,000. The plaintiff has since filed a post-trial motion asking the District Court to hold Autoliv liable for the entire amount of compensatory damages ($27,019,343), not just $13,509,671. The plaintiff has also requested pre-judgment interest on the damages awards plus attorneys’ fees and costs. Autoliv has opposed these requests.

The Company believes the District Court’s verdict was in error, including the grossly high punitive damages award, and has filed a post-trial motion with the District Court asking for reconsideration of the verdict. To the extent its post-trial motion is denied, the Company also plans to appeal the verdict.

The Company has determined that a loss with respect to this litigation is probable and in the fourth quarter of 2021 accrued $14 million pursuant to ASC 450. The accrual is reflected in the total product liability accrual. This amount reflects the low end of the range of a probable loss of $14 million to $114 million. The accrual reflects the Company’s best estimate of the probable loss based on currently available information and does not include any amount for the punitive damages. It is reasonably possible that the Company may have to pay the entire damages awarded by the District Court. The Company believes that its insurance should cover all of the types of damages awarded by the District Court, and has therefore recognized a receivable, included within Other non-current assets on the Consolidated Balance Sheets for the expected insurance proceeds. However, the extent of the Company's insurance coverage for punitive damages in this matter is uncertain and may be less than all of such punitive damages ultimately awarded. In the event all or a portion of the punitive damages award survives the Company's post-judgement actions, the Company will continue to engage with our insurance carriers and aggressively pursue all potential recoveries. The ultimate loss to the Company of the litigation matter could be materially different from the amount the Company has accrued. The Company cannot predict or estimate the duration or ultimate outcome of this matter.

Specific Recalls:

In the fourth quarter of 2020, the Company was made aware of a potential recall by one of its customers (the “Unannounced Recall”). The Company continues to evaluate this matter with its customer. The Company has determined pursuant to ASC 450 that a loss with respect to the Unannounced Recall is probable and has accrued an amount that is reflected in the total product liability accrual in the fourth quarter of 2020. The amount by which the product liability accrual exceeds the product liability insurance receivable with respect to the Unannounced Recall is $26 million, and includes self-insurance retention costs and deductibles. The ultimate loss to the Company of the Unannounced Recall could be materially different from the amount the Company has accrued.

Volvo Car USA, LLC (together with its affiliates, “Volvo”) has recalled approximately 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 no accrual has been made. Although the Company currently estimates a range of $0 to $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:

The Company utilizes technologies in its products, 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 that 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. Product-Related Liabilities 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 (“the Plan”), as amended and receive Autoliv stock-based awards which include stock options (“SOs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”).

For the three and six months periods ended June 30, 2022, the Company recorded approximately $3 million and $5 million, respectively, in stock-based compensation expense related to RSUs and PSUs. For the three and six months periods ended June 30, 2021, the Company recorded approximately $4 million and $7 million, respectively, in stock-based compensation expense related to RSUs and PSUs.

During the three and six months periods ended June 30, 2022, approximately 16 thousand and 138 thousand shares, respectively, of common stock from the treasury stock were utilized by the Plan. During the three and six months periods ended June 30, 2021, approximately 47 thousand and 116 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 EPS under the two-class method is set forth in the table below. Anti-dilutive shares outstanding were immaterial for all periods presented below.


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share amounts)	2022		2021		2022		2021
Numerator:
Basic and diluted:
Net income attributable to controlling interest	$	79	$	104	$	162	$	261
Participating share awards with dividend equivalent rights		0		0		0		0
Net income applicable to common shareholders		79		104		162		261
Earnings allocated to participating share awards1)		0		0		0		0
Net income attributable to common shareholders	$	79	$	104	$	162	$	261
Denominator: 1)
Basic: Weighted average common stock		87.2		87.4		87.2		87.4
Add: Weighted average stock options/ share awards		0.1		0.3		0.2		0.3
Diluted:		87.3		87.7		87.4		87.7

Net earnings per share - basic	$	0.91	$	1.19	$	1.86	$	2.98

Net earnings per share - diluted	$	0.91	$	1.19	$	1.85	$	2.98

1) The Company’s unvested RSUs and PSUs, of which some included the right to receive non-forfeitable dividend equivalents, are considered participating securities. Calculations of EPS under the two-class method exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities. The related participating securities are similarly excluded from the denominator.

12. RELATED PARTY TRANSACTIONS

Veoneer, Inc., was a related party until April 1, 2022. During the three months period ended March 31, 2022, when Veoneer was a related party, the Company's related party purchases from Veoneer amounted to $17 million. For the three and six months periods ended June 30, 2021, the Company's related party purchases from Veoneer amounted to $20 million and $41 million, respectively.

Amounts due to and due from related party as of December 31, 2021 were as follows (dollars in millions).


	As of
	December 31, 2021
Related party receivables1)	$	1
Related party payables2)		15
Related party accrued expenses3)		9

1) Included in Receivables, net in the Condensed Consolidated Balance Sheet.

2) Included in Accounts payable in the Condensed Consolidated Balance Sheet.

3) Included in Accrued expenses in the Condensed Consolidated Balance Sheet.

13. REVENUE DISAGGREGATION

The Company’s disaggregated revenue for the three and six months periods ended June 30, 2022 and June 30, 2021, were as follows (dollars in millions).


Net Sales by Products	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Airbag Products and Other1)	$	1,336	$	1,310	$	2,716	$	2,773
Seatbelt Products1)		746		712		1,489		1,491
Total net sales	$	2,081	$	2,022	$	4,206	$	4,265
1) Including Corporate and other sales.


Net Sales by Region	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
China	$	363	$	399	$	810	$	814
Japan		142		175		320		386
Rest of Asia		227		219		459		471
Americas		738		621		1,431		1,307
Europe		611		608		1,186		1,287
Total net sales	$	2,081	$	2,022	$	4,206	$	4,265

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 six months periods ended June 30, 2022 and June 30, 2021, were not material in any period.

14. SUBSEQUENT EVENTS

There were no reportable events subsequent to June 30, 2022.

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, 2021 filed with the United States Securities and Exchange Commission (the “SEC”) on February 22, 2022. 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

The Company managed good execution in a challenging environment in the second quarter, leading to better-than-expected results.

A strong performance in June, with some LVP recovery and progress in the customer price discussions, including some retroactive compensations, means that the Company is reporting a second quarter adjusted operating margin (Non-U.S. GAAP measure) that is better than in the first quarter. Supply chains remained distressed in the quarter, aggravated by lockdowns in China. Raw material cost increases, currency movements and a lower-than-expected and volatile LVP were also major challenges in the quarter. Cash flow was negative in the quarter, mainly due to volatility and timing effects on working capital. The Company expects to recover most of these effects in the second half of the year.

In a quarter where the Company saw continued low and volatile LVP, Autoliv managed to outperform global LVP significantly, despite negative regional mix effects.

It is encouraging that the Company is making progress in compensation from its customers in the form of sustainable price increases. Discussions continue where the Company aims for prices that reflect changes in the cost environment and a contract structure that is flexible and allows for broader and faster adjustments to future changes in the business environment.

Recent developments in supply chains, customer production plans, raw material prices and the Company's cost recovery discussions are encouraging and the Company believes it is well prepared for an improved market development. However, the Company is also making sure it is agile and prepared for more adverse market development should that be necessary. Therefore, the Company continues to step up its cost control measures. Cost reductions and footprint initiatives are on plan and include capacity alignments and footprint optimizations.

The Company is adjusting its full year 2022 indication to a narrower range, reflecting the Company's actions and the shorter time span remaining of the year. Although the leverage ratio (Non-U.S. GAAP measure) currently is above the Company's target range, the Company remains committed to its share repurchase ambitions over time.

The Company remains confident in its medium-term adjusted operating margin (Non-U.S. GAAP measure) target of 12%, based on the framework the Company outlined at its Capital Market Day in 2021.

Financial highlights in the second quarter of 2022

$2,081m net sales

2.9% net sales increase

8.0% organic sales increase (Non-U.S. GAAP measure)

6.0% operating margin

6.0% adjusted operating margin (Non-U.S. GAAP measure)

$0.91 EPS - a decrease of 24%

$0.90 adjusted EPS (Non-U.S. GAAP measure) - a decrease of 25%

Key business developments in the second quarter of 2022

•

Sales increased organically (Non-U.S. GAAP measure) by 8%, which was around 7pp better than global LVP which increased by around 1% (IHS Markit July 2022). The outperformance was mainly due to price increases and new product launches.

•

Stronger than expected performance in June driven by price increases, LVP recovery and a patent litigation settlement led to a better-than-expected operating profit for the quarter. However, profitability declined due to higher raw material costs, currency movements, low and volatile LVP and lockdowns in China. Operating margin and adjusted operating margin (Non-U.S. GAAP measure) declined by 2.2pp. Commercial recoveries relating to periods prior to second quarter 2022 and the patent litigation settlement combined amounted to around $50 million in the quarter. Return on capital employed was 13.1%.

•

Negative Q2 operating cash flow, expected to recover in the second half. Operating cash flow was negative $51 million and free cash flow (Non-U.S. GAAP measure) was negative $190 million impacted by adverse effects from working capital. Net debt (Non-U.S. GAAP measure) increased and EBITDA declined versus a year earlier, leading to a leverage ratio of 1.7x. A dividend of $0.64 per share was paid and 0.30 million shares were repurchased in the quarter.

Business update relating to COVID-19, the war in Ukraine and other market conditions

COVID-19

The COVID-19 pandemic continued to impact the Company's business in the second quarter of 2022 through limited LVP by its customers caused by global semiconductor shortage and other industry supply chain disruptions. The second quarter of 2022 saw global LVP growth year over year by around 1% (according to IHS Markit July 2022). Supply chain disruptions that led to low customer demand visibility and material changes to customer call-offs with short notice negatively impacted our production efficiency and profitability in the quarter. Rising raw material costs amounted to almost 6pp in operating margin headwind in the second quarter, of which a large part was offset by commercial customer recoveries, including retroactive compensations.

Direct COVID-19 related costs, such as personal protective equipment, quarantine costs and similar items, were around $8 million in the second quarter of 2022. Governmental support in connection with furloughing, short-term work weeks, and other similar activities was around $0.5 million in the quarter.

Pandemic related lockdowns in China in April resulted in significant loss of production and adversely impacted sales and profitability. June was not impacted by lockdowns.

The Company expects the current industry-wide semiconductor supply shortage to be a limiting factor for the global LVP recovery in 2022. The Company also expects that the current price environment could lead to raw material costs of up to 5.5pp in operating margin headwind for the full year of 2022, with similar year over year impact in all quarters. The Company is currently in discussions with its customers regarding price increases and the Company believes product price increases should gradually offset the cost inflation. The Company achieved significant price increases in the second quarter and expect further positive results in the second half of 2022.

In response to the increased challenging market conditions, the Company continues with strict cost control measures, a hiring freeze and accelerated cost savings and footprint activities. The situation is monitored closely, and further actions are being evaluated.

The war in Ukraine

The direct impact of the war in Ukraine on the Company's business has been relatively limited. In 2021, sales in Russia were less than 1.0% of total sales. The Company has one facility with less than 200 employees in Russia. The Company's net assets in Russia, mainly USD cash items, amount to around $14 million. The Company has no operations in Ukraine. The Company has identified four sub-suppliers in Ukraine and the Company is supporting its suppliers in relocating that sourcing. The Company has been able to fulfill its delivery commitments to its customers. The war initially impacted European LVP negatively due to component shortages. The actions undertaken by the impacted suppliers to relocate sourcing are either activated or could be immediately activated in emergency cases. The shortage situation has improved and is not currently materially impacting LVP.

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						Six Months Ended
	or As of June 30,						or As of June 30,
	2022			2021			2022			2021
Total parent shareholders’ equity per share	$	29.20		$	29.72		$	29.20		$	29.72
Capital employed 1)		3,876			3,815			3,876			3,815
Net debt 2)		1,318			1,200			1,318			1,200

Trade working capital8)		1,379			1,495			1,379			1,495
Trade working capital relative to sales, %9)		16.6	%		18.5	%		16.6	%		18.5	%
Receivables outstanding relative to sales, %10)		21.4	%		21.3	%		21.4	%		21.3	%
Inventory outstanding relative to sales, %11)		10.8	%		11.1	%		10.8	%		11.1	%
Payables outstanding relative to sales, %12)		15.7	%		13.9	%		15.7	%		13.9	%

Gross margin, % 3)		15.7	%		19.0	%		14.6	%		19.8	%
Operating margin, % 4)		6.0	%		8.1	%		6.1	%		9.4	%

Return on total equity, % 5)		12.1	%		16.3	%		12.4	%		20.8	%
Return on capital employed, % 6)		13.1	%		17.6	%		13.8	%		21.8	%

Headcount at period-end 7)		64,700			64,500			64,700			64,500

1) Total equity and net debt.

2) 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.

3) Gross profit relative to sales.

4) Operating income relative to sales.

5) Net income relative to average total equity.

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

7) Employees plus temporary, hourly personnel.

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

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

10) Outstanding receivables relative to annualized quarterly sales.

11) Outstanding inventory relative to annualized quarterly sales.

12) Outstanding payables relative to annualized quarterly sales.

three months period ended June 30, 2022 COMPARED WITH three months period ended June 30, 2021

Consolidated Sales Development

(dollars in millions)


	Three Months Ended June 30,							Components of change in net sales
	2022		2021		Reported change			Currency effects 1)			Organic 3)
Airbag products and Other2)	$	1,336	$	1,310		2.0	%		(4.9	)%		6.8	%
Seatbelt products 2)		746		712		4.7	%		(5.5	)%		10.2	%
Total	$	2,081	$	2,022		2.9	%		(5.1	)%		8.0	%

Asia	$	732	$	794		(7.8	)%		(6.1	)%		(1.7	)%
Whereof: China		363		399		(9.2	)%		(2.3	)%		(6.9	)%
Japan		142		175		(18.8	)%		(13.5	)%		(5.3	)%
Rest of Asia		227		219		3.3	%		(7.2	)%		10.5	%
Americas		738		621		19.0	%		0.3	%		18.6	%
Europe		611		608		0.6	%		(9.3	)%		9.9	%
Total	$	2,081	$	2,022		2.9	%		(5.1	)%		8.0	%

1) Effects from currency translations.

2) Including Corporate and Other sales.

3) Non-U.S. GAAP measure.

Sales by product - Airbags, Steering Wheels and Other

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

Sales by product - Seatbelts

The main contributor to Seatbelt products organic growth (Non-U.S. GAAP measure) was Europe and Americas, partly offset by a small decline in China.

Sales by region

The Company's global organic sales (Non-U.S. GAAP measure) increased by 8% compared to the global LVP increase of around 1% (according to IHS Markit July 2022). The 7pp outperformance was driven by price increases and new product launches, partly offset by negative geographical mix effects. Autoliv outperformed LVP by around 15pp in Europe, by around 10pp in Japan and by around 8pp in Americas. The Company underperformed by around 4pp in China reflecting that lower-end vehicles production grew while higher-end vehicle production declined. The Company underperformed by around 3pp in Rest of Asia.

Second quarter of 2022 organic growth1)

Americas

Europe

China

Japan

Rest of
Asia

Global

Autoliv

19

10

(6.9

(5.3

11

8.0

Main growth drivers

Ford, Stellantis

Stellantis, Ford, VW

Toyota, Mercedes

Subaru, Nissan

Tata, Suzuki

Ford, Stellantis

Main decline drivers

Honda

Volvo, Mitsubishi

Honda, Great Wall, GM

Toyota, Mazda, Honda

Nissan, Mitsubishi

Honda, Great Wall, Volvo

1) Non-U.S. GAAP measure.

Light Vehicle Production Development

Change second quarter of 2022 versus second quarter of 2021


	Americas			Europe			China			Japan			Rest of Asia			Global
LVP1)		11	%		(5.0	)%		(3.1	)%		(15	)%		14	%		0.6	%

1) Source: IHS Markit July 2022.

Earnings


	Three Months Ended June 30,
(Dollars in millions, except per share data)	2022			2021			Change
Net Sales	$	2,081		$	2,022			2.9	%
Gross profit		326			384			(15.2	)%
% of sales		15.7	%		19.0	%		(3.3)pp
S, G&A		(112	)		(111	)		0.9	%
% of sales		(5.4	)%		(5.5	)%		0.1	pp
R, D&E, net		(112	)		(107	)		5.0	%
% of sales		(5.4	)%		(5.3	)%		(0.1)pp
Amortization of Intangibles		(0	)		(3	)		(85.5	)%
Other income (expense), net		22			0		n/a
Operating income		124			164			(24.5	)%
% of sales		6.0	%		8.1	%		(2.2)pp
Adjusted operating income1)		124			166			(25.1	)%
% of sales		6.0	%		8.2	%		(2.2)pp
Financial and non-operating items, net		(7	)		(12	)		(43.0	)%
Income before taxes		117			152			(23.1	)%
Income taxes		(38	)		(48	)		(20.8	)%
Tax rate		32.2	%		31.3	%		0.9	pp
Net income		79			105			(24.1	)%
Earnings per share, diluted2)		0.91			1.19			(23.8	)%
Adjusted earnings per share, diluted1),2)		0.90			1.20			(25.2	)%

1) Non-U.S. GAAP measure, excluding costs for capacity alignment and gain on sale of property.

2) Assuming dilution, when applicable, and net of treasury shares. Participating share awards with right to receive dividend equivalents are under the two-class method excluded from the EPS calculation.

Second quarter of 2022 development

Gross profit decreased by $58 million, and the gross margin decreased by 3.3pp compared to the same quarter 2021. The gross margin decrease was primarily driven by adverse effects from higher raw material costs, partly offset by price increases.

S,G&A costs were close to unchanged compared to the prior year, as increased IT expenses were offset by positive foreign currency translation effects.

R,D&E, net costs increased by around $5 million compared to the prior year, mainly due to lower engineering income. R,D&E, net, in relation to sales was close to unchanged at 5.4%.

Other income (expense), net improved by around $22 million compared to the prior year, mainly due to a patent litigation settlement.

Operating income decreased by $40 million compared to the same period in 2021, mainly as a consequence of the lower gross profit, partly offset by the improved Other income (expense).

Adjusted operating income (Non-U.S. GAAP measure) decreased by $42 million versus the prior year, mainly due to lower gross profit, partly offset by the improved Other income (expense).

Financial and non-operating items, net, improved by $5 million, mainly due to lower interest expenses and non-operating items, net.

Income before taxes decreased by $35 million compared to the prior year, mainly due to the lower operating income partly offset by improved financial and non-operating items, net.

Tax rate was 32.2%, compared to 31.3% in the same period last year, mainly due to unfavorable country mix. In addition, discrete tax items, net, increased the tax rate this quarter by 1.5%. Discrete tax items were not material last year.

Earnings per share, diluted decreased by $0.28 compared to a year earlier, where the main drivers were $0.33 from lower adjusted operating income (Non-U.S. GAAP measure) partly mitigated by $0.04 from financial items.

six months period ended June 30, 2022 compared with six months period ended June 30, 2021

Consolidated Sales Development

(dollars in millions)


	Six Months Ended June 30,							Components of change in net sales
	2022		2021		Reported change			Currency effects 1)			Organic 3)
Airbag products and Other 2)	$	2,716	$	2,773		(2.1	)%		(4.4	)%		2.4	%
Seatbelt products 2)		1,489		1,491		(0.2	)%		(5.0	)%		4.8	%
Total	$	4,206	$	4,265		(1.4	)%		(4.6	)%		3.2	%

Asia	$	1,589	$	1,671		(4.9	)%		(4.8	)%		(0.1	)%
Whereof: China		810		814		(0.5	)%		(0.0	)%		(0.4	)%
Japan		320		386		(17.0	)%		(11.9	)%		(5.1	)%
Rest of Asia		459		471		(2.7	)%		(7.4	)%		4.7	%
Americas		1,431		1,307		9.4	%		0.2	%		9.2	%
Europe		1,186		1,287		(7.8	)%		(9.3	)%		1.5	%
Total	$	4,206	$	4,265		(1.4	)%		(4.6	)%		3.2	%

1) Effects from currency translations.

2) Including Corporate and Other sales.

3) Non-U.S. GAAP measure.

Sales by product - Airbags, Steering Wheels and Other

The largest contributor to the organic growth (Non-U.S. GAAP measure) was steering wheels, followed by inflatable curtains and front center airbags.

Sales by product - Seatbelts

The main contributor to Seatbelt products organic growth (Non-U.S. GAAP measure) was Americas followed by Rest of Asia and Europe, partly offset by a decline in China.

Sales by region

The Company's global organic sales (Non-U.S. GAAP measure) increased by around 3% compared to the LVP decline of around 1% (according to IHS Markit July 2022). The 4.4pp outperformance was driven by new product launches and price increases. The Company outperformed LVP by around 14pp in Europe, by around 9pp in Japan, and by around 5pp in Americas. The Company underperformed by around 3pp in China and Rest of Asia.

First six months 2022 organic growth1)

Americas

Europe

China

Japan

Rest of
Asia

Global

Autoliv

9.2

1.5

(0.4

(5.1

4.7

3.2

Main growth drivers

Ford, Stellantis

Stellantis, Toyota, Ford

Toyota, Mercedes

Mitsubishi, Honda, Subaru

Tata, Honda, Suzuki

Stellantis, Ford

Main decline drivers

Honda, Nissan

Volvo, BMW

Great Wall, GM, VW

Toyota, Nissan, Mazda

Hyundai/Kia, Nissan, Mitsubishi

Nissan, Great Wall, Honda

1) Non-U.S. GAAP measure.

Light Vehicle Production Development

Change First six months 2022 versus first six months 2021


	Americas			Europe			China			Japan			Rest of Asia			Global
LVP1)		3.8	%		(12	)%		3.0	%		(14	)%		8.0	%		(1.2	)%

1) Source: IHS Markit July 2022.

Earnings


	Six Months Ended June 30,
(Dollars in millions, except per share data)	2022			2021			Change
Net Sales	$	4,206		$	4,265			(1.4	)%
Gross profit		614			843			(27.1	)%
% of sales		14.6	%		19.8	%		(5.2)pp
S, G&A		(227	)		(219	)		4.0	%
% of sales		(5.4	)%		(5.1	)%		(0.3)pp
R, D&E, net		(219	)		(213	)		2.7	%
% of sales		(5.2	)%		(5.0	)%		(0.2)pp
Amortization of Intangibles		(2	)		(5	)		(65.1	)%
Other income (expense), net		92			(4	)	n/a
Operating income		258			401			(35.6	)%
% of sales		6.1	%		9.4	%		(3.3)pp
Adjusted operating income1)		192			403			(52.3	)%
% of sales		4.6	%		9.4	%		(4.9)pp
Financial and non-operating items, net		(22	)		(32	)		(31.2	)%
Income before taxes		237			370			(36.0	)%
Income taxes		(74	)		(108	)		(31.5	)%
Tax rate		31.3	%		29.2	%		2.1	pp
Net income		163			262			(37.9	)%
Earnings per share, diluted2)		1.85			2.98			(37.8	)%
Adjusted earnings per share, diluted1),2)		1.36			2.99			(54.5	)%

1) Non-U.S. GAAP measure, excluding costs for capacity alignment and gain on sale of property.

First six months 2022 development

Gross profit decreased by $228 million and the gross margin decreased by 5.2pp compared to the same period 2021. The gross margin decrease was primarily driven by adverse effects from higher raw material costs and higher costs for premium freight, partly offset by price increases.

S,G&A costs increased by $9 million compared to the prior year, mainly relating to investments in personnel and IT and improvement projects partly offset by positive foreign currency translation effects.

R,D&E, net costs increased by $6 million, mainly due to lower engineering income. R,D&E, net, in relation to sales was close to unchanged at 5.2%.

Other income (expense), net improved by $96 million compared to the prior year, mainly due to around $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 provision for the closure of a plant in South Korea.

Operating income decreased by $143 million compared to the same period in 2021, mainly as a consequence of the lower gross profit, partly offset by the improved Other income (expense).

Adjusted operating income (Non-U.S. GAAP measure) decreased by $211 million versus the prior year, mainly due to lower gross profit.

Financial and non-operating items, net, improved by $10 million, mainly due to lower interest expenses and non-operating items, net.

Income before taxes decreased by $133 million compared to the prior year, mainly due to the lower operating income partly offset by improved financial and non-operating items, net.

Tax rate was 31.3%, compared to 29.2% in the same period last year, mainly due to unfavorable country mix. In addition, discrete tax items, net, increased the tax rate this year by 1.0%. Discrete tax items were not material last year.

Earnings per share, diluted decreased by $1.13 compared to a year earlier, where the main drivers were $1.70 from lower adjusted operating income (Non-U.S. GAAP measure) partly mitigated by $0.50 from capacity alignment and $0.08 from financial items.

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, 2021 filed with the SEC on February 22, 2022.

Second quarter of 2022 development

Trade working capital (Non-U.S. GAAP measure, see calculation table below) was reduced by $116 million compared to the same period last year, where the main drivers were related to $178 million higher accounts payables, partly offset by $60 million in higher receivables.

Operating cash flow decreased by $114 million to negative $51 million compared to the same period last year, mainly due to unfavorable changes in operating working capital related mainly to sales volatility and timing effects.

Capital expenditure, net increased by $42 million, which mainly reflects investments related to footprint and capacity expansions. Capital expenditure, net in relation to sales was 6.7% versus 4.8% a year earlier.

Free cash flow (Non-U.S. GAAP measure, see calculation table below) was negative $190 million, compared to negative $33 million a year earlier. The decline was due to the lower operating cash flow and higher capital expenditure, net.

Net debt (Non-U.S. GAAP measure, see reconciliation table below) was $1,318 million as of June 30, 2022, which was $118 million higher than a year earlier.

Liquidity position. As of June 30, 2022, the Company's cash balance was around $0.3 billion, and including committed, unused loan facilities, the Company's liquidity position was around $1.4 billion.

Leverage ratio (Non-U.S. GAAP measure, see calculation table below). As of June 30, 2022, the Company had a leverage ratio of 1.7x, compared to 1.1x as of June 30, 2021, as both the net debt (Non-U.S. GAAP measure) decreased and the 12 months trailing adjusted EBITDA (Non-U.S. GAAP measure) decreased.

Total equity decreased by $56 million compared to June 30, 2021, mainly due to dividends paid of $222 million, adverse currency translation effects of $176 million, and $40 million from share repurchases partly offset by $338 million from net income.

First six months 2022 development

Operating cash flow decreased by $230 million to $19 million compared to the same period last year, mainly due to lower net income and changes in operating working capital.

Capital expenditure, net decreased by $34 million, which mainly reflects $95 million in proceeds from the sale of property, plant and equipment partly offset by increased investments related to footprint and capacity expansions. Capital expenditure, net in relation to sales was 3.7% versus 4.4% a year earlier.

Free cash flow (Non-U.S. GAAP measure, see calculation table below) was negative $137 million, compared to positive $60 million a year earlier. The decline was due to the lower operating cash flow, partly offset by the property sale in Japan.

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. 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 June 30, 2022									Three Months Ended June 30, 2021
	Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP			Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP
Operating income	$	124		$	0		$	124		$	164		$	1		$	166
Operating margin, %		6.0	%		0.0	%		6.0	%		8.1	%		0.1	%		8.2	%
Earnings per share, diluted	$	0.91		$	(0.01	)	$	0.90		$	1.19		$	0.01		$	1.20

1) Including costs for capacity alignment.


	Six Months Ended June 30, 2022									Six Months Ended June 30, 2021
	Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP			Reported U.S. GAAP			Adjustments1)			Non-U.S. GAAP
Operating income	$	258		$	(66	)	$	192		$	401		$	1		$	403
Operating margin, %		6.1	%		(1.6	)%		4.6	%		9.4	%		0.0	%		9.4	%
Earnings per share, diluted	$	1.85		$	(0.49	)	$	1.36		$	2.98		$	0.01		$	2.99

1) Including costs for capacity alignment and gain on sale of property in Japan in 2022.

Items included in Non-U.S. GAAP adjustments

(Dollars in millions, except per share data)


	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Millions		Per share		Millions			Per share
Capacity alignment	$	0	$	0.00	$	1		$	0.02
Total adjustments to operating income		0		0.00		1			0.02
Tax on non-U.S. GAAP adjustments1)		0		0.00		(0	)		(0.00	)
Total adjustments to net income	$	0	$	0.00	$	1		$	0.01

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


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	Millions			Per share			Millions			Per share
Capacity alignment1)	$	(66	)	$	(0.76	)	$	1		$	0.02
Total adjustments to operating income		(66	)		(0.76	)		1			0.02
Tax on non-U.S. GAAP adjustments2)		23			0.27			(0	)		(0.00	)
Total adjustments to net income	$	(43	)	$	(0.49	)	$	1		$	0.01

1) Whereof gain on sale of property in Japan of $80 million in March 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)


	June 30, 2022			December 31, 2021			June 30, 2021
Receivables, net	$	1,779		$	1,699		$	1,719
Inventories, net		903			777			901
Accounts payable		(1,303	)		(1,144	)		(1,125	)
Trade working capital	$	1,379		$	1,332		$	1,495

The non-U.S. GAAP measure “Net debt” is also used in the non-U.S. GAAP measure “Leverage ratio”. Management uses this measure 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. For details on leverage ratio refer to the table below.

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

(Dollars in millions)


	June 30, 2022			December 31, 2021			June 30, 2021
Short-term debt	$	559		$	346		$	363
Long-term debt		1,060			1,662			1,712
Total debt		1,619			2,008			2,075
Cash and cash equivalents		(327	)		(969	)		(893	)
Debt issuance cost/Debt-related derivatives, net		26			13			18
Net debt	$	1,318		$	1,052		$	1,200

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)


	June 30, 2022			December 31, 2021			June 30, 2021
Net debt1)	$	1,318		$	1,052		$	1,200
Pension liabilities		155			197			239
Debt per the Policy		1,473			1,248			1,438

Net income2)		338			437			550
Income taxes 2)		143			177			247
Interest expense, net2,3)		51			57			69
Other non-operating items, net2)		2			7			22
Income from equity method investments2)		(3	)		(3	)		(4	)
Depreciation and amortization of intangibles2)		381			394			394
Capacity alignments and antitrust related matters2)		(59	)		8			37
EBITDA per the Policy (Adjusted EBITDA)	$	854		$	1,077		$	1,313
Leverage ratio		1.7			1.2			1.1

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.

Calculation of “Free Cash Flow”

(Dollars in millions)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net income	$	79		$	105		$	163		$	262
Changes in operating working capital		(239	)		(125	)		(257	)		(214	)
Depreciation and amortization		90			100			186			199
Gain on divestiture of property		—			—			(80	)		—
Other, net		19			(16	)		7			2
Operating cash flow		(51	)		63			19			249
Capital expenditure, net		(139	)		(96	)		(156	)		(189	)
Free cash flow1)	$	(190	)	$	(33	)	$	(137	)	$	60
1) Operating cash flow less Capital expenditures, net.

Headcount


	June 30, 2022			December 31, 2021			June 30, 2021
Total headcount		64,700			60,600			64,500
Whereof:
Direct personnel in manufacturing		46,500			43,000			46,400
Indirect personnel		18,200			17,600			18,000
Temporary personnel		9.6	%		7.8	%		9.1	%

By June 30, 2022, total headcount increased by 200 compared to a year earlier. The indirect workforce increased by 1.1% while the direct workforce increased by 0.2%. Compared to March 31, 2022, total headcount decreased by 100, direct workforce decreased by 500 and the indirect workforce increased by 400.

Full year 2022 indications

The Company's outlook indications for 2022 reflect continuing uncertainty in the automotive markets and are mainly based on the Company's customer call-offs and global LVP outlook of a full year 2022 global LVP growth of 2-5% and that the Company achieves its targeted cost compensation effects along with some market stabilization.


Financial measure		Full year indication
Organic sales growth		Around 13%-16%
FX impact on net sales		Around 5% negative
Adjusted operating margin 1)		Around 6.0%-7.0%
Tax rate 2)		Around 30%
Operating cash flow 3)		Around $750-$850 million
Capex, net % of sales		Around 5.5%
1) Excluding costs for capacity alignments, antitrust related matters 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 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 second quarter of 2022

VW ID.Buzz: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Seatbelts

Mercedes-Benz GLC: Steering Wheel, Driver/Passenger Airbags

Mercedes-Benz EQE Steering Wheel, Driver/Passenger Airbags

Mercedes-Benz EQS SUV: Steering Wheel, Driver/Passenger Airbags

Great Wall ORA Ballet Cat: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts, Pyrotechnical Safety Switch

Li Xiang L9: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts

Range Rover Sport: Driver/Passenger Airbags, Side Airbags, Seatbelts

Opel Astra Sports Tourer: Steering Wheel,Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Seatbelts

Honda HR-V/ZR-V: Steering Wheel, Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags

Other Items

•

On May 23, 2022, Autoliv announced the refinancing of its existing $1.1 billion Revolving Credit Facility.

•

On July 11, 2022, Autoliv announced cooperation with POC to study and develop bicycle and e-bike helmets equipped with airbag technology to improve head protection and reduce the consequences of an impact.

•

Under Autoliv’s 2022-2024 stock purchase program, purchases of common stock and SDRs may be made in open market purchases, privately negotiated transactions, block purchase techniques, 10b5-1 trading plans or a combination of the foregoing in accordance with applicable law and the rules and regulations of both the NYSE and Nasdaq Stockholm. During the second quarter 2022, Autoliv repurchased 0.30 million shares of common stock at an average price of $73.68.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2022, 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, 2021 filed with the SEC on February 22, 2022.

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

Except as set forth below, as of June 30, 2022, 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, 2021 filed with the SEC on February 22, 2022.

We are currently operating in a period of significant macro-economic uncertainty, including global disruption of LVP due to supply-chain disruptions and COVID-related lockdowns and increasing inflationary pressures and commodity costs. Although we have minimum operations in Russia, the war in Ukraine and the current COVID-related lockdowns in China are exacerbating commodity cost increases, supply chain challenges and volatility with our customers’ production schedules. If the war in Ukraine continues for a lengthy period or spreads or the COVID-related lockdowns in China continue for a lengthy period or spread, it may have a materially negative impact on our business and results of operations.

The macro-economic uncertainty has been exacerbated by the war in Ukraine. Although the length and impact of the ongoing war is highly unpredictable, it exacerbated volatility in commodity prices, inflationary pressures, credit markets, foreign exchange rates and supply chain disruptions. Furthermore, governments in the United States, United Kingdom, Canada and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. Existing or additional sanctions could further adversely affect the global economy further disrupt the global supply chain. Inflation is also currently high world-wide and may continue for an unforeseen time.

Due in part to the negative impact of the war in Ukraine and the current COVID lock-downs in China, we have experienced exacerbated increases in raw materials and increased costs for transportation, energy, and commodities. Although we are negotiating with our customers with respect to these additional commodity costs increases, commercial negotiations with our customers may not be successful or may not offset all of the adverse impact of higher transportation, energy and commodity costs. Additionally, even if we are successful with respect to negotiations with customers relating to commodity cost increases, there may be delay before we recover any increased costs. These may have a material negative impact on our business and results of operations.

For additional information see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 22, 2022.

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 June 30, 2022.


	New York Stock Exchange (NYSE)
Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (USD) (2)		Maximum Number of Shares that May Yet Be Purchased Under the Program (3)
April 1-30, 2022		110,826	$	73.11		16,654,417
May 1-31, 2022		188,970	$	74.02		16,465,447
June 1-30, 2022		—	$	—		16,465,447

(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 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 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

Not applicable.

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		Base Listing Particulars Agreement, dated April 11, 2019, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.7 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 26, 2019).

4.8		Base Listing Particulars Agreement, dated February 21, 2020, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.10 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 24, 2020).

4.9		Base Listing Particulars Agreement, dated February 19, 2021, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.13 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 23, 2021).

4.10		Amended and Restated Programme Agreement, dated February 19, 2021, 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 23, 2021).

4.11		Amended and Restated Agency Agreement, dated February 19, 2021, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.15 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 23, 2021).

4.12		Base Listing Particulars Agreement, dated February 22, 2022, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.12 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 22, 2022).

4.13		Amended and Restated Programme Agreement, dated February 22, 2022, among Autoliv, Inc., Autoliv ASP, Inc. and the dealers named therein, incorporated herein by reference to Exhibit 4.13 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 22, 2022).

4.14		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).


10.1*		Facilities Agreement of $1,100,000,000, dated May 23, 2022, among Autoliv, Inc., Autoliv ASP, Inc., Citibank, N.A., London Branch, Mizuho Bank, Ltd. and Skandinaviska Enskilda Banken AB (publ), and the other parties and lenders named therein.

10.2*		Autoliv, Inc. Non-Employee Director Compensation Policy, effective May 1, 2022.

10.3*		Form of Non-Employee Directors 2022 restricted stock units grant agreement under Autoliv, Inc. 1997 Stock Incentive Plan, as amended and restated.

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: July 22, 2022

AUTOLIV, INC.

(Registrant)


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