Financial highlights Q4 2021 - Form 8-K

Financial highlights Q4 2021

$2,119mnet sales

16%organic sales decline*

8.2%operating margin

8.3%adjusted operating margin*

$1.31EPS - a decrease of $0.84

$1.30adjusted EPS* - a decrease of $0.89

Full year 2022 indications

Around 20%organic sales growth

Around 3%negative FX effect on net sales

Around 9.5%adjusted operating margin

Around $950m operating cash flow

•

Significant organic sales decline* as global LVP declined by 13% vs. Q4 last year (IHS Markit Jan 2022). Sales decreased organically by 15.6%, underperforming global LVP by 2.6pp, mainly due to negative geographical mix effects as LVP in high safety content per vehicle markets declined significantly more than LVP in low content markets.

•

Profitability declined due to lower sales and almost 3pp operating margin headwind from higher raw material costs. Adjusted operating margin* declined by 4.0pp to 8.3%. Adjusted return on capital employed* was 19.1%.

•

Strong balance sheet and leverage ratio* well within target range.Operating cash flow of $317 million and free cash flow* of $164 million support continued balance sheet improvement. A dividend of $0.64 per share was previously declared and paid in the quarter. Net debt* declined, resulting in a leverage ratio of 1.2x.

(Dollars in millions, except per share data)

Q4 2021

Q4 2020

Change

FY 2021

FY 2020

Change

Net sales

$2,119

$2,517

(15.8)%

$8,230

$7,447

10.5%

Operating income

$174

$307

(43.2)%

$675

$382

76.6%

Adjusted operating income¹⁾

$177

$311

(43.2)%

$683

$482

41.8%

Operating margin

8.2%

12.2%

(4.0)pp

8.2%

5.1%

3.1pp

Adjusted operating margin¹⁾

8.3%

12.4%

(4.0)pp

8.3%

6.5%

1.8pp

Earnings per share^{2, 3)}

$1.31

$2.15

(38.9)%

$4.96

$2.14

132%

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

$1.30

$2.19

(40.5)%

$5.02

$3.15

59.4%

Operating cash flow

$317

$469

(32.5)%

$754

$849

(11.2)%

Return on capital employed⁴⁾

18.9%

33.7%

(14.8)pp

18.3%

10.4%

7.9pp

Adjusted return on capital employed ^1,5)

19.1%

33.4%

(14.3)pp

18.5%

12.9%

5.6pp

1) Excluding costs for capacity alignment and in 2020 antitrust related matters. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 4) Annualized operating income and income from equity method investments, relative to average capital employed. 5) Annualized operating income and income from equity method investments, relative to average capital employed. Non-U.S. GAAP measure, see reconciliation table.

Comments from Mikael Bratt, President & CEO

The fourth quarter of 2021 remained challenging with indirect effects from COVID-19 continuing to impact our business. LVP continued to be limited by lack of semiconductors, although the situation improved in the latter part of the quarter with improved call-off stability bringing some cause for cautious optimism for LVP growth in 2022.

quarter. We therefore believe that there was an element of pull forward of our sales from the fourth to third quarter of 2021, contributing to a temporary lower than expected outperformance.

Cost increases for raw materials generated a headwind of almost 3pp to our operating margin in the quarter. We expect rising raw material costs to amount to around 3pp in operating margin headwind for full year 2022, with around 5pp y-o-y impact in the first half year and around 1-2 pp in the second half. We expect customer recoveries to offset some of the expected raw material cost increases, mainly in the second half of the year. Combined, this means that the first half year will be quite challenging. In 2021, we reduced headcount by 11%, and we will continue a strict cost control in 2022 including executing on capacity alignments, footprint optimization, and strategic initiatives.

A record number of new product launches in 2021 supports a strong outperformance in 2022. In 2021, we estimate that we booked around 50% of all available orders globally.

Based on an assumption of LVP growth of around 9%, supported by a positive regional mix and high number of product launches, we expect to grow organically by around 20%, generating an adjusted operating margin of around 9.5% for the full year 2022.

I am pleased that our operating income was solid, despite headwinds from lower sales, raw material costs and currency exchange rates. I am also pleased that our cash flow and balance sheet remained strong, that we raised the quarterly dividend to $0.64 and that our leverage ratio* remained well within our target range. We met our guidance for 2021 with organic sales growth* of around 8%, adjusted operating margin* of 8.3% and operating cash flow of $754 million.

The fourth quarter saw significant outperformance of low safety content markets vs. high safety content markets, generating a significant negative regional mix for the quarter and the full year. This contributed to our organic* sales outperformance of 5.2 pp in full year 2021 being below the around 8pp we had expected. Our sales were lower than expected in all regions except China, which is in contrast to the changes in LVP reported by IHS Markit during the

Full Year Indication

Full Year Indication

Organic sales growth

Around 20%

Tax rate²⁾

Around 30%

FX impact on net sales

Around 3% negative

Operating cash flow³⁾

Around $950m

Adjusted operating margin¹⁾

Around 9.5%

Capex, net, of sales

Around 5.5%

Key Performance Trends

Sales Developmentbyregion

Adj. operating income and margin*

Capex and D&A

Operating Cash Flow excl EC antitrust payment*

Return on Capital Employed

Cash Conversion*

Consolidated sales

Fourth quarter

Reported
(U.S. GAAP)

Currency
effects¹⁾

Organic
change*

(Dollars in millions)

2021

2020

Airbag Products and Other²⁾

$1,408

$1,637

(14.0)%

(0.4)%

(13.6)%

Seatbelt Products²⁾

$711

$880

(19.2)%

0.2%

(19.3)%

Total

$2,119

$2,517

(15.8)%

(0.2)%

(15.6)%

Asia

$958

$1,052

(8.9)%

0.4%

(9.3)%

Whereof:

China

$538

$552

(2.5)%

5.2%

(7.7)%

Japan

$187

$245

(23.6)%

(6.3)%

(17.3)%

RoA

$233

$255

(8.6)%

(3.6)%

(5.0)%

Americas

$632

$758

(16.7)%

0.1%

(16.8)%

Europe

$529

$707

(25.2)%

(1.5)%

(23.6)%

Total

$2,119

$2,517

(15.8)%

(0.2)%

(15.6)%

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

Q4 2021 organic growth*

Americas

Europe

China

Japan

Rest of Asia

Global

Autoliv

(17)%

(24)%

(7.7)%

(17)%

(5.0)%

(16)%

Main growth drivers

Rivian

Mitsubishi

Geely, Daimler, Wuling

Mitsubishi

Mitsubishi, Toyota, Tata

Mitsubishi, Geely, Wuling

Main decline drivers

Honda, GM, Nissan

VW, Stellantis, Renault

Great Wall, VW, Honda

Toyota, Nissan, Subaru

Hyundai/Kia, Nissan, Suzuki

Honda, VW, Nissan

Q4 2021

Americas

Europe

China

Japan

Rest of Asia

Global

LVP (Jan 2022)

(13)%

(26)%

(4.6)%

(18)%

(8.6)%

(13)%

LVP (Oct 2021)

(17)%

(23)%

(19)%

(21)%

(21)%

(20)%

Consolidated sales

Full year

Reported
(U.S. GAAP)

Currency
effects¹⁾

Organic
change*

(Dollars in millions)

2021

2020

Airbag Products and Other²⁾

$5,380

$4,824

11.5%

2.2%

9.3%

Seatbelt Products²⁾

$2,850

$2,623

8.6%

3.4%

5.2%

Total

$8,230

$7,447

10.5%

2.6%

7.9%

Asia

$3,407

$3,043

12.0%

3.2%

8.7%

Whereof:

China

$1,766

$1,541

14.6%

7.1%

7.5%

Japan

$733

$733

(0.0)%

(2.7)%

2.7%

RoA

$908

$769

18.0%

1.0%

17.0%

Americas

$2,535

$2,337

8.5%

1.1%

7.3%

Europe

$2,289

$2,067

10.7%

3.5%

7.2%

Total

$8,230

$7,447

10.5%

2.6%

7.9%

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

Full year 2021 organic growth*

Americas

Europe

China

Japan

Rest of Asia

Global

Autoliv

7.3%

7.2%

7.5%

2.7%

17%

7.9%

Main growth drivers

Toyota, Stellantis, Ford

Daimler, VW, BMW

Geely, GM, Wuling

Mitsubishi, Toyota, Nissan

Mitsubishi, Toyota, Tata

Toyota, Stellantis, Mitsubishi

Main decline drivers

Honda, Subaru, Mazda

Renault, Ford, Nissan

VW, Hyundai/Kia, Great Wall

Honda, Mazda

Hyundai/Kia, SsangYong

Honda, Great Wall, BYD

Full year 2021

Americas

Europe

China

Japan

Rest of Asia

Global

LVP (Jan 2022)

2.3%

(5.1)%

4.9%

(4.4)%

15%

2.6%

LVP (Jan 2021)

27%

14%

6.7%

7.6%

16%

14%

Honda BR-V

Nissan Ariya

Dacia Jogger

Infinity QX60

Geely EX11

Rivian RPV

Range Rover

Volvo C40 Recharge

Toyota Tundra

Driver/Passenger Airbags

Seatbelts

Side Airbags

Head/Inflatable Curtain Airbags

Steering Wheel

Knee Airbag

Front Center Airbag

Bag-in-Belt

Pyrotechnical Safety Switch

Pedestrian Airbag

Hood Lifter

Available as EV/PHEV

Condensed income statement

Fourth quarter

Full year

(Dollars in millions, except per share data)

2021

2020

Change

2021

2020

Change

Net sales

$2,119

$2,517

(15.8)%

$8,230

$7,447

10.5%

Cost of sales

$(1,751)

$(2,015)

(13.1)%

$(6,719)

$(6,201)

8.3%

Gross profit

$368

$502

(26.7)%

$1,511

$1,247

21.2%

S,G&A

$(113)

$(106)

6.9%

$(432)

$(389)

11.1%

R,D&E, net

$(80)

$(83)

(4.2)%

$(391)

$(376)

3.8%

Amortization of intangibles

$(3)

$(3)

(2.1)%

$(10)

$(10)

0.5%

Other income (expense), net

$1

$(4)

137%

$(3)

$(90)

(96.3)%

Operating income

$174

$307

(43.2)%

$675

$382

76.6%

Adjusted operating income¹⁾

$177

$311

(43.2)%

$683

$482

41.8%

Financial and non-operating items, net

$(17)

$(29)

(42.4)%

$(61)

$(91)

(33.3)%

Income before taxes

$158

$278

(43.3)%

$614

$291

111%

Tax rate

26.9%

32.0%

(5.1)pp

28.9%

35.3%

(6.4)pp

Net income

$115

$189

(39.1)%

$437

$188

132%

Earnings per share^{2, 3)}

$1.31

$2.15

(38.9)%

$4.96

$2.14

132%

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

$1.30

$2.19

(40.5)%

$5.02

$3.15

59.4%

Gross margin

17.4%

19.9%

(2.6)pp

18.4%

16.7%

1.6pp

S,G&A, in relation to sales

(5.3)%

(4.2)%

(1.1)pp

(5.3)%

(5.2)%

(0.0)pp

R,D&E, net in relation to sales

(3.8)%

(3.3)%

(0.5)pp

(4.7)%

(5.0)%

0.3pp

Operating margin

8.2%

12.2%

(4.0)pp

8.2%

5.1%

3.1pp

Adjusted operating margin¹⁾

8.3%

12.4%

(4.0)pp

8.3%

6.5%

1.8pp

Other data

No. of shares at period-end in millions⁴⁾

87.5

87.4

0.1%

87.5

87.4

0.1%

Weighted average no. of shares in millions⁵⁾

87.4

87.3

0.1%

87.5

87.3

0.2%

Weighted average no. of shares in millions, diluted⁵⁾

87.7

87.6

0.1%

87.7

87.5

0.2%

1) Non-U.S. GAAP measure, excluding costs for capacity alignment and in 2020 antitrust related matters. See reconciliation table. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.4) Excluding dilution and net of treasury shares. 5) Net of treasury shares.

Selected Balance Sheet items

Fourth quarter

(Dollars in millions)

2021

2020

Change

Trade working capital ¹⁾

$1,332

$1,366

(2.5)%

Trade working capital in relation to sales ²⁾

15.7%

13.6%

2.1pp

Receivables outstanding in relation to sales ³⁾

20.0%

18.1%

2.0pp

Inventory in relation to sales ⁴⁾

9.2%

7.9%

1.2pp

Payables outstanding in relation to sales ⁵⁾

13.5%

12.5%

1.0pp

Cash & cash equivalents

$969

$1,178

(17.7)%

Gross Debt ⁶⁾

$2,008

$2,411

(16.7)%

Net Debt ⁷⁾

$1,052

$1,214

(13.4)%

Capital employed ⁸⁾

$3,700

$3,637

1.7%

Return on capital employed ⁹⁾

18.9%

33.7%

(14.8)pp

Total equity

$2,648

$2,423

9.3%

Return on total equity ¹⁰⁾

17.6%

33.3%

(15.7)pp

Leverage ratio ¹¹⁾

1.2

1.7

(32.5)%

1) Outstanding receivables and outstanding inventory less outstanding payables. 2) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized quarterly sales. 3) Outstanding receivables relative to annualized quarterly sales. 4) Outstanding inventory relative to annualized quarterly sales. 5) Outstanding payables relative to annualized quarterly sales. 6) Short- and long-term interest-bearing debt. 7) Short- and long-term debt less cash and cash equivalents and debt-related derivatives.Non U.S. GAAP measure. See reconciliation table. 8) Total equity and net debt. 9) Annualized operating income and income from equity method investments, relative to average capital employed. 10) Annualized net income relative to average total equity. 11) Net debt adjusted for pension liabilities in relation to EBITDA. Non U.S. GAAP measure. See reconciliation table.

Selected Cash Flow items

Fourth quarter

Full year

(Dollars in millions)

2021

2020

Change

2021

2020

Change

Net income

$115

$189

(39.1)%

$437

$188

132%

Changes in operating working capital

$116

$113

2.5%

$(63)

$277

(123)%

Depreciation and amortization

$97

$103

(5.5)%

$394

$371

6.2%

Other, net

$(12)

$64

(118)%

$(15)

$13

(211)%

Operating cash flow

$317

$469

(32.5)%

$754

$849

(11.2)%

Capital expenditure, net

$(153)

$(111)

37.8%

$(454)

$(340)

33.7%

Free cash flow¹⁾

$164

$358

(54.3)%

$300

$509

(41.2)%

Cash conversion²⁾

142%

189%

(47.3)pp

68.6%

270%

(202)pp

Dividends paid

$(56)

-

n/a

$(165)

$(54)

204%

Cash dividend paid per share

$(0.64)

-

n/a

$(1.88)

$(0.62)

203%

Capital expenditures, net in relation to sales

7.2%

4.4%

2.8pp

5.5%

4.6%

1.0pp

1) Operating cash flow less Capital expenditure, net. Non U.S. GAAP measure. See enclosed reconciliation table. 2) Free cash flow relative to Net income. Non U.S. GAAP measure. See reconciliation table.

Dec 31

Sep 30

Dec 31

2021

2021

2020

Headcount

60,600

62,000

68,200

Whereof: Direct headcount in manufacturing

43,000

44,200

50,300

Indirect headcount

17,600

17,900

17,900

Temporary personnel

7.8%

7.7%

10.5%

(Dollars in millions, except per share data, unaudited)

Fourth quarter

Full year

2021

2020

2021

2020

Airbag products and Other¹⁾

$1,408

$1,637

$5,380

$4,824

Seatbelt products¹⁾

711

880

2,850

2,623

Total net sales

$2,119

$2,517

$8,230

$7,447

Cost of sales

(1,751)

(2,015)

(6,719)

(6,201)

Gross profit

$368

$502

$1,511

$1,247

Selling, general & administrative expenses

(113)

(106)

(432)

(389)

Research, development & engineering expenses, net

(80)

(83)

(391)

(376)

Amortization of intangibles

(3)

(3)

(10)

(10)

Other income (expense), net

1

(4)

(3)

(90)

Operating income

$174

$307

$675

$382

Income from equity method investments

1

1

3

2

Interest income

1

1

4

5

Interest expense

(14)

(20)

(60)

(73)

Other non-operating items, net

(4)

(11)

(7)

(25)

Income before income taxes

$158

$278

$614

$291

Income taxes

(42)

(89)

(177)

(103)

Net income

$115

$189

$437

$188

Less: Net income attributable to non-controlling interest

0

0

2

1

Net income attributable to controlling interest

$115

$189

$435

$187

Earnings per share^{2, 3)}

$1.31

$2.15

$4.96

$2.14

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

Dec 31

Sep 30

Jun 30

Mar 31

Dec 31

(Dollars in millions, unaudited)

2021

2021

2021

2021

2020

Assets

Cash & cash equivalents

$969

$903

$893

$1,254

$1,178

Receivables, net

1,699

1,575

1,719

1,846

1,822

Inventories, net

777

922

901

856

798

Prepaid expenses

164

242

230

183

164

Other current assets

65

68

60

260

307

Total current assets

$3,675

$3,710

$3,804

$4,399

$4,269

Property, plant & equipment, net

1,855

1,813

1,833

1,810

1,869

Operating leases right-of-use assets

132

123

133

137

141

Goodwill

1,387

1,389

1,393

1,392

1,398

Intangible assets, net

8

9

11

14

14

Investments and other non-current assets

481

467

462

457

466

Total assets

$7,537

$7,511

$7,636

$8,210

$8,157

Liabilities and equity

Short-term debt

$346

$364

$363

$291

$302

Accounts payable

1,144

1,076

1,125

1,215

1,254

Accrued expenses

996

1,096

1,066

1,323

1,270

Operating lease liabilities - current

38

38

39

38

37

Other current liabilities

297

237

260

321

284

Total current liabilities

$2,821

$2,811

$2,852

$3,188

$3,147

Long-term debt

1,662

1,687

1,712

2,039

2,110

Pension liability

197

231

239

239

248

Operating lease liabilities - non-current

94

85

94

100

103

Other non-current liabilities

115

125

125

123

126

Total non-current liabilities

$2,067

$2,127

$2,170

$2,501

$2,587

Total parent shareholders' equity

2,633

2,558

2,600

2,507

2,409

Non-controlling interest

15

15

15

14

14

Total equity

$2,648

$2,573

$2,615

$2,521

$2,423

Total liabilities and equity

$7,537

$7,511

$7,636

$8,210

$8,157

Fourth quarter

Full year

(Dollars in millions, unaudited)

2021

2020

2021

2020

Net income

$115

$189

$437

$188

Depreciation and amortization

97

103

394

371

Other, net

(12)

64

(15)

13

Changes in operating working capital, net

116

113

(63)

277

Net cash provided by operating activities

$317

$469

$754

$849

Expenditures for property, plant and equipment

(154)

(112)

(458)

(344)

Proceeds from sale of property, plant and equipment

1

1

4

4

Net cash used in investing activities

$(153)

$(111)

$(454)

$(340)

Net cash before financing¹⁾

$164

$358

$300

$509

(Decrease) in short term debt

(9)

(42)

(286)

(240)

Repayment of long-term debt

-

(723)

-

(723)

Increase (decrease) long-term debt

(19)

87

(20)

1,177

Dividends paid

(56)

-

(165)

(54)

Common stock options exercised

0

1

3

1

Dividend paid to non-controlling interests

(0)

(0)

(1)

(1)

Net cash (used in) provided by financing activities

$(84)

$(678)

$(469)

$160

Effect of exchange rate changes on cash

(14)

22

(39)

64

Increase (decrease) in cash and cash equivalents

$66

$(298)

$(209)

$733

Cash and cash equivalents at period-start

904

1,477

1,178

445

Cash and cash equivalents at period-end

$969

$1,178

$969

$1,178

1) Non-U.S. GAAP measure comprised of "Net cash provided by operating activities" and "Net cash used in investing activities". See reconciliation table.

Dec 31

Sep 30

Jun 30

Mar 31

Dec 31

(Dollars in millions)

2021

2021

2021

2021

2020

Receivables, net

$1,699

$1,575

$1,719

$1,846

$1,822

Inventories, net

$777

$922

$901

$856

$798

Accounts payable

$(1,144)

$(1,076)

$(1,125)

$(1,215)

$(1,254)

Trade Working capital

$1,332

$1,421

$1,495

$1,487

$1,366

Dec 31

Sep 30

Jun 30

Mar 31

Dec 31

(Dollars in millions)

2021

2021

2021

2021

2020

Short-term debt

$346

$364

$363

$291

$302

Long-term debt

1,662

1,687

1,712

2,039

2,110

Total debt

$2,008

$2,051

$2,075

$2,330

$2,411

Cash & cash equivalents

(969)

(903)

(893)

(1,254)

(1,178)

Debt issuance cost/Debt-related derivatives, net

13

18

18

39

(19)

Net debt

$1,052

$1,165

$1,200

$1,115

$1,214

Dec 31

Dec 31

Dec 31

Dec 31

(Dollars in millions)

2019

2018

2017

2016

Short-term debt

$368

$621

$20

$216

Long-term debt

1,726

1,609

1,311

1,313

Total debt

$2,094

$2,230

$1,330

$1,529

Cash & cash equivalents

(445)

(616)

(960)

(1,227)

Debt issuance cost/Debt-related derivatives, net

0

5

(3)

(3)

Net debt

$1,650

$1,619

$368

$299

Dec 31

Sep 30

Dec 31

(Dollars in millions)

2021

2021

2020

Net debt¹⁾

$1,052

$1,165

$1,214

Pension liabilities

197

231

248

Debt per the Policy

$1,248

$1,396

$1,462

Net income²⁾

$437

$511

$188

Income taxes²⁾

177

224

103

Interest expense, net^{2, 3)}

57

62

68

Other non-operating items, net²⁾

7

14

25

Income from equity method investments²⁾

(3)

(3)

(2)

Depreciation and amortization of intangibles²⁾

394

400

371

Capacity alignments and antitrust related matters²⁾

8

10

99

EBITDA per the Policy (Adjusted EBITDA)

$1,077

$1,217

$852

Leverage ratio

1.2

1.1

1.7

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

Fourth quarter

Full year

(Dollars in millions)

2021

2020

2021

2020

Net income

$115

$189

$437

$188

Changes in operating working capital

116

113

(63)

277

Depreciation and amortization

97

103

394

371

Other, net

(12)

64

(15)

13

Operating cash flow

$317

$469

$754

$849

Capital expenditure, net

(153)

(111)

(454)

(340)

Free cash flow¹⁾

$164

$358

$300

$509

Net cash before financing

$164

$358

$300

$509

Cash conversion²⁾

142%

189%

68.6%

270%

1) Operating cash flow less Capital expenditure, net. 2) Free cash flow relative to Net income.

Full year

Full year

Full year

Full year

(Dollars in millions)

2019

2018¹⁾

2017¹⁾

2016¹⁾

Net income

$463

$184

$303

$562

Changes in operating assets and liabilities

47

(229)

(0)

(78)

Depreciation and amortization

351

397

426

383

Goodwill impairment charges

-

-

234

-

Other, net²⁾

(220)

239

(27)

2

Operating cash flow

$641

$591

$936

$868

EC antitrust payment

(203)

-

-

-

Operating cash flow excl antitrust

$844

$591

$936

$868

Capital expenditure, net

(476)

(555)

(570)

(499)

Free cash flow³⁾

$165

$36

$366

$370

Free cash flow excl antitrust payment⁴⁾

$368

$36

$366

$370

Acquisitions of businesses and other, net

-

(73)

(128)

(227)

Net cash before financing

$165

$(37)

$239

$142

Cash conversion⁵⁾

35.6%

19.5%

121%

65.8%

Cash conversion excl antitrust⁶⁾

79.4%

19.5%

121%

65.8%

1) Including Discontinued Operations. 2) Including EC antitrust non-cash provision 2018 and EC antitrust payment 2019. 3) Operating cash flow less Capital expenditure, net. 4) For 2019, Operating cashflow excluding EC antitrust payment less Capital expenditure, net. 5) Free cash flow relative to Net income. 6) For 2019, Free cash flow excluding EC antitrust payment relative to Net income.

Fourth quarter 2021

Fourth quarter 2020

(Dollars in millions, except per share data)

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$174

$3

$177

$307

$5

$311

Operating margin

8.2%

0.1%

8.3%

12.2%

0.2%

12.4%

Income before taxes

$158

$3

$160

$278

$5

$283

Net income attributable to controlling interest

$115

$(1)

$114

$189

$3

$192

Return on capital employed²⁾

18.9%

0.3%

19.1%

33.7%

(0.3)%

33.4%

Return on total equity³⁾

17.6%

(0.1)%

17.5%

33.3%

(0.6)%

32.7%

Earnings per share^{4, 5)}

$1.31

$(0.01)

$1.30

$2.15

$0.04

$2.19

1) Costs for capacity alignment and in 2020 antitrust related matters. 2) Annualized operating income and income from equity method investments, relative to average capital employed. 3) Annualized income relative to average total equity. 4)Assuming dilution and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.

Full year 2021

Full year 2020

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$675

$8

$683

$382

$99

$482

Operating margin

8.2%

0.1%

8.3%

5.1%

1.4%

6.5%

Income before taxes

$614

$8

$622

$291

$99

$391

Net income attributable to controlling interest

$435

$5

$440

$187

$88

$275

Capital employed

$3,700

$5

$3,705

$3,637

$88

$3,725

Return on capital employed²⁾

18.3%

0.2%

18.5%

10.4%

2.5%

12.9%

Return on total equity³⁾

17.1%

0.2%

17.3%

8.8%

3.9%

12.7%

Earnings per share^{4, 5)}

$4.96

$0.06

$5.02

$2.14

$1.01

$3.15

Total parent shareholders' equity per share

$30.10

$0.06

$30.15

$27.56

$1.01

$28.57

1) Costs for capacity alignment and in 2020 antitrust related matters. 2) Annualized operating income and income from equity method investments, relative to average capital employed.3) Annualized income relative to average total equity. 4) Assuming dilution when applicable and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.

Full year 2019

Full year 2018

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$726

$49

$774

$686

$222

$908

Operating margin

8.5%

0.6%

9.1%

7.9%

2.6%

10.5%

1) Costs for capacity alignment and antitrust related matters and separation of our business segments.

Full year 2017

Full year 2016

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$860

$40

$899

$831

$35

$866

Operating margin

10.6%

0.5%

11.1%

10.5%

0.4%

10.9%

1) Costs for capacity alignment and antitrust related matters.

Items included in Non-U.S. GAAP adjustments

Fourth quarter 2021

Fourth quarter 2020

Adjustment
Million

Adjustment
Per share

Adjustment
Million

Adjustment
Per share

Capacity alignment

$3

$0.03

$4

$0.05

Antitrust related matters

-

-

$0

$0.00

Total adjustments to operating income

$3

$0.03

$5

$0.05

Tax on non-U.S. GAAP adjustments¹⁾

$(3)

$(0.04)

$(1)

$(0.01)

Total adjustments to net income

$(1)

$(0.01)

$3

$0.04

Average number of shares outstanding - diluted²⁾

87.7

87.5

Annualized adjustment on return on capital employed

$11

$18

Adjustment return on capital employed

0.3%

(0.3)%

Annualized adjustment on return on total equity

$(2)

$14

Adjustment return on total equity

(0.1)%

(0.6)%

1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) Annualized average number of outstanding shares

Items included in Non-GAAP adjustments

Full year 2021

Full year 2020

Adjustment
Million

Adjustment
Per share

Adjustment
Million

Adjustment
Per share

Capacity alignment

$8

$0.10

$99

$1.13

Antitrust related matters

-

-

$1

$0.01

Total adjustments to operating income

$8

$0.10

$99

$1.14

Tax on non-U.S. GAAP adjustments¹⁾

$(3)

$(0.04)

$(11)

$(0.13)

Total adjustments to net income

$5

$0.06

$88

$1.01

Average number of shares outstanding - diluted²⁾

87.7

87.5

Annualized adjustment on Return on capital employed

$8

$99

Adjustment Return on capital employed

0.2%

2.5%

Annualized adjustment on Return on total equity

$5

$88

Adjustment return on total equity

0.2%

3.9%

1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) Annualized average number of outstanding shares

(Dollars in millions, unaudited)

2021

2020

2019

2018

2017

Sales and Income

Net sales

$8,230

$7,447

$8,548

$8,678

$8,137

Airbag sales¹⁾

5,380

4,824

5,676

5,699

5,342

Seatbelt sales

2,850

2,623

2,871

2,980

2,794

Operating income

675

382

726

686

860

Net income attributable to controlling interest

435

187

462

376

586

Earnings per share (US$) - basic²⁾

4.97

2.14

5.29

4.32

6.70

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

4.96

2.14

5.29

4.31

6.68

Gross margin⁴⁾

18.4%

16.7%

18.5%

19.7%

20.6%

R,D&E net in relation to sales

(4.7)%

(5.0)%

(4.7)%

(4.8)%

(4.6)%

S,G &A net in relation to sales

(5.3)%

(5.2)%

(4.7)%

(4.5)%

(5.0)%

Operating margin⁵⁾

8.2%

5.1%

8.5%

7.9%

10.6%

Adjusted operating margin^{6, 7)}

8.3%

6.5%

9.1%

10.5%

11.1%

Balance Sheet

Trade working capital⁸⁾

1,332

1,366

1,417

1,396

1,444

Trade working capital in relation to sales⁹⁾

15.7%

13.6%

16.2%

15.9%

16.7%

Receivables outstanding in relation to sales¹⁰⁾

20.0%

18.1%

18.6%

19.0%

19.6%

Inventory outstanding in relation to sales¹¹⁾

9.2%

7.9%

8.5%

8.6%

8.2%

Payables outstanding in relation to sales¹²⁾

13.5%

12.5%

10.8%

11.7%

11.1%

Total equity

2,648

2,423

2,122

1,897

4,169

Total parent shareholders' equity per share (US$)

30.10

27.56

24.19

21.63

46.38

Current assets excluding cash

2,705

3,091

2,557

2,670

2,598

Property, plant and equipment, net

1,855

1,869

1,816

1,690

1,609

Intangible assets (primarily goodwill)

1,395

1,412

1,410

1,423

1,440

Capital employed

3,700

3,637

3,772

3,516

4,538

Net debt⁷⁾

1,052

1,214

1,650

1,619

368

Total assets

7,537

8,157

6,771

6,722

6,947

Long-term debt

1,662

2,110

1,726

1,609

1,311

Return on capital employed^{13, 14)}

18%

10%

20%

17%

n/a

Return on total equity^{14, 15)}

17%

9%

23%

13%

n/a

Total equity ratio

35%

30%

31%

28%

49%

Cash flow and other data

Operating Cash flow¹⁶⁾

754

849

641

591

936

Depreciation and amortization¹⁶⁾

394

371

351

397

426

Capital expenditures, net¹⁶⁾

454

340

476

555

570

Capital expenditures, net in relation to sales¹⁶⁾

5.5%

4.6%

5.6%

5.7%

5.5%

Free Cash flow^{7, 16, 17)}

300

509

165

36

366

Cash conversion^{7, 16, 18)}

68.6%

270%

35.6%

19.5%

121%

Direct shareholder return^{16, 19)}

165

54

217

214

366

Cash dividends paid per share (US$)

1.88

0.62

2.48

2.46

2.38

Number of shares outstanding (millions)²⁰⁾

87.5

87.4

87.2

87.1

87.0

Number of employees, December 31

55,900

61,000

58,900

57,700

56,700

1) Including steering wheels, inflators and initiators. 2) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 3) Assuming dilution and net of treasury shares. 4) Gross profit relative to sales. 5) Operating income relative to sales. 6) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. 7) Non-US GAAP measure, for reconciliation see tables above. 8) Outstanding receivables and outstanding inventory less outstanding payables. 9) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized fourth quarter sales. 10) Outstanding receivables relative to annualized fourth quarter sales. 11) Outstanding inventory relative to annualized fourth quarter sales. 12) Outstanding payables relative to annualized fourth quarter sales. 13) Operating income and income from equity method investments, relative to average capital employed. 14) The Company has decided not to recalculate prior periods since the distribution of Veoneer had a significant impact on total equity and capital employed making the comparison less meaningful. 15) Income relative to average total equity. 16) Including Discontinued Operations in 2017 and 2018. 17) Operating cash flow less Capital expenditures, net. 18) Free cash flow relative to Net income. 19) Dividends paid and Shares repurchased. 20) At year end, excluding dilution and net of treasury shares.