Form 8-K AUTOLIV INC For: Jul 22

Mainly based on our customer call-offs we expect organic sales for the third quarter of 2016 to grow by around 6% compared to the same quarter of 2015. Sales from recent M&A activities (ANBS and MACOM) are expected to have a positive effect of around 6%. Currency translations are expected to have a negative effect of less than 1%, resulting in a consolidated sales growth of around 12%. The adjusted operating margin, excluding costs for capacity alignments and antitrust related matters, is expected to be around 7.5%.

The indication for the full year is for an organic sales growth of around 7%. Sales from recent M&A activities (ANBS and MACOM) are expected to have a positive effect of around 5%. Currency translations are expected to have a negative effect of more than 1%, resulting in a consolidated sales growth of more than 10%. The adjusted operating margin, excluding costs for capacity alignments and antitrust related matters, is expected to be more than 8.5%. This includes expected integration and purchase accounting related costs for the joint venture with Nissin Kogyo (ANBS) of $20-30 million, as well as costs related to stronger than expected mid-term growth.

Since 2015 Autoliv has agreements with several OEMs for new supply capacity for replacement airbag inflators. Based on customer agreements and its own

expectations, the Company now expects deliveries of up to 30 million units during the period 2015 to 2018. It is still too early in this evolving situation to be able to determine final delivery volumes.

The projected tax rate, excluding any discrete items, for the full year 2016, is currently expected to be around 29% and is subject to change due to any discrete or nonrecurring events that may occur.

Operational cash flow for the full year is expected to remain strong and to be around $0.8 billion excluding any discrete items.

Capital expenditures in support of our growth strategy are expected to be in a range of 5-6% of sales, including capital expenditures for additional capacity for replacement inflators.

The forward looking non-U.S. GAAP financial measures above are provided on a non-U.S. GAAP basis. Autoliv has not provided a U.S. GAAP reconciliation of these measures because items that impact these measures, such as costs related to antitrust matters and capacity alignment, cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and Autoliv is unable to determine the probable significance of the unavailable information.

Consolidated sales increased by more than 12% to $2,579 million compared to $2,292 million in the same quarter of 2015. Excluding negative currency translation effects of $37 million and effects from M&A activities, the

organic sales growth* was 7.7%, compared to the organic sales growth of “around 10%” expected at the beginning of the quarter.

The organic sales growth* of close to 8% in the quarter was mainly a result of strong growth in Europe, where organic sales* grew by more than 16%. This was a result of a combination of high content on well performing models and the ramp up of new launches.

Sales from Autoliv’s companies in China grew organically* by more than 7% in the quarter. The growth was primarily driven by global OEMs, particularly models from Hyundai/Kia.

Organic sales* from Autoliv’s companies in Japan increased by close to 3% in the quarter. The sales increase was mainly due to positive model transitions and ramp ups with models from Toyota. Models from Honda and Nissan also contributed to the growth.

Organic sales* from Autoliv’s companies in the Rest of Asia (RoA) grew by more than 1% in the quarter. This was primarily driven by recent launches from Hyundai and Suzuki in India, and Thailand with sales increases driven by models from Mitsubishi. The growth was partly

offset by lower sales in South Korea, primarily driven by lower than expected LVP.

For Autoliv’s companies in the Americas, the sales development was mixed for the quarter. In North America, the organic sales growth* of almost 4% was mainly driven by sales increases for models from Honda, Mercedes and Ford, particularly the F-Series. Sales of active safety products and replacement inflators also contributed to the growth. Sales in South America (Brazil) declined by close to 2%, while the LVP declined by more than 15%. Autoliv’s strong performance in South America compared to the LVP was mainly due to the ramp up of models from Fiat.

The strong organic sales growth* of more than 16% in the quarter from Autoliv’s companies in Europe was driven by sales increases for a number of OEMs, positive product mix and strong growth for active safety products. Primary drivers were models from Hyundai/Kia, Renault and Mercedes.

The gross profit for the second quarter of 2016 was $67 million higher than in the same quarter of 2015, primarily as a result of higher organic sales. The gross margin improved by 0.3pp to 20.4%, from 20.1% in the same quarter of 2015, mainly as a result of higher organic sales, favorable currency effects, and raw material savings. These positive effects were partly offset by costs related to the investments for capacity and growth.

Operating income increased by $4 million to $213 million, or 8.2% of sales, compared to 9.1% of sales in the same quarter of 2015. The decrease in operating margin was primarily related to increases in investments for growth.

Selling, General and Administrative (S,G&A) expenses increased by $19 million.

Research, Development & Engineering (R,D&E) expenses, net, in support of future growth, increased by $36 million compared to the same quarter in the prior year.

Costs of $4 million related to capacity alignments and $4 million related to antitrust matters reduced operating margin by 0.4pp in the second quarter, a similar level to the same quarter of 2015. Adjusted operating margin*, excluding these costs, was 8.6% of sales compared to

9.5% of sales for the same period in 2015. The decrease was primarily driven by higher investments for growth.

Income before taxes increased by $6 million. Income attributable to controlling interest was $148 million, an increase of $12 million from the second quarter of 2015.

The effective tax rate in the second quarter of 2016 was 25.9% compared to 29.7% in the same quarter of 2015. Discrete items, net decreased the tax rate in the quarter by 1.2pp. In the second quarter of 2015, discrete tax items, net had a favorable impact of 4.3pp, primarily related to the resolution of a prior year tax refund claim.

Earnings per share (EPS) was $1.68 compared to $1.55 for the same period one year ago. The EPS was positively affected by 16 cents from a lower underlying tax rate and 3 cents by higher operating income. These positive effects were partly offset by 6 cents from discrete tax items. The adjusted EPS* assuming dilution was $1.75 compared to $1.62 for the same period one year ago.

The weighted average number of shares outstanding assuming dilution was 88.4 million compared to 88.3 million in the second quarter of 2015.

Cash Flow and Balance Sheet

Cash flow from operations amounted to $103 million compared to $154 million in the same quarter of 2015. The decrease was primarily related to timing differences in payments of accounts receivable.

Cash flow before financing* was negative $28 million compared to positive $39 million during the same quarter of 2015, a difference of $67 million. Capital expenditures, net, of $130 million were $33 million more than depreciation and amortization expense in the quarter and $21 million more than capital expenditures during the second quarter of 2015.

During the quarter working capital decreased to 17% of sales from 20% on June 30, 2015 and operating working capital* was unchanged at 7.1% of sales compared to June 30, 2015. The Company targets that operating working capital in relation to the last 12-month sales should not exceed 10%.

Accounts receivable increased in relation to sales to 75 days outstanding from 74 days outstanding on March 31,

2016 and from 72 days outstanding on June 30, 2015. Days inventory outstanding was 30 days, down from 32 days March 31, 2016 and from 31 days on June 30, 2015.

The Company’s gross interest-bearing debt increased by $27 million to $1,555 million at June 30, 2016 and its net debt position* increased by $76 million during the quarter to $438 million at June 30, 2016.

Autoliv’s policy is to maintain a leverage ratio* commensurate with a strong investment grade credit rating. The Company measures its leverage ratio as net debt* adjusted for pension liabilities in relation to EBITDA (earnings before interest taxes depreciation and amortization). The long-term target is to maintain a leverage ratio of around 1x within a range of 0.5x to 1.5x. As of June 30, 2016 the Company had a leverage ratio of 0.5x.

During the three month period from April to June 2016, global LVP is estimated by IHS to have grown by 3% compared to the same quarter in 2015. This was 1pp less than IHS’s expectation at the beginning of the quarter.

In China, which accounts for around 16% of Autoliv’s sales, LVP grew by more than 4%, 4pp less than the April estimate.

In Japan, which accounts for around 9% of Autoliv’s sales, LVP declined by close to 2%, more than 7pp worse than the April estimate.

In the RoA, which represents around 9% of Autoliv’s sales, LVP was up by close to 1%, less than 1pp worse than the April estimate.

In the Americas, which accounts for around one third of Autoliv’s sales, LVP declined by more than 1%, more than 2pp worse than in the April estimate. In North America, LVP increased by more than 1%, which was close to 3pp worse than the April estimate. In South America, the decline was more than 15%, in line with the decline expected in IHS’s April estimate.

In Europe, where Autoliv currently generates around one third of its sales, LVP increased by more than 8%, which was more than 3pp better than IHS’s April estimate. In Western Europe, LVP grew by more than 9%, close to 3pp better than the April estimate. In Eastern Europe, LVP grew by more than 5%, more than 5pp better than the April estimate.

Compared to March 31, 2016 total headcount (permanent employees and temporary personnel) increased by more than 800 people. This was primarily

driven by the organic sales growth* and the continued hiring of engineers, primarily to our active safety business.

Autoliv reports its results under two segments, Passive Safety and Electronics. Passive Safety includes Autoliv’s airbag and seatbelt business, while Electronics integrates all of Autoliv’s electronics resources and

expertise in passive safety electronics, active safety and brake control systems in one organization. Corporate sales and income, capital expenditures and depreciation and amortization for the reportable segments can be found in the tables on page 21 of this report.

Consolidated sales increased by close to 4% to $1,996 million compared to $1,925 million in the same quarter of 2015. Excluding negative currency translation effects of $37 million, the organic sales growth* was close to 6%.

All areas except South America and South Korea showed organic growth in the quarter. The higher operating margin was primarily a result of benefits from the higher organic sales.

Consolidated sales were significantly higher compared to the same quarter of 2015. The organic sales growth* in Electronics was close to 19%. The consolidated sales growth was mainly affected by $133 million from the ANBS joint venture.

The lower operating margin was mainly a result of higher R,D&E costs.

The headcount increase in Passive Safety was primarily related to higher organic growth*. In Electronics the

increase was primarily related to the continued hiring of engineers in our active safety business.

For the first six months of 2016 consolidated sales increased to $5,009 million from $4,466 million for the same period in 2015. Excluding negative currency effects of close to 3% and acquisition effects from

ANBS of close to 4%, the organic sales growth* was more than 11%. All parts of the Company, except South America and South Korea, showed organic sales growth* for the first six months.

Sales of airbag products (including steering wheels) were favorably impacted by higher sales of inflatable curtains, replacement inflators and steering wheels.

Sales of seatbelt products were particularly strong in Europe. The global trend towards more advanced and higher value-added seatbelt systems continued globally.

The growth in organic sales* for passive safety electronics products (mainly airbag control modules and remote sensing units) was due to growth across all regions, particularly in China and North America.

The strong increase in sales of active safety products (automotive radars, night vision systems, cameras with driver assist systems and positioning systems) resulted from growth particularly for radar related products primarily as a result of Mercedes’ increased demand for driving assistance. Sales of vision systems to BMW also contributed.

Brake control systems is added for the first time as a result of the start of operations of Autoliv-Nissin Brake Systems. Sales of $133 million were in line with our expectations from the beginning of the quarter.

Gross profit for the first six months of 2016 increased by $144 million, primarily as a result of the higher organic sales. Gross margin increased by 0.7pp compared to the same period in 2015, mainly as a result of higher organic sales, favorable currency effects and raw material savings.

Operating income increased by $129 million to $418 million. Operating margin was 8.3% for the first half of the year, an increase of 1.8pp compared to the same period in the prior year. In 2015 the operating margin was affected by high costs related to the ongoing capacity alignment and for settlements of antitrust related matters.

Selling, General and Administrative (S,G&A) expenses increased by $32 million.

R,D&E expenses, net increased by $68 million compared to the same period in the prior year.

Excluding costs for capacity alignments and antitrust matters (including antitrust settlements) the operating margin* was 8.8%, down from 9.2% for the same period one year ago. This was primarily due to the higher investments in R,D&E in support of future growth.

Income before taxes increased by $132 million to $391 million, $3 million more than the increase in operating income.

Net income attributable to controlling interest amounted to $282 million compared to $172 million for the first six months of 2015. Income tax expense was $109 million compared to $87 million in the same period of 2015. The effective tax rate was 27.8% compared to 33.4% for the same six month period last year. The tax rate was favorably impacted by the geographical mix of earnings compared to the previous year.

EPS amounted to $3.19, assuming dilution, compared to $1.95 for the same period of 2015. EPS assuming dilution was positively affected by lower capacity alignment and legal costs by 87 cents, higher operating income by 30 cents and 29 cents by lower underlying tax rate. These positive effects were partly offset by negative currency translation effects of 6 cents.

The weighted average number of shares outstanding assuming dilution was unchanged at 88.4 million compared to the full year 2015.

Cash flow and Balance Sheet

Operations in the first six months of 2016 generated $303 million in cash. Cash before financing* was negative $146 million. This compares to $238 million and negative $8 million, respectively, for the same period in 2015.

Capital expenditures net, amounted to $221 million and depreciation and amortization totaled $182 million compared to $237 million and $150 million, respectively, for the same period in 2015.

Autoliv’s gross interest bearing debt increased by $16 million to $1,555 million compared to December 31, 2015

and its net debt increased by $236 million to $438 million compared to December 31, 2015.

For the first six months, total equity increased by $484 million to $3,952 million compared to the same period in 2015 due to $282 million from net income, $255 million from the recognition of a minority interest in ANBS and $39 million from positive currency effects and $9 million from common stock incentives. These effects were partly offset by $104 million for dividends.

Total parent shareholders’ equity was $3,677 million corresponding to $41.69 per share.

For the first six months of 2016, global LVP is estimated by IHS to have increased by more than 2% compared to the first six months of 2015. This was less than 1pp lower than IHS’s expectation from the beginning of the year.

In China, which accounts for around 16% of Autoliv’s sales, LVP grew by less than 6%, a decrease of less than 1pp compared to the January 2016 estimate.

In Japan, which accounts for around 9% of Autoliv’s sales, LVP declined by close to 3%, over 3pp worse compared to the January 2016 estimate.

In the RoA, which accounts for 9% of Autoliv’s sales, LVP increased by less than 1%, in line with the expectation from the beginning of 2016.

In the Americas, which makes up around one third of Autoliv’s sales, LVP decreased by more than 1%, a

decrease of close to 3pp compared to IHS’s growth expectation of close to 2% from the beginning of the year. In North America, the increase was close to 3% compared to the more than 5% expected at the beginning of the year. In South America, the decrease was more than 21%, 5pp worse than the January 2016 estimate.

In Europe, where Autoliv currently generates around one third of its sales, LVP grew by close to 5% which was close to 2pp better than IHS’s estimate in January 2016. In Western Europe, LVP grew by 7%, more than 2pp better than estimated at the beginning of the year. In Eastern Europe, LVP decreased by close to 1%, in line with the January 2016 estimate.

Consolidated sales increased by more than 6% to $3,985 million compared to $3,756 million in the same period of 2015. Excluding negative currency translation effects of $111 million, the organic sales growth* was more than 9%. The organic sales growth* was primarily driven by higher sales in Europe, North America and

Japan. In the first six months of 2015 the reported operating margin for the segment was negatively affected by the antitrust related settlement costs and restructuring costs, primarily related to the on-going European capacity alignment program.

Consolidated sales increased by close to 45% compared to the same period of 2015. Excluding acquisition effects from ANBS and MACOM of $167 million and negative currency translation effects of $5 million, the organic sales growth* was close to 23%. The lower operating

margin was mainly a result of higher R,D&E costs in support of recent contract wins and future growth.

The headcount increase from December 31, 2015 was mainly due to integration of ANBS into the Electronics segment. Hiring of engineers in our active safety business and to our passive safety

business also contributed to the increase.

Other Items

Dividends

On May 10, 2016, the Company declared a quarterly dividend to shareholders of 58 cents per share for the third quarter of 2016 with the following payment schedule:

Next Report

Autoliv intends to publish the quarterly earnings report for the third quarter of 2016 on Thursday, October 27, 2016.

Footnotes

* Non-U.S. GAAP measure, see enclosed reconciliation tables.

Inquiries

Thomas Jönsson,

Group Vice President Communications.

Tel +46 (0)8 58 72 06 27

This information is information that Autoliv, Inc. is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 12.00 CET on July 22 2016.

Definitions and SEC Filings

Please refer to www.autoliv.com or to our Annual Report for definitions of terms used in this report. Autoliv’s annual report to stockholders, annual report on Form 10-K, quarterly reports on Form 10-Q, proxy statements, management certifications, press releases, current reports on Form 8-K and other documents filed with the SEC can be obtained free of charge from Autoliv at the Company’s address. These documents are also available at the SEC’s website www.sec.gov and at Autoliv’s corporate website www.autoliv.com.

“Safe Harbor Statement”

This report 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. or its management believes or anticipates may occur in the future. All forward-looking statements, including without limitation, management’s examination of historical operating trends and data, as well as estimates of future sales, operating margin, cash flow, effective tax rate or other future operating performance or financial results, are based upon our current expectations, various assumptions and 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, changes in global light vehicle production; fluctuation in vehicle production schedules for which the Company is a supplier; changes in general industry and market conditions or regional growth or declines; changes in and the successful execution of our capacity alignment, restructuring and cost reduction initiatives discussed herein 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 reorganizations 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; our ability to be awarded new business; product liability, warranty and recall claims and investigations and other litigation and customer reactions thereto (including the ultimate resolution of the ongoing Toyota recall (as defined herein)); higher expenses for our pension and other postretirement benefits, including higher funding requirements for our pension plans; work stoppages or other labor issues; possible adverse results of pending or future litigation or infringement claims; 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 limiting our business; political conditions; dependence on and relationships with customers and suppliers; and other risks and uncertainties identified under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Reports and Quarterly Reports on Forms 10-K and 10-Q and any amendments thereto. 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.