19 Segment Information
Autoliv, Inc. is a U.S. registered company where the revenues are generated by sales of safety systems to the automotive industry. The automotive industry is made up of a relatively small number of customers. A significant disruption in the industry, a significant change in demand or pricing or a dramatic change in technology could have a material adverse effect on the Company.
Automotive safety products (mainly various airbag and seatbelt products and components) are integrated complete systems that function together with common electronic and sensing systems, and hence are considered as one business segment.
The customers consist of all major European, U.S. and Asian automobile manufacturers. Sales to individual customers representing 10% or more of net sales were:
In 2005: Ford 21% (incl. Volvo Cars with 7%, Mazda, etc.); Renault 14% (incl. Nissan); and GM 13% (incl. Opel, Holden, SAAB, etc.)
In 2004: Ford 23% (incl. Volvo Cars with 8%, Mazda, etc.); Renault 15% (incl. Nissan); and GM 12% (incl. Opel, Holden, SAAB, etc.)
In 2003: Ford 24% (incl. Volvo Cars with 8%, Mazda, etc.); Renault 14% (incl. Nissan); and GM 12% (incl. Opel, Holden, SAAB, etc.)
The Company has concluded that its operating segments meet the criteria, stated in FAS-131 "Disclosures about Segments of an Enterprise and Related Information", for aggregation for reporting purposes into a single operating segment.
Net sales200520042003
North America$1,720$1,659$1,609
Europe3,3923,5182,950
Japan535507389
Rest of the World558460353
Total$6,205$6,144$5,301
Long-lived Assets200520042003
North America$1,931$2,094$2,054
Europe740824752
Japan103117106
Rest of the World129128104
Total $2,903$3,163$3,016
The Company's operations are located primarily in Europe and the United States. Exports to other regions amounted to approximately $410 million and $425 million in 2005 and 2004 respectively. Net sales in the U.S. amounted to $1,585 million, $1,558 million and $1,542 million in 2005, 2004 and 2003, respectively.
Long-lived assets in the U.S. amounted to $1,801 million, $1,982 million and $1,979 million for 2005, 2004 and 2003, respectively. For 2005, $1,543 million of the long-lived assets in the U.S. refers to intangible assets, principally from acquisition goodwill.
The Company has attributed net sales to the geographic area based on the location of the entity selling the final product.
Sales by product200520042003
Airbags and associated
products1)$4,083$4,028$3,608
Seatbelts and associated
products2)2,1222,1161,693
Total$6,205$6,144$5,301
1) Includes sales of Steering wheels, Electronics, Inflators and Initiators
2)Includes sales of Seat components
20 Quarterly Financial Data (unaudited)
 Q1Q2Q3Q41)
2005
Net sales$1,693.6$1,654.6$1,391.7$1,465.0
Gross profit338.6348.0281.2300.2
Income before taxes122.8133.495.1130.7
Net income77.985.659.170.0
Earnings per share$0.84$0.94$0.66$0.81
Dividends paid$0.25$0.30$0.30$0.32
2004
Net sales$1,487.8$1,578.6$1,382.7$1,694.8
Gross profit297.6325.3263.6334.7
Income before taxes114.8135.396.6137.8
Net income76.489.267.393.4
Earnings per share$0.80$0.94$0.72$1.01
Dividends paid$0.15$0.20$0.20$0.20
1)In Q4 2005, net income was negatively affected by a $14 million one-time tax expense for the Jobs Act transaction (see note 4). After taking into account interest expense savings, the effects of the Jobs Act transaction reduced earnings per share by 13 cents.
Exchange Rates for Key Currencies vs. U.S. dollar
  2005 2005 2004 2004 2003 2003 2002 2002 2001 2001
  Average Year end Average Year end Average Year end Average Year end Average Year end
EUR 1.243 1.186 1.241 1.362 1.127 1.250 0.941 1.042 0.896 0.883
AUD 0.762 0.733 0.735 0.774 0.648 0.747 0.542 0.564 0.518 0.509
GBP 1.817 1.727 1.830 1.992 1.631 1.775 1.498 1.603 1.441 1.451
SEK 0.134 0.126 0.136 0.151 0.123 0.137 0.103 0.113 0.097 0.094
JPY/1000 9.081 8.526 9.239 9.641 8.620 9.347 7.972 8.380 8.238 7.617
Report of Independent Registered
Public Accounting Firm
The Board of Directors and Shareholders of Autoliv, Inc.,
We have audited the accompanying consolidated balance sheets of Autoliv, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Autoliv, Inc. at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Autoliv, Inc.'s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2006 expressed an unqualified opinion thereon.
Ernst & Young AB
February 14, 2006
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
The Board of Directors and Shareholders of Autoliv, Inc.,
We have audited management's assessment, included in the accompanying "Management's Report on Internal Control Over Financial Reporting," that Autoliv, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in "Internal ControlIntegrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Autoliv, Inc.'s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of the internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management's assessment that Autoliv, Inc. maintained effective internal control over financial reporting as of December 31, 2005 is fairly stated, in all material respects, based on the COSO criteria. Also in our opinion, Autoliv, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2005 of Autoliv, Inc. and our report dated February 14, 2006 expressed an unqualified opinion.
 Ernst & Young AB
February 14, 2006