Delphi Reports Third Quarter 2014 Financial Results

GILLINGHAM, England--()--Delphi Automotive PLC (NYSE: DLPH), a leading global vehicle components manufacturer, today reported record third quarter 2014 U.S. GAAP earnings of $1.02 per diluted share. Excluding special items, third quarter earnings increased 20% to $1.16 per diluted share.

Third Quarter Highlights Include:

  • Revenue of $4.1 billion, up 3%
  • U.S. GAAP diluted earnings per share of $1.02, up 17%
    • Excluding special items, earnings of $1.16 per diluted share, up 20%
  • Adjusted Operating Income of $468 million, up 9%
    • Adjusted Operating Income margin of 11.3%, up 60 basis points
  • Generated $499 million of cash from operations, up 25%
  • Share repurchases and dividends of $372 million
  • Announced the acquisitions of Antaya Technologies Corporation and Unwired Technology LLC, further expanding connector portfolio

Year-to-Date Highlights Include:

  • Revenue of $12.9 billion, up 5%
  • U.S. GAAP diluted earnings per share of $3.32, up 14%
    • Excluding special items, earnings of $3.78 per diluted share, up 15%
  • Adjusted Operating Income of $1,498 million, up 9%
    • Adjusted Operating Income margin of 11.6%, up 40 basis points
  • Generated $1,262 million of cash from operations, up 18%
  • Share repurchases and dividends of $902 million

“Our record third quarter financial results demonstrate continued outstanding operating performance and the leverage of our operating model," said Rodney O'Neal, chief executive officer and president. "The entire Delphi team remains committed to building shareholder value and achieving our key objectives for the year."

Third Quarter 2014 Results

The Company reported third quarter 2014 revenue of $4.1 billion, an increase of 3% from the prior year period, reflecting continued growth in Asia and North America. Adjusted for the impacts of currency exchange, commodity movements and acquisitions and divestitures, revenue increased by 3% in the third quarter. This reflects growth of 9% in Asia, 6% in North America and 1% in Europe, partially offset by a decline of 20% in South America.

The Company reported third quarter U.S. GAAP net income of $305 million and earnings of $1.02 per diluted share, compared to $271 million and $0.87 per diluted share in the prior year period. Third quarter net income excluding special items consisting of restructuring-related charges, acquisition-related integration costs, asset impairments and losses on extinguishment of debt ("Adjusted Net Income"), totaled $347 million, or $1.16 per diluted share, which includes the favorable impacts of a decreased effective tax rate and a reduced share count. Adjusted Net Income in the prior year period was $302 million, or $0.97 per diluted share.

Third quarter earnings before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, restructuring, other acquisition-related costs and asset impairments ("Adjusted Operating Income") was $468 million, compared to $428 million in the prior year period. Adjusted Operating Income margin increased 60 basis points in the third quarter of 2014 to 11.3%, compared with 10.7% in the prior year period. The increase in Adjusted Operating Income reflects the continued strong performance and growth of our businesses in Asia and North America, as well as the benefits of our on-going restructuring programs focused on aligning our manufacturing capacity with the current automotive production levels in Europe and South America. Depreciation and amortization expense totaled $150 million in the third quarter, compared to $138 million in the prior year period.

Interest expense for the third quarter totaled $33 million, a decrease from $34 million in the prior year period, which reflects the benefits of our debt refinancing transactions in the first quarter of 2014.

Tax expense in the third quarter of 2014 was $63 million, resulting in an effective tax rate of approximately 16%, compared to $72 million, or an effective rate of 20%, in the prior year period. The decrease reflects the geographic mix of pretax earnings, partially offset by higher pretax earnings, and the unfavorable impacts of discrete items recorded in the prior period.

The Company generated net cash flow from operating activities of $499 million in the three months ended September 30, 2014, compared to $398 million in the prior year period.

Year-to-Date 2014 Results

For the nine months ended September 30, 2014, the Company reported revenue of $12.9 billion, an increase of 5% from the prior year period, reflecting continued growth in Asia and North America. Adjusted for the impacts of currency exchange, commodity movements and acquisitions and divestitures, revenue increased by 4% during the period. This reflects growth of 11% in Asia, 7% in North America and 1% in Europe, partially offset by a decline of 17% in South America.

For the 2014 year-to-date period, the Company reported U.S. GAAP net income of $1,007 million and earnings of $3.32 per diluted share, compared to $914 million and $2.92 per diluted share in the prior year period. Year-to-date Adjusted Net Income totaled $1,146 million, or $3.78 per diluted share, which includes the favorable impact of a reduced share count, compared to Adjusted Net Income of $1,026 million, or $3.28 per diluted share, in the prior year period.

The Company reported Adjusted Operating Income of $1,498 million for the nine months ended September 30, 2014, compared to $1,372 million in the prior year period. Adjusted Operating Income margin was 11.6% for the nine months ended September 30, 2014, an improvement of 40 basis points, compared with 11.2% in the prior year period. The increase in Adjusted Operating Income reflects the continued strong performance and growth of our businesses in Asia and North America, as well as the benefits of our on-going restructuring programs focused on aligning our manufacturing capacity with the current automotive production levels in Europe and South America. Depreciation and amortization expense totaled $441 million, compared to $401 million in the prior year period.

Interest expense for the nine months ended September 30, 2014 totaled $101 million, a decrease from $106 million in the prior year period, reflecting the benefits of our debt refinancing transactions in the first quarter of 2014. Additionally, the nine months ended September 30, 2014 and September 30, 2013 included losses on the extinguishment of debt totaling $34 million and $39 million, respectively.

Tax expense for the 2014 year-to-date period was $200 million, resulting in an effective tax rate of approximately 16%, compared to $182 million, or an effective rate of 16%, in the prior year period, which includes the impact of higher pretax earnings in the current period and the geographic mix of these pretax earnings.

The Company generated net cash flow from operating activities of $1,262 million in the nine months ended September 30, 2014, compared to $1,070 million in the prior year period. As of September 30, 2014, the Company had cash and cash equivalents of $1.0 billion and total debt of $2.5 billion.

Share Repurchase Program

During the third quarter of 2014, Delphi repurchased 4.36 million shares for approximately $297 million under its existing authorized share repurchase program, leaving approximately $516 million available for future share repurchases. Year-to-date, the Company has repurchased 10.0 million shares for approximately $674 million. All repurchased shares were retired, and are reflected as a reduction of ordinary share capital for the par value of the shares, with the excess applied as reductions to additional paid-in-capital and retained earnings.

Full Year 2014 Outlook

The Company's full year 2014 financial guidance is as follows:

(in millions, except per share amounts)     Full Year 2014
Revenue     $17,000 - $17,300
Adjusted Operating Income $2,000 - $2,050
Adjusted Operating Income Margin 11.8%
Adjusted Earnings Per Share $5.00 - $5.10
Cash Flow Before Financing $1,100
Capital Expenditures $800
Depreciation and Amortization $600
Adjusted Effective Tax Rate 17%
Share Count - Diluted 302

Conference Call and Webcast

The Company will host a conference call to discuss these results at 10:00 a.m. (ET) today, which is accessible by dialing 888.486.0553 (US domestic) or 706.634.4982 (international) or through a webcast at http://investor.delphi.com/. The conference ID number is 15136190. A slide presentation will accompany the prepared remarks and has been posted on the investor relations section of the Company's website. A replay will be available two hours following the conference call.

Use of Non-GAAP Financial Information

This press release contains information about Delphi's financial results which are not presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Such non-GAAP financial measures are reconciled to their closest GAAP financial measures at the end of this press release. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures of other companies.

About Delphi

Delphi Automotive PLC (NYSE: DLPH) is a leading global supplier of technologies for the automotive and commercial vehicle markets. Headquartered in Gillingham, England, Delphi operates major technical centers, manufacturing sites and customer support services in 32 countries, with regional headquarters in Bascharage, Luxembourg; Sao Paulo, Brazil; Shanghai, China and Troy, Michigan, U.S. Delphi delivers innovation for the real world with technologies that make cars and trucks safer as well as more powerful, efficient and connected.

Forward-Looking Statements

This press release, as well as other statements made by Delphi Automotive PLC (the “Company”), contain forward-looking statements that reflect, when made, the Company's current views with respect to current events and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating to the Company's operations and business environment, which may cause the actual results of the Company to be materially different from any future results. All statements that address future operating, financial or business performance or the Company's strategies or expectations are forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements are discussed under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company's filings with the Securities and Exchange Commission. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. It should be remembered that the price of the ordinary shares and any income from them can go down as well as up. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events and/or otherwise, except as may be required by law.

DELPHI AUTOMOTIVE PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
  Three Months Ended   Nine Months Ended
September 30, September 30,
2014   2013 2014   2013
(in millions, except per share amounts)
Net sales $ 4,144 $ 4,017 $ 12,871 $ 12,281
Operating expenses:
Cost of sales 3,388 3,338 10,507 10,141
Selling, general and administrative 270 228 803 699
Amortization 25 27 76 79
Restructuring 47   37   124   95  
Total operating expenses 3,730   3,630   11,510   11,014  
Operating income 414 387 1,361 1,267
Interest expense (33 ) (34 ) (101 ) (106 )
Other income (expense), net 5   4   (8 ) (25 )
Income before income taxes and equity income 386 357 1,252 1,136
Income tax expense (63 ) (72 ) (200 ) (182 )
Income before equity income 323 285 1,052 954
Equity income, net of tax 2   8   20   26  
Net income 325 293 1,072 980
Net income attributable to noncontrolling interest 20   22   65   66  
Net income attributable to Delphi $ 305   $ 271   $ 1,007   $ 914  
Diluted net income per share:
Diluted net income per share attributable to Delphi $ 1.02   $ 0.87   $ 3.32   $ 2.92  
Weighted average number of diluted shares outstanding 300.14   310.62   303.56   312.87  
 
Cash dividends declared per share $ 0.25 $ 0.17 $ 0.75 $ 0.51
 

DELPHI AUTOMOTIVE PLC

CONSOLIDATED BALANCE SHEETS

 
  September 30,
2014
  December 31,
2013
(unaudited)
(in millions)
ASSETS
Current assets:
Cash and cash equivalents $ 1,026 $ 1,389
Restricted cash 2 4
Accounts receivable, net 2,839 2,662
Inventories 1,227 1,093
Other current assets 588   604
Total current assets 5,682 5,752
Long-term assets:
Property, net 3,273 3,216
Investments in affiliates 243 234
Intangible assets, net 627 723
Goodwill 456 496
Other long-term assets 642   626
Total long-term assets 5,241   5,295
Total assets $ 10,923   $ 11,047
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt $ 37 $ 61
Accounts payable 2,521 2,595
Accrued liabilities 1,286   1,238
Total current liabilities 3,844 3,894
Long-term liabilities:
Long-term debt 2,417 2,351
Pension benefit obligations 911 959
Other long-term liabilities 372   409
Total long-term liabilities 3,700   3,719
Total liabilities 7,544   7,613
Commitments and contingencies
Total Delphi shareholder's equity 2,894 2,911
Noncontrolling interest 485   523
Total shareholders’ equity 3,379   3,434
Total liabilities and shareholders’ equity $ 10,923   $ 11,047
 

DELPHI AUTOMOTIVE PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
  Nine Months Ended
September 30,
2014   2013
(in millions)
Cash flows from operating activities:
Net income $ 1,072 $ 980
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 441 401
Deferred income taxes (4 ) 23
Income from equity method investments, net of dividends received (10 ) 4
Loss on extinguishment of debt 34 39
Other, net 142 84
Changes in operating assets and liabilities:
Accounts receivable, net (177 ) (431 )
Inventories (134 ) (167 )
Accounts payable 38 306
Other, net (74 ) (104 )
Pension contributions (66 ) (65 )
Net cash provided by operating activities 1,262   1,070  
Cash flows from investing activities:
Capital expenditures (666 ) (512 )
Proceeds from sale of property / investments 7 24
Cost of business and technology acquisitions, net of cash acquired (10 )
Decrease in restricted cash 2   3  
Net cash used in investing activities (657 ) (495 )
Cash flows from financing activities:
Increase (decrease) in short and long-term debt, net 10 (80 )
Dividend payments of consolidated affiliates to minority shareholders (61 ) (26 )
Repurchase of ordinary shares (662 ) (353 )
Distribution of cash dividends (228 ) (159 )
Taxes withheld and paid on employees' restricted share awards (8 ) (14 )
Net cash used in financing activities (949 ) (632 )
Effect of exchange rate fluctuations on cash and cash equivalents (19 ) 5  
Decrease in cash and cash equivalents (363 ) (52 )
Cash and cash equivalents at beginning of period 1,389   1,105  
Cash and cash equivalents at end of period $ 1,026   $ 1,053  

DELPHI AUTOMOTIVE PLC

FOOTNOTES

(Unaudited)

1. Segment Summary

 
  Three Months Ended   Nine Months Ended
September 30, September 30,
2014   2013   % 2014   2013   %
(in millions) (in millions)
Net Sales
Electrical/Electronic Architecture $ 1,993 $ 1,956 2% $ 6,269 $ 5,921 6%
Powertrain Systems 1,131 1,048 8% 3,433 3,316 4%
Electronics and Safety 697 705 (1)% 2,180 2,123 3%
Thermal Systems 390 364 7% 1,176 1,097 7%
Eliminations and Other (a) (67 ) (56 ) (187 ) (176 )
Net sales $ 4,144   $ 4,017   $ 12,871   $ 12,281  
 
Adjusted Operating Income
Electrical/Electronic Architecture $ 254 $ 248 2% $ 825 $ 745 11%
Powertrain Systems 118 94 26% 375 354 6%
Electronics and Safety 84 81 4% 256 242 6%
Thermal Systems 12 5 140% 42 31 35%
Eliminations and Other (a)        
Adjusted Operating Income $ 468   $ 428   $ 1,498   $ 1,372  
 
(a) Eliminations and Other includes the elimination of inter-segment transactions.

2. Weighted Average Number of Diluted Shares Outstanding

The following table illustrates the weighted average shares outstanding used in calculating basic and diluted net income per share attributable to Delphi for the three and nine months ended September 30, 2014 and 2013:

  Three Months Ended September 30,   Nine Months Ended September 30,
2014   2013 2014   2013
(in millions, except per share data)
Weighted average ordinary shares outstanding, basic 298.59 309.68 302.35 312.08
Dilutive shares related to RSUs 1.55   0.94   1.21   0.79
Weighted average ordinary shares outstanding, including dilutive shares 300.14 310.62 303.56 312.87
Net income per share attributable to Delphi:
Basic $ 1.02 $ 0.88 $ 3.33 $ 2.93
Diluted $ 1.02 $ 0.87 $ 3.32 $ 2.92
 

DELPHI AUTOMOTIVE PLC
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)

In this press release the Company has provided information regarding certain non-GAAP financial measures, including "Adjusted Operating Income," "Adjusted Net Income," "Adjusted Net Income per Share" and "Cash Flow Before Financing." Such non-GAAP financial measures are reconciled to their closest GAAP financial measure in the following schedules.

Adjusted Operating Income: Adjusted Operating Income is presented as a supplemental measure of the Company's performance which is consistent with the basis and manner in which management presents financial information for the purpose of making internal operating decisions. Adjusted Operating Income is defined as net income before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, restructuring, other acquisition-related costs and asset impairments. Not all companies use identical calculations of Adjusted Operating Income therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2014 guidance was determined using a consistent manner and methodology.

Consolidated Adjusted Operating Income        
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
(in millions)
Net income attributable to Delphi $ 305 $ 271 $ 1,007 $ 914
Income tax expense 63 72 200 182
Interest expense 33 34 101 106
Other (income) expense, net (5 ) (4 ) 8 25
Noncontrolling interest 20 22 65 66
Equity income, net of tax (2 ) (8 ) (20 ) (26 )
Operating income 414   387   1,361   1,267  
Restructuring 47 37 124 95
Other acquisition-related costs 3 4 6 10
Asset impairments 4     7    
Adjusted operating income $ 468   $ 428   $ 1,498   $ 1,372  
 
Segment Adjusted Operating Income            
(in millions)
Three Months Ended September 30, 2014

Electrical/
Electronic
Architecture

Powertrain
Systems

Electronics
and Safety

Thermal
Systems

Eliminations
and Other

Total
Operating income $ 226 $ 108 $ 69 $ 11 $ $ 414
Restructuring 24 9 13 1 47
Other acquisition-related costs 3 3
Asset impairments 1   1   2       4
Adjusted operating income $ 254   $ 118   $ 84   $ 12   $   $ 468
 
Depreciation and amortization (a) $ 67 $ 50 $ 20 $ 13 $ $ 150
 
Three Months Ended September 30, 2013

Electrical/
Electronic
Architecture

Powertrain
Systems

Electronics
and Safety

Thermal
Systems

Eliminations
and Other

Total
Operating income $ 237 $ 86 $ 62 $ 2 $ $ 387
Restructuring 7 8 19 3 37
Other acquisition-related costs 4           4
Adjusted operating income $ 248   $ 94   $ 81   $ 5   $   $ 428
 
Depreciation and amortization (a) $ 61 $ 48 $ 19 $ 10 $ $ 138
 
Nine Months Ended September 30, 2014

Electrical/
Electronic
Architecture

Powertrain
Systems

Electronics
and Safety

Thermal
Systems

Eliminations
and Other

Total
Operating income $ 767 $ 326 $ 230 $ 38 $ $ 1,361
Restructuring 50 48 22 4 124
Other acquisition-related costs 6 6
Asset impairments 2   1   4       7
Adjusted operating income $ 825   $ 375   $ 256   $ 42   $   $ 1,498
 
Depreciation and amortization (a) $ 196 $ 149 $ 60 $ 36 $ $ 441
 
Nine Months Ended September 30, 2013

Electrical/
Electronic
Architecture

Powertrain
Systems

Electronics
and Safety

Thermal
Systems

Eliminations
and Other

Total
Operating income $ 709 $ 334 $ 198 $ 26 $ $ 1,267
Restructuring 26 20 44 5 95
Other acquisition-related costs 10           10
Adjusted operating income $ 745   $ 354   $ 242   $ 31   $   $ 1,372
 
Depreciation and amortization (a) $ 174 $ 140 $ 55 $ 32 $ $ 401
 
(a) Includes asset impairments.
 

DELPHI AUTOMOTIVE PLC
RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS
(Unaudited)

Adjusted Net Income and Adjusted Net Income Per Share: Management believes adjusted net income and adjusted net income per share, which are non-GAAP measures, are useful in evaluating the ongoing operating performance of the Company. Adjusted Net Income is defined as net income (loss) before restructuring, acquisition-related integration costs, asset impairments and debt extinguishment costs. Adjusted Net Income Per Share is defined as Adjusted Net Income divided by the weighted average number of diluted shares outstanding for the period. Not all companies use identical calculations of Adjusted Net Income and Adjusted Net Income Per Share, therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2014 guidance was determined using a consistent manner and methodology.

  Three Months Ended   Nine Months Ended
September 30, September 30,
2014   2013 2014   2013
(in millions, except per share amounts)
Net income attributable to Delphi $ 305 $ 271 $ 1,007 $ 914
Adjusting items:
Restructuring charges 47 37 124 95
Acquisition-related integration costs 3 4 6 10
Asset impairments 4 7
Debt extinguishment costs 34 39
Tax impact of adjusting items (a) (12 ) (10 ) (32 ) (32 )
Adjusted net income attributable to Delphi $ 347   $ 302   $ 1,146   $ 1,026  
 
Weighted average number of diluted shares outstanding 300.14   310.62   303.56   312.87  
Diluted net income per share attributable to Delphi $ 1.02   $ 0.87   $ 3.32   $ 2.92  
Adjusted net income per share $ 1.16   $ 0.97   $ 3.78   $ 3.28  
(a)   Represents the income tax impacts of the adjustments made for restructuring charges, acquisition-related integration costs, asset impairments and debt extinguishment costs, by calculating the income tax impact of these items using the appropriate tax rate for the jurisdiction where the charges were incurred.

Cash Flow Before Financing: Cash flow before financing is presented as a supplemental measure of the Company's liquidity which is consistent with the basis and manner in which management presents financial information for the purpose of making internal operating decisions. Cash flow before financing is defined as cash provided by (used in) operating activities plus cash provided by (used in) investing activities. Not all companies use identical calculations of cash flow before financing therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2014 guidance was determined using a consistent manner and methodology.

  Three Months Ended   Nine Months Ended
September 30, September 30,
2014   2013 2014   2013
(in millions)
Cash flows from operating activities:
Net income $ 325 $ 293 $ 1,072 $ 980
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 150 138 441 401
Working capital 58 (49 ) (273 ) (292 )
Pension contributions (23 ) (24 ) (66 ) (65 )
Other, net (11 ) 40   88   46  
Net cash provided by operating activities 499   398   1,262   1,070  
 
Cash flows from investing activities:
Capital expenditures (196 ) (176 ) (666 ) (512 )
Other, net 5   8   9   17  
Net cash used in investing activities (191 ) (168 ) (657 ) (495 )
               
Cash flow before financing $ 308   $ 230   $ 605   $ 575  
 

Contacts

Delphi Automotive PLC
Investor Contact:
Jessica Holscott
248.813.2312
Jessica.Holscott@delphi.com
Media Contact:
Claudia Tapia
248.813.1507
Claudia.Tapia@delphi.com

Contacts

Delphi Automotive PLC
Investor Contact:
Jessica Holscott
248.813.2312
Jessica.Holscott@delphi.com
Media Contact:
Claudia Tapia
248.813.1507
Claudia.Tapia@delphi.com