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Delphi Reports Third Quarter 2012 Financial Results

Highlights include:

  • Third quarter diluted earnings per share increased to $0.84 from $0.79 in Q3 2011; Year-to-date diluted earnings per share increased to $2.89 from $1.89 in the prior year
  • Third quarter EBITDA and EBITDA margin of $480 million and 13.1%, compared with $516 million and 13.1% in Q3 2011; Year-to-date EBITDA and EBITDA margin of $1,639 million and 13.9%, compared with $1,589 million and 13.1% for the first nine months of 2011
  • Year-to-date cash flow from operations of $1,168 million, a $259 million increase from the prior year
  • Completed acquisition of Motorized Vehicles Division from FCI Group on October 26, 2012

GILLINGHAM, England & TROY, Mich.--(BUSINESS WIRE)--Nov. 1, 2012-- Delphi Automotive (NYSE: DLPH), a leading global vehicle components manufacturer providing electrical and electronic, powertrain, safety and thermal technology solutions to the global automotive and commercial vehicle markets, today reported third quarter 2012 revenues of $3.7 billion, a decrease of 6.8% from the prior year period, the result of further reductions in European production and a significant weakening of the Euro and Brazilian Real. Adjusted for the impacts of currency exchange, commodity movements and divestitures, revenue was flat in the third quarter. The Company reported third quarter net income of $269 million and diluted earnings per share of $0.84, compared to $266 million and $0.79 per diluted share in the prior year period.

“Delphi's third quarter earnings growth demonstrates the benefits of our lean and flexible cost structure in the face of a difficult macroeconomic environment, particularly in Europe where vehicle production levels have weakened further," said Rodney O'Neal, chief executive officer and president.

Third Quarter 2012 Results

The Company reported third quarter 2012 revenue of $3.7 billion, essentially flat compared to the third quarter of 2011, adjusting for currency exchange, commodity movements and divestitures. Adjusted revenue reflects growth of 12% in Asia and 3% in North America, offset by a 6% decline in Europe and a 5% decline in South America.

Third quarter net income totaled $269 million, or $0.84 per diluted share, which includes the impacts of a lower effective tax rate, share repurchases in 2012, and a $0.05 per share impact from the increased expense resulting from the variable accounting related to the Company's 2010 Long-Term Incentive Plan. Net income in the prior year period was $266 million, or $0.79 per diluted share (refer to footnote 2 for determination of weighted average shares outstanding and earnings per share calculations).

Third quarter earnings before depreciation and amortization, interest expense, other income (expense), income tax expense, and equity income (“EBITDA”) was $480 million, compared to $516 million in the prior year period. EBITDA margin was 13.1% in the third quarter of 2012, consistent with 13.1% in the prior year period. The reduction in EBITDA reflects the unfavorable impacts of currency exchange, $21 million of increased expense resulting from the variable accounting impacts related to the Company's 2010 Long-Term Incentive Plan, and the continuing volume reductions in Europe. Excluding the variable impacts of the 2010 Long-Term Incentive Plan, EBITDA margin for the third quarter of 2012 was 13.7%.

Interest expense for the third quarter totaled $32 million, compared to $37 million in the prior year period, reflecting lower debt levels.

Tax expense for the third quarter was $52 million, representing an effective tax rate of approximately 15%, compared to $87 million, or an effective tax rate of 24%, in the prior year period, reflecting the impacts of the geographic mix of pretax earnings and tax planning initiatives.

The Company generated net cash flow from operating activities of $414 million in the third quarter, compared to $410 million in the prior year period. Cash flow before financing totaled $254 million compared to $274 million in the prior year period.

Year-to-Date 2012 Results

For the nine month period ended September 30, 2012, the Company reported revenue of $11.8 billion, an increase of 1.9% over the first nine months of 2011, adjusting for currency exchange, commodity movements and divestitures. The increase in adjusted revenue reflects growth of 11% in Asia and 6% in North America, partially offset by a 2% decline in Europe and a 10% decline in South America.

For the 2012 year-to-date period, net income totaled $941 million, or $2.89 per diluted share, which includes a $0.13 impact from the increased expense of the variable 2010 Long-Term Incentive Plan, compared to net income of $855 million, or $1.89 per diluted share, in the prior year period (refer to footnote 2 for determination of weighted average shares outstanding and earnings per share calculations).

EBITDA for the first nine months of 2012 totaled $1,639 million, compared to $1,589 million in the prior year period, an increase of 3.1%. EBITDA margin was 13.9% for year-to-date 2012, compared to 13.1% in the prior year period. The improvement in EBITDA reflects strong performance in the Electrical/Electronic Architecture and Powertrain segments. Partially offsetting these improvements were lower earnings in our Thermal business segment, the unfavorable impacts of currency exchange, and $53 million of increased expense resulting from the variable accounting impacts related to the Company's 2010 Long-Term Incentive Plan. Excluding the variable impacts of the 2010 Long-Term Incentive Plan, EBITDA margin for the first nine months of 2012 was 14.4%.

Interest expense for the first nine months of 2012 totaled $100 million, compared to $84 million in the prior year period, reflecting the debt financing incurred at the end of the first quarter of 2011 to redeem the ownership interests previously held by General Motors Company and the Pension Benefit Guaranty Corporation.

Tax expense for year-to-date 2012 was $227 million, resulting in an effective tax rate of approximately 19%, compared to $276 million, or an effective rate of 24%, in the prior year period. The improvement in 2012 primarily reflects the impacts of the geographic mix of pretax earnings, tax planning initiatives, and the reduction of withholding taxes.

In the first nine months of 2012, the Company generated net cash flow from operating activities of $1,168 million, as compared to $909 million in the prior year period. Cash flow before financing totaled $642 million compared to $534 million in the prior year period.

As of September 30, 2012, the Company had cash and cash equivalents of $1.6 billion and access to $1.3 billion in undrawn committed revolving bank facilities, providing the Company with $2.9 billion of total liquidity. Total debt outstanding as of September 30, 2012 was $2.1 billion.

Share Repurchase Program

During the third quarter of 2012, the Board of Directors authorized a share repurchase program of up to $750 million of ordinary shares. This program follows the completion in the third quarter of 2012 of $300 million of share repurchases under the Company's previously announced share repurchase program that commenced in January 2012. During the three and nine months ended September 30, 2012, Delphi repurchased 5.44 million and 10.74 million shares at an average price of $29.78 and $29.08, which totaled approximately $162 million and $312 million, respectively, leaving approximately $738 million available under the $750 million repurchase program. These share repurchases are in addition to approximately $180 million of ownership interest repurchases in the third quarter of 2011. 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.

Acquisition of Motorized Vehicles Division from FCI Group

Delphi completed the acquisition of FCI Group's Motorized Vehicles Division ("MVL") on October 26, 2012 for €765 million. MVL is a leading global manufacturer of automotive connection systems with a focus on high-value, leading technology applications. The acquisition was funded with cash on hand inclusive of additional borrowings of $363 million.

Restructuring

In order to improve Delphi's industry leading cost structure and margins and in response to the continued economic uncertainties, we initiated various restructuring programs in the fourth quarter. The programs are anticipated to total approximately $250 million ($70 million related to MVL), with approximately $175 million anticipated to be recognized in Q4 2012, and the balance to be recognized in 2013. Approximately 75% of the restructuring program costs are in Europe.

Q4 2012 and Full Year 2012 Outlook

The Company's Q4 2012 and full year financial guidance reflects our current outlook on exchange rates, which negatively impacts year over year comparisons, further reductions in European OEM production schedules, and the acquisition of MVL, excluding non-recurring MVL transaction costs and the Q4 restructuring program. The Company's updated Q4 and full year financial guidance reflects an estimated average exchange rate of $1.29 per Euro for Q4 and $1.28 per Euro for the full year, as compared to the average exchange rate for Q4 2011 and full year 2011 of $1.35 per Euro and $1.39 per Euro, respectively.

     
    Excludes non-recurring MVL transaction costs and Q4 restructuring program of approximately $0.50 per share
 

Q4

 

2 Months Impact of

 

Q4 2012

 

Full Year

(dollars in millions)

 

2012

 

MVL Acquisition

  With MVL  

2012

Earnings Per Share $0.79 - $0.89 $0.01 $0.80 - $0.90 $3.68 - $3.78
EBITDA $440 - $480 ~$22 $460 - $500 $2,100 - $2,140
EBITDA Margin 12.2% - 13.0% ~18.0% 12.3% - 13.1% 13.6% - 13.7%
Revenue $3,600 - $3,700 ~$125 $3,725 - $3,825 $15,475 - $15,575
 

Full year cash flow before financing is expected to be approximately $800 million. The Company estimates a full year tax rate of approximately 17%. The reduction in the estimated rate reflects the anticipated geographical mix of pretax earnings, the impacts of various tax planning initiatives, and the timing of discrete tax events. Quarterly tax rates can be affected by the geographic mix of pretax earnings as well as the timing of discrete tax items.

Conference Call and Webcast

The Company will host a conference call to discuss these results at 9:00 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://delphi.com/investors. The conference ID number is 37602040. 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 is a leading global supplier of electronics and technologies for automotive, commercial vehicle and other market segments. Operating major technical centers, manufacturing sites and customer support facilities in 30 countries, Delphi delivers real-world innovations that make products smarter and safer as well as more powerful and efficient. Connect to innovation at www.delphi.com.

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,
2012   2011 2012   2011
(in millions, except

per share amounts)

(in millions, except

per share amounts)

Net sales $ 3,663 $ 3,931 $ 11,752 $ 12,141
Operating expenses:
Cost of sales 3,058 3,294 9,703 10,165
Selling, general and administrative 215 222 673 667
Amortization 20 19 60 56
Restructuring 3   3   17   20  
Total operating expenses 3,296   3,538   10,453   10,908  
Operating income 367 393 1,299 1,233
Interest expense (32 ) (37 ) (100 ) (84 )
Other income (expense), net 3   14   15   13  
Income before income taxes and equity income 338 370 1,214 1,162
Income tax expense (52 ) (87 ) (227 ) (276 )
Income before equity income 286 283 987 886
Equity income, net of tax 6   2   18   25  
Net income 292 285 1,005 911
Net income attributable to noncontrolling interest 23   19   64   56  
Net income attributable to Delphi $ 269   $ 266   $ 941   $ 855  
Diluted net income per share:
Diluted net income per share attributable to Delphi $ 0.84   $ 0.79   $ 2.89   $ 1.89  
Weighted average number of diluted shares outstanding 321.28   336.83   325.28   452.58  
 
DELPHI AUTOMOTIVE PLC
CONSOLIDATED BALANCE SHEETS
 

 

   

September 30,
2012

  December 31,
2011
(unaudited)
(in millions)
ASSETS
Current assets:
Cash and cash equivalents $ 1,634 $ 1,363
Restricted cash 11 9
Accounts receivable, net 2,540 2,459
Inventories 1,121 1,054
Other current assets 591   616
Total current assets $ 5,897 $ 5,501
Long-term assets:
Property, net 2,466 2,315
Investments in affiliates 222 257
Intangible assets, net 548 596
Other long-term assets 506   459
Total long-term assets 3,742   3,627
Total assets $ 9,639   $ 9,128
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt $ 92 $ 107
Accounts payable 2,244 2,397
Accrued liabilities 1,334   1,208
Total current liabilities 3,670 3,712
Long-term liabilities:
Long-term debt 1,998 1,996
Pension benefit obligations 694 674
Other long-term liabilities 407   575
Total long-term liabilities 3,099   3,245
Total liabilities 6,769   6,957
Commitments and contingencies
Total Delphi shareholder's equity 2,406 1,688
Noncontrolling interest 464   483
Total shareholders’ equity 2,870   2,171
Total liabilities and shareholders’ equity $ 9,639   $ 9,128
 
DELPHI AUTOMOTIVE PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
    Nine Months Ended
September 30,
2012   2011
(in millions)
Cash flows from operating activities:
Net income $ 1,005 $ 911
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 340 356
Deferred income taxes 18 17
Income from equity method investments, net of dividends received 8 (15 )
Other, net 34 3
Changes in operating assets and liabilities:
Accounts receivable, net (87 ) (334 )
Inventories (69 ) (156 )
Accounts payable (22 ) 185
Other, net (17 ) (7 )
Pension contributions (42 ) (51 )
Net cash provided by operating activities 1,168   909  
Cash flows from investing activities:
Capital expenditures (563 ) (454 )
Maturity of time deposits 550
Proceeds from sale of property / investments 18 64
Cost of acquisitions, net of cash acquired (17 )
(Increase) decrease in restricted cash (2 ) 37
Acquisition of minority held shares (16 ) (5 )
Dividends from equity method investments in excess of earnings 37
Other, net    
Net cash (used in) provided by investing activities (526 ) 175  
Cash flows from financing activities:
(Decrease) increase in short and long-term debt, net (21 ) 1,759
Dividend payments of consolidated affiliates to minority shareholders (39 ) (29 )
Repurchase of ordinary shares (300 )
Redemption of membership interests   (4,638 )
Net cash used in financing activities (360 ) (2,908 )
Effect of exchange rate fluctuations on cash and cash equivalents (11 ) (9 )
Increase (decrease) in cash and cash equivalents 271 (1,833 )
Cash and cash equivalents at beginning of period 1,363   3,219  
Cash and cash equivalents at end of period $ 1,634   $ 1,386  
 
DELPHI AUTOMOTIVE PLC
FOOTNOTES
(unaudited)
1. Segment Summary
 
    Three Months Ended     Nine Months Ended
September 30, September 30,
2012   2011   % 2012   2011   %
(in millions) (in millions)

Net sales

Electrical/Electronic Architecture $ 1,607 $ 1,658 (3 )% $ 5,049 $ 5,012 1 %
Powertrain Systems 1,087 1,183 (8 )% 3,597 3,729 (4 )%
Electronics and Safety 648 719 (10 )% 2,092 2,245 (7 )%
Thermal Systems 374 431 (13 )% 1,192 1,353 (12 )%
Eliminations and Other (a) (53 ) (60 ) (178 ) (198 )
Net sales $ 3,663   $ 3,931   $ 11,752   $ 12,141  
 

EBITDA

Electrical/Electronic Architecture $ 210 $ 233 (10 )% $ 708 $ 690 3 %
Powertrain Systems 169 167 1 % 571 487 17 %
Electronics and Safety 78 81 (4 )% 269 279 (4 )%
Thermal Systems 23 35 (34 )% 91 133 (32 )%
Eliminations and Other (a)        
EBITDA $ 480   $ 516   $ 1,639   $ 1,589  
 
(a) Eliminations and Other includes the elimination of inter-segment transactions.
 

2. Weighted Average Number of Diluted Shares Outstanding

The Company has calculated weighted average number of diluted shares outstanding giving retrospective effect to our corporate conversion (exchange of membership interests for ordinary shares and consummation of the initial public offering). The impact of these transactions on the weighted average number of diluted shares outstanding for the three and nine months ended September 30, 2011 follows:

 
    Three Months Ended September 30,   Nine Months Ended September 30,
2012   2011 2012   2011
(in millions, except per share data)
Weighted average ordinary shares outstanding as result of the initial public offering n/a 328.24 n/a 328.24
Redemption of Class A & C membership interests n/a

n/a

116.40
Repurchase of Class B membership interests n/a 8.59   n/a 7.94
Weighted average ordinary shares outstanding for the period 321.28   336.83   325.28   452.58
 
Net income attributable to Delphi $ 269   $ 266   $ 941   $ 855
Diluted earnings per share $ 0.84   $ 0.79   $ 2.89   $ 1.89
 

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 "EBITDA" and "cash flow before financing". Such non-GAAP financial measures are reconciled to their closest GAAP financial measure in the schedules below.

EBITDA: EBITDA 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. EBITDA is defined as net income (loss) before depreciation and amortization (including long-lived asset and goodwill impairment), interest expense, other income (expense), net, income tax expense and equity income (loss), net of tax. Not all companies use identical calculations of EBITDA therefore this presentation may not be comparable to other similarly titled measures of other companies. The Company's 2012 guidance was determined using a consistent manner and methodology.

 
Consolidated EBITDA
    Three Months Ended     Nine Months Ended
September 30, September 30,
2012   2011 2012   2011
(in millions)
Net income attributable to Delphi $ 269 $ 266 $ 941 $ 855
Income tax expense 52 87 227 276
Interest expense 32 37 100 84
Other income, net (3 ) (14 ) (15 ) (13 )
Noncontrolling interest 23 19 64 56
Equity income, net of tax (6 ) (2 ) (18 ) (25 )
Operating income 367 393 1,299 1,233
Depreciation and amortization 113   123   340   356  
EBITDA $ 480   $ 516   $ 1,639   $ 1,589  
 
 
Segment EBITDA
(in millions)
Three Months Ended September 30, 2012    

Electrical/
Electronic
Architecture

 

Powertrain
Systems

 

Electronics
and Safety

 

Thermal
Systems

 

Eliminations
and Other

  Total
 
Operating income $ 171 $ 125 $ 58 $ 13 $ $ 367
Depreciation and amortization 39   44   20   10     113
EBITDA $ 210   $ 169   $ 78   $ 23   $   $ 480
 
Three Months Ended September 30, 2011

Electrical/
Electronic
Architecture

Powertrain
Systems

Electronics
and Safety

Thermal
Systems

Eliminations
and Other

Total
 
Operating income $ 200 $ 116 $ 55 $ 22 $ $ 393
Depreciation and amortization 33   51   26   13     123
EBITDA $ 233   $ 167   $ 81   $ 35   $   $ 516
 
Nine Months Ended September 30, 2012

Electrical/
Electronic
Architecture

Powertrain
Systems

Electronics
and Safety

Thermal
Systems

Eliminations
and Other

Total
 
Operating income $ 596 $ 437 $ 207 $ 59 $ $ 1,299
Depreciation and amortization 112   134   62   32     340
EBITDA $ 708   $ 571   $ 269   $ 91   $   $ 1,639
 
Nine Months Ended September 30, 2011

Electrical/
Electronic
Architecture

Powertrain
Systems

Electronics
and Safety

Thermal
Systems

Eliminations
and Other

Total
 
Operating income $ 593 $ 343 $ 200 $ 97 $ $ 1,233
Depreciation and amortization 97   144   79   36     356
EBITDA $ 690   $ 487   $ 279   $ 133   $   $ 1,589
 

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, adjusted for maturities of time deposits and costs associated with the initial public offering (IPO). 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 2012 guidance was determined using a consistent manner and methodology.

 
    Three Months Ended     Nine Months Ended
September 30, September 30,
2012   2011 2012   2011
(in millions) (in millions)
Cash flows from operating activities:
Net income $ 292 $ 285 $ 1,005 $ 911
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 113 123 340 356
Working capital (14 ) 28 (178 ) (305 )
Pension contributions (16 ) (18 ) (42 ) (51 )
Other, net 39   (8 ) 43   (2 )
Net cash provided by operating activities 414   410   1,168   909  
 
Cash flows from investing activities:
Capital expenditures (163 ) (162 ) (563 ) (454 )
Maturity of time deposits 550
Other, net 3   26   37   79  
Net cash (used in) provided by investing activities (160 ) (136 ) (526 ) 175  
 
Adjustment for maturities of time deposits       (550 )
 
Cash flow before financing $ 254   $ 274   $ 642   $ 534  
 

Source: Delphi Automotive

Delphi Automotive
INVESTOR CONTACT:
Jack Monti - 248.813.2385
jack.monti@delphi.com
or
MEDIA CONTACT:
Lindsey Williams - 248.813.2528
lindsey.c.williams@delphi.com