Aptiv Reports Third Quarter 2020 Financial Results

DUBLIN, Oct. 29, 2020 /PRNewswire/ -- Aptiv PLC (NYSE: APTV), a global technology company focused on making mobility safer, greener and more connected, today reported third quarter 2020 U.S. GAAP earnings of $1.05 per diluted share. Excluding special items, third quarter earnings totaled $1.13 per diluted share.

Third Quarter Highlights Include:

• U.S. GAAP revenue of $3.7 billion, an increase of 3% 
  - Revenue increased 3% adjusted for currency exchange, commodity movements and divestitures
• U.S. GAAP net income of $283 million, diluted earnings per share of $1.05
  - Excluding special items, diluted earnings per share of $1.13
• U.S. GAAP operating income margin of 9.9%, operating income of $364 million
  - Adjusted Operating Income margin of 10.6%, Adjusted Operating Income of $389 million; Adjusted EBITDA of $581 million
• Generated $559 million of cash from operations

Year-to-Date Highlights Include:

• U.S. GAAP revenue of $8.9 billion, a decrease of 18%
  - Revenue decreased 16% adjusted for currency exchange, commodity movements and divestitures; largely resulting from volume declines associated with the adverse impacts of the COVID-19 pandemic
• U.S. GAAP net income of $1,486 million, diluted earnings per share of $5.63; which includes a gain of $5.39 per diluted share resulting from the completion of the Motional autonomous driving joint venture in the first quarter
  - Excluding special items, diluted earnings per share of $0.77
• U.S. GAAP operating income of $1,672 million; which includes a gain of $1,434 million resulting from the completion of the Motional autonomous driving joint venture in the first quarter
  - Adjusted Operating Income margin of 4.4%, Adjusted Operating Income of $391 million; Adjusted EBITDA of $943 million
• Generated $614 million of cash from operations

"Our third quarter results reflect the efforts we have taken to build a more sustainable business, with a portfolio of advanced technologies driving sustained above market growth despite the ongoing challenging environment," said Kevin Clark, president and chief executive officer. "The actions we have taken to improve our through-cycle resiliency, optimize our industry-leading cost structure and enhance our operational execution resulted in stronger revenue growth and earnings in the quarter. Never has Aptiv's mission of enabling a safer, greener and more connected world had more meaning for our society than it does today. We are confident our technologies aligned to these key megatrends, flexible business model and strong balance sheet position Aptiv for recovery outperformance and sustainable long-term value creation for all of our stakeholders."

Third Quarter 2020 Results
For the three months ended September 30, 2020, the Company reported U.S. GAAP revenue of $3.7 billion, an increase of 3% from the prior year period, despite global vehicle production declines of 4% (4% on an Aptiv weighted market basis, which represents global vehicle production weighted to the geographic regions in which the Company generates its revenue, "AWM") over the same period. Adjusted for currency exchange, commodity movements and divestitures, revenue increased by 3% in the third quarter. This reflects growth of 3% in Europe, 11% in Asia, which includes growth of 14% in China, and 3% in South America, partially offset by a decline of 3% in North America.

The Company reported third quarter 2020 U.S. GAAP net income of $283 million and earnings of $1.05 per diluted share, compared to $246 million and $0.96 per diluted share in the prior year period. Third quarter Adjusted Net Income, a non-GAAP financial measure defined below, totaled $320 million, or earnings of $1.13 per diluted share, compared to $325 million, or $1.27 per diluted share, in the prior year period.

Third quarter Adjusted Operating Income, a non-GAAP financial measure defined below, was $389 million, compared to $410 million in the prior year period. Adjusted Operating Income margin was 10.6%, compared to 11.5% in the prior year period, reflecting the stabilization during the quarter of global vehicle production levels. Depreciation and amortization expense totaled $192 million, an increase from $178 million in the prior year period.

Interest expense for the third quarter totaled $38 million, as compared to $42 million in the prior year period.

Tax benefit in the third quarter of 2020 was $2 million, resulting in an effective tax rate of approximately (1)%, as a result of current period net discrete tax benefits of $38 million, or approximately 12 points, primarily due to the favorable tax impacts of certain intragroup reorganizations during the quarter, which are intended to streamline and simplify the Company's operating and legal structure. Tax expense in the third quarter of 2019 was $38 million, resulting in an effective tax rate of approximately 13%.

The Company generated net cash flow from operating activities of $559 million in the third quarter, compared to $325 million in the prior year period.

Year-to-Date 2020 Results
For the nine months ended September 30, 2020, the Company reported U.S. GAAP revenue of $8.9 billion, a decrease of 18% from the prior year period, which includes volume declines of 15% primarily resulting from the impacts of the COVID-19 pandemic, which also resulted in global vehicle production declines of 23% (26% on an AWM basis) over the same period. Adjusted for currency exchange, commodity movements and divestitures, revenue decreased by 16% during the period. This reflects declines of 25% in North America, 16% in Europe, 3% in Asia, which was flat in China, and 15% in South America.

For the 2020 year-to-date period, the Company reported U.S. GAAP net income of $1,486 million and earnings of $5.63 per diluted share, compared to $760 million and $2.95 per diluted share in the prior year period. Year-to-date Adjusted Net Income totaled $206 million, or earnings of $0.77 per diluted share, compared to $940 million, or $3.65 per diluted share, in the prior year period.

The Company reported Adjusted Operating Income of $391 million for the nine months ended September 30, 2020, compared to $1,160 million in the prior year period. Adjusted Operating Income margin was 4.4% for the nine months ended September 30, 2020, compared to 10.8% in the prior year period, primarily as a result of the adverse impacts of the COVID-19 pandemic, which primarily affected the first half of 2020, and included declines in global vehicle production and consumer demand, work stoppages, disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from temporary governmental "lock-down" orders for all non-essential activities. Depreciation and amortization expense totaled $556 million, an increase from $539 million in the prior year period.

Interest expense for the nine months ended September 30, 2020 totaled $125 million, as compared to $123 million in the prior year period.

Tax benefit for the nine months ended September 30, 2020 was $6 million, resulting in an effective tax rate of nil. Tax expense in the prior year period was $102 million, resulting in an effective tax rate of approximately 12%.

The Company generated net cash flow from operating activities of $614 million in the nine months ended September 30, 2020, compared to $921 million in the prior year period. As of September 30, 2020, the Company had cash and cash equivalents of $2.1 billion and total available liquidity of $4.5 billion.

Reconciliations of Adjusted Revenue Growth, Adjusted Net Income, Adjusted Net Income Per Share, Adjusted Operating Income, Adjusted EBITDA and Cash Flow Before Financing, which are non-GAAP measures, to the most directly comparable financial measures, respectively, calculated and presented in accordance with accounting principles generally accepted in the United States ("GAAP") are provided in the attached supplemental schedules.

Full Year 2020 Outlook
The Company's full year 2020 financial guidance is as follows:

Conference Call and Webcast
The Company will host a conference call to discuss these results at 8:00 a.m. (ET) today, which is accessible by dialing +1.800.367.2403 (U.S. and Canada) or +1.334.777.6978 (international) or through a webcast at ir.aptiv.com. The conference ID number is 6173758. 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 Aptiv's financial results which are not presented in accordance with GAAP. Specifically, Adjusted Revenue Growth, Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share and Cash Flow Before Financing are non-GAAP financial measures. Adjusted Revenue Growth represents the year-over-year change in reported net sales relative to the comparable period, excluding the impact on net sales from currency exchange, commodity movements and divestitures. Adjusted Operating Income represents net income before interest expense, other income (expense), net, income tax (expense) benefit, equity income (loss), net of tax, restructuring, other acquisition and portfolio project costs, asset impairments, gains (losses) on business divestitures and other transactions and deferred compensation related to acquisitions. Other acquisition and portfolio project costs include costs incurred to integrate acquired businesses and to plan and execute product portfolio transformation actions, including business and product acquisitions and divestitures. Adjusted Operating Income margin is defined as Adjusted Operating Income as a percentage of net sales. Adjusted EBITDA represents net income before depreciation and amortization (including asset impairments), interest expense, other income (expense), net, income tax (expense) benefit, equity income (loss), net of tax, restructuring and other special items.

Adjusted Net Income represents net income attributable to Aptiv before restructuring and other special items, including the tax impact thereon. Adjusted Net Income Per Share represents Adjusted Net Income divided by the Adjusted Weighted Average Number of Diluted Shares Outstanding for the period. The Adjusted Weighted Average Number of Diluted Shares Outstanding assumes the application of the if-converted method of share dilution, if not already applied for U.S. GAAP purposes of calculating the weighted average number of diluted shares outstanding. Cash Flow Before Financing represents cash provided by operating activities plus cash provided by (used in) investing activities, adjusted for the purchase price of business acquisitions and net proceeds from the divestiture of other significant businesses.

Management believes the non-GAAP financial measures used in this press release are useful to both management and investors in their analysis of the Company's financial position, results of operations and liquidity. In particular, management believes Adjusted Revenue Growth, Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share and Cash Flow Before Financing are useful measures in assessing the Company's ongoing financial performance that, when reconciled to the corresponding GAAP measure, provide improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company's core operating performance and that may obscure underlying business results and trends. Management also uses these non-GAAP financial measures for internal planning and forecasting purposes.

Such non-GAAP financial measures are reconciled to the most directly comparable GAAP financial measures in the attached supplemental schedules 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 Aptiv
Aptiv is a global technology company that develops safer, greener and more connected solutions enabling the future of mobility. Visit aptiv.com.

Forward-Looking Statements
This press release, as well as other statements made by Aptiv PLC (the "Company"), contain forward-looking statements that reflect, when made, the Company's current views with respect to current events, certain investments and acquisitions 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 include, but are not limited to, the following: global and regional economic conditions, including conditions affecting the credit market; uncertainties posed by the COVID-19 pandemic and the difficulty in predicting its future course and its impact on the global economy and the Company's future operations; fluctuations in interest rates and foreign currency exchange rates; the cyclical nature of global automotive sales and production; the potential disruptions in the supply of and changes in the competitive environment for raw material integral to the Company's products; the Company's ability to maintain contracts that are critical to its operations; potential changes to beneficial free trade laws and regulations such as the United States-Mexico-Canada Agreement; the ability of the Company to integrate and realize the expected benefits of recent transactions; the ability of the Company to attract, motivate and/or retain key executives; the ability of the Company to avoid or continue to operate during a strike, or partial work stoppage or slow down by any of its unionized employees or those of its principal customers; and the ability of the Company to attract and retain customers. Additional factors 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.