Delphi Reports Second Quarter 2017 Financial Results; Raises Full Year Outlook

GILLINGHAM, England, Aug. 2, 2017 /PRNewswire/ -- Delphi Automotive PLC (NYSE: DLPH), a leading global technology company serving the automotive sector, today reported second quarter 2017 U.S. GAAP earnings from continuing operations of $1.38 per diluted share. Excluding special items, second quarter earnings from continuing operations totaled $1.71 per diluted share.

Second Quarter Highlights Include:

• Revenue of $4.3 billion, up 5% adjusted for currency exchange, commodity movements, acquisitions and divestitures
• U.S. GAAP net income from continuing operations of $369 million, diluted earnings per share from continuing operations of $1.38
• Excluding special items, earnings from continuing operations of $1.71 per diluted share, up 8%
• Adjusted Operating Income of $587 million, up 1%
• U.S. GAAP Operating Income margin of 10.8%. Adjusted Operating Income margin of 13.6%
• Generated $599 million of cash from continuing operations
• Share repurchases and dividends of $173 million

Year-to-Date Highlights Include:

• Revenue of $8.6 billion, up 7% adjusted for currency exchange, commodity movements, acquisitions and divestitures
• U.S. GAAP net income from continuing operations of $704 million, diluted earnings per share from continuing operations of $2.62
• Excluding special items, earnings from continuing operations of $3.29 per diluted share, up 12%
• Adjusted Operating Income of $1,124 million, up 3%
• U.S. GAAP Operating Income margin of 10.8%. Adjusted Operating Income margin of 13.1%
• Generated $889 million of cash from continuing operations
• Share repurchases and dividends of $444 million
• Spin-off of Powertrain Systems segment remains on track for completion by March 2018
• Raising full year outlook for sales and earnings

"Delphi delivered another strong quarter driven by our portfolio of relevant technologies," said Kevin Clark, president and chief executive officer. "Based on our strong first half performance, we are raising our sales and earnings outlook for the year. We continue to execute as planned on the announced spin-off of our Powertrain segment and remain committed to providing value to our customers and creating value for our shareholders."

Second Quarter 2017 Results

The Company reported second quarter 2017 revenue of $4.3 billion, an increase of 3% from the prior year period. Adjusted for currency exchange, commodity movements and the divestiture of the Company's Mechatronics businesses, revenue increased by 5% in the second quarter. This reflects growth of 3% in Europe, 16% in Asia, 15% in South America and consistent performance in North America.

The Company reported second quarter 2017 U.S. GAAP net income from continuing operations of $369 million and earnings from continuing operations of $1.38 per diluted share, compared to $258 million and $0.94 per diluted share in the prior year period. Second quarter Adjusted Net Income, a non-GAAP financial measure defined below, totaled $457 million, or $1.71 per diluted share, which includes the favorable impacts of a reduced share count and a lower tax rate compared to the prior period. Adjusted Net Income in the prior year period was $435 million, or $1.59 per diluted share.

Second quarter Adjusted Operating Income, a non-GAAP financial measure defined below, was $587 million, compared to $580 million in the prior year period, resulting from the continued above-market growth of our businesses in all regions. Second quarter Adjusted Operating margin was 13.6%, compared to 13.8% in the prior year period, reflecting the 40 basis point impact of the Mechatronics divestiture as well as continued investments for growth, offset by sales growth and the beneficial impacts of cost reduction initiatives, including our continuing rotation to best cost manufacturing locations in Europe. Depreciation and amortization expense (including asset impairment charges) totaled $181 million, a decrease from $190 million in the prior year period.

Interest expense for the second quarter totaled $35 million, as compared to $41 million in the prior year period, which reflects the benefits of our debt refinancing transactions in the third quarter of 2016.

Tax expense in the second quarter of 2017 was $62 million, resulting in an effective tax rate of approximately 14%, compared to $84 million, or an effective rate of 24%, in the prior year period. The decrease in the effective tax rate reflects the geographic mix of pretax earnings and the absence of certain restructuring charges recorded in the prior period for which no tax benefit was recognized.

The Company generated net cash flow from operating activities of $599 million in the second quarter, compared to $575 million in the prior year period.

Year-to-Date 2017 Results

For the six months ended June 30, 2017, the Company reported revenue of $8.6 billion, an increase of 4% from the prior year period, reflecting volume growth in all regions. Adjusted for currency exchange, commodity movements and the divestiture of the Company's Mechatronics businesses, revenue increased by 7% during the period. This reflects growth of 3% in North America, 6% in Europe, 13% in Asia and 15% in South America.

For the 2017 year-to-date period, the Company reported U.S. GAAP net income from continuing operations of $704 million and earnings from continuing operations of $2.62 per diluted share, compared to $578 million and $2.10 per diluted share in the prior year period. Year-to-date Adjusted Net Income totaled $885 million, or $3.29 per diluted share, which includes the favorable impacts of a reduced share count and a lower tax rate compared to the prior period. Adjusted Net Income in the prior year period was $812 million, or $2.95 per diluted share.

The Company reported Adjusted Operating Income of $1,124 million for the six months ended June 30, 2017, compared to $1,092 million in the prior year period, resulting from the continued above-market growth of our businesses in all regions. Adjusted Operating margin was 13.1% for the six months ended June 30, 2017, compared to 13.2% in the prior year period, reflecting the 30 basis point impact of the Mechatronics divestiture, continued investments for growth and warranty charges, offset by sales growth and the beneficial impacts of cost reduction initiatives, including our continuing rotation to best cost manufacturing locations in Europe. Depreciation and amortization expense totaled $356 million, an increase from $352 million in the prior year period.

Interest expense for the six months ended June 30, 2017 totaled $69 million, as compared to $82 million in the prior year period, which reflects the benefits of our debt refinancing transactions in the third quarter of 2016.

Tax expense for the six months ended June 30, 2017 was $123 million, resulting in an effective tax rate of approximately 15%, compared to $159 million, or an effective rate of 21%, in the prior year period. The decrease in the effective tax rate reflects the geographic mix of pretax earnings, the absence of certain restructuring charges recorded in the prior period for which no tax benefit was recognized and the impacts of discrete items.

The Company generated net cash flow from operating activities of $889 million in the six months ended June 30, 2017, compared to $843 million in the prior year period. As of June 30, 2017, the Company had cash and cash equivalents of $0.8 billion and total debt of $4.1 billion.

Reconciliations of Adjusted Net Income, Adjusted Net Income per Share, Adjusted Operating Income 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.

Share Repurchase Program

During the second quarter of 2017, the Company repurchased 1.09 million shares for approximately $95 million under its existing authorized share repurchase program, leaving approximately $1,084 million available for future share repurchases. Year-to-date, the Company repurchased 3.65 million shares for approximately $288 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.

Q3 and Full Year 2017 Outlook

The Company's third quarter and full year 2017 financial guidance is as follows:

Spin-off of Powertrain Systems Segment

The Company continued its progress toward the planned tax-free spin-off of its Powertrain Systems segment into a new, independent publicly traded company, and remains on track to complete the transaction by March 2018. Certain details of the separation were included in the initial Form 10 registration statement that was filed with the Securities and Exchange Commission in June 2017, and further information will be included in future amendments to the Form 10 registration statement. Powertrain intends to have its ordinary shares listed on the New York Stock Exchange. There can be no assurance regarding the timing of the spin-off or its completion, and the transaction is subject to customary market, regulatory and other conditions.

Conference Call and Webcast

The Company will host a conference call to discuss the planned transaction and 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://investor.delphi.com/. The conference ID number is 54160666. 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 GAAP. Specifically, Adjusted Operating Income, Adjusted Net Income, Adjusted Net Income per Share and Cash Flow Before Financing are non-GAAP financial measures. Adjusted Operating Income represents net income before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, income (loss) from discontinued operations, net of tax, restructuring, separation costs related to the planned spin-off of the Powertrain Systems segment, other acquisition and portfolio project costs, asset impairments and gains (losses) on business divestitures. 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 Net Income represents net income attributable to Delphi before discontinued operations, restructuring and other special items, including the tax impact thereon. Adjusted Net Income Per Share represents Adjusted Net Income divided by the weighted average number of diluted shares outstanding for the period. Cash Flow Before Financing represents cash provided by operating activities from continuing operations plus cash provided by (used in) investing activities from continuing operations, adjusted for the purchase price of business acquisitions and net proceeds from the divestiture of discontinued operations and 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 Operating Income, 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 Delphi

Delphi Automotive PLC (NYSE: DLPH) is a high-technology company that integrates safer, greener and more connected solutions for the automotive and transportation sectors. Headquartered in Gillingham, U.K., Delphi operates technical centers, manufacturing sites and customer support services in 46 countries. Visit 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
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 financial performance which management believes is useful to investors in assessing the Company's ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company's core operating performance and which may obscure underlying business results and trends. Our management utilizes Adjusted Operating Income in its financial decision making process, to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Management also utilizes Adjusted Operating Income as the key performance measure of segment income or loss and for planning and forecasting purposes to allocate resources to our segments, as management also believes this measure is most reflective of the operational profitability or loss of our operating segments. Adjusted Operating Income is defined as net income before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, income (loss) from discontinued operations, net of tax, restructuring and other special items. 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. Operating Income margin represents Operating Income as a percentage of Net sales, and Adjusted Operating Income margin represents Adjusted Operating Income as a percentage of Net sales.

Adjusted Net Income and Adjusted Net Income Per Share: Adjusted Net Income and Adjusted Net Income Per Share, which are non-GAAP measures, are presented as supplemental measures of the Company's financial performance which management believes are useful to investors in assessing the Company's ongoing financial performance that, when reconciled to the corresponding U.S. 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 which may obscure underlying business results and trends. Management utilizes Adjusted Net Income and Adjusted Net Income Per Share in its financial decision making process, to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Adjusted Net Income is defined as net income attributable to Delphi before discontinued operations, restructuring and other special items, including the tax impact thereon. 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.

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, evaluating its liquidity and determining appropriate capital allocation strategies. Management believes this measure is useful to investors to understand how the Company's core operating activities generate and use cash. Cash Flow Before Financing is defined as cash provided by operating activities from continuing operations plus cash provided by (used in) investing activities from continuing operations, adjusted for the purchase price of business acquisitions (including the settlement of foreign currency derivatives in 2016 related to the 2015 acquisition of HellermannTyton) and net proceeds from the divestiture of discontinued operations and other significant businesses. 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 calculation of Cash Flow Before Financing does not reflect cash used to service debt, pay dividends or repurchase shares and, therefore, does not necessarily reflect funds available for investment or other discretionary uses.

Financial Guidance: The reconciliation of the forward-looking non-GAAP financial measures provided in the Company's financial guidance to the most comparable forward-looking GAAP measure is as follows:

SOURCE Delphi Automotive PLC