Delphi Reports Third Quarter 2016 Financial Results

GILLINGHAM, England, Nov. 2, 2016 /PRNewswire/ -- Delphi Automotive PLC (NYSE: DLPH), a leading global technology company serving the automotive sector, today reported third quarter 2016 U.S. GAAP earnings from continuing operations of $1.07 per diluted share. Excluding special items, third quarter earnings from continuing operations totaled $1.50 per diluted share.

Third Quarter Highlights Include:

• Revenue of $4.1 billion, up 10% adjusted for currency exchange, commodity movements, acquisitions and divestitures
• U.S. GAAP net income from continuing operations of $293 million, diluted earnings per share from continuing operations of $1.07
  • Excluding special items, earnings from continuing operations of $1.50 per diluted share, up 17%
• Adjusted Operating Income of $531 million, up 13%
  • U.S. GAAP Operating Income margin of 11.2%. Adjusted Operating Income margin of 13.0%, up 10 basis points
• Generated $415 million of cash from continuing operations
• Share repurchases and dividends of $179 million

Year-to-Date Highlights Include:

• Revenue of $12.3 billion, up 8% adjusted for currency exchange, commodity movements, acquisitions and divestitures
• U.S. GAAP net income from continuing operations of $871 million, diluted earnings per share from continuing operations of $3.18
  • Excluding special items, earnings from continuing operations of $4.45 per diluted share, up 16%
• Adjusted Operating Income of $1,617 million, up 10%
  • U.S. GAAP Operating Income margin of 10.5%. Adjusted Operating Income margin of 13.1%, up 10 basis points
• Generated $1,258 million of cash from continuing operations
• Share repurchases and dividends of $773 million

"We delivered strong performance in the third quarter with double-digit sales and earnings growth," said Kevin Clark, president and chief executive officer. "We are confident in our outlook as we continue to aggressively optimize our cost structure to expand margins and fund smart investments in technologies that will enhance our future profitable growth."

Third Quarter 2016 Results

The Company reported third quarter 2016 revenue of $4.1 billion, an increase of 13% from the prior year period, reflecting the acquisition of HellermannTyton Group PLC ("HellermannTyton") and continued volume growth in North America, Europe and Asia Pacific. Adjusted for currency exchange, commodity movements, the acquisition of HellermannTyton and the divestiture of the Company's Reception Systems business, revenue increased by 10% in the third quarter. This reflects growth of 9% in North America, 7% in Europe and 19% in Asia, partially offset by a decline of 13% in South America.

The Company reported third quarter 2016 U.S. GAAP net income from continuing operations of $293 million and earnings from continuing operations of $1.07 per diluted share, compared to $351 million and $1.23 per diluted share in the prior year period. The third quarter 2016 results include pre-tax restructuring charges of $63 million, principally related to programs focused on the continued rotation of our manufacturing footprint to low cost locations in Europe and on reducing our global overhead costs, and $73 million of pre-tax losses on the extinguishment of debt resulting from the refinancing of a portion of our debt during the quarter.

Third quarter Adjusted Net Income, a non-GAAP financial measure defined below, totaled $409 million, or $1.50 per diluted share, which includes the favorable impact of a reduced share count, offset by a higher tax rate compared to the prior year period. Adjusted Net Income in the prior year period was $365 million, or $1.28 per diluted share.

Third quarter Adjusted Operating Income, a non-GAAP financial measure defined below, was $531 million, compared to $470 million in the prior year period. Adjusted Operating Income margin increased 10 basis points in the third quarter of 2016 to 13.0%, compared with 12.9% in the prior year period, resulting from the continued above-market growth of our businesses in Europe, North America and Asia Pacific, increased earnings from the December 2015 acquisition of HellermannTyton and the impact of cost reduction initiatives, including our continuing rotation to low cost manufacturing locations in Europe. Depreciation and amortization expense totaled $174 million in the third quarter, an increase from $131 million in the prior year period, primarily attributable to the acquisition of HellermannTyton in December of 2015.

Interest expense for the third quarter totaled $41 million, an increase from $30 million in the prior year period, which reflects the issuance of $1.3 billion in senior unsecured notes in the fourth quarter of 2015 to finance the acquisition of HellermannTyton.

Tax expense in the third quarter of 2016 was $57 million, resulting in an effective tax rate of approximately 16%, compared to $61 million, or an effective rate of 15%, in the prior year period. The increase in the effective tax rate was primarily attributable to the geographic mix of pretax earnings.

The Company generated net cash flow from continuing operating activities of $415 million in the three months ended September 30, 2016, compared to $394 million in the prior year period.

Year-to-Date 2016 Results

For the nine months ended September 30, 2016, the Company reported revenue of $12.3 billion, an increase of 9% from the prior year period, reflecting the acquisition of HellermannTyton and continued volume growth in North America, Europe and Asia Pacific. Adjusted for currency exchange, commodity movements, the acquisition of HellermannTyton and the divestiture of the Company's Reception Systems business, revenue increased by 8% during the period. This reflects growth of 7% in North America, 9% in Europe and 11% in Asia, partially offset by a decline of 19% in South America.

For the 2016 year-to-date period the Company reported U.S. GAAP net income from continuing operations of $871 million and earnings from continuing operations of $3.18 per diluted share, compared to $989 million and $3.43 per diluted share in the prior year period. Year-to-date Adjusted Net Income totaled $1,221 million, or $4.45 per diluted share, which includes the favorable impact of a reduced share count, partially offset by a higher tax rate compared to the prior year period. Adjusted Net Income in the prior year period was $1,104 million, or $3.83 per diluted share.

The Company reported Adjusted Operating Income of $1,617 million for the nine months ended September 30, 2016, compared to $1,468 million in the prior year period. Adjusted Operating Income margin was 13.1% for the nine months ended September 30, 2016, an improvement of 10 basis points, compared with 13.0% in the prior year period, resulting from the continued above-market growth of our businesses in Europe, Asia Pacific and North America, increased earnings from the acquisition of HellermannTyton and the impact of cost reduction initiatives, including our continuing rotation to low cost manufacturing locations in Europe. Depreciation and amortization expense (including asset impairment charges) totaled $526 million, an increase from $394 million in the prior year period, primarily attributable to the acquisition of HellermannTyton.

Interest expense for the nine months ended September 30, 2016 totaled $123 million, an increase from $92 million in the prior year period, which reflects the issuance of $1.3 billion in senior unsecured notes in the fourth quarter of 2015 to finance the acquisition of HellermannTyton. Additionally, the nine months ended September 30, 2016 and 2015 included losses on the extinguishment of debt totaling $73 million and $52 million, respectively.

Tax expense for the nine months ended September 30, 2016 was $216 million, resulting in an effective tax rate of approximately 20%, compared to $202 million, or an effective rate of 16%, in the prior year period. The increase is primarily attributable to the geographic mix of pretax earnings, and includes the impacts related to certain of the restructuring charges described above for which no tax benefit was recognized.

The Company generated net cash flow from continuing operating activities of $1,258 million in the nine months ended September 30, 2016, compared to $1,029 million in the prior year period. As of September 30, 2016, the Company had cash and cash equivalents of $0.4 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 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 third quarter of 2016, Delphi repurchased 1.49 million shares for approximately $100 million under its existing authorized share repurchase programs, leaving approximately $1,472 million available for future share repurchases. Year-to-date, the Company has repurchased 7.98 million shares for approximately $535 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 2016 Outlook

The Company's full year 2016 financial guidance is as follows:

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://investor.delphi.com/. The conference ID number is 93892935. 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, other acquisition and portfolio project costs, asset impairments and gains (losses) on business divestitures. Other acquisition and portfolio project costs includes 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 (used in) 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 amount deposited for the acquisition of HellermannTyton in September 2015 and the settlement of foreign currency derivatives related to the acquisition of HellermannTyton) and net proceeds from the divestiture of discontinued operations.

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 sector. Headquartered in Gillingham, U.K., Delphi operates technical centers, manufacturing sites and customer support services in 44 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
FOOTNOTES
(Unaudited)

1. Segment Summary

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, 2016 and 2015:

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. The Company's 2016 guidance was determined using a consistent manner and methodology.

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

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. The Company's 2016 guidance was determined using a consistent manner and methodology.

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 (used in) 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 amount deposited for the acquisition of HellermannTyton in September 2015 and the settlement of foreign currency derivatives related to the acquisition of HellermannTyton) and net proceeds from the divestiture of discontinued operations. 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. The Company's 2016 guidance was determined using a consistent manner and methodology.

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SOURCE Delphi Automotive PLC