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:
| (in millions, except per share amounts) | Full Year 2016 |
| Revenue | $16,400 – $16,500 |
| Adjusted operating income | $2,160 – $2,190 |
| Adjusted operating income margin | 13.2% – 13.3% |
| Adjusted earnings per share | $6.00 – $6.10 |
| Cash flow from operations | $1,900 |
| Capital expenditures | $800 |
| Adjusted effective tax rate | 17% |
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.
