Delphi Technologies reports first quarter 2020 results

Delphi Technologies PLC (“Delphi Technologies” or the “Company”) today announced financial results for its first quarter 2020.

Q1 2020 results

Q1 2020

• Revenue of $945 million decreased 18% percent from Q1 2019. Adjusting for currency exchange, revenue decreased 16%. The decline was primarily due to lower global production and the closure of customer production sites related to COVID-19 and the downward trend in passenger car diesel fuel injection systems in Europe, partially offset by solid growth in advanced gasoline direct injection fuel systems.
• On a regional basis, adjusted revenue reflects decreases of 20% in Europe, 23% in North America, and 15% in South America, partially offset by an increase of 6% in Asia Pacific, including an increase of 12% in China.
• Operating loss was $20 million, compared to operating income of $55 million in the prior year period. Adjusted operating income was $40 million, compared to $87 million in the prior year period. The decline was primarily due to lower volumes and unfavorable product mix, most notably between higher margin passenger car diesel fuel injection systems and lower margin advanced gasoline direct injection fuel systems, offset by structural cost reductions.
• Quarterly earnings per diluted share of $(0.66), compared to $0.18 in the prior year period. Excluding special items, earnings per diluted share was $0.22, compared to $0.67 in the prior year period.
• Cash flow from operating activities was $31 million, compared to $21 million in the prior year period. The year-on-year increase is primarily due to changes in working capital inflow, offset by the decrease in net income.
• Cash balance of $611 million as of March 31, 2020, including $500 million of unused amounts drawn on the Company’s Revolving Credit Facility.

CEO comments

“In the face of unprecedented uncertainty and a significant decline in global production, I am pleased with our strong revenue outgrowth and cash flow performance in Q1. During the COVID-19 pandemic, our focus has and continues to be on the safety of our people, customers and suppliers and on adhering to government directives, while taking the necessary actions to navigate the significant shorter-term impacts to our industry. Our restructuring initiatives and footprint consolidation plans are ahead of schedule, allowing us to accelerate our cost savings and preserve cash” said Richard F. Dauch, Chief Executive Officer of Delphi Technologies.

“We are pleased to be proceeding with the transaction with BorgWarner which we continue to believe delivers clear benefits to all Delphi Technologies stakeholders, particularly in light of the current market and macroeconomic environment. The combination will create a company uniquely equipped to serve both OEM and aftermarket customers. Together we will be able to address market trends toward electrification while satisfying the ongoing demand for clean, efficient, combustion technologies.”

Amended Transaction Agreement with BorgWarner

BorgWarner Inc. (NYSE: BWA) and Delphi Technologies today announced that the companies have amended certain terms of the definitive transaction agreement they originally entered into on January 28, 2020 under which BorgWarner will acquire Delphi Technologies in an all-stock transaction. The amendment represents a resolution to BorgWarner’s previously stated assertion that Delphi Technologies materially breached the definitive transaction agreement by drawing down on its full $500 million Revolving Credit Facility without BorgWarner’s consent, which Delphi Technologies disputed on the basis that BorgWarner unreasonably withheld and conditioned its consent.

Under the terms of the amendment, which has been approved by the boards of directors of both companies. BorgWarner consents to Delphi Technologies’ recent draw down of its revolver. The amended transaction agreement also provides for new closing conditions requiring that, at the time of the transaction closing, the total amount of Delphi Technologies’ outstanding revolver borrowings does not exceed $225 million, and net of its cash balances, does not exceed $115 million, and its net debt-to-adjusted EBITDA ratio does not exceed a specified threshold. As part of resolving the dispute, the parties have also agreed to a revised exchange ratio pursuant to which Delphi Technologies’ shareholders will receive 0.4307 shares of BorgWarner common stock for each Delphi Technologies share. This represents a 5% reduction in the exchange ratio relative to the exchange ratio contained in the original agreement. In accordance with the amended terms, current BorgWarner and Delphi Technologies shareholders would own approximately 85% and 15%, respectively, of the outstanding shares of the combined company following completion of the transaction. All other terms and conditions of the original transaction agreement remain substantially the same.

The integration planning teams continue to work diligently toward the closing of the transaction, which is expected to occur in the second half of 2020, subject to approval by Delphi Technologies’ shareholders, receipt of required regulatory approvals and satisfaction or waiver of other closing conditions.

Amendment to Credit Agreement

Delphi Technologies also announced today that it had amended its existing Credit Agreement given the impact of COVID-19 on the global automotive industry. The Company believes that the amendments significantly enhance its financial flexibility to manage through the unprecedented market disruption caused by the pandemic. With the support of its lending group, the amendments include changes to the definition of the Company’s net leverage ratio as well as increasing the maximum permitted leverage ratio. For more details, please refer to the Company’s Form 8-K, dated May 6, 2020, filed with the Securities and Exchange Commission (the “SEC”).

SOURCE: Delphi Technologies