Delphi Reports Improved Second Quarter Results
TROY, Mich., July 17 Delphi Corp. today reported a 29 percent year-over-year increase in earnings for the second quarter of 2002 as the company benefited from a 5.4 percent improvement in revenue combined with operating cost reductions resulting from ongoing restructuring and cost containment initiatives.
"Non-GM revenue grew 13 percent versus the same period last year, which contributed to solid results for the quarter," said Delphi Chairman, CEO and President J.T. Battenberg III. "In 2001 and early 2002, we announced restructuring plans to re-size the company to benefit from an anticipated rebound. Our continued restructuring, portfolio transformation and customer diversification initiatives are on track to yield improved results."
- Second Quarter 2002 financial highlights:
- Revenue of $7.3 billion (up 5.4 percent from $6.9 billion in Q2 2001)
- Non-GM revenue at 34 percent of total revenue for the quarter at $2.5
billion (up 13 percent from $2.2 billion in Q2 2001)
- Net income of $220 million (up 29 percent from $171 million(1) in Q2 2001)
- Net income margin of 3 percent (compared to 2.5 percent(1) in Q2 2001)
- Earnings per share of $0.39, at the high end of our June 25, 2002 guidance and in-line with Thomson First Call consensus estimates
- Continued strong operating cash flow of $398 million (2), up 28 percent from Q2 2001
"We experienced strong growth in our non-GM revenue during the quarter as several previously announced customer programs began ramping up to volume production levels," said Delphi Chief Financial Officer Alan S. Dawes. "Our leading edge Recognition(TM) occupant sensing system, new rear seat entertainment systems, diesel common rail injection and new aftermarket sales channels all made an impact in the quarter."
Dawes also reported that operating cash flow remained strong during the quarter enabling the company to make a $400 million contribution to its U.S. hourly employee pension plan and fund employee separation programs associated with its restructuring plans.
Restructuring Update
During Q2 2002 Delphi further reduced its global workforce by 1,250 as part of its previously announced restructuring.
"These and other restructuring actions helped Delphi to offset increased healthcare and pension costs and improve our gross margin by 0.3 percent," said Dawes.
To-date, Delphi has completed approximately 75 percent of the 2002 plan, which called for the reduction of 6,100 global positions by the end of March 2003. During the quarter, Delphi utilized $58 million cash to fund separation programs and other restructuring actions related to the Q1 2002 restructuring charge of $150 million after-tax.
"When completed, the combined effects of Delphi's 2001 and 2002 restructuring plans are expected to reduce global employment by 17,540," said Dawes.
Portfolio Actions
On July 16, 2002, Delphi announced its intent to wind down its global generator business. Details of the wind down plan are being developed and discussed with customers, suppliers and employees.
"Immediate actions are being taken to reduce administrative and support costs associated with this product line. Capital and engineering expenses will be allocated only to maintain existing customer programs," said Dawes. "During 2001 and in Q1 2002 we established reserves to resolve the status of this product line and believe these reserves are adequate to cover costs associated with the wind down."
3Q 2002 Outlook
Dawes said third quarter 2002 revenue and earnings are expected to be comparable to Q3 2001. "Revenue is expected to range between $6.2 billion and $6.3 billion in the third quarter and net income is expected to be between $30 and $45 million. Cash flow is forecast between $50 and $150 million," he said.
"This third quarter outlook reflects continued strong year-over-year non- GM sales growth offset by the impact of changes in mix and packaging at our largest customer. The market remains intensely competitive and vehicle affordability pressure is resulting in lower Delphi content per vehicle," said Dawes. "These factors present a greater challenge at the reduced volume level traditionally experienced in the third quarter."
Additional Information
As is customary, Delphi today will file its 10Q for the second quarter 2002. Delphi Chairman J.T. Battenberg III and CFO Alan Dawes will also sign and submit attestations to the accuracy of Delphi's 2001 annual report on Form 10-K, its proxy statement and its 2002 quarterly financial reports in accordance with new Securities and Exchange Commission requirements.
A briefing concerning second quarter results for news media representatives, institutional investors and security analysts will be held at 11 a.m. EDT today. To participate in the briefing, call 800-513-1181 (International: 952-556-2826) up to fifteen minutes prior to the start time and ask to be connected to the Delphi conference call. For the general public, the briefing will be simultaneously audio webcast from the Investor Relations page of www.delphi.com .
For more information about Delphi and its operating subsidiaries, visit Delphi's Virtual Press Room at www.delphi.com/vpr .
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. All statements contained or incorporated in this press release which address operating performance, events or developments that we expect or anticipate may occur in the future (including statements relating to future sales or earnings expectations, savings expected as a result of our global restructurings or other initiatives, portfolio restructuring plans, volume growth, awarded sales contracts and earnings per share expectations or statements expressing general optimism about future operating results) are forward-looking statements. These statements are made on the basis of management's views and assumptions; as a result, there can be no assurance that management's expectations will necessarily come to pass. Principal important factors, risks and uncertainties which may cause actual results to differ from those expressed in our forward-looking statements include: our ability to increase non-GM sales and achieve the labor benefits expected from our separation from GM; our ability to retain GM business; potential increases in our warranty costs; our ability to successfully implement our global restructuring plans, including our planned 2002 portfolio restructuring; our ability to successfully implement our new markets initiative and achieve the benefits anticipated by such strategy; our ability to enter into definitive agreements to sell or wind down our generator and instrumentation businesses and make satisfactory arrangements with respect to antitrust matters, the labor force, customers of such businesses and other matters; changes in economic conditions, currency exchange rates or political environment in the markets in which we operate; the impact of possible terrorist attacks which could exacerbate other risks to our business such as incremental costs, slowed production or interruptions in the transportation system; financial or market declines of our customers or significant business partners; labor disruptions or material shortages; the level of competition in the markets in which we operate; the cyclical nature of the automotive industry, including significant downturns in the automobile production rate; costs relating to legal and administrative proceedings; changes in laws or regulations affecting our business; our ability to realize cost savings expected to offset price reductions; our ability to make pension and other post-retirement payments at levels anticipated by management; our ability to protect and assert patent and other intellectual property rights; our ability to successfully exit non-performing businesses and absorb contingent liabilities related to divestitures and facility closures; our ability to complete and integrate acquisitions; changes in technology and technological risks; our ability to provide high quality products at competitive prices, to develop new products to meet changing consumer preferences and to meet changing vehicle manufacturers' supply requirements on a timely, cost-effective basis; and other factors, risks and uncertainties discussed in our annual report on Form 10-K for the year ended December 31, 2001 and our other filings with the Securities and Exchange Commission. Delphi does not intend or assume any obligation to update any of these forward-looking statements.
- (1) Adjusted for goodwill amortization of $7 million after-tax.
- (2) Before dividends, pension contributions, true-ups and restructuring related cash payout of $71 million.
HIGHLIGHTS (PRO FORMA RESULTS)
THREE MONTHS ENDED JUNE 30, 2002 VS. THREE MONTHS ENDED JUNE 30, 2001 COMPARISON
SEE FOOTNOTES BELOW FOR AN EXPLANATION OF ADJUSTMENTS TO OUR UNAUDITED
GAAP OPERATING RESULTS USED IN CALCULATING OUR PRO FORMA RESULTS.
Three Months Ended
June 30,
2002 2001
(in millions, except
per share amounts)
Net sales:
General Motors and affiliates $4,818 $4,724
Other customers 2,504 2,220
Total net sales 7,322 6,944
Less operating expenses:
Cost of sales, excluding items listed below 6,332 6,024
Selling, general and administrative 361 363
Depreciation and amortization 247 245 (a)
Operating income 382 312 (a)
Less interest expense 47 56
Other income, net 8 9
Income before income taxes 343 265 (a)
Less income tax expense 123 94 (a)
Net income $220 $171 (a)
Gross margin 13.5% 13.2%
Net income margin 3.0% 2.5% (a)
Basic and diluted earnings per share,
561 million (basic) and 569 million (diluted)
shares outstanding, respectively, in 2002 and
560 million (basic) and 565 million (diluted)
shares outstanding, respectively, in 2001 $0.39 $0.30 (a)
HIGHLIGHTS (PRO FORMA RESULTS)
SIX MONTHS ENDED JUNE 30, 2002 VS. SIX MONTHS ENDED JUNE 30, 2001 COMPARISON
SEE FOOTNOTES BELOW FOR AN EXPLANATION OF ADJUSTMENTS TO OUR UNAUDITED GAAP OPERATING RESULTS USED IN CALCULATING OUR PRO FORMA RESULTS.
Six Months Ended
June 30,
2002 2001
(in millions, except
per share amounts)
Net sales:
General Motors and affiliates $9,302 $9,090
Other customers 4,708 4,389
Total net sales 14,010 13,479
Less operating expenses:
Cost of sales, excluding items listed below 12,184 (a) 11,925
Selling, general and administrative 723 741
Depreciation and amortization 491 493 (b)
Operating income 612 (a) 320 (b)
Less interest expense 95 112
Other income, net 18 24 (b)
Income before income taxes 535 (a) 232 (b)
Less income tax expense 192 (a) 81 (b)
Net income $343 (a) $151 (b)
Gross margin 13.0% (a) 11.5%
Net income margin 2.4% (a) 1.1% (b)
Basic earnings per share, 561 million and
560 million shares outstanding in
2002 and 2001, respectively $0.61 (a) $0.27 (b)
Diluted earnings per share, 568 million and
565 million shares outstanding in
2002 and 2001, respectively $0.60 (a) $0.27 (b)
- (a) Excludes the net restructuring and product line charges of $262 million ($174 million after-tax). Including these items, cost of sales was $12,221 million, operating income was $350 million, income before income taxes was $273 million, income tax expense was $104 million, net income was $169 million and basic and diluted earnings per share was $0.30.
- (b) Excludes the restructuring and impairment charges of $617 million ($404 million after-tax). In addition, in accordance with new accounting rules, we stopped amortizing goodwill effective January 1, 2002. For ease of comparison and consistency, we have excluded 2001 goodwill amortization of $15 million ($12 million after-tax). Including these items, depreciation and amortization was $571 million, operating loss was $294 million, other income, net was $6 million, loss before income taxes was $400 million, income tax benefit was $135 million, net loss was $265 million, and basic and diluted loss per share was $0.47.
HIGHLIGHTS (PRO FORMA RESULTS)
Sector Financial Results
SEE FOOTNOTES BELOW FOR AN EXPLANATION OF ADJUSTMENTS TO OUR UNAUDITED GAAP OPERATING RESULTS USED IN CALCULATING OUR PRO FORMA RESULTS.
Three Months Ended June 30,
2002 2001
Sector 2002 2001 Operating Operating
Sales Sales Income Income
(Loss) (Loss)
(in millions)
Electronics & Mobile Communication
Mobile MultiMedia $94 $102 $(4) $(7)
Other Electronics &
Mobile Communication 1,234 1,167 143 109 (c)
Total 1,328 1,269 139 102 (c)
Safety, Thermal &
Electrical Architecture 2,596 2,404 187 130 (c)
Dynamics & Propulsion 3,488 3,378 78 123 (c)
Other (90) (107) (22) (43) (c)
Total $7,322 $6,944 $382 $312 (c)
Six Months Ended June 30,
2002 2001
Sector 2002 2001 Operating Operating
Sales Sales Income Income
(Loss) (Loss)
(in millions)
Electronics & Mobile Communication
Mobile MultiMedia $180 $213 $(10) $(10)
Other Electronics &
Mobile Communication 2,378 2,258 254 (a) 178 (b)(c)
Total 2,558 2,471 244 (a) 168 (b)(c)
Safety, Thermal &
Electrical Architecture 4,943 4,652 322 (a) 180 (b)(c)
Dynamics & Propulsion 6,700 6,555 86 (a) 26 (b)(c)
Other (191) (199) (40)(a) (54)(b)(c)
Total $14,010 $13,479 $612 (a) $320 (b)(c)
- (a) Excludes the net restructuring and product line charges of $20 million for Electronics & Mobile Communication, $101 million for Safety, Thermal & Electrical Architecture, $126 million for Dynamics & Propulsion and $15 million for Other.
- (b) Excludes the restructuring and asset impairment charges of $78 million for Electronics & Mobile Communication, $214 million for Safety, Thermal & Electrical Architecture, $280 million for Dynamics & Propulsion and $27 million for Other.
- (c) For comparative purposes, the three months ended June 30, 2001 excludes goodwill amortization of $9 million with $1 million for Electronics & Mobile Communication, $3 million for Safety, Thermal & Electrical Architecture, $4 million for Dynamics & Propulsion and $1 million for Other. The six months ended June 30, 2001 excludes goodwill amortization of $15 million with $2 million for Electronics & Mobile Communication, $4 million for Safety, Thermal & Electrical Architecture, $7 million for Dynamics & Propulsion and $2 million for Other.
HIGHLIGHTS (PRO FORMA RESULTS)
Liquidity and Capital Resources
SEE FOOTNOTES BELOW FOR AN EXPLANATION OF ADJUSTMENTS TO OUR UNAUDITED GAAP OPERATING RESULTS USED IN CALCULATING OUR PRO FORMA RESULTS.
BALANCE SHEET DATA:
(in millions) June 30, March 31, December 31, June 30,
2002 2002 2001 2001
Cash and cash equivalents $753 $697 $757 $689
Debt 3,662 3,303 3,353 3,388
Net liquidity $(2,909) $(2,606) $(2,596) $(2,699)
Total stockholders'
equity $2,439 (a) $2,221 (a) $2,312 (a) $3,311
RECONCILIATION OF NET LIQUIDITY:
(in millions)
Net liquidity at December 31, 2001 $(2,596)
Net income 343 (b)
Depreciation and amortization 491
Capital expenditures (461)
Other, net 210 (b)
Operating cash flow
less capital expenditures 583 (b)
Pension contribution (400)
Cash paid for restructuring
and product line charges (245) (b)(c)
Amount paid to GM for
separation related obligations (143)
Dividends and other non-operating (108)
Net liquidity at June 30, 2002 $(2,909)
- (a) Includes a pension charge to equity of $830 million after-tax. Excluding this pension charge, stockholders' equity would be $3,269 million as of June 30, 2002, $3,051 million as of March 31, 2002 and $3,142 million as of December 31, 2001.
- (b) Excludes the impact of the first quarter 2002 net restructuring and product line charges of $262 million ($174 million after-tax). Total cash outflows associated with the 2002 charges and 2001 product line impairment charges are expected to be $275 million, of which $131 million was paid in the first six months of 2002.
- (c) Total cash outflows associated with the 2001 restructuring charge were $457 million, of which $114 million was paid in the first six months of 2002.
CONSOLIDATED STATEMENTS OF OPERATIONS (a)
Three Months Ended June 30,
2002 2001
(in millions, except per share amounts)
Net sales:
General Motors and affiliates $4,818 $4,724
Other customers 2,504 2,220
Total net sales 7,322 6,944
Operating expenses:
Cost of sales, excluding
items listed below 6,332 6,024
Selling, general and administrative 361 363
Depreciation and amortization 247 254
Total operating expenses 6,940 6,641
Operating income 382 303
Less interest expense 47 56
Other income, net 8 9
Income before income taxes 343 256
Income tax expense 123 92
Net income $220 $164
Earnings per share
Basic and diluted $0.39 $0.29
CONSOLIDATED STATEMENTS OF OPERATIONS (a)
Six Months Ended June 30,
2002 2001
(in millions, except per share amounts)
Net sales:
General Motors and affiliates $9,302 $9,090
Other customers 4,708 4,389
Total net sales 14,010 13,479
Operating expenses:
Cost of sales, excluding
items listed below 12,221 11,925
Selling, general and administrative 723 741
Depreciation and amortization 491 571
Restructuring 225 536
Total operating expenses 13,660 13,773
Operating income (loss) 350 (294)
Less interest expense 95 112
Other income, net 18 6
Income (loss) before income taxes 273 (400)
Income tax expense (benefit) 104 (135)
Net income (loss) $169 $(265)
Earnings (loss) per share
Basic and diluted $0.30 $(0.47)
CONSOLIDATED BALANCE SHEETS (a)
June 30, December 31,
2002 2001
(in millions)
ASSETS
Current assets:
Cash and cash equivalents $753 $757
Accounts receivable, net:
General Motors and affiliates 3,320 2,829
Other customers 2,104 1,778
Inventories, net 1,703 1,621
Deferred income taxes 344 319
Prepaid expenses and other 178 194
Total current assets 8,402 7,498
Long-term assets:
Property, net 5,794 5,724
Deferred income taxes 3,079 3,152
Goodwill, net 674 630
Other 1,611 1,598
Total assets $19,560 $18,602
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $1,598 $1,270
Accounts payable 3,337 2,779
Restructuring obligations 80 121
Accrued liabilities 1,737 1,680
Total current liabilities 6,752 5,850
Long-term liabilities:
Long-term debt 2,064 2,083
Pension benefits 1,898 2,146
Postretirement benefits
other than pensions 4,943 4,702
Other 1,464 1,509
Total liabilities 17,121 16,290
Stockholders' equity:
Common stock, $0.01 par value,
1,350 million shares authorized,
565 million shares issued
in 2002 and 2001 6 6
Additional paid-in capital 2,446 2,450
Retained earnings 1,434 1,343
Minimum pension liability (830) (830)
Accumulated other comprehensive
loss, excluding minimum
pension liability (519) (567)
Treasury stock, at cost (98) (90)
Total stockholders' equity 2,439 2,312
Total liabilities and
stockholders' equity $19,560 $18,602
CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
Six Months Ended
June 30,
2002 2001
(in millions)
Cash flows from operating activities:
Net income (loss) $169 $(265)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization,
excluding amortization of goodwill 491 556
Amortization of goodwill - 15
Deferred income taxes 36 (233)
Restructuring 225 536
Changes in operating assets and liabilities:
Accounts receivable, net (817) (25)
Inventories, net (87) (58)
Prepaid expenses and other 11 94
Accounts payable 558 320
Restructuring obligations (245) (142)
Accrued liabilities 69 (176)
Other long-term liabilities (74) 56
Other (80) (28)
Net cash provided by
operating activities 256 650
Cash flows from investing activities:
Capital expenditures (461) (503)
Cost of acquisitions, net of cash acquired - (313)
Other 38 (10)
Net cash used in investing activities (423) (826)
Cash flows from financing activities:
Net proceeds from (repayments of)
borrowings under credit facilities
and other debt 309 (301)
Net proceeds from issuance of debt securities - 498
Dividend payments (78) (78)
Issuance (purchases) of treasury stock, net (12) 2
Net cash provided by financing activities 219 121
Effect of exchange rate fluctuations on
cash and cash equivalents (56) (16)
Decrease in cash and cash equivalents (4) (71)
Cash and cash equivalents at
beginning of period 757 760
Cash and cash equivalents at
end of period $753 $689
