Delphi Announces First Quarter 2001 Financial
Results
Soft Auto Production Leads to Weaker Revenues, Breakeven Operating Results
GAAP Results Include Global Restructuring Plans
TROY, Mich., April 19 Citing ongoing vehicle production
softness in the global automotive market, Delphi Automotive Systems
today reported first quarter financial results including $2
million of operating income and a consolidated net loss of $25 million, or
$0.04 loss per share, excluding the impact of global restructuring and
impairment charges announced on March 29, 2001. Delphi's net income margin
declined to (0.4) percent, compared to 4.1 percent in the first quarter 2000,
while sales revenue was down 16 percent, or $1.3 billion, on a comparable
basis. Analyst consensus for the quarter as reported on First Call was $0.05
loss per share.
(Photo: http://www.newscom.com/cgi-bin/prnh/20001019/DELPHIAS )
Including the impact of the $404 million restructuring and impairment
charges, Delphi's first quarter 2001 net loss was $429 million, or $0.77 loss
per share.
"The first quarter was very challenging for Delphi as we adjusted our
infrastructure to match rapidly changing market conditions," said Alan S.
Dawes, Delphi chief financial officer. "While we anticipate slightly higher
production schedules in the second quarter, we will continue to implement our
cost reduction and revenue enhancement business strategies to facilitate a
stronger second half for calendar year 2001, and beyond.
"In response to market conditions, Delphi was able to reduce selling,
general and administrative expenses by $81 million compared to the first
quarter of 2000. In spite of breakeven operating results, Delphi generated
$102 million of operating cash flow during the period," Dawes said.
Quarterly net sales totaled $6.5 billion, down 16 percent from the same
period last year. Sales to customers other than General Motors were 33
percent of total sales, or $2.1 billion, while sales to GM totaled $4.4
billion. In addition to declining vehicle production schedules, Dawes
attributed the decline to further softening of aftermarket demand and year-
over-year weakness in the euro.
"We are extremely disappointed that we were not able to improve earnings
and margins at lower volumes," said Dawes. "We moved aggressively on
structural and selling, general and administrative costs, but we were hurt by
inefficiencies related to the uneven order-flow we faced in North America. We
believe the long-term answer is to reduce our structural costs and our
breakeven point."
Delphi's $404 million after-tax charge was primarily related to major
restructuring plans to close or consolidate nine plants, to reduce the global
workforce by 11,500 employees, and to exit selected products over the next 12
months. In the first quarter, approximately 2,000 employees were separated
under early retirement, voluntary separation and other programs with a first
quarter cash impact of $(50) million.
"The restructuring plans are intended to dramatically reduce Delphi's
breakeven point and to address the weaker businesses of our portfolio," he
said. Delphi expects the restructuring plans to resolve $900 million of the
$4 billion to $5 billion of products that are currently under management
review.
Dawes said the restructuring actions should begin to positively impact
Delphi's net income later this year and grow over the next two years. By late
2003, the company expects the charge-related actions will lift Delphi's
ongoing cash earnings power by more than $300 million annually.
1Q 2001 Highlights
During the quarter, Delphi supported the implementation of its customer
diversification and product portfolio actions with a series of announcements,
including:
* The completion of the Delphi Mechatronic Systems (formerly Vehicle
Switch/Electronics Division) acquisition from Eaton Corp. on March 30 for
approximately $300 million. The newly combined resources and customer base
establish Delphi as a market leader in mechatronic devices and complement
Delphi's market leading electrical and electronic architecture business.
* Continued strong customer acceptance of Delphi's advanced common-rail
diesel direct injection system. The system will be fitted in Europe on the
Ford Focus TDCi, which will be launched in May, and on Renault's Clio, Magane
and Kangoo vehicles available this summer.
* The introduction of 10 new Communiport(R) Mobile MultiMedia products
and technologies in 2001.
* The debut of the first development vehicle to be equipped with a solid
oxide fuel cell by Delphi and BMW.
* The purchase of advanced disc brake systems technology from Federal-
Mogul Corp. The unique technology, which can significantly reduce brake
corner assembly mass and system operating pressure, will be integrated into
Delphi's market-leading brake systems.
* A teaming agreement with Ashimori Industry Co. Ltd. of Japan to pursue
airbag business worldwide, which opens new markets for both companies and
enhances Delphi's occupant protection systems support in the Asian automotive
market.
* The creation of a New Markets unit, further demonstrating the company's
commitment to profitably grow its high-tech product sales outside traditional
automotive markets. During the quarter Delphi began selling 2mm hard metric
connectors to the telecom and datacom markets through its Packard-Hughes
Interconnect subsidiary. The new contract will supplement Delphi's existing
New Markets business in the communications, military & aerospace, agriculture
& construction, and recreation segments, which generated revenues of $460
million in 2000.
* Several new product contracts with companies such as Renault,
Brilliance China Automotive Holdings Ltd., National Seating, General Motors,
Ford and Lexus.
Outlook
Dawes repeated his March 29 outlook for improved second quarter financial
performance, resulting from a combination of cost reduction initiatives and
more level and somewhat higher vehicle production schedules. Dawes said the
company estimates Q2 2001 revenues in the $6.8 to $6.9 billion range, which is
approximately 11 percent below Q2 2000 revenues of $7.7 billion. In line with
lower year-over-year revenue, Delphi expects second quarter net income in the
$160 million to $200 million range, and operating cash flow in the $300
million to $400 million range, excluding the impact of cash outflows
associated with the global restructuring charges. The impact of employee
separation cash costs are expected to be up to $175 million in the second
quarter, and $250 million to $350 million for the calendar year.
Regarding future business opportunities, Dawes said, "As stated at our
independence, we expect our revenues, on a comparable basis, to grow modestly
from 1998 to 2003, assuming projected production levels. By growing our
revenues with customers other than GM by 10-15 percent annually, we expect to
outpace an anticipated decline of 3-4 percent in sales with GM."
Additional information concerning Delphi's Q1 results can be accessed
through the Investor Relations page of Delphi's website at
http://www.delphiauto.com , and in Delphi's first quarter 10-Q, expected to be filed
with the Securities and Exchange Commission later today.
Highlights attached.
About Delphi
For more information about Delphi Automotive Systems, visit Delphi's
Virtual Press Room at http://www.delphiauto.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 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 restructuring plans or other
initiatives, volume growth, awarded sales contracts and earnings per share
expectations or statements expressing general optimism about future operating
results) are forward-looking statements. Principal important factors, risks
and uncertainties which may cause actual results to differ from those
expressed in our forward-looking statements are: our ability to increase non-
GM sales and achieve the labor benefits expected from our separation from GM,
potential increases in our warranty costs, our ability to successfully
implement our global restructuring plans, changes in the economic conditions
or political environment in the markets in which we operate, currency
exchange/fluctuations, financial or market declines of our customers or
significant business partners, labor disruptions or material shortages, the
level of competition in the automotive industry, significant downturns in the
automobile production rate, costs relating to legal and administrative
proceedings, changes in laws or regulations pertaining to the automotive
industry, our ability to realize costs savings expected to offset price
reductions, our ability to make pension and other post-retirement payments at
levels anticipated by management, our ability to successfully exit non-
performing businesses and absorb contingent liabilities related to
divestitures, our ability to complete and integrate acquisitions, changes in
technology and technological risks, our ability to protect and assert patent
and other intellectual property rights, and other factors, risks and
uncertainties discussed in our annual report on Form 10-K for the fiscal year
ended December 31, 2000 and other filings with the Securities and Exchange
Commission. Delphi does not intend or assume any obligation to update any of
these forward-looking statements.
HIGHLIGHTS - Three months ended March 31, 2001 vs. three months ended
March 31, 2000 comparison
Three Months Ended
March 31,
2001 2000
(in millions, except per
share amounts)
Net sales:
General Motors and affiliates $4,366 $5,570
Other customers 2,169 2,234
Total net sales 6,535 7,804
Less operating expenses:
Cost of sales, excluding items listed below 5,901 6,596
Selling, general and administrative 378 459
Depreciation and amortization 254 (1) 232
Operating income 2 (1) 517 (2)
Less interest expense 56 40
Other income, net 15 (1) 34
(Loss) income before income taxes (39) 511
Less income tax (benefit) expense (14) (1) 189 (2)
Net (loss) income $(25) (1) $322 (2)
Gross margin 9.7% 15.5%
Basic and diluted (loss) earnings per share,
560 million shares outstanding in 2001 and
563 million (basic) and 566 million (diluted)
shares outstanding in 2000 $(0.04) (1) $0.57 (2)
(1) Excludes the impact of $617 million ($404 million after-tax) of
restructuring and impairment charges comprised of restructuring of $536
million, asset impairments of $63 million, investment impairments of $18
million and income tax benefit of $213 million. Including these restructuring
and impairment charges, depreciation and amortization was $317 million,
operating (loss) income was $(597) million, other (expense) income was $(3)
million, income tax (benefit) expense was $(227) million, net (loss) income
was $(429) million and basic and diluted (loss) earnings per share was
$(0.77).
(2) Excludes the impact of a one-time, non-cash charge of $51 million
($32 million after-tax) resulting from acquisition-related in-process research
and development. Including the $51 million charge, net income was $290
million and basic and diluted earnings per share was $0.51.
HIGHLIGHTS - Sector financial results
Sector Three Months Ended March 31,
2001 2000 2001 2000
Sales Sales Operating Operating
Income (Loss) Income (Loss)
(in millions)
Electronics & Mobile
Communication
Mobile MultiMedia $111 $32 $(3) $(8)
Other Electronics & Mobile
Communication 1,095 1,360 67 (1) 149
Total 1,206 1,392 64 (1) 141
Safety, Thermal & Electrical
Architecture 2,248 2,692 49 (1) 207
Dynamics & Propulsion 3,178 3,821 (100) (1) 184 (2)
Other (97) (101) (11) (1) (15)
Total $6,535 $7,804 $2 (1) $517 (2)
(1) Excludes 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.
(2) Excludes the one-time, non-cash charge of $51 million resulting from
acquisition-related in-process research and development.
HIGHLIGHTS - Liquidity and capital resources
BALANCE SHEET DATA:
(in millions)
March 31, December 31, March 31,
2001 2000 2000
Cash and cash equivalents $704 $760 $916
Debt 3,368 3,182 2,927
Net liquidity $(2,664) $(2,422) $(2,011)
Total stockholders' equity $3,222 $3,766 $3,434
RECONCILIATION OF NET LIQUIDITY:
(in millions)
Net liquidity at December 31, 2000 $(2,422)
Net loss (25) (1)
Depreciation and amortization 254 (1)
Capital expenditures (194)
Cash paid for restructuring (50) (2)
Other, net 117 (1)
Operating cash flow less capital expenditures 102
Cash paid for acquisitions (263)
Dividends and other non-operating (81)
Net liquidity at March 31, 2001 $(2,664)
(1) Excludes the impact of $617 million ($404 million after-tax) of
restructuring and impairment charges comprised of restructuring of $536
million, asset impairments of $63 million and investment impairments of $18
million.
(2) Total cash outflows associated with the restructuring are expected to
be $450 million, of which $50 million was paid in the first quarter of 2001.
