Delphi Earnings Increase 9 Percent to $148 Million in Third Quarter
12 October 2000
Delphi Earnings Increase 9 Percent to $148 Million in Third Quarter
Year-over-year Margin Improvement Every Quarter Since IPO
Mobile MultiMedia Product Line Sales up 777% Over Prior Year
TROY, Mich., Oct. 11 Delphi Automotive Systems
today reported third quarter 2000 consolidated earnings of $148 million, or
$0.26 earnings per share, in line with analyst consensus estimates. This
represents a 9 percent increase in earnings over the same period last year.
"We continue to see improved margins in our operations as we aggressively
manage our portfolio, exiting more than $125 million of low-margin business in
the third quarter," said Alan S. Dawes, Delphi Chief Financial Officer.
"Additionally, Delphi Manufacturing System implementation continues to
generate results as we utilize lean practices and improve capital efficiency
at our manufacturing facilities worldwide."
Sales to customers other than General Motors rose to $2.0 billion, or 30
percent of total sales, representing a 15 percent increase over the third
quarter of 1999 on a comparable basis. Net income margin reached 2.2 percent,
up from 2.0 percent for the same period last year. Gross and operating
margins also increased. Quarterly net sales were $6.6 billion, down 2 percent
from the same period last year. Dawes attributed the sales reduction to
exited businesses, price reductions, foreign currency fluctuations and a
slight softening of new vehicle and aftermarket demand in North America and
Europe.
"Today's results mark the seventh consecutive quarter since our IPO that
we have achieved solid financial performance," said J.T. Battenberg III,
Delphi chairman, chief executive officer and president. "We continue to
deliver on the targets established at our independence to produce long-term
value for our shareholders. We remain focused on targets of 5 percent net
income margin by the end of 2002, year-over-year non-GM sales growth of more
than 10 percent and return on net assets of 12.5 percent, while generating
operating cash flow of $1.5-2.0 billion per year."
Aggressive Growth Initiatives
Growth in Delphi's Mobile MultiMedia (MMM) product line continued strong
with $114 million in sales in the third quarter, representing a 777 percent
increase over the third quarter of 1999, and a 97 percent increase over second
quarter 2000 results. The previous target for 2000 MMM sales was estimated at
$200 million, but based on higher than expected sales year-to-date, Delphi now
anticipates the total could approach $300 million.
New Business
Delphi's customer-differentiating technologies continue to generate new
business bookings. Major contracts* announced during the quarter include:
* Renault chose Delphi to provide advanced climate control technology for
all versions of its next-generation Laguna model, expected to go on sale in
Europe by early 2001. The expected lifetime value of the contract is more
than $550 million.
* Jaguar selected Delphi's Passive Occupant Detection System (PODS), the
first and only weight-sensing system of its kind to reach the market. This
technology will be standard equipment on the 2001 Jaguar XK sports car series.
* Delphi won a contract to supply significant electrical wiring content
to Volvo Truck Corporation in Europe. The programs include commercial trucks
of 16 tons and greater, and have expected annual volumes in excess of 40,000
units.
* Volkswagen do Brasil selected Delphi to provide its Compact Variable
Compressor for the VW Gol. The expected lifetime value of the contract is
worth more than $40 million when full production is reached in 2002.
* Delphi will supply its E-STEER(TM) Electric Power Steering System to
Volkswagen for its Lupo 3L TDI model, arriving in Europe this autumn.
Other Highlights
Delphi announced the formation of a majority-owned joint venture with
Ashimori Industry Co., Ltd. to jointly pursue seat belt business growth. The
venture will focus on new and existing opportunities in the North American,
South American and European seat belt systems markets.
HIGHLIGHTS -- Three months ended September 30, 2000 vs. three months ended
September 30, 1999 comparison
Three Months Ended
September 30,
2000 1999
(in millions, except per share amounts)
Net sales:
General Motors and affiliates $4,682 $5,102
Other customers 1,966 1,688
Total net sales. 6,648 6,790
Less operating expenses:
Cost of sales, excluding items listed below 5,773 5,980
Selling, general and administrative 420 402
Depreciation and amortization 225 202
Operating income 230 206
Less interest expense 42 34
Other income, net 48 48
Income before income taxes 236 220
Income tax expense 88 84
Net income $148 $136
Gross margin 13.2% 11.9%
Operating income margin 3.5% 3.0%
Net income margin 2.2% 2.0%
Basic and diluted earnings per share,
560 million and 562 million shares
outstanding in 2000 and 563 million and
566 million shares outstanding in 1999 $0.26 $0.24
HIGHLIGHTS -- Nine months ended September 30, 2000 vs. nine months ended
September 30, 1999 comparison
Nine Months Ended
September 30,
2000 1999
(in millions, except per share amounts)
Net sales:
General Motors and affiliates $15,844 $16,941
Other customers 6,386 5,001
Total net sales. 22,230 21,942
Less operating expenses:
Cost of sales, excluding items listed below 18,825 18,824
Selling, general and administrative 1,289 1,180
Depreciation and amortization 686 646
Operating income 1,430(1) 1,292
Less interest expense 127 94
Other income, net 116 115
Income before income taxes 1,419 1,313
Income tax expense 525(1) 499
Net income $894(1) $814
Gross margin 15.3% 14.2%
Operating income margin 6.4%(1) 5.9%
Net income margin 4.0%(1) 3.7%
Basic earnings per share, 561 million and
550 million shares outstanding, respectively
in 2000 and 1999 $1.59 $1.48
Diluted earnings per share, 564 million and
551 million shares outstanding in 2000 and
1999, respectively $1.58 $1.48
Basic and diluted earnings per share
- pro forma (2) N/A $1.44
(1) 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 $862
million and diluted earnings per share was $1.53.
(2) Pro forma earnings per share are presented as if the initial public
stock offering of 100 million shares took place on January 1, 1999, resulting
in 564 million shares outstanding (566 million on a diluted basis) during the
first nine months of 1999.
HIGHLIGHTS -- Sector financial results
Sector Three Months Ended September 30,
2000 1999 2000 Operating 1999 Operating
Sales Sales Income (Loss) Income (Loss)
(in millions)
Electronics & Mobile Communication
Mobile MultiMedia $114 $13 $(2) $(9)
Other Electronics &
Mobile Communication 1,157 1,212 103 119
Total 1,271 1,225 101 110
Safety, Thermal & Electrical
Architecture 2,242 2,445 78 62
Dynamics & Propulsion 3,280 3,267 60 46
Other (145) (147) (9) (12)
Total $6,648 $6,790 $230 $206
Sector Nine Months Ended September 30,
2000 1999 2000 Operating 1999 Operating
Sales Sales Income (Loss) Income (Loss)
(in millions)
Electronics & Mobile Communication
Mobile MultiMedia $204 $28 $(18) $(24)
Other Electronics & Mobile
Communication 3,850 3,946 409 472
Total 4,054 3,974 391 448
Safety, Thermal & Electrical
Architecture 7,628 7,925 545 526
Dynamics & Propulsion 10,968 10,471 536(1) 392
Other (420) (428) (42) (74)
Total $22,230 $21,942 $1,430(1) $1,292
(1) 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:
September 30, December 31, September 30,
2000 1999 1999
(in millions)
Cash and cash equivalents $727 $1,546 $1,217
Debt $2,838 $1,757 $1,766
Net liquidity $(2,111) $(211) $(549)
Stockholders' equity $3,583 $3,200 $3,712
RECONCILIATION OF NET LIQUIDITY:
Net liquidity at December 31, 1999 $(211)
Net income 894(1)
Depreciation and amortization 686
Capital expenditures (955)
Other, net 486
Operating cash flow less capital expenditures 1,111
Cash paid for acquisitions, net of cash acquired (897)
Pension contributions (1,125)
Amounts paid to GM for estimated pension
and other postretirement benefit adjustments (715)
Dividends and other non-operating (274)
Net liquidity at September 30, 2000 $(2,111)
(1) Excludes the one-time, non-cash charge of $51 million ($32 million
after tax) resulting from acquisition-related in-process research and
development.