Aptiv Reports First Quarter 2019 Financial Results Ahead of Expectations; Strong Outgrowth Continues Despite Weakening Macro Environment

Full Year 2019 (1)

Net sales

$3,600 - $3,700

$14,425 - $14,825

Adjusted operating income

$375 - $395

$1,630 - $1,710

Adjusted operating income margin

10.4% - 10.7%

11.3% - 11.5%

Adjusted net income per share

$1.11 - $1.17

$4.90 - $5.10

Cash flow from operations

$1,650

Capital expenditures

$800

Adjusted effective tax rate

15% - 16%

14% - 15%

(1)

Three Months Ended March 31,

2019

2018

(in millions, except per share amounts)

Net sales

$

3,575

$

3,630

Operating expenses:

Cost of sales

2,962

2,947

Selling, general and administrative

256

259

Amortization

34

30

Restructuring

20

Total operating expenses

3,278

3,256

Operating income

297

374

Interest expense

(38)

(34)

Other income, net

16

30

Income before income taxes and equity income

275

370

Income tax expense

(33)

(59)

Income before equity income

242

311

Equity income, net of tax

3

5

Net income

245

316

Net income attributable to noncontrolling interest

5

9

Net income attributable to Aptiv

240

$

307

Diluted net income per share:

Diluted net income per share attributable to Aptiv

$

0.92

$

1.15

Weighted average number of diluted shares outstanding

259.55

266.44

APTIV PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31,
 2019

December 31,
2018

(Unaudited)

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

$

321

$

567

Restricted cash

1

1

Accounts receivable, net

2,736

2,487

Inventories

1,326

1,277

Other current assets

435

445

Total current assets

4,819

4,777

Long-term assets:

Property, net

3,218

3,179

Operating lease right-of-use assets

434

—

Investments in affiliates

102

99

Intangible assets, net

1,334

1,380

Goodwill

2,503

2,524

Other long-term assets

609

521

Total long-term assets

8,200

7,703

Total assets

13,019

$

12,480

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term debt

$

542

$

306

Accounts payable

2,340

2,334

Accrued liabilities

1,132

1,054

Total current liabilities

4,014

3,694

Long-term liabilities:

Long-term debt

3,995

4,038

Pension benefit obligations

440

445

Long-term operating lease liabilities

350

—

Other long-term liabilities

585

633

Total long-term liabilities

5,370

5,116

Total liabilities

9,384

8,810

Commitments and contingencies

Total Aptiv shareholders' equity

3,418

3,459

Noncontrolling interest

217

211

Total shareholders' equity

3,635

3,670

Total liabilities and shareholders' equity

$

13,019

$

12,480

APTIV PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended March 31,

2019

2018

(in millions)

Cash flows from operating activities:

Net income

$

245

$

316

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

173

155

Restructuring expense, net of cash paid

(5)

(16)

Deferred income taxes

4

(7)

Income from equity method investments, net of dividends received

(3)

(5)

Loss on extinguishment of debt

6

—

Other, net

27

26

Changes in operating assets and liabilities:

Accounts receivable, net

(249)

(206)

Inventories

(49)

(119)

Accounts payable

53

140

Other, net

(110)

(87)

Pension contributions

(8)

(11)

Net cash provided by operating activities from continuing operations

84

186

Net cash used in operating activities from discontinued operations

—

(31)

Net cash provided by operating activities

84

155

Cash flows from investing activities:

Capital expenditures

(235)

(243)

Proceeds from sale of property / investments

3

3

Cost of business acquisitions, net of cash acquired

2

—

Deposit for acquisition of KUM

—

(5)

Cost of technology investments

(3)

—

Settlement of derivatives

(2)

—

Net cash used in investing activities

(235)

(245)

Cash flows from financing activities:

Increase in other short and long-term debt, net

229

35

Repayment of senior notes

(654)

—

Proceeds from issuance of senior notes, net of issuance costs

643

—

Repurchase of ordinary shares

(226)

(149)

Distribution of cash dividends

(57)

(59)

Taxes withheld and paid on employees' restricted share awards

(34)

(32)

Net cash used in financing activities

(99)

(205)

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash

4

44

Decrease in cash, cash equivalents and restricted cash

(246)

(251)

Cash, cash equivalents and restricted cash at beginning of period

568

1,597

Cash, cash equivalents and restricted cash at end of period

$

322

$

1,346

APTIV PLC

FOOTNOTES

(Unaudited)

1. Segment Summary

Three Months Ended March 31,

2019

2018

%

(in millions)

Net Sales

Signal and Power Solutions

$

2,562

$

2,617

Advanced Safety and User Experience

1,023

1,032

Eliminations and Other (a)

(19)

Net Sales

$

3,575

$

3,630

Adjusted Operating Income

Signal and Power Solutions

$

283

$

351

(19)%

Advanced Safety and User Experience

62

76

(18)%

Eliminations and Other (a)

—

—

Adjusted Operating Income

$

345

$

427

(a) Eliminations and Other includes the elimination of inter-segment transactions.

2. Weighted Average Number of Diluted Shares Outstanding

The following table illustrates the weighted average shares outstanding used in calculating basic and diluted net income
per share attributable to Aptiv for the three months ended March 31, 2019 and 2018:

Three Months Ended March 31,

2019

2018

(in millions, except per share amounts)

Weighted average ordinary shares outstanding, basic

259.08

265.69

Dilutive shares related to RSUs

0.47

0.75

Weighted average ordinary shares outstanding, including dilutive shares

259.55

266.44

Net income per share attributable to Aptiv

Basic

$

0.93

$

1.16

Diluted

$

0.92

$

1.15

APTIV PLC

RECONCILIATION OF NON-GAAP MEASURES

(Unaudited)

In this press release the Company has provided information regarding certain non-GAAP financial measures, including "Adjusted Operating Income," "Adjusted Net Income," "Adjusted Net Income Per Share" and "Cash Flow Before Financing." Such non-GAAP financial measures are reconciled to their closest GAAP financial measure in the following schedules.

Adjusted Operating Income: Adjusted Operating Income is presented as a supplemental measure of the Company's financial performance which management believes is useful to investors in assessing the Company's ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company's core operating performance and which may obscure underlying business results and trends. Our management utilizes Adjusted Operating Income in its financial decision making process, to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Management also utilizes Adjusted Operating Income as the key performance measure of segment income or loss and for planning and forecasting purposes to allocate resources to our segments, as management also believes this measure is most reflective of the operational profitability or loss of our operating segments. Adjusted Operating Income is defined as net income before interest expense, other income (expense), net, income tax expense, equity income (loss), net of tax, restructuring and other special items. Not all companies use identical calculations of Adjusted Operating Income, therefore this presentation may not be comparable to other similarly titled measures of other companies. Operating income margin represents Operating income as a percentage of net sales, and Adjusted Operating Income margin represents Adjusted Operating Income as a percentage of net sales.

Consolidated Adjusted Operating Income

Three Months Ended March 31,

2019

2018

($ in millions)

$

Margin

$

Margin

Net income attributable to Aptiv

$

240

$

307

Interest expense

38

34

Other income, net

(16)

(30)

Income tax expense

33

59

Equity income, net of tax

(3)

(5)

Net income attributable to noncontrolling interest

5

9

Operating income

$

297

8.3

%

$

374

10.3

%

Restructuring

26

20

Other acquisition and portfolio project costs

11

19

Deferred compensation related to nuTonomy acquisition

11

14

Adjusted operating income

$

345

9.7

%

$

427

11.8

%

Segment Adjusted Operating Income

(in millions)

Three Months Ended March 31, 2019

Signal and
Power Solutions

Advanced
Safety and User
Experience

Eliminations
and Other

Total

Operating income

$

257

$

40

$

—

$

297

Restructuring

19

7

—

26

Other acquisition and portfolio project costs

7

4

—

11

Deferred compensation related to nuTonomy acquisition

—

11

—

11

Adjusted operating income

$

283

$

62

$

—

$

345

Depreciation and amortization (a)

$

131

$

42

$

—

$

173

Three Months Ended March 31, 2018

Signal and
Power Solutions

Advanced
Safety and User
Experience

Eliminations
and Other

Total

Operating income

$

322

$

52

$

—

$

374

Restructuring

18

2

—

20

Other acquisition and portfolio project costs

11

8

—

19

Deferred compensation related to nuTonomy acquisition

—

14

—

14

Adjusted operating income

$

351

$

76

$

—

$

427

Depreciation and amortization (a)

$

119

$

36

$

—

$

155

(a) Includes asset impairments.

Adjusted Net Income and Adjusted Net Income Per Share: Adjusted Net Income and Adjusted Net Income Per Share, which are non-GAAP measures, are presented as supplemental measures of the Company's financial performance which management believes are useful to investors in assessing the Company's ongoing financial performance that, when reconciled to the corresponding U.S. GAAP measure, provide improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company's core operating performance and which may obscure underlying business results and trends. Management utilizes Adjusted Net Income and Adjusted Net Income Per Share in its financial decision making process, to evaluate performance of the Company and for internal reporting, planning and forecasting purposes. Adjusted Net Income is defined as net income attributable to Aptiv before restructuring and other special items, including the tax impact thereon. Adjusted Net Income Per Share is defined as Adjusted Net Income divided by the weighted average number of diluted shares outstanding for the period. Not all companies use identical calculations of Adjusted Net Income and Adjusted Net Income Per Share, therefore this presentation may not be comparable to other similarly titled measures of other companies.

Three Months Ended March 31,

2019

2018

(in millions, except per share amounts)

Net income attributable to Aptiv

$

240

$

307

Adjusting items:

Restructuring

26

20

Other acquisition and portfolio project costs

11

19

Deferred compensation related to nuTonomy acquisition

11

14

Debt extinguishment costs

6

—

Transaction and related (benefits) costs associated with acquisitions

—

(11)

Gain on changes in fair value of equity investments

(19)

—

Tax impact of adjusting items (a)

(2)

(6)

Adjusted net income attributable to Aptiv

$

273

$

343

Weighted average number of diluted shares outstanding

259.55

266.44

Diluted net income per share attributable to Aptiv

$

0.92

$

1.15

Adjusted net income per share

$

1.05

$

1.29

(a)

Represents the income tax impacts of the adjustments made for restructuring and other special items by calculating the income tax impact of these items using the appropriate tax rate for the jurisdiction where the charges were incurred.

Cash Flow Before Financing: Cash Flow Before Financing is presented as a supplemental measure of the Company's liquidity which is consistent with the basis and manner in which management presents financial information for the purpose of making internal operating decisions, evaluating its liquidity and determining appropriate capital allocation strategies. Management believes this measure is useful to investors to understand how the Company's core operating activities generate and use cash. Cash Flow Before Financing is defined as cash provided by operating activities from continuing operations plus cash provided by (used in) investing activities, adjusted for the purchase price of business acquisitions and net proceeds from the divestiture of discontinued operations and other significant businesses. Not all companies use identical calculations of Cash Flow Before Financing, therefore this presentation may not be comparable to other similarly titled measures of other companies. The calculation of Cash Flow Before Financing does not reflect cash used to service debt, pay dividends or repurchase shares and, therefore, does not necessarily reflect funds available for investment or other discretionary uses.

Three Months Ended March 31,

2019

2018

(in millions)

Cash flows from operating activities:

Net income

$

245

$

316

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

173

155

Restructuring expense, net of cash paid

(5)

(16)

Working capital

(245)

(185)

Pension contributions

(8)

(11)

Other, net

(76)

(73)

Net cash provided by operating activities from continuing operations

84

186

Cash flows from investing activities:

Capital expenditures

(235)

(243)

Cost of business acquisitions, net of cash acquired

2

—

Deposit for acquisition of KUM

—

(5)

Cost of technology investments

(3)

—

Settlement of derivatives

(2)

—

Other, net

3

3

Net cash used in investing activities

(235)

(245)

Adjusting items:

Adjustment for amount deposited for acquisition of KUM

—

5

Adjustment for the cost of business acquisitions, net of cash acquired

(2)

—

Cash flow before financing

$

(153)

$

(54)

Financial Guidance: The reconciliation of the forward-looking non-GAAP financial measures provided in the Company's financial guidance to the most comparable forward-looking GAAP measure is as follows:

Estimated Q2

Estimated Full Year

2019 (1)

2019 (1)

($ and shares in millions, except per share amounts)

Adjusted Operating Income

$

Margin (2)

$

Margin (2)

Net income attributable to Aptiv

$

237

$

1,128

Interest expense

39

156

Other income, net

(8)

(32)

Income tax expense

50

195

Equity income, net of tax

(4)

(21)

Net income attributable to noncontrolling interest

9

40

Operating income

323

8.8

%

1,466

10.0

%

Restructuring

40

126

Other acquisition and portfolio project costs

10

35

Deferred compensation related to nuTonomy acquisition

12

43

Adjusted operating income

$

385

10.5

%

$

1,670

11.4

%

Adjusted Net Income Per Share

Net income attributable to Aptiv

$

237

$

1,128

Restructuring

40

126

Other acquisition and portfolio project costs

10

35

Deferred compensation related to nuTonomy acquisition

12

43

Debt extinguishment costs

—

6

Gain on changes in fair value of equity investments

—

(19)

Tax impact of adjusting items

(5)

(29)

Adjusted net income attributable to Aptiv

$

294

$

1,290

Weighted average number of diluted shares outstanding

258.59

258.06

Diluted net income per share attributable to Aptiv

$

0.92

$

4.37

Adjusted net income per share

$

1.14

$

5.00

(1)

Prepared at the estimated mid-point of the Company's financial guidance range.

(2)

Represents operating income and Adjusted Operating Income, respectively, as a percentage of estimated net sales.