Aptiv Reports Record First Quarter 2018 Financial Results And Raises Full Year Outlook

Q2 2018

Full Year 2018

Net sales

$3,500 - $3,600

$13,950 - $14,350

Adjusted operating income

$450 - $470

$1,750 - $1,830

Adjusted operating income margin

12.9% - 13.1%

12.6% - 12.8%

Adjusted net income per share

$1.33 - $1.38

$5.20 - $5.40

Cash flow from operations

$1,550

Capital expenditures

$750

Adjusted effective tax rate

15% - 16%

15% - 16%

Three Months Ended March 31,

2018

2017

(in millions, except per share amounts)

Net sales

$

3,630

$

3,143

Operating expenses:

Cost of sales

2,947

2,544

Selling, general and administrative

259

225

Amortization

30

29

Restructuring

20

52

Total operating expenses

3,256

2,850

Operating income

374

293

Interest expense

(34)

(33)

Other income (expense), net

30

(23)

Income from continuing operations before income taxes and equity income

370

237

Income tax expense

(59)

(19)

Income from continuing operations before equity income

311

218

Equity income, net of tax

5

11

Income from continuing operations

316

229

Income from discontinued operations, net of tax

—

123

Net income

316

352

Net income attributable to noncontrolling interest

9

17

Net income attributable to Aptiv

$

307

$

335

Amounts attributable to Aptiv:

Income from continuing operations

$

307

$

220

Income from discontinued operations

—

115

Net income

$

307

$

335

Diluted net income per share:

Continuing operations

$

1.15

$

0.82

Discontinued operations

—

0.42

Diluted net income per share attributable to Aptiv

$

1.15

$

1.24

Weighted average number of diluted shares outstanding

266.44

269.54

Cash dividends declared per share

$

—

$

0.29

APTIV PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31,
 2018

December 31,
 2017

(Unaudited)

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

$

1,345

$

1,596

Restricted cash

1

1

Accounts receivable, net

2,646

2,440

Inventories

1,202

1,083

Other current assets

732

521

Total current assets

5,926

5,641

Long-term assets:

Property, net

2,890

2,804

Investments in affiliates

101

91

Intangible assets, net

1,204

1,219

Goodwill

1,980

1,944

Other long-term assets

459

470

Total long-term assets

6,634

6,528

Total assets

$

12,560

$

12,169

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term debt

$

60

$

17

Accounts payable

2,282

2,227

Accrued liabilities

1,366

1,296

Total current liabilities

3,708

3,540

Long-term liabilities:

Long-term debt

4,163

4,132

Pension benefit obligations

460

454

Other long-term liabilities

531

526

Total long-term liabilities

5,154

5,112

Total liabilities

8,862

8,652

Commitments and contingencies

Total Aptiv shareholders' equity

3,467

3,299

Noncontrolling interest

231

218

Total shareholders' equity

3,698

3,517

Total liabilities and shareholders' equity

$

12,560

$

12,169

APTIV PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended March 31,

2018

2017

(in millions)

Cash flows from operating activities:

Net income

$

316

$

352

Income from discontinued operations, net of tax

—

123

Income from continuing operations

316

229

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

Depreciation and amortization

155

126

Restructuring expense, net of cash paid

(16)

18

Deferred income taxes

(7)

5

Income from equity method investments, net of dividends received

(5)

(10)

Other, net

26

24

Changes in operating assets and liabilities:

Accounts receivable, net

(206)

(96)

Inventories

(119)

(110)

Accounts payable

140

55

Other, net

(87)

25

Pension contributions

(11)

(8)

Net cash provided by operating activities from continuing operations

186

258

Net cash (used in) provided by operating activities from discontinued operations

(31)

32

Net cash provided by operating activities

155

290

Cash flows from investing activities:

Capital expenditures

(243)

(164)

Proceeds from sale of property / investments

3

—

Cost of business acquisitions, net of cash acquired

—

(40)

Deposit for acquisition of KUM

(5)

—

Cost of technology investments

—

(15)

Net cash used in investing activities from continuing operations

(245)

(219)

Net cash used in investing activities from discontinued operations

—

(51)

Net cash used in investing activities

(245)

(270)

Cash flows from financing activities:

Net borrowings (repayments) under short-term debt agreements

35

(4)

Contingent consideration and deferred acquisition purchase price payments

—

(20)

Dividend payments of consolidated affiliates to minority shareholders

—

(10)

Repurchase of ordinary shares

(149)

(194)

Distribution of cash dividends

(59)

(78)

Taxes withheld and paid on employees' restricted share awards

(32)

(26)

Net cash used in financing activities

(205)

(332)

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

44

21

Decrease in cash, cash equivalents and restricted cash

(251)

(291)

Cash, cash equivalents and restricted cash at beginning of period

1,597

839

Cash, cash equivalents and restricted cash at end of period

$

1,346

$

548

Cash, cash equivalents and restricted cash of discontinued operations

$

—

$

61

Cash, cash equivalents and restricted cash of continuing operations

$

1,346

$

487

APTIV PLC

FOOTNOTES

(Unaudited)

1. Segment Summary

Three Months Ended March 31,

2018

2017

%

(in millions)

Net Sales

Signal and Power Solutions

$

2,617

$

2,342

12%

Advanced Safety and User Experience

1,032

821

26%

Eliminations and Other (a)

(19)

(20)

Net Sales

$

3,630

$

3,143

Adjusted Operating Income

Signal and Power Solutions

$

351

$

309

14%

Advanced Safety and User Experience

76

43

77%

Eliminations and Other (a)

—

—

Adjusted Operating Income

$

427

$

352

(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, 2018 and 2017:

Three Months Ended March 31,

2018

2017

(in millions, except per share amounts)

Weighted average ordinary shares outstanding, basic

265.69

269.20

Dilutive shares related to RSUs

0.75

0.34

Weighted average ordinary shares outstanding, including dilutive shares

266.44

269.54

Basic net income per share:

Continuing operations

$

1.16

$

0.82

Discontinued operations

—

0.42

Basic net income per share attributable to Aptiv

$

1.16

$

1.24

Diluted net income per share:

Continuing operations

$

1.15

$

0.82

Discontinued operations

—

0.42

Diluted net income per share attributable to Aptiv

$

1.15

$

1.24

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, income (loss) from discontinued operations, 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,

2018

2017

($ in millions)

$

Margin

$

Margin

Net income attributable to Aptiv

$

307

$

335

Interest expense

34

33

Other (income) expense, net

(30)

23

Income tax expense

59

19

Equity income, net of tax

(5)

(11)

Income from discontinued operations, net of tax

—

(123)

Net income attributable to noncontrolling interest

9

17

Operating income

$

374

10.3

%

$

293

9.3

%

Restructuring

20

52

Other acquisition and portfolio project costs

19

6

Asset impairments

—

1

Deferred compensation related to nuTonomy acquisition

14

—

Adjusted operating income

$

427

11.8

%

$

352

11.2

%

Segment Adjusted Operating Income

(in millions)

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

Three Months Ended March 31, 2017

Signal and
Power Solutions

Advanced
Safety and User
Experience

Eliminations
and Other

Total

Operating income

$

291

$

2

$

—

$

293

Restructuring

13

39

—

52

Other acquisition and portfolio project costs

5

1

—

6

Asset impairments

—

1

—

1

Adjusted operating income

$

309

$

43

$

—

$

352

Depreciation and amortization (a)

$

102

$

24

$

—

$

126

(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 discontinued operations, 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,

2018

2017

(in millions, except per share amounts)

Net income attributable to Aptiv

$

307

$

335

Income from discontinued operations attributable to Aptiv, net of tax

—

(115)

Income from continuing operations attributable to Aptiv

307

220

Adjusting items:

Restructuring

20

52

Other acquisition and portfolio project costs

19

6

Asset impairments

—

1

Deferred compensation related to nuTonomy acquisition

14

—

Reserve for Unsecured Creditors litigation

—

27

Transaction and related (benefits) costs associated with acquisitions

(11)

—

Tax impact of adjusting items (a)

(6)

(15)

Adjusted net income attributable to Aptiv

$

343

$

291

Weighted average number of diluted shares outstanding

266.44

269.54

Diluted net income per share from continuing operations attributable to Aptiv

$

1.15

$

0.82

Adjusted net income per share

$

1.29

$

1.08

(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 from continuing operations, 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,

2018

2017

(in millions)

Cash flows from operating activities:

Income from continuing operations

$

316

$

229

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

Depreciation and amortization

155

126

Restructuring expense, net of cash paid

(16)

18

Working capital

(185)

(151)

Pension contributions

(11)

(8)

Other, net

(73)

44

Net cash provided by operating activities from continuing operations

186

258

Cash flows from investing activities:

Capital expenditures

(243)

(164)

Cost of business acquisitions, net of cash acquired

—

(40)

Deposit for acquisition of KUM

(5)

—

Cost of technology investments

—

(15)

Other, net

3

—

Net cash used in investing activities from continuing operations

(245)

(219)

Adjusting items:

Adjustment for amount deposited for acquisition of KUM

5

—

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

—

40

Cash flow before financing

$

(54)

$

79

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

2018 (1)

2018 (1)

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

Adjusted Operating Income

$

Margin (2)

$

Margin (2)

Net income attributable to Aptiv

$

273

$

1,131

Interest expense

35

138

Other (income) expense, net

1

(37)

Income tax expense

64

268

Equity income, net of tax

(8)

(30)

Net income attributable to noncontrolling interest

8

40

Operating income

373

10.5

%

1,510

10.7

%

Restructuring

50

147

Other acquisition and portfolio project costs

22

76

Deferred compensation related to nuTonomy acquisition

15

57

Adjusted operating income

$

460

13.0

%

$

1,790

12.7

%

Adjusted Net Income Per Share

Net income attributable to Aptiv

$

273

$

1,131

Restructuring

50

147

Other acquisition and portfolio project costs

22

76

Deferred compensation related to nuTonomy acquisition

15

57

Transaction and related (benefits) costs associated with acquisitions

—

(11)

Tax impact of adjusting items

(1)

8

Adjusted net income attributable to Aptiv

$

359

$

1,408

Weighted average number of diluted shares outstanding

265.41

265.88

Diluted net income per share attributable to Aptiv

$

1.03

$

4.25

Adjusted net income per share

$

1.35

$

5.30

(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.