Delphi Announces Improved First Quarter 2002 Financial Results
Reports the first quarter-over-quarter sales increase in seven quarters Initiates new restructuring plan and charge to earnings Operating cash flow remains strong
biz.yahoo.com
TROY, Mich., April 17 /PRNewswire-FirstCall/ - Delphi Corporation (NYSE: DPH) today reported pro forma first quarter earnings of $123 million, up from a pro forma loss of $20 million* in Q1 2001. The Q1 2002 pro forma results exclude the impact of a net charge to earnings of $174 million after-tax for restructuring and portfolio actions. Earnings per share for the quarter was $0.22 compared to analyst consensus as reported on First Call of $0.21 per share.
(Photo: newscom.com )
On a GAAP basis, including the impact of special charges taken in the quarter, Delphi reported a loss of $51 million or $(0.09) per share versus a loss of $429 million or $(0.77) per share in Q1 2001.
Delphi's pro forma net income margin increased to 1.8 percent compared to (0.3)* percent in Q1 2001.
Pro forma operating cash flow in the first quarter, excluding payments for special charges, improved to $185 million, up from $152 million during the same period in 2001.
Q1 2002 revenue of approximately $6.69 billion was up two percent from $6.54 billion in Q1 2001, reflecting modest strengthening in the North American automotive market. Sales to customers other than General Motors accounted for 33 percent of revenue for the quarter.
``While our results reflect an increase in North American production compared to last year, Delphi's business in other major automotive markets remained weak. We continue to face price pressure and increased operating costs, principally in wage, health care and pension expenses, that we must offset in 2002,'' said Alan Dawes, Delphi chief financial officer. ``To meet these continued challenges, we have had to initiate additional restructuring actions and operating cost reductions, carefully time discretionary spending for certain internal process improvement programs to match performance improvements, and further reduce the size of Delphi's global workforce.''
2001 Restructuring Completed
In March 2001, Delphi announced a comprehensive restructuring program designed to reduce our breakeven point and restructure the company for reduced industry-wide production levels.
``We made a commitment to complete aggressive restructuring actions by March 2002 in order to meet the challenges of a recessionary market. We completed this program on time, following the parameters announced in March 2001,'' said Dawes. ``The results of these activities helped us stay ahead of the impact of soft production schedules and continuing cost and pricing pressure experienced during 2001.''
The 2001 restructuring plan, now completed, included the following major actions over a one-year period of time:
closure of nine plants
global headcount reduction of 11,440 positions
consolidation of activities at more than 40 global locations
To complete these actions, during the first quarter of 2002, Delphi concluded operations at its Southampton facility in the United Kingdom and reduced global headcount by 1,340 positions.
Delphi utilized cash totaling $106 million to complete actions associated with the restructuring plan during Q1 2002. During Q2 2002 an additional $8 million will be spent to complete deferred severance payments to employees who separated in 2001. Including the first and second quarter 2002 amounts, cash used for the entire 2001 restructuring program will total $457 million.
2002 Restructuring and Portfolio Updates
Consistent with previous guidance, Delphi is taking a special charge in the first quarter of 2002 to accelerate additional restructuring activities and complete portfolio actions by the end of Q1 2003.
Restructuring Charge
``Specifically, we are taking a net charge of $174 million after-tax ($262 million pre-tax) to restructure additional operations in the United States and Europe,'' said Dawes. ``We are continuing to address market and portfolio challenges. With this action we plan to fund separation programs and other restructuring activities to eliminate approximately 6,100 hourly and salaried positions at more than 25 sites in the United States and Europe. We also will complete portfolio actions, principally generators. All of the actions associated with this charge will be complete before the end of Q1 2003.''
Delphi already has begun to implement this plan, eliminating 3,300 salaried and hourly positions during the quarter through separation programs funded through this charge.
Cash used to implement these activities is expected to total $237 million. During Q1 2002, Delphi utilized $68 million in cash to fund separation programs and other actions and expects to use the balance over the next 12 months.
``We expect the 2002 restructuring program to lift our forward earnings by approximately a $125 million annual rate by early 2004,'' said Dawes.
These actions bring the total workforce reduction-to-date from the 2001 and 2002 restructuring plans to 14,740 positions, towards a cumulative total of 17,540 positions to be eliminated.
Portfolio Update
During the quarter, Delphi continued its efforts to address previously announced portfolio actions, specifically with its $0.5 billion generator and $0.5 billion instrumentation product lines.
``Delphi, Delco Remy International and the product line's largest customer had successful discussions on the proposed sale of the generator product line, subject to the resolution of employee contract matters with the largest union,'' said Dawes. ``Over the course of the second quarter, Delphi will continue discussions with the largest impacted union on this matter. We expect to complete these activities in Q2 2002. Failing a satisfactory resolution, Delphi intends to quickly wind down the generator product line.''
Dawes reported that during the quarter Delphi's instrumentation product line moved through the sale process and shifted from the bidding phase to final due diligence phase, including the preparation of definitive agreements. The completion target continues to be set for the second half of 2002.
2002 Q1 Business Highlights and Other Consolidation Actions
During the quarter, Delphi launched new technology, won several contracts with multiple manufacturers, expanded existing business opportunities and changed its name to more aggressively pursue new market business opportunities. Highlights of the quarter include:
Delphi name changed to reflect customer and market diversification. Delphi changed its name to ``Delphi Corporation'' to more accurately reflect the breadth of its technologies and services. The company will market its products under ``Delphi.''
Delphi's Forewarn® Back Up Aid featured on several Ford and Lincoln Mercury models -- Delphi announced it will supply the rear-warning system known as Ford Extended Rear Park Assist for three Ford and Lincoln Mercury 2003 models.
Delphi launched commercial vehicle SDARs. Delphi was first-to-market with Satellite Digital Audio Receiver validated for OEM application in the Heavy-Duty market.
Delphi announced a multi-year contract with DaimlerChrysler to supply catalyst washcoats for future model year Dodge and Jeep® vehicles. The contract makes Delphi one of the major catalyst suppliers for the Chrysler Group.
Delphi QUADRASTEER® availability expanded on GM trucks. QUADRASTEER, which debuted on the GMC Sierra Denali, is now an available option on six additional models during 2002 and 2003.
Delphi selected to supply the satellite digital audio service (SDARS) modules for DaimlerChrysler Corporation. The multi-year manufacturing agreement will add satellite radio broadcast reception to audio systems for new Chrysler, Dodge, Jeep, Mercedes-Benz and Freightliner LLC vehicles for the North American market.
Delphi recognized with two PACE(TM) Awards (Premier Automotive Supplier's Contribution to Excellence). Delphi's QUADRASTEER(TM) Four Wheel Steering System and Delphi's Recognition(TM) passive occupant detection system were recognized.
Delphi topped 2002 Shingo Prize list with five plants honored for lean manufacturing excellence. Five Delphi operations earned the 2002 Shingo Prize, dubbed the ``Nobel Prize of Manufacturing'' by Business Week magazine.
Other Consolidation Actions
While not comprehended in the Q1 2002 restructuring, Dawes reviewed additional actions implemented to reduce operating costs.
Delphi completed the closure of manufacturing operations in Casablanca, Morocco and is consolidating or downsizing operations at 12 other sites in Europe.
In Mexico, consolidation activities will move all product lines and people from Delphi's Chihuahua III facility into existing available Delphi manufacturing space, allowing for the closure of that facility.
In China, Delphi's Packard division is consolidating all the manufacturing, engineering and administrative activities of Delphi Packard Electric Shanghai, Delphi Packard Electric Baicheng and Delphi Packard Electric Guangzhou to form a new venture named Delphi Packard Electric Systems Company Ltd., headquartered in Shanghai. Redundancy from the consolidation is expected to allow for reduction of approximately 5 percent of the existing venture's workforce over the next year.
Q2 2002 Outlook
``We expect Q2 sales to be up slightly for the second quarter in a row,'' said Dawes. ``With North American dealer vehicle inventories back in line and retail sales of North American vehicles still being strengthened by incentives, Delphi expects revenue of approximately $7.1 billion during Q2 2002, and net income at the $200 million level, or $0.35 EPS. Operating cash flow, excluding restructuring payments, is anticipated between $250 and $350 million.''
During the quarter, Delphi expects to use up to $80 million cash to continue implementation of restructuring actions.
Sales Outlook through 2004
Delphi's total sales for 2002 calendar year are estimated at $26.2 billion, without reflecting planned divestitures. Sales to customers other than GM are expected to be 35 percent. Total annual sales, based on organic growth plans, are expected to rise from $26.2 billion in 2002 to $28.2 billion in 2004. Based on this organic growth plan, sales to customers other than GM are expected to grow to 44 percent of total sales.
``We continue to build our base of business with customers outside of General Motors and through 2004 are projecting a compound annual growth rate in excess of 10 percent, which will offset our anticipated reduction in business with GM of approximately three percent annually,'' said Dawes.
Additional information concerning Delphi's Q1 2002 results can be accessed through the Investor Relations page of Delphi's website at www.delphi.com , and in Delphi's first quarter Form 10-Q, expected to be filed with the Securities and Exchange Commission later today. |
