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Aptiv Reports Record 2nd Quarter 2018 Financial Results

The company reported second quarter 2018 revenue of $3.7 billion, an increase of 17 percent from the prior year period.

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Aptiv PLC, a global technology company enabling the future of mobility, has reported second quarter 2018 U.S. GAAP earnings from continuing operations of $1.10 per diluted share. Excluding special items, second quarter earnings from continuing operations totaled $1.40 per diluted share.

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“During the second quarter, we delivered record double-digit revenue growth, operating income, earnings per share and free cash flow,” said Kevin Clark, president and CEO. “We continued to see strong new business awards, totaling $11 billion year-to-date, focused on delivering the software capabilities, advanced computing platforms and networking architecture that are making the future of mobility real. Also in the quarter, we closed on the acquisition of KUM, an accretive bolt-on to our engineered components business and announced the acquisition of Winchester Interconnect, a leading provider of custom engineered interconnect solutions for harsh environment applications, further establishing Aptiv as a market leader of connectivity solutions and reinforcing our strategy to diversify our business. As we look to the second half of 2018, we expect our portfolio of advanced technologies to drive continued above-market growth, as reflected in our increased outlook for the year.”

Second Quarter 2018 Results

The company reported second quarter 2018 revenue of $3.7 billion, an increase of 17 percent from the prior year period. Adjusted for currency exchange, commodity movements, acquisitions and divestitures, revenue increased by 12 percent in the second quarter. This reflects growth of 15 percent in North America, 11 percent in Asia, 9 percent in Europe and 10 percent in South America.

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The company reported second quarter 2018 U.S. GAAP net income from continuing operations of $291 million and earnings from continuing operations of $1.10 per diluted share, compared to $297 million and $1.11 per diluted share in the prior year period. Second quarter Adjusted Net Income, a non-GAAP financial measure defined below, totaled $372 million, or $1.40 per diluted share, an increase of 24 percent on a per share basis compared to $302 million, or $1.13 per diluted share in the prior year period.

Second quarter Adjusted Operating Income was $474 million, compared to $398 million in the prior year period, resulting from the continued above-market growth of our businesses across all regions. Second quarter Adjusted Operating Income margin was 12.9 percent, compared to 12.6 percent in the prior year period, reflecting sales growth and the beneficial impacts of cost reduction initiatives, partially offset by continued incremental investments for growth. Depreciation and amortization expense totaled $156 million, an increase from $130 million in the prior year period.

Interest expense for the second quarter totaled $36 million, as compared to $35 million in the prior year period.

Tax expense in the second quarter of 2018 was $83 million, resulting in an effective tax rate of approximately 22 percent, which includes $24 million, or approximately 6 points, due to the adjustment to the provisional amounts recorded for the one-time impacts of the U.S. tax reform enactment. Tax expense in the second quarter of 2017 was $38 million, resulting in an effective rate of approximately 11 percent.

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The company generated net cash flow from continuing operating activities of $566 million in the second quarter, compared to $414 million in the prior year period.

Year-to-Date 2018 Results

For the six months ended June 30, 2018, the company reported revenue of $7.3 billion, an increase of 16 percent from the prior year period. Adjusted for currency exchange, commodity movements, acquisitions and divestitures, revenue increased by 10 percent during the period. This reflects growth of 10 percent in North America, 10 percent in Asia, 8 percent in Europe and 14 percent in South America.

For the 2018 year-to-date period, the company reported U.S. GAAP net income from continuing operations of $598 million and earnings from continuing operations of $2.25 per diluted share, compared to $517 million and $1.92 per diluted share in the prior year period. Year-to-date Adjusted Net Income totaled $715 million, or $2.69 per diluted share, an increase of 22 percent on a per share basis compared to $593 million, or $2.21 per diluted share in the prior year period.

The company reported Adjusted Operating Income of $901 million for the six months ended June 30, 2018, compared to $750 million in the prior year period, resulting from the continued above-market growth of our businesses across all regions. Adjusted Operating Income margin was 12.3 percent for the six months ended June 30, 2018, compared to 11.9 percent in the prior year period, reflecting sales growth, the beneficial impacts of cost reduction initiatives and the absence of certain warranty charges recorded in the prior year period, partially offset by continued incremental investments for growth. Depreciation and amortization expense totaled $311 million, an increase from $256 million in the prior year period.

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The company generated net cash flow from continuing operating activities of $752 million in the six months ended June 30, 2018, compared to $672 million in the prior year period. As of June 30, 2018, the company had cash and cash equivalents of $1 billion and total available liquidity of $3.3 billion.

Acquisitions of KUM and Winchester Interconnect

Aptiv completed the acquisition of KUM in June 2018. KUM is a leading provider of highly engineered connectors and cable management solutions for the automotive industry. The company says the acquisition of KUM enhances Aptiv’s global market position and expands Aptiv’s range of specialized connectors and cable management solutions, specifically in the Asia Pacific region

Aptiv also agreed to acquire Winchester Interconnect, a leading provider of custom engineered interconnect solutions for harsh environment applications for approximately $650 million, or approximately 10.6 times 2018 estimated EBITDA. Winchester’s portfolio of precision-engineered interconnect solutions further establishes Aptiv as a market leader of connectivity solutions and is a strategic fit to its Signal and Power Solutions segment. By adding more than $250 million in non-automotive revenues, this transaction establishes a broader platform to further expand into adjacent markets, leveraging Aptiv’s harsh environment expertise in engineered components.

Share Repurchase Program

During the second quarter of 2018, the company repurchased 0.04 million shares for approximately $4 million under its existing authorized share repurchase program, leaving approximately $836 million available for future share repurchases. Year-to-date, the company repurchased 1.72 million shares for approximately $153 million. All repurchased shares were retired, and are reflected as a reduction of ordinary share capital for the par value of the shares, with the excess applied as reductions to additional paid-in-capital and retained earnings.

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