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Delphi Reports Increased First Quarter Income
TROY, Mich. -- Delphi Corp. increased its non-General Motors business in the first quarter of 2004 by 43 percent over its income for the same period last year.Delphi today reported first quarter 2004 revenues of $7.4 billion, up from $7.2 billion for the same period in 2003. Non-GM revenues were $3.2 billion, up 23 percent from first quarter 2003. GAAP net income for the quarter was $54 million, or $0.10 per share. Net income for the quarter, excluding charges related to plans announced in October 2003, was $123 million or $0.22 per share, compared to analyst consensus as reported on First Call of $0.20 per share. Operating cash flow in the first quarter was $217(1) million, up 43 percent year-over-year from Q1 2003."In the first quarter, we increased our strong operating cash flow and continued to move aggressively on restructuring initiatives that improve our ability to compete for - and win - new business," said J.T. Battenberg III, Delphi's chairman, president and chief executive officer. "Moreover, as a result of our ongoing technology leadership, we saw double-digit growth in sales to customers other than GM. We see this strong growth continuing, as evidenced by the 14 percent compound annual growth rate for non-GM business forecast through 2006." Financial HighlightsFirst quarter revenue of $7.4 billion represented an increase of 3.2 percent from $7.2 billion in Q1 2003.Non-GM business increased to 43 percent of Q1 revenues, compared to year-ago levels of 37 percent. Non-GM revenue for the quarter was $3.2 billion, up 23 percent from $2.6 billion in Q1 2003. Excluding the effects of foreign exchange (principally, the appreciation of the Euro against the U.S. dollar), non-GM revenue for the quarter increased 14 percent.Operating cash flow was $217 million, up from $152 million for first quarter 2003.GAAP net income of $54 million or $0.10 per share. Excluding charges related to plans announced in October 2003, net income for the quarter was $123 million or $0.22 per share, compared to Q1 2003 net income of $127 million or $0.23 per share."Once again, Delphi extended its track record for strong cash generation," said Alan Dawes, Delphi vice chairman and chief financial officer. "We've continued to manage our discretionary capital expenditures and SG&A, freeing up substantial cash for restructuring, dividends and other value-enhancing activities." "We accelerated our non-GM business growth," Dawes added. "Demand for Delphi's safety, connector and electrical/electronic distribution systems has resulted in new revenues from customers that include Ford Motor Company and various commercial vehicle manufacturers. Our growth strategy -- which emphasizes investment in technology-rich products, leverage of our capabilities into adjacent non-automotive markets, and pursuit of new business with every major automaker worldwide -- is validated by Delphi's performance during the quarter. Delphi's results were at the high end of the prior guidance range, primarily reflecting higher revenue and a lower effective tax rate (tax impact of $0.01 per share)." In the first quarter, Delphi made significant progress toward completing a restructuring plan announced in October 2003, which anticipated total charges of $807 million pre-tax and a planned reduction in Delphi's worldwide workforce of 8,500 by the end of 2004. In CY 2003, the company incurred $616 million pre-tax in charges related to this effort. In first quarter 2004, Delphi recorded $90 million in pre-tax charges primarily relating to global hourly and salaried workforce reductions. Total charges for the restructuring incurred to date are $706 million pre-tax. "To date, Delphi has reduced its U.S. hourly workforce by 3,750 through a combination of normal retirements, flowbacks to GM, and other attrition, against our goal of 5,000," Dawes said. "We've also trimmed our non-U.S. workforce by a total of 2,900 and we've completed the consolidation of our support staffs across headquarters, divisions and regions. To date, our global workforce has been reduced by 7,150 through these restructuring initiatives. Additionally, our consolidation activities are progressing, along with discussions regarding a competitive wage structure. We expect these issues to be addressed in April."2004 First Quarter Business HighlightsThroughout the quarter, Delphi won new business and was recognized for technology leadership and customer satisfaction. Highlights for first quarter 2004 include: Delphi in China - During the quarter, Delphi said it plans to expand its current manufacturing capability in Suzhou, China. The company announced it will invest $41 million in two new manufacturing facilities where Delphi Electronics & Safety will produce various electronic and mobile multi-media products. Delphi continues to grow its sales in China to leading local manufacturers, including affiliates of GM and Volkswagen. Delphi in adjacent markets - In 2004, Delphi expects sales of more than $2 billion in adjacent markets, including independent aftermarket, consumer electronics, commercial vehicles, medical, homeland security and other sectors. Consumer electronics and satellite radio -- In the first quarter, Delphi introduced the Delphi CD Audio System, the industry's first "all-in-one" audio system that enables users to access Delphi XM SKYFiTM satellite radio, AM/FM radio and CD/MP3 player capabilities. The company also unveiled Delphi Mobile Video, a compact single-disc overhead entertainment solution, as well as two brand new audio receivers designed to provide consumers advanced functionality and improved performance with digital quality.Additionally, Delphi announced Penske Truck Leasing will outfit some of its class 8 trucks with Delphi's satellite radio and antennas to receive SIRIUS reception through a deal with its distributor, Pana-Pacific. Defense and homeland security -- In the first quarter, Delphi said it is working with the U.S. Marine Corps and the National Center for Manufacturing Sciences (NCMS) to provide a technology edge for the Light Armored Vehicle (LAV). Medical devices -- In addition, Delphi Medical Systems Corporation, a Delphi subsidiary, secured $80 million in new business with Sunrise Medical, one of the world's largest manufacturers of homecare and extended care products. E/EDS business with Mercedes -- Delphi earned significant E/EDS content on the next generation Mercedes C-Class scheduled for introduction in 2007. The lifetime value of the contract is approximately $750 million. Ford business growth -- During the first quarter, Delphi announced key business wins with Ford, including: E/EDS for Ford's next-generation Transit MCV. Delphi also began supplying the electrical system for the current Transit model during the second half of last year. Delphi also announced it is providing E/EDS for Ford's line-up of full-size, rear-wheel-drive vehicles, including the Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town Car. Family Entertainment Systems for the 2004 Ford Freestar and Mercury Monterey. SIRIUS satellite radio content with Delphi audio systems for two of its popular truck platforms. Awards - During the quarter, Delphi won Automotive News PACETM Awards for its Forewarn Back-up Aid and Side Detection technology, and its Horizontal Modeling and Digital Processes Design for CAD/CAM, as well as a PACE honorable mention for its set-top box for mobile TV reception. In addition, eight Delphi facilities were announced as recipients of the 2004 Shingo Prize, which recognizes manufacturing excellence. Including those received in 2004, Delphi has received 20 Shingo awards to date, more than any other company in the world. Also in the first quarter, Delphi earned a quality performance award from Toyota Motor for products featured on various models, as well as several awards from Toyota Motor Manufacturing North America for excellence in quality, cost and delivery. Finally, the company received the Triple Crown Award from NUMMI for achieving performance excellence and meeting all NUMMI targets in cost, quality and delivery. Sales Outlook Through 2006 Delphi's total sales for 2004 are estimated at $28.6 billion to $29.1 billion. Total annual sales, based on organic growth plans, are expected to rise to $29.6 billion in 2006 and sales to customers other than GM are expected to grow 14 percent on a compound annual basis from 2003 through 2006. In 2006, sales to customers other than GM are expected to be $16.6 billion, or 56 percent of total sales. Forecasts are based on the company's revenue backlog through 2006, which is subject to exchange rates and production volumes."We're well-positioned to have no single customer account for more than 50 percent of Delphi's revenue," Dawes stated. "As we grow our business with automakers around the world, we expect these new revenues will offset anticipated declines in GM business, which will continue as we implement our strategy to exit certain commodity businesses. We've worked hard to enhance our product portfolio and diversify our customer base, and these efforts will continue to drive our financial performance," Dawes noted. Second Quarter 2004 OutlookDawes said second quarter 2004 revenue is expected to range between $7.5 billion and $7.8 billion. "GAAP net income is expected to range from $105 million to $145 million in the quarter, reflecting $20 million to $40 million in after-tax restructuring costs, or $145 million to $165 million excluding these items. Operating cash flow is forecast between $350 and $450 million," he said. "For 2004, Delphi's challenges, principally U.S. production and raw material price exposures, are balanced by opportunities in Asia and adjacent markets, as well as additional anticipated tax benefits," Dawes continued. "Delphi will continue to grow its enterprise value by increasing operating cash flow. Combined with the impact of favorable external market and legislative factors, use of this cash will allow us to manage down legacy claims on the enterprise."Additional information concerning Delphi's first quarter 2004 results and sales outlook is available through the Investor Relations page of Delphi's website at www.delphi.com, and in Delphi's first-quarter Form 10-Q, scheduled to be filed with the Securities and Exchange Commission later today.For more information about Delphi, visit www.delphi.com. "