Aptiv PLC — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; includes unaudited fourth-quarter results. Comparisons are primarily with 2020. Aptiv supplies automotive electrical architecture, safety, connectivity and software technologies through Signal and Power Solutions (SPS) and Advanced Safety and User Experience (AS&UX).
Financial performance
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Net sales | $15.618 billion | $13.066 billion |
| Gross margin | $2.436 billion; 15.6% | $1.940 billion; 14.8% |
| Operating income | $1.189 billion | $2.118 billion |
| Adjusted operating income (non-GAAP) | $1.230 billion | $867 million |
| Net income attributable to Aptiv | $590 million | $1.804 billion |
| Diluted EPS | $1.94 | $6.66 |
| Cash from operations | $1.222 billion | $1.413 billion |
| Capital expenditures | $611 million | $584 million |
- Sales rose 20%, with volume up 16%, favorable foreign exchange adding $279 million and commodity pass-through adding $337 million. Global vehicle production rose only 2% year over year, and was flat on Aptiv’s weighted-market basis.
- Gross margin improved to 15.6%. Adjusted operating income increased 42% to $1.230 billion, while GAAP operating income fell because 2020 included a $1.434 billion gain from forming Motional.
- 2021 results included a $126 million loss on extinguishment of debt. Equity-method losses were $200 million, primarily reflecting Motional.
- Operating cash flow declined $191 million year over year, including a $710 million cash use from increased inventories. Cash flow from operations less capital expenditures was approximately $611 million; this is a simple calculation, not a company-reported free-cash-flow measure.
- At year-end, cash and equivalents were $3.139 billion and total debt was $4.067 billion, for net debt of approximately $928 million. Available liquidity was $5.649 billion, including an undrawn $2.0 billion revolver and $510 million of available European factoring capacity.
- Debt activity included issuing $1.5 billion of 3.10% notes due 2051 and using proceeds to redeem $1.35 billion of notes. The credit agreement matures in 2026; Aptiv reported compliance with its covenants.
Material changes and fourth quarter
- FY 2021 SPS sales were $11.598 billion, up from $9.522 billion; segment adjusted operating income was $1.084 billion versus $762 million. AS&UX sales were $4.056 billion, up from $3.573 billion; adjusted operating income was $146 million versus $105 million.
- Supply shortages and cost inflation weighed on operating performance. Aptiv cited approximately $260 million of increased semiconductor and commodity costs and approximately $210 million of increased supply-chain disruption costs during 2021.
- Fourth-quarter sales were $4.134 billion, down from $4.212 billion. Gross margin was $591 million versus $779 million; operating income was $260 million versus $446 million; net income attributable to Aptiv was $31 million versus $299 million. Diluted EPS was $0.06 versus $1.04. The quarter included the $126 million debt-extinguishment loss.
Outlook, risks and unusual items
- The filing does not provide specific 2022 revenue or earnings guidance. Aptiv expected semiconductor and broader supply-chain disruptions to persist through 2022, and said inflationary pressures were expected to continue. It expected cash, available liquidity and operating cash flows to be sufficient for 2022 operations and planned investment needs.
- Net research and development spending, after customer and government co-investment, was expected to be approximately $1.0 billion in 2022. Aptiv reported $1.4 billion of total R&D, including engineering, in 2021.
- In January 2022, Aptiv agreed to acquire Wind River for approximately $4.3 billion, expected to close in mid-2022 subject to approvals and customary conditions, using cash and new debt. Aptiv also agreed to invest €200 million in TTTech Auto, with closing expected in Q1 2022.
- Principal risks include semiconductor and other supply interruptions, COVID-19 effects, automotive production cyclicality, commodity and labor inflation, customer pricing pressure and concentration, foreign exchange exposure, competition, technology execution, cybersecurity, and acquisition integration and financing.
- Customers’ potential claims for losses related to supply disruptions were not reserved because management did not believe a loss was probable. Brazil litigation claims totaled approximately $95 million, against which Aptiv recorded $20 million; reasonably possible loss above the reserve was estimated at zero to $75 million. Environmental remediation reserves were $4 million.
- The auditor issued unqualified opinions on the financial statements and internal controls. Critical audit matters included uncertain tax positions and revenue recognition. Unrecognized tax benefits were $224 million at year-end.
Important facts for investors to verify
- How much of sales and adjusted operating income growth reflects sustainable product volume and mix versus foreign exchange and commodity pass-through.
- Whether supply constraints, inventory levels and cost inflation improve or worsen, and the resulting effect on margins and working capital.
- The recurring earnings and cash-generation picture excluding the 2020 Motional formation gain and the 2021 debt-extinguishment charge.
- Wind River’s final purchase financing, closing conditions, integration costs and contribution to growth and profitability; also verify the TTTech investment’s completion.
- Potential outcomes of Brazil claims and customer claims related to supply disruptions, as well as tax exposures and the effect of preferred-share dividends and eventual conversion.