Aptiv PLC — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; fourth-quarter results are noted separately below. Aptiv supplies vehicle electrical architectures, components, software and advanced safety technologies through Signal and Power Solutions (SPS) and Advanced Safety and User Experience (AS&UX).
Financial performance
| Metric | FY2020 | FY2019 |
|---|---|---|
| Net sales | $13.066 billion | $14.357 billion |
| Gross margin | $1.940 billion; 14.8% | $2.646 billion; 18.4% |
| Operating income (GAAP) | $2.118 billion | $1.276 billion |
| Adjusted operating income (non-GAAP) | $867 million; 6.6% margin | $1.548 billion; 10.8% margin |
| Net income attributable to Aptiv | $1.804 billion | $990 million |
| Diluted EPS | $6.66 | $3.85 |
| Cash from operating activities | $1.413 billion | $1.624 billion |
| Capital expenditures | $584 million | $781 million |
Reported FY2020 operating income and net income include a $1.434 billion pre-tax gain from forming the Motional autonomous-driving joint venture with Hyundai. Aptiv recorded a $98 million equity-method loss from Motional after formation. Operating cash flow less capital expenditures was approximately $829 million, calculated from the reported figures.
Sales fell 9% year over year; volume declined approximately 7%, primarily reflecting the pandemic. Global vehicle production fell 16% (19% on Aptiv’s weighted-market basis). Sales by segment were $9.522 billion for SPS and $3.573 billion for AS&UX. Adjusted operating income fell in both segments: SPS to $762 million from $1.274 billion, and AS&UX to $105 million from $274 million.
Fourth quarter: Sales were $4.212 billion versus $3.596 billion in Q4 2019. Operating income was $446 million versus $324 million; net income was $315 million versus $241 million; diluted EPS was $1.04 versus $0.90.
Balance sheet, liquidity and capital
- Cash and cash equivalents were $2.821 billion at year-end, compared with $412 million a year earlier. Total debt was $4.101 billion, down from $4.364 billion; net debt was approximately $1.280 billion.
- Available liquidity was reported at $5.190 billion, comprising cash, an undrawn $2.0 billion revolving facility and $369 million of available European receivables factoring capacity. Aptiv said cash, liquidity and operating cash flows were expected to fund operations and investment in 2021 and beyond.
- FY2020 financing cash flow was positive $1.613 billion, driven principally by net proceeds of $1.115 billion each from ordinary and mandatory convertible preferred share offerings. Preferred shares carry a 5.50% cumulative dividend, when declared, and are scheduled to convert in June 2023.
- Ordinary dividends were $0.22 per share for 2020 versus $0.88 in 2019; the ordinary-share dividend was suspended after the first quarter. Credit-agreement terms also restricted ordinary dividends and share repurchases during the covenant relief period.
- Substantially all of the applicable credit-facility maturities were extended to August 2022, but certain portions remained due August 2021. The leverage covenant limit was temporarily raised from 3.5x to 4.5x through July 1, 2021. Aptiv reported covenant compliance at year-end.
Outlook, commentary and risks
- Management provided no specific 2021 revenue or earnings forecast in the supplied filing text. It expected 2021 research and development spending, net of customer and government co-investment, of approximately $1.0 billion, and non-cash amortization of approximately $151 million. It expected approximately $80 million of 2021 cash restructuring payments and about $45 million of additional restructuring costs for programs approved by year-end 2020.
- Management described a strong second-half recovery, particularly in Q4, after pandemic-related shutdowns and reduced vehicle production in the first half. It cautioned that the pandemic’s continuing effects on demand, production, suppliers and cash flows remained uncertain.
- Aptiv cited a worldwide semiconductor shortage emerging in early 2021 and approximately $40 million of 2020 costs from supply-chain inefficiencies, mainly associated with microchips and the Q4 production ramp.
- Other material risks include automotive cyclicality, customer pricing pressure and concentration (the five largest customers represented approximately 39% of FY2020 sales), raw-material cost volatility, foreign exchange, trade and Brexit-related disruption, intense competition, technology and autonomous-driving commercialization risks, product warranty/recall exposure, and restructuring or impairment needs.
- Brazil claims totaled approximately $105 million; Aptiv accrued $20 million and estimated reasonably possible losses above accruals of zero to $85 million. Environmental remediation reserves were approximately $4 million. The auditor issued unqualified opinions on the financial statements and internal controls; critical audit matters included uncertain tax positions, revenue recognition and the Motional valuation.
Key facts for investors to verify
- Separate recurring operating performance from the $1.434 billion Motional gain; assess the decline in adjusted operating income and segment margins.
- Track semiconductor availability, production schedules and whether the Q4 recovery continued into 2021.
- Review liquidity and refinancing needs around the remaining 2021 and extended 2022 credit-facility maturities, covenant relief expiry, and restrictions on ordinary dividends and repurchases.
- Assess Motional’s valuation assumptions, ongoing equity-method losses, and stated commercialization milestones for prototype testing in 2022 and higher-volume deployment in 2023.
- Monitor customer concentration and the potential effects of the FCA–PSA merger into Stellantis, as well as Brazil litigation exposure and warranty costs.