DELPHI 2014 Annual Report Download - page 58

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We typically experience (as described below) fluctuations in operating income due to:
• Volume, net of contractual price reductions—changes in volume offset by contractual price reductions (which
typically range from 1% to 3% of net sales) and changes in mix;
• Operational performance—changes to costs for materials and commodities or manufacturing variances; and
• Other—including restructuring costs and any remaining variances not included in Volume, net of contractual price
reductions or Operational performance.
The automotive component supply industry is subject to inflationary pressures with respect to raw materials and labor
which have placed and will continue to place operational and profitability burdens on the entire supply chain. We will continue
to work with our customers and suppliers to mitigate the impact of these inflationary pressures in the future. In addition, we
expect commodity cost volatility, particularly related to copper, aluminum and petroleum-based resin products, to have a
continual impact on future earnings and/or operating cash flows. As such, we continually seek to mitigate both inflationary
pressures and our material-related cost exposures using a number of approaches, including combining purchase requirements
with customers and/or other suppliers, using alternate suppliers or product designs, negotiating cost reductions and/or
commodity cost contract escalation clauses into our vehicle manufacturer supply contracts, and hedging.
2014 versus 2013
The results of operations for the years ended December 31, 2014 and 2013 were as follows:
Year Ended December 31,
2014 2013 Favorable/
(unfavorable)
(dollars in millions)
Net sales............................................................................................................... $ 17,023 $ 16,463 $ 560
Cost of sales......................................................................................................... 13,850 13,567 (283)
Gross margin........................................................................................................ 3,173 18.6% 2,896 17.6% 277
Selling, general and administrative...................................................................... 1,081 963 (118)
Amortization........................................................................................................ 101 104 3
Restructuring........................................................................................................ 144 145 1
Operating income......................................................................................... 1,847 1,684 163
Interest expense ........................................................................................... (135) (143) 8
Other (expense) income, net........................................................................ (7) (18) 11
Income before income taxes and equity income.................................................. 1,705 1,523 182
Income tax expense...................................................................................... (282) (256) (26)
Income before equity income .............................................................................. 1,423 1,267 156
Equity income, net of tax............................................................................. 17 34 (17)
Net income........................................................................................................... 1,440 1,301 139
Net income attributable to noncontrolling interest.............................................. 89 89 —
Net income attributable to Delphi........................................................................ $ 1,351 $ 1,212 $ 139
Total Net Sales
Below is a summary of our total net sales for the years ended December 31, 2014 versus December 31, 2013.
Year Ended December 31, Variance Due To:
2014 2013 Favorable/
(unfavorable)
Volume, net of
contractual
price
reductions FX
Commodity
pass-
through Other Total
(in millions) (in millions)
Total net sales ................. $ 17,023 $ 16,463 $ 560 $ 595 $ 5 $ (62) $ 22 $ 560
Total net sales for the year ended December 31, 2014 increased 3% compared to the year ended December 31, 2013. We
experienced volume growth of 5% for the period, primarily as a result of increased sales in North America and Asia Pacific,
partially offset by contractual price reductions.