AUBURN HILLS, Mich., July 26, 2018 /PRNewswire/
-- BorgWarner Inc. (NYSE: BWA) today reported second quarter results.
Second Quarter Highlights:
- U.S. GAAP net sales of $2,694 million, up 12.7% compared with second quarter 2017.
-
- On a comparable basis, excluding the impact of foreign currencies and the acquisition of Sevcon, net sales were up 7.3%
compared with second quarter 2017.
- U.S. GAAP net earnings of $1.30 per diluted share.
-
- Excluding non-comparable items (detailed in the table below), net earnings were $1.18 per
diluted share.
- U.S. GAAP operating income of $312.8 million.
-
- Adjusted operating income was 12.7% of net sales.
Full Year 2018 Guidance: The company has increased its 2018 full year organic growth
guidance. Full year net sales are expected to be $10.64 billion to $10.75 billion, implying organic sales growth of approximately 6.0% to 7.0%. Foreign currencies are
expected to increase sales by $220 million, due to the appreciation of the Euro and Chinese Yuan.
The acquisition of Sevcon will increase sales by approximately $50 million. Excluding
the impact of noncomparable items, operating margin is expected to be in the range of 12.5% to 12.6%. Net earnings are now
expected to be within a range of $4.45 to $4.50 per diluted share,
with the increase in guidance due to the revised organic sales growth guidance and a decrease in the company's expected tax
rate.
Third Quarter 2018 Guidance: The company expects third quarter 2018 organic net sales
growth of 4.5% to 6.5%, compared with third quarter 2017 net sales of $2.42 billion. Foreign
currencies are expected to decrease sales by approximately $53 million. The acquisition of
Sevcon will increase sales by approximately $16 million. Net earnings are expected to be
within a range of $1.03 to $1.06 per diluted share.
Financial Results: Net sales were $2,694 million in second
quarter 2018, up 12.7% from $2,390 million in second quarter 2017. Excluding the impact of
foreign currencies and the acquisition of Sevcon, net sales were up 7.3% compared with second quarter 2017. Net earnings in
second quarter 2018 were $272 million, or $1.30 per diluted share,
compared with $212 million, or $1.00 per diluted share in second
quarter 2017. Net earnings in second quarter 2018 included non-comparable items of $0.11 per
diluted share. Net earnings in the second quarter 2017 included net non-comparable items of $0.05 per diluted share. These items are listed in a table below, which is provided by the company for
comparison with other results and the most directly comparable U.S. GAAP measures. The impact of foreign currencies
increased net sales by approximately $112 million and increased net earnings by approximately
$0.05 per diluted share in second quarter 2018 compared with second quarter 2017. The impact
of the acquisition of Sevcon increased net sales by $18 million in the second quarter 2018 compared
with second quarter 2017.
For the first six months of 2018, net sales were $5,478 million, up 14.2% from $4,797 million in the first six months of 2017. Net earnings in the first six months of 2018 were
$497 million, or $2.36 per diluted share, compared with $401 million, or $1.89 per diluted share, in the first six months of 2017.
Net earnings in the first six months of 2018 included net non-comparable items of $0.08 per diluted
share. Net earnings in the first six months of 2017 included net non-comparable items of $0.03 per diluted share. These items are listed in a table below, which is provided by the company for
comparison with other results and the most directly comparable U.S. GAAP measures. The impact of foreign currencies increased net
sales by approximately $312 million and increased net earnings by approximately $0.13 per diluted share in the first six months of 2018 compared with the first six months of 2017. The impact
of the acquisition of Sevcon increased net sales by $38 million in the first six months of 2018
compared with the first six months of 2017.
The company believes the following table is useful in highlighting non-comparable items that impacted its U.S. GAAP net
earnings per diluted share:
Net earnings per diluted share
|
Second
Quarter
|
|
First Six
Months
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
U.S. GAAP
|
$
|
1.30
|
|
|
$
|
1.00
|
|
|
$
|
2.36
|
|
|
$
|
1.89
|
|
|
|
|
|
|
|
|
|
Non-comparable items:
|
|
|
|
|
|
|
|
Restructuring expense
|
0.11
|
|
|
—
|
|
|
0.14
|
|
|
—
|
|
CEO stock awards modification
|
(0.02)
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
Merger and acquisition expense
|
0.01
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
Gain on commercial settlement
|
—
|
|
|
—
|
|
|
(0.01)
|
|
|
—
|
|
Tax adjustments
|
(0.21)
|
|
|
(0.05)
|
|
|
(0.21)
|
|
|
(0.03)
|
|
|
|
|
|
|
|
|
|
Non – U.S. GAAP
|
$
|
1.18
|
*
|
|
$
|
0.96
|
*
|
|
$
|
2.28
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
*Column does not add due to rounding and/or use of basic vs. diluted
shares
|
|
|
|
Net cash provided by operating activities was $305 million in the
first six months of 2018 compared with $399 million in the first six months of 2017.
Investments in capital expenditures, including tooling outlays, totaled $269 million in the
first six months of 2018, compared with $254 million in the first six months of 2017. Balance
sheet debt decreased $(15) million and cash decreased by $(183)
million at the end of second quarter 2018 compared with the end of 2017. The company's net debt to net capital ratio
was 30.9% at the end of second quarter 2018 compared with 30.0% at the end of 2017.
Engine Segment Results: Engine segment net sales were $1,674
million in second quarter 2018 compared with $1,482 million in second quarter 2017.
Excluding the impact of foreign currencies and the acquisition of Sevcon, net sales were up 7.2% from the prior year's
quarter. Adjusted earnings before interest, income taxes and non-controlling interest ("Adjusted EBIT") were $279 million in second quarter of 2018. Excluding the impact of foreign currencies and the acquisition of
Sevcon, Adjusted EBIT was $268 million, up 10.0% from second quarter of 2017.
Drivetrain Segment Results: Drivetrain segment net sales were $1,034 million in second quarter 2018 compared with $921 million in second
quarter 2017. Excluding the impact of foreign currencies and the acquisition of Sevcon, net sales were up 7.4% from the
prior year's quarter. Adjusted EBIT was $116 million in second quarter 2018. Excluding
the impact of foreign currencies and the acquisition of Sevcon, Adjusted EBIT was $118 million, up
7.7% from second quarter 2017.
Recent Highlights:
- The BorgWarner Board of Directors announced the appointment of Frederic Lissalde to president and chief executive officer
effective August 1, 2018, at which time he will also join the Board of Directors. Effective on
the same date, James R. Verrier will step down from the president and chief executive officer
role and serve in a non-executive advisory role to the Board of Directors and CEO to support a successful transition until he
retires from the company February 28, 2019.
- BorgWarner enhances driving performance and fuel economy with its latest electro-hydraulically actuated all-wheel drive
(AWD) coupling for Lynk & Co's first model Lynk & Co 01. A new high-end automotive brand owned by Geely Auto, Lynk
& Co focuses on internet connectivity and an innovative buy-or-subscribe purchasing model. Featuring integrated vehicle
dynamics software, BorgWarner's latest AWD coupling is a compact, lightweight solution that distributes torque between the
front and rear axle automatically, providing this new SUV with high torque capacity for improved fuel economy and enhanced
stability, traction and handling.
- BorgWarner has opened a new 100,000 square-foot technical center in Noblesville, Indiana.
Combining operations from existing facilities in Anderson and Pendleton, Indiana, the new technical center features a state-of-the-art lab which increases the company's
research and development capacity to meet growing customer demand for these products by expanding the prototype building and
testing capabilities for its electrified products. The building's thoughtful, open concept office space is designed to spur
employee collaboration and creativity to assist BorgWarner in maintaining its position as a global leader in providing clean
and efficient vehicle propulsion solutions.
- BorgWarner's latest variable cam timing (VCT) system delivers improved engine efficiency and fuel economy for the new
Hyundai Gamma II engine. For the engine's intake valve timing, BorgWarner supplies a variable force solenoid (VFS) and patented
passive torsional assist (TA) phaser with mid-position lock (MPL) and integrated center bolt hydraulic control valve. For
exhaust valve timing, the company supplies the VFS and TA phaser with integrated center bolt valve. The 1.6-liter I4 gasoline
engine launched in the Kia K3 Forte/Cerato and is expected to power a growing number of vehicles for markets in South Korea, China and North America
over the next few years.
At 9:30 a.m. ET today, a brief conference call concerning second
quarter 2018 results will be webcast at: http://www.borgwarner.com/en/Investors/default.aspx.
BorgWarner Inc. (NYSE: BWA) is a global product leader in clean and efficient technology
solutions for combustion, hybrid and electric vehicles. With manufacturing and technical facilities in 66 locations in 18
countries, the company employs approximately 29,000 worldwide. For more information, please visit borgwarner.com.
Statements contained in, or incorporated by reference into this presentation, future filings by us with the Securities and
Exchange Commission ("SEC"), and oral statements made by, or with the approval of, our authorized personnel, that relate to our
future performance or future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995.
Such statements can be identified by use of forward-looking words or phrases such as "intend," "anticipate," "plan," "estimate,"
"target," "aim," "forecast," "project," "expect," "believe," "we are optimistic that we can," "current visibility indicates that
we forecast," "contemplation" or "currently envisions" and similar phrases. Although we believe that the expectations reflected
in these forward-looking statements are reasonable, our expectations may not prove to be correct. Forward-looking statements are
necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some
of which may be beyond our control, which could cause actual results to differ materially from those suggested by the
forward-looking statements. These risks and uncertainties, among others, include: our dependence on automotive and truck
production, both of which are highly cyclical; our reliance on major OEM customers; commodities availability and pricing; supply
disruptions; fluctuations in interest rates and foreign currency exchange rates; availability of credit; our dependence on key
management; our dependence on information systems; the uncertainty of the global economic environment; the outcome of existing or
any future legal proceedings, including litigation with respect to various claims; and future changes in laws and regulations in
the countries in which we operate. All forward-looking statements should be evaluated with the understanding of their inherent
uncertainty. All subsequent written and oral forward-looking statements concerning the matters addressed in this presentation and
attributable to us or any person acting on our behalf are qualified by these cautionary statements. Forward-looking statements
are based on current expectations only and are not guarantees of future performance, and are subject to certain risks,
uncertainties and assumptions. We may change our intentions, beliefs or expectations at any time and without notice, based upon
any change in our assumptions or otherwise. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. In addition, some
factors are beyond our control. We undertake no obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as required by law.
BorgWarner Inc.
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Operations (Unaudited)
|
|
|
|
|
(millions, except per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net sales
|
$
|
2,694.0
|
|
|
$
|
2,389.7
|
|
|
$
|
5,478.3
|
|
|
$
|
4,796.7
|
|
Cost of sales
|
2,114.8
|
|
|
1,876.8
|
|
|
4,307.3
|
|
|
3,767.5
|
|
Gross profit
|
579.2
|
|
|
512.9
|
|
|
1,171.0
|
|
|
1,029.2
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
236.0
|
|
|
215.1
|
|
|
489.4
|
|
|
434.1
|
|
Other expense (income), net
|
30.4
|
|
|
(0.3)
|
|
|
35.3
|
|
|
5.5
|
|
Operating income
|
312.8
|
|
|
298.1
|
|
|
646.3
|
|
|
589.6
|
|
|
|
|
|
|
|
|
|
Equity in affiliates' earnings, net of tax
|
(13.0)
|
|
|
(14.4)
|
|
|
(23.2)
|
|
|
(24.1)
|
|
Interest income
|
(1.4)
|
|
|
(1.4)
|
|
|
(2.9)
|
|
|
(2.9)
|
|
Interest expense and finance charges
|
14.9
|
|
|
18.0
|
|
|
31.0
|
|
|
36.0
|
|
Other postretirement income
|
(2.4)
|
|
|
(1.4)
|
|
|
(5.0)
|
|
|
(2.6)
|
|
Earnings before income taxes and noncontrolling interest
|
314.7
|
|
|
297.3
|
|
|
646.4
|
|
|
583.2
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
30.4
|
|
|
76.2
|
|
|
125.3
|
|
|
162.5
|
|
Net earnings
|
284.3
|
|
|
221.1
|
|
|
521.1
|
|
|
420.7
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to the noncontrolling interest, net of
tax
|
12.5
|
|
|
9.1
|
|
|
24.2
|
|
|
19.5
|
|
Net earnings attributable to BorgWarner Inc.
|
$
|
271.8
|
|
|
$
|
212.0
|
|
|
$
|
496.9
|
|
|
$
|
401.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share — diluted
|
$
|
1.30
|
|
|
$
|
1.00
|
|
|
$
|
2.36
|
|
|
$
|
1.89
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding — diluted
|
209.857
|
|
|
211.478
|
|
|
210.312
|
|
|
211.857
|
|
|
|
|
|
|
|
|
|
Supplemental Information (Unaudited)
|
|
|
|
|
|
|
|
(millions of dollars)
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Capital expenditures, including tooling outlays
|
$
|
108.3
|
|
|
$
|
123.3
|
|
|
$
|
268.7
|
|
|
$
|
254.2
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
$
|
109.1
|
|
|
$
|
99.8
|
|
|
$
|
218.3
|
|
|
$
|
197.1
|
|
BorgWarner Inc.
|
|
|
|
|
|
|
|
Net Sales by Reporting Segment (Unaudited)
|
|
|
|
|
|
|
(millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Engine
|
$
|
1,674.3
|
|
|
$
|
1,481.8
|
|
|
$
|
3,390.4
|
|
|
$
|
2,977.2
|
|
Drivetrain
|
1,034.1
|
|
|
921.0
|
|
|
2,117.0
|
|
|
1,845.9
|
|
Inter-segment eliminations
|
(14.4)
|
|
|
(13.1)
|
|
|
(29.1)
|
|
|
(26.4)
|
|
Net sales
|
$
|
2,694.0
|
|
|
$
|
2,389.7
|
|
|
$
|
5,478.3
|
|
|
$
|
4,796.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest
("Adjusted EBIT") (Unaudited)
|
(millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Engine
|
$
|
278.8
|
|
|
$
|
243.3
|
|
|
$
|
559.0
|
|
|
$
|
489.5
|
|
Drivetrain
|
116.3
|
|
|
109.2
|
|
|
237.3
|
|
|
213.6
|
|
Adjusted EBIT
|
395.1
|
|
|
352.5
|
|
|
796.3
|
|
|
703.1
|
|
Restructuring expense
|
31.2
|
|
|
—
|
|
|
38.7
|
|
|
—
|
|
Merger, acquisition and divestiture expense
|
1.0
|
|
|
—
|
|
|
3.2
|
|
|
—
|
|
Lease termination settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
5.3
|
|
Other income, net
|
—
|
|
|
—
|
|
|
(4.8)
|
|
|
—
|
|
Other postretirement income
|
(2.4)
|
|
|
(1.4)
|
|
|
(5.0)
|
|
|
(2.6)
|
|
Corporate, including equity in affiliates' earnings and stock-based
compensation
|
37.1
|
|
|
40.0
|
|
|
89.7
|
|
|
84.1
|
|
Interest income
|
(1.4)
|
|
|
(1.4)
|
|
|
(2.9)
|
|
|
(2.9)
|
|
Interest expense and finance charges
|
14.9
|
|
|
18.0
|
|
|
31.0
|
|
|
36.0
|
|
Earnings before income taxes and noncontrolling interest
|
314.7
|
|
|
297.3
|
|
|
646.4
|
|
|
583.2
|
|
Provision for income taxes
|
30.4
|
|
|
76.2
|
|
|
125.3
|
|
|
162.5
|
|
Net earnings
|
284.3
|
|
|
221.1
|
|
|
521.1
|
|
|
420.7
|
|
Net earnings attributable to the noncontrolling interest, net of
tax
|
12.5
|
|
|
9.1
|
|
|
24.2
|
|
|
19.5
|
|
Net earnings attributable to BorgWarner Inc.
|
$
|
271.8
|
|
|
$
|
212.0
|
|
|
$
|
496.9
|
|
|
$
|
401.2
|
|
BorgWarner Inc.
|
|
|
|
Condensed Consolidated Balance Sheets (Unaudited)
|
(millions of dollars)
|
|
|
|
|
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
Assets
|
|
|
|
|
|
|
|
Cash
|
$
|
361.9
|
|
|
$
|
545.3
|
|
Receivables, net
|
2,131.0
|
|
|
2,018.9
|
|
Inventories, net
|
800.2
|
|
|
766.3
|
|
Prepayments and other current assets
|
185.1
|
|
|
145.4
|
|
Assets held for sale
|
65.5
|
|
|
67.3
|
|
Total current assets
|
3,543.7
|
|
|
3,543.2
|
|
|
|
|
|
Property, plant and equipment, net
|
2,825.7
|
|
|
2,863.8
|
|
Other non-current assets
|
3,407.8
|
|
|
3,380.6
|
|
Total assets
|
$
|
9,777.2
|
|
|
$
|
9,787.6
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
Notes payable and other short-term debt
|
$
|
70.5
|
|
|
$
|
84.6
|
|
Accounts payable and accrued expenses
|
2,122.1
|
|
|
2,270.3
|
|
Income taxes payable
|
12.4
|
|
|
40.8
|
|
Liabilities held for sale
|
31.3
|
|
|
29.5
|
|
Total current liabilities
|
2,236.3
|
|
|
2,425.2
|
|
|
|
|
|
Long-term debt
|
2,102.5
|
|
|
2,103.7
|
|
Other non-current liabilities
|
1,384.4
|
|
|
1,432.8
|
|
|
|
|
|
Total BorgWarner Inc. stockholders' equity
|
3,960.3
|
|
|
3,716.8
|
|
Noncontrolling interest
|
93.7
|
|
|
109.1
|
|
Total equity
|
4,054.0
|
|
|
3,825.9
|
|
Total liabilities and equity
|
$
|
9,777.2
|
|
|
$
|
9,787.6
|
|
BorgWarner Inc.
|
|
|
|
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
(millions of dollars)
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
Operating
|
|
|
|
Net earnings
|
$
|
521.1
|
|
|
$
|
420.7
|
|
Depreciation and amortization
|
218.3
|
|
|
197.1
|
|
Deferred income tax (benefit) provision
|
(34.5)
|
|
|
38.8
|
|
Restructuring expense, net of cash paid
|
30.8
|
|
|
—
|
|
Stock-based Compensation Expense
|
21.9
|
|
|
24.3
|
|
Equity in affiliates' earnings, net of dividends received, and
other
|
(26.9)
|
|
|
(10.4)
|
|
Net earnings adjusted for non-cash charges to operations
|
730.7
|
|
|
670.5
|
|
Changes in assets and liabilities
|
(425.5)
|
|
|
(271.3)
|
|
Net cash provided by operating activities
|
305.2
|
|
|
399.2
|
|
|
|
|
|
Investing
|
|
|
|
Capital expenditures, including tooling outlays
|
(268.7)
|
|
|
(254.2)
|
|
Proceeds from asset disposals and other
|
5.1
|
|
|
1.0
|
|
Payments for venture capital investment
|
(3.0)
|
|
|
(2.0)
|
|
Net cash used in investing activities
|
(266.6)
|
|
|
(255.2)
|
|
|
|
|
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Financing
|
|
|
|
Net increase (decrease) in notes payable
|
0.8
|
|
|
(32.0)
|
|
Additions to long-term debt, net of debt issuance costs
|
19.4
|
|
|
—
|
|
Repayments of long-term debt, including current portion
|
(14.3)
|
|
|
(12.5)
|
|
Payments for debt issuance cost
|
—
|
|
|
(2.4)
|
|
Payments for purchase of treasury stock
|
(110.5)
|
|
|
(84.7)
|
|
Payments for stock-based compensation items
|
(15.1)
|
|
|
(1.9)
|
|
Dividends paid to BorgWarner stockholders
|
(71.1)
|
|
|
(59.1)
|
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Dividends paid to noncontrolling stockholders
|
(24.9)
|
|
|
(21.7)
|
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Net cash used in financing activities
|
(215.7)
|
|
|
(214.3)
|
|
|
|
|
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Effect of exchange rate changes on cash
|
(6.3)
|
|
|
13.7
|
|
|
|
|
|
Net decrease in cash
|
(183.4)
|
|
|
(56.6)
|
|
|
|
|
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Cash at beginning of year
|
545.3
|
|
|
443.7
|
|
Cash at end of period
|
$
|
361.9
|
|
|
$
|
387.1
|
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View original content:http://www.prnewswire.com/news-releases/borgwarner-reports-second-quarter-2018-us-gaap-net-earnings-of-1-30-per-diluted-share-or-1-18-per-diluted-share-excluding-non-comparable-items-300686734.html
SOURCE BorgWarner Inc.