AUBURN HILLS, Mich.,
April 25, 2019 /PRNewswire/ --
BorgWarner Inc. (NYSE: BWA) today reported first quarter
results.
First Quarter Highlights:
- U.S. GAAP net sales of $2,566
million, down 7.8% compared with first quarter 2018.
-
- Excluding the impact of foreign currencies, net sales were down
3.3% compared with first quarter 2018.
- U.S. GAAP net earnings of $0.77
per diluted share.
-
- Excluding the $(0.22) per diluted
share related to non-comparable items (detailed in the table
below), adj. net earnings were $1.00
per diluted share.
- U.S. GAAP operating income of $264
million, 10.3% of net sales.
-
- Excluding the $31 million of
pretax expenses related to non-comparable items, adj. operating
income was $295 million. Excluding
the impact of non-comparable items, adj. operating income was 11.5%
of net sales.
Full Year 2019 Guidance: The company has reaffirmed its
2019 full year guidance. Full year organic growth over the
company's market is expected to be 250 to 400 basis points. Net
sales are expected to be in the range of $9.90 billion to $10.37
billion. This implies year over year organic sales change of
down 2.5% to up 2.0%. The company expects its market to decline in
the range of 2.0% to 5.0% in 2019. Foreign currencies are expected
to decrease sales by $280 million,
primarily due to the depreciation of the Euro and Chinese Renminbi.
The divestiture of the thermostat product line will decrease sales
by approximately $98 million.
Excluding the impact of non-comparable items, adj. operating margin
is expected to be in the range of 11.9% to 12.2%. Excluding
the impact of non-comparable items, adj. net earnings are expected
to be within a range of $4.00 to
$4.35 per diluted share. 2019
full year free cash flow is expected to be in the range of
$550 million to $600 million.
Second Quarter 2019 Guidance: The company expects a
second quarter 2019 organic net sales change in the range of down
2.5% to flat, compared with second quarter 2018 net sales of
$2.69 billion. Foreign
currencies are expected to decrease sales by $100 million. The divestiture of the
thermostat product line will decrease sales by approximately
$33 million. Excluding the impact of
non-comparable items, adj. net earnings are expected to be within a
range of $0.99 to $1.05 per diluted share.
Cost Restructuring Plan: Over the course of the next two
years, the company plans to take several actions to reduce existing
structural costs. These actions are expected to result in
restructuring costs in the $80
million to $100 million range
through the end of 2020. The resulting annual gross cost
reduction is expected to be in the range of $40 million to $50
million by 2021. The company plans to utilize these
savings to sustain the company's overall operating margin profile
as it simultaneously increases investment to support future growth
in hybrid and electric propulsion.
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
|
First Three
Months
|
|
2019
|
|
2018
|
|
|
|
|
U.S.
GAAP
|
$
|
0.77
|
|
$
|
1.07
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Restructuring
expense
|
0.05
|
|
0.03
|
Merger, acquisition
and divestiture expense
|
0.01
|
|
0.01
|
Officer stock awards
modification
|
0.01
|
|
—
|
Loss on
arbitration
|
0.07
|
|
—
|
Gain on commercial
settlement
|
—
|
|
(0.01)
|
Tax
adjustments
|
0.08
|
|
—
|
|
|
|
|
Non – U.S.
GAAP
|
$
|
1.00
|
*
|
$
|
1.10
|
* Column does not add
due to rounding
|
|
|
|
|
|
|
|
Financial Results: Net sales were $2,566 million in first quarter 2019, down 7.8%
from $2,784 million in first quarter
2018. Net income in first quarter 2019 was $160 million, or $0.77 per diluted share, compared with
$225 million, or $1.07 per diluted share in first quarter
2018. Adj. net income in first quarter 2019 included
non-comparable items of ($0.22) per
diluted share. Adj. net earnings in the first quarter 2018
included net non-comparable items of $(0.03) per diluted share. These items are
listed in a table above, 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 decreased net
sales by approximately $127 million
and decreased net earnings by approximately $0.05 per diluted share in first quarter 2019
compared with first quarter 2018.
Net cash provided by operating activities was $40 million in first quarter 2019 compared with
$35 million in first quarter
2018. Investments in capital expenditures, including tooling
outlays, totaled $117 million in
first quarter 2019, compared with $160
million in first quarter 2018. Balance sheet debt
decreased $27 million and cash and
restricted cash decreased by $222
million at the end of first quarter 2019 compared with the
end of 2018. The company's net debt to net capital ratio was
26.6% at the end of first quarter 2019 compared with 24.0% at the
end of 2018.
Engine Segment Results: Engine segment net sales
were $1,598 million in first quarter
2019 compared with $1,716 million in
first quarter 2018. Excluding the impact of foreign
currencies, net sales were down 1.8% from the prior year's
quarter. Adj. earnings before interest, income taxes and
non-controlling interest ("Adj. EBIT") were $241 million in first quarter of 2019.
Excluding the impact of foreign currencies, Adj. EBIT was
$252 million, down 10.0% from first
quarter of 2018.
Drivetrain Segment Results: Drivetrain segment net
sales were $982 million in first
quarter 2019 compared with $1,083
million in first quarter 2018. Excluding the impact of
foreign currencies, net sales were down 5.6% from the prior year's
quarter. Adj. EBIT was $105
million in first quarter 2019. Excluding the impact of
foreign currencies, Adj. EBIT was $109
million, down 9.9% from first quarter 2018.
Recent Highlights:
- BorgWarner was named a 2019 PACE Awards Winner for Innovative
Dual Volute Turbocharger. For the second year in a row, BorgWarner
has been recognized as an Automotive News PACE (Premier
Automotive Suppliers' Contribution to Excellence) Awards winner,
this year for its revolutionary dual volute turbocharger for
gasoline engines. The new dual volute turbocharger was specifically
engineered for gasoline engines in light-duty vehicles with
aggressive transient response targets. The company's new
turbocharger delivers a noticeably quicker engine response time
when accelerating from low speeds. General Motors is the first OEM
to put this innovative technology in a production vehicle, the 2019
Chevy Silverado 1500 and 2019 GMC Sierra 1500 pickup truck models
powered by GM's 2.7-liter four-cylinder turbocharged engine.
- BorgWarner's reputation as a leading supplier of hybrid vehicle
systems was further strengthened by the news that a major European
commercial vehicle manufacturer has chosen the company's proven
High Voltage Hairpin (HVH) 410 electric motor for a plug-in hybrid
electric truck (PHEV) to be launched in 2019. The electric motor is
a key component in a range of vehicles including urban and
night-time delivery trucks and waste handling vehicles. Generating
130 kW (174 hp) of power and 1,050 Nm of torque, the HVH motor will
work in parallel with an inline five-cylinder engine that runs on
hydro treated vegetable oil (HVO) or diesel. The HVH motor will
also regeneratively charge the battery pack during braking or
downhill coasting.
- BorgWarner's EGR Technology Enables NOX Reductions for a
Variety of Hyundai Motor Group's Engines. BorgWarner provides the
Hyundai Motor Group with exhaust gas recirculation (EGR) valves
that reduce nitrogen oxide (NOX) and carbon monoxide (CO). In
addition, the company's technology contributes to improved fuel
efficiency of up to 2.5% and features cost-effective design.
BorgWarner is producing this clean and efficient technology
solution locally in Korea for the first time. The technology is
currently suitable for three of the automaker's engines, including
the Gamma II (1.6 liter), Nu Imp. (1.8 and 2.0 liter) and Theta III
(2.5 liter).
- BorgWarner was named one of Barron's 100 Most Sustainable U.S.
Companies. BorgWarner has been named one of Barron's 100 Most
Sustainable U.S. Companies after a research team conducted a
thorough review and ranked large, publicly-held companies based on
200 key indicators and nearly 30 issues related to environmental,
social and corporate governance. BorgWarner is one of just a few
automotive companies to receive this honor.
- BorgWarner formed Cascadia Motion LLC to acquire assets and
merge the operations of two Oregon-based businesses – Rinehart Motion
Systems LLC and AM Racing Inc., in February
2019. Recognizing that the demand for electric and hybrid
propulsion systems is growing rapidly and goes beyond mainstream
passenger and commercial vehicles, Cascadia Motion will focus on
electric and hybrid propulsion solutions for niche and emerging
applications. Cascadia Motion LLC will expand the company's ability
to support a wide variety of customers with small scale projects,
specialty products, and low volume manufacturing needs. In
addition, BorgWarner's global production facilities can be utilized
as Cascadia Motion customers grow to require high-volume
production.
At 9:30 a.m. ET today, a brief
conference call concerning first quarter 2019 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 68 locations in 19 countries, the company employs
approximately 30,000 worldwide. For more information, please visit
borgwarner.com.
Statements in this press release may contain forward-looking
statements as contemplated by the 1995 Private Securities
Litigation Reform Act that are based on management's current
outlook, expectations, estimates and projections. Words such as
"anticipates," "believes," "continues," "could," "designed,"
"effect," "estimates," "evaluates," "expects," "forecasts," "goal,"
"guidance," "initiative," "intends," "may," "outlook," "plans,"
"potential," "predicts," "project," "pursue," "seek," "should,"
"target," "when," "will," "would," variations of such words and
similar expressions are intended to identify such forward-looking
statements. Forward-looking statements are subject to risks and
uncertainties, many of which are difficult to predict and generally
beyond our control, that could cause actual results to differ
materially from those expressed, projected or implied in or 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,
including, by way of example, tariffs, in the countries in which we
operate, as well as other risks noted in reports that we file with
the Securities and Exchange Commission, including the Risk Factors
identified in our most recently filed Annual Report on Form 10-K.
We do not undertake any obligation to update or announce publicly
any updates to or revision to any of the forward-looking
statements.
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
|
|
|
(millions, except per
share amounts)
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2019
|
|
2018
|
Net sales
|
$
|
2,566
|
|
$
|
2,784
|
Cost of
sales
|
|
|
|
2,047
|
|
2,193
|
Gross
profit
|
519
|
|
591
|
|
|
|
|
Selling, general and
administrative expenses
|
226
|
|
253
|
Other expense,
net
|
|
|
|
29
|
|
5
|
Operating
income
|
264
|
|
333
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(9)
|
|
(10)
|
Interest
income
|
(3)
|
|
(2)
|
Interest
expense
|
14
|
|
16
|
Other postretirement
income
|
|
|
|
—
|
|
(3)
|
Earnings before
income taxes and noncontrolling interest
|
262
|
|
332
|
|
|
|
|
Provision for income
taxes
|
|
|
|
91
|
|
95
|
Net
earnings
|
171
|
|
237
|
|
|
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
|
|
|
11
|
|
12
|
Net earnings
attributable to BorgWarner Inc.
|
|
$
|
160
|
|
$
|
225
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share —
diluted
|
|
$
|
0.77
|
|
$
|
1.07
|
|
|
|
|
Weighted average
shares outstanding — diluted
|
|
|
|
207.1
|
|
210.8
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
(millions of
dollars)
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2019
|
|
2018
|
Capital expenditures,
including tooling outlays
|
|
$
|
117
|
|
$
|
160
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
$
|
107
|
|
$
|
109
|
BorgWarner
Inc.
|
|
|
|
Net Sales by
Reporting Segment (Unaudited)
|
|
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
2019
|
|
2018
|
Engine
|
$
|
1,598
|
|
$
|
1,716
|
Drivetrain
|
982
|
|
1,083
|
Inter-segment
eliminations
|
(14)
|
|
(15)
|
Net sales
|
$
|
2,566
|
|
$
|
2,784
|
|
|
|
|
|
|
|
|
Adjusted Earnings
Before Interest, Income Taxes and Noncontrolling Interest ("Adj.
EBIT") (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
2019
|
|
2018
|
Engine
|
$
|
241
|
|
$
|
280
|
Drivetrain
|
105
|
|
121
|
Adj. EBIT
|
346
|
|
401
|
Restructuring
expense
|
14
|
|
8
|
Merger, acquisition
and divestiture expense
|
1
|
|
2
|
Other expense
(income)
|
14
|
|
(5)
|
Officer stock awards
modification
|
2
|
|
—
|
Other postretirement
income
|
—
|
|
(3)
|
Corporate, including
equity in affiliates' earnings and stock-based
compensation
|
42
|
|
53
|
Interest
income
|
(3)
|
|
(2)
|
Interest
expense
|
14
|
|
16
|
Earnings before
income taxes and noncontrolling interest
|
262
|
|
332
|
Provision for income
taxes
|
91
|
|
95
|
Net
earnings
|
171
|
|
237
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
11
|
|
12
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
160
|
|
$
|
225
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Assets
|
|
|
|
|
|
|
|
Cash
|
$
|
494
|
|
$
|
739
|
Restricted
cash
|
23
|
|
—
|
Receivables,
net
|
2,065
|
|
1,988
|
Inventories,
net
|
807
|
|
781
|
Prepayments and other
current assets
|
280
|
|
250
|
Assets held for
sale
|
|
|
50
|
|
47
|
Total current
assets
|
3,719
|
|
3,805
|
|
|
|
|
Property, plant and
equipment, net
|
2,895
|
|
2,904
|
Other non-current
assets
|
3,490
|
|
3,386
|
Total
assets
|
$
|
10,104
|
|
$
|
10,095
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
Notes payable and
other short-term debt
|
$
|
164
|
|
$
|
173
|
Accounts payable and
accrued expenses
|
2,056
|
|
2,144
|
Income taxes
payable
|
57
|
|
59
|
Liabilities held for
sale
|
22
|
|
23
|
Total current
liabilities
|
2,299
|
|
2,399
|
|
|
|
|
Long-term
debt
|
1,923
|
|
1,941
|
Other non-current
liabilities
|
1,497
|
|
1,410
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
4,274
|
|
4,226
|
Noncontrolling
interest
|
111
|
|
119
|
Total
equity
|
4,385
|
|
4,345
|
Total liabilities and
equity
|
$
|
10,104
|
|
$
|
10,095
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
2019
|
|
2018
|
Operating
|
|
|
|
Net
earnings
|
$
|
171
|
|
$
|
237
|
Depreciation and
amortization
|
107
|
|
109
|
Stock-based
compensation expense
|
8
|
|
15
|
Restructuring
expense, net of cash paid
|
7
|
|
7
|
Deferred income tax
(benefit) provision
|
(2)
|
|
8
|
Tax reform
adjustments to provision for income taxes
|
22
|
|
—
|
Equity in affiliates'
earnings, net of dividends received, and other
|
6
|
|
(11)
|
Net earnings adjusted
for non-cash charges to operations
|
319
|
|
365
|
Changes in assets and
liabilities
|
(279)
|
|
(330)
|
Net cash provided by
operating activities
|
40
|
|
35
|
|
|
|
|
Investing
|
|
|
|
Capital expenditures,
including tooling outlays
|
(117)
|
|
(160)
|
Payments for business
acquired
|
(10)
|
|
—
|
Proceeds from sale of
business
|
23
|
|
—
|
Proceeds from asset
disposals and other
|
1
|
|
—
|
Payments for venture
capital investment
|
(1)
|
|
(1)
|
Net cash used in
investing activities
|
(104)
|
|
(161)
|
|
|
|
|
Financing
|
|
|
|
Net increase in notes
payable
|
—
|
|
118
|
Additions to
long-term debt, net of debt issuance costs
|
11
|
|
12
|
Repayments of
long-term debt, including current portion
|
(26)
|
|
(10)
|
Payments for purchase
of treasury stock
|
(67)
|
|
(55)
|
Payments for
stock-based compensation items
|
(14)
|
|
(14)
|
Dividends paid to
BorgWarner stockholders
|
(35)
|
|
(36)
|
Dividends paid to
noncontrolling stockholders
|
(22)
|
|
(18)
|
Net cash used in
financing activities
|
(153)
|
|
(3)
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(5)
|
|
(6)
|
|
|
|
|
Net decrease in
cash
|
(222)
|
|
(135)
|
|
|
|
|
Cash and restricted
cash at beginning of year
|
739
|
|
545
|
Cash and restricted
cash at end of period
|
$
|
517
|
|
$
|
410
|
Net Earnings Per
Diluted Share Guidance Reconciliation
|
|
|
Q2 2019
|
|
Full-Year
2019
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
U.S.
GAAP
|
$
|
0.91
|
|
$
|
1.05
|
|
$
|
3.59
|
|
$
|
4.13
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
0.08
|
|
|
|
0.24
|
|
0.05
|
Merger, acquisition
and divestiture expense
|
|
|
|
|
0.01
|
|
0.01
|
Officer stock awards
modification
|
|
|
|
|
0.01
|
|
0.01
|
Loss on
arbitration
|
|
|
|
|
0.07
|
|
0.07
|
Tax
adjustments
|
|
|
|
|
0.08
|
|
0.08
|
|
|
|
|
|
|
|
|
Non – U.S. GAAP
EPS Guidance
|
$
|
0.99
|
|
$
|
1.05
|
|
$
|
4.00
|
|
$
|
4.35
|
|
|
|
|
|
|
|
|
Free Cash Flow
Outlook Reconciliation
|
|
Full-Year
2019
|
|
Low
|
|
High
|
Free Cash
Flow:
|
|
|
|
Cash Provided By
Operating Activities
|
$
|
1,125
|
|
$
|
1,225
|
Capital
Expenditures
|
(575)
|
|
(625)
|
Free Cash
Flow
|
$
|
550
|
|
$
|
600
|
Key Definitions
Organic Revenue Change: Revenue change
year over year excluding the estimated impact of FX and net
M&A.
Market: The estimated change in light vehicle production
weighted for BorgWarner's geographic exposure.
Outgrowth: BorgWarner's "Organic Revenue Change" vs.
"Market".
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content:http://www.prnewswire.com/news-releases/borgwarner-reports-first-quarter-2019-us-gaap-net-earnings-of-0-77-per-diluted-share-or-1-00-per-diluted-share-excluding-non-comparable-items-300837878.html
SOURCE BorgWarner