AUBURN HILLS, Mich.,
Feb. 13, 2020
/PRNewswire/ -- BorgWarner Inc. (NYSE: BWA) today reported 2019
fourth quarter and full-year results.
Fourth Quarter Highlights:
- U.S. GAAP net sales of $2,559
million, down 0.6% compared with fourth quarter 2018.
-
- Excluding the impact of foreign currencies and the net impact
of acquisitions and divestitures, net sales were up 2.6% compared
with fourth quarter 2018.
- U.S. GAAP net earnings of $1.06
per diluted share.
-
- Excluding $0.11 per diluted share
related to non-comparable items (detailed in the table below),
adjusted net earnings were $1.17 per
diluted share.
- U.S. GAAP operating income of $478
million, or 18.7% of net sales.
-
- Excluding $138 million of net
pretax impacts related to non-comparable items, adjusted operating
income was $340 million.
Excluding the impact of non-comparable items, adjusted operating
income was 13.3% of net sales.
Full Year Highlights:
- U.S. GAAP net sales of $10,168
million, down 3.4% compared to 2018.
-
- Excluding the impact of foreign currencies and the net impact
of acquisitions and divestitures, net sales were up 0.7% compared
with 2018.
- U.S. GAAP net earnings of $3.61
per diluted share.
-
- Excluding $0.52 per diluted share
related to non-comparable items (detailed in the table below),
adjusted net earnings were $4.13 per
diluted share.
- U.S. GAAP operating income of $1,303
million, or 12.8% of net sales.
-
- Excluding $71 million of net
pretax impacts related to non-comparable items, adjusted operating
income was $1,232 million.
Excluding the impact of non-comparable items, adjusted operating
income was 12.1% of net sales.
Financial Results:
The company believes the following
table is useful in highlighting non-comparable items that impacted
its U.S. GAAP net earnings per diluted share. The Company defines
adjusted earnings per diluted share as earnings per diluted share
adjusted to eliminate the impact of restructuring expense, merger,
acquisition and divestiture expense, other net expenses,
discontinued operations, other gains and losses not reflective of
the Company's ongoing operations, and related tax effects.
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Earnings per
diluted share
|
$
|
1.06
|
|
|
$
|
1.10
|
|
|
$
|
3.61
|
|
|
$
|
4.44
|
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
0.11
|
|
|
0.08
|
|
|
0.26
|
|
|
0.24
|
|
Pension settlement
loss
|
—
|
|
|
—
|
|
|
0.10
|
|
|
—
|
|
Unfavorable
arbitration loss
|
—
|
|
|
—
|
|
|
0.07
|
|
|
—
|
|
Merger, acquisition
and divestiture expense
|
0.01
|
|
|
0.01
|
|
|
0.05
|
|
|
0.03
|
|
Asset impairment and
loss on divestiture
|
0.03
|
|
|
0.09
|
|
|
0.03
|
|
|
0.09
|
|
Officer stock awards
modification
|
—
|
|
|
0.03
|
|
|
0.01
|
|
|
0.04
|
|
Gain on derecognition
of subsidiary
|
(0.02)
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
Asbestos-related
adjustments
|
—
|
|
|
0.08
|
|
|
—
|
|
|
0.08
|
|
Gain on sale of
building
|
—
|
|
|
(0.07)
|
|
|
—
|
|
|
(0.07)
|
|
Gain on commercial
settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01)
|
|
Tax reform
adjustments
|
—
|
|
|
(0.06)
|
|
|
—
|
|
|
(0.06)
|
|
Tax
adjustments
|
(0.02)
|
|
|
(0.05)
|
|
|
0.02
|
|
|
(0.30)
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
per diluted share
|
$
|
1.17
|
|
|
$
|
1.21
|
|
|
$
|
4.13
|
|
|
$
|
4.48
|
|
Net sales were $2,559 million in
the fourth quarter 2019, down 0.6% from $2,574 million in the fourth quarter 2018.
Net income in the fourth quarter 2019 was $220 million, or $1.06 per diluted share, compared with
$230 million, or $1.10 per diluted share, in the fourth quarter
2018. Adjusted net earnings per share in the fourth quarter
2019 were $1.17 down from
$1.21 in the fourth quarter
2018. Adjusted net earnings in the fourth quarter 2019
excluded non-comparable items of $0.11 per diluted share. Adjusted net
earnings in the fourth quarter 2018 excluded net non-comparable
items of $0.11 per diluted
share. These items are listed in the table above, which is
provided by the company for comparison with other results and the
most directly comparable U.S. GAAP measures. The depreciation
of certain foreign currencies against the U.S. dollar decreased net
sales by approximately $51 million
and decreased net earnings by approximately $0.02 per diluted share in the fourth quarter
2019 compared with the fourth quarter 2018. The impact of the
divestiture of the thermostat product line decreased net sales by
$31 million in the fourth quarter
2019 compared with the fourth quarter 2018. The decline in
net earnings and adjusted net earnings is primarily due to the
year-over-year decrease in equity in affiliates' earnings,
corporate costs and an increase in the company's tax rate.
Full year 2019 net sales were $10,168
million, down 3.4% from $10,530
million in 2018. Full year 2019 net income was
$746 million, or $3.61 per diluted share, compared with
$931 million, or $4.44 per diluted share, in 2018. Adjusted
net earnings per share for the full year 2019 were $4.13, down from $4.48 in 2018. Adjusted net earnings in the full
year 2019 excluded net non-comparable items of $0.52 per diluted share. Adjusted net
earnings in the full year 2018 excluded net non-comparable items of
$0.04 per diluted share. These items
are listed in the table above, which is provided by the company for
comparison with other results and the most directly comparable U.S.
GAAP measures. The depreciation of certain foreign currencies
against the U.S. dollar decreased net sales by approximately
$350 million and decreased net
earnings by approximately $0.14 per
diluted share in the full year 2019 compared with 2018. The impact
of the divestiture of the thermostat product line decreased net
sales by $90 million in the full year
2019 compared with 2018. The decline in net earnings and adjusted
net earnings is primarily due to the impact of lower revenue, the
increased cost from tariffs, supplier cost reductions not keeping
pace with normal customer price deflation and a year-over-year
increase in the company's tax rate.
Net cash provided by operating activities was $1,008 million in 2019 compared with $1,126 million in 2018. Investments in
capital expenditures, including tooling outlays, totaled
$481 million in 2019, compared with
$546 million in 2018. Balance sheet
debt decreased $154 million, and cash
and cash equivalents increased by $93
million, at the end of 2019 compared with the end of
2018.
Engine Segment Results: Engine segment net sales
were $1,533 million in the fourth
quarter 2019 compared with $1,541
million in fourth quarter 2018. Excluding the impact
of foreign currencies and the divestiture of the thermostat product
line, net sales were up 3.5% from the prior year. Adjusted
earnings before interest, income taxes and non-controlling interest
("Adjusted EBIT") were $264 million
in the fourth quarter of 2019. Excluding the impact of
foreign currencies and the divestiture of the thermostat product
line, Adjusted EBIT was up 11.2% from the fourth quarter of
2018. The increase in Adjusted EBIT was primarily due to
impact of higher revenue excluding the impact of weaker currencies
and lower SG&A and R&D expense.
Drivetrain Segment Results: Drivetrain segment net
sales were $1,042 million in the
fourth quarter 2019 compared with $1,047
million in the fourth quarter 2018. Excluding the
impact of foreign currencies, net sales were up 1.5% from the prior
year. Adjusted EBIT was $136
million in the fourth quarter 2019. Excluding the
impact of foreign currencies, Adjusted EBIT was up 7.7% from the
fourth quarter 2018. The increase in Adjusted EBIT was
primarily due to supplier cost savings and lower R&D costs.
Full Year 2020 Guidance: The company has provided 2020
full year guidance. This guidance is for BorgWarner as
currently consolidated and excludes the potential impact from the
acquisition of Delphi Technologies PLC, which BorgWarner announced
on January 28, 2020. Net sales
are expected to be in the range of $9,750
million to $10,075 million.
This implies year-over-year organic sales change of down 2.5% to up
0.5%. The company expects its blended light-vehicle market to
decline in the range of 2.0% to 4.0% in 2020. Global light
vehicle production expectations remain volatile, particularly in
China. Foreign currencies are expected to result in a
year-over-year decrease in sales of $130
million, primarily due to the depreciation of the Euro,
Chinese Renminbi and Korean Won against the U.S. dollar. The
divestiture of the thermostat product line will decrease
year-over-year sales by approximately $30
million. Operating margin is expected to be in the
range of 10.0% to 11.0%. Excluding the impact of
non-comparable items, adjusted operating margin is expected to be
in the range of 11.6% to 12.0%. Net earnings are expected to
be within a range of $3.22 to
$3.75 per diluted share.
Excluding the impact of non-comparable items, adjusted net earnings
are expected to be within a range of $3.85 to $4.15 per
diluted share. Full-year operating cash flow is expected to
be approximately $1,250 million,
while free cash flow is expected to be in the range of $675 million to $725
million.
Net New Business Backlog: The company expects its 2020 to
2023 light vehicle net new business backlog to be within the range
of $2,500 million to $2,630 million. Asia, the Americas and Europe are expected to account for
approximately 70%, 20% and 10%, respectively, of the total net new
business backlog over the four-year period with 50% expected in
China. Electrification is driving greater than 100% of the
net new business backlog amount over the four-year period.
Cost Restructuring Plan: Over the course of the next few
years, the company plans to take additional actions to reduce
existing structural costs. These actions are expected to
result in primarily cash restructuring costs in the $275 million to $300
million range through the end of 2023. The resulting
annual cost savings are expected to be in the range of
approximately $90 million to
$100 million by 2023. The
company plans to utilize these savings to sustain the company's
strong operating margin profile and long-term cost
competitiveness.
At 9:30 a.m. ET today, a brief
conference call concerning fourth quarter and full year 2019
results and guidance 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 67 locations in 19 countries, the company employs
approximately 29,000 worldwide. For more information, please visit
borgwarner.com.
Forward-Looking Statements: This press release may
contain forward-looking statements as contemplated by the 1995
Private Securities Litigation Reform Act that reflect, when made,
Delphi's or BorgWarner's respective current views with respect to
future events, including the proposed transaction, and financial
performance or that are based on their respective management's
current outlook, expectations, estimates and projections, including
with respect to the combined group following the proposed
transaction, if completed. Such forward-looking statements are
subject to many risks, uncertainties and factors relating to
Delphi's or BorgWarner's respective operations and business
environment, which may cause the actual results of Delphi or
BorgWarner to be materially different from any future results. All
statements that address future operating, financial or business
performance or Delphi's or BorgWarner's respective strategies or
expectations are forward-looking statements. In some cases, you can
identify these statements by forward-looking words such as "may,"
"might," "will," "should," "could," "designed," "effect,"
"evaluates," "forecasts," "goal," "guidance," "initiative,"
"intends," "pursue," "seek," "target," "when," "will," "expects,"
"plans," "intends," "anticipates," "believes," "estimates,"
"predicts," "projects," "potential," "outlook" or "continue," the
negatives thereof and other comparable terminology. Factors that
could cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the
possibility that the proposed transaction will not be pursued;
failure to obtain necessary regulatory approvals or required
financing or to satisfy any of the other conditions to the proposed
transaction; adverse effects on the market price of Delphi's
ordinary shares or BorgWarner's shares of common stock and on
Delphi's or BorgWarner's operating results because of a
failure to complete the proposed transaction; failure to realize
the expected benefits of the proposed transaction; failure to
promptly and effectively integrate Delphi's businesses; negative
effects relating to the announcement of the proposed transaction or
any further announcements relating to the proposed transaction or
the consummation of the proposed transaction on the market price of
Delphi's ordinary shares or BorgWarner's shares of common stock;
significant transaction costs and/or unknown or inestimable
liabilities; potential litigation associated with the proposed
transaction; general economic and business conditions that affect
the combined group following the consummation of the proposed
transaction; changes in global, political, economic, business,
competitive, market and regulatory forces; changes in tax laws,
regulations, rates and policies; future business acquisitions or
disposals; competitive developments; and the timing and occurrence
(or non-occurrence) of other events or circumstances that may be
beyond Delphi's or BorgWarner's control.
For additional information about these and other factors, see
the information under the caption "Risk Factors" in Delphi's most
recent Annual Report on Form 10-K filed with the SEC and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", and the information under the caption "Risk
Factors" in BorgWarner's most recent Annual Report on Form 10-K
filed with the SEC and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Delphi's and BorgWarner's forward-looking statements speak only
as of the date of this communication or as of the date they are
made. Delphi and BorgWarner each disclaim any intent or obligation
to update or revise any "forward looking statement" made in this
communication to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over
time, except as may be required by law. All subsequent written and
oral forward-looking statements attributable to Delphi, BorgWarner
or their respective directors, executive officers or any person
acting on behalf of any of them are expressly qualified in their
entirety by this paragraph.
Forward-looking statements are not guarantees of performance,
and the Company's actual results may 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;
future changes in laws and regulations, including, by way of
example, tariffs, in the countries in which we operate; and other
risks noted in reports that we file with the Securities and
Exchange Commission, including the Risk Factors 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 in this press
release to reflect any change in our expectations or any change in
events, conditions, circumstances, or assumptions underlying the
statements.
No Offer or Solicitation: This communication is being
made in respect of the proposed acquisition (the "proposed
transaction") of Delphi Technologies PLC ("Delphi") by BorgWarner
Inc. ("BorgWarner"). This communication is not intended to
and does not constitute an offer to sell or the solicitation of an
offer to subscribe for or buy or an invitation to purchase or
subscribe for any securities or the solicitation of any vote or
approval in any jurisdiction pursuant to the proposed transaction
or otherwise, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in contravention of applicable law.
In particular, this communication is not an offer of securities for
sale into the United States. No
offer of securities shall be made in the
United States absent registration under the U.S. Securities
Act of 1933, as amended (the "Securities Act"), or pursuant to an
exemption from, or in a transaction not subject to, such
registration requirements. Any securities issued in the proposed
transaction are anticipated to be issued in reliance upon available
exemptions from such registration requirements pursuant to Section
3(a)(10) of the Securities Act. In connection with the proposed
transaction, Delphi will file certain proxy materials, which shall
constitute the scheme document and the proxy statement relating to
the proposed transaction (the "proxy statement"). The proxy
statement will contain the full terms and conditions of the
proposed transaction, including details with respect to the Delphi
shareholder vote in respect of the proposed transaction. Any
decision in respect of, or other response to, the proposed
transaction should be made only on the basis of the information
contained in the proxy statement.
Participants in the Solicitation: Delphi, BorgWarner and
certain of their respective directors, executive officers and
employees may be deemed "participants" in the solicitation of
proxies from Delphi shareholders in respect of the proposed
transaction. Information regarding the foregoing persons, including
a description of their direct or indirect interests, by security
holdings or otherwise, will be set forth in the proxy statement and
any other relevant documents to be filed with the Securities and
Exchange Commission (the "SEC"). You can find information about
Delphi's directors and executive officers in its Annual Report on
Form 10-K for the fiscal year ended December
31, 2018, its definitive proxy statement filed with the SEC
on Schedule 14A on March 15, 2019,
and certain of Delphi's Current Reports on Form 8-K filed with the
SEC on January 7, 2019 and
July 30, 2019. You can find
information about BorgWarner's directors and executive officers in
its Annual Report on Form 10-K for the fiscal year ended
December 31, 2018 and its definitive
proxy statement filed with the SEC on Schedule 14A on March 15, 2019.
Additional Information and Where to Find It: This
communication may be deemed solicitation material in respect of the
proposed transaction. In connection with the proposed transaction,
Delphi will file with the SEC and furnish to Delphi's shareholders
a proxy statement and other relevant documents. This communication
does not constitute a solicitation of any vote or approval. Before
making any voting decision, Delphi's shareholders are urged to read
the proxy statement and any other relevant documents filed or to be
filed with the SEC in connection with the proposed transaction or
incorporated by reference in the proxy statement (if any) carefully
and in their entirety when they become available because they will
contain important information about the proposed transaction and
the parties to the proposed transaction.
Investors will be able to obtain free of charge the proxy
statement and other documents filed with the SEC at the SEC's
website at http://www.sec.gov. In addition, the proxy statement and
Delphi's and BorgWarner's respective annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to section
13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as
amended, are available free of charge through Delphi's and
BorgWarner's websites at www.delphi.com and www.borgwarner.com,
respectively, as soon as reasonably practicable after they are
electronically filed with, or furnished to, the SEC.
BorgWarner Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
|
(in
millions)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net sales
|
$
|
2,559
|
|
|
$
|
2,574
|
|
|
$
|
10,168
|
|
|
$
|
10,530
|
|
Cost of
sales
|
2,014
|
|
|
2,030
|
|
|
8,067
|
|
|
8,300
|
|
Gross
profit
|
545
|
|
|
544
|
|
|
2,101
|
|
|
2,230
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
205
|
|
|
226
|
|
|
873
|
|
|
946
|
|
Other (income)
expense, net
|
(138)
|
|
|
52
|
|
|
(75)
|
|
|
94
|
|
Operating
income
|
478
|
|
|
266
|
|
|
1,303
|
|
|
1,190
|
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(7)
|
|
|
(11)
|
|
|
(32)
|
|
|
(49)
|
|
Interest
income
|
(3)
|
|
|
(2)
|
|
|
(12)
|
|
|
(6
|
|
Interest
expense
|
12
|
|
|
14
|
|
|
55
|
|
|
59
|
|
Other postretirement
(income) expense
|
1
|
|
|
(2)
|
|
|
27
|
|
|
(10)
|
|
Earnings before
income taxes and noncontrolling interest
|
475
|
|
|
267
|
|
|
1,265
|
|
|
1,196
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
238
|
|
|
19
|
|
|
468
|
|
|
211
|
|
Net
earnings
|
237
|
|
|
248
|
|
|
797
|
|
|
985
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
17
|
|
|
18
|
|
|
51
|
|
|
54
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
220
|
|
|
$
|
230
|
|
|
$
|
746
|
|
|
$
|
931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share —
diluted
|
$
|
1.06
|
|
|
$
|
1.10
|
|
|
$
|
3.61
|
|
|
$
|
4.44
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding — diluted
|
206.9
|
|
|
208.6
|
|
|
206.8
|
|
|
209.5
|
|
Supplemental
Information (Unaudited)
|
(in
millions)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Capital expenditures,
including tooling outlays
|
$
|
135
|
|
|
$
|
152
|
|
|
$
|
481
|
|
|
$
|
546
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$
|
115
|
|
|
$
|
105
|
|
|
$
|
439
|
|
|
$
|
431
|
|
BorgWarner Inc.
Net Sales by Reporting Segment (Unaudited)
|
(in
millions)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Engine
|
$
|
1,533
|
|
|
$
|
1,541
|
|
|
$
|
6,214
|
|
|
$
|
6,447
|
|
Drivetrain
|
1,042
|
|
|
$
|
1,047
|
|
|
4,015
|
|
|
4,140
|
|
Inter-segment
eliminations
|
(16)
|
|
|
(14)
|
|
|
(61)
|
|
|
(57)
|
|
Net sales
|
$
|
2,559
|
|
|
$
|
2,574
|
|
|
$
|
10,168
|
|
|
$
|
10,530
|
|
BorgWarner Inc.
Adjusted Earnings Before Interest, Income Taxes and Noncontrolling
Interest ("Adjusted EBIT")
(Unaudited)
|
(in
millions)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Engine
|
$
|
264
|
|
|
$
|
243
|
|
|
$
|
995
|
|
|
$
|
1,040
|
|
Drivetrain
|
136
|
|
|
130
|
|
|
443
|
|
|
475
|
|
Adjusted
EBIT
|
400
|
|
|
373
|
|
|
1,438
|
|
|
1,515
|
|
Gain on derecognition
of subsidiary
|
(177)
|
|
|
—
|
|
|
(177)
|
|
|
—
|
|
Restructuring
expense
|
31
|
|
|
23
|
|
|
72
|
|
|
67
|
|
Unfavorable
arbitration loss
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Merger, acquisition
and divestiture expense
|
1
|
|
|
1
|
|
|
11
|
|
|
6
|
|
Asset impairment and
loss on divestiture
|
7
|
|
|
25
|
|
|
7
|
|
|
25
|
|
Officer stock awards
modification
|
—
|
|
|
6
|
|
|
2
|
|
|
8
|
|
Asbestos-related
adjustments
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
Gain on sale of
building
|
—
|
|
|
(19)
|
|
|
—
|
|
|
(19)
|
|
Other income,
net
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(4)
|
|
Corporate, including
stock-based compensation
|
60
|
|
|
49
|
|
|
206
|
|
|
219
|
|
Equity in affiliates'
earnings, net of tax
|
(7)
|
|
|
(11)
|
|
|
(32)
|
|
|
(49
|
|
Interest
income
|
(3)
|
|
|
(2)
|
|
|
(12)
|
|
|
(6
|
|
Interest
expense
|
12
|
|
|
14
|
|
|
55
|
|
|
59
|
|
Other postretirement
expense (income)
|
1
|
|
|
(2)
|
|
|
27
|
|
|
(10)
|
|
Earnings before
income taxes and noncontrolling interest
|
475
|
|
|
267
|
|
|
1,265
|
|
|
1,196
|
|
Provision for income
taxes
|
238
|
|
|
19
|
|
|
468
|
|
|
211
|
|
Net
earnings
|
237
|
|
|
248
|
|
|
797
|
|
|
985
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
17
|
|
|
18
|
|
|
51
|
|
|
54
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
220
|
|
|
$
|
230
|
|
|
$
|
746
|
|
|
$
|
931
|
|
BorgWarner Inc.
Condensed Consolidated Balance Sheets (Unaudited)
|
(in
millions)
|
|
|
|
|
|
December 31,
2019
|
|
December 31,
2018
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
832
|
|
|
$
|
739
|
|
Receivables,
net
|
1,921
|
|
|
1,988
|
|
Inventories,
net
|
807
|
|
|
781
|
|
Prepayments and other
current assets
|
276
|
|
|
250
|
|
Assets held for
sale
|
—
|
|
|
47
|
|
Total current
assets
|
3,836
|
|
|
3,805
|
|
|
|
|
|
Property, plant and
equipment, net
|
2,925
|
|
|
2,904
|
|
Other non-current
assets
|
2,941
|
|
|
3,386
|
|
Total
assets
|
$
|
9,702
|
|
|
$
|
10,095
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Notes payable and
other short-term debt
|
$
|
286
|
|
|
$
|
173
|
|
Accounts payable and
accrued expenses
|
1,977
|
|
|
2,144
|
|
Income taxes
payable
|
66
|
|
|
59
|
|
Liabilities held for
sale
|
—
|
|
|
23
|
|
Total current
liabilities
|
2,329
|
|
|
2,399
|
|
|
|
|
|
Long-term
debt
|
1,674
|
|
|
1,941
|
|
Other non-current
liabilities
|
855
|
|
|
1,410
|
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
4,706
|
|
|
4,226
|
|
Noncontrolling
interest
|
138
|
|
|
119
|
|
Total
equity
|
4,844
|
|
|
4,345
|
|
Total liabilities and
equity
|
$
|
9,702
|
|
|
$
|
10,095
|
|
BorgWarner Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
(in
millions)
|
|
|
Twelve Months
Ended
December 31,
|
|
2019
|
|
2018
|
Operating
|
|
|
|
Net
earnings
|
$
|
797
|
|
|
$
|
985
|
|
Depreciation and
amortization
|
439
|
|
|
431
|
|
Deferred income tax
provision (benefit)
|
186
|
|
|
(57)
|
|
Stock-based
compensation expense
|
42
|
|
|
53
|
|
Restructuring
expense, net of cash paid
|
30
|
|
|
33
|
|
Pension settlement
loss
|
27
|
|
|
—
|
|
Tax reform
adjustments to provision for income taxes
|
16
|
|
|
(13)
|
|
Asset impairment and
loss on divestiture
|
7
|
|
|
26
|
|
Gain on derecognition
of subsidiary
|
(177)
|
|
|
—
|
|
Equity in affiliates'
earnings, net of dividends received, and other
|
—
|
|
|
(12)
|
|
Net earnings adjusted
for non-cash charges to operations
|
1,367
|
|
|
1,446
|
|
Derecognition of a
subsidiary
|
(172)
|
|
|
—
|
|
Changes in assets and
liabilities
|
(187)
|
|
|
(320)
|
|
Net cash provided by
operating activities
|
1,008
|
|
|
1,126
|
|
|
|
|
|
Investing
|
|
|
|
Capital expenditures,
including tooling outlays
|
(481)
|
|
|
(546)
|
|
Payments for
investments in equity securities
|
(53)
|
|
|
(6)
|
|
Payments for
businesses acquired, including restricted cash, net of cash
acquired
|
(10)
|
|
|
—
|
|
Proceeds from sale of
businesses, net of cash divested
|
24
|
|
|
—
|
|
Proceeds from
settlement of net investment hedges
|
22
|
|
|
2
|
|
Proceeds from asset
disposals and other
|
9
|
|
|
36
|
|
Net cash used in
investing activities
|
(489)
|
|
|
(514)
|
|
|
|
|
|
Financing
|
|
|
|
Net decrease in notes
payable
|
—
|
|
|
(34)
|
|
Additions to debt,
net of debt issuance costs
|
63
|
|
|
59
|
|
Repayments of long
term debt, including current portion
|
(204)
|
|
|
(66)
|
|
Payments for purchase
of treasury stock
|
(100)
|
|
|
(150)
|
|
Payments for
stock-based compensation items
|
(15)
|
|
|
(15)
|
|
Capital contribution
from noncontrolling interest
|
4
|
|
|
—
|
|
Dividends paid to
BorgWarner stockholders
|
(140)
|
|
|
(142)
|
|
Dividends paid to
noncontrolling stockholders
|
(28)
|
|
|
(35)
|
|
Net cash used in
financing activities
|
(420)
|
|
|
(383)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(6)
|
|
|
(35)
|
|
Net increase in cash
and cash equivalents
|
93
|
|
|
194
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
739
|
|
|
545
|
|
Cash and cash
equivalents at end of period
|
$
|
832
|
|
|
$
|
739
|
|
Non-GAAP Financial Measures
This press release contains information about BorgWarner's
financial results that is not presented in accordance with
accounting principles generally accepted in the United States ("GAAP").
Such non-GAAP financial measures are reconciled to their
closest GAAP financial measures below and in the Financial Results
table above. The provision of these comparable GAAP financial
measures for 2020 is not intended to indicate that BorgWarner is
explicitly or implicitly providing projections on those GAAP
financial measures, and actual results for such measures are likely
to vary from those presented. The reconciliations include all
information reasonably available to the company at the date of this
press release and the adjustments that management can reasonably
predict.
Management believes that these non-GAAP financial measures are
useful to management, investors, and banking institutions in their
analysis of the Company's business and operating performance.
Management also uses this information for operational planning and
decision-making purposes.
Non-GAAP financial measures are not and should not be considered
a substitute for any GAAP measure. Additionally, because not all
companies use identical calculations, the non-GAAP financial
measures as presented by BorgWarner may not be comparable to
similarly titled measures reported by other companies.
Adjusted Operating Income and Adjusted Earnings Per
Share
The Company defines adjusted operating income as operating
income adjusted to eliminate the impact of restructuring expense,
merger, acquisition and divestiture expense, other net expenses,
discontinued operations, and other gains and losses not reflective
of the Company's ongoing operations. The Company defines adjusted
earnings per diluted share as earnings per diluted share adjusted
for the items above and related tax effects.
Adjusted Operating
Income
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net sales
|
$
|
2,559
|
|
|
$
|
2,574
|
|
|
$
|
10,168
|
|
|
$
|
10,530
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
545
|
|
|
$
|
544
|
|
|
$
|
2,101
|
|
|
$
|
2,230
|
|
Gross
margin
|
21.3%
|
|
|
21.1%
|
|
|
20.7%
|
|
|
21.2%
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
478
|
|
|
$
|
266
|
|
|
$
|
1,303
|
|
|
$
|
1,190
|
|
Operating
margin
|
18.7%
|
|
|
10.3%
|
|
|
12.8%
|
|
|
11.3%
|
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
$
|
31
|
|
|
$
|
23
|
|
|
$
|
72
|
|
|
$
|
67
|
|
Merger, acquisition
and divestiture expense
|
1
|
|
|
1
|
|
|
11
|
|
|
6
|
|
Officer stock awards
modification
|
—
|
|
|
6
|
|
|
2
|
|
|
8
|
|
Unfavorable
arbitration loss
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Gain on derecognition
of subsidiary
|
(177)
|
*
|
|
—
|
|
|
(177)
|
|
*
|
—
|
|
Asset impairment and
loss on divestiture
|
7
|
|
|
25
|
|
|
7
|
|
|
25
|
|
Asbestos-related
adjustments
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
Gain on sale of
building
|
—
|
|
|
(19)
|
|
|
—
|
|
|
(19)
|
|
Gain on commercial
settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
Other, net
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
Adjusted operating
income
|
$
|
340
|
|
|
$
|
323
|
|
|
$
|
1,232
|
|
|
$
|
1,296
|
|
Adjusted operating
margin
|
13.3%
|
|
|
12.5%
|
|
|
12.1%
|
|
|
12.3%
|
|
|
*On October 30, 2019,
the Company entered into a definitive agreement with Enstar
Holdings (US) LLC ("Enstar"), a subsidiary of Enstar
Group Limited, pursuant to which Enstar acquired 100% of the equity
interests of BorgWarner Morse TEC LLC ("Morse TEC"), a
consolidated
wholly-owned subsidiary of the Company that holds asbestos and
certain other liabilities. In connection with the closing, the
Company recorded
a pre-tax gain of $177 million. The tax expense associated with
this transaction was $173 million, resulting in a net after-tax
gain of $4 million.
|
Adjusted Operating
Income Guidance Reconciliation
|
|
|
Full-Year 2020
Guidance
|
|
Low
|
|
High
|
Net Sales
|
$
|
9,750
|
|
|
$
|
10,075
|
|
|
|
|
|
Operating
Income
|
975
|
|
|
1,110
|
|
Operating
Margin
|
10.0%
|
|
|
11.0%
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Restructuring and
other expense
|
$
|
115
|
|
|
$
|
65
|
|
Merger, acquisition
and divestiture expense
|
45
|
|
|
35
|
|
Adjusted Operating
Income
|
$
|
1,135
|
|
|
$
|
1,210
|
|
Adjusted Operating
Margin
|
11.6%
|
|
|
12.0%
|
|
Adjusted Earnings
Per Diluted Share Guidance Reconciliation
|
|
|
Full-Year 2020
Guidance
|
|
Low
|
|
High
|
Earnings per
Diluted Share
|
$
|
3.22
|
|
|
$
|
3.75
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Restructuring
expense
|
0.41
|
|
|
0.23
|
|
Merger, acquisition
and divestiture expense
|
0.22
|
|
|
0.17
|
|
|
|
|
|
Adjusted Earnings
per Diluted Share
|
$
|
3.85
|
|
|
$
|
4.15
|
|
Free Cash Flow
The Company defines free cash flow as net cash provided by
operating activities minus capital expenditures and it is useful to
both management and investors in evaluating the Company's ability
to service and repay its debt.
Free Cash Flow
Outlook Reconciliation
|
|
Full-Year 2020
Guidance
|
|
Low
|
|
High
|
Cash provided by
operating activities
|
$
|
1,250
|
|
|
$
|
1,250
|
|
Capital
expenditures
|
(575)
|
|
|
(525)
|
|
Free cash
flow
|
$
|
675
|
|
|
$
|
725
|
|
Key Definitions
The terms below are commonly used by management and investors in
assessing ongoing financial performance.
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".
View original
content:http://www.prnewswire.com/news-releases/borgwarner-reports-fourth-quarter-2019-us-gaap-net-earnings-of-1-06-per-diluted-share-or-1-17-per-diluted-share-excluding-non-comparable-items-301004169.html
SOURCE BorgWarner