AUBURN HILLS, Mich.,
Oct. 29, 2020 /PRNewswire/
-- BorgWarner Inc. (NYSE: BWA) today reported third quarter
results.
Third Quarter Highlights:
- U.S. GAAP net sales of $2,534
million, up 2% compared with third quarter 2019.
-
- Excluding the impact of foreign currencies and the net impact
of acquisitions and divestitures, net sales were up 1% compared
with third quarter 2019.
- U.S. GAAP net earnings of $0.53
per diluted share.
-
- Excluding the $(0.35) per diluted
share related to non-comparable items (detailed in the table
below), adj. net income was $0.88 per
diluted share.
- U.S. GAAP operating income of $284
million, or 11.2% of net sales.
-
- Excluding the $33 million of
pretax expenses related to non-comparable items, adj. operating
income was $317 million.
Excluding the impact of non-comparable items, adj. operating income
was 12.5% of net sales.
- Net cash provided by operating activities of $481 million.
-
- Free cash flow was $390
million.
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Earnings per
diluted share
|
$
|
0.53
|
|
|
$
|
0.94
|
|
|
$
|
0.69
|
|
|
$
|
2.54
|
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
0.07
|
|
|
0.04
|
|
|
0.29
|
|
|
0.15
|
|
Merger, acquisition
and divestiture expense
|
0.04
|
|
|
0.02
|
|
|
0.24
|
|
|
0.04
|
|
Asset
impairments
|
—
|
|
|
—
|
|
|
0.11
|
|
|
—
|
|
Net gain on insurance
recovery for property damage
|
(0.01)
|
|
|
—
|
|
|
(0.04)
|
|
|
—
|
|
Delayed-draw term loan
cancellation
|
—
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Unfavorable
arbitration loss
|
—
|
|
|
—
|
|
|
—
|
|
|
0.07
|
|
Officer stock awards
modification
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Pension settlement
loss
|
—
|
|
|
—
|
|
|
—
|
|
|
0.10
|
|
Tax
adjustments
|
0.25
|
|
|
(0.04)
|
|
|
0.21
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
per diluted share
|
$
|
0.88
|
|
|
$
|
0.96
|
|
|
$
|
1.51
|
|
|
$
|
2.95
|
|
Net sales were $2,534 million for
the third quarter 2020, up 2% from $2,492
million for the third quarter 2019, as increased demand for
the company's products offset lower industry production volume. Net
earnings for the third quarter 2020 were $111 million, or $0.53 per diluted share, compared with net
earnings of $194 million, or
$0.94 per diluted share, for the
third quarter 2019. Adj. net income per diluted share for the
third quarter 2020 was $0.88, down
from adj. net income per diluted share of $0.96 for the third quarter 2019. Adj. net income
for the third quarter 2020 excluded net non-comparable items of
$(0.35) per diluted share. Adj. net
income for the third quarter 2019 excluded net non-comparable items
of $(0.02) 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 decrease in net earnings was
primarily due to the increase in the company's effective tax rate.
The impact of foreign currencies increased net sales by
approximately $22 million and had
minimal impact on net earnings per diluted share for the third
quarter 2020, compared with the third quarter 2019.
For the first nine months of 2020, net sales were $6,239 million, down 18% from $7,609 million for the first nine months of 2019,
due primarily to production disruptions in the second quarter
arising from the COVID-19 pandemic. Net income for the first nine
months of 2020 was $142 million, or
$0.69 per diluted share, compared
with $526 million, or $2.54 per diluted share, for the first nine
months of 2019. Adj. net income per share for the first nine
months of 2020 was $1.51, down from
$2.95 for the first nine months of
2019. Adj. net income for the first nine months of 2020 excluded
net non-comparable items of $(0.82)
per diluted share. Adj. net income for the first nine months of
2019 excluded net non-comparable items of $(0.41) 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 decrease in net earnings was primarily due to the
impact of lower revenue and the increase in the company's effective
tax rate. The impact of foreign currencies decreased net sales by
approximately $66 million and
decreased net earnings by approximately $0.02 per diluted share for the first nine months
of 2020, compared with the first nine months of 2019.
Net cash provided by operating activities was $808 million for the first nine months of 2020,
compared with $824 million for the
nine months of 2019. Investments in capital expenditures, including
tooling outlays, totaled $262 million
for the first nine months of 2020 compared with $346 million for the first nine months of 2019.
Compared with the end of 2019, balance sheet debt at the end of the
third quarter 2020 increased $876
million, while cash and cash equivalents increased by
$1,289 million.
Engine Segment Results: Engine segment net sales
were $1,476 million during the third
quarter 2020, compared with $1,514
million during the third quarter 2019. Excluding the impact
of foreign currencies, net sales were down 4% from the prior year.
Adj. earnings before interest, income taxes and non-controlling
interest ("Adj. EBIT") were $225
million during the third quarter 2020, compared to
$241 million from the prior year. The
decline in Adj. EBIT was primarily due to the impact of lower
revenue. The impact of foreign currencies was not significant
Drivetrain Segment Results: Drivetrain segment net
sales were $1,075 million during the
third quarter 2020, compared with $993
million during the third quarter 2019. Excluding the impact
of foreign currencies, net sales were up 8% from the prior year.
Adj. EBIT was $131 million during the
third quarter 2020, compared to $100
million from the prior year. The increase in Adj. EBIT was
primarily due to the impact of higher revenue. Excluding the impact
of foreign currencies, Adj. EBIT was $133 million, up
$33 million from the third quarter
2019.
Fourth Quarter 2020 Guidance: For the fourth quarter
2020, net sales are expected to be in the range of $3.46 billion to $3.61
billion, under the assumption that there are not additional
production disruptions arising from COVID-19. This includes
the impact of the acquisition of Delphi Technologies, which is
expected to increase fourth quarter sales by $950 million to $1.0
billion. Excluding the impact of non-comparable items, adj.
operating margin is expected to be in the range of 8.8% to
9.6%.
Full Year 2020 Guidance: For the full-year 2020, net
sales are expected to be in the range of $9.7 billion to $9.85
billion, under the assumption that there are not additional
production disruptions arising from COVID-19. This implies a
year-over-year decrease in organic sales of 12.5% to 13.5%. The
company expects its blended light-vehicle market to decline in the
range of approximately 18.5% to 19.0% in 2020. The divestiture of
the thermostat product line decreased year-over-year sales by
approximately $30 million. Foreign
currencies are expected to result in a year-over-year decrease in
sales of approximately $18
million.
Excluding the impact of non-comparable items, adj. operating
margin is expected to be in the range of 8.7% to 9.0%.
Full-year operating cash flow is expected to be in the range of
$900 million to $975 million, while free cash flow is expected to
be in the range of $475 million to
$525 million. The company's
free cash flow guidance includes approximately $100 million negative impact from
transaction-related costs and synergy-related costs associated with
the Delphi Technologies acquisition.
At 9:30 a.m. ET today, a brief
conference call concerning third quarter 2020 results and guidance
will be webcast at:
http://www.borgwarner.com/en/Investors/default.aspx. Additionally,
an earnings call presentation will be available 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. Building on its original equipment expertise,
BorgWarner also brings market leading product and service solutions
to the global aftermarket. With manufacturing and technical
facilities in 99 locations in 24 countries, the company employs
approximately 48,000 worldwide. For more information, please visit
borgwarner.com.
Forward-Looking Statements: This news 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 (including instances where "E"
immediately precedes a year)," "evaluates," "expects," "forecasts,"
"goal," "guidance," "initiative," "intends," "may," "outlook,"
"plans," "potential," "predicts," "project," "pursue," "seek,"
"should," "target," "when," "will," "would," and variations of such
words and similar expressions are intended to identify such
forward-looking statements. Further, all statements, other than
statements of historical fact contained or incorporated by
reference in this news release that we expect or anticipate will or
may occur in the future regarding our financial position, business
strategy and measures to implement that strategy, including changes
to operations, competitive strengths, goals, expansion and growth
of our business and operations, plans, references to future success
and other such matters, are forward-looking statements. Accounting
estimates, such as those described under the heading "Critical
Accounting Policies" in Item 7 of our Annual Report on Form 10-K
for the year ended December 31, 2019
("Form 10-K"), are inherently forward-looking. All forward-looking
statements are based on assumptions and analyses made by us in
light of our experience and our perception of historical trends,
current conditions and expected future developments, as well as
other factors we believe are appropriate in the circumstances.
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.
You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this news release.
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:
uncertainties regarding the extent and duration of impacts of
matters associated with COVID-19/coronavirus, including additional
production disruptions; the failure to realize the expected
benefits of the acquisition of Delphi Technologies PLC that the
Company completed on October 1, 2020;
the failure to promptly and effectively integrate acquired
businesses; the potential for unknown or inestimable liabilities
relating to the acquired businesses; 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 the other risks, including, by
way of example, pandemics and quarantines, noted in reports that we
file with the Securities and Exchange Commission, including Item
1A, "Risk Factors" in our most recently-filed Form 10-K. We do not
undertake any obligation to update or announce publicly any updates
to or revisions to any of the forward-looking statements in this
news release to reflect any change in our expectations or any
change in events, conditions, circumstances, or assumptions
underlying the statements.
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
|
|
|
|
(in millions, except
per share amounts)
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net sales
|
$
|
2,534
|
|
|
$
|
2,492
|
|
|
$
|
6,239
|
|
|
$
|
7,609
|
|
Cost of
sales
|
2,017
|
|
|
1,968
|
|
|
5,101
|
|
|
6,053
|
|
Gross
profit
|
517
|
|
|
524
|
|
|
1,138
|
|
|
1,556
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
204
|
|
|
230
|
|
|
601
|
|
|
668
|
|
Other expense,
net
|
29
|
|
|
18
|
|
|
142
|
|
|
63
|
|
Operating
income
|
284
|
|
|
276
|
|
|
395
|
|
|
825
|
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(3)
|
|
|
(7)
|
|
|
(10)
|
|
|
(25)
|
|
Interest
income
|
(3)
|
|
|
(4)
|
|
|
(8)
|
|
|
(9)
|
|
Interest
expense
|
20
|
|
|
15
|
|
|
50
|
|
|
43
|
|
Other postretirement
(income) expense
|
(2)
|
|
|
(1)
|
|
|
(5)
|
|
|
26
|
|
Earnings before income
taxes and noncontrolling interest
|
272
|
|
|
273
|
|
|
368
|
|
|
790
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
143
|
|
|
66
|
|
|
186
|
|
|
230
|
|
Net
earnings
|
129
|
|
|
207
|
|
|
182
|
|
|
560
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
18
|
|
|
13
|
|
|
40
|
|
|
34
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
111
|
|
|
$
|
194
|
|
|
$
|
142
|
|
|
$
|
526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share —
diluted
|
$
|
0.53
|
|
|
$
|
0.94
|
|
|
$
|
0.69
|
|
|
$
|
2.54
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding — diluted
|
207.3
|
|
|
206.3
|
|
|
206.7
|
|
|
206.8
|
|
|
|
|
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net cash provided by
operating activities
|
$
|
481
|
|
|
$
|
357
|
|
|
$
|
808
|
|
|
$
|
824
|
|
|
|
|
|
|
|
|
|
Capital expenditures,
including tooling outlays
|
$
|
91
|
|
|
$
|
102
|
|
|
$
|
262
|
|
|
$
|
346
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$
|
115
|
|
|
$
|
110
|
|
|
$
|
339
|
|
|
$
|
324
|
|
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Net Sales by
Reporting Segment (Unaudited)
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Engine
|
$
|
1,476
|
|
|
$
|
1,514
|
|
|
$
|
3,736
|
|
|
$
|
4,681
|
|
Drivetrain
|
1,075
|
|
|
993
|
|
|
2,542
|
|
|
2,973
|
|
Inter-segment
eliminations
|
(17)
|
|
|
(15)
|
|
|
(39)
|
|
|
(45)
|
|
Net sales
|
$
|
2,534
|
|
|
$
|
2,492
|
|
|
$
|
6,239
|
|
|
$
|
7,609
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings
Before Interest, Income Taxes and Noncontrolling Interest ("Adj.
EBIT") (Unaudited)
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Engine
|
$
|
225
|
|
|
$
|
241
|
|
|
$
|
461
|
|
|
$
|
731
|
|
Drivetrain
|
131
|
|
|
100
|
|
|
195
|
|
|
307
|
|
Adjusted
EBIT
|
356
|
|
|
341
|
|
|
656
|
|
|
1,038
|
|
Restructuring
expense
|
20
|
|
|
14
|
|
|
72
|
|
|
41
|
|
Merger, acquisition
and divestiture expense
|
16
|
|
|
4
|
|
|
58
|
|
|
10
|
|
Asset
impairments
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
Net gain on insurance
recovery for property damage
|
(3)
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
Unfavorable
arbitration loss
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Officer stock awards
modification
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Corporate, including
stock-based compensation
|
39
|
|
|
47
|
|
|
114
|
|
|
146
|
|
Equity in affiliates'
earnings, net of tax
|
(3)
|
|
|
(7)
|
|
|
(10)
|
|
|
(25)
|
|
Interest
income
|
(3)
|
|
|
(4)
|
|
|
(8)
|
|
|
(9)
|
|
Interest
expense
|
20
|
|
|
15
|
|
|
50
|
|
|
43
|
|
Other postretirement
(income) expense
|
(2)
|
|
|
(1)
|
|
|
(5)
|
|
|
26
|
|
Earnings before income
taxes and noncontrolling interest
|
272
|
|
|
273
|
|
|
368
|
|
|
790
|
|
Provision for income
taxes
|
143
|
|
|
66
|
|
|
186
|
|
|
230
|
|
Net
earnings
|
129
|
|
|
207
|
|
|
182
|
|
|
560
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
18
|
|
|
13
|
|
|
40
|
|
|
34
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
111
|
|
|
$
|
194
|
|
|
$
|
142
|
|
|
$
|
526
|
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
(in
millions)
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
2,121
|
|
|
$
|
832
|
|
Receivables,
net
|
1,977
|
|
|
1,921
|
|
Inventories,
net
|
815
|
|
|
807
|
|
Prepayments and other
current assets
|
252
|
|
|
276
|
|
Total current
assets
|
5,165
|
|
|
3,836
|
|
|
|
|
|
Property, plant and
equipment, net
|
2,824
|
|
|
2,925
|
|
Other non-current
assets
|
2,903
|
|
|
2,941
|
|
Total
assets
|
$
|
10,892
|
|
|
$
|
9,702
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Notes payable and
other short-term debt
|
$
|
49
|
|
|
$
|
286
|
|
Accounts payable and
accrued expenses
|
2,127
|
|
|
1,977
|
|
Income taxes
payable
|
23
|
|
|
66
|
|
Total current
liabilities
|
2,199
|
|
|
2,329
|
|
|
|
|
|
Long-term
debt
|
2,787
|
|
|
1,674
|
|
Other non-current
liabilities
|
988
|
|
|
855
|
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
4,757
|
|
|
4,706
|
|
Noncontrolling
interest
|
161
|
|
|
138
|
|
Total
equity
|
4,918
|
|
|
4,844
|
|
Total liabilities and
equity
|
$
|
10,892
|
|
|
$
|
9,702
|
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(in
millions)
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
OPERATING
|
|
|
|
Net
earnings
|
$
|
182
|
|
|
$
|
560
|
|
Depreciation and
amortization
|
339
|
|
|
324
|
|
Restructuring expense,
net of cash paid
|
49
|
|
|
14
|
|
Asset
impairments
|
26
|
|
|
—
|
|
Stock-based
compensation expense
|
29
|
|
|
30
|
|
Gain on insurance
recovery received for property damage
|
(9)
|
|
|
—
|
|
Deferred income tax
provision
|
56
|
|
|
28
|
|
Pension settlement
loss
|
—
|
|
|
26
|
|
Tax reform adjustments
to provision for income taxes
|
—
|
|
|
16
|
|
Equity in affiliates'
earnings, net of dividends received, and other
|
(1)
|
|
|
9
|
|
Net earnings adjusted
for non-cash charges to operations
|
671
|
|
|
1,007
|
|
Changes in assets and
liabilities:
|
137
|
|
|
(183)
|
|
Net cash provided by
operating activities
|
808
|
|
|
824
|
|
|
|
|
|
INVESTING
|
|
|
|
Capital expenditures,
including tooling outlays
|
(262)
|
|
|
(346)
|
|
Insurance proceeds
received for damage to property, plant and equipment
|
23
|
|
|
—
|
|
Capital expenditures
for damage to property, plant and equipment
|
(18)
|
|
|
—
|
|
Proceeds from
settlement of net investment hedges
|
12
|
|
|
—
|
|
Payments for business
acquired, net of cash acquired
|
(2)
|
|
|
(10)
|
|
Payments for
investments in equity securities
|
(2)
|
|
|
(52)
|
|
Proceeds from sale of
business, net of cash divested
|
—
|
|
|
24
|
|
Proceeds from asset
disposals and other, net
|
—
|
|
|
4
|
|
Net cash used in
investing activities
|
(249)
|
|
|
(380)
|
|
|
|
|
|
FINANCING
|
|
|
|
Net increase in notes
payable
|
6
|
|
|
—
|
|
Additions to
debt
|
1,163
|
|
|
45
|
|
Payments for debt
issuance costs
|
(11)
|
|
|
—
|
|
Repayments of debt,
including current portion
|
(308)
|
|
|
(54)
|
|
Payments for purchase
of treasury stock
|
—
|
|
|
(100)
|
|
Payments for
stock-based compensation items
|
(13)
|
|
|
(15)
|
|
Contributions from
noncontrolling interest stockholders
|
—
|
|
|
4
|
|
Dividends paid to
BorgWarner stockholders
|
(105)
|
|
|
(105)
|
|
Dividends paid to
noncontrolling stockholders
|
(21)
|
|
|
(23)
|
|
Net cash provided by
(used in) financing activities
|
711
|
|
|
(248)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
19
|
|
|
(19)
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
1,289
|
|
|
177
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
832
|
|
|
739
|
|
Cash and cash
equivalents at end of period
|
$
|
2,121
|
|
|
$
|
916
|
|
Non-GAAP Financial Measures
This press release contains information about BorgWarner's
financial results which 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
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.
Adjusted Operating
Income
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net sales
|
$
|
2,534
|
|
|
$
|
2,492
|
|
|
$
|
6,239
|
|
|
$
|
7,609
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
517
|
|
|
524
|
|
|
1,138
|
|
|
1,556
|
|
Gross
margin
|
20.4
|
%
|
|
21.0
|
%
|
|
18.2
|
%
|
|
20.4
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
284
|
|
|
276
|
|
|
395
|
|
|
825
|
|
Operating
margin
|
11.2
|
%
|
|
11.1
|
%
|
|
6.3
|
%
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
$
|
20
|
|
|
$
|
14
|
|
|
$
|
72
|
|
|
$
|
41
|
|
Merger, acquisition
and divestiture expense
|
16
|
|
|
4
|
|
|
58
|
|
|
10
|
|
Asset
impairments
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
Net gain on insurance
recovery for property damage
|
(3)
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
Unfavorable
arbitration loss
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Officer stock awards
modification
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Adjusted operating
income
|
$
|
317
|
|
|
$
|
294
|
|
|
$
|
542
|
|
|
$
|
892
|
|
Adjusted operating
margin
|
12.5
|
%
|
|
11.8
|
%
|
|
8.7
|
%
|
|
11.7
|
%
|
Adjusted Operating
Income
|
|
|
|
|
|
|
Q4 2020
Outlook
|
|
Full Year 2020
Outlook
|
|
Low
|
|
High
|
|
Low
|
|
High
|
Net sales
|
$
|
3,461
|
|
|
$
|
3,611
|
|
|
$
|
9,700
|
|
|
$
|
9,850
|
|
|
|
|
|
|
|
|
|
Operating
income
|
90
|
|
|
170
|
|
|
485
|
|
|
565
|
|
Operating
margin
|
2.6
|
%
|
|
4.7
|
%
|
|
5.0
|
%
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
$
|
100
|
|
|
$
|
75
|
|
|
$
|
172
|
|
|
$
|
147
|
|
Merger, acquisition
and divestiture expense
|
50
|
|
|
45
|
|
|
108
|
|
|
103
|
|
Inventory
step-up
|
65
|
|
|
55
|
|
|
65
|
|
|
55
|
|
Asset
Impairment
|
—
|
|
|
—
|
|
|
26
|
|
|
26
|
|
Net gain on insurance
recovery for property damage
|
—
|
|
|
—
|
|
|
(9)
|
|
|
(9)
|
|
Adjusted operating
income
|
$
|
305
|
|
|
$
|
345
|
|
|
$
|
847
|
|
|
$
|
887
|
|
Adjusted operating
margin
|
8.8
|
%
|
|
9.6
|
%
|
|
8.7
|
%
|
|
9.0
|
%
|
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
Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Cash provided by
operating activities
|
|
$
|
481
|
|
|
$
|
357
|
|
|
$
|
808
|
|
|
$
|
824
|
|
|
Capital expenditures,
including tooling outlays
|
|
$
|
(91)
|
|
|
$
|
(102)
|
|
|
$
|
(262)
|
|
|
$
|
(346)
|
|
|
Free cash
flow
|
|
$
|
390
|
|
|
$
|
255
|
|
|
$
|
546
|
|
|
$
|
478
|
|
|
Free Cash Flow
Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2020
Outlook
|
|
Full Year 2020
Outlook
|
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Cash provided by
operating activities
|
|
$
|
92
|
|
$
|
167
|
|
$
|
900
|
|
$
|
975
|
|
Capital expenditures,
including tooling outlays
|
|
$
|
(163)
|
|
$
|
(188)
|
|
$
|
(425)
|
|
$
|
(450)
|
|
Free cash
flow
|
|
$
|
(71)
|
|
$
|
(21)
|
|
$
|
475
|
|
$
|
525
|
|
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: Light vehicle production weighted for BorgWarner's
geographic exposure as estimated by BorgWarner
Outgrowth: BorgWarner's "Organic Revenue Change" vs. change in
"Market".
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SOURCE BorgWarner