AUBURN
HILLS, Mich., May 4, 2022
/PRNewswire/ -- BorgWarner Inc. (NYSE: BWA) today reported first
quarter results.
New Program Awards and Charging Forward Highlights:
- BorgWarner announced the first OEM business win for the
Company's flexible battery management system (BMS) technology. The
Company's BMS has been selected by a leading global vehicle
manufacturer to equip all of its B-segment, C-segment and light
commercial vehicles, expected to begin in 2023.
- BorgWarner has been selected to provide high-voltage hairpin
(HVH) eMotors for a leading electric vehicle brand in China. The eMotors will be used in an 800V
propulsion system platform, expected to start mass production in
2023.
- BorgWarner will supply a leading Chinese OEM with a dual
Inverter to be used in hybrid vehicles expected to launch in 2023.
The award further strengthens the Company's leadership position in
China's dedicated hybrid
transmission (DHT) and hybrid inverter market.
- Based on new business awards and actions announced to date,
BorgWarner believes it is already on track to achieve more than
$3.3 billion of electric vehicle
revenue by 2025. The Company continues to expect its 2022 electric
vehicle revenue to grow to more than $800
million, which is more than double what it was in
2021.
First Quarter Highlights:
- U.S. GAAP net sales of $3,874
million, down 3% compared with first quarter 2021.
-
- Excluding the impact of foreign currencies and the impact of
divestitures, organic sales were up 1% compared with first quarter
2021.
- U.S. GAAP net earnings of $0.84
per diluted share.
-
- Excluding the $(0.21) per diluted
share related to non-comparable items (detailed in the table
below), adjusted net earnings were $1.05 per diluted share.
- U.S. GAAP operating income of $352
million, or 9.1% of net sales.
-
- Excluding the $37 million of
pretax expenses related to non-comparable items, adjusted operating
income was $389 million, or 10.0% of
net sales.
- Net cash provided by operating activities of $116 million.
-
- Free cash flow was $(61)
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
March 31,
|
|
2022
|
|
2021
|
Earnings per diluted share
|
$
0.84
|
|
$
0.27
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Unrealized loss on equity securities
|
0.14
|
|
0.87
|
Merger, acquisition and divestiture expense
|
0.09
|
|
0.04
|
Restructuring expense
|
0.06
|
|
0.12
|
Gain on sale of business
|
(0.08)
|
|
—
|
Tax
adjustments
|
—
|
|
(0.09)
|
|
|
|
|
Adjusted earnings per diluted
share
|
$
1.05
|
|
$
1.21
|
Net sales were $3,874 million for
the first quarter 2022, down 3% from $4,009
million for the first quarter 2021, due primarily to the
impact of the decline in industry production and weaker foreign
currencies. Net earnings for the first quarter 2022 were
$200 million, or $0.84 per diluted share, compared with net
earnings of $65 million, or
$0.27 per diluted share, for the
first quarter 2021. Adjusted net earnings per diluted share for the
first quarter 2022 were $1.05, down
from an adjusted net earnings per diluted share of $1.21 for the first quarter 2021. Adjusted net
earnings for the first quarter 2022 excluded net non-comparable
items of $(0.21) per diluted share.
Adjusted net earnings for the first quarter 2021 excluded net
non-comparable items of $(0.94) 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
adjusted net earnings was primarily due to the impact of lower
revenue, higher commodity costs, and the AKASOL AG
acquisition.
Full Year 2022 Guidance: The Company has provided 2022
full year guidance. Net sales are expected to be in the range of
$15.5 billion to $16.0 billion, compared with 2021 sales of
$14.8 billion. This implies a
year-over-year increase in organic sales of 10% to 13%. The Company
expects its weighted light and commercial vehicle markets to
increase in the range of approximately 2.5% to 5% in 2022.
Foreign currencies are expected to result in a year-over-year
decrease in sales of approximately $650 million primarily due
to the Euro, as well as the weakening of the Korean Won and Chinese
Renminbi against the U.S. dollar. The acquisition of Santroll's
light vehicle eMotor business is expected to increase
year-over-year sales by approximately $60
million to $70 million. The
divestiture of the Water Valley,
Mississippi business will decrease year-over-year sales by
approximately $177 million.
Operating margin for the full year is expected to be in the
range of 8.5% to 9.0%. Excluding the impact of non-comparable
items, adjusted operating margin is expected to be in the range of
9.8% to 10.2%. Net earnings are expected to be within a range
of $3.39 to $3.77 per diluted share. Excluding the impact of
non-comparable items, adjusted net earnings are expected to be
within a range of $3.90 to
$4.25 per diluted share. Full-year
operating cash flow is expected to be in the range of $1,500 million to $1,550
million, while free cash flow is expected to be in the range
of $650 million to $750 million.
At 9:30 a.m. ET today, a brief
conference call concerning first quarter 2022 results and guidance
will be webcast at: https://www.borgwarner.com/investors.
Additionally, an earnings call presentation will be available at
https://www.borgwarner.com/investors.
For more than 130 years, BorgWarner Inc. (NYSE: BWA) has been a
transformative global product leader bringing successful mobility
innovation to market. Today, we're accelerating the world's
transition to eMobility -- to help build a cleaner, healthier,
safer future for all.
Forward-Looking Statements: 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," 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 press 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 and
Estimates" in Item 7 of our most recently-filed Annual Report on
Form 10-K ("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
under 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 press 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:
supply disruptions impacting us or our customers, such as the
current shortage of semiconductor chips that has impacted original
equipment manufacturer ("OEM") customers and their suppliers,
including us; commodities availability and pricing; competitive
challenges from existing and new competitors including OEM
customers; the challenges associated with rapidly-changing
technologies, particularly as relates to electric vehicles, and our
ability to innovate in response; uncertainties regarding the extent
and duration of impacts of matters associated with the COVID-19
pandemic, including additional production disruptions; the
difficulty in forecasting demand for electric vehicles and our
electric vehicles revenue growth; potential disruptions in the
global economy caused by Russia's
invasion of Ukraine; the ability
to identify targets and consummate acquisitions on acceptable
terms; failure to realize the expected benefits of acquisitions on
a timely basis including our recent acquisitions of AKASOL AG and
Santroll's light vehicle eMotor business and our 2020 acquisition
of Delphi Technologies PLC; the ability to identify appropriate
combustion portfolio businesses for disposition and consummate
planned dispositions on acceptable terms; 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 and subject to disruptions; our
reliance on major OEM customers; fluctuations in interest rates and
foreign currency exchange rates; 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, taxes and tariffs,
in the countries in which we operate; impacts from any potential
future acquisition or disposition transactions; and the other risks
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 and/or Quarterly Report on Form 10-Q. 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 press 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
March 31,
|
|
2022
|
|
2021
|
Net sales
|
$
3,874
|
|
$
4,009
|
Cost of
sales
|
3,124
|
|
3,191
|
Gross profit
|
750
|
|
818
|
Gross margin
|
19.4 %
|
|
20.4 %
|
|
|
|
|
Selling, general and
administrative expenses
|
388
|
|
377
|
Restructuring
expense
|
15
|
|
30
|
Other operating
(income) expense, net
|
(5)
|
|
8
|
Operating income
|
352
|
|
403
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(8)
|
|
(12)
|
Unrealized loss on
equity securities
|
39
|
|
272
|
Interest expense,
net
|
15
|
|
18
|
Other postretirement
income
|
(9)
|
|
(11)
|
Earnings before income taxes and noncontrolling
interest
|
315
|
|
136
|
|
|
|
|
Provision for income
taxes
|
91
|
|
42
|
Net
earnings
|
224
|
|
94
|
|
|
|
|
Net earnings
attributable to noncontrolling interest, net of tax
|
24
|
|
29
|
Net
earnings attributable to BorgWarner Inc.
|
$ 200
|
|
$
65
|
|
|
|
|
Diluted earnings per
share of common stock
|
$ 0.84
|
|
$ 0.27
|
|
|
|
|
Weighted average shares
outstanding — diluted
|
239.0
|
|
238.4
|
BorgWarner
Inc.
|
|
|
|
Net Sales by Reporting
Segment (Unaudited)
|
|
|
(in millions)
|
|
|
|
|
Three Months
Ended
March 31,
|
|
2022
|
|
2021
|
Air
Management
|
$ 1,931
|
|
$ 2,011
|
e-Propulsion &
Drivetrain
|
1,390
|
|
1,466
|
Fuel
Injection
|
472
|
|
475
|
Aftermarket
|
205
|
|
197
|
Inter-segment
eliminations
|
(124)
|
|
(140)
|
Net
sales
|
$ 3,874
|
|
$ 4,009
|
|
|
|
|
Segment Adjusted
Operating Income (Unaudited)
|
(in millions)
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
2022
|
|
2021
|
Air
Management
|
$
257
|
|
$
329
|
e-Propulsion &
Drivetrain
|
119
|
|
149
|
Fuel
Injection
|
52
|
|
34
|
Aftermarket
|
24
|
|
21
|
Segment Adjusted Operating Income
|
452
|
|
533
|
Corporate, including
stock-based compensation
|
63
|
|
69
|
Merger, acquisition and
divestiture expense
|
23
|
|
13
|
Intangible asset
amortization expense
|
23
|
|
20
|
Restructuring
expense
|
15
|
|
30
|
Gain on sale of
business
|
(24)
|
|
—
|
Net gain on insurance
recovery for property damage
|
—
|
|
(2)
|
Equity in affiliates'
earnings, net of tax
|
(8)
|
|
(12)
|
Unrealized loss on
equity securities
|
39
|
|
272
|
Interest expense,
net
|
15
|
|
18
|
Other postretirement
income
|
(9)
|
|
(11)
|
Earnings before income taxes and noncontrolling
interest
|
315
|
|
136
|
Provision for income
taxes
|
91
|
|
42
|
Net
earnings
|
224
|
|
94
|
Net earnings
attributable to noncontrolling interest, net of tax
|
24
|
|
29
|
Net
earnings attributable to BorgWarner Inc.
|
$
200
|
|
$
65
|
BorgWarner
Inc.
|
|
|
|
Condensed Consolidated
Balance Sheets (Unaudited)
|
(in millions)
|
|
|
|
|
|
|
|
|
March 31,
2022
|
|
December
31,
2021
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
1,501
|
|
$
1,841
|
Restricted
cash
|
3
|
|
3
|
Receivables,
net
|
3,166
|
|
2,898
|
Inventories,
net
|
1,644
|
|
1,534
|
Prepayments and other
current assets
|
326
|
|
321
|
Total current assets
|
6,640
|
|
6,597
|
|
|
|
|
Property, plant and
equipment, net
|
4,337
|
|
4,395
|
Other non-current
assets
|
5,701
|
|
5,583
|
Total assets
|
$
16,678
|
|
$
16,575
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
Notes payable and other
short-term debt
|
$
64
|
|
$
66
|
Accounts
payable
|
2,465
|
|
2,276
|
Other current
liabilities
|
1,330
|
|
1,456
|
Total current liabilities
|
3,859
|
|
3,798
|
|
|
|
|
Long-term
debt
|
4,223
|
|
4,261
|
Other non-current
liabilities
|
1,258
|
|
1,254
|
Total liabilities
|
9,340
|
|
9,313
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
7,050
|
|
6,948
|
Noncontrolling
interest
|
288
|
|
314
|
Total equity
|
7,338
|
|
7,262
|
Total liabilities and equity
|
$
16,678
|
|
$
16,575
|
BorgWarner
Inc.
|
|
|
|
Condensed Consolidated
Statements of Cash Flows (Unaudited)
|
(in millions)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2022
|
|
2021
|
OPERATING
|
|
|
|
Net
cash provided by operating activities
|
$
116
|
|
$
342
|
INVESTING
|
|
|
|
Capital expenditures,
including tooling outlays
|
(177)
|
|
(195)
|
Capital expenditures
for damage to property, plant and equipment
|
—
|
|
(2)
|
Payments for businesses
acquired, net of cash acquired
|
(157)
|
|
—
|
Proceeds from
settlement of net investment hedges, net
|
12
|
|
11
|
Proceeds from (payments
for) investments in equity securities
|
30
|
|
(2)
|
Proceeds from the sale
of business, net
|
25
|
|
—
|
Proceeds from asset
disposals and other, net
|
13
|
|
3
|
Net
cash used in investing activities
|
(254)
|
|
(185)
|
|
|
|
|
FINANCING
|
|
|
|
Net increase in notes
payable
|
—
|
|
7
|
Additions to
debt
|
—
|
|
22
|
Payments for debt
issuance costs
|
—
|
|
(1)
|
Repayments of debt,
including current portion
|
(2)
|
|
(26)
|
Payments for purchase
of treasury stock
|
(40)
|
|
—
|
Payments for
stock-based compensation items
|
(17)
|
|
(13)
|
Purchase of
noncontrolling interest
|
(59)
|
|
—
|
Dividends paid to
BorgWarner stockholders
|
(41)
|
|
(40)
|
Dividends paid to
noncontrolling stockholders
|
(36)
|
|
—
|
Net
cash used in financing activities
|
(195)
|
|
(51)
|
Effect of exchange rate
changes on cash
|
(7)
|
|
(1)
|
Net
(decrease) increase in cash, cash equivalents and restricted
cash
|
(340)
|
|
105
|
Cash, cash equivalents
and restricted cash at beginning of year
|
1,844
|
|
1,650
|
Cash, cash equivalents
and restricted cash at end of period
|
$
1,504
|
|
$
1,755
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
(in
millions)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2022
|
|
2021
|
Depreciation and
tooling amortization
|
$
157
|
|
$
175
|
Intangible asset
amortization
|
$
23
|
|
$
20
|
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 2022 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 Operating
Margin
In 2021 and prior, the Company defined adjusted
operating income as operating income adjusted to exclude 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. Beginning in the first quarter of 2022, the Company
updated its definition of adjusted operating income and adjusted
operating margin to add back intangible asset amortization expense.
For comparability, the 2021 reconciliation below adds back
intangible asset amortization expense. The updated definition of
adjusted operating income is operating income adjusted to exclude
the impact of restructuring expense, merger, acquisition and
divestiture expense, intangible asset amortization expense, other
net expenses, discontinued operations, and other gains and losses
not reflective of the Company's ongoing operations. Adjusted
operating margin is defined as adjusted operating income divided by
net sales.
Adjusted Net Earnings
The Company defines adjusted net
earnings as net earnings attributable to BorgWarner Inc. 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, and related tax effects. The
impact of intangible asset amortization expense will continue to be
included in adjusted net earnings.
Adjusted 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. The
impact of intangible asset amortization expense continues to be
included in adjusted earnings per share.
Free Cash Flow
The Company defines free cash flow as
net cash provided by operating activities minus capital
expenditures and is useful to both management and investors in
evaluating the Company's ability to service and repay its debt.
Organic Net Sales Change
The Company defines organic
net sales changes as net sales change year over year excluding the
estimated impact of foreign exchange (FX) and net MD&A.
Adjusted Operating Income and Adjusted Operating
Margin (Unaudited)
|
|
Three Months
Ended
March 31,
|
(in
millions)
|
2022
|
|
2021
|
Net sales
|
$
3,874
|
|
$
4,009
|
|
|
|
|
Operating
income
|
$ 352
|
|
$ 403
|
Operating
margin
|
9.1 %
|
|
10.1 %
|
|
|
|
|
Non-comparable items:
|
|
|
|
Merger, acquisition and divestiture expense
|
$
23
|
|
$
13
|
Intangible asset amortization expense
|
23
|
|
20
|
Restructuring expense
|
15
|
|
30
|
Gain on sale of business
|
(24)
|
|
—
|
Net
gain on insurance recovery for property damage
|
—
|
|
(2)
|
Adjusted operating
income
|
$ 389
|
|
$ 464
|
Adjusted operating
margin
|
10.0 %
|
|
11.6
%
|
Free Cash Flow Reconciliation
(Unaudited)
|
|
|
|
|
Three Months
Ended
March 31,
|
(in
millions)
|
2022
|
|
2021
|
Net cash provided by
operating activities
|
$
116
|
|
$
342
|
Capital expenditures,
including tooling outlays
|
(177)
|
|
(195)
|
Free cash
flow
|
$
(61)
|
|
$
147
|
First Quarter 2022 Organic Net Sales Change
(Unaudited)
|
|
|
(in
millions)
|
Q1 2021 Net
Sales
|
|
FX
|
|
Q1 2022
Disposition
Impact
|
|
Organic Net
Sales
Change
|
|
Q1 2022 Net
Sales
|
|
Organic
Net Sales
Change %
|
Air
Management
|
$
2,011
|
|
$
(70)
|
|
$
—
|
|
$
(10)
|
|
$
1,931
|
|
(0.5) %
|
e-Propulsion & Drivetrain
|
1,466
|
|
(20)
|
|
(52)
|
|
(4)
|
|
1,390
|
|
(0.3) %
|
Fuel Injection
|
475
|
|
(10)
|
|
—
|
|
7
|
|
472
|
|
1.5 %
|
Aftermarket
|
197
|
|
(13)
|
|
—
|
|
21
|
|
205
|
|
10.7 %
|
Inter-segment eliminations
|
(140)
|
|
—
|
|
—
|
|
16
|
|
(124)
|
|
—
|
Total
|
$
4,009
|
|
$
(113)
|
|
$
(52)
|
|
$
30
|
|
$
3,874
|
|
0.8 %
|
Adjusted Operating Income and Adjusted Operating
Margin Guidance Reconciliation (Unaudited)
|
|
|
|
|
Full-Year 2022
Guidance
|
(in
millions)
|
Low
|
|
High
|
Net sales
|
$
15,500
|
|
$
16,000
|
|
|
|
|
Operating
income
|
1,325
|
|
1,442
|
Operating
margin
|
8.5 %
|
|
9.0 %
|
|
|
|
|
Non-comparable items:
|
|
|
|
Restructuring expense
|
$
100
|
|
$
100
|
Intangible asset amortization expense
|
94
|
|
94
|
Merger, acquisition and divestiture expense
|
30
|
|
23
|
Gain on sale of business
|
(24)
|
|
(24)
|
Adjusted operating
income
|
$
1,525
|
|
$
1,635
|
Adjusted operating
margin
|
9.8 %
|
|
10.2 %
|
Adjusted Earnings Per Diluted Share Guidance
Reconciliation (Unaudited)
|
|
|
|
|
Full-Year 2022
Guidance
|
|
Low
|
|
High
|
Earnings per Diluted Share
|
$
3.39
|
|
$
3.77
|
|
|
|
|
Non-comparable items:
|
|
|
|
Restructuring expense
|
0.33
|
|
0.33
|
Unrealized loss on equity securities
|
0.14
|
|
0.14
|
Merger, acquisition and divestiture expense
|
0.12
|
|
0.09
|
Gain on sale of business
|
(0.08)
|
|
(0.08)
|
Adjusted Earnings per Diluted
Share
|
$
3.90
|
|
$
4.25
|
Free Cash Flow Guidance Reconciliation
(Unaudited)
|
|
|
|
|
|
|
Full-Year 2022
Guidance
|
(in
millions)
|
|
Low
|
|
High
|
Net cash provided by
operating activities
|
|
$
1,500
|
|
$
1,550
|
Capital expenditures,
including tooling outlays
|
|
(850)
|
|
(800)
|
Free cash
flow
|
|
$
650
|
|
$
750
|
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SOURCE BorgWarner