AUBURN HILLS, Mich.,
July 27, 2017 /PRNewswire/
-- BorgWarner Inc. (NYSE: BWA) today reported second quarter
results.
Second Quarter Highlights:
- U.S. GAAP net sales of $2,390
million, up 2.6% compared with second quarter 2016.
-
- On a comparable basis, excluding the impact of foreign
currencies and the sale of the Remy light vehicle aftermarket
business, net sales were up 7.8% compared with second quarter
2016.
- U.S. GAAP net earnings of $1.00
per diluted share.
-
- Excluding the non-comparable item (detailed in the table
below), net earnings were $0.96 per
diluted share.
- U.S. GAAP operating income of $300
million.
-
- Operating income was 12.5% of net sales.
Full Year 2017 Guidance: The company has increased its
2017 full year organic growth guidance. Full year net sales are
expected to be $9.28 billion - $9.38
billion, implying organic net sales growth of 6.5% to
7.5%. Foreign currencies are expected to lower sales by
approximately $100 million, due to
the depreciation of the Euro, Yuan and Pound. The divested
Remy light vehicle aftermarket business contributed net sales of
approximately $255 million in
2016. Net earnings are now expected to be within a range of
$3.65 to $3.70 per diluted share,
with the increase in guidance primarily due to higher than
previously expected sales. Excluding the impact of
non-comparable items, operating margin is expected to improve by 30
to 40 basis points.
Third Quarter 2017 Guidance: The company expects third
quarter 2017 organic net sales growth of 3.0% to 6.0% compared with
third quarter 2016 proforma net sales of $2.1 billion. Foreign currencies are
expected to lower sales by approximately $36
million, or 1.7%. The divested Remy light vehicle
aftermarket business contributed net sales of approximately
$68 million in the third quarter
2016. Net earnings are expected to be within a range of
$0.84 to $0.87 per diluted share.
Financial Results: Net sales were $2,390 million in second quarter 2017, up 2.6%
from $2,329 million in second quarter
2016. Excluding the impact of foreign currencies and the sale
of the Remy light vehicle aftermarket business, net sales were up
7.8% compared with second quarter 2016. Net earnings in
second quarter 2017 were $212
million, or $1.00 per diluted
share, compared with $164 million, or
$0.76 per diluted share in second
quarter 2016. Net earnings in second quarter 2017 included
non-comparable items of $0.05 per
diluted share. Net earnings in the second quarter 2016
included net non-comparable items of $(0.08) per diluted share. These items are listed
in a table below, which is provided by the company for comparison
with other results and the most directly comparable U.S. GAAP
measures. The impact of foreign currencies decreased net
sales by approximately $38 million
and decreased net earnings by approximately $0.02 per diluted share in second quarter 2017
compared with second quarter 2016. The impact of the sale of
the Remy light vehicle aftermarket business decreased net sales by
$77 million in the second quarter
2017 compared with second quarter 2016.
For the first six months of 2017, net sales were $4,797 million, up 4.3% from $4,598 million in the first six months of 2016.
Net earnings in the first six months of 2017 were $401 million, or $1.89 per diluted share, compared with
$329 million, or $1.51 per diluted share, in the first six months
of 2016. Net earnings in the first six months of 2017 included net
non-comparable items of $0.03 per
diluted share. Net earnings in the first six months of 2016
included net non-comparable items of $(0.13) per diluted share. These items are listed
in a table below, which is provided by the company for comparison
with other results and the most directly comparable U.S. GAAP
measures. The impact of foreign currencies decreased net sales by
approximately $86 million and
decreased net earnings by approximately $0.05 per diluted share in the first six months
of 2017 compared with the first six months of 2016. The impact of
the sale of the Remy light vehicle aftermarket business decreased
net sales by $168 million in
the first six months of 2017 compared with the first six
months of 2016.
The company believes the following table is useful in
highlighting non-comparable items that impacted its U.S. GAAP net
earnings per diluted share:
Net earnings per
diluted share
|
Second
Quarter
|
|
First Six
Months
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
U.S.
GAAP
|
$
|
1.00
|
|
|
$
|
0.76
|
|
|
$
|
1.89
|
|
|
$
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
|
Restructuring
expense
|
—
|
|
|
0.07
|
|
|
—
|
|
|
0.09
|
|
|
Contract expiration
gain
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
(0.02)
|
|
|
Merger and
acquisition expense
|
—
|
|
|
0.03
|
|
|
—
|
|
|
0.06
|
|
|
Tax
adjustments
|
(0.05)
|
|
|
—
|
|
|
(0.03)
|
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
Non – U.S.
GAAP
|
$
|
0.96
|
|
*
|
$
|
0.84
|
|
|
$
|
1.86
|
|
|
$
|
1.64
|
|
|
|
|
|
|
|
|
|
|
|
*Column does not add
due to rounding and/or use of basic vs. diluted shares
|
|
|
Net cash provided by operating activities was $399 million in the first six months of 2017
compared with $362 million in the
first six months of 2016. Investments in capital
expenditures, including tooling outlays, totaled $254 million in the first six months of 2017,
compared with $235 million in the
first six months of 2016. Balance sheet debt was flat and
cash decreased by $57 million at the
end of second quarter 2017 compared with the end of 2016. The
company's net debt to net capital ratio was 33.2% at the end of
second quarter 2017 compared with 35.0% at the end of 2016.
Engine Segment Results: Engine segment net sales were
$1,482 million in second quarter 2017
compared with $1,444 million in
second quarter 2016. Excluding the impact of foreign
currencies, net sales were up 4.5% from the prior year's
quarter. Adjusted earnings before interest, income taxes and
non-controlling interest ("Adjusted EBIT") were $244 million in second quarter of 2017.
Excluding the impact of foreign currencies, Adjusted EBIT was
$250 million, up 4.9% from second
quarter of 2016.
Drivetrain Segment Results: Drivetrain segment net sales
were $921 million in second quarter
2017 compared with $895 million in
second quarter 2016. Excluding the impact of foreign
currencies and the sale of the Remy light vehicle aftermarket
business, net sales were up 13.9% from the prior year's
quarter. Adjusted EBIT was $110
million in second quarter 2017. Excluding the impact
of foreign currencies, Adjusted EBIT was $110 million, up 17.5% from second quarter
2016.
Recent Highlights:
- BorgWarner has entered into a definitive agreement to acquire
Sevcon, Inc., a global player in electrification technologies.
Sevcon complements BorgWarner's power electronics capabilities
utilized to provide electrified propulsion solutions. The expected
enterprise value of the transaction at closing is approximately
$200 million. The transaction is
expected to close in the fourth quarter of 2017 subject to the
satisfaction of closing conditions.
- BorgWarner supplies its sprag one-way clutch for the 2017
Chrysler Pacifica Hybrid, the first FCA US LLC mass-produced
plug-in hybrid electric vehicle and the industry's first PHEV
minivan.
- BorgWarner offers customized DualTronicTM clutch and control
modules using advanced solenoid valves and friction materials for
Great Wall Motors' (GWM's) self-developed wet dual-clutch
transmission (wet DCT).
- BorgWarner's regulated two-stage (R2S®) turbocharging
technology boosts performance for Great Wall Motor's new 2.0-liter
4-cylinder diesel engine. Utilized in a Chinese passenger car for
the first time, BorgWarner's R2S turbocharging technology optimizes
performance, provides an enhanced driving experience and reduces
fuel consumption for Great Wall's Haval H8 and H9 SUVs.
- BorgWarner has started production of a new dual-clutch module
family to be featured in the latest transmission from ZF.
- BorgWarner supplies the complete engine timing system,
including silent timing chains, guides, hydraulic tensioners,
sprockets and oil pump chains, for a variety of General Motors'
(GM's) 1.0- to 1.5-liter Ecotec engines built in South America and South Korea to power the Chevrolet Spark,
Cruze and Malibu.
- BorgWarner has achieved exclusive status as a supplier of fans
and fan drives for Freightliner's new Cascadia® model, its most
popular over-the-road truck. BorgWarner technology is now the only
available option on 2017 Detroit™ DD13®, DD15® and DD16® engines as
well as the 2017 Cummins ISX15.
- BorgWarner supplies its line of high-speed (HS) starter motors
developed for the new family of 1.0-, 1.4- and 1.8-liter engines
from General Motors (GM) Brazil.
- BorgWarner supplies its Torque-On-Demand® transfer case with
new vehicle dynamic control (VDC) technology for the 2017 and
2018 Dodge Challenger GT powered by the 3.6-liter Pentastar
V6 from FCA US LLC.
- BorgWarner delivers its proven wastegate turbocharger for
Honda's new three-cylinder 1.0-liter gasoline direct-injected
engine, initially available for the Civic in China and Europe.
At 9:30 a.m. ET today, a brief
conference call concerning second quarter 2017 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
62 locations in 17 countries, the company employs approximately
27,000 worldwide. For more information, please visit
borgwarner.com.
Statements contained in, or incorporated by reference into this
presentation, future filings by us with the Securities and Exchange
Commission ("SEC"), and oral statements made by, or with the
approval of, our authorized personnel, that relate to our future
performance or future events are forward-looking statements under
the Private Securities Litigation Reform Act of 1995. Such
statements can be identified by use of forward-looking words or
phrases such as "intend," "anticipate," "plan," "estimate,"
"target," "aim," "forecast," "project," "expect," "believe," "we
are optimistic that we can," "current visibility indicates that we
forecast," "contemplation" or "currently envisions" and similar
phrases. Although we believe that the expectations reflected in
these forward-looking statements are reasonable, our expectations
may not prove to be correct. Forward-looking statements are
necessarily estimates reflecting the best judgment of our senior
management and involve a number of risks and uncertainties, some of
which may be beyond our control, which could cause actual results
to differ materially from those suggested by the forward-looking
statements. These risks and uncertainties, among others, include:
our dependence on automotive and truck production, both of which
are highly cyclical; our reliance on major OEM customers;
commodities availability and pricing; supply disruptions;
fluctuations in interest rates and foreign currency exchange rates;
availability of credit; our dependence on key management; our
dependence on information systems; the uncertainty of the global
economic environment; the outcome of existing or any future legal
proceedings, including litigation with respect to various claims;
and future changes in laws and regulations in the countries in
which we operate. All forward-looking statements should be
evaluated with the understanding of their inherent uncertainty. All
subsequent written and oral forward-looking statements concerning
the matters addressed in this presentation and attributable to us
or any person acting on our behalf are qualified by these
cautionary statements. Forward-looking statements are based on
current expectations only and are not guarantees of future
performance, and are subject to certain risks, uncertainties and
assumptions. We may change our intentions, beliefs or expectations
at any time and without notice, based upon any change in our
assumptions or otherwise. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those
anticipated, estimated or projected. In addition, some factors are
beyond our control. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by
law.
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
|
|
|
|
(millions, except per
share amounts)
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net sales
|
$
|
2,389.7
|
|
|
$
|
2,329.2
|
|
|
$
|
4,796.7
|
|
|
$
|
4,597.8
|
|
Cost of
sales
|
1,875.5
|
|
|
1,832.5
|
|
|
3,765.2
|
|
|
3,636.8
|
|
Gross
profit
|
514.2
|
|
|
496.7
|
|
|
1,031.5
|
|
|
961.0
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
215.0
|
|
|
202.3
|
|
|
433.8
|
|
|
390.7
|
|
Other (income)
expense, net
|
(0.3)
|
|
|
25.0
|
|
|
5.5
|
|
|
36.7
|
|
Operating
income
|
299.5
|
|
|
269.4
|
|
|
592.2
|
|
|
533.6
|
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(14.4)
|
|
|
(10.1)
|
|
|
(24.1)
|
|
|
(19.2)
|
|
Interest
income
|
(1.4)
|
|
|
(1.5)
|
|
|
(2.9)
|
|
|
(3.1)
|
|
Interest expense and
finance charges
|
18.0
|
|
|
21.4
|
|
|
36.0
|
|
|
42.7
|
|
Earnings before
income taxes and noncontrolling interest
|
297.3
|
|
|
259.6
|
|
|
583.2
|
|
|
513.2
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
76.2
|
|
|
84.2
|
|
|
162.5
|
|
|
164.6
|
|
Net
earnings
|
221.1
|
|
|
175.4
|
|
|
420.7
|
|
|
348.6
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
9.1
|
|
|
11.0
|
|
|
19.5
|
|
|
20.1
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
212.0
|
|
|
$
|
164.4
|
|
|
$
|
401.2
|
|
|
$
|
328.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share —
diluted
|
$
|
1.00
|
|
|
$
|
0.76
|
|
|
$
|
1.89
|
|
|
$
|
1.51
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding — diluted
|
211.478
|
|
|
216.663
|
|
|
211.857
|
|
|
217.401
|
|
|
|
|
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
|
|
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Capital expenditures,
including tooling outlays
|
$
|
123.3
|
|
|
$
|
130.4
|
|
|
$
|
254.2
|
|
|
$
|
234.7
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$
|
99.8
|
|
|
$
|
99.0
|
|
|
$
|
197.1
|
|
|
$
|
193.4
|
|
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Net Sales by
Reporting Segment (Unaudited)
|
|
|
|
|
|
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Engine
|
$
|
1,481.8
|
|
|
$
|
1,444.2
|
|
|
$
|
2,977.2
|
|
|
$
|
2,843.4
|
|
Drivetrain
|
921.0
|
|
|
895.4
|
|
|
1,845.9
|
|
|
1,774.6
|
|
Inter-segment
eliminations
|
(13.1)
|
|
|
(10.4)
|
|
|
(26.4)
|
|
|
(20.2)
|
|
Net sales
|
$
|
2,389.7
|
|
|
$
|
2,329.2
|
|
|
$
|
4,796.7
|
|
|
$
|
4,597.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings
Before Interest, Income Taxes and Noncontrolling Interest
("Adjusted EBIT") (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Engine
|
$
|
244.3
|
|
|
$
|
238.1
|
|
|
$
|
491.3
|
|
|
$
|
474.8
|
|
Drivetrain
|
109.6
|
|
|
95.3
|
|
|
214.4
|
|
|
181.6
|
|
Adjusted
EBIT
|
353.9
|
|
|
333.4
|
|
|
705.7
|
|
|
656.4
|
|
Lease termination
settlement
|
—
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
Restructuring
expense
|
—
|
|
|
19.2
|
|
|
—
|
|
|
25.6
|
|
Merger and
acquisition expense
|
—
|
|
|
7.2
|
|
|
—
|
|
|
13.0
|
|
Contract expiration
gain
|
—
|
|
|
(7.5)
|
|
|
—
|
|
|
(7.5)
|
|
Corporate, including
equity in affiliates' earnings and stock-based
compensation
|
40.0
|
|
|
35.0
|
|
|
84.1
|
|
|
72.5
|
|
Interest
income
|
(1.4)
|
|
|
(1.5)
|
|
|
(2.9)
|
|
|
(3.1)
|
|
Interest expense and
finance charges
|
18.0
|
|
|
21.4
|
|
|
36.0
|
|
|
42.7
|
|
Earnings before
income taxes and noncontrolling interest
|
297.3
|
|
|
259.6
|
|
|
583.2
|
|
|
513.2
|
|
Provision for income
taxes
|
76.2
|
|
|
84.2
|
|
|
162.5
|
|
|
164.6
|
|
Net
earnings
|
221.1
|
|
|
175.4
|
|
|
420.7
|
|
|
348.6
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
9.1
|
|
|
11.0
|
|
|
19.5
|
|
|
20.1
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
212.0
|
|
|
$
|
164.4
|
|
|
$
|
401.2
|
|
|
$
|
328.5
|
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
Assets
|
|
|
|
|
|
|
|
Cash
|
$
|
387.1
|
|
|
$
|
443.7
|
|
Receivables,
net
|
1,939.3
|
|
|
1,689.3
|
|
Inventories,
net
|
701.4
|
|
|
641.2
|
|
Prepayments and other
current assets
|
165.4
|
|
|
137.4
|
|
Total current
assets
|
3,193.2
|
|
|
2,911.6
|
|
|
|
|
|
Property, plant and
equipment, net
|
2,663.8
|
|
|
2,501.8
|
|
Other non-current
assets
|
3,431.5
|
|
|
3,421.3
|
|
Total
assets
|
$
|
9,288.5
|
|
|
$
|
8,834.7
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
Notes payable and
other short-term debt
|
$
|
141.8
|
|
|
$
|
175.9
|
|
Accounts payable and
accrued expenses
|
1,904.7
|
|
|
1,847.3
|
|
Income taxes
payable
|
59.6
|
|
|
68.6
|
|
Total current
liabilities
|
2,106.1
|
|
|
2,091.8
|
|
|
|
|
|
Long-term
debt
|
2,077.9
|
|
|
2,043.6
|
|
Other non-current
liabilities
|
1,412.6
|
|
|
1,397.4
|
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
3,612.0
|
|
|
3,218.3
|
|
Noncontrolling
interest
|
79.9
|
|
|
83.6
|
|
Total
equity
|
3,691.9
|
|
|
3,301.9
|
|
Total liabilities and
equity
|
$
|
9,288.5
|
|
|
$
|
8,834.7
|
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
Operating
|
|
|
|
Net
earnings
|
$
|
420.7
|
|
|
$
|
348.6
|
|
Depreciation and
amortization
|
197.1
|
|
|
193.4
|
|
Restructuring
expense, net of cash paid
|
—
|
|
|
9.8
|
|
Deferred income tax
provision
|
38.8
|
|
|
23.5
|
|
Other non-cash
items
|
13.9
|
|
|
(4.0)
|
|
Net earnings adjusted
for non-cash charges to operations
|
670.5
|
|
|
571.3
|
|
Changes in assets and
liabilities
|
(271.3)
|
|
|
(209.1)
|
|
Net cash provided by
operating activities
|
399.2
|
|
|
362.2
|
|
|
|
|
|
Investing
|
|
|
|
Capital expenditures,
including tooling outlays
|
(254.2)
|
|
|
(234.7)
|
|
Proceeds from asset
disposals and other
|
1.0
|
|
|
5.8
|
|
Payments for venture
capital investment
|
(2.0)
|
|
|
—
|
|
Net cash used in
investing activities
|
(255.2)
|
|
|
(228.9)
|
|
|
|
|
|
Financing
|
|
|
|
Net (decrease)
increase in notes payable
|
(32.0)
|
|
|
65.2
|
|
Repayments of
long-term debt, including current portion
|
(12.5)
|
|
|
(9.3)
|
|
Payments for debt
issuance cost
|
(2.4)
|
|
|
—
|
|
Payments for purchase
of treasury stock
|
(84.7)
|
|
|
(183.8)
|
|
Payments for
stock-based compensation items
|
(1.9)
|
|
|
(3.3)
|
|
Dividends paid to
BorgWarner stockholders
|
(59.1)
|
|
|
(56.2)
|
|
Dividends paid to
noncontrolling stockholders
|
(21.7)
|
|
|
(23.5)
|
|
Net cash used in
financing activities
|
(214.3)
|
|
|
(210.9)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
13.7
|
|
|
(5.1)
|
|
|
|
|
|
Net decrease in
cash
|
(56.6)
|
|
|
(82.7)
|
|
|
|
|
|
Cash at beginning of
year
|
443.7
|
|
|
577.7
|
|
Cash at end of
period
|
$
|
387.1
|
|
|
$
|
495.0
|
|
View original
content:http://www.prnewswire.com/news-releases/borgwarner-reports-second-quarter-2017-us-gaap-net-earnings-of-100-per-diluted-share-or-096-per-diluted-share-excluding-non-comparable-items-300494583.html
SOURCE BorgWarner