AUBURN HILLS, Mich.,
Oct. 26, 2017 /PRNewswire/ --
BorgWarner Inc. (NYSE: BWA) today reported third quarter
results.
Third Quarter Highlights:
- U.S. GAAP net sales of $2,416
million, up 9.1% compared with third 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 10.8% compared with third quarter
2016.
- U.S. GAAP net earnings of $0.88
per diluted share.
-
- Excluding the non-comparable item (detailed in the table
below), net earnings were $0.95 per
diluted share.
- U.S. GAAP operating income of $276
million.
-
- Adjusted operating income was 12.3% 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 $9.67 billion - $9.70
billion, implying organic net sales growth of 9.0% to
9.5%. The acquisition of Sevcon is expected to increase full
year net sales by approximately $15
million. Foreign currencies are expected to increase
sales by approximately $37 million,
due to the appreciation of the Euro. 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 $3.81 to $3.83 per diluted share, with the
increase in guidance primarily due to higher than previously
expected sales. Excluding the impact of non-comparable items
but including the dilutive impact of Sevcon, operating margin is
expected to improve by approximately 20 to 30 basis points.
Fourth Quarter 2017 Guidance: The company expects fourth
quarter 2017 organic net sales growth of 5.0% to 6.5% compared with
fourth quarter 2016 proforma net sales of $2.24 billion. The acquisition of Sevcon is
expected to increase fourth quarter net sales by approximately
$15 million. Foreign currencies
are expected to increase sales by approximately $85 million. The divested Remy light
vehicle aftermarket business contributed net sales of approximately
$20 million in the fourth quarter
2016. Net earnings are expected to be within a range of
$0.99 to $1.01 per diluted share.
Financial Results: Net sales were $2,416 million in third quarter 2017, up 9.1%
from $2,214 million in third quarter
2016. Excluding the impact of foreign currencies and the sale
of the Remy light vehicle aftermarket business, net sales were up
10.8% compared with third quarter 2016. Net earnings in third
quarter 2017 were $185 million, or
$0.88 per diluted share, compared
with $83 million, or $0.39 per diluted share in third quarter
2016. Net earnings in third quarter 2017 included
non-comparable items of ($0.08) per
diluted share. Net earnings in the third quarter 2016
included net non-comparable items of $(0.39) 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 increased net
sales by approximately $38 million
and increased net earnings by approximately $0.01 per diluted share in third quarter 2017
compared with third quarter 2016. The impact of the sale of
the Remy light vehicle aftermarket business decreased net sales by
$68 million in the third quarter 2017
compared with third quarter 2016.
For the first nine months of 2017, net sales were $7,213 million, up 5.9% from $6,812 million in the first nine months of 2016.
Excluding the impact of foreign currencies and the sale of the Remy
light vehicle aftermarket business, net sales were up 10.4%
compared with the first nine months of 2016. Net earnings in the
first nine months of 2017 were $586
million, or $2.77 per diluted
share, compared with $412 million, or
$1.90 per diluted share, in the first
nine months of 2016. Net earnings in the first nine months of 2017
included net non-comparable items of ($0.04) per diluted share. Net earnings in the
first nine months of 2016 included net non-comparable items of
($0.51) 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 $48 million
and decreased net earnings by approximately $0.04 per diluted share in the first nine months
of 2017 compared with the first nine months of 2016. The impact of
the sale of the Remy light vehicle aftermarket business decreased
net sales by $235 million in
the first nine months of 2017 compared with the first nine
months of 2016.
Emissions Business Restructuring: During the third
quarter of 2017, the Company incurred restructuring expense of
$12.6 million, primarily due to the
initiation of actions within its emissions business in the Engine
Segment designed to improve future profitability and
competitiveness. The largest portion of the anticipated
restructuring expenses is related to footprint rationalization in
product lines that the Company has determined are non-core.
The Company plans to explore strategic options for these product
lines. In addition, the Company will also implement
restructuring measures to improve the overall competitiveness of
its remaining European emissions business in the Engine
segment.
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
|
Third
Quarter
|
|
First Nine
Months
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
U.S.
GAAP
|
$
|
0.88
|
|
*
|
$
|
0.39
|
|
|
$
|
2.77
|
|
|
$
|
1.90
|
|
*
|
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
|
Asset impairment
expense
|
—
|
|
|
0.37
|
|
|
—
|
|
|
0.36
|
|
|
Merger and
acquisition expense
|
0.03
|
|
|
0.03
|
|
|
0.03
|
|
|
0.09
|
|
|
Restructuring
expense
|
0.07
|
|
|
—
|
|
|
0.07
|
|
|
0.10
|
|
|
Contract expiration
gain
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.02)
|
|
|
Tax
adjustments
|
(0.02)
|
|
|
(0.01)
|
|
|
(0.06)
|
|
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
Non – U.S.
GAAP
|
$
|
0.95
|
|
|
$
|
0.78
|
|
|
$
|
2.81
|
|
|
$
|
2.42
|
|
|
|
|
|
|
|
|
|
|
|
*Column does not add
due to rounding and/or use of basic vs. diluted shares
|
|
|
|
Net cash provided by operating activities was $624 million in the first nine months of 2017
compared with $593 million in the
first nine months of 2016. Investments in capital
expenditures, including tooling outlays, totaled $390 million in the first nine months of 2017,
compared with $355 million in the
first nine months of 2016. Balance sheet debt increased
$176 million and cash decreased by
$29 million at the end of third
quarter 2017 compared with the end of 2016 to fund the Sevcon
acquisition. The company's net debt to net capital ratio was
33.6% at the end of third quarter 2017 compared with 35.0% at the
end of 2016.
Engine Segment Results: Engine segment net sales were
$1,506 million in third quarter 2017
compared with $1,359 million in third
quarter 2016. Excluding the impact of foreign currencies, net
sales were up 8.7% from the prior year's quarter. Adjusted
earnings before interest, income taxes and non-controlling interest
("Adjusted EBIT") were $239 million
in third quarter of 2017. Excluding the impact of foreign
currencies, Adjusted EBIT was $237
million, up 7.1% from third quarter of 2016.
Drivetrain Segment Results: Drivetrain segment net sales
were $922 million in third quarter
2017 compared with $866 million in
third quarter 2016. Excluding the impact of foreign
currencies and the sale of the Remy light vehicle aftermarket
business, net sales were up 14.4% from the prior year's
quarter. Adjusted EBIT was $112
million in third quarter 2017. Excluding the impact of
foreign currencies, Adjusted EBIT was $111
million, up 24.6% from third quarter 2016.
Recent Highlights:
- BorgWarner announced that it has finalized its acquisition of
Sevcon, Inc. (Sevcon). A global player in electrification
technologies, Sevcon complements BorgWarner's power electronics
capabilities utilized to provide electrified propulsion solutions.
Sevcon's annual sales for 2017 are expected to be approximately
$60 million. The acquisition is
expected to be modestly dilutive to earnings in 2018.
- BorgWarner supplies the engine timing system for Renault's
newest compact vehicle in Brazil,
the 1.0-liter Kwid.
- BorgWarner announced it will be supplying its advanced
high-voltage positive temperature coefficient (PTC) cabin heating
technology for a new electric vehicle (EV) for a globally known EV
automaker. BorgWarner's technology features more efficient use of
energy while providing rapid cabin heating.
- BorgWarner continues to drive electrification into the
commercial vehicle market segment with its powerful High Voltage
Hairpin (HVH) 410 electric motors. The advanced and highly
efficient technology propels Scania's new Citywide hybrid bus for
urban areas. Positioned between the clutch and gearbox in a P2
layout, the 650-volt electric motor drives the vehicle at low
speeds when enough energy is available.
- BorgWarner produces engine timing chains, primary tensioners,
guides, arms, balancer chains and balancer tensioners for the
Renault Kadjar 2.0L sport utility vehicle, Dongfen Renault
Automotive Company's (DRAC's) first vehicle built at its new plant
in Wuhan, China.
- BorgWarner supplies 6.35 mm silent oil pump chain for Toyota's
new 8-speed automatic transmission, which drives the newly launched
2.5-liter Camry as well as another transmission program coming next
year.
- BorgWarner's award-winning regulated two-stage
(R2S®) turbocharging technology boosts the new 2.0-liter
I4 diesel engine with 177 kW (240 HP) from Jaguar Land Rover.
At 10:00 a.m. ET today, a brief
conference call concerning third 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
64 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net sales
|
$
|
2,416.2
|
|
|
$
|
2,214.2
|
|
|
$
|
7,212.9
|
|
|
$
|
6,812.0
|
|
Cost of
sales
|
1,893.5
|
|
|
1,743.1
|
|
|
5,658.7
|
|
|
5,379.9
|
|
Gross
profit
|
522.7
|
|
|
471.1
|
|
|
1,554.2
|
|
|
1,432.1
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
224.8
|
|
|
209.7
|
|
|
658.6
|
|
|
600.4
|
|
Other (income)
expense, net
|
22.0
|
|
|
111.1
|
|
|
27.5
|
|
|
147.8
|
|
Operating
income
|
275.9
|
|
|
150.3
|
|
|
868.1
|
|
|
683.9
|
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(14.4)
|
|
|
(12.4)
|
|
|
(38.5)
|
|
|
(31.6)
|
|
Interest
income
|
(1.3)
|
|
|
(1.6)
|
|
|
(4.2)
|
|
|
(4.7)
|
|
Interest expense and
finance charges
|
17.6
|
|
|
22.4
|
|
|
53.6
|
|
|
65.1
|
|
Earnings before
income taxes and noncontrolling interest
|
274.0
|
|
|
141.9
|
|
|
857.2
|
|
|
655.1
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
79.4
|
|
|
48.8
|
|
|
241.9
|
|
|
213.4
|
|
Net
earnings
|
194.6
|
|
|
93.1
|
|
|
615.3
|
|
|
441.7
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
9.7
|
|
|
9.8
|
|
|
29.2
|
|
|
29.9
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
184.9
|
|
|
$
|
83.3
|
|
|
$
|
586.1
|
|
|
$
|
411.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share —
diluted
|
$
|
0.88
|
|
|
$
|
0.39
|
|
|
$
|
2.77
|
|
|
$
|
1.90
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding — diluted
|
211.013
|
|
|
213.766
|
|
|
211.575
|
|
|
216.189
|
|
|
|
|
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
|
|
|
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Capital expenditures,
including tooling outlays
|
$
|
135.5
|
|
|
$
|
120.1
|
|
|
$
|
389.7
|
|
|
$
|
354.8
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$
|
104.9
|
|
|
$
|
97.8
|
|
|
$
|
302.0
|
|
|
$
|
291.2
|
|
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Net Sales by
Reporting Segment (Unaudited)
|
|
|
|
|
|
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Engine
|
$
|
1,506.4
|
|
|
$
|
1,359.3
|
|
|
$
|
4,483.6
|
|
|
$
|
4,202.7
|
|
Drivetrain
|
921.8
|
|
|
865.9
|
|
|
2,767.7
|
|
|
2,640.5
|
|
Inter-segment
eliminations
|
(12.0)
|
|
|
(11.0)
|
|
|
(38.4)
|
|
|
(31.2)
|
|
Net sales
|
$
|
2,416.2
|
|
|
$
|
2,214.2
|
|
|
$
|
7,212.9
|
|
|
$
|
6,812.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings
Before Interest, Income Taxes and Noncontrolling Interest
("Adjusted EBIT") (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Engine
|
$
|
238.5
|
|
|
$
|
221.5
|
|
|
$
|
729.8
|
|
|
$
|
696.3
|
|
Drivetrain
|
111.5
|
|
|
89.4
|
|
|
325.9
|
|
|
271.0
|
|
Adjusted
EBIT
|
350.0
|
|
|
310.9
|
|
|
1,055.7
|
|
|
967.3
|
|
Restructuring
expense
|
13.3
|
|
|
1.3
|
|
|
13.3
|
|
|
26.9
|
|
Merger and
acquisition expense
|
6.4
|
|
|
5.9
|
|
|
6.4
|
|
|
18.9
|
|
Lease termination
settlement
|
—
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
Other expense,
net
|
2.7
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
Asset impairment
expense
|
—
|
|
|
106.5
|
|
|
—
|
|
|
106.5
|
|
Contract expiration
loss (gain)
|
—
|
|
|
1.3
|
|
|
—
|
|
|
(6.2)
|
|
Corporate, including
equity in affiliates' earnings and stock-based
compensation
|
37.3
|
|
|
33.2
|
|
|
121.4
|
|
|
105.7
|
|
Interest
income
|
(1.3)
|
|
|
(1.6)
|
|
|
(4.2)
|
|
|
(4.7)
|
|
Interest expense and
finance charges
|
17.6
|
|
|
22.4
|
|
|
53.6
|
|
|
65.1
|
|
Earnings before
income taxes and noncontrolling interest
|
274.0
|
|
|
141.9
|
|
|
857.2
|
|
|
655.1
|
|
Provision for income
taxes
|
79.4
|
|
|
48.8
|
|
|
241.9
|
|
|
213.4
|
|
Net
earnings
|
194.6
|
|
|
93.1
|
|
|
615.3
|
|
|
441.7
|
|
Net earnings
attributable to the noncontrolling interest, net of tax
|
9.7
|
|
|
9.8
|
|
|
29.2
|
|
|
29.9
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
|
184.9
|
|
|
$
|
83.3
|
|
|
$
|
586.1
|
|
|
$
|
411.8
|
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
Assets
|
|
|
|
|
|
|
|
Cash
|
$
|
414.3
|
|
|
$
|
443.7
|
|
Receivables,
net
|
2,046.1
|
|
|
1,689.3
|
|
Inventories,
net
|
773.4
|
|
|
641.2
|
|
Prepayments and other
current assets
|
167.3
|
|
|
137.4
|
|
Total current
assets
|
3,401.1
|
|
|
2,911.6
|
|
|
|
|
|
Property, plant and
equipment, net
|
2,753.7
|
|
|
2,501.8
|
|
Other non-current
assets
|
3,661.4
|
|
|
3,421.3
|
|
Total
assets
|
$
|
9,816.2
|
|
|
$
|
8,834.7
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
Notes payable and
other short-term debt
|
$
|
303.2
|
|
|
$
|
175.9
|
|
Accounts payable and
accrued expenses
|
2,015.0
|
|
|
1,847.3
|
|
Income taxes
payable
|
63.0
|
|
|
68.6
|
|
Total current
liabilities
|
2,381.2
|
|
|
2,091.8
|
|
|
|
|
|
Long-term
debt
|
2,091.9
|
|
|
2,043.6
|
|
Other non-current
liabilities
|
1,426.8
|
|
|
1,397.4
|
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
3,825.7
|
|
|
3,218.3
|
|
Noncontrolling
interest
|
90.6
|
|
|
83.6
|
|
Total
equity
|
3,916.3
|
|
|
3,301.9
|
|
Total liabilities and
equity
|
$
|
9,816.2
|
|
|
$
|
8,834.7
|
|
BorgWarner
Inc.
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(millions of
dollars)
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2017
|
|
2016
|
Operating
|
|
|
|
Net
earnings
|
$
|
615.3
|
|
|
$
|
441.7
|
|
Asset impairment
expense
|
—
|
|
|
106.5
|
|
Depreciation and
amortization
|
302.0
|
|
|
291.2
|
|
Restructuring
expense, net of cash paid
|
3.5
|
|
|
12.0
|
|
Deferred income tax
provision
|
39.5
|
|
|
0.7
|
|
Other non-cash
items
|
11.8
|
|
|
5.0
|
|
Net earnings adjusted
for non-cash charges to operations
|
972.1
|
|
|
857.1
|
|
Changes in assets and
liabilities
|
(348.2)
|
|
|
(264.0)
|
|
Net cash provided by
operating activities
|
623.9
|
|
|
593.1
|
|
|
|
|
|
Investing
|
|
|
|
Capital expenditures,
including tooling outlays
|
(389.7)
|
|
|
(354.8)
|
|
Payments for business
acquired, net of cash acquired
|
(180.6)
|
|
|
—
|
|
Proceeds from sale of
business, net of cash divested
|
—
|
|
|
5.4
|
|
Proceeds from asset
disposals and other
|
1.6
|
|
|
7.0
|
|
Payments for venture
capital investment
|
(2.0)
|
|
|
—
|
|
Net cash used in
investing activities
|
(570.7)
|
|
|
(342.4)
|
|
|
|
|
|
Financing
|
|
|
|
Net increase in notes
payable
|
124.9
|
|
|
51.6
|
|
Additions to
long-term debt, net of debt issuance costs
|
—
|
|
|
4.6
|
|
Repayments of
long-term debt, including current portion
|
(14.5)
|
|
|
(16.6)
|
|
Proceeds from
interest rate swap termination
|
—
|
|
|
8.9
|
|
Payments for debt
issuance cost
|
(2.4)
|
|
|
—
|
|
Payments for purchase
of treasury stock
|
(100.0)
|
|
|
(250.0)
|
|
Payments for
(proceeds from) stock-based compensation items
|
(2.1)
|
|
|
0.9
|
|
Dividends paid to
BorgWarner stockholders
|
(88.5)
|
|
|
(83.8)
|
|
Dividends paid to
noncontrolling stockholders
|
(23.6)
|
|
|
(25.7)
|
|
Net cash used in
financing activities
|
(106.2)
|
|
|
(310.1)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
23.6
|
|
|
0.4
|
|
|
|
|
|
Net decrease in
cash
|
(29.4)
|
|
|
(59.0)
|
|
|
|
|
|
Cash at beginning of
year
|
443.7
|
|
|
577.7
|
|
Cash at end of
period
|
$
|
414.3
|
|
|
$
|
518.7
|
|
View original
content:http://www.prnewswire.com/news-releases/borgwarner-reports-third-quarter-2017-us-gaap-net-earnings-of-088-per-diluted-share-or-095-per-diluted-share-excluding-non-comparable-items-300543564.html
SOURCE BorgWarner Inc.