BorgWarner Announces First Quarter Results
CHICAGO, April 25 BorgWarner Inc. today
reported that it earned $.80 per share on sales of $606.8 million in the
2001 first quarter. Results were affected by severely reduced and erratic
North American vehicle production, delayed launches of key customer programs
and weak European and Asian currencies. Despite a $20 million decline in
income from the record 2000 first quarter, operating cash flow was positive
and the company improved its debt-to-capital ratio.
Financial Results: The company reported net earnings for the 2001 first
quarter of $21.1 million, or $.80 per share, compared with $41.0 million, or
$1.53 per share, in the record 2000 first quarter. Sales were $606.8 million
compared with $730.2 million in the prior first quarter.
Comments and Outlook: "As we went into this difficult quarter, we
challenged ourselves to maintain our strong balance sheet, and we did," said
John F. Fiedler, Chairman and CEO. "We have continued to invest in research
and development but have reduced other administrative expenses, have delayed
capital spending and are ready to take additional actions if industry
conditions deteriorate further. Our industry faces another difficult quarter
and perhaps a slow recovery. With the combination of our propriety
technology, solid new business expectations and strong balance sheet, however,
BorgWarner expects to resume its growth as the industry and overall economy
improves. If opportunities arise during this downturn to expand our global
reach or strategic technology, we also believe that we have the ability to
take advantage of them."
Mr. Fiedler noted that the outlook for the remainder of the year remains
uncertain. "Looking at our markets around the world, we hope the direction of
the North American auto industry will become clearer by mid-year. While
European production has softened, demand for our products is strong, driven by
new engine programs and the need for fuel efficiency and improved emissions.
Asia remains stable. By developing technology for automakers around the
world, including those non-U.S. automakers that manufacture engines and
transmissions in North America, we are well positioned to benefit from
changing market dynamics."
Operating Group Results: Sales in each of the company's operating groups
were down from the record first quarter of 2000. Revenue at Morse TEC, the
company's chain and turbocharger business, was $220.6 million. North American
production cuts hurt sales of the group's chain products for automatic
transmissions and four-wheel drive systems. This weakness was partially
offset by strong demand in Europe for engine timing systems and turbochargers.
Sales for Air/Fluid Systems of $90.9 million were reduced by severe
production cuts at Chrysler, its major customer, and an absence of one-time
emission controls sales that boosted results in the 2000 first quarter.
TorqTransfer Systems sales were $125.4 million, negatively impacted by the
delayed launch of the new Ford Explorer but aided by strong export sales
to Korea. Sales for Transmission Systems of $104.0 million reflected the
10% decline in automatic transmission production in North America during the
quarter, partially offset by improved U.S. productivity and good demand in
Europe for transmission products, particularly for models exported to the U.S.
Sales of $58.3 million from Cooling Systems were adversely affected by a
number of factors, including reduced production of light and heavy-duty trucks
and business lost prior to the group being acquired by BorgWarner.
Recent Highlights: During the quarter, the company announced a strategic
alliance with Hitachi Automotive Products (USA), one of the world's largest
electronics companies, for the production of electronic control units,
including new generation units that can be integrated into the harsh
environment for its four-wheel drive systems. The company has also developed
a new range of turbochargers for small diesel engines, and will supply the
turbochargers to Renault over the next several years under a contract worth
approximately $125 million. To continue to meet the demand for turbochargers,
the company announced that it is establishing two new facilities in Asheville,
North Carolina and Oroszlany, Hungary. The global market for turbochargers is
expected to grow 30% over the next five years.
At the start of the second quarter, the company sold its Fuel Systems
business, a non-core business it acquired with the purchase of Kuhlman
Corporation in 1999. With the sale completed, BorgWarner is fully focused on
its strategy of building product leadership in core engine and driveline
technologies.
BorgWarner Inc.
Consolidated Statement of Operations (Unaudited)
(millions of dollars, except per
share data) Three Months Ended
March 31,
2001 2000
Net sales $606.8 $730.2
Cost of sales 471.1 550.3
Depreciation 27.0 26.2
Selling, general and administrative
expenses 55.6 63.5
Minority interest 0.7 0.7
Goodwill amortization 10.6 11.0
Equity in affiliate earnings and
other income (4.5) (3.5)
Earnings before interest expense,
finance charges and
taxes 46.3 82.0
Interest expense and finance charges 12.8 15.9
Earnings before income taxes 33.5 66.1
Provision for income taxes 12.4 25.1
Net earnings $21.1 $41.0
Net earnings per share - basic $0.80 $1.54
Net earnings per share - diluted $0.80 $1.53
Average shares outstanding - basic
(in millions) 26.3 26.7
Average shares outstanding - diluted
(in millions) 26.4 26.8
BorgWarner Inc.
Selected Financial Information (Unaudited)
(millions of dollars) March 31, December 31,
2001 2000
Receivables $202.8 $168.9
Inventories $153.5 $161.6
Debt $795.1 $794.8
Stockholders' equity $1,104.6 $1,087.1
Three Months Ended
March 31,
2001 2000
Capital spending $17.2 $28.3
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars) Three Months Ended
March 31,
2001 2000
Air/Fluid Systems $90.9 $124.1
Cooling Systems 58.3 80.1
Morse TEC 220.6 234.7
TorqTransfer Systems 125.4 147.3
Transmission Systems 104.0 115.6
Divested Operations 18.0 41.3
Subtotal 617.2 743.1
Eliminations (10.4) (12.9)
Total Sales by Operating Group $606.8 $730.2
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars) Three Months Ended
March 31,
2001 2000
Air/Fluid Systems $3.0 $15.6
Cooling Systems 2.0 11.0
Morse TEC 27.8 33.4
TorqTransfer Systems 4.0 10.4
Transmission Systems 12.0 14.7
Divested Operations (0.2) 2.2
Total EBIT by Operating Group $48.6 $87.3
