BorgWarner Earns $1.70 Per Share in Q2; Sales Up 18% on Strong Global Demand and New Business
CHICAGO, July 22 BorgWarner Inc. today reported earnings of $1.70 per share on an 18% sales increase to $712.4 million in the 2002 second quarter. The company's broad customer base, geographic growth and key technology for engine and transmission efficiency and vehicle stability were key factors in its strong results. During the quarter, the company continued to improve margins and deliver significant cash flow that enabled it to reduce debt by $29.4 million. All of the company's operating groups contributed to the record second quarter.
Financial Results: For the 2002 second quarter, the company reported net earnings of $45.7 million, or $1.70 per share, compared with $24.7 million, or $.93 per share for the 2001 second quarter. Sales were $712.4 million compared with $602.0 million in the prior year's second quarter.
Net earnings for the first six months of 2002 were $77.2 million or $2.88 per share before the cumulative effect of the change in accounting for goodwill, compared with $45.8 million, or $1.73 per share for the 2001 first half. Sales were up 11% to $1.3 billion, compared with $1.2 billion in 2001.
Comments and Outlook: "BorgWarner's performance continues to outpace global auto industry growth because we have powertrain technology for the fastest growing areas of the market," said John F. Fiedler, Chairman and CEO. "These include our electronic all-wheel and four-wheel drive systems for popular mid-sized crossover vehicles in North America. In Europe, the demand for fuel-efficient cars is driving the growth of our engine-related products, while our Asian customers are experiencing significant growth in North America. Because of trends such as these, and our anticipated new business of $1.1 billion from 2002 through 2004, we believe that we can continue to grow faster than the industry."
Operating Group Results: Sales and income in all of the company's operating groups were up over the second quarter of 2001. Morse TEC, the company's chain and turbocharger business, registered a 23% sales gain to $271.1 million and a 20% gain in income. The group benefited from a number of positive trends including continued penetration of chain timing systems and increased usage of turbochargers, particularly for both gas and diesel passenger car engines in Europe.
TorqTransfer Systems had sales of $160.7 million, a 24% increase over the 2001 quarter. Income increased 74% and operating margins improved due to the benefit of volume gains. These gains were aided by four-wheel drive transfer case programs with Ford and Korean automakers, and increased sales to Honda of the company's new InterActive Torque Management(TM) (ITM(TM)) all-wheel drive system. New business with General Motors was also launched during the quarter.
Transmission Systems experienced sales growth of 17% to $128.9 million with income increasing by 50%. Results benefited from improved volumes in North America. Sales for Air/Fluid Systems were up 11% to $105.3 million and income rose 30%. The group benefited from improvement at Chrysler, its major customer and the ramp up of business with BMW. Cooling Systems' sales rose 8% to $62.5 million, with income up 23%, bolstered by improvements in the heavy truck sectors.
Recent Highlights: During the quarter, production began on the company's electronically controlled, full-time four-wheel drive system that is at the heart of the H2, General Motors' all-new vehicle that expands the HUMMER brand's product lineup and customer base with a more refined but still-rugged, full-size SUV. The BorgWarner system is integrated with the powertrain, and is standard on the H2. In addition, the company announced that it will provide complete chain-based systems for Nissan's V6 and V8 engines beginning in December 2002. Combined volume for the V6 and V8 programs will be approximately 500,000 units. Nissan models equipped with V6 engines include the Altima, Maxima, and Quest. V8 engines, introduced after the V6, will be available in the new pickup and SUV that Nissan is building in Mississippi.
BorgWarner Inc. (NYSE: BWA - News) is a product leader in highly engineered components and systems for vehicle powertrain applications worldwide. The company operates manufacturing and technical facilities in 50 locations in 14 countries. Customers include Ford, DaimlerChrysler, General Motors, Toyota, Honda, Caterpillar, Navistar International, PSA and VW Group. The Internet address for BorgWarner is: http://www.bwauto.com . For further information contact BorgWarner Corporate Communications at 312-322-8500. Investor conference calls are webcast at: www.videonewswire.com/borgwarner .
Statements contained in 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 expectations, estimates and projections. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied in the forward- looking statements. Such risks and uncertainties include: fluctuations in domestic or foreign automotive production, the continued use of outside suppliers by original equipment manufacturers, fluctuations in demand for vehicles containing the Company's products, general economic conditions, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including the Cautionary Statements filed as Exhibit 99.1 to the Form 10-K for the fiscal year ended December 31, 2001.
BorgWarner Inc.
Consolidated Statement of Operations
(Unaudited)
(millions of dollars,
except per
share data) Three Months Ended Six Months Ended
June 30, % June 30, %
2002 2001 Change 2002 2001 Change
Net sales $712.4 $602.0 18.3% $1,346.3 $1,208.8 11.4%
Cost of sales 530.8 452.5 17.3% 1,005.4 917.5 9.6%
Amortization of
tooling 7.2 5.9 22.0% 13.7 12.1 13.2%
Total cost of
sales 538.0 458.4 17.4% 1,019.1 929.6 9.6%
Gross profit 174.4 143.6 21.4% 327.2 279.2 17.2%
Depreciation 27.2 25.7 5.8% 54.2 52.8 2.7%
Selling, general
and administrative
expenses 72.7 59.3 22.6% 143.3 114.9 24.7%
Minority interest 1.6 0.7 0.0% 3.1 1.4 0.0%
Goodwill
amortization 0.0 10.3 0.0% 0.0 20.9 0.0%
Equity in affiliate
earnings and other
income (5.9) (4.6) 28.3% (9.8) (9.3) 5.4%
Earnings before
interest expense,
finance charges
and taxes 78.8 52.2 51.0% 136.4 98.5 38.5%
Interest expense
and finance
charges 9.5 12.4 -23.4% 19.4 25.2 -23.0%
Earnings before
income taxes 69.3 39.8 74.1% 117.0 73.3 59.6%
Provision for
income taxes 23.6 15.1 56.3% 39.8 27.5 44.7%
Net earnings
before cumulative
effect of
accounting change 45.7 24.7 85.0% 77.2 45.8 68.6%
Cumulative effect
of change in
accounting
principle, net
of tax 0.0 0.0 (269.0) 0.0
Net earnings/
(loss) $45.7 $24.7 ($191.8) $45.8
Net earnings per
share before
cumulative effect
of accounting
change - diluted $1.70 $0.93 $2.88 $1.73
Per share charge
due to
cumulative effect
of accounting
change - diluted $0.00 $0.00 ($10.04) $0.00
Net earnings/
(loss) per
share - diluted $1.70 $0.93 ($7.16) $1.73
Average shares
outstanding
- diluted
(in millions) 26.9 26.5 26.8 26.4
BorgWarner Inc.
Selected Financial Information
(Unaudited)
(millions of dollars) June 30, December 31,
2002 2001
Cash and cash equivalents $30.2 $32.9
Receivables $295.6 $203.7
Inventories $156.0 $143.8
Payables $281.0 $236.7
Debt $667.6 $737.0
Stockholders' equity $936.2 $1,104.2
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Capital spending $29.2 $33.4 $55.3 $50.6
Tooling outlays,
net of customer
reimbursements $8.3 $7.3 $16.1 $10.3
BorgWarner Inc.
Sales by Operating Group
(Unaudited)
(millions
of dollars) Three Months Ended Six Months Ended
June 30, % June 30, %
2002 2001 Change 2002 2001 Change
Air/Fluid Systems $105.3 $94.6 11.3% $205.4 $185.5 10.7%
Cooling Systems 62.5 58.1 7.6% 115.8 116.4 -0.5%
Morse TEC 271.1 221.2 22.6% 512.2 441.9 15.9%
TorqTransfer
Systems 160.7 129.3 24.3% 297.5 254.7 16.8%
Transmission
Systems 128.9 109.8 17.4% 244.6 213.8 14.4%
Divested
Operations 0.0 0.0 N/A 0.0 18.0 N/A
Subtotal 728.5 613.0 18.8% 1,375.5 1,230.3 11.8%
Eliminations (16.1) (11.0) N/A (29.2) (21.5) N/A
Total Sales by
Operating Group $712.4 $602.0 18.3% $1,346.3 $1,208.8 11.4%
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars) Three Months Ended
June 30, % Change
2001 2001 2002 to
2002 As Pro 2001 Pro
Reported Forma Forma
Air/Fluid Systems $10.0 $6.1 $7.7 29.9%
Cooling Systems 8.0 2.1 6.5 23.1%
Morse TEC 40.4 30.9 33.8 19.5%
TorqTransfer Systems 10.8 6.2 6.2 74.2%
Transmission Systems 19.9 11.9 13.3 49.6%
Divested Operations 0.0 0.0 0.0 N/A
Total EBIT by Operating Group $89.1 $57.2 $67.5 32.0%
Six Months Ended
June 30, % Change
2001 2001 2002 to
2002 As Pro 2001 Pro
Reported Forma Forma
Air/Fluid Systems $17.5 $9.0 $12.3 42.3%
Cooling Systems 13.4 4.0 13.0 3.1%
Morse TEC 75.3 58.9 64.9 16.0%
TorqTransfer Systems 17.7 10.2 10.2 73.5%
Transmission Systems 33.8 23.9 26.7 26.6%
Divested Operations 0.0 (0.2) (0.2) N/A
Total EBIT by Operating Group $157.7 $105.8 $126.9 24.3%
The pro forma column excludes the impact of goodwill amortization for
comparability.