BorgWarner 2002 Sales Up 16%; Margins Improve; Debt Reduced.."Its A Happy Day"
CHICAGO, Feb. 4 -- BorgWarner Inc.
today reported record sales and operating earnings for 2002. The powertrain
systems supplier earned $5.58 per share on sales of $2.73 billion, before a
goodwill accounting change. Results were bolstered by the company's broad
customer base, stronger than expected new business volume and demand for key
technologies for more efficient engines. The company also delivered
improvements in gross margins and strong cash flow that allowed it to reduce
debt.
Financial Results: For the 2002 fourth quarter, sales were $701 million
compared with $583 million in the 2001 fourth quarter. Net income in the
quarter was $40.8 million, or $1.52 per share, compared with $27.9 million, or
$1.06 per share in 2001, before non-recurring charges. (For a full comparison
of income and earnings per share before non-recurring items and accounting
change, see table that follows.)
Sales for 2002 totaled $2.73 billion compared with $2.35 billion in 2001.
Full-year 2002 net income was $149.9 million, or $5.58 per share before the
goodwill accounting change, compared with $111.9 million, or $4.23 per share
in 2001 before the change.
Comments and Outlook: "With technology targeted at the fastest growing
parts of our market, we again delivered growth that significantly outpaced
worldwide car and truck production levels," said John F. Fiedler, Chairman and
CEO. "Our sales were up 16% while industry production was only up 2%. We also
continued to strengthen our financial position, improving margins, reducing
debt and generating strong cash flow. We clearly demonstrated the viability
of our technology driven growth strategy by securing anticipated new business
of $1.2 billion over the next three years. This pipeline of expected new
programs benefits both our Engine and Driveline Groups and puts us in a strong
position even if auto production is softer during 2003."
The company reiterated that it expects 2003 earnings per share in a range
of $6.20 to $6.35. Commented Mr. Fiedler: "We expect to deliver continued
growth in 2003 from new business and increased penetration of the faster
growing parts of the auto market. Strong demand is expected in Europe for our
more fuel-efficient engine and transmission systems, and in North America for
computer-controlled four-wheel and all-wheel drive systems that enhance
vehicle stability."
Operating Results: Revenue in the Engine Group was up 17% over last year.
Operating income benefited from greater productivity from increased production
volume. Within the new group, sales at Morse TEC, the company's chain and
turbocharger business, were $268.7 million for the 2002 fourth quarter and
$1,046.9 million for the full year. The group benefited from continued
penetration of engine chain timing systems, the increased use of
turbochargers, particularly for both gas and diesel passenger car engines in
Europe and continued strength in sales of sport-utility vehicles, many of
which utilize the company's chain products.
Sales for Air/Fluid Systems, now part of Emissions/Thermal Systems within
the Engine Group, were $89.1 million for the quarter and $388.4 million for
the year. The increase in sales was primarily due to continued ramp up and
higher volumes at DaimlerChrysler. Sales for Cooling Systems, also now part
of Emissions/Thermal Systems, were $57.8 million in the quarter and
$235.8 million for the year. Penetration into Asian and European markets
contributed to the increased revenues.
Sales for the Driveline Group were up 25% over the prior year. Operating
income improvement was due to a combination of increased volume from new
programs and cost controls. Within the group, Transmission Systems' sales
were $125.9 million for the quarter and $495.2 million for the year. Sales
growth was strong in all regions for this business, due to a combination of
market conditions and new applications, both in North America and overseas.
TorqTransfer Systems' sales were $177.9 million for the quarter and
$630.1 million for the year. Driving the sales increase were higher volumes
for Hyundai and Kia, and the InterActive Torque Management (ITM)(TM) system
application in the Acura MDX and the new Honda Pilot. Additionally, new four-
wheel drive applications were launched with General Motors.
Reconciliation of reported net income to net income before non-recurring
items and change in accounting principle.
Q4 2002 Q4 2001 FY 2002 FY 2001
Reported net income $40.8 $2.2 $(119.1) $66.4
Change in accounting principle,
net of tax ---- ---- 269.0 ----
Goodwill amortization, net of tax ---- 6.7 ---- 26.5
Non-recurring charges, net of tax ---- 19.0 ---- 19.0
40.8 27.9 149.9 111.9
Reconciliation of reported earnings per share to earnings per share before
non-recurring items and change in accounting principle.
Q4 2002 Q4 2001 FY 2002 FY 2001
Reported earnings per share $1.52 $0.08 $(4.44) $2.51
Change in accounting principle,
net of tax ---- ---- 10.02 ----
Goodwill amortization, net of tax ---- 0.26 ---- 1.00
Non-recurring charges, net of tax ---- 0.72 ---- 0.72
1.52 1.06 5.58 4.23
BorgWarner Inc. 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, Hyundai/Kia, 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: Thomson / PR Newswire.
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 Statements of Operations (Unaudited)
(millions of dollars, except per share data)
Three Months Ended Twelve Months Ended
December 31, % December 31, %
2002 2001 Change 2002 2001 Change
Net sales $700.8 $582.9 20.2% $2,731.1 $2,351.6 16.1%
Cost of sales 554.9 464.6 19.4% 2,176.5 1,890.8 15.1%
Gross profit 145.9 118.3 23.3% 554.6 460.8 20.4%
Selling, general and
administrative
expenses 79.2 68.1 16.3% 303.5 249.7 21.5%
Goodwill amortization 0.0 10.7 -100.0% 0.0 42.0 -100.0%
Other, net (0.3) (1.1) -72.7% (0.9) (2.1) -57.1%
Restructuring and
other non-recurring
charges 0.0 28.4 -100.0% 0.0 28.4 -100.0%
Operating Income 67.0 12.2 449.2% 252.0 142.8 76.5%
Equity in affiliate
earnings, net of tax (5.6) (2.9) 93.1% (19.5) (14.9) 30.9%
Interest expense, net 9.0 10.3 -12.6% 37.7 47.8 -21.1%
Income before
income taxes 63.6 4.8 1225.0% 233.8 109.9 112.7%
Provisions for
income taxes 21.0 1.3 1515.4% 77.2 39.7 94.5%
Minority interest in
net income of
consolidated
subsidiaries 1.8 1.3 0.0% 6.7 3.8 0.0%
Net earnings
before cumulative
effect of
accounting change 40.8 2.2 1754.5% 149.9 66.4 125.8%
Cumulative effect of
change in accounting
principle, net of
tax 0.0 0.0 (269.0) 0.0
Net
earnings/(loss) $40.8 $2.2 ($119.1) $66.4
Net earnings per
share before
cumulative effect
of accounting
change - diluted $1.52 $0.08 $5.58 $2.51
Per share charge due
to cumulative
effect of
accounting change -
diluted $0.00 $0.00 ($10.02) $0.00
Net earnings/(loss)
per share - diluted $1.52 $0.08 ($4.44) $2.51
Average shares
outstanding -
diluted (in
millions) 26.9 26.5 26.9 26.5
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Capital spending $57.0 $47.7 $138.4 $140.9
Tooling outlays, net
of customer
reimbursements $10.4 $19.8 $27.7 $42.0
Depreciation and
Amortization:
Fixed Asset
Depreciation 27.2 26.0 108.1 104.2
Goodwill
Amortization 0.0 10.7 0.0 42.0
Tooling Amortization 8.0 5.6 29.3 23.7
35.2 42.3 137.4 169.9
EBITDA $107.8 $57.4 $408.9 $327.6
EBITDA represents income before interest expense, income taxes, minority
interest, depreciation, and amortization. EBITDA should not be construed
as income from operations, net income, or cash flow from operating
activities as determined by generally accepted accounting principles.
Other companies may calculate EBITDA differently.
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended
December 31, %
2002 2001 Change
Morse TEC $268.7 $215.5 24.7%
Air/Fluid Systems 89.1 88.9 0.2%
Cooling Systems 57.8 50.8 13.8%
TorqTransfer Systems 177.9 131.0 35.8%
Transmission Systems 125.9 108.2 16.4%
Divested Operations 0.0 0.0 N/A
Subtotal 719.4 594.4 21.0%
Eliminations (18.6) (11.5) N/A
Total Sales by Operating Group $700.8 $582.9 20.2%
Twelve Months Ended
December 31, %
2002 2001 Change
Morse TEC $1,046.9 $869.4 20.4%
Air/Fluid Systems 388.4 357.8 8.6%
Cooling Systems 235.8 220.5 6.9%
TorqTransfer Systems 630.1 500.1 26.0%
Transmission Systems 495.2 428.8 15.5%
Divested Operations 0.0 18.0 N/A
Subtotal 2,796.4 2,394.6 16.8%
Eliminations (65.3) (43.0) N/A
Total Sales by Operating
Group $2,731.1 $2,351.6 16.1%
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended
December 31, % Change
2001 2001 2002 to
As Pro 2001 Pro
2002 Reported Forma Forma
Morse TEC $49.0 $34.2 $37.3 31.4%
Air/Fluid Systems $2.0 $1.7 $3.4 -41.2%
Cooling Systems 4.8 1.5 5.9 -18.6%
TorqTransfer Systems 14.0 11.4 11.5 21.7%
Transmission Systems 14.9 12.6 14.1 5.7%
Divested Operations 0.0 0.0 0.0 N/A
Total EBIT by Operating Group $84.7 $61.4 $72.2 17.3%
The pro forma column excludes the impact of goodwill amortization for
comparability.
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars)
Twelve Months Ended
December 31, % Change
2001 2001 2002 to
As Pro 2001 Pro
2002 Reported Forma Forma
Morse TEC $159.2 $119.8 $132.1 20.5%
Air/Fluid Systems $23.4 $12.9 $19.4 20.6%
Cooling Systems 25.1 7.5 25.2 -0.4%
TorqTransfer Systems 39.2 24.1 24.2 62.0%
Transmission Systems 64.9 48.5 54.2 19.7%
Divested Operations 0.0 (0.2) (0.2) N/A
Total EBIT by Operating Group $311.8 $212.6 $254.9 22.3%
The pro forma column excludes the impact of goodwill amortization for
comparability.
The following charts show sales and EBIT by group under BorgWarner's new
group structure. The new structure will be effective for all 2003
reporting.
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars) Three Months Ended
December 31, %
2002 2001 Change
Driveline $302.6 $241.5 25.3%
Engine 408.1 349.4 16.8%
Divested Operations 0.0 0.0 N/A
Subtotal 710.7 590.9 20.3%
Eliminations (9.9) (8.0) N/A
Total Sales by Operating Group $700.8 $582.9 20.2%
Twelve Months Ended
December 31, %
2002 2001 Change
Driveline $1,122.1 $937.2 19.7%
Engine 1,648.2 1,426.6 15.5%
Divested Operations 0.0 18.0 N/A
Subtotal 2,770.3 2,381.8 16.3%
Eliminations (39.2) (30.2) N/A
Total Sales by Operating
Group $2,731.1 $2,351.6 16.1%
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group
(Unaudited)
(millions of dollars)
Three Months Ended
December 31, % Change
2001 2002 to
As 2001 2001 Pro
2002 Reported Pro Forma Forma
Driveline $28.0 $23.7 $25.4 10.2%
Engine 56.7 37.7 46.8 21.2%
Divested Operations 0.0 0.0 0.0 N/A
Total EBIT by Operating
Group $84.7 $61.4 $72.2 17.3%
The pro forma column excludes the impact of goodwill amortization for
comparability.
Twelve Months Ended
December 31, % Change
2001 2002 to
As 2001 2001 Pro
2002 Reported Pro Forma Forma
Driveline $99.4 $70.0 $76.8 29.4%
Engine 212.4 142.8 178.3 19.1%
Divested Operations 0.0 (0.2) (0.2) N/A
Total EBIT by Operating
Group $311.8 $212.6 $254.9 22.3%
The pro forma column excludes the impact of goodwill amortization for
comparability.
BorgWarner Inc.
Consolidated Condensed Balance Sheet (Unaudited)
(millions of dollars)
December 31, 2002 December 31, 2001
ASSETS
Cash and cash equivalents $36.6 $32.9
Receivables 292.1 203.7
Inventories 180.3 143.8
Other current assets 51.3 60.9
Total Current Assets 560.3 441.3
Property, plant, and equipment 894.9 838.2
Other long-term assets 1,206.7 1,491.4
Total assets $2,661.9 $2,770.9
LIABILITIES
Notes payable $14.4 $35.6
Accounts payable and accrued expenses 412.4 410.6
Accrued income taxes payable 23.2 8.8
Total current liabilities 450.0 455.0
Long-term debt 632.3 701.4
Other long-term liabilities 606.1 510.3
STOCKHOLDERS' EQUITY
Stockholders' equity 973.5 1,104.2
Total liabilities and
stockholders' equity $2,661.9 $2,770.9