BorgWarner Earns $1.30 Per Share for Q303; Engine and Four-Wheel Drive Systems Continue to Spur Growth
CHICAGO, Oct. 27, 2003 -- BorgWarner Inc. delivered earnings of $1.30 per share in the third quarter of 2003 on a 6% sales increase. Increased demand for the company's fuel-efficient engine technology and four-wheel drive systems continued to drive growth.
Financial Results: The company reported 2003 third quarter net earnings of $35.9 million or $1.30 per share, compared with $31.9 million, or $1.18 per share last year. Third quarter 2003 sales were $725.2 million compared with $684.0 million in the 2002 third quarter. These results came in the face of a very weak automotive market, with production soft in all regions, especially North America which was off 5%.
Net earnings for the first nine months of 2003 were $124.9 million or $4.59 per share compared with $109.1 million or $4.07 per share for the 2002 period before the cumulative effect of the change in accounting for goodwill. Sales were $2,270.4 million, up 12% over 2002 nine-month sales of $2,030.3 million.
Comments and Outlook: "We continue to see strong sales growth for our turbochargers and four-wheel drive systems," said Timothy M. Manganello, Chairman and CEO. "These include our electronic all-wheel systems for crossover vehicles such as those from Honda, Acura and Hyundai, and four-wheel drive systems for new GM applications. 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."
Manganello tightened the company's full-year 2003 guidance to a range of $6.25 to $6.35 per share. Commenting on the company's 2004 outlook, Mr. Manganello noted that the company expects overall stability but little growth in the global auto market. "We expect BorgWarner's performance to continue to outpace that of the global auto industry because our powertrain technology serves the fastest growing areas of the market. With our fuel-efficient products for Europe and new business among Japanese and Korean automakers, we expect to achieve our growth targets of 8% to 11% in sales, and 12% to 16% in earnings in 2004. We will release our pipeline of new business for 2004 through 2006 in early November, and we expect this business to provide the platform for our growth."
Operating Group Results: The company's Engine Group registered an 8% sales gain to $451.4 million with an increase in operating income. Strong sales of turbochargers boosted the group's results. The group continues to benefit from demand for the company's products for European passenger cars and commercial vehicles, and sales growth for a variety of products in emerging markets such as India and China, which more than offset weak North American markets.
Sales for the Drivetrain Group were up 3% while operating income declined compared with last year's third quarter. Increased sales came from four-wheel drive systems. The impact of start-up costs for the group's new fuel-efficient transmission technology being introduced in Europe and mix changes combined to cause the short-term operating income decline. The company expects operating income improvements in the fourth quarter as new programs expand and cost reductions begin to be realized.
Recent Highlights: During the quarter, the company announced a commitment for the first use of its patented Morse TEC Gemini(TM) chain system in a four-wheel drive transfer-case application for the 2004 Dodge Durango. In addition, BorgWarner TorqTransfer Systems will supply its InterActive Torque Management (ITM)(TM) system to the new Hyundai Santa Fe CM crossover utility vehicle, beginning in June 2005.
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 43 locations in 14 countries. Customers include Ford, DaimlerChrysler, General Motors, Toyota, Honda, Hyundai/Kia, Caterpillar, Navistar International, Renault/Nissan, Peugeot and VW/Audi. 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: http://www.bwauto.com/investor/investor_index.html .
BorgWarner Inc.
Consolidated Statements of Operations (Unaudited)
(millions of dollars, except per share data)
Three Months Ended Nine Months Ended
September 30, % September 30, %
2003 2002 Change 2003 2002 Change
Net sales $725.2 $684.0 6.0% $2,270.4 $2,030.3 11.8%
Cost of sales 595.9 556.1 7.2% 1,842.8 1,621.6 13.6%
Gross profit 129.3 127.9 1.1% 427.6 408.7 4.6%
Selling, general and
administrative
expenses 72.7 73.2 -0.7% 233.4 224.3 4.1%
Other, net 0.1 (0.2) -150.0% 0.2 (0.6) -133.3%
Operating Income 56.5 54.9 2.9% 194.0 185.0 4.9%
Equity in affiliate
earnings, net of
tax (3.6) (4.5) -20.0% (15.3) (13.9) 10.1%
Interest expense and
finance charges 8.1 9.3 -12.9% 25.8 28.7 -10.1%
Earnings before
income taxes 52.0 50.1 3.8% 183.5 170.2 7.8%
Provision for income
taxes 14.2 16.4 -13.4% 52.3 56.2 -6.9%
Minority interest,
net of tax 1.9 1.8 5.6% 6.3 4.9 28.6%
Net earnings
before
cumulative
effect of
accounting
change $35.9 $31.9 12.5% $124.9 $109.1 14.5%
Cumulative effect of
change in
accounting
principle, net of
tax - - - (269.0)
Net earnings/(loss) $35.9 $31.9 $124.9 ($159.9)
Net earnings per
share before
cumulative effect
of accounting
change - Diluted $1.30 $1.18 $4.59 $4.07
Per share charge due
to cumulative
effect of
accounting change -
Diluted - - - (10.03)
Net earnings/(loss)
per share - Diluted $1.30 $1.18 $4.59 ($5.97)
Average shares
outstanding -
Diluted (in
millions) 27.5 27.0 27.2 26.8
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Capital expenditures $39.3 $26.1 $104.1 $81.4
Tooling outlays, net
of customer
reimbursements $8.0 $1.3 $28.8 $17.3
Depreciation and
amortization:
Fixed asset
depreciation $30.3 $26.7 $90.5 $80.8
Amortization of
tooling 9.9 7.5 25.6 21.2
$40.2 $34.2 $116.1 $102.0
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
September 30, % September 30, %
2003 2002 Change 2003 2002 Change
Drivetrain $284.3 $277.5 2.5% $915.3 $819.5 11.7%
Engine 451.4 416.6 8.4% 1,388.8 1,240.1 12.0%
Subtotal 735.7 694.1 6.0% 2,304.1 2,059.6 11.9%
Eliminations (10.5) (10.1) N/A (33.7) (29.3) N/A
Total Sales by
operating group $725.2 $684.0 6.0% $2,270.4 $2,030.3 11.8%
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
September 30, % September 30, %
2003 2002 Change 2003 2002 Change
Drivetrain $16.7 $22.2 -24.8% $66.5 $71.7 -7.3%
Engine 55.6 47.9 16.1% 178.3 158.7 12.4%
Total EBIT by operating
group $72.3 $70.1 3.1% $244.8 $230.4 6.3%
Corporate (12.2) (10.7) 14.0% (35.5) (31.5) 12.7%
Consolidated 60.1 59.4 1.2% 209.3 198.9 5.2%
Interest and finance
charges (8.1) (9.3) -12.9% (25.8) (28.7) -10.1%
Earnings before
income taxes 52.0 50.1 3.8% 183.5 170.2 7.8%
BorgWarner Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(millions of dollars)
September 30, December 31,
2003 2002
ASSETS
Cash and cash equivalents $106.8 $36.6
Receivables 381.0 292.1
Inventories 198.4 180.3
Other current assets 67.0 57.5
Total current assets 753.2 566.5
Property, plant, and equipment 927.6 894.9
Other long-term assets 1,258.7 1,221.5
Total assets $2,939.5 $2,682.9
LIABILITIES
Notes payable $12.8 $14.4
Accounts payable and accrued expenses 448.8 435.6
Accrued income taxes payable 25.3 1.2
Total current liabilities 486.9 451.2
Long-term debt 635.0 632.3
Other long-term liabilities 638.2 618.0
STOCKHOLDERS' EQUITY
Stockholders' equity 1,179.4 981.4
Total liabilities and
stockholders' equity $2,939.5 $2,682.9