BorgWarner Second Quarter EPS Up 17%
CHICAGO, July 29 -- BorgWarner Inc. announced strong second quarter 2004 results. Demand for the company's technology for fuel-efficient engines in Europe and better than expected sales in North America continued to drive growth.
Second Quarter Highlights:
-- Earnings per share grew by 17% to a new record high of $0.97
-- Sales were up 16% to $893.2 million
-- New business awards include first North American contract for
InterActive Torque Management(TM) System
-- Operating income margin improves
-- Engine Group sales up 19%
-- Drivetrain Group sales up 12%
"We had a strong second quarter, delivering solid growth in both our Engine and Drivetrain businesses," said Timothy M. Manganello, Chairman and CEO. "The trends driving our growth are expected to continue into the second half of the year. These trends include the growth of diesel engines in Europe, the popularity of cross-over vehicles in North America and the move to chain engine timing systems in both Europe and Asia. Combining this growth with our focus on continuous improvement, we expect to grow faster than the industry. As a result, we are raising our guidance for the year to $3.60 to $3.70 per share, up from $3.55 to $3.65 per share. This range represents continued strong earnings growth in the second half of the year. Our guidance is based on current industry production assumptions and an expectation that commodity prices remain at current levels."
For the 2004 second quarter, the company reported net earnings of $54.7 million or $0.97 per share, compared with $44.8 million or $0.83 per share, on a split-adjusted basis. Sales were $893.2 million compared with $769.5 million in the prior year's second quarter.
Net earnings for the first six months of 2004 were $105.8 million, or $1.88 per share, compared with $89.0 million or $1.65 per share on a split-adjusted basis. Sales were up 16% to $1.8 billion, compared with $1.5 billion in 2003.
Operating income was $81.4 million or 9.1% of sales in the 2004 second quarter, compared with $69.6 million or 9.0% of sales in the 2003 second quarter. Research and development spending was $30.8 million in the quarter, versus $28.9 million in the same period in 2003.
Net cash provided by operating activities was $221.5 million for the first six months of 2004 compared with $155.3 million for the same period in 2003.
Operating Group Results: Sales in the company's Engine Group were up 19% to $559.6 million over the second quarter of 2003. Operating income rose 25% to $75.7 million. Results were driven by continued growth of fuel-efficient diesel and gas engines in Europe, the move from belt to chain timing systems among European and Asian automakers and growing strength in the commercial vehicle market in North America and Europe.
Sales for the Drivetrain Group were up 12% to $347.4 million over the second quarter of 2003. These gains were driven by strong demand for four-wheel drive systems in North America and for transmission components and systems worldwide. Operating income was $23.8 million, essentially flat with the 2003 second quarter, reflecting higher prices for steel and other commodities, and higher health care costs.
Recent Highlights: During the quarter, BorgWarner stockholders approved an increase in the number of shares of authorized common stock to 150 million from 50 million allowing for a two-for-one stock split. The stock split was effective May 17, 2004. In addition, the company announced the first North American application of its intelligent torque management systems for a popular front-wheel-drive-based sport wagon, beginning in 2006. The company's engine and transmission products will also help drive North America's first hybrid, the Ford Escape, which is on sale now and will be arriving in dealerships later this summer.
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.
BorgWarner Inc.
Consolidated Statements of Operations
(Unaudited)
(millions of dollars, except per share
data) Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Net sales $893.2 $769.5 $1,796.2 $1,545.2
Cost of sales 723.4 622.8 1,453.9 1,246.9
Gross profit 169.8 146.7 342.3 298.3
Selling, general and administrative
expenses 87.8 77.0 182.5 160.7
Other, net 0.6 0.1 0.9 0.1
Operating Income 81.4 69.6 158.9 137.5
Equity in affiliate earnings, net of
tax (8.4) (5.2) (14.9) (11.6)
Interest expense and finance charges 7.7 8.7 15.2 17.7
Earnings before income taxes 82.1 66.1 158.6 131.4
Provision for income taxes 24.6 19.2 47.5 38.1
Minority interest, net of tax 2.8 2.1 5.3 4.3
Net Earnings $54.7 $44.8 $105.8 $89.0
Net earnings/(loss) per share -
Diluted $0.97 $0.83 $1.88 $1.65
Average shares outstanding - Diluted
(in millions) 56.4 54.2 56.2 54.0
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Capital expenditures $43.7 $39.5 $84.2 $64.8
Tooling outlays, net of customer
reimbursements $16.4 $11.3 $30.1 $20.7
Depreciation and amortization:
Fixed asset depreciation $33.5 $30.5 $67.3 $60.2
Amortization of tooling 10.1 8.0 19.9 15.7
$43.6 $38.5 $87.2 $75.9
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars) Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Drivetrain $347.4 $309.3 $707.0 $631.0
Engine 559.6 471.6 1,116.7 937.4
Subtotal 907.0 780.9 1,823.7 1,568.4
Eliminations (13.8) (11.4) (27.5) (23.2)
Total Sales by operating group $893.2 $769.5 $1,796.2 $1,545.2
BorgWarner Inc.
Earnings Before Interest and Taxes by
Operating Group (Unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Drivetrain $23.8 $23.7 $54.5 $49.8
Engine 75.7 60.5 143.7 121.2
Total EBIT by operating group $99.5 $84.2 $198.2 $171.0
Corporate (9.7) (9.4) (24.4) (21.9)
Consolidated 89.8 74.8 173.8 149.1
Interest and finance charges (7.7) (8.7) (15.2) (17.7)
Earnings before income taxes $82.1 $66.1 $158.6 $131.4
BorgWarner Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(millions of dollars)
June 30, December 31,
2004 2003
ASSETS
Cash and cash equivalents $144.0 $113.1
Receivables 491.2 414.9
Inventories 215.6 201.3
Other current assets 112.1 95.3
Total current assets 962.9 824.6
Property, plant, and equipment 990.9 985.3
Other long-term assets 1,241.0 1,240.5
Total assets $3,194.8 $3,050.4
LIABILITIES
Notes payable $9.0 $10.0
Accounts payable and accrued expenses 549.5 460.3
Accrued income taxes payable 17.3 -
Total current liabilities 575.8 470.3
Long-term debt 573.9 645.5
Other long-term liabilities 663.5 674.2
STOCKHOLDERS' EQUITY
Stockholders' equity 1,381.6 1,260.4
Total liabilities and stockholders'
equity $3,194.8 $3,050.4