Engine Programs Drive BWA Third Quarter Results
22 October 1998
Engine Programs Drive BWA Third Quarter Results; Strong Fourth Quarter Performance Expected
CHICAGO, Oct. 22 -- Borg-Warner Automotive, Inc.
today reported 1998 third quarter earnings of $.73 per share (diluted)
compared with $.90 in the same 1997 period. Strong performance in engine-
related systems offset continued weakness in Asia to deliver results in line
with investor expectations.
Third quarter net earnings for 1998 were $17.3 million compared with
$21.6 million in the 1997 quarter. Sales were up slightly to $431.6 million
compared with $406.8 million the prior year. The net earnings impact of the
General Motors strike during the quarter was $.17 per share.
Net earnings for the first nine months of 1998 were $62.9 million, or
$2.65 per share (diluted), compared with $76.0 million, or $3.17 per share, in
the first nine months of 1997. Revenue was $1,347.6 million compared with
$1,300.0 million in 1997. Factors affecting performance included the General
Motors strike, weak sales in Asia and a low installation rate of four-wheel
drive products on a major truck model.
"Delivering on third quarter expectations despite difficult economic
conditions was a major accomplishment and we expect to see our first strong
year-over-year improvement for 1998 in the fourth quarter," said John F.
Fiedler, chairman and chief executive officer of Borg-Warner Automotive. He
cited strong engine-related growth, new programs at Chrysler and cost
reduction efforts for the anticipated improvement. These conditions are
expected to extend into 1999.
For the third quarter, revenue at Morse TEC rose 4% to $80.8 million. The
group experienced continued strong demand in North America for its engine
components and systems. This demand offset the weakness in its business in
Asia and the impact of the GM strike. The launch of new engine timing systems
for Chrysler and the growth of direct injected diesel engines which require
timing systems will drive continued growth.
Powertrain Systems' sales of $118.2 million were 17% below last year's
strong third quarter results. During the quarter, four wheel-drive transfer
case shipments for the Ford F-150 truck were down 33% from the prior-year
quarter, but installation rates began to improve from the second quarter of
1998. Four-wheel drive transfer case shipments to Korea showed minor
improvement.
Automatic Transmission Systems' sales were down 9% to $113.8 million.
Strong European demand could not offset the impact of the Asian market, the
General Motors strike and revenue lost through the partial sale of a torque
converter product line last year. During the quarter, the sale of the powder
metal connecting rod business was also completed. Improvement in the fourth
quarter of 1998 is anticipated from the new automatic transmission program at
Chrysler and sales to General Motors.
Sales for Air/Fluid Systems were up 7% to $82.1 million, due to Chrysler
engine and transmission programs. Transmission solenoid content on the new
Chrysler transmission, and increased demand for air induction modules for
Chrysler LH vehicles and other air management products both in North America
and Europe are expected to fuel future improvement.
Sales from the European turbocharger business through AG Kuhnle, Kopp &
Kausch were $47.3 million. The growth of direct injected diesel engines in
Europe for improved fuel performance and air quality is driving growth in that
business.
Chicago-based Borg-Warner Automotive, Inc. is a product leader in highly
engineered components and systems primarily for automotive drivetrain
applications. The company operates manufacturing facilities in 12 countries
serving the North American, European and Asian automotive markets.
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, 1997.
Note: Borg-Warner Automotive press releases are available on the Internet
via Company News On-Call: http://www.prnewswire.com or via fax, 800-758-5804,
ext. 120941.
Borg-Warner Automotive, Inc.
Consolidated Statement of Operations (Unaudited)
(millions of dollars, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
Net sales $431.6 $406.8 $1,347.6 $1,300.0
Cost of sales 337.9 323.7 1,058.6 1,016.3
Depreciation 18.9 17.0 57.5 51.5
Selling, general and administrative
expenses 36.6 25.5 112.7 95.5
Minority interest 0.9 0.6 2.4 1.8
Goodwill amortization 4.3 4.2 12.7 12.4
Equity in affiliate earnings
and other income (0.5) (3.1) (8.9) (11.7)
Earnings before interest expense,
finance charges and taxes 33.5 38.9 112.6 134.2
Interest expense and finance
charges 7.6 6.2 20.6 19.0
Provision for income taxes 8.6 11.1 29.1 39.2
Net earnings $17.3 $21.6 $62.9 $76.0
Net earnings per share - basic $0.74 $0.91 $2.68 $3.21
Net earnings per share - diluted $0.73 $0.90 $2.65 $3.17
Average shares outstanding
- basic (in millions) 23.5 23.7 23.5 23.7
Average shares outstanding
- diluted (in millions) 23.7 23.9 23.7 23.9
Borg-Warner Automotive, Inc.
Sales by Operating Group (Unaudited)
(millions of dollars, average shares outstanding)
Three Three % Nine Nine %
Months Months Change Months Months Change
1998 1997 1998 1997
Powertrain Systems $118.2 $142.1 -16.8% $379.7 $457.2 -17.0%
Automatic Transmission
Systems 113.8 124.6 -8.7% 358.3 387.0 -7.4%
Morse TEC 80.8 78.0 3.6% 252.7 239.3 5.6%
Air/Fluid Systems 82.1 76.7 7.0% 262.2 259.6 1.0%
AG Kuhnle, Kopp
& Kausch 47.3 0.0 N/A 129.8 0.0 N/A
Subtotal 442.2 421.4 4.9% 1,382.7 1,343.1 2.9%
Eliminations (10.6) (14.6)-27.4% (35.1) (43.1) -18.6%
Total $431.6 $406.8 6.1% $1,347.6 $1,300.0 3.7%