Strong Year-End for Borg-Warner Automotive
9 February 1999
Strong Year-End for Borg-Warner Automotive; Fourth Quarter EPS Up 18%
CHICAGO, Feb. 8 -- Borg-Warner Automotive, Inc.
today reported that 1998 fourth quarter earnings per share were up 18% to
$1.35 per share. Strong performance in the company's engine-related systems
business drove full-year results, with strength across all operations during
the fourth quarter. Economic conditions in Asia and the General Motors strike
reduced full-year results.
Financial Results: For the 1998 fourth quarter, net income was
$31.8 million or $1.35 per share compared with $27.2 million, or $1.14 per
share in 1997. Sales for the quarter rose to $489 million from $467 million
in 1997.
Full-year 1998 net income was $94.7 million or $4.00 per share, compared
with $103.2 million or $4.31 per share. Sales for 1998 totaled $1.84 billion
compared with $1.77 billion in 1997. Results for 1998 were reduced by
approximately $.90 per share due to Asia and the General Motors strike.
Comments and Outlook: "We expected to make a comeback in the second half
of 1998 and we did," said John F. Fiedler, chairman and chief executive
officer of Borg-Warner Automotive. "Our fourth quarter performance was
especially gratifying because we delivered on investor expectations and
reaffirmed the value of our long-range strategy following a disappointing
first half of the year.
"Going into 1999, we expect to see continued strength in our markets. For
BWA, changing engine technologies have replaced four-wheel drive as our
near-term growth catalyst. These changes are creating demand for our timing
systems, turbochargers and air management systems and components throughout
the world. Our presence in Europe, which doubled in 1998 to 17% of combined
worldwide sales, is especially important, because that is where much of the
technology change is occurring."
Operating Results: For the fourth quarter, revenue at Morse TEC rose
19% to $100.6 million. The group experienced continued strong demand in North
America and Europe for its engine components and systems. The launch of new
engine timing systems for Chrysler and the growth of direct injected diesel
engines which require timing systems are expected to drive continued growth.
Powertrain Systems' sales of $139.1 million were 11% below last year's
strong fourth quarter results. During the quarter, four wheel-drive transfer
case shipments for the Ford F-150 truck were down from the prior-year quarter,
but installation rates continued the improvement begun in the third quarter of
1998. Four-wheel-drive transfer case shipments to Korea during the fourth
quarter also showed improvement over the third quarter.
Automatic Transmission Systems' sales for the fourth quarter were up 2% to
$107.2 million, excluding sold product lines. Strong European demand and
robust sales to General Motors offset the impact of the Asian market, although
some improvement in Korea from the 1998 third to the fourth quarter was
evident.
Sales for Air/Fluid Systems were up 8% to $89.2 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 were $53.1 million. During
the fourth quarter, Borg-Warner Automotive announced that it had purchased the
remaining 37% of this turbocharger business from of AG Kuhnle, Kopp & Kausch,
and that it had signed a definitive agreement to acquire Kuhlman Corporation,
a major US supplier of turbochargers. This acquisition is anticipated to
close in early March, pending a vote of Kuhlman Corporation shareholders.
Turbocharged engines are becoming increasingly popular in Europe because of
high fuel prices and increasing stringent air quality regulations. In the US,
turbocharged engines are an emerging solution to improve fuel performance for
sport-utility vehicles and light trucks.
Chicago-based Borg-Warner Automotive, Inc. is a product leader in highly
engineered components and systems for automotive drivetrain applications
worldwide. The company operates manufacturing facilities in 12 countries
serving automakers in North America, Europe and Asia.
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
at http://www.bwauto.com or 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 TWELVE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
Net sales $489.2 $467.0 $1,836.8 $1,767.0
Cost of sales 385.2 359.1 1,450.7 1,375.4
Depreciation 17.3 18.9 74.8 70.4
Selling, general and
administrative expenses 29.3 36.5 135.1 132.0
Minority interest (0.3) 1.4 2.1 3.2
Goodwill amortization 4.1 4.3 16.8 16.7
Equity in affiliate earnings
and other income (1.4) (1.5) (10.3) (13.2)
Earnings before interest expense,
finance charges and taxes 55.0 48.3 167.6 182.5
Interest expense and finance
charges 6.3 5.6 26.9 24.6
Provision for income taxes 16.9 15.5 46.0 54.7
Net earnings $31.8 $27.2 $94.7 $103.2
Net earnings per share -- basic $1.35 $1.14 $4.03 $4.35
Net earnings per share -- diluted $1.35 $1.14 $4.00 $4.31
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)
Fourth Fourth % Twelve Twelve %
Quarter Quarter Change Months Months Change
1998 1997 1998 1997
Powertrain Systems $139.1 $156.4 -11.1% $518.8 $613.6 -15.4%
Automatic
Transmission
Systems 107.2 105.1 2.0% 402.6 418.1 -3.7%
Morse TEC 100.6 84.8 18.6% 353.3 324.1 9.0%
Air/Fluid Systems 89.2 82.9 7.6% 351.4 342.4 2.6%
AG Kuhnle,
Kopp & Kausch 53.1 24.8 N/A 182.9 24.8 N/A
Businesses Sold 10.6 27.4 N/A 73.5 101.4 N/A
Subtotal 499.8 481.4 3.8% 1,882.5 1,824.4 3.2%
Eliminations (10.6) (14.4) -26.4% (45.7) (57.4) -20.4%
Total $489.2 $467.0 4.8% $1,836.8 $1,767.0 4.0%
* Last year's AG Kuhnle, Kopp & Kausch reflects only two months of sales.