BorgWarner Reports Record Year With EPS Up 27%
3 February 2000
BorgWarner Reports Record Year With EPS Up 27%; Strong Internal Growth Continues
CHICAGO, Feb. 2 -- Borg-Warner Automotive, Inc.
today announced record financial results for 1999. Earnings rose 27% per
share; sales climbed 34% with strong internal growth accounting for over
one-third of the sales increase. Driving record results were: Increased
BorgWarner content in new engine and automatic transmission programs that
improve fuel economy and emissions, strong U.S. production, the continued
popularity of sport-utility vehicles and light trucks, and acquisitions.
Financial Results: For the 1999 fourth quarter, net income was
$36.4 million, or $1.36 per share compared with $31.8 million or $1.35 per
share in 1998. Sales for the quarter rose to $677 million from $489 million
in 1998.
Full-year 1999 net income was $132.3 million or $5.07 per share compared
with $94.7 million or $4.00 per share in 1998. Sales for 1999 totaled
$2.46 billion compared with $1.84 billion in 1998. Results for 1998 were
reduced by approximately $.30 per share due to the General Motors strike.
Comments and Outlook: "We have had an exceptional year with excellent
results from all our operations," said John F. Fiedler, BorgWarner chairman
and chief executive officer. "Our continued strength from internal growth and
the integration of two acquisitions with accompanying market share gains
provide us with a solid base for anticipating another outstanding year in
2000. Our strategic emphasis on powertrain technology to improve fuel economy
and emissions is driving our growth. We expect to see continued strong growth
in our engine components and systems, with about 50% of our 2000 revenue and
70% of new business over the next three years anticipated in this area.
Margin improvement is expected from our expanded base of technology-driven
businesses and continued productivity improvement. Margins will also benefit
if vehicle production moderates in North America from the overheated levels of
1999 and we can operate at more efficient, normal production levels."
Quarter in Review: During the fourth quarter, the company announced
anticipated new business over the next three years of $850 million from
vehicle makers worldwide. The purchase of the Fluid Power Division of Eaton
Corporation was completed to create BorgWarner Cooling Systems, the world
leader in highly engineered viscous cooling products for improved engine
temperature management.
In addition, the company sold Coleman Cable, acquired as part of the
company's acquisition of Kuhlman Corporation in March, 1999. In October, the
company sold its forged powder metal operation in Ohio. With the divestitures
of non-core businesses off-setting some acquisition costs and anticipated
solid cash flow, the company has already begun to bring its debt level back to
more conservative levels.
Operating Results: For the fourth quarter, revenue at Morse TEC,
including BorgWarner Turbo Systems, rose 50% to $230.9 million. Strong demand
for Morse TEC chain products and systems for engines, automatic transmissions
and four-wheel drive drove revenue for those products. Accelerating demand
for European passenger car turbochargers continued to boost Turbo Systems'
results.
TorqTransfer Systems' (formerly Powertrain Systems) sales of
$142.8 million improved 3% over their strong 1998 quarter. The results
reflect strong sales of four-wheel-drive systems for Ford light trucks and
sport-utility vehicles and the Mercedes M-Class All-Activity Vehicle, as well
as exports of four-wheel-drive transfer cases to Korea.
Transmission Systems' sales were up 15% to $108.3 million, excluding sold
product lines. The group saw continued strong European and North American
demand and stable conditions in Asia during the quarter.
Sales for Air/Fluid Systems were up 48% to $132.5 million, due to demand
for emission reduction products and the inclusion of the acquired fuel systems
business of Kuhlman Corporation.
Sales for the newly created Cooling Systems operations, broken out as a
separate operating group for the first time, were $74.2 million for the
quarter and $142.8 million for the full year. Sales include three months of
the Eaton Fluid Power Division acquired in the fourth quarter and 10 months of
the BorgWarner cooling system business acquired with Kuhlman Corporation in
March and previously reported through Morse TEC.
Chicago-based BorgWarner is a product leader in highly engineered
components and systems for vehicle powertrain applications worldwide. The
company operates 60 manufacturing and technical facilities in 13 countries.
Customers include Ford, DaimlerChrysler, General Motors, Toyota, Caterpillar,
Navistar, PSA and VW Group. The Internet address for BorgWarner is:
http://www.bwauto.com .
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, 1998.
BorgWarner Inc.
Consolidated Statement of Operations (Unaudited)
(millions of dollars, except per share data)
Three Months Ended, Twelve Months Ended
December 31, December 31,
1999 1998 1999 1998
Net sales $676.8 $489.2 $2,458.6 $1,836.8
Cost of sales 513.9 385.2 1,888.5 1,450.7
Depreciation 25.3 17.3 91.3 74.8
Selling, general and
administrative expenses 56.4 29.3 203.3 135.1
Minority interest 0.1 (0.3) 1.3 2.1
Goodwill amortization 11.0 4.1 32.1 16.8
Equity in affiliate earnings
and other income (3.1) (1.4) (14.1) (10.3)
Earnings before interest
expense, finance charges
and taxes 73.2 55.0 256.2 167.6
Interest expense and finance
charges 17.6 6.3 49.2 26.9
Earnings before income taxes 55.6 48.7 207.0 140.7
Provision for income taxes 19.2 16.9 74.7 46.0
Net earnings $36.4 $31.8 $132.3 $94.7
Net earnings per share - basic $1.36 $1.35 $5.10 $4.03
Net earnings per share -
diluted $1.36 $1.35 $5.07 $4.00
Average shares outstanding -
basic (in millions) 26.7 23.5 25.9 23.5
Average shares outstanding -
diluted (in millions) 26.8 23.7 26.1 23.7
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars)
Fourth Fourth % Twelve Twelve %
Quarter Quarter Change Months Months Change
1999 1998 1999 1998
Air/Fluid Systems 132.5 89.3 48.4% 491.5 351.4 39.9%
Cooling Systems 74.2 0.0 N/A 142.8 0.0 N/A
Morse TEC $230.9 $153.7 50.2% $856.0 $536.2 59.6%
TorqTransfer Systems 142.8 139.1 2.7% 563.3 518.8 8.6%
Transmission Systems 108.3 94.1 15.1% 413.4 355.0 16.5%
Divested Operations 0.8 23.7 N/A 41.3 121.1 N/A
Subtotal 689.5 499.9 37.9% 2,508.3 1,882.5 33.2%
Eliminations (12.7) (10.7) 18.7% (49.7) (45.7) 8.8%
Total $676.8 $489.2 38.3% $2,458.6 $1,836.8 33.9%