EPS Up 12% At BorgWarner
21 July 2000
Strong European Demand, Soft Euro Affect Q2 Results
CHICAGO - BorgWarner Inc. announced record second quarter earnings per
share of $1.51 on sales of $700.9 million, an increase of 12% over the prior
year's quarter. Results were down slightly from analysts' consensus
expectations due primarily to the impact of the continuing weak Euro on strong
European sales and softening in the heavy-duty truck market. The company
delivered good organic growth of 6% and operating margins above its target range
of 14-16% EBITDA.
Financial Results: The company reported net earnings for the second
quarter of $40.1 million, or $1.51 per share, compared with $36.3 million, or
$1.35 per share for the 1999 second quarter. Sales were up 9% to
$700.9 million compared with $640.8 million in the prior second quarter.
Net earnings for the first six months of 2000 were $81.1 million, or
$3.04 per share, a 13% increase, compared with $68.4 million, or $2.69 per
share, for the 1999 first half. Sales were up 20% to $1.4 billion compared
with $1.2 billion in 1999.
Comments and Outlook: "This was another record quarter for BorgWarner,"
said Chief Executive Officer John F. Fiedler. "With double digit sales growth
in Europe, however, we were adversely affected by a weak Euro when results are
translated into US dollars. Europe remains our fastest growing market because
of demand for more fuel efficient, clean burning engines that use our
products. We have high expectations for our business in this region going
forward."
Fiedler noted that the impact of European currency translation and a
weaker heavy-duty truck market, which will account for about 10% of company
sales after two planned divestitures, are expected to continue to impact
results in the second half of the year. The company has also begun to see a
decline in auto production in North America while levels in Europe and Asia
remain stable.
"Even as vehicle production begins to moderate in North America, we expect
to produce good internal growth, cash flow and strong margins, and expect to
adjust capital spending and costs to reflect the moderation," he said.
"Longer term, we continue to secure new business for engine, transmission and
four-wheel drive programs worldwide that we anticipate will enable us to
sustain growth for the foreseeable future."
Operating Results: For the second quarter ending June 30, 2000, revenue
at Morse TEC, including Turbo Systems, rose 8% to $226.1 million compared with
the 1999 second quarter. Demand for engine timing systems and turbochargers
in both North America and Europe drove revenue for those products. Sales for
Air/Fluid Systems, excluding a business unit to be sold, were up 8% to
$113.6 million despite weak vehicle sales at a major customer that reduced
demand for the group's air management and control products. TorqTransfer
Systems' sales of $143.2 million rose slightly from the prior year quarter.
Transmission Systems' sales were up 9% to $113.8 million, excluding sold
product lines, as the result of continued market share gains in shift quality
components and systems. The company's newest operating group, Cooling
Systems, reported sales of $76.9 million for the quarter, including results
from the acquisition of the Fluid Power Division of Eaton Corporation.
Second Quarter Activities: During the quarter, the company announced that
its board of directors authorized the purchase of up to 1.2 million shares of
the company's common stock. The company completed its previous share
repurchase program from 1997 in May. Approximately 500,000 shares of common
stock have been purchased since the beginning of 2000 under both programs.
In addition, the company announced a strategic alliance with Valeo Engine
Cooling to collaborate on the development of engine cooling systems for light,
medium and heavy truck engine vehicle applications. BorgWarner also launched
the first electronically controlled four-wheel drive system for front-wheel
drive vehicles, significantly broadening its market for these products.
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.
BorgWarner Inc.
Consolidated Statement of Operations (Unaudited)
(millions of dollars, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Net sales $700.9 $640.8 $1,431.1 $1,192.1
Cost of sales 531.3 491.7 1,081.5 916.1
Depreciation 25.9 22.8 52.1 43.3
Selling, general and
administrative expenses 57.8 53.5 121.3 95.9
Minority interest 0.4 0.4 1.2 0.8
Goodwill amortization 10.7 7.7 21.7 13.4
Equity in affiliate earnings
and other income (4.7) (4.6) (8.3) (7.1)
Earnings before interest
expense, finance charges
and taxes 79.5 69.3 161.6 129.7
Interest expense and
finance charges 15.9 12.6 31.8 21.2
Earnings before income taxes 63.6 56.7 129.8 108.5
Provision for income taxes 23.5 20.4 48.7 40.1
Net earnings $40.1 $36.3 $81.1 $68.4
Net earnings per share - basic $1.52 $1.36 $3.05 $2.71
Net earnings per share - diluted $1.51 $1.35 $3.04 $2.69
Average shares outstanding -
basic (in millions) 26.4 26.7 26.6 25.3
Average shares outstanding -
diluted (in millions) 26.5 26.9 26.7 25.5
BorgWarner Inc.
Selected Financial Information (Unaudited)
(millions of dollars)
June 30, December 31,
2000 1999
Receivables $252.2 $216.2
Inventories $182.0 $164.4
Debt $897.3 $980.3
Stockholders' Equity $1,095.6 $1,057.5
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Capital Spending $50.3 $30.5 $78.6 $57.9
BorgWarner Inc.
Sales by Operating Group (Unaudited
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Air/Fluid Systems $113.6 $105.0 $237.7 $201.9
Cooling Systems 76.9 30.8 157.0 40.1
Morse TEC 226.1 208.4 460.9 385.1
TorqTransfer Systems 143.2 142.1 290.5 292.3
Transmission Systems 113.8 104.7 229.3 206.6
Divested Operations 39.3 62.8 80.6 92.5
Subtotal 712.9 653.8 1,456.0 1,218.5
Eliminations (12.0) (13.0) (24.9) (26.4)
Total Sales by Operating Group $700.9 $640.8 $1,431.1 $1,192.1
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Air/Fluid Systems $10.1 $8.9 $25.8 $16.9
Cooling Systems 10.2 4.0 21.2 5.4
Morse TEC 32.5 29.0 65.8 55.6
TorqTransfer Systems 9.4 10.4 19.7 21.3
Transmission Systems 13.5 14.6 28.2 30.1
Divested Operations 1.8 5.6 4.2 6.7
Total EBIT by Operating Group $77.5 $72.5 $164.9 $136.0