BorgWarner Reports Third Quarter Sales Up 5%
24 October 2000
BorgWarner Reports Third Quarter Sales Up 5%; New Business Gains Expected to Drive Growth
CHICAGO, Oct. 23 BorgWarner Inc. today
reported third quarter earnings of $.95 per share, excluding a restructuring
charge, in line with previously announced expectations. Sales were up 5% for
the quarter and 15% year-to-date over 1999. As anticipated, results were
affected by the impact of a continuing weak euro on strong European sales,
Ford production shutdowns during the quarter and the deterioration of the
heavy-duty truck market.
Financial Results: The company reported 2000 third quarter net earnings
before the restructuring charge of $24.9 million, or $.95 per share, compared
with $27.4 million, or $1.02 per share for the 1999 third quarter. The
one-time after tax restructuring charge was $19.6 million or $.75 per
share. Third quarter 2000 sales were $618.5 million, up 5% compared with
$589.7 million in the prior third quarter. Net income for the 2000 third
quarter was $5.3 million.
Excluding the restructuring charge, net earnings for the first nine
months of 2000 were $105.9 million, or $4.00 per share, compared with
$95.8 million, or $3.71 per share, for the 1999 period. Sales were up 15% to
$2,049.6 million compared with $1,781.8 million in 1999. Net income for the
first nine months of 2000 was $86.3 million.
Comments and Outlook: "We have acted quickly and continue to focus on
getting costs in line to manage through this period of slower industry
growth," said John Fiedler, chairman and chief executive officer. "We are
pleased to have maintained sales growth momentum in the quarter and are very
encouraged by the new business we are winning for the long-term. By managing
our operations effectively over the next year, we will be well positioned to
keep BorgWarner on track to achieve our historic growth targets."
John Fiedler pointed to a number of external factors that will continue to
impact the company's performance. These factors include the significant
effect of currency translation from the euro, weak volumes for Ford and
Chrysler vehicles in which BorgWarner has significant content, and a
deterioration in heavy-duty truck orders from all-time highs to below-average
levels this year. "Despite these issues, BorgWarner expects to deliver
full-year earnings above last year's level of $5.07 per share, exclusive of
the restructuring charge. Growth from continuing operations in 2001 is
expected to be about 3% to 5%," he said.
In addition, he expressed optimism about the long-term growth prospects
for the company. "We continue to secure contracts with significant new
customers for four-wheel drive systems and engine related products, and for
the first application of our innovative technology to automated manual
transmissions. Our growth continues to be driven by the need to improve fuel
economy and air quality worldwide," he said. "Our strategy of powertrain
technology leadership remains viable."
Quarter in Review: During the quarter, the company announced new business
with a major European automaker to supply the first application of its
wet clutch and control system technology for a new concept OEM automated
transmission. The potential market for the fuel-saving technology is expected
to exceed $1 billion in annual sales in the future. The company also
announced firm commitments from a major North American vehicle supplier for
purchase of a new generation of electronically controlled engine cooling
products that provide better cooling solutions and improved fuel economy for
SUVs, light trucks and other applications.
During the quarter, the company also announced cost-reduction efforts to
bring costs in line with industry conditions, resulting in a one-time charge
to earnings. The charge includes restructuring costs related to the
rationalization and integration of certain businesses and actions taken to
bring costs in line with vehicle production slowdowns in major customer
product lines. The restructuring is expected to save the company
approximately $9 million annually after taxes, beginning in 2001.
Operating Results: For the third quarter ended September 30, 2000,
revenue at Morse TEC, including Turbo Systems, rose 8% to $215.6 million
compared with the 1999 third quarter. Results for the group were driven
by demand for engine timing systems and turbochargers in both North America
and Europe. Sales for Air/Fluid Systems, excluding a business unit to be
sold, were flat at $98.7 million due to weak vehicle sales at a major customer
that reduced demand for the group's air management and control products.
TorqTransfer Systems' sales of $115.9 million were off 10%. Transmission
Systems' sales were up 5% to $103.3 million, excluding sold product lines, the
result of continued market share gains in shift-quality components and systems
in both Europe and North America. The company's newest operating group,
Cooling Systems, reported sales of $66.7 million for the quarter, including
results from the acquisition of the Fluid Power Division of Eaton Corporation.
BorgWarner Inc.
Consolidated Statement of Operations (Unaudited)
(millions of dollars, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Net sales $618.5 $589.7 $2,049.6 $1,781.8
Cost of sales 473.1 458.6 1,554.6 1,374.7
Depreciation 25.2 22.6 77.2 65.9
Selling, general and
administrative expenses 57.5 51.0 178.8 146.9
Minority interest 0.7 0.4 1.9 1.2
Goodwill amortization 10.8 7.7 32.5 21.1
Restructuring charge 32.6 0.0 32.6 0.0
Equity in affiliate
earnings and other
income (4.2) (3.9) (12.3) (11.0)
Earnings before interest
expense, finance
charges and taxes 22.8 53.3 184.3 183.0
Interest expense and
finance charges 15.9 10.5 47.7 31.7
Earnings before income
taxes 6.9 42.8 136.6 151.3
Provision for income
taxes 1.6 15.4 50.3 55.5
Net earnings $5.3 $27.4 $86.3 $95.8
Net earnings per share
- basic $0.20 $1.03 $3.27 $3.73
Net earnings per share
- diluted $0.20 $1.02 $3.26 $3.71
Average shares
outstanding - basic
(in millions) 26.2 26.7 26.4 25.7
Average shares
outstanding - diluted
(in millions) 26.3 26.8 26.5 25.9
BorgWarner Inc.
Selected Financial Information (Unaudited)
(millions of dollars)
September 30, December 31,
2000 1999
Receivables $231.0 $216.2
Inventories $184.5 $164.4
Debt $893.9 $980.3
Stockholders' equity $1,082.1 $1,057.5
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Capital spending $32.9 $34.9 $111.5 $92.8
BorgWarner Inc.
Net Earnings Reconciliation (Unaudited)
(millions of dollars, except per share data)
Three Months Ended,
September 30, 2000
Restructuring From
Consolidated Charge Operations
Net sales $618.5 $618.5
Cost of sales 473.1 473.1
Depreciation 25.2 25.2
Selling, general and
administrative expenses 57.5 57.5
Minority interest 0.7 0.7
Goodwill amortization 10.8 10.8
Restructuring charge 32.6 32.6 0.0
Equity in affiliate earnings
and other income (4.2) (4.2)
Earnings before interest
expense, finance charges
and taxes 22.8 (32.6) 55.4
Interest expense and
finance charges 15.9 15.9
Earnings before income taxes 6.9 (32.6) 39.5
Provision for income taxes 1.6 (13.0) 14.6
Net earnings $5.3 ($19.6) $24.9
Net earnings per share - basic $0.20 ($0.75) $0.95
Net earnings per share
- diluted $0.20 ($0.75) $0.95
Average shares outstanding
- basic (in millions) 26.2 26.2 26.2
Average shares outstanding
- diluted (in millions) 26.3 26.3 26.3
Nine Months Ended,
September 30, 2000
Restructuring From
Consolidated Charge Operations
Net sales $2,049.6 $2,049.6
Cost of sales 1,554.6 1,554.6
Depreciation 77.2 77.2
Selling, general and
administrative expenses 178.8 178.8
Minority interest 1.9 1.9
Goodwill amortization 32.5 32.5
Restructuring charge 32.6 32.6 0.0
Equity in affiliate earnings
and other income (12.3) (12.3)
Earnings before interest
expense, finance charges
and taxes 184.3 (32.6) 216.9
Interest expense and
finance charges 47.7 47.7
Earnings before income taxes 136.6 (32.6) 169.2
Provision for income taxes 50.3 (13.0) 63.3
Net earnings $86.3 ($19.6) $105.9
Net earnings per share
- basic $3.27 ($0.74) $4.01
Net earnings per share
- diluted $3.26 ($0.74) $4.00
Average shares outstanding
- basic (in millions) 26.4 26.4 26.4
Average shares outstanding
- diluted (in millions) 26.5 26.5 26.5
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Air/Fluid Systems $98.7 $98.7 $336.4 $300.6
Cooling Systems 66.7 27.6 223.7 67.7
Morse TEC 215.6 199.5 676.4 584.6
TorqTransfer Systems 115.9 128.2 406.4 420.5
Transmission Systems 103.3 98.5 332.6 305.1
Divested Operations 28.7 48.7 109.3 141.2
Subtotal 628.9 601.2 2,084.8 1,819.7
Eliminations (10.3) (11.5) (35.2) (37.9)
Total Sales by
Operating Group $618.6 $589.7 $2,049.6 $1,781.8
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Air/Fluid Systems $4.8 $6.8 $30.5 $23.7
Cooling Systems 6.9 3.3 28.1 8.7
Morse TEC 30.3 26.5 96.2 82.1
TorqTransfer Systems 7.0 8.2 26.7 29.5
Transmission Systems 9.2 11.6 37.4 41.7
Divested Operations (0.3) (0.3) 4.0 6.4
Total EBIT by Operating
Group $57.9 $56.1 $222.9 $192.1