BorgWarner Growth Drives Record First Quarter Results; Company Reaffirms 2008 Guidance
02 May 2008 - 9:30PM
PR Newswire (US)
AUBURN HILLS, Mich., May 2 /PRNewswire-FirstCall/ -- BorgWarner
Inc. (NYSE:BWA) today reported record sales and earnings for the
first quarter of 2008. Demand for its fuel-efficient technologies
in Europe and Asia drove the global powertrain systems supplier's
strong results, despite weak auto sales in North America. First
Quarter Highlights: -- Record sales of $1,498.9 million, up 17%
from first quarter 2007, or 8% excluding currency -- Sales outside
of the U.S. grew 15% over first quarter 2007, excluding the impact
of currency -- Record earnings of $0.75 per diluted share, up 50%
from first quarter 2007 adjusted for a two-for-one stock split on
December 17, 2007. -- Operating income margin of 8.5% -- 2008
earnings guidance of $2.85 to $3.00 per diluted share reaffirmed
Comment and Outlook: "The year got off to a strong start, with
excellent results in Europe and Asia," said Tim Manganello,
Chairman and CEO. "Despite recession worries, we are seeing stable
growth driven by our product technologies that improve fuel
economy, lower emissions and provide better vehicle performance.
Our sales outside of the U.S. were up 15%, excluding the impact of
currency, compared with vehicle production outside of the U.S. that
was up only 4%. Our sales in the U.S. declined 4% due to lower U.S.
vehicle production, which was down 8%." Commenting on the remainder
of the year, Manganello pointed to the Company's reaffirmation of
its 2008 earnings guidance in the range of $2.85 to $3.00 per
diluted share, which implies earnings growth of 20% to 25% compared
with 2007. "We expect 2008 to be another record year for
BorgWarner," he said. "Consumers want better fuel economy and
reduced emissions in every region of the world. These needs are
driving demand for BorgWarner's leading powertrain technologies
like turbochargers and dual-clutch transmission modules for which
we are launching new programs and expanding capacity. The strength
of the platforms we are on has allowed us to more than offset
general vehicle schedule declines, and will enable our continued
growth to outpace that of the industry in the future." Financial
Results: For first quarter 2008, sales were up 17% to $1,498.9
million, compared with $1,277.8 million in first quarter 2007. Net
income in the quarter was $88.7 million, or $0.75 per diluted
share, compared with $58.4 million, or $0.50 per diluted share in
first quarter 2007 adjusted for the two-for-one stock split on
December 17, 2007. The impact of foreign currencies, primarily the
Euro, increased sales by $115.3 in first quarter 2008 compared with
first quarter 2007, and net income by $7.3 million, or $0.06 per
diluted share adjusted for the two-for-one stock split. Operating
income was $126.7 million, or 8.5% of sales, in first quarter 2008
versus $89.9 million, or 7.0% of sales, in first quarter 2007.
First quarter 2007 operating income and net income were negatively
impacted by a warranty related charge of $14.0 million pre-tax or
$0.085 per diluted share. Research and development spending was
$57.5 million in the quarter versus $50.9 million in 2007. Net cash
provided by operating activities was $74.5 million in first quarter
2008 versus $82.6 million in first quarter 2007. Investments in
capital expenditures, including tooling outlays, totaled $75.4
million for the quarter, compared with $58.3 million for the same
period in 2007. The company also repurchased $13.5 million of its
stock during the quarter. Balance sheet debt increased by $93
million and cash increased by $15 million in first quarter 2008
compared with the end of 2007. Engine Group Results: Strong global
demand for its turbochargers boosted Engine Group first quarter
2008 sales 23% versus first quarter 2007 to $1,098.1 million with
earnings before interest and taxes at $137.9 million. Sales outside
of the U.S. were up 16% excluding the impact of foreign currencies.
Demand outside of the U.S. for the group's engine timing, ignition,
emissions and thermal products helped offset lower domestic sales
of those products, which were lower primarily due to lower domestic
vehicle production. Drivetrain Group Results: First quarter 2008
sales were up 5% versus first quarter 2007 to $409.8 million with
earnings before interest and income taxes at $18.3 million. Sales
outside of the U.S. were up 12%, excluding the impact of foreign
currencies, as the group continued to benefit from increased demand
for dual-clutch transmission and torque transfer products. Sales in
the U.S. were down 10% primarily due to lower domestic vehicle
production. The decline in the group's earnings before interest and
taxes in the quarter was related to challenging new product
launches outside of the U.S. and lower North American sales of
light trucks and SUVs equipped with our products. Recent
Highlights: Continued global expansion to meet the demand for its
fuel efficient products saw BorgWarner expanding, breaking ground
or opening a number of facilities in recent months. In the Engine
segment, BorgWarner Turbo & Emissions Systems broke ground for
a new production facility in Rzeszow, Poland. BorgWarner Thermal
Systems opened a new facility in Ningbo, China and broke ground for
a new facility near Chennai, India. In addition, the company's
Board of Directors approved the investment of approximately $125
million to increase its global turbocharger capacity by more than
three million units over the next several years. The increased
capacity will support new business awards in North America, Europe
and Asia. The projects include new facilities to produce
turbochargers in Mexico for Ford and in Thailand for a major
Japanese automaker. Expansion of facilities in Hungary and Poland
will provide turbochargers for both diesel and gasoline engine
programs in Europe. The world market for turbochargers is expected
to grow over 40% in the next five years. To serve the growing
market for dual-clutch transmission technology, BorgWarner opened
its second manufacturing facility on its Drivetrain campus in
Arnstadt, Germany, doubling the manufacturing area of the current
site. Construction is also underway for a new Drivetrain facility
in Ramos, Mexico. The facility will produce dual-clutch
transmission modules to serve the North American market in addition
to other drivetrain products. In other action, the company's Board
of Directors authorized the repurchase of an additional 5 million
shares of common stock. The new authorization was made in
anticipation of exhausting the limited number of shares that remain
available under the previous program authorized in 2000. The
company has maintained share repurchase programs since 1997. At
9:30 a.m. ET today, a brief conference call concerning first
quarter results will be webcast at:
http://www.borgwarner.com/invest/webcasts.shtml . Auburn Hills,
Michigan-based BorgWarner Inc. (NYSE:BWA) is a product leader in
highly engineered components and systems for vehicle powertrain
applications worldwide. The FORTUNE 500 company operates
manufacturing and technical facilities in 64 locations in 17
countries. Customers include VW/Audi, Ford, Toyota, Renault/Nissan,
General Motors, Hyundai/Kia, Daimler, Chrysler, Fiat, BMW, Honda,
John Deere, PSA, and MAN. The Internet address for BorgWarner is:
http://www.borgwarner.com/ . Additional Important Information
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,
many of which are difficult to predict and generally beyond our
control, that could cause actual results to differ materially from
those expressed, projected or implied in or by the forward-looking
statements. Such risks and uncertainties include: fluctuations in
domestic or foreign vehicle production, the continued use of
outside suppliers, fluctuations in demand for vehicles containing
our products, changes in general economic conditions, and other
risks detailed in our filings with the Securities and Exchange
Commission, including the Risk Factors, identified in our most
recently filed Annual Report on Form 10-K. We do not undertake any
obligation to update any forward-looking statements. Financial
Tables Follow BorgWarner Inc. Condensed Consolidated Statement of
Operations (Unaudited) (millions of dollars, except per share data)
Three Months Ended March 31, 2008 2007 Net Sales $1,498.9 $1,277.8
Cost of Sales 1,215.4 1,061.9 Gross profit 283.5 215.9 Selling,
general and administrative expenses 155.7 126.7 Other (income)
expense 1.1 (0.7) Operating income 126.7 89.9 Equity in affiliates'
earnings, net of tax (9.1) (9.2) Interest expense and finance
charges 6.5 8.9 Earnings before income taxes and minority interest
129.3 90.2 Provision for income taxes 33.6 24.4 Minority interest,
net of tax 7.0 7.4 Net earnings $ 88.7 $ 58.4 Earnings per share -
Diluted $ 0.75 $ 0.50 Weighted average shares outstanding - Diluted
(millions) 118.5 117.2 Supplemental Information (Unaudited)
(millions of dollars) Three Months Ended March 31, 2008 2007
Capital expenditures, including tooling outlays $ 75.4 $ 58.3
Depreciation and amortization: Fixed assets and tooling $ 66.8 $
60.2 Other 5.4 4.1 $ 72.2 $ 64.3 BorgWarner Inc. Net Sales by
Reporting Segment (Unaudited) (millions of dollars) Three Months
Ended March 31, 2008 2007 Engine $1,098.1 $ 894.1 Drivetrain 409.8
392.0 Inter-segment eliminations (9.0) (8.3) Operations $1,498.9
$1,277.8 Segment Earnings Before Interest and Income Taxes
(Unaudited) (millions of dollars) Three Months Ended March 31, 2008
2007 Engine $ 137.9 $ 85.3 Drivetrain 18.3 27.7 Segment earnings
before interest and income taxes ("Segment EBIT") 156.2 113.0
Corporate expenses, net of equity in affiliates' earnings 20.4 13.9
Consolidated earnings before interest and taxes ("EBIT") 135.8 99.1
Interest expense and finance charges 6.5 8.9 Earnings before income
taxes and minority interest 129.3 90.2 Provision for income taxes
33.6 24.4 Minority interest, net of tax 7.0 7.4 Net earnings $ 88.7
$ 58.4 BorgWarner Inc. Condensed Consolidated Balance Sheet
(Unaudited) (millions of dollars) March 31, 2008 December 31, 2007
Assets Cash $ 203.4 $ 188.5 Marketable securities 11.8 14.6
Receivables, net 955.1 802.4 Inventories, net 471.8 447.6 Other
current assets 125.0 127.2 Total current assets 1,767.1 1,580.3
Property, plant and equipment, net 1,672.2 1,609.1 Other
non-current assets 1,847.9 1,769.1 Total assets $ 5,287.2 $ 4,958.5
Liabilities and Stockholders' Equity Notes payable $ 144.3 $ 63.7
Current portion of long-term debt 138.6 - Accounts payable and
accrued expenses 1,035.6 993.0 Income taxes payable 17.9 27.2 Total
current liabilities 1,336.4 1,083.9 Long-term debt 446.7 572.6
Other non-current liabilities 902.7 863.0 Minority interest in
consolidated subsidiaries 122.0 117.9 Stockholders' equity 2,479.4
2,321.1 Total liabilities and stockholders' equity $ 5,287.2 $
4,958.5 BorgWarner Inc. Condensed Consolidated Statements of Cash
Flow (Unaudited) (millions of dollars) Three Months Ended March 31,
2008 2007 Operating Net earnings $ 88.7 $ 58.4 Non-cash charges
(credits) to operations: Depreciation and amortization 72.2 64.3
Deferred income tax loss (benefit) 4.0 (7.0) Other non-cash items
9.9 11.0 Net earnings adjusted for non-cash charges to operations
174.8 126.7 Changes in assets and liabilities (100.3) (44.1) Net
cash provided by operating activities 74.5 82.6 Investing Capital
expenditures, including tooling outlays (75.4) (58.3) Net proceeds
from asset disposals 0.3 2.1 Purchases of marketable securities -
(12.5) Proceeds from sale of marketable securities 3.7 14.4 Net
cash used in investing activities (71.4) (54.3) Financing Net
increase (decrease) in notes payable 79.0 (39.7) Net change in
long-term debt (5.1) 12.5 Payment for purchase of treasury stock
(13.5) - Proceeds from stock options exercised, net of tax benefit
2.7 13.1 Dividends paid to BorgWarner stockholders (12.8) (9.8)
Dividends paid to minority shareholders (8.2) (10.9) Net cash (used
in) provided by financing activities 42.1 (34.8) Effect of exchange
rate changes on cash (30.3) 1.3 Net increase (decrease) in cash
14.9 (5.2) Cash at beginning of year 188.5 123.3 Cash at end of
year $ 203.4 $ 118.1 DATASOURCE: BorgWarner Inc. CONTACT: Mary
Brevard of BorgWarner Inc., +1-248-754-0881 Web site:
http://www.borgwarner.com/
http://www.borgwarner.com/invest/webcasts.shtml
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