BorgWarner Earns $1.65 Per Share for Q203; Engine and Four-Wheel Drive Systems Continue to Spur Growth
CHICAGO, July 21 -- BorgWarner Inc. delivered earnings of $1.65 per share in the second quarter of 2003 on an 8% sales increase. Increased demand for the company's fuel-efficient engine technology and four-wheel drive systems continued to drive growth and more than offset the impact of lower industry production during the quarter.
Financial Results: For the 2003 second quarter, the company reported net earnings of $44.8 million or $1.65 per share, compared with $45.7 million, or $1.70 per share for the exceptionally strong 2002 second quarter. Sales were $769.5 million compared with $712.4 million in the prior year's second quarter.
Net earnings for the first six months of 2003 were $89.0 million or $3.30 per share compared with $77.2 million or $2.88 per share before the cumulative effect of the change in accounting for goodwill. Sales were up 15% to $1.5 billion, compared with $1.3 billion in 2002.
Comments and Outlook: "BorgWarner's performance continues to outpace global auto industry growth because our powertrain technology serves the fastest growing areas of the market," said Timothy M. Manganello, Chairman and CEO. "Significant new business has bolstered our performance beginning in the second quarter of last year. These include our electronic all-wheel systems for crossover vehicles such as those from Honda, Acura and Hyundai, and four- wheel drive systems for new GM applications. In Europe, the demand for fuel- efficient cars is driving the growth of our engine-related products, while our Asian customers are experiencing significant growth in North America."
George E. Strickler, Executive Vice President and CFO, said the company expects continued growth in 2003 and reiterated guidance for full-year earnings per share of $6.20 to $6.35. "We continue to see strong sales growth for our turbochargers and four-wheel drive systems," he noted. "As our product mix shifts to these systems with more purchased content, we expect to continue to improve our return on invested capital while having a minimal impact on margins. Second quarter margins were also affected by currency, especially the strong Euro, and costs related to new business opportunities."
Operating Group Results: The company's Engine Group registered a 9% sales gain to $471.6 million with a 2% increase in operating income. Strong sales of turbochargers offset the decline in sales of chain and emissions/thermal products compared with last year's strong second quarter. The group continues to benefit from demand for the company's products for European passenger cars and commercial vehicles, and sales growth for a variety of products in emerging markets such as India and China.
Sales for the Drivetrain Group were up 7% while operating margins declined compared with last year's strong second quarter. Increased sales of four- wheel drive systems offset the impact of start-up costs for the group's new fuel-efficient transmission technology being introduced in Europe.
Recent Highlights: During the quarter, CEO Timothy Manganello was elected to the additional position of Chairman, succeeding retiring Chairman John Fiedler. BorgWarner Turbo Systems and Honeywell also announced that they have settled their patent dispute relating to variable geometry turbochargers by extending their licensing arrangement until 2006. In addition, BorgWarner Morse TEC introduced the first chain for a power take-off unit (PTU) offered to the marketplace. The system will help enable the all-wheel drive capability of Volvo's first SUV, the XC90.
BorgWarner Inc. is a product leader in highly engineered components and systems for vehicle powertrain applications worldwide. The company operates manufacturing and technical facilities in 43 locations in 14 countries. Customers include Ford, DaimlerChrysler, General Motors, Toyota, Honda, Hyundai/Kia, Caterpillar, Navistar International, Renault/Nissan, Peugeot and VW/Audi. The Internet address for BorgWarner is: http://www.bwauto.com/ . For further information contact BorgWarner Corporate Communications at 312-322-8500. Investor conference calls are webcast at: http://www.bwauto.com/investor/investor_index.html .
BorgWarner Inc.
Consolidated Statements of Operations (Unaudited)
(millions of dollars, except per share data)
Three Months Ended Six Months Ended
June 30, % June 30, %
2003 2002 Change 2003 2002 Change
Net sales $769.5 $712.4 8.0% $1,545.2 $1,346.3 14.8%
Cost of sales 622.8 561.4 10.9% 1,246.9 1,065.6 17.0%
Gross profit 146.7 151.0 -2.8% 298.3 280.7 6.3%
Selling, general and
administrative
expenses 77.0 76.5 0.7% 160.7 151.0 6.4%
Other, net 0.1 0.1 0.0% 0.1 (0.4) -125.0%
Operating Income 69.6 74.4 -6.5% 137.5 130.1 5.7%
Equity in affiliate
earnings, net of tax (5.2) (6.0) -13.3% (11.6) (9.4) 23.4%
Interest expense and
finance charges 8.7 9.5 -8.4% 17.7 19.3 -8.3%
Earnings before
income taxes 66.1 70.9 -6.8% 131.4 120.2 9.3%
Provision for income
taxes 19.2 23.6 -18.6% 38.1 39.9 -4.5%
Minority interest,
net of tax 2.1 1.6 31.3% 4.3 3.1 38.7%
Net earnings
before cumulative
effect of
accounting change $44.8 $45.7 -2.0% $89.0 $77.2 15.3%
Cumulative effect of
change in accounting
principle, net of tax - - - (269.0)
Net
earnings/(loss) $44.8 $45.7 $89.0 ($191.8)
Net earnings per
share before
cumulative effect of
accounting change -
Diluted $1.65 $1.70 $3.30 $2.88
Per share charge due
to cumulative effect
of accounting change
- Diluted - - - (10.04)
Net earnings/(loss)
per share - Diluted $1.65 $1.70 $3.30 ($7.16)
Average shares
outstanding -
Diluted (in
millions) 27.1 26.9 27.0 26.8
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Capital expenditures $39.5 $29.2 $64.8 $55.3
Tooling outlays, net
of customer
reimbursements $11.3 $8.3 $20.7 $16.1
Depreciation and
amortization:
Fixed asset
depreciation $30.5 $27.2 $60.2 $54.2
Amortization of
tooling 8.0 7.2 15.7 13.7
$38.5 $34.4 $75.9 $67.9
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars) Three Months Ended
June 30, %
2003 2002 Change
Drivetrain $309.3 $288.3 7.3%
Engine 471.6 434.2 8.6%
Subtotal 780.9 722.5 8.1%
Eliminations (11.4) (10.1) N/A
Total Sales by operating group $769.5 $712.4 8.0%
BorgWarner Inc.
Sales by Operating Group (Unaudited)
(millions of dollars) Six Months Ended
June 30, %
2003 2002 Change
Drivetrain $631.0 $542.0 16.4%
Engine 937.4 823.5 13.8%
Subtotal 1,568.4 1,365.5 14.9%
Eliminations (23.2) (19.2) N/A
Total Sales by operating group $1,545.2 $1,346.3 14.8%
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars)
Three Months Ended
June 30, %
2003 2002 Change
Drivetrain $23.7 $29.5 -19.7%
Engine 60.5 59.6 1.5%
Total EBIT by operating group $84.2 $89.1 -5.5%
Corporate (9.4) (8.7) 8.0%
Consolidated 74.8 80.4 -7.0%
Interest and finance charges (8.7) (9.5) -8.4%
Earnings before income taxes 66.1 70.9 -6.8%
BorgWarner Inc.
Earnings Before Interest and Taxes by Operating Group (Unaudited)
(millions of dollars)
Six Months Ended
June 30, %
2003 2002 Change
Drivetrain $49.8 $49.1 1.4%
Engine 121.2 108.5 11.7%
Total EBIT by operating group $171.0 $157.6 8.5%
Corporate (21.9) (18.1) 21.0%
Consolidated 149.1 139.5 6.9%
Interest and finance charges (17.7) (19.3) -8.3%
Earnings before income taxes 131.4 120.2 9.3%
BorgWarner Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(millions of dollars)
June 30, 2003 December 31, 2002
ASSETS
Cash and cash equivalents $73.4 $36.6
Receivables 367.0 292.1
Inventories 192.6 180.3
Other current assets 63.8 57.5
Total current assets 696.8 566.5
Property, plant, and equipment 919.9 894.9
Other long-term assets 1,239.6 1,221.5
Total assets $2,856.3 $2,682.9
LIABILITIES
Notes payable $11.4 $14.4
Accounts payable and accrued expenses 452.8 435.6
Accrued income taxes payable 16.7 1.2
Total current liabilities 480.9 451.2
Long-term debt 627.6 632.3
Other long-term liabilities 629.1 618.0
STOCKHOLDERS' EQUITY
Stockholders' equity 1,118.7 981.4
Total liabilities and
stockholders' equity $2,856.3 $2,682.9
