BORGWARNER AUBURN HILLS, Mich., July 28, 2016 /PRNewswire/ -- BorgWarner Inc. (NYSE: BWA) today reported second quarter results.
Second Quarter Highlights:
-- U.S. GAAP net sales of $2,329 million, up 14.6% compared with second
quarter 2015.
-- Excluding the impact of foreign currencies and the Remy acquisition,
net sales were up 3.5% compared with second quarter 2015.
-- U.S. GAAP net earnings of $0.76 per diluted share.
-- Excluding the $(0.08) per diluted share related to net
non-comparable items (detailed in the table below), net earnings
were $0.84 per diluted share, of which $0.04 per diluted share were
contributed by the Remy acquisition.
-- U.S. GAAP operating income of $269 million.
-- Excluding the $19 million of pretax expenses related to net
non-comparable items, operating income was $288 million, of which
$13 million was contributed by the Remy acquisition. Excluding the
impact of non-comparable items, operating income was 12.4% of net
sales. Excluding the impact of non-comparable items and the Remy
acquisition, operating income was 13.2% of net sales.
Full Year 2016 Guidance: The company has narrowed its 2016 full year net sales and net earnings guidance to the high end of the previous range. Net sales growth is now expected to be within a range of 13.7% to 17.5% compared with 2015. Excluding the impact of foreign currencies and the Remy acquisition, net sales growth is now expected to be within a range of 3.0% to 5.5%. Net earnings are now expected to be within a range of $3.16 to $3.32 per diluted share, of which approximately $0.12 per diluted share are expected to be contributed by the Remy acquisition. Excluding the impact of non-comparable items, operating income, as a percentage of net sales, is still expected to be above 12%. Excluding the impact of non-comparable items and the Remy acquisition, operating income, as a percentage of net sales, is still expected to be above 13%.
Third Quarter 2016 Guidance: Third quarter 2016 net sales growth is expected to be within a range of 13.0% to 20.8% compared with third quarter 2015. Excluding the impact of foreign currencies and the Remy acquisition, net sales growth is expected to be within a range of 2.5% to 7.7%. Net earnings are expected to be within a range of $0.74 to $0.81 per diluted share, of which approximately $0.03 per diluted share are expected to be contributed by the Remy acquisition. Excluding the impact of non-comparable items, operating income, as a percentage of net sales, is expected to be approximately 12%. Excluding the impact of non-comparable items and the Remy acquisition, operating income, as a percentage of net sales, is expected to be approximately 13%.
Financial Results: Net sales were $2,329 million in second quarter 2016, up 14.6% from $2,032 million in second quarter 2015. Net earnings in second quarter 2016 were $164 million, or $0.76 per diluted share, compared with $148 million, or $0.65 per diluted share, in second quarter 2015. Net earnings in second quarter 2016 included net non-comparable items of $(0.08) per diluted share. Net earnings in the second quarter 2015 included non-comparable items of $(0.10) per diluted share. These items are listed in a table below, which is provided by the company for comparison with other results and the most directly comparable U.S. GAAP measures. The impact of foreign currencies decreased net sales by approximately $14 million and decreased net earnings by approximately $0.01 per diluted share in second quarter 2016 compared with the second quarter 2015.
For the first six months of 2016, net sales were $4,598 million, up 14.5% from $4,016 million in the first six months of 2015. Net earnings in the first six months of 2016 were $329 million, or $1.51 per diluted share, compared with $327 million, or $1.44 per diluted share, in the first six months of 2015. Net earnings in the first six months of 2016 included net non-comparable items of $(0.13) per diluted share. Net earnings in the first six months of 2015 included net non-comparable items of $(0.09) per diluted share. These items are listed in a table below, which is provided by the company for comparison with other results and the most directly comparable U.S. GAAP measures. The impact of foreign currencies decreased net sales by approximately $72 million and decreased net earnings by approximately $0.03 per diluted share in the first six months of 2016 compared with the first six months of 2015.
The company believes the following table is useful in highlighting non-comparable items that impacted its U.S. GAAP net earnings per diluted share:
Net earnings per diluted share Second Quarter First Six Months
-------------- ----------------
2016 2015 2016 * 2015
---- ---- ----
U.S. GAAP $0.76 $0.65 $1.51 $1.44
Non-comparable items:
Restructuring expense 0.07 0.08 0.09 0.13
Contract expiration gain (0.02) - (0.02) -
Merger and acquisition expense 0.03 - 0.06 -
Gain on previously held equity interest - - - (0.05)
Tax adjustments - 0.02 (0.01) 0.01
Non - U.S. GAAP $0.84 $0.75 $1.64 $1.53
===== ===== ===== =====
*Column does not add due to rounding
Net cash provided by operating activities was $362 million in the first six months of 2016 compared with $319 million in the first six months of 2015. Investments in capital expenditures, including tooling outlays, totaled $235 million in the first six months of 2016, compared with $285 million in the first six months of 2015. Balance sheet debt increased by $85 million and cash decreased by $83 million at the end of second quarter 2016 compared with the end of 2015. The company's net debt to net capital ratio was 36.3% at the end of second quarter 2016 compared with 35.2% at the end of 2015.
Engine Segment Results: Engine segment net sales were $1,444 million in second quarter 2016 compared with $1,413 million in second quarter 2015. Excluding the impact of foreign currencies, primarily the Chinese Renminbi and Korean Won, net sales were up 2.8% from the prior year's quarter. Adjusted earnings before interest, income taxes and non-controlling interest ("Adjusted EBIT") were $235 million in second quarter 2016. Excluding the impact of foreign currencies, Adjusted EBIT was $236 million, up 3.5% from second quarter 2015.
Drivetrain Segment Results: Drivetrain segment net sales were $895 million in second quarter 2016 compared with $627 million in second quarter 2015. Excluding the impact of foreign currencies, primarily the Chinese Renminbi and Korean Won, and the Remy acquisition, net sales were up 5.4% from the prior year's quarter. Adjusted EBIT was $93 million in second quarter 2016. Excluding the impact of foreign currencies, and the Remy acquisition, Adjusted EBIT was $82 million, up 13.5% from second quarter 2015.
Recent Highlights:
-- The company announced that it will host an Investor Day for members of
the investment community at the company's Technical Center in Auburn
Hills, Michigan on Wednesday, Sept. 7, 2016.
-- Jaguar Land Rover is the first European automaker to feature
BorgWarner's innovative pre-emptive on-demand transfer case. Initially
available for the new Jaguar XF, BorgWarner will also provide the
all-wheel drive technology for the Jaguar XE and F-PACE crossover.
At 9:30 a.m. ET today, a brief conference call concerning second quarter 2016 results will be webcast at: http://www.borgwarner.com/en/Investors/default.aspx.
BorgWarner Inc. (NYSE: BWA) is a product leader in highly engineered components and systems for powertrains around the world. Operating manufacturing and technical facilities in 74 locations in 19 countries, the company delivers innovative powertrain solutions to improve fuel economy, reduce emissions and enhance performance. For more information, please visit borgwarner.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 outlook, expectations, estimates and projections. Words such as "anticipates," "believes," "continues," "could," "designed," "effect," "estimates," "evaluates," "expects," "forecasts," "goal," "initiative," "intends," "outlook," "plans," "potential," "project," "pursue," "seek," "should," "target," "when," "would," and 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: the failure to complete or receive the anticipated benefits from BorgWarner's acquisition of Remy International Inc. ("Remy"), the possibility that the parties may be unable to successfully integrate Remy's operations with those of BorgWarner, that such integration may be more difficult, time-consuming or costly than expected, revenues following the transaction may be lower than expected, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, or suppliers) may be greater than expected following the transaction; the retention of key employees at Remy may not be achieved; fluctuations in domestic or foreign vehicle production, the continued use by original equipment manufacturers of outside suppliers, fluctuations in demand for vehicles containing our products, changes in general economic conditions, as well as other risks noted in reports that we file 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 or announce publicly any updates to or revision to any of the forward-looking statements.
BorgWarner Inc.
Condensed Consolidated Statements of Operations (Unaudited)
----------------------------------------------------------
(millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
---- ---- ---- ----
Net sales $2,329.2 $2,031.9 $4,597.8 $4,016.1
Cost of sales 1,832.5 1,602.9 3,636.8 3,158.1
------- ------- ------- -------
Gross profit 496.7 429.0 961.0 858.0
Selling, general and administrative expenses 202.3 167.4 390.7 335.6
Other expense, net 25.0 19.1 36.7 20.3
---- ---- ---- ----
Operating income 269.4 242.5 533.6 502.1
Equity in affiliates' earnings, net of tax (10.1) (11.1) (19.2) (19.6)
Interest income (1.5) (1.6) (3.1) (3.3)
Interest expense and finance charges 21.4 17.6 42.7 27.6
---- ---- ---- ----
Earnings before income taxes and noncontrolling interest 259.6 237.6 513.2 497.4
Provision for income taxes 84.2 80.2 164.6 152.3
---- ---- ----- -----
Net earnings 175.4 157.4 348.6 345.1
Net earnings attributable to the noncontrolling interest, net of tax 11.0 9.3 20.1 18.1
---- --- ---- ----
Net earnings attributable to BorgWarner Inc. $164.4 $148.1 $328.5 $327.0
====== ====== ====== ======
Earnings per share - diluted $0.76 $0.65 $1.51 $1.44
Weighted average shares outstanding - diluted 216.663 226.615 217.401 226.852
Supplemental Information (Unaudited)
-----------------------------------
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Capital expenditures, including tooling outlays $130.4 $145.0 $234.7 $285.0
====== ====== ====== ======
Depreciation and amortization $99.0 $80.9 $193.4 $158.0
===== ===== ====== ======
BorgWarner Inc.
Net Sales by Reporting Segment (Unaudited)
-----------------------------------------
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
---- ---- ---- ----
Engine $1,444.2 $1,413.0 $2,843.4 $2,793.9
Drivetrain 895.4 626.9 1,774.6 1,238.1
Inter-segment eliminations (10.4) (8.0) (20.2) (15.9)
----- ---- ----- -----
Net sales $2,329.2 $2,031.9 $4,597.8 $4,016.1
======== ======== ======== ========
Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest ("Adjusted EBIT") (Unaudited)
--------------------------------------------------------------------------------------------------------
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
---- ---- ---- ----
Engine $234.8 $228.0 $468.2 $458.4
Drivetrain 92.8 72.1 176.6 143.1
---- ---- ----- -----
Adjusted EBIT 327.6 300.1 644.8 601.5
Restructuring expense 19.2 19.9 25.6 32.0
Merger and acquisition expense 7.2 - 13.0 -
Contract expiration gain (7.5) - (7.5) -
Gain on previously held equity interest - - - (10.8)
Corporate, including equity in affiliates' earnings and stock-based compensation 29.2 26.6 60.9 58.6
Interest income (1.5) (1.6) (3.1) (3.3)
Interest expense and finance charges 21.4 17.6 42.7 27.6
---- ---- ---- ----
Earnings before income taxes and noncontrolling interest 259.6 237.6 513.2 497.4
Provision for income taxes 84.2 80.2 164.6 152.3
---- ---- ----- -----
Net earnings 175.4 157.4 348.6 345.1
Net earnings attributable to the noncontrolling interest, net of tax 11.0 9.3 20.1 18.1
---- --- ---- ----
Net earnings attributable to BorgWarner Inc. $164.4 $148.1 $328.5 $327.0
====== ====== ====== ======
BorgWarner Inc.
Condensed Consolidated Balance Sheets (Unaudited)
------------------------------------------------
(millions of dollars)
June 30, December 31,
2016 2015
---- ----
Assets
------
Cash $495.0 $577.7
Receivables, net 1,806.9 1,665.0
Inventories, net 744.6 723.6
Other current assets 160.4 168.9
Total current assets 3,206.9 3,135.2
Property, plant and
equipment, net 2,502.8 2,448.1
Other non-current
assets 3,278.9 3,242.4
Total assets $8,988.6 $8,825.7
======== ========
Liabilities and Equity
----------------------
Notes payable and
other short-term
debt $515.3 $441.4
Accounts payable and
accrued expenses 1,790.7 1,866.4
Income taxes payable 93.8 49.4
---- ----
Total current
liabilities 2,399.8 2,357.2
Long-term debt 2,119.5 2,108.9
Other non-current
liabilities 713.2 728.1
Total BorgWarner Inc.
stockholders' equity 3,681.7 3,553.7
Noncontrolling
interest 74.4 77.8
---- ----
Total equity 3,756.1 3,631.5
------- -------
Total liabilities and
equity $8,988.6 $8,825.7
======== ========
BorgWarner Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
----------------------------------------------------------
(millions of dollars)
Six Months Ended
June 30,
2016 2015
---- ----
Operating
---------
Net earnings $348.6 $345.1
Depreciation
and
amortization 193.4 158.0
Restructuring
expense, net
of cash paid 9.8 19.1
Gain on
previously
held equity
interest - (10.8)
Deferred income
tax provision 23.5 22.3
Other non-cash
items (4.0) 1.9
Net earnings
adjusted for
non-cash
charges to
operations 571.3 535.6
Changes in
assets and
liabilities (209.1) (216.3)
Net cash
provided by
operating
activities 362.2 319.3
Investing
---------
Capital
expenditures,
including
tooling
outlays (234.7) (285.0)
Payment for
business
acquired, net
of cash
acquired - (12.6)
Proceeds from
asset
disposals and
other 5.8 2.5
Net cash used
in investing
activities (228.9) (295.1)
Financing
---------
Net increase
(decrease) in
notes payable 65.2 (539.0)
Additions to
long-term
debt, net of
debt issuance
costs - 1,015.9
Repayments of
long-term
debt,
including
current
portion (9.3) (15.5)
Payments for
purchase of
treasury stock (183.8) (62.9)
(Payments for)
proceeds from
stock-based
compensation
items (3.3) 0.4
Dividends paid
to BorgWarner
stockholders (56.2) (58.7)
Dividends paid
to
noncontrolling
stockholders (23.5) (18.1)
----- -----
Net cash (used
in) provided
by financing
activities (210.9) 322.1
Effect of
exchange rate
changes on
cash (5.1) (36.2)
---- -----
Net (decrease)
increase in
cash (82.7) 310.1
Cash at
beginning of
year 577.7 797.8
----- -----
Cash at end of
period $495.0 $1,107.9
====== ========
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SOURCE BorgWarner Inc.
