BorgWarner Posts First Quarter Results; Reports Benefits From Restructuring Actions, Positive Cash Flow From Operations And Impr
April 30 2009 - 7:00AM
PR Newswire (US)
AUBURN HILLS, Mich., April 30 /PRNewswire-FirstCall/ -- BorgWarner
Inc. (NYSE:BWA) today reported first quarter results that
benefitted from 2008 restructuring initiatives. Additional cost
structure actions were implemented in the first quarter to address
continued instability in customer production schedules and general
economic uncertainty. The company also generated positive cash flow
from operations in the quarter (net cash provided by operating
activities less capital expenditures, including tooling outlays),
and strengthened its capital structure and financial flexibility.
First Quarter Highlights: -- Sales were $819.5 million. --
Aggressive restructuring actions in 2008 helped reduce Q1
decremental margins. -- U.S. GAAP earnings were a loss of $(0.06)
per diluted share, including a number of non-recurring items: --
$(0.03) per diluted share loss upon adoption of FAS 141R for
treatment of on-going acquisition-related activity -- $(0.06) per
diluted share loss from interest rate derivative agreements --
$0.15 per diluted share net gain related to retiree obligations
resulting from the closure of the Muncie, Indiana, Drivetrain
facility. -- Excluding non-recurring items for comparative purposes
with past quarters, the earnings loss from operations in the
quarter was $(0.12) per diluted share. -- Q1 cost structure actions
included global pay cuts, selected plant shutdowns and reduced work
weeks outside of the U.S.. -- Net cash provided by operating
activities was $68.0 million. -- Public debt maturity of $136.7
million was repaid in February. -- Cash on hand at the end of the
quarter was $90.8 million. -- Net debt to capital ratio was 24.2%.
-- Subsequent to quarter end, the company completed a convertible
senior note offering of $373.8 million and is completing a $250
million extension of its revolving credit facility for 18 months.
Comment and Outlook: "BorgWarner distinguished itself from many
industry peers by continuing to generate positive cash flow from
operations in the first quarter," said Timothy Manganello, Chairman
and CEO. "Our cash on hand and cash generated in the quarter
allowed us to repay $136.7 million of public debt that matured in
February. In addition we have strengthened our financial structure
by executing a very successful convertible bond offering and
addressing our revolving credit facility." "Further, the
restructuring actions we took in 2008, while difficult, have
already begun to yield positive financial results," he continued.
"We also continued to make structural cost adjustments during the
first quarter to improve operating efficiency, and to address
profitability and cash flow. Special attention has been given to
Drivetrain Group profitability where disappointing first quarter
results were caused by declining volumes, European employee costs
tied to operational issues and dual clutch growth-related costs.
Going forward, the Drivetrain Group will benefit from the
previously announced closing of the Muncie, Indiana, plant and
operational improvements in Europe." Commenting on the outlook for
the year, Manganello noted, "Customer schedules remain uncertain,
providing little clarity to the rest of the year. As a result, we
are sizing our operations as if first quarter production levels
will continue throughout the remainder of the year. However, our
target in this more challenging scenario, is to still generate
positive earnings and cash flow from operations. The actions we
have taken favorably position BorgWarner to withstand current
industry pressures and resume growth as the auto sector recovers.
The global focus on fuel efficiency and emissions reduction remains
strong, and our technology and expertise meet that demand. We
continue to execute against our long-term strategy and continue to
invest in research and development that will foster future growth."
Financial Results: For first quarter 2009, sales were $819.5
million, down 45% compared with $1,498.9 million in first quarter
2008. The negative impact of currency accounted for 6% of the
decline. Net income in the quarter was a loss of $(7.0) million or
$(0.06) per diluted share compared with a gain of $88.7 million, or
$0.75 per diluted share, in first quarter 2008. The first quarter
2009 loss included a $(0.03) per diluted share loss upon adoption
of FAS 141R for the treatment of on-going acquisition-related
activity, a $(0.06) per diluted share loss from interest rate
derivative agreements, and a $0.15 per diluted share net gain
related to retiree obligations resulting from the closure of the
Muncie, Indiana, Drivetrain facility. The impact of foreign
currencies, primarily the lower Euro, reduced sales by $82.3
million in first quarter 2009 compared with first quarter 2008, and
reduced the loss on earnings by $3.4 million, or $0.03 per diluted
share. Operating income was $5.5 million or 0.7% of sales in the
first quarter of 2009 versus $124.8 million, or 8.3% of sales, in
first quarter 2008. Excluding non-recurring items, operating income
was a loss of $(17.6) million. Net cash provided by operating
activities was $68.0 million in first quarter 2009 versus $74.5
million in first quarter 2008. Investments in capital expenditures,
including tooling outlays, totaled $38.6 million for the quarter,
compared with $75.4 million for the same period in 2008. Balance
sheet debt decreased by $63.4 million at the end of the quarter
compared with the end of 2008. The company's capital structure
remains strong. The ratio of balance sheet debt net of cash to
capital was 24.2% at the end of the quarter. The company has ample
liquidity. It repaid $136.7 million of public debt that matured in
February, and ended the quarter with no outstanding borrowing under
its revolving credit facility and with $90.8 million of cash on
hand. Since the end of the quarter, the company completed a
convertible senior note offering of $373.8 million and is
completing a $250 million extension of its revolving credit
facility for 18 months. The following table reconciles the
company's non-U.S. GAAP amounts included in the press release to
the most directly comparable U.S. GAAP amounts and is provided for
comparisons with other results: Net earnings per diluted share
First Quarter ---------------- 2009 2008 ---- ---- Non - U.S. GAAP
$(0.12) $ 0.75 Reconciliations Adoption of FAS 141R - Acquisition
Activity (0.03) - Muncie Closure Retiree Obligation Net Gain 0.15 -
Interest Rate Derivative Agreements (0.06) - ------ ------ U.S.
GAAP $(0.06) $ 0.75 ====== ====== Engine Group Results: Reduced
global vehicle production cut demand for the company's engine
products. Engine segment net sales decreased to $624.5 million, or
43.1%, compared with $1,098.1 million in the prior year's quarter.
The negative impact of currency accounted for 6% of the decline.
Severe cuts in auto production reduced European Engine segment
sales by 46% compared with last year. Sales in the U.S. declined
33%. Earnings before interest and taxes were $35.9 million.
Drivetrain Group Results: Drivetrain segment first quarter sales
were impacted by continued production declines in North America and
very weak demand in Europe. Sales were $198.2 million, down 52%
compared with $409.8 million in the first quarter of 2008. The
negative impact of currency accounted for 4% of the decline.
Earnings before interest and income taxes were a loss of $(32.7)
million. Recent Highlights: During the quarter the company
announced that it is providing its award winning Regulated
Two-stage Turbocharger for the Volvo 2.4-liter D5 diesel engine,
and for the new four-cylinder diesel engine from Mercedes-Benz
expected to be the backbone of their diesel engine production. The
company's patented turbocharger technology helps improve fuel
economy, reduce emissions and improve driving dynamics. The company
also announced its first business award for dry dual clutch
transmission technology. The company will supply the hydraulic
actuation module for Fiat's first dry dual clutch transmission,
launching in late 2009. In April, two emerging BorgWarner
technologies were recognized for their "game-changing" innovation.
PACE Awards for 2009 were presented to the company for its cam
torque actuated (CTA(TM)) variable cam timing phaser and for its
pressure sensor glow plug for diesel engines. Both contribute to
improved fuel economy and reduced emissions. The company received
additional recognition for its collaboration with Ford on the 2009
3.0-liter Duratec V6 engine which benefits from BorgWarner's CTA
technology. An honorable mention was awarded to the company's
DualTronic(R) Performance Package introduced on the Nissan GT-R.
Additional activity in April included the completion of a
convertible senior note offering of $373.8 million. The $373.8
million 3.50% convertible senior notes are due in 2012. Note
holders may convert the notes at their option at any time up to the
maturity date. The conversion price represents a conversion premium
of 27.5%. In conjunction with the note offering, the company
entered into a bond hedge overlay at a net pre-tax cost of $25.2
million, effectively raising the conversion premium to 50%. Upon
conversion, the company will pay or deliver cash, shares of its
common stock or a combination of the two at its election. The
company expects to use the proceeds for general corporate purposes,
including the repayment of short-term indebtedness. 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 60 locations in
18 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/. Financial Tables
Follow 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
"outlook", "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. BorgWarner Inc. Condensed Consolidated Statements of
Operations (Unaudited)
-----------------------------------------------------------
(millions of dollars, except per share data) Three Months Ended
March 31, 2009 2008 ---- ---- Net sales $819.5 $1,498.9 Cost of
sales 739.9 1,215.4 ----- ------- Gross profit 79.6 283.5 Selling,
general and administrative expenses 74.1 155.7 Other expense - 3.0
- --- Operating income 5.5 124.8 Equity in affiliates' earnings,
net of tax (0.2) (9.1) Interest income (0.5) (1.9) Interest expense
and finance charges 19.1 6.5 ---- --- Earnings (loss) before income
taxes and noncontrolling interest (12.9) 129.3 Provision (benefit)
for income taxes (6.6) 33.6 ---- ---- Net earnings (loss) (6.3)
95.7 Net earnings attributable to the noncontrolling interest 0.7
7.0 --- --- Net earnings (loss) attributable to BorgWarner Inc.
$(7.0) $88.7 ===== ===== Earnings (loss) per share - diluted
$(0.06) $0.75 Weighted average shares outstanding (millions) -
diluted 116.0 118.5 Supplemental Information (Unaudited)
------------------------------------ (millions of dollars) Three
Months Ended March 31, 2009 2008 ---- ---- Capital expenditures,
including tooling outlays $38.6 $75.4 ===== ===== Depreciation and
amortization: Fixed assets and tooling $57.3 $66.8 Other 5.8 5.4
--- --- $63.1 $72.2 ===== ===== BorgWarner Inc. Net Sales by
Reporting Segment (Unaudited)
------------------------------------------ (millions of dollars)
Three Months Ended March 31, 2009 2008 ---- ---- Engine $624.5
$1,098.1 Drivetrain 198.2 409.8 Inter-segment eliminations (3.2)
(9.0) ---- ---- Net sales $819.5 $1,498.9 ====== ======== Segment
Earnings (Loss) Before Interest and Income Taxes (Unaudited)
-------------------------------------------------- (millions of
dollars) Three Months Ended March 31, 2009 2008 ---- ---- Engine
$35.9 $137.9 Drivetrain (32.7) 18.3 ----- ---- Segment earnings
before interest and taxes ("Segment EBIT") 3.2 156.2 Muncie closure
retiree obligation net gain 27.9 - Corporate, including equity in
affiliates' earnings and stock-based compensation (25.4) (22.3)
----- ----- Consolidated earnings before interest and taxes
("EBIT") 5.7 133.9 Interest income (0.5) (1.9) Interest expense and
finance charges 19.1 6.5 ---- --- Earnings (loss) before income
taxes and noncontrolling interest (12.9) 129.3 Provision (benefit)
for income taxes (6.6) 33.6 ---- ---- Net earnings (loss) (6.3)
95.7 Net earnings attributable to the noncontrolling interest 0.7
7.0 --- --- Net earnings (loss) attributable to BorgWarner Inc.
$(7.0) $88.7 ===== ===== BorgWarner Inc. Condensed Consolidated
Balance Sheets ------------------------------------- (millions of
dollars) March 31, 2009 December 31, 2008 (Unaudited) Assets ------
Cash $90.8 $103.4 Receivables, net 622.1 607.1 Inventories, net
352.4 451.2 Other current assets 123.1 146.5 ----- ----- Total
current assets 1,188.4 1,308.2 Property, plant and equipment, net
1,510.1 1,586.2 Other non-current assets 1,655.2 1,749.6 -------
------- Total assets $4,353.7 $4,644.0 ======== ========
Liabilities and Stockholders' Equity
------------------------------------ Notes payable $250.4 $183.8
Current portion of long-term debt - 136.9 Accounts payable and
accrued expenses 851.4 923.0 Income taxes payable 9.2 6.3 --- ---
Total current liabilities 1,111.0 1,250.0 Long-term debt 466.5
459.6 Other non-current liabilities 789.3 896.9 Total BorgWarner
Inc. stockholders' equity 1,961.0 2,006.0 Noncontrolling interest
25.9 31.5 ---- ---- Total stockholders' equity 1,986.9 2,037.5
------- ------- Total liabilities and stockholders' equity $4,353.7
$4,644.0 ======== ======== BorgWarner Inc. Condensed Consolidated
Statements of Cash Flows (Unaudited)
-----------------------------------------------------------
(millions of dollars) Three Months Ended March 31, 2009 2008 ----
---- Operating --------- Net earnings (loss) attributable to
BorgWarner Inc. $(7.0) $88.7 Non-cash charges (credits) to
operations: Depreciation and amortization 63.1 72.2 Deferred income
tax loss (benefit) (12.1) 4.0 Other non-cash items 50.3 9.9 ----
--- Net earnings adjusted for non-cash charges to operations 94.3
174.8 Changes in assets and liabilities (26.3) (100.3) ----- ------
Net cash provided by operating activities 68.0 74.5 Investing
--------- Capital expenditures, including tooling outlays (38.6)
(75.4) Net proceeds from asset disposals 5.2 0.3 Payments for
businesses acquired, net of cash acquired (12.2) - Proceeds from
sales of marketable securities - 3.7 - --- Net cash used in
investing activities (45.6) (71.4) Financing --------- Increase in
notes payable 70.2 79.0 Additions to long-term debt 20.0 -
Repayments of long-term debt, including current portion (136.7)
(5.1) Payment for purchase of treasury stock - (13.5) Proceeds from
interest rate swap termination 30.0 - Proceeds from stock options
exercised, including the tax benefit 0.5 2.7 Dividends paid to
BorgWarner stockholders (13.8) (12.8) Dividends paid to
noncontrolling stockholders (4.6) (8.2) ---- ---- Net cash provided
by (used in) financing activities (34.4) 42.1 Effect of exchange
rate changes on cash (0.6) (30.3) ---- ----- Net increase
(decrease) in cash (12.6) 14.9 Cash at beginning of year 103.4
188.5 ----- ----- Cash at end of period $90.8 $203.4 ===== ======
DATASOURCE: BorgWarner Inc. CONTACT: Mary Brevard, +1-248-754-0881
Web Site: http://www.borgwarner.com/
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