AUBURN
HILLS, Mich., July 31,
2024 /PRNewswire/ -- BorgWarner Inc. (NYSE: BWA)
today reported second quarter results.
Strong Second Quarter Margin and Free Cash Flow, Increasing
Full Year Adjusted Operating Margin and EPS Guidance
- BorgWarner achieved an adjusted operating margin performance of
10.4% during the second quarter, which equated to a U.S. GAAP
operating margin of 8.2%. The Company also generated net cash
provided by operating activities of $462
million and $297 million in
free cash flow, despite a modest decline in the Company's weighted
light and commercial vehicle markets.
- The Company increased its mid-point full year adjusted
operating margin guidance by 30 basis points and adjusted earnings
per share guidance by approximately $0.07 per share. This is being driven by
BorgWarner's technology-focused portfolio and strong cost controls.
BorgWarner reduced its full year mid-point net sales guidance by
$400 million primarily due to a lower
market production outlook, weaker foreign currencies and slower
year-over-year growth in eProduct sales.
- BorgWarner intends to repurchase $300
million of the Company's outstanding shares during the
second half of 2024. After these repurchases, BorgWarner will have
repurchased $577 million of its
outstanding shares since the start of the fourth quarter of
2023.
Business Update
The Company announced a number of items that are intended to
support its future long-term profitable growth including:
- Introduction of a new business unit structure that we expect to
drive synergies, strengthen the Company's product and go to market
strategy and improve reporting transparency for our stockholders.
This new business unit structure was effective July 1st, 2024.
- Restructuring of the Company's ePropulsion segment, which is
expected to align the segment's cost structure to current market
dynamics while preserving its long-term profitable growth
potential. This restructuring is expected to result in annual cost
savings of approximately $100 million
by 2026.
- Multiple new business awards across its combustion, hybrid and
battery electric vehicle (BEV) portfolio. BorgWarner booked three
electric cross differential, a high-voltage eFan and two
exhaust gas recirculation awards. These awards are primarily
expected to launch in 2026 and 2027.
Second Quarter Highlights (continuing operations
basis):
- U.S. GAAP net sales of $3,603
million, a decrease of 2% compared with second quarter 2023.
- Excluding the impact of foreign currencies and the impact of
net M&A, organic sales were down 0.3% compared with second
quarter 2023.
- U.S. GAAP net earnings of $1.39
per diluted share.
- Excluding $0.20 of net gains per
diluted share related to non-comparable items (detailed in the
table below), adjusted net earnings were $1.19 per diluted share.
- U.S. GAAP operating income of $297
million, or 8.2% of net sales.
- Excluding $79 million of pretax
expenses related to non-comparable items, adjusted operating income
was $376 million, or 10.4% of net
sales.
- Net cash provided by operating activities of $462 million.
- Free cash flow of $297
million.
Financial Results (continuing operations basis):
The Company believes the following table is useful in
highlighting non-comparable items that impacted its U.S. GAAP net
earnings per diluted share. The non-comparable items presented
below are calculated after tax using the corresponding effective
tax rate discrete to each item and the weighted average number of
diluted shares for the periods presented. The Company defines
adjusted earnings per diluted share as earnings per diluted share
adjusted to eliminate the impact of restructuring expense, merger,
acquisition and divestiture expense, other net expenses,
discontinued operations, other gains and losses not reflective of
the Company's ongoing operations, and related tax effects.
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Earnings per diluted
share
|
$
1.39
|
|
$
0.97
|
|
$
2.32
|
|
$
1.69
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
0.08
|
|
0.03
|
|
0.14
|
|
0.04
|
Commercial contract
settlement
|
0.05
|
|
—
|
|
0.05
|
|
—
|
Adjustments associated
with Spin-Off related balances
|
0.05
|
|
—
|
|
0.05
|
|
—
|
Accelerated
depreciation
|
0.03
|
|
—
|
|
0.03
|
|
0.01
|
Merger and acquisition
expense
|
—
|
|
0.03
|
|
0.02
|
|
0.07
|
Gain on sale of
businesses
|
—
|
|
(0.02)
|
|
(0.01)
|
|
(0.02)
|
Service and lease
agreement termination
|
—
|
|
0.03
|
|
—
|
|
0.03
|
Gain on sale of
assets
|
—
|
|
(0.02)
|
|
—
|
|
(0.02)
|
Unrealized loss on
equity and debt securities
|
—
|
|
0.18
|
|
0.01
|
|
0.23
|
Corporate synergy from
spin-off
|
—
|
|
0.02
|
|
—
|
|
0.03
|
Tax
adjustments
|
(0.42)
|
|
(0.17)
|
|
(0.42)
|
|
(0.18)
|
Other non-comparable
items
|
0.01
|
|
0.01
|
|
0.03
|
|
(0.01)
|
|
|
|
|
|
|
|
|
Adjusted earnings
per diluted share
|
$
1.19
|
|
$
1.06
|
|
$
2.22
|
|
$
1.87
|
Net sales were $3,603 million for
the second quarter 2024, a decrease of 2% compared with net sales
of $3,671 million for the second
quarter 2023, primarily due to declining market production volumes
and the negative impact of foreign currencies. Net earnings for the
second quarter 2024 were $315
million, or $1.39 per diluted
share, compared with net earnings of $228
million, or $0.97 per diluted
share, for the second quarter 2023. Adjusted net earnings per
diluted share for the second quarter 2024 were $1.19, up from adjusted net earnings per diluted
share of $1.06 for the second quarter
2023. Adjusted net earnings for the second quarter 2024 excluded
net non-comparable items of $0.20 per
diluted share, while adjusted net earnings for the second quarter
2023 excluded net non-comparable items of $(0.09) per diluted share. These items are listed
in the table above, which is provided by the Company for comparison
with other results and the most directly comparable U.S. GAAP
measures. The increase in adjusted net earnings per diluted share
was primarily due to higher adjusted operating margin driven by the
Company's cost controls, a lower effective tax rate and a lower
share count.
Full Year 2024 Guidance: The Company has updated full
year sales, margin and EPS guidance. Net sales for 2024 are
expected to be in the range of $14.1 billion to $14.4 billion, compared to the Company's
prior guidance of $14.4 billion to
$14.9 billion and 2023 sales of
approximately $14.2 billion. The
Company expects its weighted light and commercial vehicle markets
to be in the range of down 3% to down 2% year-over-year in 2024, a
decrease from the Company's prior guidance of flat to down 2.5%.
The Company's sales guidance implies a year-over-year increase in
organic sales of approximately 0.5% to 2.5%, or estimated outgrowth
above market production of approximately 350 to 450 basis points.
The Company expects its 2024 eProduct sales to be near the low-end
of the Company's prior $2.5 billion
to $2.8 billion guidance, up from
approximately $2.0 billion in 2023.
Foreign currencies are expected to result in a year-over-year
decrease in sales of approximately $175 million primarily due
to the weakening of the Chinese Renminbi, the Korean Won and the
Euro against the U.S. dollar. The acquisitions of SSE and the
Electric Hybrid Systems business segment of Eldor Corporation are
expected to increase year-over-year sales by approximately
$30 million.
Operating margin for the full year is expected to be in the
range of 8.2% to 8.3%. Excluding the impact of non-comparable
items, adjusted operating margin is expected to be in the range of
9.6% to 9.8%, up from the Company's prior guidance of 9.2% to 9.6%.
Net earnings are expected to be within a range of $3.88 to $4.05 per
diluted share. Excluding the impact of non-comparable items,
adjusted net earnings are expected to be within a range of
$3.95 to $4.15 per diluted share, up from the Company's
prior guidance of $3.80 to
$4.15 per diluted share. The
Company's full-year EPS guidance includes the expected impact of
the Company's intended share repurchases of $300 million during the second half of 2024.
Full-year operating cash flow is expected to be in the range of
$1,325 million to $1,375 million, while free cash flow is expected
to be in the range of $475 million to
$575 million.
At 9:30 a.m. ET today, a brief
conference call concerning second quarter 2024 results and guidance
will be webcast at: https://www.borgwarner.com/investors.
Additionally, an earnings call presentation will be available at
https://www.borgwarner.com/investors.
For more than 130 years, BorgWarner Inc. (NYSE: BWA) has been a
transformative global product leader bringing successful mobility
innovation to market. Today, we're accelerating the world's
transition to eMobility -- to help build a cleaner, healthier,
safer future for all.
Forward Looking Statements: This press release contains
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," "guidance," "initiative," "intends," "may,"
"outlook," "plans," "potential," "predicts," "project," "pursue,"
"seek," "should," "target," "when," "will," "would," and variations
of such words and similar expressions are intended to identify such
forward-looking statements. Further, all statements, other than
statements of historical fact contained in this press release that
we expect or anticipate will or may occur in the future regarding
our financial position, business strategy and measures to implement
that strategy, including changes to operations, competitive
strengths, goals, expansion and growth of our business and
operations, plans, references to future success and other such
matters, are forward-looking statements. Accounting estimates, such
as those described under the heading "Critical Accounting Policies
and Estimates" in Item 7 of our most recently-filed Annual Report
on Form 10-K ("Form 10-K"), are inherently forward-looking. All
forward-looking statements are based on assumptions and analyses
made by us in light of our experience and our perception of
historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate
under the circumstances. Forward-looking statements are not
guarantees of performance, and the Company's actual results may
differ materially from those expressed, projected or implied in or
by the forward-looking statements.
You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this press release.
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. These risks and uncertainties, among others, include:
supply disruptions impacting us or our customers, commodity
availability and pricing, and an inability to achieve expected
levels of recoverability in commercial negotiations with customers
concerning these costs; competitive challenges from existing and
new competitors, including original equipment manufacturer ("OEM")
customers; the challenges associated with rapidly changing
technologies, particularly as they relate to electric vehicles, and
our ability to innovate in response; the difficulty in forecasting
demand for electric vehicles and our electric vehicles revenue
growth; potential disruptions in the global economy caused by wars
or other geopolitical conflicts; the ability to identify targets
and consummate acquisitions on acceptable terms; failure to realize
the expected benefits of acquisitions on a timely basis; the
possibility that our 2023 tax-free spin-off of our former Fuel
Systems and Aftermarket segments into a separate publicly traded
company will not achieve its intended benefits; the failure to
promptly and effectively integrate acquired businesses; the
potential for unknown or inestimable liabilities relating to the
acquired businesses; our dependence on automotive and truck
production, which is highly cyclical and subject to disruptions;
our reliance on major OEM customers; impacts of any future strikes
involving any of our OEM customers and any actions such OEM
customers take in response; fluctuations in interest rates and
foreign currency exchange rates; our dependence on information
systems; the uncertainty of the global economic environment; the
outcome of existing or any future legal proceedings, including
litigation with respect to various claims, or governmental
investigations, including related litigation; future changes in
laws and regulations, including, by way of example, taxes and
tariffs, in the countries in which we operate; impacts from any
potential future acquisition or disposition transactions; and the
other risks, noted in reports that we file with the Securities and
Exchange Commission, including Item 1A, "Risk Factors" in our most
recently-filed Form 10-K and/or Quarterly Report on Form 10-Q. We
do not undertake any obligation to update or announce publicly any
updates to or revisions to any of the forward-looking statements in
this press release to reflect any change in our expectations or any
change in events, conditions, circumstances, or assumptions
underlying the statements.
We do not undertake any obligation to update or announce
publicly any updates to or revisions to any of the forward-looking
statements in this press release to reflect any change in our
expectations or any change in events, conditions, circumstances, or
assumptions underlying the statements.
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Condensed Consolidated
Statements of Operations (Unaudited)
|
|
|
|
|
(in millions, except
per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Net sales
|
$
3,603
|
|
$
3,671
|
|
$
7,198
|
|
$
7,054
|
Cost of
sales
|
2,918
|
|
2,991
|
|
5,869
|
|
5,797
|
Gross
profit
|
685
|
|
680
|
|
1,329
|
|
1,257
|
Gross
margin
|
19.0 %
|
|
18.5 %
|
|
18.5 %
|
|
17.8 %
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
341
|
|
334
|
|
670
|
|
633
|
Restructuring
expense
|
25
|
|
9
|
|
44
|
|
12
|
Other operating
expense, net
|
22
|
|
4
|
|
23
|
|
5
|
Operating
income
|
297
|
|
333
|
|
592
|
|
607
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(12)
|
|
(12)
|
|
(17)
|
|
(13)
|
Unrealized loss on
equity and debt securities
|
—
|
|
54
|
|
2
|
|
69
|
Interest expense,
net
|
8
|
|
12
|
|
13
|
|
22
|
Other postretirement
expense
|
3
|
|
3
|
|
6
|
|
5
|
Earnings from
continuing operations before income taxes and noncontrolling
interest
|
298
|
|
276
|
|
588
|
|
524
|
|
|
|
|
|
|
|
|
(Benefit) provision for
income taxes
|
(31)
|
|
30
|
|
31
|
|
97
|
Net earnings from
continuing operations
|
329
|
|
246
|
|
557
|
|
427
|
Net (loss) earnings
from discontinued operations
|
(12)
|
|
(24)
|
|
(19)
|
|
25
|
Net earnings
|
317
|
|
222
|
|
538
|
|
452
|
Net earnings from
continuing operations attributable to noncontrolling
interest
|
14
|
|
18
|
|
29
|
|
31
|
Net earnings
attributable to BorgWarner Inc.
|
$
303
|
|
$
204
|
|
$
509
|
|
$
421
|
|
|
|
|
|
|
|
|
Amounts attributable to
BorgWarner Inc.:
|
|
|
|
|
|
|
|
Net earnings from
continuing operations
|
$
315
|
|
$
228
|
|
$
528
|
|
$
396
|
Net (loss) earnings
from discontinued operations
|
(12)
|
|
(24)
|
|
(19)
|
|
25
|
Net earnings
attributable to BorgWarner Inc.
|
$
303
|
|
$
204
|
|
$
509
|
|
$
421
|
|
|
|
|
|
|
|
|
Earnings per share
from continuing operations — basic
|
$
1.39
|
|
$
0.98
|
|
$
2.33
|
|
$
1.70
|
(Loss) earnings per
share from discontinued operations — basic
|
(0.05)
|
|
(0.10)
|
|
(0.08)
|
|
0.11
|
Earnings per share
attributable to BorgWarner Inc. — basic
|
$
1.34
|
|
$
0.88
|
|
$
2.25
|
|
$
1.81
|
|
|
|
|
|
|
|
|
Earnings per share
from continuing operations — diluted
|
$
1.39
|
|
$
0.97
|
|
$
2.32
|
|
$
1.69
|
(Loss) earnings per
share from discontinued operations — diluted
|
(0.05)
|
|
(0.10)
|
|
(0.08)
|
|
0.11
|
Earnings per share
attributable to BorgWarner Inc. — diluted
|
$
1.34
|
|
$
0.87
|
|
$
2.24
|
|
$
1.80
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
226.1
|
|
233.4
|
|
227.0
|
|
233.1
|
Diluted
|
227.2
|
|
234.4
|
|
227.9
|
|
234.3
|
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Net Sales by Reportable
Segment (Unaudited)
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Air
Management
|
$
1,974
|
|
$
2,027
|
|
$
4,004
|
|
$
4,006
|
Drivetrain &
Battery Systems
|
1,196
|
|
1,117
|
|
2,355
|
|
2,073
|
ePropulsion
|
464
|
|
566
|
|
900
|
|
1,053
|
Inter-segment
eliminations
|
(31)
|
|
(39)
|
|
(61)
|
|
(78)
|
Net sales
|
$
3,603
|
|
$
3,671
|
|
$
7,198
|
|
$
7,054
|
|
|
|
|
|
|
|
|
Segment Adjusted
Operating Income (Loss) (Unaudited)
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Air
Management
|
$
304
|
|
$
305
|
|
$
612
|
|
$
590
|
Drivetrain &
Battery Systems
|
176
|
|
142
|
|
334
|
|
253
|
ePropulsion
|
(49)
|
|
(19)
|
|
(111)
|
|
(54)
|
Segment Adjusted
Operating Income
|
431
|
|
428
|
|
835
|
|
789
|
Corporate, including
stock-based compensation
|
55
|
|
61
|
|
120
|
|
122
|
Restructuring
expense
|
25
|
|
9
|
|
44
|
|
12
|
Intangible asset
amortization expense
|
17
|
|
17
|
|
34
|
|
34
|
Commercial contract
settlement
|
15
|
|
—
|
|
15
|
|
—
|
Adjustments associated
with Spin-Off related balances
|
11
|
|
—
|
|
11
|
|
—
|
Accelerated
depreciation
|
8
|
|
—
|
|
8
|
|
3
|
Merger and acquisition
expense
|
—
|
|
8
|
|
5
|
|
16
|
Gain on sale of
businesses
|
—
|
|
(5)
|
|
(3)
|
|
(5)
|
Service and lease
agreement termination
|
—
|
|
9
|
|
—
|
|
9
|
Gain on sale of
assets
|
—
|
|
(6)
|
|
—
|
|
(6)
|
Other non-comparable
items
|
3
|
|
2
|
|
9
|
|
(3)
|
Equity in affiliates'
earnings, net of tax
|
(12)
|
|
(12)
|
|
(17)
|
|
(13)
|
Unrealized loss on
equity and debt securities
|
—
|
|
54
|
|
2
|
|
69
|
Interest expense,
net
|
8
|
|
12
|
|
13
|
|
22
|
Other postretirement
expense
|
3
|
|
3
|
|
6
|
|
5
|
Earnings from
continuing operations before income taxes and noncontrolling
interest
|
298
|
|
276
|
|
588
|
|
524
|
(Benefit) provision for
income taxes
|
(31)
|
|
30
|
|
31
|
|
97
|
Net earnings from
continuing operations
|
329
|
|
246
|
|
557
|
|
427
|
Net earnings from
continuing operations attributable to noncontrolling
interest
|
14
|
|
18
|
|
29
|
|
31
|
Net earnings from
continuing operations attributable to BorgWarner Inc.
|
$
315
|
|
$
228
|
|
$
528
|
|
$
396
|
BorgWarner
Inc.
|
|
|
|
Condensed Consolidated
Balance Sheets (Unaudited)
|
(in
millions)
|
|
|
|
|
|
|
|
|
June 30,
2024
|
|
December 31,
2023
|
ASSETS
|
|
|
|
Cash, cash equivalents
and restricted cash
|
$
1,288
|
|
$
1,534
|
Receivables,
net
|
3,111
|
|
3,109
|
Inventories,
net
|
1,322
|
|
1,313
|
Prepayments and other
current assets
|
283
|
|
261
|
Total current
assets
|
6,004
|
|
6,217
|
|
|
|
|
Property, plant and
equipment, net
|
3,736
|
|
3,783
|
Other non-current
assets
|
4,368
|
|
4,453
|
Total
assets
|
$
14,108
|
|
$
14,453
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Short-term
debt
|
$
445
|
|
$
73
|
Accounts
payable
|
2,202
|
|
2,546
|
Other current
liabilities
|
1,065
|
|
1,148
|
Total current
liabilities
|
3,712
|
|
3,767
|
|
|
|
|
Long-term
debt
|
3,283
|
|
3,707
|
Other non-current
liabilities
|
828
|
|
913
|
Total
liabilities
|
7,823
|
|
8,387
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
6,093
|
|
5,828
|
Noncontrolling
interest
|
192
|
|
238
|
Total
equity
|
6,285
|
|
6,066
|
Total liabilities and
equity
|
$
14,108
|
|
$
14,453
|
BorgWarner
Inc.
|
|
|
|
Condensed Consolidated
Statements of Cash Flows (Unaudited)
|
(in
millions)
|
|
|
|
|
Six Months Ended June
30,
|
|
2024
|
|
2023
|
OPERATING ACTIVITIES
OF CONTINUING OPERATIONS
|
|
|
|
Net cash provided by
operating activities from continuing operations
|
$
344
|
|
$
289
|
INVESTING ACTIVITIES
OF CONTINUING OPERATIONS
|
|
|
|
Capital expenditures,
including tooling outlays
|
(355)
|
|
(439)
|
Payments for businesses
acquired, net of cash acquired
|
—
|
|
(30)
|
Proceeds from
settlement of net investment hedges, net
|
36
|
|
13
|
(Payments for) proceeds
from investments in debt and equity securities, net
|
(4)
|
|
6
|
Proceeds from the sale
of business, net
|
8
|
|
—
|
Proceeds from asset
disposals and other, net
|
2
|
|
14
|
Net cash used in
investing activities from continuing operations
|
(313)
|
|
(436)
|
FINANCING ACTIVITIES
OF CONTINUING OPERATIONS
|
|
|
|
Net increase in notes
payable
|
—
|
|
3
|
Additions to
debt
|
2
|
|
1
|
Repayments of debt,
including current portion
|
(15)
|
|
(6)
|
Payments for purchase
of treasury stock
|
(100)
|
|
—
|
Payments for
stock-based compensation items
|
(23)
|
|
(25)
|
Payments for contingent
consideration
|
(1)
|
|
(23)
|
Purchase of
noncontrolling interest
|
—
|
|
(15)
|
Dividends paid to
BorgWarner stockholders
|
(50)
|
|
(79)
|
Dividends paid to
noncontrolling stockholders
|
(55)
|
|
(64)
|
Net cash used in
financing activities from continuing operations
|
(242)
|
|
(208)
|
CASH FLOWS FROM
DISCONTINUED OPERATIONS
|
|
|
|
Operating activities of
discontinued operations
|
(18)
|
|
(21)
|
Investing activities of
discontinued operations
|
—
|
|
(85)
|
Net cash used in
discontinued operations
|
(18)
|
|
(106)
|
Effect of exchange rate
changes on cash
|
(17)
|
|
(29)
|
Net decrease in cash,
cash equivalents and restricted cash
|
(246)
|
|
(490)
|
Cash, cash equivalents
and restricted cash at beginning of year
|
1,534
|
|
1,338
|
Cash, cash equivalents
and restricted cash at end of period
|
$
1,288
|
|
$
848
|
Less: Cash, cash
equivalents and restricted cash of discontinued operations at end
of period
|
$
—
|
|
$
215
|
Cash, cash equivalents
and restricted cash of continuing operations at end of
period
|
$
1,288
|
|
$
633
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
(in
millions)
|
|
|
|
|
Six Months Ended June
30,
|
|
2024
|
|
2023
|
Depreciation and
tooling amortization
|
$
276
|
|
$
250
|
Intangible asset
amortization
|
$
34
|
|
$
34
|
Non-GAAP Financial Measures
This press release contains information about BorgWarner's
financial results that is not presented in accordance with
accounting principles generally accepted in the United States ("GAAP").
Such non-GAAP financial measures are reconciled to their
closest GAAP financial measures below and in the Financial Results
table above. The provision of these comparable GAAP financial
measures for 2024 is not intended to indicate that BorgWarner is
explicitly or implicitly providing projections on those GAAP
financial measures, and actual results for such measures are likely
to vary from those presented. The reconciliations include all
information reasonably available to the Company at the date of this
press release and the adjustments that management can reasonably
predict.
Management believes that these non-GAAP financial measures are
useful to management, investors, and banking institutions in their
analysis of the Company's business and operating performance.
Management also uses this information for operational planning and
decision-making purposes.
Non-GAAP financial measures are not and should not be considered
a substitute for any GAAP measure. Additionally, because not all
companies use identical calculations, the non-GAAP financial
measures as presented by BorgWarner may not be comparable to
similarly titled measures reported by other companies.
Adjusted Operating Income and Adjusted Operating
Margin
The Company defines adjusted operating income as operating
income adjusted to exclude the impact of restructuring expense,
merger, acquisition and divestiture expense, intangible asset
amortization expense, other net expenses, discontinued operations,
and other gains and losses not reflective of the Company's ongoing
operations. Adjusted operating margin is defined as adjusted
operating income divided by net sales.
Adjusted Net Earnings
The Company defines adjusted net earnings as net earnings
attributable to BorgWarner Inc. adjusted to eliminate the impact of
restructuring expense, merger, acquisition and divestiture expense,
other net expenses, discontinued operations, and other gains and
losses not reflective of the Company's ongoing operations, and
related tax effects. The impact of intangible asset amortization
expense will continue to be included in adjusted net earnings.
Adjusted Earnings per Diluted Share
The Company defines adjusted earnings per diluted share as
earnings per diluted share adjusted to eliminate the impact of
restructuring expense, merger, acquisition and divestiture expense,
other net expenses, discontinued operations, other gains and losses
not reflective of the Company's ongoing operations, and related tax
effects. The impact of intangible asset amortization expense
continues to be included in adjusted earnings per share.
Free Cash Flow
The Company defines free cash flow as net cash provided by
operating activities minus capital expenditures and is useful to
both management and investors in evaluating the Company's ability
to service and repay its debt.
Organic Net Sales Change
The Company defines organic net sales changes as net sales
change year-over-year excluding the estimated impact of foreign
exchange (FX) and the acquisitions of the smart grid and smart
energy businesses of Hubei Surpass Sun Electric and the Electric
Hybrid Systems business segment of Eldor Corporation.
Outgrowth
The Company defines outgrowth as organic net sales change versus
the year-over-year change in light and commercial vehicle
production weighted for the Company's geographic exposure, as
estimated by the Company.
Adjusted Operating
Income and Adjusted Operating Margin (Unaudited)
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Net sales
|
$
3,603
|
|
$
3,671
|
|
$
7,198
|
|
$
7,054
|
|
|
|
|
|
|
|
|
Operating
income
|
$
297
|
|
$
333
|
|
$
592
|
|
$
607
|
Operating
margin
|
8.2 %
|
|
9.1 %
|
|
8.2 %
|
|
8.6 %
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
$
25
|
|
$
9
|
|
$
44
|
|
$
12
|
Intangible asset
amortization expense
|
17
|
|
17
|
|
34
|
|
34
|
Commercial contract
settlement
|
15
|
|
—
|
|
15
|
|
—
|
Adjustments associated
with Spin-Off related balances
|
11
|
|
—
|
|
11
|
|
—
|
Accelerated
depreciation
|
8
|
|
—
|
|
8
|
|
3
|
Merger and acquisition
expense
|
—
|
|
8
|
|
5
|
|
16
|
Gain on sale of
businesses
|
—
|
|
(5)
|
|
(3)
|
|
(5)
|
Corporate synergy from
spin-off
|
—
|
|
5
|
|
—
|
|
10
|
Service and lease
agreement termination
|
—
|
|
9
|
|
—
|
|
9
|
Gain on sale of
assets
|
—
|
|
(6)
|
|
—
|
|
(6)
|
Other non-comparable
items
|
3
|
|
2
|
|
9
|
|
(3)
|
Adjusted operating
income
|
$
376
|
|
$
372
|
|
$
715
|
|
$
677
|
Adjusted operating
margin
|
10.4 %
|
|
10.1 %
|
|
9.9 %
|
|
9.6 %
|
Free Cash Flow
Reconciliation (Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Net cash provided by
operating activities from continuing operations
|
$
462
|
|
$
230
|
|
$
344
|
|
$
289
|
Capital expenditures,
including tooling outlays
|
(165)
|
|
(200)
|
|
(355)
|
|
(439)
|
Free cash
flow
|
$
297
|
|
$
30
|
|
$
(11)
|
|
$
(150)
|
Second Quarter 2024
Organic Net Sales Change (Unaudited)
|
|
|
(in
millions)
|
Q2 2023 Net
Sales
|
|
FX
|
|
Acquisition
Impact
|
|
Organic Net Sales
Change
|
|
Q2 2024 Net
Sales
|
|
Organic Net Sales
Change %
|
Air
Management
|
$
2,027
|
|
$ (33)
|
|
$
—
|
|
$ (20)
|
|
$
1,974
|
|
(1.0) %
|
Drivetrain &
Battery Systems
|
1,117
|
|
(20)
|
|
—
|
|
99
|
|
1,196
|
|
8.9 %
|
ePropulsion
|
566
|
|
(9)
|
|
6
|
|
(99)
|
|
464
|
|
(17.5) %
|
Inter-segment
eliminations
|
(39)
|
|
—
|
|
—
|
|
8
|
|
(31)
|
|
(20.5) %
|
Net sales
|
$
3,671
|
|
$ (62)
|
|
$
6
|
|
$ (12)
|
|
$
3,603
|
|
(0.3) %
|
Year to Date 2024
Organic Net Sales Change (Unaudited)
|
|
|
(in
millions)
|
Q2 2023 YTD Net
Sales
|
|
FX
|
|
Acquisition
Impact
|
|
Organic Net Sales
Change
|
|
Q2 2024 YTD Net
Sales
|
|
Organic Net Sales
Change %
|
Air
Management
|
$
4,006
|
|
$ (42)
|
|
$
5
|
|
$
35
|
|
$
4,004
|
|
0.9 %
|
Drivetrain &
Battery Systems
|
2,073
|
|
(33)
|
|
—
|
|
315
|
|
2,355
|
|
15.2 %
|
ePropulsion
|
1,053
|
|
(19)
|
|
12
|
|
(146)
|
|
900
|
|
(13.9) %
|
Inter-segment
eliminations
|
(78)
|
|
—
|
|
—
|
|
17
|
|
(61)
|
|
(21.8) %
|
Total
|
$
7,054
|
|
$ (94)
|
|
$
17
|
|
$ 221
|
|
$
7,198
|
|
3.1 %
|
Adjusted Operating
Income and Adjusted Operating Margin Guidance Reconciliation
(Unaudited)
|
|
|
|
|
Full-Year 2024
Guidance
|
(in
millions)
|
Low
|
|
High
|
Net sales
|
$ 14,100
|
|
$ 14,400
|
|
|
|
|
Operating
income
|
1,150
|
|
1,195
|
Operating
margin
|
8.2 %
|
|
8.3 %
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Restructuring
expense
|
$
90
|
|
$
100
|
Intangible asset
amortization expense
|
70
|
|
70
|
Commercial contract
settlement
|
15
|
|
15
|
Adjustments associated
with Spin-Off related balances
|
11
|
|
11
|
Accelerated
depreciation
|
8
|
|
8
|
Merger and acquisition
expense
|
5
|
|
5
|
Gain on sale of
business
|
(3)
|
|
(3)
|
Other non-comparable
items
|
9
|
|
9
|
Adjusted operating
income
|
$
1,355
|
|
$
1,410
|
Adjusted operating
margin
|
9.6 %
|
|
9.8 %
|
Adjusted Earnings
Per Diluted Share Guidance Reconciliation
(Unaudited)
|
|
|
|
|
Full-Year 2024
Guidance
|
|
Low
|
|
High
|
Earnings per Diluted
Share from Continuing Operations
|
$
3.88
|
|
$
4.05
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Restructuring
expense
|
0.30
|
|
0.33
|
Commercial contract
settlement
|
0.05
|
|
0.05
|
Adjustments associated
with Spin-Off related balances
|
0.05
|
|
0.05
|
Accelerated
depreciation
|
0.03
|
|
0.03
|
Merger and acquisition
expense
|
0.02
|
|
0.02
|
Unrealized loss on
equity and debt securities
|
0.01
|
|
0.01
|
Gain on sale of
business
|
(0.01)
|
|
(0.01)
|
Tax
adjustments
|
(0.42)
|
|
(0.42)
|
Other non-comparable
items
|
0.04
|
|
0.04
|
Adjusted Earnings
per Diluted Share from Continuing Operations
|
$
3.95
|
|
$
4.15
|
Free Cash Flow
Guidance Reconciliation (Unaudited)
|
|
|
|
|
Full-Year 2024
Guidance
|
(in
millions)
|
Low
|
|
High
|
Net cash provided by
operating activities
|
$
1,325
|
|
$
1,375
|
Capital expenditures,
including tooling outlays
|
(850)
|
|
(800)
|
Free cash
flow
|
$
475
|
|
$
575
|
Full Year 2024
Estimated Organic Net Sales Change Guidance and Outgrowth
Reconciliation From Continuing Operations
(Unaudited)
|
(in
millions)
|
FY 2023 Net
Sales
|
|
FX
|
|
FY 2024 Acquisition
Impact
|
|
Organic Net Sales
Change
|
|
FY 2024 Net
Sales
|
|
Organic Net Sales
Change %
|
|
LV/CV Weighted
Market
|
|
Outgrowth
|
Low
|
$ 14,198
|
|
$
(175)
|
|
$
30
|
|
$
47
|
|
$ 14,100
|
|
0.3 %
|
|
(3.0) %
|
|
3.3 %
|
High
|
$ 14,198
|
|
$
(175)
|
|
$
30
|
|
$
347
|
|
$ 14,400
|
|
2.4 %
|
|
(2.0) %
|
|
4.4 %
|
Full Year 2024
Estimated Year-Over-Year Change in Production
(Unaudited)
|
|
|
North
America
|
|
Europe
|
|
China
|
|
Total
|
Light
vehicle
|
|
0% to 1%
|
|
(5)% to (4)%
|
|
(0.5)% to
0.5%
|
|
(2)% to
(1.5)%
|
Commercial
vehicle
|
|
(6)% to
(2.5)%
|
|
(13.5)% to
(10)%
|
|
~4%
|
|
(1.5)% to 0%
|
BorgWarner
weighted
|
|
(0.5)% to
0.5%
|
|
(6.5)% to
(5)%
|
|
0 to 1%
|
|
(3)% to (2)%
|
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SOURCE BorgWarner