0000908255-16-000123.txt : 20160728 0000908255-16-000123.hdr.sgml : 20160728 20160728081116 ACCESSION NUMBER: 0000908255-16-000123 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20160728 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20160728 DATE AS OF CHANGE: 20160728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BORGWARNER INC CENTRAL INDEX KEY: 0000908255 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 133404508 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12162 FILM NUMBER: 161788435 BUSINESS ADDRESS: STREET 1: 3850 HAMLIN RD. CITY: AUBURN HILLS STATE: MI ZIP: 48326 BUSINESS PHONE: 2487549200 MAIL ADDRESS: STREET 1: 3850 HAMLIN RD. CITY: AUBURN HILLS STATE: MI ZIP: 48326 FORMER COMPANY: FORMER CONFORMED NAME: BORG WARNER AUTOMOTIVE INC DATE OF NAME CHANGE: 19930628 8-K 1 a8k6302016.htm 8-K Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 28, 2016

BORGWARNER INC.
________________________________________________
(Exact name of registrant as specified in its charter)

Delaware
 
1-12162
 
13-3404508
State or other jurisdiction of
 
Commission File No.
 
(I.R.S. Employer
Incorporation or organization
 
 
 
Identification No.)


3850 Hamlin Road, Auburn Hills, Michigan
 
48326
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (248) 754-9200

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02. Results of Operations and Financial Condition

On July 28, 2016, BorgWarner Inc. issued a press release announcing its financial results for the three and six months ended June 30, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for the purpose of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in any such filings.

Item 9.01. Financial Statements and Exhibits

(d)     Exhibits. The following exhibits are being furnished as part of this Report.

Exhibit
Number
Description
 
 
99.1
Press release regarding earnings issued by BorgWarner Inc. dated July 28, 2016







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
BorgWarner Inc.
 
 
 
Date: July 28, 2016
By:
/s/ John J. Gasparovic
 
 
Name: John J. Gasparovic
 
 
Title: Secretary






EXHIBIT INDEX
 
 
Exhibit
Number
Description
 
 
99.1
Press release regarding earnings issued by BorgWarner Inc. dated July 28, 2016




 EX-99.1 2 a8k6302016exhibit991pressr.htm EXHIBIT 99.1 Exhibit


Immediate Release
Contact: Ken Lamb
248.754.0884

BORGWARNER REPORTS SECOND QUARTER 2016 U.S. GAAP NET EARNINGS OF $0.76 PER DILUTED SHARE, OR $0.84 PER DILUTED SHARE EXCLUDING NON-COMPARABLE ITEMS

NARROWS FULL YEAR GUIDANCE TO THE HIGH END OF THE PREVIOUS RANGE,
PROVIDES GUIDANCE FOR THIRD QUARTER

Auburn Hills, Michigan, July 28, 2016 – 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%.

1



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.


2


    
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.

3



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.



4


BorgWarner Inc.
 
 
 
 
 
 
 
Condensed Consolidated Statements of Operations (Unaudited)
 
 
 
 
(millions, except per share amounts)
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
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
June 30,
 
Six Months Ended
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





5




BorgWarner Inc.
 
 
 
 
 
 
 
Net Sales by Reporting Segment (Unaudited)
 
 
 
 
 
 
(millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
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
June 30,
 
Six Months Ended
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





6





BorgWarner Inc.
 
 
 
Condensed Consolidated Balance Sheets (Unaudited)
(millions of dollars)
 
 
 
 
 
 
 
 
June 30,
2016
 
December 31,
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





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




8