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) |
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)) |
Exhibit Number | Description |
99.1 |
BorgWarner Inc. | ||
Date: October 25, 2018 | By: | /s/ Tonit M. Calaway |
Name: Tonit M. Calaway | ||
Title: Executive Vice President and Secretary |
EXHIBIT INDEX | |
Exhibit Number | Description |
99.1 |
Immediate Release |
Contact: Patrick Nolan |
248.754.0884 |
• | U.S. GAAP net sales of $2,479 million, up 2.6% compared with third quarter 2017. |
◦ | On a comparable basis, excluding the impact of foreign currencies and the acquisition of Sevcon, net sales were up 3.6% compared with third quarter 2017. |
• | U.S. GAAP net earnings of $0.98 per diluted share. |
◦ | Excluding non-comparable items (detailed in the table below), net earnings were $1.00 per diluted share. |
• | U.S. GAAP operating income of $278.0 million. |
◦ | Adjusted operating income was 11.8% of net sales. |
Net earnings per diluted share | Third Quarter | First Nine Months | |||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
U.S. GAAP | $ | 0.98 | $ | 0.88 | $ | 3.34 | $ | 2.77 | |||||||
Non-comparable items: | |||||||||||||||
Restructuring and other expense | 0.03 | 0.07 | 0.17 | 0.07 | |||||||||||
CEO stock awards modification | 0.03 | — | 0.01 | — | |||||||||||
Merger and acquisition expense | — | 0.03 | 0.02 | 0.03 | |||||||||||
Gain on commercial settlement | — | — | (0.01 | ) | — | ||||||||||
Tax adjustments | (0.04 | ) | (0.02 | ) | (0.25 | ) | (0.06 | ) | |||||||
Non – U.S. GAAP | $ | 1.00 | $ | 0.95 | * | $ | 3.28 | $ | 2.81 | ||||||
*Column does not add due to rounding and/or use of basic vs. diluted shares |
• | BorgWarner announced the appointment of Thomas J. McGill to the role of interim Chief Financial Officer, effective January 1, 2019. Mr. McGill will succeed Ron Hundzinski, 59, who will remain with the company through the end of 2018 to ensure a smooth transition of responsibilities before retiring from the company effective December 31, 2018. Management has initiated a comprehensive search process, which includes hiring an external search firm, to consider internal and external candidates to permanently fill the Chief Financial Officer position. |
• | BorgWarner entered into a three-year strategic cooperation agreement with Chinese auto manufacturer, WM Motor. The two parties will cooperate in the establishment of transportation models for tomorrow’s smart city. BorgWarner will provide a full range of advanced electric propulsion technologies and efficient electrical application systems, including its high-performance electric drive modules (eDM). |
• | BorgWarner has entered into two high volume contracts to supply its advanced High-voltage Coolant Heater to one of the leading European automakers and to one of Asia’s major vehicle manufacturers, with start of production expected to be in 2020. These awards recognize BorgWarner’s vast experience in the field of thermal management solutions for electric vehicles and are another step forward on the journey to a cleaner and more energy efficient world. |
• | BorgWarner has been selected to supply its state-of-the-art on-axis P2 drive module and electro-hydraulic control unit for hybrid-electric vehicles to two leading Chinese original equipment manufacturers (OEMs). BorgWarner was chosen as the supplier for these high-volume programs based on the technological advantages their P2 modules deliver including: the cost-effective power dense electric motor; state-of-the-art clutching and controls technology; and the efficiency, functional and packaging optimization of integrating the modules in the vehicle powertrains. This new business award is the result of close collaboration between the company’s global research and development centers and strong local Chinese engineering capability. With these two recent awards, BorgWarner will now have content on 18 P2 hybrid transmissions by 2023 serving various global OEMs and spanning multiple vehicle platforms. |
• | BorgWarner provides its high-performance electric drive module (eDM) for the 2018 C30 electric vehicle (EV) and the brand ORA from China’s leading automaker, Great Wall Motors (GWM). The 2018 C30 is the first EV model in China equipped with BorgWarner’s eDM technology. Unveiled at Auto China 2018 in Beijing, GWM’s new brand ORA is the automaker’s strategic EV brand for new energy vehicle market. With the integrated design of the electric motor and eGearDrive® transmission, BorgWarner’s eDM enables weight, cost and space savings in addition to easy installation, significantly improving efficiency to meet growing demand for power and comfort from electric vehicles. |
• | BorgWarner is announcing its innovative High Voltage Coolant Heater as part of the company’s Battery and Cabin Heater families. The technology improves battery performance by keeping the battery’s operating temperature within an optimal operating range and providing a consistent temperature distribution inside the battery pack and its cells. With its |
• | BorgWarner has developed a dual volute turbocharger specifically engineered for gasoline engines in light-duty vehicles with aggressive transient response targets. The company’s new turbocharger delivers a noticeably quicker engine response time when accelerating from low speeds. The dual volute geometry allows for the complete segregation of engine exhaust pulsations so more exhaust energy is available to the turbine wheel, compared with traditional twin-scroll turbochargers. Adding to BorgWarner’s extensive portfolio of engine boosting products, the dual volute turbocharger is a new performance solution for gasoline-powered light-duty vehicles to help Original Equipment Manufacturers (OEMs) accomplish their individual goals. |
• | BorgWarner supplies its advanced high-voltage positive temperature coefficient (PTC) cabin heating technology for the latest pure-electric ES8 SUV from Chinese electric car maker NIO. The advanced heating solution quickly warms the cabin and defrosts windows for maximum comfort and driving visibility. |
• | Developed for hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs), BorgWarner’s innovative Exhaust Heat Recovery System (EHRS) will enter production later this year for vehicles from a major North American automaker. By using the heat from exhaust gas which would normally be diverted through the exhaust pipes and wasted, the company’s technology reduces engine warm-up time, enhances efficiency and significantly improves fuel economy and reduces emissions. This cost-effective solution offers compact packaging, low weight and can easily be integrated into existing vehicles. |
• | BorgWarner announced that Deborah McWhinney and Paul Mascarenas have been named to its board of directors. McWhinney is the former Division CEO, Global Enterprise Payments, Citigroup Inc., one of the largest financial services firms. In this role, McWhinney was responsible for developing and implementing new mobile and online services around the globe for some of the world’s largest corporations and governments. McWhinney is a board member of IHS Markit Ltd., Fresenius Medical Care AG & Co., KGaA, Lloyds Banking Group plc and Fluor Corporation. She is also on the Board of Trustees for the California Institute for Technology and the Institute for Defense Analyses. Paul Mascarenas is the former chief technical officer of Ford Motor Company. In that role, he led Ford’s worldwide research organization, overseeing the development and implementation of the company’s technology strategy and plans. He is currently a Venture Partner with Fontinalis Partners LLP and serves on the boards of the United States Steel Corporation, ON Semiconductor Corporation and Spartan Motors Inc. |
BorgWarner Inc. | |||||||||||||||
Condensed Consolidated Statements of Operations (Unaudited) | |||||||||||||||
(millions, except per share amounts) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 2,478.5 | $ | 2,416.2 | $ | 7,956.8 | $ | 7,212.9 | |||||||
Cost of sales | 1,962.9 | 1,894.6 | 6,270.2 | 5,662.1 | |||||||||||
Gross profit | 515.6 | 521.6 | 1,686.6 | 1,550.8 | |||||||||||
Selling, general and administrative expenses | 230.5 | 225.0 | 719.9 | 659.1 | |||||||||||
Other expense, net | 7.1 | 22.0 | 42.4 | 27.5 | |||||||||||
Operating income | 278.0 | 274.6 | 924.3 | 864.2 | |||||||||||
Equity in affiliates’ earnings, net of tax | (15.2 | ) | (14.4 | ) | (38.4 | ) | (38.5 | ) | |||||||
Interest income | (1.5 | ) | (1.3 | ) | (4.4 | ) | (4.2 | ) | |||||||
Interest expense and finance charges | 14.4 | 17.6 | 45.4 | 53.6 | |||||||||||
Other postretirement income | (2.4 | ) | (1.3 | ) | (7.4 | ) | (3.9 | ) | |||||||
Earnings before income taxes and noncontrolling interest | 282.7 | 274.0 | 929.1 | 857.2 | |||||||||||
Provision for income taxes | 66.8 | 79.4 | 192.1 | 241.9 | |||||||||||
Net earnings | 215.9 | 194.6 | 737.0 | 615.3 | |||||||||||
Net earnings attributable to the noncontrolling interest, net of tax | 12.1 | 9.7 | 36.3 | 29.2 | |||||||||||
Net earnings attributable to BorgWarner Inc. | $ | 203.8 | $ | 184.9 | $ | 700.7 | $ | 586.1 | |||||||
Earnings per share — diluted | $ | 0.98 | $ | 0.88 | $ | 3.34 | $ | 2.77 | |||||||
Weighted average shares outstanding — diluted | 208.738 | 211.013 | 209.787 | 211.575 | |||||||||||
Supplemental Information (Unaudited) | |||||||||||||||
(millions of dollars) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Capital expenditures, including tooling outlays | $ | 125.6 | $ | 135.5 | $ | 394.3 | $ | 389.7 | |||||||
Depreciation and amortization | $ | 107.5 | $ | 104.9 | $ | 325.8 | $ | 302.0 |
BorgWarner Inc. | |||||||||||||||
Net Sales by Reporting Segment (Unaudited) | |||||||||||||||
(millions of dollars) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Engine | $ | 1,515.8 | $ | 1,506.4 | $ | 4,906.2 | $ | 4,483.6 | |||||||
Drivetrain | 976.7 | 921.8 | 3,093.7 | 2,767.7 | |||||||||||
Inter-segment eliminations | (14.0 | ) | (12.0 | ) | (43.1 | ) | (38.4 | ) | |||||||
Net sales | $ | 2,478.5 | $ | 2,416.2 | $ | 7,956.8 | $ | 7,212.9 | |||||||
Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest ("Adjusted EBIT") (Unaudited) | |||||||||||||||
(millions of dollars) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Engine | $ | 238.2 | $ | 237.6 | $ | 797.2 | $ | 727.1 | |||||||
Drivetrain | 107.6 | 111.1 | 344.9 | 324.7 | |||||||||||
Adjusted EBIT | 345.8 | 348.7 | 1,142.1 | 1,051.8 | |||||||||||
Restructuring expense | 5.7 | 13.3 | 44.4 | 13.3 | |||||||||||
Merger, acquisition and divestiture expense | 1.6 | 6.4 | 4.8 | 6.4 | |||||||||||
Lease termination settlement | — | — | — | 5.3 | |||||||||||
Other expense (income), net | 1.5 | 2.7 | (3.3 | ) | 2.7 | ||||||||||
Other postretirement income | (2.4 | ) | (1.3 | ) | (7.4 | ) | (3.9 | ) | |||||||
Corporate, including equity in affiliates' earnings and stock-based compensation | 43.8 | 37.3 | 133.5 | 121.4 | |||||||||||
Interest income | (1.5 | ) | (1.3 | ) | (4.4 | ) | (4.2 | ) | |||||||
Interest expense and finance charges | 14.4 | 17.6 | 45.4 | 53.6 | |||||||||||
Earnings before income taxes and noncontrolling interest | 282.7 | 274.0 | 929.1 | 857.2 | |||||||||||
Provision for income taxes | 66.8 | 79.4 | 192.1 | 241.9 | |||||||||||
Net earnings | 215.9 | 194.6 | 737.0 | 615.3 | |||||||||||
Net earnings attributable to the noncontrolling interest, net of tax | 12.1 | 9.7 | 36.3 | 29.2 | |||||||||||
Net earnings attributable to BorgWarner Inc. | $ | 203.8 | $ | 184.9 | $ | 700.7 | $ | 586.1 |
BorgWarner Inc. | |||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||
(millions of dollars) | |||||||
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Cash | $ | 361.8 | $ | 545.3 | |||
Receivables, net | 2,061.1 | 2,018.9 | |||||
Inventories, net | 810.3 | 766.3 | |||||
Prepayments and other current assets | 192.9 | 145.4 | |||||
Assets held for sale | 64.5 | 67.3 | |||||
Total current assets | 3,490.6 | 3,543.2 | |||||
Property, plant and equipment, net | 2,827.8 | 2,863.8 | |||||
Other non-current assets | 3,398.0 | 3,380.6 | |||||
Total assets | $ | 9,716.4 | $ | 9,787.6 | |||
Liabilities and Equity | |||||||
Notes payable and other short-term debt | $ | 50.7 | $ | 84.6 | |||
Accounts payable and accrued expenses | 2,009.2 | 2,270.3 | |||||
Income taxes payable | 9.8 | 40.8 | |||||
Liabilities held for sale | 29.9 | 29.5 | |||||
Total current liabilities | 2,099.6 | 2,425.2 | |||||
Long-term debt | 2,085.6 | 2,103.7 | |||||
Other non-current liabilities | 1,361.0 | 1,432.8 | |||||
Total BorgWarner Inc. stockholders’ equity | 4,066.4 | 3,716.8 | |||||
Noncontrolling interest | 103.8 | 109.1 | |||||
Total equity | 4,170.2 | 3,825.9 | |||||
Total liabilities and equity | $ | 9,716.4 | $ | 9,787.6 |
BorgWarner Inc. | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
(millions of dollars) | |||||||
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Operating | |||||||
Net earnings | $ | 737.0 | $ | 615.3 | |||
Depreciation and amortization | 325.8 | 302.0 | |||||
Stock-based compensation expense | 37.6 | 35.5 | |||||
Deferred income tax (benefit) provision | (36.6 | ) | 39.5 | ||||
Restructuring expense, net of cash paid | 34.7 | 3.5 | |||||
Equity in affiliates’ earnings, net of dividends received, and other | (21.6 | ) | (23.7 | ) | |||
Net earnings adjusted for non-cash charges to operations | 1,076.9 | 972.1 | |||||
Changes in assets and liabilities | (520.6 | ) | (348.2 | ) | |||
Net cash provided by operating activities | 556.3 | 623.9 | |||||
Investing | |||||||
Capital expenditures, including tooling outlays | (394.3 | ) | (389.7 | ) | |||
Payments for business acquired, net of cash acquired | — | (180.6 | ) | ||||
Payments for venture capital investment | (4.2 | ) | (2.0 | ) | |||
Proceeds from asset disposals and other | 5.5 | 1.6 | |||||
Net cash used in investing activities | (393.0 | ) | (570.7 | ) | |||
Financing | |||||||
Net (decrease) increase in notes payable | (29.8 | ) | 124.9 | ||||
Additions to long-term debt, net of debt issuance costs | 20.3 | — | |||||
Repayments of long-term debt, including current portion | (15.0 | ) | (14.5 | ) | |||
Payments for debt issuance cost | — | (2.4 | ) | ||||
Payments for purchase of treasury stock | (150.0 | ) | (100.0 | ) | |||
Payments for stock-based compensation items | (15.1 | ) | (2.1 | ) | |||
Dividends paid to BorgWarner stockholders | (106.3 | ) | (88.5 | ) | |||
Dividends paid to noncontrolling stockholders | (27.5 | ) | (23.6 | ) | |||
Net cash used in financing activities | (323.4 | ) | (106.2 | ) | |||
Effect of exchange rate changes on cash | (23.4 | ) | 23.6 | ||||
Net decrease in cash | (183.5 | ) | (29.4 | ) | |||
Cash at beginning of year | 545.3 | 443.7 | |||||
Cash at end of period | $ | 361.8 | $ | 414.3 |