AUBURN
HILLS, Mich., Aug. 2, 2023
/PRNewswire/ -- BorgWarner Inc. (NYSE: BWA) today reported second
quarter results.
Charging Forward Update:
- In June, BorgWarner unveiled Charging Forward 2027,
which included the following 2027 targets:
-
- eProduct sales of over $10
billion,
- eProducts adjusted operating margin of approximately 7%,
and
- Maintaining double-digit margins for Foundational
products.
- BorgWarner agreed to acquire the Electric Hybrid Systems (EHS)
segment of Eldor for €75 million at closing with a potential
additional amount due subject to an earnout. The acquisition is
expected to enhance BorgWarner's capabilities in engineering
compact and efficient 400V and 800V on-board chargers while also
bringing innovative and cost-effective, high-frequency DC/DC
converter technology to the portfolio.
- BorgWarner has been selected by a major East Asian OEM to
supply inverters and eMotors for the automaker's new electric
vehicle platform, scheduled to enter production mid-2025.
- BorgWarner has secured a contract with a global automotive
thermal and energy management solutions supplier to deliver high
voltage coolant heaters (HVCH) for use on a series of three
electric vehicle (EV) platforms for a major OEM, expected to start
production in 2025.
- BorgWarner has been selected by a leading Chinese domestic OEM
to supply its iDM for advanced hybrid vehicles expected to start
production in 2024.
- BorgWarner completed the strategic spin-off of PHINIA on
July 3, 2023. This transaction
completes the disposition pillar of the Company's Charging
Forward strategy.
- BorgWarner issued its 2023 Sustainability Report:
Accelerating Action, highlighting the progress the Company has
made toward meeting its environmental stewardship, social
responsibility and governance (ESG) objectives and outlining
additional goals for 2023 and beyond.
- BorgWarner expects its 2023 eProduct sales to be $2.3 billion to $2.4
billion, up from approximately $1.5
billion in 2022.
Second Quarter Highlights:
- U.S. GAAP net sales of $4,520
million, an increase of 20% compared with second quarter
2022.
-
- Excluding the impact of foreign currencies and the acquisitions
of Santroll's light vehicle eMotor business, Rhombus Energy
Solutions, Drivetek and SSE, organic sales were up 21% compared
with the second quarter 2022.
- Pro forma for the spin-off of PHINIA, BorgWarner's organic
sales were $3,671 million, up 22%
compared with the second quarter 2022.
- U.S. GAAP net earnings of $0.87
per diluted share.
-
- Excluding $(0.48) per diluted
share related to non-comparable items (detailed in the table
below), adjusted net earnings were $1.35 per diluted share.
- Excluding non-comparable items and pro forma for the spin-off
of PHINIA, adjusted net earnings were $1.05 per diluted share.
- U.S. GAAP operating income of $383
million, or 8.5% of net sales.
-
- Excluding $91 million of pretax
expenses related to non-comparable items, adjusted operating income
was $474 million, or 10.5% of net
sales.
- Excluding non-comparable items and pro forma for the spin-off
of PHINIA, adjusted operating income was $369 million, or 10.1% of net sales.
- Net cash generated by operating activities of $280 million.
-
- Free cash flow was positive $38
million.
- Pro forma for the spin-off of PHINIA and and excluding the
one-time spin-off-related cash costs, free cash flow was a usage of
$42 million.
Financial Results:
The Company believes the following table is useful in
highlighting non-comparable items that impacted its U.S. GAAP net
earnings per diluted share and the impact of the spin-off of
PHINIA. 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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Earnings per diluted
share
|
$
0.87
|
|
$
0.91
|
|
$
1.80
|
|
$
1.74
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Merger, acquisition
and divestiture expense, net
|
0.24
|
|
0.04
|
|
0.35
|
|
0.13
|
Restructuring
expense
|
0.04
|
|
0.11
|
|
0.06
|
|
0.17
|
Service and lease
agreement termination
|
0.03
|
|
—
|
|
0.03
|
|
—
|
Gain on sale of
business
|
(0.02)
|
|
—
|
|
(0.02)
|
|
(0.08)
|
Gain on sale of
asset
|
(0.02)
|
|
—
|
|
(0.02)
|
|
—
|
Other non-comparable
items
|
—
|
|
0.05
|
|
(0.01)
|
|
0.05
|
Unrealized loss (gain)
on debt and equity securities
|
0.18
|
|
(0.03)
|
|
0.23
|
|
0.11
|
Tax
adjustments
|
0.03
|
|
(0.03)
|
|
0.02
|
|
(0.03)
|
|
|
|
|
|
|
|
|
Adjusted earnings
per diluted share
|
$
1.35
|
|
$
1.05
|
|
$
2.44
|
|
$
2.09
|
|
|
|
|
|
|
|
|
PHINIA
spin-off
|
(0.30)
|
|
(0.31)
|
|
(0.56)
|
|
(0.63)
|
|
|
|
|
|
|
|
|
Pro forma adjusted
earnings per diluted share
|
$
1.05
|
|
$
0.74
|
|
$
1.88
|
|
$
1.46
|
Net sales were $4,520 million for
the second quarter 2023, an increase of 20% compared with
$3,759 million for the second quarter
2022, primarily due to increased demand for the Company's products
and recoveries from the Company's customers of material cost
inflation. Net earnings for the second quarter 2023 were
$204 million, or $0.87 per diluted share, compared with net
earnings of $216 million, or
$0.91 per diluted share, for the
second quarter 2022. Pro forma adjusted net earnings per diluted
share for the second quarter 2023 were $1.05, up from pro forma adjusted net earnings
per diluted share of $0.74 for the
second quarter 2022. Pro forma adjusted net earnings for the second
quarter 2023 excluded net non-comparable items and the pro forma
impact of the PHINIA spin-off of $0.18 per diluted share, while pro forma adjusted
net earnings for the second quarter 2022 excluded net
non-comparable items and the pro forma impact of the PHINIA
spin-off of $(0.17) 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 pro forma
adjusted net earnings was primarily due to the benefit of higher
sales and customer recoveries, partially offset by higher input
costs due to inflation.
Full Year 2023 Guidance: The Company has updated full
year sales, margin and EPS guidance. Starting in the third
quarter of 2023, the Company will no longer consolidate its Fuel
Systems and Aftermarket segments, and results of those segments for
all periods prior to the PHINIA spin-off will be reflected as
discontinued operations. The Company's guidance and 2022 sales
reflect its continuing operations. Net sales for 2023 are
expected to be in the range of $14.2 billion to $14.6 billion, compared with 2022 sales of
approximately $12.6 billion. This
implies a year-over-year increase in organic sales of 13% to 16%.
Foreign currencies are expected to result in a year-over-year
decrease in sales of approximately $35 million primarily due
to the weakening of the Chinese Renminbi against the U.S. dollar,
partially offset by the strengthening of the Euro against the U.S.
dollar. The acquisitions of Santroll's light vehicle eMotor
business, Rhombus Energy Solutions, Drivetek and SSE are expected
to increase year-over-year sales by an aggregate of approximately
$75 million.
Operating margin from continuing operations for the full year is
expected to be in the range of 7.6% to 8.0%. Excluding the impact
of non-comparable items, adjusted operating margin from continuing
operations is expected to be in the range of 9.2% to 9.6%. Net
earnings from continuing operations are expected to be within a
range of $2.58 to $2.75 per diluted share. Excluding the impact of
non-comparable items, adjusted net earnings from continuing
operations are expected to be within a range of $3.50 to $3.85 per
diluted share. Full-year operating cash from continuing operations
is expected to be in the range of $1,000
million to $1,150 million,
while free cash flow from continuing operations is expected to be
in the range of $400 million to
$500 million, excluding one-time cash
costs associated with the PHINIA spin-off.
At 9:30 a.m. ET today, a brief
conference call concerning second quarter 2023 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 (the "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 or incorporated by
reference 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 Annual Report on Form 10-K for the year
ended December 31, 2022 ("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, such as the
current shortage of semiconductor chips that has impacted original
equipment manufacturer ("OEM") customers and their suppliers,
including us; 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 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 sales
growth; potential disruptions in the global economy caused by
Russia's invasion of Ukraine; 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 recently-completed 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, both of which are highly cyclical and subject to
disruptions; our reliance on major OEM customers; 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. 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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$
4,520
|
|
$
3,759
|
|
$ 8,700
|
|
$ 7,633
|
Cost of
sales
|
3,652
|
|
3,047
|
|
7,082
|
|
6,171
|
Gross
profit
|
868
|
|
712
|
|
1,618
|
|
1,462
|
Gross
margin
|
19.2 %
|
|
18.9 %
|
|
18.6 %
|
|
19.2 %
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
422
|
|
394
|
|
806
|
|
782
|
Restructuring
expense
|
12
|
|
27
|
|
19
|
|
42
|
Other operating
expense, net
|
51
|
|
19
|
|
70
|
|
14
|
Operating
income
|
383
|
|
272
|
|
723
|
|
624
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(14)
|
|
(11)
|
|
(18)
|
|
(19)
|
Unrealized loss (gain)
on debt and equity securities
|
54
|
|
(11)
|
|
69
|
|
28
|
Interest expense,
net
|
12
|
|
15
|
|
22
|
|
30
|
Other postretirement
expense (income)
|
3
|
|
(9)
|
|
5
|
|
(18)
|
Earnings before income
taxes and noncontrolling interest
|
328
|
|
288
|
|
645
|
|
603
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
106
|
|
57
|
|
193
|
|
148
|
Net
earnings
|
222
|
|
231
|
|
452
|
|
455
|
|
|
|
|
|
|
|
|
Net earnings
attributable to noncontrolling interest, net of tax
|
18
|
|
15
|
|
31
|
|
39
|
Net earnings
attributable to BorgWarner Inc.
|
$
204
|
|
$
216
|
|
$
421
|
|
$
416
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to BorgWarner Inc. — diluted
|
$
0.87
|
|
$
0.91
|
|
$
1.80
|
|
$
1.74
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding — diluted
|
234.4
|
|
238.0
|
|
234.3
|
|
238.5
|
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Net Sales by Reportable
Segment (Unaudited)*
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Air
Management
|
$
2,027
|
|
$
1,724
|
|
$
4,006
|
|
$
3,492
|
Drivetrain &
Battery Systems
|
1,118
|
|
896
|
|
2,073
|
|
1,791
|
Fuel Systems
|
605
|
|
516
|
|
1,173
|
|
1,107
|
ePropulsion
|
567
|
|
432
|
|
1,054
|
|
872
|
Aftermarket
|
339
|
|
326
|
|
669
|
|
633
|
Inter-segment
eliminations
|
(136)
|
|
(135)
|
|
(275)
|
|
(262)
|
Net sales
|
$
4,520
|
|
$
3,759
|
|
$
8,700
|
|
$
7,633
|
|
|
|
|
|
|
|
|
Segment Adjusted
Operating Income (Loss) (Unaudited)*
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Air
Management
|
$
307
|
|
$
244
|
|
$
592
|
|
$
495
|
Drivetrain &
Battery Systems
|
140
|
|
113
|
|
250
|
|
226
|
Fuel Systems
|
57
|
|
44
|
|
105
|
|
110
|
Aftermarket
|
52
|
|
51
|
|
97
|
|
90
|
ePropulsion
|
(19)
|
|
(42)
|
|
(53)
|
|
(59)
|
Segment Adjusted
Operating Income
|
537
|
|
410
|
|
991
|
|
862
|
Corporate, including
stock-based compensation
|
63
|
|
62
|
|
121
|
|
125
|
Merger, acquisition and
divestiture expense, net
|
56
|
|
9
|
|
86
|
|
32
|
Intangible asset
amortization expense
|
24
|
|
27
|
|
48
|
|
50
|
Restructuring
expense
|
12
|
|
27
|
|
19
|
|
42
|
Service and lease
agreement termination
|
9
|
|
—
|
|
9
|
|
—
|
Gain on sale of
business
|
(5)
|
|
—
|
|
(5)
|
|
(24)
|
Gain on sale of
asset
|
(6)
|
|
—
|
|
(6)
|
|
—
|
Other non-comparable
items
|
1
|
|
13
|
|
(4)
|
|
13
|
Equity in affiliates'
earnings, net of tax
|
(14)
|
|
(11)
|
|
(18)
|
|
(19)
|
Unrealized loss (gain)
on debt and equity securities
|
54
|
|
(11)
|
|
69
|
|
28
|
Interest expense,
net
|
12
|
|
15
|
|
22
|
|
30
|
Other postretirement
expense (income)
|
3
|
|
(9)
|
|
5
|
|
(18)
|
Earnings before income
taxes and noncontrolling interest
|
328
|
|
288
|
|
645
|
|
603
|
Provision for income
taxes
|
106
|
|
57
|
|
193
|
|
148
|
Net
earnings
|
222
|
|
231
|
|
452
|
|
455
|
Net earnings
attributable to noncontrolling interest, net of tax
|
18
|
|
15
|
|
31
|
|
39
|
Net earnings
attributable to BorgWarner Inc.
|
$
204
|
|
$
216
|
|
$
421
|
|
$
416
|
____________________________
*
|
In the first quarter of
2023, the Company elected to disaggregate the former e-Propulsion
& Drivetrain reportable segment into two separate reportable
segments of Drivetrain & Battery Systems and ePropulsion. In
the first quarter of 2022, the Company announced that the Americas
starter and alternator business, previously reported in its former
e-Propulsion & Drivetrain segment, would transition to the
Aftermarket segment. The Company also announced in 2022 that the
canisters and fuel delivery modules business, previously reported
in its Air Management segment, would transition to the Fuel Systems
segment. Both of these transitions were completed during the second
quarter of 2022. Additionally, in the fourth quarter of 2022, the
Company moved its battery systems business, previously reported in
its Air Management segment, to the e-Propulsion & Drivetrain
segment.The reportable segment disclosures have been updated
accordingly which included recasting prior period information for
the new reporting structures.
|
BorgWarner
Inc.
|
|
|
|
Condensed Consolidated
Balance Sheets (Unaudited)
|
(in
millions)
|
|
|
|
|
|
|
|
|
June 30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Cash, cash equivalents
and restricted cash
|
$
848
|
|
$
1,338
|
Receivables,
net
|
3,856
|
|
3,323
|
Inventories,
net
|
1,860
|
|
1,687
|
Prepayments and other
current assets
|
312
|
|
269
|
Total current
assets
|
6,876
|
|
6,617
|
|
|
|
|
Property, plant and
equipment, net
|
4,482
|
|
4,365
|
Other non-current
assets
|
5,959
|
|
6,012
|
Total
assets
|
$
17,317
|
|
$
16,994
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Notes payable and other
short-term debt
|
$
65
|
|
$
62
|
Accounts
payable
|
2,725
|
|
2,684
|
Other current
liabilities
|
1,445
|
|
1,490
|
Total current
liabilities
|
4,235
|
|
4,236
|
|
|
|
|
Long-term
debt
|
4,191
|
|
4,166
|
Other non-current
liabilities
|
1,110
|
|
1,084
|
Total
liabilities
|
9,536
|
|
9,486
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
7,551
|
|
7,224
|
Noncontrolling
interest
|
230
|
|
284
|
Total
equity
|
7,781
|
|
7,508
|
Total liabilities and
equity
|
$
17,317
|
|
$
16,994
|
BorgWarner
Inc.
|
|
|
|
Condensed Consolidated
Statements of Cash Flows (Unaudited)
|
(in
millions)
|
|
|
|
|
Six Months Ended June
30,
|
|
2023
|
|
2022
|
OPERATING
|
|
|
|
Net cash provided by
operating activities
|
$
268
|
|
$
332
|
INVESTING
|
|
|
|
Capital expenditures,
including tooling outlays
|
(520)
|
|
(331)
|
Payments for businesses
acquired, net of cash acquired
|
(30)
|
|
(157)
|
Proceeds from
settlement of net investment hedges, net
|
13
|
|
28
|
(Payments) proceeds
from investments in debt and equity securities, net
|
(1)
|
|
30
|
Proceeds from the sale
of business, net
|
—
|
|
25
|
Proceeds from asset
disposals and other, net
|
16
|
|
17
|
Net cash used in
investing activities
|
(522)
|
|
(388)
|
|
|
|
|
FINANCING
|
|
|
|
Net increase in notes
payable
|
3
|
|
—
|
Additions to
debt
|
2
|
|
2
|
Repayments of debt,
including current portion
|
(6)
|
|
(6)
|
Payments for purchase
of treasury stock
|
—
|
|
(140)
|
Payments for
stock-based compensation items
|
(25)
|
|
(17)
|
Payments for contingent
consideration
|
(23)
|
|
—
|
Purchase of
noncontrolling interest
|
(15)
|
|
(59)
|
Dividends paid to
BorgWarner stockholders
|
(79)
|
|
(82)
|
Dividends paid to
noncontrolling stockholders
|
(64)
|
|
(46)
|
Net cash used in
financing activities
|
(207)
|
|
(348)
|
Effect of exchange rate
changes on cash
|
(29)
|
|
(50)
|
Net decrease in cash,
cash equivalents and restricted cash
|
(490)
|
|
(454)
|
Cash, cash equivalents
and restricted cash at beginning of year
|
1,338
|
|
1,844
|
Cash, cash equivalents
and restricted cash at end of period
|
$
848
|
|
$
1,390
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
(in
millions)
|
|
|
|
|
Six Months Ended June
30,
|
|
2023
|
|
2022
|
Depreciation and
tooling amortization
|
$
321
|
|
$
315
|
Intangible asset
amortization
|
$
48
|
|
$
50
|
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 2023 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 Santroll's light vehicle
eMotor business, Rhombus Energy Solutions, Drivetek and the
electric vehicle solution, smart grid and smart energy businesses
of Hubei Surpass Sun Electric.
Adjusted Operating
Income and Adjusted Operating Margin (Unaudited)
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
(in
millions)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$
4,520
|
|
$
3,759
|
|
$
8,700
|
|
$
7,633
|
|
|
|
|
|
|
|
|
Operating
income
|
$
383
|
|
$
272
|
|
$
723
|
|
$
624
|
Operating
margin
|
8.5 %
|
|
7.2 %
|
|
8.3 %
|
|
8.2 %
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Merger, acquisition
and divestiture expense, net
|
$
56
|
|
$
9
|
|
$
86
|
|
$
32
|
Intangible asset
amortization expense
|
24
|
|
27
|
|
48
|
|
50
|
Restructuring
expense
|
12
|
|
27
|
|
19
|
|
42
|
Service and lease
agreement termination
|
9
|
|
—
|
|
9
|
|
—
|
Gain on sale of
business
|
(5)
|
|
—
|
|
(5)
|
|
(24)
|
Gain on sale of
asset
|
(6)
|
|
—
|
|
(6)
|
|
—
|
Other non-comparable
items
|
1
|
|
13
|
|
(4)
|
|
13
|
Adjusted operating
income
|
$
474
|
|
$
348
|
|
$
870
|
|
$
737
|
Adjusted operating
margin
|
10.5 %
|
|
9.3 %
|
|
10.0 %
|
|
9.7 %
|
|
|
|
|
|
|
|
|
PHINIA
spin-off
|
(105)
|
|
(90)
|
|
(193)
|
|
(189)
|
|
|
|
|
|
|
|
|
Pro forma adjusted
operating income
|
$
369
|
|
$
258
|
|
$
677
|
|
$
548
|
Pro forma adjusted
operating margin
|
10.1 %
|
|
8.5 %
|
|
9.6 %
|
|
9.0 %
|
Free Cash Flow
Reconciliation (Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
(in
millions)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net cash provided by
operating activities
|
$
280
|
|
$
216
|
|
$
268
|
|
$
332
|
Capital expenditures,
including tooling outlays
|
(242)
|
|
(154)
|
|
(520)
|
|
(331)
|
Free cash
flow
|
$
38
|
|
$
62
|
|
$
(252)
|
|
$
1
|
|
|
|
|
|
|
|
|
PHINIA spin-off net
cash provided by operating activities
|
$
168
|
|
N/A
|
|
$
84
|
|
N/A
|
PHINIA spin-off capital
expenditures, including tooling outlays
|
$
(41)
|
|
N/A
|
|
$
(69)
|
|
N/A
|
One-time cash costs for
spin-off transaction
|
$
(47)
|
|
N/A
|
|
$
(60)
|
|
N/A
|
|
|
|
|
|
|
|
|
Pro forma free cash
flow excluding one-time cash costs for
spin-off transaction
|
$
(42)
|
|
N/A
|
|
$
(207)
|
|
N/A
|
Second Quarter 2023
Organic Net Sales Change (Unaudited)
|
|
|
(in
millions)
|
Q2 2022
Net
Sales
|
|
FX
|
|
Acquisition
Impact
|
|
Organic
Net
Sales
Change
|
|
Q2 2023
Net
Sales
|
|
Organic
Net
Sales
Change
%
|
Air
Management
|
$ 1,724
|
|
$ (8)
|
|
$
13
|
|
$ 298
|
|
$
2,027
|
|
17.3 %
|
Drivetrain &
Battery Systems
|
896
|
|
(11)
|
|
—
|
|
233
|
|
1,118
|
|
26.0 %
|
Fuel Systems
|
516
|
|
(4)
|
|
—
|
|
93
|
|
605
|
|
18.0 %
|
ePropulsion
|
432
|
|
(14)
|
|
5
|
|
144
|
|
567
|
|
33.3 %
|
Aftermarket
|
326
|
|
1
|
|
—
|
|
12
|
|
339
|
|
3.7 %
|
Inter-segment
eliminations
|
(135)
|
|
—
|
|
—
|
|
(1)
|
|
(136)
|
|
—
|
Net sales
|
$ 3,759
|
|
$
(36)
|
|
$
18
|
|
$ 779
|
|
$
4,520
|
|
20.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date 2023
Organic Net Sales Change (Unaudited)
|
(in
millions)
|
Q2 2022
YTD Net
Sales
|
|
FX
|
|
Acquisition
Impact
|
|
Organic
Net
Sales
Change
|
|
Q2 2023
YTD Net
Sales
|
|
Organic
Net
Sales
Change
%
|
Air
Management
|
$ 3,492
|
|
$
(89)
|
|
$
15
|
|
$ 588
|
|
$
4,006
|
|
16.8 %
|
Drivetrain &
Battery Systems
|
1,791
|
|
(43)
|
|
—
|
|
325
|
|
2,073
|
|
18.1 %
|
Fuel Systems
|
1,107
|
|
(28)
|
|
—
|
|
69
|
|
1,173
|
|
6.2 %
|
ePropulsion
|
872
|
|
(33)
|
|
25
|
|
190
|
|
1,054
|
|
21.8 %
|
Aftermarket
|
633
|
|
(5)
|
|
—
|
|
41
|
|
669
|
|
6.5 %
|
Inter-segment
eliminations
|
(262)
|
|
—
|
|
—
|
|
(13)
|
|
(275)
|
|
—
|
Net sales
|
$ 7,633
|
|
$ (198)
|
|
$
40
|
|
$
1,200
|
|
$
8,700
|
|
16.0 %
|
Adjusted Operating
Income and Adjusted Operating Margin Guidance Reconciliation
From
Continuing Operations (Unaudited)
|
|
|
|
|
Full-Year 2023
Guidance
|
(in
millions)
|
Low
|
|
High
|
Net sales
|
$
14,200
|
|
$
14,600
|
|
|
|
|
Operating
income
|
1,086
|
|
1,161
|
Operating
margin
|
7.6 %
|
|
8.0 %
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Intangible asset
amortization expense
|
$
95
|
|
$
95
|
Merger, acquisition
and divestiture expense, net
|
90
|
|
100
|
Restructuring
expense
|
40
|
|
50
|
Service and lease
agreement termination
|
9
|
|
9
|
Gain on sale of
business
|
(5)
|
|
(5)
|
Gain on sale of
asset
|
(6)
|
|
(6)
|
Other non-comparable
items
|
(4)
|
|
(4)
|
Adjusted operating
income
|
$
1,305
|
|
$
1,400
|
Adjusted operating
margin
|
9.2 %
|
|
9.6 %
|
Adjusted Earnings
Per Diluted Share Guidance Reconciliation From Continuing
Operations
(Unaudited)
|
|
|
|
|
Full-Year 2023
Guidance
|
|
Low
|
|
High
|
Earnings per Diluted
Share from Continuing Operations
|
$
2.58
|
|
$
2.75
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Merger, acquisition
and divestiture expense, net
|
0.56
|
|
0.70
|
Restructuring
expense
|
0.13
|
|
0.17
|
Unrealized loss on
debt and equity securities
|
0.23
|
|
0.23
|
Service and lease
agreement termination
|
0.03
|
|
0.03
|
Gain on sale of
business
|
(0.02)
|
|
(0.02)
|
Gain on sale of
asset
|
(0.02)
|
|
(0.02)
|
Other non-comparable
items
|
(0.01)
|
|
(0.01)
|
Tax
adjustments
|
0.02
|
|
0.02
|
Adjusted Earnings
per Diluted Share from Continuing Operations
|
$
3.50
|
|
$
3.85
|
Free Cash Flow
Guidance Reconciliation From Continuing Operations
(Unaudited)
|
|
|
|
|
|
|
Full-Year 2023
Guidance
|
(in
millions)
|
|
Low
|
|
High
|
Net cash provided by
operating activities
|
|
$
1,000
|
|
$
1,150
|
Capital expenditures,
including tooling outlays
|
|
(750)
|
|
(800)
|
Free cash
flow
|
|
$
250
|
|
$
350
|
One-time cash costs for
spin-off transaction
|
|
150
|
|
150
|
Free cash flow
excluding one-time cash costs for spin-off transaction
|
|
$
400
|
|
$
500
|
Full Year 2023
Organic Net Sales Change Guidance Reconciliation From Continuing
Operations (Unaudited)
|
|
|
(in
millions)
|
FY 2022 Net
Sales
|
|
Disposition
Impact
|
|
FY 2022 Pro
Forma Net
Sales
|
|
FX
|
|
FY 2023
Acquisition
Impact
|
|
Organic Net
Sales
Change
|
|
FY 2023 Net
Sales
|
|
Organic Net
Sales
Change %
|
Low
|
$ 15,801
|
|
$
(3,234)
|
|
$ 12,567
|
|
$
(35)
|
|
$
75
|
|
$
1,593
|
|
$ 14,200
|
|
12.7 %
|
High
|
$ 15,801
|
|
$
(3,234)
|
|
$ 12,567
|
|
$
(35)
|
|
$
75
|
|
$
1,993
|
|
$ 14,600
|
|
15.9 %
|
BorgWarner Excluding PHINIA Spin-Off
Pro Forma
Historical Information
On July 3, 2023, BorgWarner
completed the previously announced spin-off of its Fuel Systems and
Aftermarket segments in a transaction intended to qualify as
tax-free to the Company's stockholders for U.S. federal income tax
purposes, which was accomplished by the distribution of 100% of the
outstanding common stock of PHINIA, Inc. ("PHINIA") to holders of
record of common stock of the Company on a pro rata basis. For
informational purposes only, in the following tables, the Company
provides unaudited pro forma financial information as if the
Spin-Off had occurred on January 1,
2022, in that they reflect the removal of PHINIA results for
all periods presented.
BorgWarner Excluding
PHINIA Spin-Off (Unaudited)
Pro Forma
Information
|
|
2022
|
(in
millions)
|
Three Months
Ended March 31,
2022
|
|
Three Months
Ended June 30,
2022
|
|
Three Months
Ended
September 30,
2022
|
|
Three Months
Ended December
31, 2022
|
|
Year Ended
December 31,
2022
|
Net
Sales
|
|
|
|
|
|
|
|
|
|
Air
Management
|
$
1,768
|
|
$
1,724
|
|
$
1,841
|
|
$
1,796
|
|
$
7,129
|
Drivetrain &
Battery Systems
|
895
|
|
896
|
|
954
|
|
991
|
|
3,736
|
ePropulsion
|
440
|
|
432
|
|
489
|
|
545
|
|
1,906
|
Inter-segment
eliminations
|
(65)
|
|
(33)
|
|
(51)
|
|
(55)
|
|
(204)
|
Net
Sales
|
$
3,038
|
|
$
3,019
|
|
$
3,233
|
|
$
3,277
|
|
$
12,567
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income
|
|
|
|
|
|
|
|
|
|
Air
Management
|
$
251
|
|
$
244
|
|
$
294
|
|
$
279
|
|
$
1,068
|
Drivetrain &
Battery Systems
|
113
|
|
113
|
|
101
|
|
135
|
|
462
|
ePropulsion
|
(17)
|
|
(42)
|
|
(32)
|
|
8
|
|
(83)
|
Corporate &
Non-Operating
|
(57)
|
|
(57)
|
|
(52)
|
|
(103)
|
|
(269)
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income
|
$
290
|
|
$
258
|
|
$
311
|
|
$
319
|
|
$
1,178
|
Adjusted Operating
Margin
|
9.5 %
|
|
8.5 %
|
|
9.6 %
|
|
9.7 %
|
|
9.4 %
|
|
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net
of tax
|
4
|
|
9
|
|
7
|
|
7
|
|
27
|
Intangible
amortization
|
(16)
|
|
(20)
|
|
(17)
|
|
(17)
|
|
(70)
|
Other postretirement
income
(expense)
|
1
|
|
1
|
|
—
|
|
(3)
|
|
(1)
|
Interest expense,
net
|
(14)
|
|
(13)
|
|
(11)
|
|
(9)
|
|
(47)
|
Provision for income
taxes
|
(68)
|
|
(44)
|
|
(75)
|
|
(64)
|
|
(251)
|
Net earnings
attributable to
noncontrolling interest, net of tax
|
(23)
|
|
(16)
|
|
(19)
|
|
(24)
|
|
(82)
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to
BorgWarner Inc.
|
$
174
|
|
$
175
|
|
$
196
|
|
$
209
|
|
$
754
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares
outstanding
|
236.8
|
|
236.8
|
|
236.8
|
|
236.8
|
|
236.8
|
|
|
|
|
|
|
|
|
|
|
Pro forma adjusted
earnings
per diluted share
|
$
0.73
|
|
$
0.74
|
|
$
0.83
|
|
$
0.88
|
|
$
3.18
|
|
|
|
|
|
|
|
|
|
|
PHINIA
Spin-Off
|
$
0.32
|
|
$
0.31
|
|
$
0.41
|
|
$
0.38
|
|
$
1.42
|
Other non-comparable
items
|
(0.21)
|
|
(0.14)
|
|
(0.08)
|
|
(0.17)
|
|
(0.61)
|
Earnings per diluted
share -
GAAP
|
$
0.84
|
|
$
0.91
|
|
$
1.16
|
|
$
1.09
|
|
$
3.99
|
BorgWarner Excluding
PHINIA Spin-Off (Unaudited)
Pro Forma
Information
|
|
2023
|
(in
millions)
|
Three Months
Ended March 31,
2023
|
|
Three Months
Ended June 30,
2023
|
Net
Sales
|
|
|
|
Air
Management
|
$
1,979
|
|
$
2,027
|
Drivetrain &
Battery Systems
|
955
|
|
1,118
|
ePropulsion
|
487
|
|
567
|
Inter-segment
eliminations
|
(40)
|
|
(41)
|
Net
Sales
|
$
3,381
|
|
$
3,671
|
|
|
|
|
Adjusted Operating
Income
|
|
|
|
Air
Management
|
$
285
|
|
$
307
|
Drivetrain &
Battery Systems
|
110
|
|
140
|
ePropulsion
|
(34)
|
|
(19)
|
Corporate &
Non-Operating
|
(53)
|
|
(59)
|
|
|
|
|
Adjusted Operating
Income
|
$
308
|
|
$
369
|
Adjusted Operating
Margin
|
9.1 %
|
|
10.1 %
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
2
|
|
12
|
Intangible
amortization
|
(18)
|
|
(17)
|
Other postretirement
expense
|
(2)
|
|
(3)
|
Interest expense,
net
|
(7)
|
|
(10)
|
Provision for income
taxes
|
(74)
|
|
(89)
|
Net earnings
attributable to noncontrolling interest, net of tax
|
(14)
|
|
(17)
|
|
|
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
195
|
|
$
245
|
|
|
|
|
Weighted average shares
outstanding
|
234.3
|
|
234.3
|
|
|
|
|
Pro forma adjusted
earnings per diluted share
|
$
0.83
|
|
$
1.05
|
|
|
|
|
PHINIA
Spin-Off
|
$
0.26
|
|
$
0.30
|
Other non-comparable
items
|
(0.16)
|
|
(0.48)
|
Earnings per diluted
share - GAAP
|
$
0.93
|
|
$
0.87
|
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SOURCE BorgWarner