AUBURN
HILLS, Mich., Nov. 2, 2023
/PRNewswire/ -- BorgWarner Inc. (NYSE: BWA) today reported third
quarter results.
Charging Forward Update:
- BorgWarner expects its 2023 eProduct sales to be $2.0 billion to $2.1
billion, up from approximately $1.5
billion in 2022.
- BorgWarner has signed an agreement with a major North American
OEM to supply its bi-directional 800V Onboard Charger (OBC) for use
on the automaker's premium passenger car battery electric vehicle
(BEV) platforms. This marks BorgWarner's first OBC win in
North America and its first major
eProduct award with this customer, with start of production
expected to be in 2027.
- BorgWarner has been awarded increased business by a premium
European OEM to supply additional Combined Inverter and DC/DC
Converters (CIDD), for use in the customer's all-wheel-drive B- and
C-segment hybrid applications. Start of production of this program
is expected to be in 2025.
- BorgWarner has solidified an agreement with a major, global OEM
to supply its 400V high voltage coolant heaters (HVCH) for the
automaker's European light vehicle program. Start of production of
this program is expected to be in 2026.
- BorgWarner has an agreement to supply inverters for Volvo Cars'
Next-Generation Electric Vehicles. This inverter uses 750V silicon
carbide MOSFET dies.
- BorgWarner announced that the Science Based Targets initiative
(SBTi) has validated its targets to reduce absolute Scope 1 and 2
greenhouse gas (GHG) emissions 85% by 2030 from a 2021 base year
and to reduce absolute Scope 3 GHG emissions 25% by 2030 from a
2021 base year.
Third Quarter Highlights (continuing operations
basis):
- U.S. GAAP net sales of $3,622
million, an increase of 12% compared with third quarter
2022.
- Excluding the impact of foreign currencies and the acquisitions
of Drivetek and SSE, organic sales were up 11% compared with the
third quarter 2022.
- U.S. GAAP net earnings of $0.37
per diluted share.
- Excluding $(0.61) per diluted
share related to non-comparable items (detailed in the table
below), adjusted net earnings were $0.98 per diluted share.
- U.S. GAAP operating income of $272
million, or 7.5% of net sales.
- Excluding $77 million of pretax
expenses related to non-comparable items, adjusted operating income
was $349 million, or 9.6% of net
sales.
- Net cash generated by operating activities of $221 million.
- Free cash flow of $36
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 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Earnings per diluted
share
|
$
0.37
|
|
$
0.73
|
|
$
2.06
|
|
$
1.95
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Merger, acquisition
and divestiture expense, net
|
0.01
|
|
0.01
|
|
0.05
|
|
0.07
|
Restructuring
expense
|
0.17
|
|
0.02
|
|
0.21
|
|
0.17
|
Service and lease
agreement termination
|
—
|
|
—
|
|
0.03
|
|
—
|
Gain on debt
extinguishment
|
(0.09)
|
|
—
|
|
(0.09)
|
|
—
|
Loss (gain) on sale of
business
|
—
|
|
0.03
|
|
(0.02)
|
|
(0.05)
|
Gain on sale of
assets
|
(0.03)
|
|
—
|
|
(0.04)
|
|
|
Other non-comparable
items
|
0.05
|
|
(0.01)
|
|
0.06
|
|
(0.03)
|
Realized and
unrealized loss (gain) on debt and equity securities
|
0.32
|
|
—
|
|
0.55
|
|
0.11
|
Corporate synergy from
spin-off
|
—
|
|
0.02
|
|
0.03
|
|
0.05
|
Tax
adjustments
|
0.18
|
|
—
|
|
—
|
|
(0.04)
|
|
|
|
|
|
|
|
|
Adjusted earnings
per diluted share
|
$
0.98
|
|
$
0.80
|
|
$
2.84
|
|
$
2.23
|
Net sales were $3,622 million for
the third quarter 2023, an increase of 12% compared with net sales
of $3,226 million for the third
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 third quarter 2023 were
$87 million, or $0.37 per
diluted share, compared with net earnings of $173 million, or $0.73 per diluted share, for the third quarter
2022. Adjusted net earnings per diluted share for the third quarter
2023 were $0.98, up from adjusted net
earnings per diluted share of $0.80
for the third quarter 2022. Adjusted net earnings for the third
quarter 2023 excluded net non-comparable items of $(0.61) per diluted share, while adjusted net
earnings for the third quarter 2022 excluded net non-comparable
items of $(0.07) 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 was primarily due to the benefit of higher sales
(including 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. The Company's guidance
and comparable 2022 sales reflect its continuing operations.
Net sales for 2023 are expected to be in the range of $14.1 billion to $14.3 billion, compared with 2022 sales of
approximately $12.6 billion. This
implies a year-over-year increase in organic sales of 12% to 14%.
Foreign currencies are expected to result in a year-over-year
decrease in sales of approximately $110 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
$63 million.
Operating margin for the full year is expected to be in the
range of 8.1% to 8.2%. Excluding the impact of non-comparable
items, adjusted operating margin is expected to be in the range of
9.4% to 9.6%. Net earnings are expected to be within a range of
$2.65 to $2.81 per diluted share. Excluding the impact of
non-comparable items, adjusted net earnings are expected to be
within a range of $3.60 to
$3.80 per diluted share. Full-year
operating cash is expected to be in the range of $1,200 million to $1,250
million, while free cash flow is expected to be in the range
of $400 million to $450 million.
At 9:30 a.m. ET today, a brief
conference call concerning third 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 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
challenges we will face as we seek to achieve our environmental,
social, and governance targets, including Scope 1, 2, and 3
emissions, 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 revenue
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 and is highly cyclical and subject to disruptions; our
reliance on major OEM customers; the extent, duration, and impact
of the current and any future strikes involving some 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.
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Condensed Consolidated
Statements of Operations (Unaudited)
|
|
|
|
|
(in millions, except
per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$ 3,622
|
|
$ 3,226
|
|
$
10,676
|
|
$ 9,318
|
Cost of
sales
|
2,970
|
|
2,619
|
|
8,767
|
|
7,588
|
Gross
profit
|
652
|
|
607
|
|
1,909
|
|
1,730
|
Gross
margin
|
18.0 %
|
|
18.8 %
|
|
17.9 %
|
|
18.6 %
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
330
|
|
325
|
|
963
|
|
951
|
Restructuring
expense
|
56
|
|
5
|
|
68
|
|
42
|
Other operating
(income) expense, net
|
(6)
|
|
12
|
|
(1)
|
|
(7)
|
Operating
income
|
272
|
|
265
|
|
879
|
|
744
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(10)
|
|
(5)
|
|
(23)
|
|
(21)
|
Realized and unrealized
loss (gain) on debt and equity securities
|
60
|
|
(1)
|
|
129
|
|
27
|
Interest (income)
expense, net
|
(19)
|
|
12
|
|
3
|
|
41
|
Other postretirement
expense (income)
|
3
|
|
(1)
|
|
8
|
|
(2)
|
Earnings from
continuing operations before income taxes and noncontrolling
interest
|
238
|
|
260
|
|
762
|
|
699
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
133
|
|
68
|
|
230
|
|
177
|
Net earnings from
continuing operations
|
105
|
|
192
|
|
532
|
|
522
|
Net (loss) earnings
from discontinued operations
|
(37)
|
|
100
|
|
(12)
|
|
225
|
Net earnings
|
68
|
|
292
|
|
520
|
|
747
|
Net earnings from
continuing operations attributable to noncontrolling interest, net
of tax
|
18
|
|
19
|
|
49
|
|
58
|
Net earnings from
discontinued operations attributable to noncontrolling interest,
net of tax
|
—
|
|
—
|
|
—
|
|
—
|
Net earnings
attributable to BorgWarner Inc.
|
$
50
|
|
$
273
|
|
$
471
|
|
$
689
|
|
|
|
|
|
|
|
|
Amounts attributable to
BorgWarner Inc.:
|
|
|
|
|
|
|
|
Net earnings from
continuing operations
|
$
87
|
|
$
173
|
|
$
483
|
|
$
464
|
Net (loss) earnings
from discontinued operations
|
(37)
|
|
100
|
|
(12)
|
|
225
|
Net earnings
attributable to BorgWarner Inc.
|
$
50
|
|
$
273
|
|
$
471
|
|
$
689
|
|
|
|
|
|
|
|
|
Earnings per share
from continuing operations — basic
|
$
0.37
|
|
$
0.74
|
|
$
2.07
|
|
$
1.96
|
Earnings per share
from discontinued operations — basic
|
(0.16)
|
|
0.43
|
|
(0.05)
|
|
0.95
|
Earnings per share
attributable to BorgWarner Inc. — basic
|
$
0.21
|
|
$
1.17
|
|
$
2.02
|
|
$
2.91
|
|
|
|
|
|
|
|
|
Earnings per share
from continuing operations — diluted
|
$
0.37
|
|
$
0.73
|
|
$
2.06
|
|
$
1.95
|
Earnings per share
from discontinued operations — diluted
|
(0.16)
|
|
0.42
|
|
(0.05)
|
|
0.95
|
Earnings per share
attributable to BorgWarner Inc. — diluted
|
$
0.21
|
|
$
1.15
|
|
$
2.01
|
|
$
2.90
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
233.4
|
|
234.3
|
|
233.2
|
|
236.5
|
Diluted
|
235.3
|
|
235.6
|
|
234.6
|
|
237.5
|
BorgWarner
Inc.
|
|
|
|
|
|
|
|
Net Sales by Reportable
Segment (Unaudited)*
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Air
Management
|
$
1,945
|
|
$
1,843
|
|
$
5,951
|
|
$
5,328
|
Drivetrain &
Battery Systems
|
1,145
|
|
954
|
|
3,218
|
|
2,745
|
ePropulsion
|
571
|
|
489
|
|
1,624
|
|
1,361
|
Inter-segment
eliminations
|
(39)
|
|
(60)
|
|
(117)
|
|
(116)
|
Net sales
|
$
3,622
|
|
$
3,226
|
|
$
10,676
|
|
$
9,318
|
|
|
|
|
|
|
|
|
Segment Adjusted
Operating Income (Loss) (Unaudited)*
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Air
Management
|
$
294
|
|
$
291
|
|
$
884
|
|
$
793
|
Drivetrain &
Battery Systems
|
147
|
|
103
|
|
400
|
|
330
|
ePropulsion
|
(20)
|
|
(33)
|
|
(74)
|
|
(89)
|
Segment Adjusted
Operating Income
|
421
|
|
361
|
|
1,210
|
|
1,034
|
Corporate, including
stock-based compensation
|
72
|
|
61
|
|
194
|
|
198
|
Restructuring
expense
|
56
|
|
5
|
|
68
|
|
42
|
Intangible asset
amortization expense
|
17
|
|
16
|
|
51
|
|
52
|
Merger and acquisition
expense, net
|
3
|
|
5
|
|
22
|
|
13
|
Service and lease
agreement termination
|
—
|
|
—
|
|
9
|
|
—
|
Loss (gain) on sale of
business
|
—
|
|
9
|
|
(5)
|
|
(15)
|
Gain on sale of
assets
|
(7)
|
|
—
|
|
(13)
|
|
—
|
Other non-comparable
items
|
8
|
|
—
|
|
5
|
|
—
|
Equity in affiliates'
earnings, net of tax
|
(10)
|
|
(5)
|
|
(23)
|
|
(21)
|
Realized and unrealized
loss (gain) on debt and equity securities
|
60
|
|
(1)
|
|
129
|
|
27
|
Interest (income)
expense, net
|
(19)
|
|
12
|
|
3
|
|
41
|
Other postretirement
expense (income)
|
3
|
|
(1)
|
|
8
|
|
(2)
|
Earnings from
continuing operations before income taxes and noncontrolling
interest
|
238
|
|
260
|
|
762
|
|
699
|
Provision for income
taxes
|
133
|
|
68
|
|
230
|
|
177
|
Net earnings from
continuing operations
|
105
|
|
192
|
|
532
|
|
522
|
Net earnings from
continuing operations attributable to noncontrolling interest, net
of tax
|
18
|
|
19
|
|
49
|
|
58
|
Net earnings
attributable to BorgWarner Inc.
|
$
87
|
|
$
173
|
|
$
483
|
|
$
464
|
___________________
|
*
|
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.
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)
|
|
|
|
|
|
|
|
|
September
30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Cash, cash equivalents
and restricted cash
|
$
949
|
|
$
1,083
|
Receivables,
net
|
3,351
|
|
2,471
|
Inventories,
net
|
1,328
|
|
1,217
|
Prepayments and other
current assets
|
272
|
|
230
|
Current assets of
discontinued operations
|
—
|
|
1,616
|
Total current
assets
|
5,900
|
|
6,617
|
|
|
|
|
Property, plant and
equipment, net
|
3,569
|
|
3,426
|
Other non-current
assets
|
4,635
|
|
4,905
|
Non-current assets of
discontinued operations
|
—
|
|
2,046
|
Total
assets
|
$
14,104
|
|
$
16,994
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Notes payable and other
short-term debt
|
$
63
|
|
$
60
|
Accounts
payable
|
2,396
|
|
2,146
|
Other current
liabilities
|
1,114
|
|
1,084
|
Current liabilities of
discontinued operations
|
—
|
|
946
|
Total current
liabilities
|
3,573
|
|
4,236
|
|
|
|
|
Long-term
debt
|
3,665
|
|
4,140
|
Other non-current
liabilities
|
859
|
|
815
|
Non-current liabilities
of discontinued operations
|
—
|
|
295
|
Total
liabilities
|
8,097
|
|
9,486
|
|
|
|
|
Total BorgWarner Inc.
stockholders' equity
|
5,768
|
|
7,224
|
Noncontrolling
interest
|
239
|
|
284
|
Total
equity
|
6,007
|
|
7,508
|
Total liabilities and
equity
|
$
14,104
|
|
$
16,994
|
BorgWarner
Inc.
|
|
|
|
Condensed Consolidated
Statements of Cash Flows (Unaudited)
|
(in
millions)
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
OPERATING ACTIVITIES
OF CONTINUING OPERATIONS
|
|
|
|
Net cash provided by
operating activities from continuing operations
|
$
510
|
|
$
552
|
INVESTING ACTIVITIES
OF CONTINUING OPERATIONS
|
|
|
|
Capital expenditures,
including tooling outlays
|
(624)
|
|
(427)
|
Payments for businesses
acquired, net of cash acquired
|
(31)
|
|
(288)
|
Proceeds from
settlement of net investment hedges, net
|
25
|
|
40
|
Proceeds from
investments in debt and equity securities, net
|
63
|
|
27
|
Proceeds from the sale
of business, net
|
—
|
|
25
|
Proceeds from asset
disposals and other, net
|
29
|
|
16
|
Net cash used in
investing activities from continuing operations
|
(538)
|
|
(607)
|
|
|
|
|
FINANCING ACTIVITIES
OF CONTINUING OPERATIONS
|
|
|
|
Net increase in notes
payable
|
3
|
|
—
|
Additions to
debt
|
4
|
|
2
|
Repayments of debt,
including current portion
|
(444)
|
|
(9)
|
Payments for debt
issuance costs
|
(3)
|
|
—
|
Payments for purchase
of treasury stock
|
—
|
|
(240)
|
Payments for
stock-based compensation items
|
(25)
|
|
(18)
|
Payments for contingent
consideration
|
(23)
|
|
—
|
Purchase of
noncontrolling interest
|
(15)
|
|
(56)
|
Net distribution from
PHINIA
|
401
|
|
—
|
Dividends paid to
BorgWarner stockholders
|
(105)
|
|
(121)
|
Dividends paid to
noncontrolling stockholders
|
(71)
|
|
(48)
|
Net cash used in
financing activities from continuing operations
|
(278)
|
|
(490)
|
CASH FLOWS FROM
DISCONTINUED OPERATIONS
|
|
|
|
Operating activities of
discontinued operations
|
(66)
|
|
127
|
Investing activities of
discontinued operations
|
(86)
|
|
(79)
|
Financing activities of
discontinued operations
|
84
|
|
(3)
|
Net cash (used in)
provided by discontinued operations
|
(68)
|
|
45
|
Effect of exchange rate
changes on cash
|
(15)
|
|
(103)
|
Net decrease in cash,
cash equivalents and restricted cash
|
(389)
|
|
(603)
|
Cash, cash equivalents
and restricted cash at beginning of year
|
1,338
|
|
1,844
|
Cash, cash equivalents
and restricted cash at end of period
|
$
949
|
|
$
1,241
|
Less: Cash, cash
equivalents and restricted cash of discontinued operations at end
of period
|
$
—
|
|
$
172
|
Cash, cash equivalents
and restricted cash of continuing operations at end of
period
|
$
949
|
|
$
1,069
|
|
|
|
|
Supplemental
Information (Unaudited)
|
|
|
|
(in
millions)
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
Depreciation and
tooling amortization
|
$
376
|
|
$
360
|
Intangible asset
amortization
|
$
51
|
|
$
52
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
(in
millions)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$
3,622
|
|
$
3,226
|
|
$
10,676
|
|
$
9,318
|
|
|
|
|
|
|
|
|
Operating
income
|
$
272
|
|
$
265
|
|
$
879
|
|
$
744
|
Operating
margin
|
7.5 %
|
|
8.2 %
|
|
8.2 %
|
|
8.0 %
|
|
|
|
|
|
|
|
|
Non-comparable
items:
|
|
|
|
|
|
|
|
Restructuring
expense
|
$
56
|
|
$
5
|
|
$
68
|
|
$
42
|
Intangible asset
amortization expense
|
17
|
|
16
|
|
51
|
|
52
|
Merger and acquisition
expense, net
|
3
|
|
5
|
|
22
|
|
13
|
Corporate synergy from
spin-off
|
—
|
|
5
|
|
10
|
|
15
|
Service and lease
agreement termination
|
—
|
|
—
|
|
9
|
|
—
|
Loss (gain) on sale of
business
|
—
|
|
9
|
|
(5)
|
|
(15)
|
Gain on sale of
assets
|
(7)
|
|
—
|
|
(13)
|
|
—
|
Other non-comparable
items
|
8
|
|
—
|
|
5
|
|
—
|
Adjusted operating
income
|
$
349
|
|
$
305
|
|
$
1,026
|
|
$
851
|
Adjusted operating
margin
|
9.6 %
|
|
9.5 %
|
|
9.6 %
|
|
9.1 %
|
|
|
|
|
|
|
|
|
Free Cash Flow
Reconciliation (Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(in
millions)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net cash provided by
operating activities from continuing operations
|
$
221
|
|
N/A
|
|
$
510
|
|
N/A
|
Capital expenditures,
including tooling outlays
|
(185)
|
|
N/A
|
|
(624)
|
|
N/A
|
Free cash
flow
|
$
36
|
|
N/A
|
|
$
(114)
|
|
N/A
|
Third Quarter 2023
Organic Net Sales Change (Unaudited)
|
|
|
(in
millions)
|
Q3 2022
Net Sales
|
|
FX
|
|
Acquisition
Impact
|
|
Organic
Net
Sales
Change
|
|
Q3 2023
Net Sales
|
|
Organic
Net
Sales
Change
%
|
Air
Management
|
$
1,843
|
|
$ 45
|
|
$
8
|
|
$ 49
|
|
$
1,945
|
|
2.7 %
|
Drivetrain &
Battery Systems
|
954
|
|
12
|
|
—
|
|
179
|
|
1,145
|
|
18.8 %
|
ePropulsion
|
489
|
|
(13)
|
|
—
|
|
95
|
|
571
|
|
19.4 %
|
Inter-segment
eliminations
|
(60)
|
|
—
|
|
—
|
|
21
|
|
(39)
|
|
—
|
Net sales
|
$
3,226
|
|
$ 44
|
|
$
8
|
|
$ 344
|
|
$
3,622
|
|
10.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date 2023
Organic Net Sales Change (Unaudited)
|
(in
millions)
|
Q3 2022
YTD Net
Sales
|
|
FX
|
|
Acquisition
Impact
|
|
Organic
Net
Sales
Change
|
|
Q3 2023
YTD Net
Sales
|
|
Organic
Net
Sales
Change
%
|
Air
Management
|
$
5,328
|
|
$
(44)
|
|
$
23
|
|
$ 644
|
|
$
5,951
|
|
12.1 %
|
Drivetrain &
Battery Systems
|
2,745
|
|
(31)
|
|
—
|
|
504
|
|
3,218
|
|
18.4 %
|
ePropulsion
|
1,361
|
|
(46)
|
|
25
|
|
284
|
|
1,624
|
|
20.9 %
|
Inter-segment
eliminations
|
(116)
|
|
—
|
|
—
|
|
(1)
|
|
(117)
|
|
—
|
Net sales
|
$
9,318
|
|
$ (121)
|
|
$
48
|
|
$
1,431
|
|
$
10,676
|
|
15.4 %
|
Adjusted Operating
Income and Adjusted Operating Margin Guidance Reconciliation
From
Continuing Operations (Unaudited)
|
|
|
|
|
Full-Year 2023
Guidance
|
(in
millions)
|
Low
|
|
High
|
Net sales
|
$
14,100
|
|
$
14,300
|
|
|
|
|
Operating
income
|
1,140
|
|
1,175
|
Operating
margin
|
8.1 %
|
|
8.2 %
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Restructuring
expense
|
$
95
|
|
$
100
|
Intangible asset
amortization expense
|
67
|
|
67
|
Merger and acquisition
expense, net
|
22
|
|
27
|
Corporate synergy from
spin-off
|
10
|
|
10
|
Service and lease
agreement termination
|
9
|
|
9
|
Gain on sale of
business
|
(5)
|
|
(5)
|
Gain on sale of
asset
|
(13)
|
|
(13)
|
Other non-comparable
items
|
5
|
|
5
|
Adjusted operating
income
|
$
1,330
|
|
$
1,375
|
Adjusted operating
margin
|
9.4 %
|
|
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
|
$
2.65
|
|
$
2.81
|
|
|
|
|
Non-comparable
items:
|
|
|
|
Merger and acquisition
expense, net
|
0.09
|
|
0.11
|
Restructuring
expense
|
0.29
|
|
0.31
|
Unrealized loss on
debt and equity securities
|
0.55
|
|
0.55
|
Service and lease
agreement termination
|
0.03
|
|
0.03
|
Gain on sale of
business
|
(0.02)
|
|
(0.02)
|
Gain on sale of
asset
|
(0.04)
|
|
(0.04)
|
Other non-comparable
items
|
0.02
|
|
0.02
|
Corporate synergy from
spin-off
|
0.03
|
|
0.03
|
Adjusted Earnings
per Diluted Share from Continuing Operations
|
$
3.60
|
|
$
3.80
|
Free Cash Flow
Guidance Reconciliation From Continuing Operations
(Unaudited)
|
|
|
|
|
|
|
Full-Year 2023
Guidance
|
(in
millions)
|
|
Low
|
|
High
|
Net cash provided by
operating activities
|
|
$
1,200
|
|
$
1,250
|
Capital expenditures,
including tooling outlays
|
|
(800)
|
|
(800)
|
Free cash
flow
|
|
$
400
|
|
$
450
|
Full Year 2023
Organic Net Sales Change Guidance Reconciliation From Continuing
Operations (Unaudited)
|
|
|
(in
millions)
|
FY 2022 Net
Sales
|
|
Discontinued
Operations
Impact
|
|
FY 2022 Net
Sales
Continuing
Operations
Basis
|
|
FX
|
|
FY 2023
Acquisition
Impact
|
|
Organic Net
Sales
Change
|
|
FY 2023 Net
Sales
|
|
Organic Net
Sales
Change %
|
Low
|
$ 15,801
|
|
$
(3,166)
|
|
$ 12,635
|
|
$
(110)
|
|
$
63
|
|
$
1,512
|
|
$ 14,100
|
|
12.0 %
|
High
|
$ 15,801
|
|
$
(3,166)
|
|
$ 12,635
|
|
$
(110)
|
|
$
63
|
|
$
1,712
|
|
$ 14,300
|
|
13.5 %
|
BorgWarner Continuing Operations Basis
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. The
historical results of operations and the financial position of
PHINIA for periods prior to the spin-off are presented as
discontinued operations in the Company's financial statements. For
informational purposes only, in the following tables, the Company
provides unaudited, continuing operations 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
Continuing Operations (Unaudited)
|
|
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
|
Revenue
|
|
|
|
|
|
|
|
|
|
Air
Management
|
$
1,781
|
|
$
1,704
|
|
$
1,843
|
|
$
1,809
|
|
$
7,137
|
Drivetrain &
Battery Systems
|
895
|
|
896
|
|
954
|
|
990
|
|
3,735
|
ePropulsion
|
440
|
|
432
|
|
489
|
|
545
|
|
1,906
|
Inter-segment
eliminations
|
(37)
|
|
(19)
|
|
(60)
|
|
(27)
|
|
(143)
|
Net
Sales
|
$
3,079
|
|
$
3,013
|
|
$
3,226
|
|
$
3,317
|
|
$
12,635
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
2,504
|
|
2,465
|
|
2,619
|
|
2,678
|
|
10,266
|
Gross Profit
|
575
|
|
548
|
|
607
|
|
639
|
|
2,369
|
Gross Margin
|
18.7 %
|
|
18.2 %
|
|
18.8 %
|
|
19.3 %
|
|
18.7 %
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
306
|
|
320
|
|
325
|
|
339
|
|
1,290
|
Restructuring
expense
|
13
|
|
24
|
|
5
|
|
6
|
|
48
|
Other operating
expense, net
|
(14)
|
|
(5)
|
|
12
|
|
29
|
|
22
|
Operating
income
|
270
|
|
209
|
|
265
|
|
265
|
|
1,009
|
|
|
|
|
|
|
|
|
|
|
Non-comparable
items
|
21
|
|
46
|
|
40
|
|
59
|
|
166
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income
|
|
|
|
|
|
|
|
|
|
Air
Management
|
$
252
|
|
$
249
|
|
$
291
|
|
$
320
|
|
$
1,112
|
Drivetrain &
Battery Systems
|
114
|
|
114
|
|
103
|
|
90
|
|
421
|
ePropulsion
|
(14)
|
|
(43)
|
|
(33)
|
|
6
|
|
(84)
|
Corporate &
Non-Operating
|
(58)
|
|
(68)
|
|
(56)
|
|
(92)
|
|
(274)
|
Adjusted Operating
Income
|
$
294
|
|
$
252
|
|
$
305
|
|
$
324
|
|
$
1,175
|
|
|
|
|
|
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(5)
|
|
(11)
|
|
(5)
|
|
(7)
|
|
(28)
|
Realized and unrealized
loss (gain) on debt and equity securities
|
39
|
|
(11)
|
|
(1)
|
|
46
|
|
73
|
Other postretirement
income (expense)
|
(1)
|
|
—
|
|
(1)
|
|
2
|
|
—
|
Interest expense,
net
|
15
|
|
14
|
|
12
|
|
10
|
|
51
|
Provision for income
taxes
|
69
|
|
40
|
|
68
|
|
18
|
|
195
|
Net earnings
attributable to noncontrolling interest, net of tax
|
23
|
|
16
|
|
19
|
|
24
|
|
82
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
130
|
|
$
161
|
|
$
173
|
|
$
172
|
|
$
636
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding
|
239.0
|
|
238.0
|
|
235.6
|
|
234.5
|
|
236.8
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
0.54
|
|
$
0.68
|
|
$
0.73
|
|
$
0.73
|
|
$
2.68
|
|
|
|
|
|
|
|
|
|
|
Other non-comparable
items
|
$
0.19
|
|
$
0.02
|
|
$
0.07
|
|
$
0.13
|
|
$
0.41
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations adjusted earnings per diluted share
|
$
0.73
|
|
$
0.70
|
|
$
0.80
|
|
$
0.86
|
|
$
3.09
|
BorgWarner
Continuing Operations (Unaudited)
|
|
2023
|
(in
millions)
|
Three Months
Ended March 31,
2023
|
|
Three Months
Ended June 30,
2023
|
Revenue
|
|
|
|
Air
Management
|
$
1,979
|
|
$
2,027
|
Drivetrain &
Battery Systems
|
956
|
|
1,117
|
ePropulsion
|
487
|
|
566
|
Inter-segment
eliminations
|
(39)
|
|
(39)
|
Net
Sales
|
$
3,383
|
|
$
3,671
|
|
|
|
|
Cost of
sales
|
2,805
|
|
2,992
|
Gross profit
|
578
|
|
679
|
Gross margin
|
17.1 %
|
|
18.5 %
|
|
|
|
|
Selling, general and
administrative expenses
|
301
|
|
332
|
Restructuring
expense
|
3
|
|
9
|
Other operating
expense, net
|
1
|
|
4
|
Operating
income
|
273
|
|
334
|
|
|
|
|
Non-comparable
items
|
34
|
|
37
|
|
|
|
|
Adjusted Operating
Income
|
|
|
|
Air
Management
|
$
284
|
|
$
306
|
Drivetrain &
Battery Systems
|
113
|
|
141
|
ePropulsion
|
(35)
|
|
(20)
|
Corporate &
Non-Operating
|
(55)
|
|
(56)
|
Adjusted Operating
Income
|
$
307
|
|
$
371
|
|
|
|
|
Equity in affiliates'
earnings, net of tax
|
(2)
|
|
(11)
|
Realized &
Unrealized loss (gain) on debt and equity securities
|
15
|
|
54
|
Other postretirement
expense
|
2
|
|
3
|
Interest expense,
net
|
10
|
|
12
|
Provision for income
taxes
|
67
|
|
30
|
Net earnings
attributable to noncontrolling interest, net of tax
|
13
|
|
18
|
|
|
|
|
Net earnings
attributable to BorgWarner Inc.
|
$
168
|
|
$
228
|
|
|
|
|
Weighted average shares
outstanding
|
234.4
|
|
234.4
|
|
|
|
|
Earnings per share -
diluted
|
$
0.72
|
|
$
0.97
|
|
|
|
|
Other non-comparable
items
|
$
0.11
|
|
$
0.07
|
|
|
|
|
Continuing
operations adjusted earnings per diluted share
|
$
0.83
|
|
$
1.04
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/borgwarner-reports-third-quarter-2023-results-announces-additional-eproduct-awards-across-portfolio-301975054.html
SOURCE BorgWarner