State or other jurisdiction of | Commission File No. | (I.R.S. Employer | ||
Incorporation or organization | Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Exhibit Number | Description |
99.1 | |
99.2 | |
104 | The cover page from this Current Report on Form 8-K, formatted as Inline XBRL |
EXHIBIT INDEX | |
Exhibit Number | Description |
99.1 | |
99.2 | |
104 | The cover page from this Current Report on Form 8-K, formatted as Inline XBRL |
BorgWarner Inc. | ||
Date: February 13, 2020 | By: | /s/ Tonit M. Calaway |
Name: Tonit M. Calaway | ||
Title: Executive Vice President and Secretary |
Immediate Release |
Contact: Patrick Nolan |
248.754.0884 |
• | U.S. GAAP net sales of $2,559 million, down 0.6% compared with fourth quarter 2018. |
◦ | Excluding the impact of foreign currencies and the net impact of acquisitions and divestitures, net sales were up 2.6% compared with fourth quarter 2018. |
• | U.S. GAAP net earnings of $1.06 per diluted share. |
◦ | Excluding $0.11 per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $1.17 per diluted share. |
• | U.S. GAAP operating income of $478 million, or 18.7% of net sales. |
◦ | Excluding $138 million of net pretax impacts related to non-comparable items, adjusted operating income was $340 million. Excluding the impact of non-comparable items, adjusted operating income was 13.3% of net sales. |
• | U.S. GAAP net sales of $10,168 million, down 3.4% compared to 2018. |
◦ | Excluding the impact of foreign currencies and the net impact of acquisitions and divestitures, net sales were up 0.7% compared with 2018. |
• | U.S. GAAP net earnings of $3.61 per diluted share. |
◦ | Excluding $0.52 per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $4.13 per diluted share. |
• | U.S. GAAP operating income of $1,303 million, or 12.8% of net sales. |
◦ | Excluding $71 million of net pretax impacts related to non-comparable items, adjusted operating income was $1,232 million. Excluding the impact of non-comparable items, adjusted operating income was 12.1% of net sales. |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Earnings per diluted share | $ | 1.06 | $ | 1.10 | $ | 3.61 | $ | 4.44 | |||||||
Non-comparable items: | |||||||||||||||
Restructuring expense | 0.11 | 0.08 | 0.26 | 0.24 | |||||||||||
Pension settlement loss | — | — | 0.10 | — | |||||||||||
Unfavorable arbitration loss | — | — | 0.07 | — | |||||||||||
Merger, acquisition and divestiture expense | 0.01 | 0.01 | 0.05 | 0.03 | |||||||||||
Asset impairment and loss on divestiture | 0.03 | 0.09 | 0.03 | 0.09 | |||||||||||
Officer stock awards modification | — | 0.03 | 0.01 | 0.04 | |||||||||||
Gain on derecognition of subsidiary | (0.02 | ) | — | (0.02 | ) | — | |||||||||
Asbestos-related adjustments | — | 0.08 | — | 0.08 | |||||||||||
Gain on sale of building | — | (0.07 | ) | — | (0.07 | ) | |||||||||
Gain on commercial settlement | — | — | — | (0.01 | ) | ||||||||||
Tax reform adjustments | — | (0.06 | ) | — | (0.06 | ) | |||||||||
Tax adjustments | (0.02 | ) | (0.05 | ) | 0.02 | (0.30 | ) | ||||||||
Adjusted earnings per diluted share | $ | 1.17 | $ | 1.21 | $ | 4.13 | $ | 4.48 |
BorgWarner Inc. | |||||||||||||||
Condensed Consolidated Statements of Operations (Unaudited) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 2,559 | $ | 2,574 | $ | 10,168 | $ | 10,530 | |||||||
Cost of sales | 2,014 | 2,030 | 8,067 | 8,300 | |||||||||||
Gross profit | 545 | 544 | 2,101 | 2,230 | |||||||||||
Selling, general and administrative expenses | 205 | 226 | 873 | 946 | |||||||||||
Other (income) expense, net | (138 | ) | 52 | (75 | ) | 94 | |||||||||
Operating income | 478 | 266 | 1,303 | 1,190 | |||||||||||
Equity in affiliates’ earnings, net of tax | (7 | ) | (11 | ) | (32 | ) | (49 | ) | |||||||
Interest income | (3 | ) | (2 | ) | (12 | ) | (6 | ) | |||||||
Interest expense | 12 | 14 | 55 | 59 | |||||||||||
Other postretirement (income) expense | 1 | (2 | ) | 27 | (10 | ) | |||||||||
Earnings before income taxes and noncontrolling interest | 475 | 267 | 1,265 | 1,196 | |||||||||||
Provision for income taxes | 238 | 19 | 468 | 211 | |||||||||||
Net earnings | 237 | 248 | 797 | 985 | |||||||||||
Net earnings attributable to the noncontrolling interest, net of tax | 17 | 18 | 51 | 54 | |||||||||||
Net earnings attributable to BorgWarner Inc. | $ | 220 | $ | 230 | $ | 746 | $ | 931 | |||||||
Earnings per share — diluted | $ | 1.06 | $ | 1.10 | $ | 3.61 | $ | 4.44 | |||||||
Weighted average shares outstanding — diluted | 206.9 | 208.6 | 206.8 | 209.5 | |||||||||||
Supplemental Information (Unaudited) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Capital expenditures, including tooling outlays | $ | 135 | $ | 152 | $ | 481 | $ | 546 | |||||||
Depreciation and amortization | $ | 115 | $ | 105 | $ | 439 | $ | 431 |
BorgWarner Inc. | |||||||||||||||
Net Sales by Reporting Segment (Unaudited) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Engine | $ | 1,533 | $ | 1,541 | $ | 6,214 | $ | 6,447 | |||||||
Drivetrain | 1,042 | $ | 1,047 | 4,015 | 4,140 | ||||||||||
Inter-segment eliminations | (16 | ) | (14 | ) | (61 | ) | (57 | ) | |||||||
Net sales | $ | 2,559 | $ | 2,574 | $ | 10,168 | $ | 10,530 |
BorgWarner Inc. | |||||||||||||||
Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest ("Adjusted EBIT") (Unaudited) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Engine | $ | 264 | $ | 243 | $ | 995 | $ | 1,040 | |||||||
Drivetrain | 136 | 130 | 443 | 475 | |||||||||||
Adjusted EBIT | 400 | 373 | 1,438 | 1,515 | |||||||||||
Gain on derecognition of subsidiary | (177 | ) | — | (177 | ) | — | |||||||||
Restructuring expense | 31 | 23 | 72 | 67 | |||||||||||
Unfavorable arbitration loss | — | — | 14 | — | |||||||||||
Merger, acquisition and divestiture expense | 1 | 1 | 11 | 6 | |||||||||||
Asset impairment and loss on divestiture | 7 | 25 | 7 | 25 | |||||||||||
Officer stock awards modification | — | 6 | 2 | 8 | |||||||||||
Asbestos-related adjustments | — | 23 | — | 23 | |||||||||||
Gain on sale of building | — | (19 | ) | — | (19 | ) | |||||||||
Other income, net | — | (1 | ) | — | (4 | ) | |||||||||
Corporate, including stock-based compensation | 60 | 49 | 206 | 219 | |||||||||||
Equity in affiliates' earnings, net of tax | (7 | ) | (11 | ) | (32 | ) | (49 | ) | |||||||
Interest income | (3 | ) | (2 | ) | (12 | ) | (6 | ) | |||||||
Interest expense | 12 | 14 | 55 | 59 | |||||||||||
Other postretirement expense (income) | 1 | (2 | ) | 27 | (10 | ) | |||||||||
Earnings before income taxes and noncontrolling interest | 475 | 267 | 1,265 | 1,196 | |||||||||||
Provision for income taxes | 238 | 19 | 468 | 211 | |||||||||||
Net earnings | 237 | 248 | 797 | 985 | |||||||||||
Net earnings attributable to the noncontrolling interest, net of tax | 17 | 18 | 51 | 54 | |||||||||||
Net earnings attributable to BorgWarner Inc. | $ | 220 | $ | 230 | $ | 746 | $ | 931 |
BorgWarner Inc. | |||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||
(in millions) | |||||||
December 31, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 832 | $ | 739 | |||
Receivables, net | 1,921 | 1,988 | |||||
Inventories, net | 807 | 781 | |||||
Prepayments and other current assets | 276 | 250 | |||||
Assets held for sale | — | 47 | |||||
Total current assets | 3,836 | 3,805 | |||||
Property, plant and equipment, net | 2,925 | 2,904 | |||||
Other non-current assets | 2,941 | 3,386 | |||||
Total assets | $ | 9,702 | $ | 10,095 | |||
Liabilities and Equity | |||||||
Notes payable and other short-term debt | $ | 286 | $ | 173 | |||
Accounts payable and accrued expenses | 1,977 | 2,144 | |||||
Income taxes payable | 66 | 59 | |||||
Liabilities held for sale | — | 23 | |||||
Total current liabilities | 2,329 | 2,399 | |||||
Long-term debt | 1,674 | 1,941 | |||||
Other non-current liabilities | 855 | 1,410 | |||||
Total BorgWarner Inc. stockholders’ equity | 4,706 | 4,226 | |||||
Noncontrolling interest | 138 | 119 | |||||
Total equity | 4,844 | 4,345 | |||||
Total liabilities and equity | $ | 9,702 | $ | 10,095 |
BorgWarner Inc. | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
(in millions) | |||||||
Twelve Months Ended December 31, | |||||||
2019 | 2018 | ||||||
Operating | |||||||
Net earnings | $ | 797 | $ | 985 | |||
Depreciation and amortization | 439 | 431 | |||||
Deferred income tax provision (benefit) | 186 | (57 | ) | ||||
Stock-based compensation expense | 42 | 53 | |||||
Restructuring expense, net of cash paid | 30 | 33 | |||||
Pension settlement loss | 27 | — | |||||
Tax reform adjustments to provision for income taxes | 16 | (13 | ) | ||||
Asset impairment and loss on divestiture | 7 | 26 | |||||
Gain on derecognition of subsidiary | (177 | ) | — | ||||
Equity in affiliates’ earnings, net of dividends received, and other | — | (12 | ) | ||||
Net earnings adjusted for non-cash charges to operations | 1,367 | 1,446 | |||||
Derecognition of a subsidiary | (172 | ) | — | ||||
Changes in assets and liabilities | (187 | ) | (320 | ) | |||
Net cash provided by operating activities | 1,008 | 1,126 | |||||
Investing | |||||||
Capital expenditures, including tooling outlays | (481 | ) | (546 | ) | |||
Payments for investments in equity securities | (53 | ) | (6 | ) | |||
Payments for businesses acquired, including restricted cash, net of cash acquired | (10 | ) | — | ||||
Proceeds from sale of businesses, net of cash divested | 24 | — | |||||
Proceeds from settlement of net investment hedges | 22 | 2 | |||||
Proceeds from asset disposals and other | 9 | 36 | |||||
Net cash used in investing activities | (489 | ) | (514 | ) | |||
Financing | |||||||
Net decrease in notes payable | — | (34 | ) | ||||
Additions to debt, net of debt issuance costs | 63 | 59 | |||||
Repayments of long term debt, including current portion | (204 | ) | (66 | ) | |||
Payments for purchase of treasury stock | (100 | ) | (150 | ) | |||
Payments for stock-based compensation items | (15 | ) | (15 | ) | |||
Capital contribution from noncontrolling interest | 4 | — | |||||
Dividends paid to BorgWarner stockholders | (140 | ) | (142 | ) | |||
Dividends paid to noncontrolling stockholders | (28 | ) | (35 | ) | |||
Net cash used in financing activities | (420 | ) | (383 | ) | |||
Effect of exchange rate changes on cash | (6 | ) | (35 | ) | |||
Net increase in cash and cash equivalents | 93 | 194 | |||||
Cash and cash equivalents at beginning of year | 739 | 545 | |||||
Cash and cash equivalents at end of period | $ | 832 | $ | 739 |
Adjusted Operating Income | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 2,559 | $ | 2,574 | $ | 10,168 | $ | 10,530 | |||||||
Gross profit | $ | 545 | $ | 544 | $ | 2,101 | $ | 2,230 | |||||||
Gross margin | 21.3 | % | 21.1 | % | 20.7 | % | 21.2 | % | |||||||
Operating income | $ | 478 | $ | 266 | $ | 1,303 | $ | 1,190 | |||||||
Operating margin | 18.7 | % | 10.3 | % | 12.8 | % | 11.3 | % | |||||||
Non-comparable items: | |||||||||||||||
Restructuring expense | $ | 31 | $ | 23 | $ | 72 | $ | 67 | |||||||
Merger, acquisition and divestiture expense | 1 | 1 | 11 | 6 | |||||||||||
Officer stock awards modification | — | 6 | 2 | 8 | |||||||||||
Unfavorable arbitration loss | — | — | 14 | — | |||||||||||
Gain on derecognition of subsidiary | (177 | ) | * | — | (177 | ) | * | — | |||||||
Asset impairment and loss on divestiture | 7 | 25 | 7 | 25 | |||||||||||
Asbestos-related adjustments | — | 23 | — | 23 | |||||||||||
Gain on sale of building | — | (19 | ) | — | (19 | ) | |||||||||
Gain on commercial settlement | — | — | — | (4 | ) | ||||||||||
Other, net | — | (2 | ) | — | — | ||||||||||
Adjusted operating income | $ | 340 | $ | 323 | $ | 1,232 | $ | 1,296 | |||||||
Adjusted operating margin | 13.3 | % | 12.5 | % | 12.1 | % | 12.3 | % | |||||||
*On October 30, 2019, the Company entered into a definitive agreement with Enstar Holdings (US) LLC (“Enstar”), a subsidiary of Enstar Group Limited, pursuant to which Enstar acquired 100% of the equity interests of BorgWarner Morse TEC LLC ("Morse TEC"), a consolidated wholly-owned subsidiary of the Company that holds asbestos and certain other liabilities. In connection with the closing, the Company recorded a pre-tax gain of $177 million. The tax expense associated with this transaction was $173 million, resulting in a net after-tax gain of $4 million. |
Adjusted Operating Income Guidance Reconciliation | |||||||
Full-Year 2020 Guidance | |||||||
Low | High | ||||||
Net Sales | $ | 9,750 | $ | 10,075 | |||
Operating Income | 975 | 1,110 | |||||
Operating Margin | 10.0 | % | 11.0 | % | |||
Non-comparable items: | |||||||
Restructuring and other expense | $ | 115 | $ | 65 | |||
Merger, acquisition and divestiture expense | 45 | 35 | |||||
Adjusted Operating Income | $ | 1,135 | $ | 1,210 | |||
Adjusted Operating Margin | 11.6 | % | 12.0 | % |
Adjusted Earnings Per Diluted Share Guidance Reconciliation | |||||||
Full-Year 2020 Guidance | |||||||
Low | High | ||||||
Earnings per Diluted Share | $ | 3.22 | $ | 3.75 | |||
Non-comparable items: | |||||||
Restructuring expense | 0.41 | 0.23 | |||||
Merger, acquisition and divestiture expense | 0.22 | 0.17 | |||||
Adjusted Earnings per Diluted Share | $ | 3.85 | $ | 4.15 |
Free Cash Flow Outlook Reconciliation | |||||||
Full-Year 2020 Guidance | |||||||
Low | High | ||||||
Cash provided by operating activities | $ | 1,250 | $ | 1,250 | |||
Capital expenditures | (575 | ) | (525 | ) | |||
Free cash flow | $ | 675 | $ | 725 |
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