BORGWARNER ANNOUNCES MULTIPLE ELECTRIFICATION AWARDS AND REPORTS FIRST QUARTER RESULTS
BorgWarner Inc. (NYSE: BWA) reported first quarter 2022 results, revealing net sales of $3.874 billion, a 3% decline year-over-year, attributed to lower industry production and currency fluctuations. However, adjusted net earnings per diluted share stood at $1.05, down from $1.21 in Q1 2021. The company announced significant new business wins, including battery management systems and eMotors for electric vehicles, aiming for over $3.3 billion in electric vehicle revenue by 2025. Full-year guidance estimates net sales between $15.5 billion and $16 billion, reflecting a 10-13% organic sales increase.
- Significant new program awards for battery management systems and high-voltage eMotors.
- Projected electric vehicle revenue exceeding $3.3 billion by 2025.
- Expected organic sales growth of 10% to 13% for full year 2022.
- Net sales decreased by 3% compared to Q1 2021.
- Adjusted net earnings per diluted share fell from $1.21 to $1.05.
- Free cash flow recorded at $(61) million.
AUBURN HILLS, Mich., May 4, 2022 /PRNewswire/ -- BorgWarner Inc. (NYSE: BWA) today reported first quarter results.
New Program Awards and Charging Forward Highlights:
- BorgWarner announced the first OEM business win for the Company's flexible battery management system (BMS) technology. The Company's BMS has been selected by a leading global vehicle manufacturer to equip all of its B-segment, C-segment and light commercial vehicles, expected to begin in 2023.
- BorgWarner has been selected to provide high-voltage hairpin (HVH) eMotors for a leading electric vehicle brand in China. The eMotors will be used in an 800V propulsion system platform, expected to start mass production in 2023.
- BorgWarner will supply a leading Chinese OEM with a dual Inverter to be used in hybrid vehicles expected to launch in 2023. The award further strengthens the Company's leadership position in China's dedicated hybrid transmission (DHT) and hybrid inverter market.
- Based on new business awards and actions announced to date, BorgWarner believes it is already on track to achieve more than
$3.3 billion of electric vehicle revenue by 2025. The Company continues to expect its 2022 electric vehicle revenue to grow to more than$800 million , which is more than double what it was in 2021.
First Quarter Highlights:
- U.S. GAAP net sales of
$3,874 million , down3% compared with first quarter 2021. - Excluding the impact of foreign currencies and the impact of divestitures, organic sales were up
1% compared with first quarter 2021. - U.S. GAAP net earnings of
$0.84 per diluted share. - Excluding the
$(0.21) per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were$1.05 per diluted share. - U.S. GAAP operating income of
$352 million , or9.1% of net sales. - Excluding the
$37 million of pretax expenses related to non-comparable items, adjusted operating income was$389 million , or10.0% of net sales. - Net cash provided by operating activities of
$116 million . - Free cash flow was
$(61) 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. 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 | |||
2022 | 2021 | ||
Earnings per diluted share | $ 0.84 | $ 0.27 | |
Non-comparable items: | |||
Unrealized loss on equity securities | 0.14 | 0.87 | |
Merger, acquisition and divestiture expense | 0.09 | 0.04 | |
Restructuring expense | 0.06 | 0.12 | |
Gain on sale of business | (0.08) | — | |
Tax adjustments | — | (0.09) | |
Adjusted earnings per diluted share | $ 1.05 | $ 1.21 | |
Net sales were
Full Year 2022 Guidance: The Company has provided 2022 full year guidance. Net sales are expected to be in the range of
Operating margin for the full year is expected to be in the range of
At 9:30 a.m. ET today, a brief conference call concerning first quarter 2022 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 may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management's current outlook, expectations, estimates and projections. Words such as "anticipates," "believes," "continues," "could," "designed," "effect," "estimates," "evaluates," "expects," "forecasts," "goal," "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: 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; commodities availability and pricing; competitive challenges from existing and new competitors including OEM customers; the challenges associated with rapidly-changing technologies, particularly as relates to electric vehicles, and our ability to innovate in response; uncertainties regarding the extent and duration of impacts of matters associated with the COVID-19 pandemic, including additional production disruptions; 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 including our recent acquisitions of AKASOL AG and Santroll's light vehicle eMotor business and our 2020 acquisition of Delphi Technologies PLC; the ability to identify appropriate combustion portfolio businesses for disposition and consummate planned dispositions on acceptable terms; 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; 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 | |||
2022 | 2021 | ||
Net sales | $ 3,874 | $ 4,009 | |
Cost of sales | 3,124 | 3,191 | |
Gross profit | 750 | 818 | |
Gross margin | 19.4 % | 20.4 % | |
Selling, general and administrative expenses | 388 | 377 | |
Restructuring expense | 15 | 30 | |
Other operating (income) expense, net | (5) | 8 | |
Operating income | 352 | 403 | |
Equity in affiliates' earnings, net of tax | (8) | (12) | |
Unrealized loss on equity securities | 39 | 272 | |
Interest expense, net | 15 | 18 | |
Other postretirement income | (9) | (11) | |
Earnings before income taxes and noncontrolling interest | 315 | 136 | |
Provision for income taxes | 91 | 42 | |
Net earnings | 224 | 94 | |
Net earnings attributable to noncontrolling interest, net of tax | 24 | 29 | |
Net earnings attributable to BorgWarner Inc. | $ 200 | $ 65 | |
Diluted earnings per share of common stock | $ 0.84 | $ 0.27 | |
Weighted average shares outstanding — diluted | 239.0 | 238.4 | |
BorgWarner Inc. | |||
Net Sales by Reporting Segment (Unaudited) | |||
(in millions) | |||
Three Months Ended | |||
2022 | 2021 | ||
Air Management | $ 1,931 | $ 2,011 | |
e-Propulsion & Drivetrain | 1,390 | 1,466 | |
Fuel Injection | 472 | 475 | |
Aftermarket | 205 | 197 | |
Inter-segment eliminations | (124) | (140) | |
Net sales | $ 3,874 | $ 4,009 | |
Segment Adjusted Operating Income (Unaudited) | |||
(in millions) | |||
Three Months Ended | |||
2022 | 2021 | ||
Air Management | $ 257 | $ 329 | |
e-Propulsion & Drivetrain | 119 | 149 | |
Fuel Injection | 52 | 34 | |
Aftermarket | 24 | 21 | |
Segment Adjusted Operating Income | 452 | 533 | |
Corporate, including stock-based compensation | 63 | 69 | |
Merger, acquisition and divestiture expense | 23 | 13 | |
Intangible asset amortization expense | 23 | 20 | |
Restructuring expense | 15 | 30 | |
Gain on sale of business | (24) | — | |
Net gain on insurance recovery for property damage | — | (2) | |
Equity in affiliates' earnings, net of tax | (8) | (12) | |
Unrealized loss on equity securities | 39 | 272 | |
Interest expense, net | 15 | 18 | |
Other postretirement income | (9) | (11) | |
Earnings before income taxes and noncontrolling interest | 315 | 136 | |
Provision for income taxes | 91 | 42 | |
Net earnings | 224 | 94 | |
Net earnings attributable to noncontrolling interest, net of tax | 24 | 29 | |
Net earnings attributable to BorgWarner Inc. | $ 200 | $ 65 | |
BorgWarner Inc. | |||
Condensed Consolidated Balance Sheets (Unaudited) | |||
(in millions) | |||
March 31, | December 31, | ||
ASSETS | |||
Cash and cash equivalents | $ 1,501 | $ 1,841 | |
Restricted cash | 3 | 3 | |
Receivables, net | 3,166 | 2,898 | |
Inventories, net | 1,644 | 1,534 | |
Prepayments and other current assets | 326 | 321 | |
Total current assets | 6,640 | 6,597 | |
Property, plant and equipment, net | 4,337 | 4,395 | |
Other non-current assets | 5,701 | 5,583 | |
Total assets | $ 16,678 | $ 16,575 | |
LIABILITIES AND EQUITY | |||
Notes payable and other short-term debt | $ 64 | $ 66 | |
Accounts payable | 2,465 | 2,276 | |
Other current liabilities | 1,330 | 1,456 | |
Total current liabilities | 3,859 | 3,798 | |
Long-term debt | 4,223 | 4,261 | |
Other non-current liabilities | 1,258 | 1,254 | |
Total liabilities | 9,340 | 9,313 | |
Total BorgWarner Inc. stockholders' equity | 7,050 | 6,948 | |
Noncontrolling interest | 288 | 314 | |
Total equity | 7,338 | 7,262 | |
Total liabilities and equity | $ 16,678 | $ 16,575 | |
BorgWarner Inc. | |||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||
(in millions) | |||
Three Months Ended March 31, | |||
2022 | 2021 | ||
OPERATING | |||
Net cash provided by operating activities | $ 116 | $ 342 | |
INVESTING | |||
Capital expenditures, including tooling outlays | (177) | (195) | |
Capital expenditures for damage to property, plant and equipment | — | (2) | |
Payments for businesses acquired, net of cash acquired | (157) | — | |
Proceeds from settlement of net investment hedges, net | 12 | 11 | |
Proceeds from (payments for) investments in equity securities | 30 | (2) | |
Proceeds from the sale of business, net | 25 | — | |
Proceeds from asset disposals and other, net | 13 | 3 | |
Net cash used in investing activities | (254) | (185) | |
FINANCING | |||
Net increase in notes payable | — | 7 | |
Additions to debt | — | 22 | |
Payments for debt issuance costs | — | (1) | |
Repayments of debt, including current portion | (2) | (26) | |
Payments for purchase of treasury stock | (40) | — | |
Payments for stock-based compensation items | (17) | (13) | |
Purchase of noncontrolling interest | (59) | — | |
Dividends paid to BorgWarner stockholders | (41) | (40) | |
Dividends paid to noncontrolling stockholders | (36) | — | |
Net cash used in financing activities | (195) | (51) | |
Effect of exchange rate changes on cash | (7) | (1) | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (340) | 105 | |
Cash, cash equivalents and restricted cash at beginning of year | 1,844 | 1,650 | |
Cash, cash equivalents and restricted cash at end of period | $ 1,504 | $ 1,755 | |
Supplemental Information (Unaudited) | |||
(in millions) | |||
Three Months Ended March 31, | |||
2022 | 2021 | ||
Depreciation and tooling amortization | $ 157 | $ 175 | |
Intangible asset amortization | $ 23 | $ 20 | |
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 2022 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
In 2021 and prior, the Company defined adjusted operating income as operating income adjusted to exclude 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. Beginning in the first quarter of 2022, the Company updated its definition of adjusted operating income and adjusted operating margin to add back intangible asset amortization expense. For comparability, the 2021 reconciliation below adds back intangible asset amortization expense. The updated definition of adjusted operating income is 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 net MD&A.
Adjusted Operating Income and Adjusted Operating Margin (Unaudited) | |||
Three Months Ended | |||
(in millions) | 2022 | 2021 | |
Net sales | $ 3,874 | $ 4,009 | |
Operating income | $ 352 | $ 403 | |
Operating margin | 9.1 % | 10.1 % | |
Non-comparable items: | |||
Merger, acquisition and divestiture expense | $ 23 | $ 13 | |
Intangible asset amortization expense | 23 | 20 | |
Restructuring expense | 15 | 30 | |
Gain on sale of business | (24) | — | |
Net gain on insurance recovery for property damage | — | (2) | |
Adjusted operating income | $ 389 | $ 464 | |
Adjusted operating margin | 10.0 % | 11.6 % | |
Free Cash Flow Reconciliation (Unaudited) | |||
Three Months Ended | |||
(in millions) | 2022 | 2021 | |
Net cash provided by operating activities | $ 116 | $ 342 | |
Capital expenditures, including tooling outlays | (177) | (195) | |
Free cash flow | $ (61) | $ 147 | |
First Quarter 2022 Organic Net Sales Change (Unaudited) | |||||||||||
(in millions) | Q1 2021 Net | FX | Q1 2022 | Organic Net | Q1 2022 Net | Organic Net | |||||
Air Management | $ 2,011 | $ (70) | $ — | $ (10) | $ 1,931 | (0.5) % | |||||
e-Propulsion & Drivetrain | 1,466 | (20) | (52) | (4) | 1,390 | (0.3) % | |||||
Fuel Injection | 475 | (10) | — | 7 | 472 | 1.5 % | |||||
Aftermarket | 197 | (13) | — | 21 | 205 | 10.7 % | |||||
Inter-segment eliminations | (140) | — | — | 16 | (124) | — | |||||
Total | $ 4,009 | $ (113) | $ (52) | $ 30 | $ 3,874 | 0.8 % | |||||
Adjusted Operating Income and Adjusted Operating Margin Guidance Reconciliation (Unaudited) | |||
Full-Year 2022 Guidance | |||
(in millions) | Low | High | |
Net sales | $ 15,500 | $ 16,000 | |
Operating income | 1,325 | 1,442 | |
Operating margin | 8.5 % | 9.0 % | |
Non-comparable items: | |||
Restructuring expense | $ 100 | $ 100 | |
Intangible asset amortization expense | 94 | 94 | |
Merger, acquisition and divestiture expense | 30 | 23 | |
Gain on sale of business | (24) | (24) | |
Adjusted operating income | $ 1,525 | $ 1,635 | |
Adjusted operating margin | 9.8 % | 10.2 % | |
Adjusted Earnings Per Diluted Share Guidance Reconciliation (Unaudited) | |||
Full-Year 2022 Guidance | |||
Low | High | ||
Earnings per Diluted Share | $ 3.39 | $ 3.77 | |
Non-comparable items: | |||
Restructuring expense | 0.33 | 0.33 | |
Unrealized loss on equity securities | 0.14 | 0.14 | |
Merger, acquisition and divestiture expense | 0.12 | 0.09 | |
Gain on sale of business | (0.08) | (0.08) | |
Adjusted Earnings per Diluted Share | $ 3.90 | $ 4.25 | |
Free Cash Flow Guidance Reconciliation (Unaudited) | ||||
Full-Year 2022 Guidance | ||||
(in millions) | Low | High | ||
Net cash provided by operating activities | $ 1,500 | $ 1,550 | ||
Capital expenditures, including tooling outlays | (850) | (800) | ||
Free cash flow | $ 650 | $ 750 | ||
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SOURCE BorgWarner
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