First Quarter Highlights:
• U.S. GAAP net sales of $2,279 million, down 11.2% compared with first quarter
2019.
Excluding the impact of foreign currencies and the net impact of
acquisitions and divestitures, net sales were down 8.1% compared with first
quarter 2019.
• U.S. GAAP net earnings of $0.63 per diluted share.
Excluding the $(0.14) per diluted share related to non-comparable items
(detailed in the table below), adj. net earnings were $0.77 per diluted share.
• U.S. GAAP operating income of $189 million, or 8.3% of net sales.
Excluding the $45 million of pretax expenses related to non-comparable
items, adj. operating income was $234 million. Excluding the impact of
non-comparable items, adj. operating income was 10.3% of net sales.
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 operation
Net sales were $2,279 million for the first quarter 2020, down 11.2% from $2,566 million for the first quarter 2019. Net income for the first quarter 2020 was $129 million, or $0.63 per diluted share, compared with $160 million, or $0.77 per diluted share, for the first quarter 2019. Adj. net income per share for the first quarter 2020 was $0.77, down from $1.00 for the first quarter 2019. Adj. net income for the first quarter 2020 excluded net non comparable items of $(0.14) per diluted share. Adj. net income for the first quarter 2019 excluded net non-comparable items of $(0.23) 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 impact of foreign currencies decreased net sales by approximately $52 million and decreased net earnings by approximately $0.01 per diluted share for the first quarter 2020 compared with the first quarter 2019. The decline in net earnings is primarily due to the impact of lower revenue.
Net cash provided by operating activities was $263 million for the first three months of 2020 compared with $40 million for the first three months of 2019. Investments in capital expenditures, including tooling outlays, totaled $117 million for the first three months of 2019 and 2020. Balance sheet debt decreased $10 million, and cash and cash equivalents increased by $69 million, at the end of first quarter 2020 compared with the end of 2019.
Engine Segment Results: Engine segment net sales were $1,434 million for the first quarter 2020 compared with $1,598 million for the first quarter 2019. Excluding the impact of foreign currencies and the divestiture of the thermostat product line, net sales were down 6.4% from the prior year’s quarter. Adj. earnings before interest, income taxes and non controlling interest (“Adj. EBIT”) were $208 million for the first quarter of 2020. Excluding the impact of foreign currencies, Adj. EBIT was $212 million, down 11.3% from the first quarter of 2019. The decline in Adj. EBIT is primarily due to the impact of lower revenue.
Drivetrain Segment Results: Drivetrain segment net sales were $860 million for the first quarter 2020 compared with $982 million for the first quarter 2019. Excluding the impact of foreign currencies, net sales were down 10.6% from the prior year’s quarter. Adj. EBIT was $63 million for the first quarter 2020. Excluding the impact of foreign currencies, Adj. EBIT was $64 million, down 39.0% from the first quarter 2019. The decline in Adj. EBIT is primarily due to the impact of lower revenue and higher net research and development spending.
Full Year 2020 Guidance: The company is providing updated 2020 full year guidance. This guidance is for BorgWarner as currently consolidated and excludes the potential impact from the acquisition of Delphi Technologies PLC, which BorgWarner announced on January 28, 2020. Net sales are expected to be in the range of $7.25 billion to $8.0 billion. This implies a year-over-year decrease in organic sales of 20% to 27%. The company expects its blended light-vehicle market to decline in the range of approximately 25% to 31% in 2020. Due to the impact of COVID-19/coronavirus, global light vehicle production expectations remain volatile. Foreign currencies are expected to result in a year-over-year decrease in sales by approximately $120 million, primarily due to the depreciation of the Euro, Chinese Renminbi and Korean Won against the U.S. dollar. The divestiture of the thermostat product line decreased year-overyear sales by approximately $30 million. Full-year operating cash flow is expected to be in the range of $530 million to $780 million, while free cash flow is expected to be in the range of $100 million to $300 million.
Liquidity Update: During the first four months of 2020, the company took measures to increase its committed borrowing capacity. On March 13, 2020, the company increased its revolving credit facility to $1,500 million from $1,200 million, and on April 29, 2020, the company entered into a $750 million delayed-draw term loan facility. Additionally, at March 31, 2020 the company had cash balances of $901 million. Given its strong liquidity position, the company believes it will have sufficient liquidity and maintain compliance with all covenants throughout 2020.
SOURCE: BorgWarner
