BorgWarner Inc.'s second quarter sales showed strong growth over last year, driven by the demand for fuel-efficient engine and drivetrain technology around the world. The company posted solid earnings growth in the quarter despite the impact of lower domestic vehicle production and sharply higher commodity costs. Second quarter highlights were:
• Record sales of $1,364.3 million, up 17 percent from second quarter 2006.
• Sales outside of the U.S. grew 20 percent over second quarter 2006, excluding the impact of currency.
• Earnings of $1.29 per diluted share, up 7 percent from second quarter 2006.
• Operating income margin of 8.3 percent.
• Company has raised its 2007 full year sales growth expectation to greater than 10 percent and its earnings guidance by $0.10 per diluted share to $4.63 to $4.83 per diluted share primarily due to the favorable impact of foreign currencies. "BorgWarner had an outstanding quarter," says Tim Manganello, chairman and CEO. "Our sales outside of the U.S. were up 20 percent, excluding the impact of currency, compared with vehicle production outside of the U.S. that was up 5 percent. Global powertrain technology trends toward improved fuel economy, lower emissions and better vehicle performance, continued to drive strong growth for the company." Manganello adds that sales in the U.S. were up 2 percent, despite lower U.S. vehicle production, which was down 3 percent. "Our technology leadership, global presence and customer diversity have been key elements in the successful execution of our growth strategy," he continues. "Furthermore, the restructuring of our North American operations in the second half of 2006, actions we took in anticipation of permanent reductions in customer production schedules, has stabilized our margins." Due to the favorable impact of foreign currencies, primarily the Euro, the company says it now expects sales growth of greater than 10 percent in 2007, and has raised its 2007 full year earnings guidance range to $4.63 to $4.83 per diluted share, which includes the impact of a 17-cent per diluted share warranty-related charge taken in first quarter 2007. Operating margins are expected to be near the low end of its historical range of 8.5 percent to 9 percent. Financial Results: Sales were $1,364.3 million in second quarter 2007, up 17 percent from $1,168.7 million in second quarter 2006. Net income in the quarter was $75.7 million, or $1.29 per diluted share, compared with $70.2 million, or $1.21 per diluted share in second quarter 2006. The impact of foreign currencies, primarily the Euro, increased sales by $51.3 million, or 4 percent, in second quarter 2007 compared with the same period in 2006, and net income by $2.8 million, or $0.05 per diluted share. Sales were $2,642.1 million in the first six months of 2007, up 14 percent from $2,323.9 million in the first six months of 2006. Net income was $134.1 million in the first six months of 2007, or $2.28 per diluted share, compared with $131.5 million, or $2.27 per diluted share in the first six months of 2006, according to the company. The impact of foreign currencies, primarily the Euro, increased sales by $111.3 million, or 5 percent, in the first six months of 2007 compared with the same period in 2006, and net income by $5.2 million, or $0.09 per diluted share. Operating income was $113.6 million, or 8.3 percent of sales, in second quarter 2007 versus $107.5 million, or 9.2 percent of sales, in second quarter 2006. Research and development spending was $56.7 million in the quarter versus $47.8 million in 2006. Net cash provided by operating activities was $223.4 million in first six months of 2007 versus $233.2 million in the first six months of 2006. Investments in capital expenditures, including tooling outlays, totaled $122.5 million for the first six months of 2007, compared with $145.5 million for the same period in 2006, the company reports. Balance sheet debt decreased by $75.7 million, cash decreased by $4.8 million, and marketable securities decreased by $0.7 million at the end of second quarter 2007 compared with the end of 2006. Engine Group results
The Engine Group's second quarter 2007 sales were up 21 percent versus second quarter 2006 to $955.4 million, while earnings before interest and income taxes were up 14 percent to $108.3 million. Sales outside of the U.S. were up 18 percent excluding the impact of foreign currencies, as the group continued to benefit from European and Asian automaker demand for turbochargers, timing systems and emissions products, and European demand for diesel engine ignition systems. Sales in the U.S. were up 10 percent as increased turbocharger sales more than offset lower domestic sales of other Engine Group products, which were lower primarily due to lower domestic vehicle production. Segment earnings in the quarter were negatively impacted by sharply higher commodity costs, primarily nickel. In the quarter, gross nickel-related costs were approximately $37 million higher than second quarter 2006. Drivetrain Group results
The Drivetrain Group's second quarter 2007 sales were up 8 percent versus second quarter 2006 to $417.7 million, while earnings before interest and income taxes were up 16 percent to $33.3 million. Sales outside of the U.S. were up 14 percent, excluding the impact of foreign currencies and the acquisition of the European transmission and engine solenoid product lines from Eaton Corporation, as the group continued to benefit from increased demand for dual-clutch transmission and torque transfer products. Sales in the U.S. were down 6 percent primarily due to the impact of lower domestic vehicle production. Auburn Hills, Mich.-based BorgWarner Inc. produces highly engineered components and systems for vehicle powertrain applications worldwide For more information, visit www.borgwarner.com. |
