Comment and Outlook:
"2007 was an excellent year for our
company," said Tim Manganello, Chairman and CEO. "Sales outside of the
U.S. grew 17%, excluding the impact of currency, compared with vehicle
production outside of the U.S. that was up 7%. Sales in our U.S.
operations were flat despite lower domestic vehicle production in the
U.S., which was down 3%."
"2007 was also a year during which events
around the globe validated our company's strategic plan. A number of
governments, including the U.S., took steps toward increasingly
stringent fuel economy standards, while the automotive industry
continued to unveil powertrain strategies clearly focused on meeting
tougher standards. BorgWarner, a global leader in powertrain technology
that improves fuel economy, lowers emissions and enhances vehicle
performance, is well positioned to enjoy sustained growth as the
industry accelerates its investment in advanced powertrains."
Financial Results:
Sales were $1,372.9 million in fourth
quarter 2007, up 14.2% from $1,201.7 million in fourth quarter 2006. Net
income in the quarter was $71.2 million, or $0.60 per diluted share,
compared with $40.9 million, or $0.35 per diluted share in fourth
quarter 2006. Fourth quarter 2007 net income included unfavorable tax
adjustments of $(13.3) million, or $(0.11) per diluted share, and
purchase accounting adjustments related to the purchase of additional
Beru shares of $(2.4) million, or $(0.02) per diluted share. Fourth
quarter 2006 net income included: restructuring charges, primarily
related to asset impairments in North America of $(39.2) million, or
$(0.34) per diluted share; final purchase accounting adjustments of
$(2.4) million, or $(0.02) per diluted share, related to the third
quarter 2006 acquisition of transmission and engine controls product
lines from Eaton Corporation in Monaco; and $25.0 million, or $0.22 per
diluted share, related to favorable tax adjustments. The impact of
foreign currencies in fourth quarter 2007, primarily the Euro, increased
sales by $91 million and net income by $6 million.
Sales were $5,328.6 million in 2007, up
16.2% from $4,585.4 million in 2006. 2007 net income was $288.5 million,
or $2.45 per diluted share, compared with $211.6 million, or $1.83 per
diluted share in 2006. 2007 net income included net favorable tax
adjustments, recorded in the third and fourth quarters, of $3.4 million,
or $0.03 per diluted share, and purchase accounting adjustments related
to the purchase of additional Beru shares of $(2.4) million, or $(0.02)
per diluted share. 2006 net income included: charges related to
restructuring activities in North America, reported in the third and
fourth quarters, of $(47.6) million, or $(0.41) per diluted share; final
purchase accounting adjustments of $(2.4) million, or $(0.02) per
diluted share, related to the third quarter 2006 acquisition of
transmission and engine controls product lines from Eaton Corporation in
Monaco; a gain related to a previous divestiture, reported in the third
quarter, of $3.5 million, or $0.03 per diluted share; and $22.3 million,
or $0.19 per diluted share, related to favorable tax adjustments. The
impact of foreign currencies, primarily the Euro, added $262 million to
sales in 2007 compared with 2006, and $15 million to net income.
Net cash provided by operating activities
was $602.2 million in 2007 compared to $442.1 million in 2006.
Investments in capital expenditures, including tooling outlays, totaled
$293.9 million in 2007, compared with $268.3 million in 2006. Debt
decreased $84.8 million, cash and cash equivalents increased $65.2
million and marketable securities decreased by $44.5 million during
2007.
Engine Group Results:
Fourth quarter 2007 sales were up 16%
versus fourth quarter 2006 to $977.9 million with a 26% increase in
segment earnings before interest and income taxes to $123.5 million.
Sales outside of the U.S. were up 13% excluding the impact of foreign
currencies, while sales in the U.S. were down 5%.
For the full year, 2007 sales were up 19%
versus 2006 to $3,761.3 million with a 14% increase in segment earnings
before interest and income taxes to $418.0 million. Sales outside of the
U.S. were up 16% excluding the impact of foreign currencies, while sales
in the U.S. were up 4%.
In the quarter and in the full year, the
group continued to benefit from European and Asian automaker demand for
turbochargers, timing systems, thermal management products and emissions
products as well as higher sales of turbochargers and emissions products
in the U.S.
Drivetrain Group Results:
Fourth quarter 2007 sales were up 9%
versus fourth quarter 2006 to $401.9 million with a 16% increase in
segment earnings before interest and income taxes to $30.3 million.
Sales outside of the U.S. were up 12% excluding the impact of foreign
currencies, while sales in the U.S. were down 1%.
For the full year, 2007 sales were up 9%
versus 2006 to $1,598.8 million with a 30% increase in segment earnings
before interest and income taxes to $118.1 million. Sales outside of the
U.S. were up 11% excluding the impact of foreign currencies and sales
during the first nine months of 2007 related to the acquisition of the
European transmission and engine solenoid product lines from Eaton
Corporation, while sales in the U.S. were down 3%
In the quarter and in the full year, the
group benefited from increased demand for dual-clutch transmission
components and transmission solenoids and control modules, but was
negatively impacted by lower domestic production of vehicles equipped
with its traditional transmission and torque management products.
Recent Highlights:
During the quarter, BorgWarner announced
$1.95 billion of net new business for the three-year period ending in
2010, an implied growth rate of approximately 11% for the three-year
period. 50% of the net new business is expected to be in Europe, 30% in
Asia, and 20% in North America.
The company's board of directors declared
a 29% increase in the quarterly cash dividend and approved a two-for-one
stock split effected in the form of a stock dividend on its common
stock. To implement the stock split, shares of common stock were issued
on December 17, 2007 to stockholders of record as of the close of
business on December 6, 2007. The increased cash dividend will be paid
February 15, 2008 to stockholders of record as of the close of business
on February 1, 2008.
In the Drivetrain Group, the company
announced advances in its market- leading dual-clutch transmission
technology during the quarter. Innovations in materials science and
controls enable its next generation dual-clutch modules to operate in a
"humid" environment, with less lubrication and a smaller fluid pump,
thereby delivering fuel efficiency improvements over the current
modules. In addition to advances in traditional modules, the company has
developed an entirely new dual-clutch transmission. The unique
transmission combines leading-edge dual-clutch technology with a compact
design. The transmission provides the convenience of an automatic in a
wide range of power and vehicle applications from the small vehicle
segment, which is expected to grow 30% worldwide over the next five
years, up through the mid-size vehicle segment.
In the Engine Group, BorgWarner's
majority-owned subsidiary, SeohanWarner Turbo Systems, opened a facility
on the BorgWarner Engine Group campus in Pyongtaek, Korea. The
world-class facility includes office, production and warehousing space
for a workforce expected to reach 130 within five years. In addition,
the facility will house the first on-site engine and turbocharger
testing cells for a turbocharger supplier in Korea. Also in Asia,
BorgWarner Thermal Systems has broken ground for a new facility near
Chennai, India. Located in a high-tech business park near several
automakers, the new facility will include manufacturing, training,
design services and administrative space for over 100 employees with
room for future expansion.
Auburn Hills, Michigan-based BorgWarner
Inc. is a product leader in highly engineered components and systems for
vehicle powertrain applications worldwide. The FORTUNE 500 company
operates manufacturing and technical facilities in 64 locations in 17
countries. Customers include VW/Audi, Ford, Toyota, Renault/Nissan,
General Motors, Hyundai/Kia, Daimler, Chrysler, Fiat, BMW, Honda, John
Deere, PSA, and MAN. The Internet address for BorgWarner is:
http://www.borgwarner.com.
Source: BorgWarner Press Release