AUBURN HILLS, Mich. – BorgWarner has reported that its second quarter results reflect the benefits of restructuring initiatives the company took in 2008. Additional restructuring actions, primarily the impairment of certain assets, were required in response to a weakened business climate. Positive free cash flow of $56.1 million in the quarter (net cash provided by operating activities less capital expenditures, including tooling outlays), further strengthened the balance sheet.

For the second quarter 2009, sales were $916.2 million, down 39.6 percent compared with $1.51 billion in the second quarter 2008. The negative impact of currency accounted for 6.5 percent of the decline. Net income in the quarter was a loss of $35.9 million, or 31 cents per diluted share, compared with income of $87.5 million, or 74 cents per diluted share, in second quarter 2008. The second quarter 2009 loss included a 29 cents per diluted share loss related to restructuring activities, and a 4 cents per diluted share gain from interest rate derivative agreements. Second quarter 2008 net income included purchase accounting adjustments related to the acquisition of BERU of $4.5 million net of tax, or 4 cents per diluted share. The impact of foreign currencies, primarily the lower Euro, reduced sales by $99.3 million in second quarter 2009 compared with second quarter 2008, and reduced earnings by $3.2 million, or 3 cents per diluted share.

For the first six months of 2009, sales were $1.73 billion, down 42.4 percent compared with $3 billion in the first six months of 2008. The negative impact of currency accounted for 6 percent of the decline. Net income in the first six months of 2009 was a loss of $42.9 million, or 37 cents per diluted share, compared with income of $176.2 million, or $1.49 per diluted share, in the first six months of 2008. The loss in the first six months of 2009 included a 29 cents per diluted share loss related to restructuring activities, a 3 cents per diluted share net loss from interest rate derivative agreements, a 3 cents per diluted share loss upon adoption of FAS 141R for the treatment of on-going acquisition-related activity, and a 15 cents per diluted share net gain related to retiree obligations resulting from the closure of the Muncie, Ind., Drivetrain facility. The first six months of 2008 net income included purchase accounting adjustments related to the acquisition of BERU of 4 cents per diluted share. The impact of foreign currencies, primarily the lower Euro, reduced sales by $181.6 million in the first six months of 2009 compared with first six months of 2008, and reduced the loss in earnings by $0.2 million, or 0 cents per diluted share.

The company’s operating loss was 49.5 million in second quarter 2009 versus operating income of $118.7 million in second quarter 2008. Excluding non-recurring items, operating income was $0.8 million in second quarter 2009, or 0.1 percent of sales, and $123.8 million, or 8.2 percent of sales, in second quarter 2008. Research and development spending was $35.8, or 3.9 percent of sales, versus $57.8 million, or 3.8 percent of sales, in second quarter 2008.

Net cash provided by operating activities was $173.8 million in the first six months of 2009 versus $267.1 million in the first six months of 2008. Investments in capital expenditures, including tooling outlays, totaled $88.3 million during the first six months of 2009, compared with $162.2 million for the same period in 2008. Balance sheet debt increased by $81.7 million at the end of the quarter compared with the end of 2008 primarily due to the net impact of the issuance of $373.8 million in convertible senior notes, the retirement of $136.7 million in senior notes and payments related to other short term debt obligations. Cash on hand increased by $153.5 million during the same period.

"The restructuring actions taken by our company in 2008 buoyed our second quarter results. We generated positive cash flow and were diligent in managing our cost structure as evidenced by a solid year-over-year 20 percent decremental margin at the operating income line," said Timothy Manganello, chairman and CEO. "Further restructuring actions were taken in the second quarter to proactively address near-term challenges and to position the company for healthy returns as the market recovers."

Commenting on the remainder of the year, Manganello noted, "With the uncertainty surrounding the fate of General Motors and Chrysler behind us, we now have more clarity on the state of the industry. However, the breadth and duration of the global recession is still an open question that concerns us and, as a result, we approach the near-term with caution. That said, we now believe that production levels for the second half of 2009 will be incrementally stronger than the first half. As a result, we expect to be profitable in the second half, which is consistent with our previously stated targets of positive cash flow and earnings for full year 2009."