BorgWarner Posts Third Quarter Results; Revises Outlook for 2008 - aftermarketNews

BorgWarner Posts Third Quarter Results; Revises Outlook for 2008

The company said international sales offset steep declines in U.S. revenue due to declining economic conditions in the market. The company also adjusted its outlook for the remainder of the year to reflect deteriorating global economic conditions and automotive production declines in Europe.

AUBURN HILLS, Mich. — BorgWarner has reported third quarter sales and earnings for 2008.

The company said international sales offset steep declines in U.S. revenue due to declining economic conditions in the market. The company also adjusted its outlook for the remainder of the year to reflect deteriorating global economic conditions and automotive production declines in Europe.

Third quarter sales were $1,316.9 million, flat with the year-earlier period. Sales outside of the U.S. were up 5.5 percent, excluding currency. U.S. GAAP earnings were a loss of $(1.12) per diluted share. For comparison with other quarters, third quarter 2008 earnings were 44 cents per diluted share excluding one-time items. These included a charge of $(1.27) for a goodwill adjustment related to the BERU acquisition, a valuation adjustment for foreign tax credits of $(12 cents), a third quarter restructuring charge of $(16 cents), and a charge related to the outcome of retiree healthcare benefits litigation of $(3 cents). Operating income margin was 5.6 percent excluding the one-time items. The company has refined its 2008 full-year earnings guidance to $2.25 to $2.35 per diluted share, excluding one-time items, compared with previous guidance of $2.80 to $2.95 per diluted share.

Sales were $1,316.9 million in third quarter 2008, flat with $1,313.6 million in third quarter 2007. The impact of foreign currencies, primarily the Euro, increased sales by $64.4 million, or 4.9 percent, in third quarter 2008 compared with the same period in 2007. Net income (loss) in the quarter was $(130.4) million or $(1.12) per diluted share compared with $83.2 million, or 70 cents per diluted share in third quarter 2007.

Excluding one-time adjustments, third quarter 2008 net income was $51.6 million or 44 cents per diluted share. Third quarter 2007 included a net gain of $16.7 million, or 14 cents per diluted share, related to tax account adjustments, primarily due to a change in the statutory tax rate in Germany. The impact of foreign currencies, primarily the Euro, increased net income by $4.2 million, or 4 cents per diluted share, in third quarter 2008 compared with the same period in 2007.

Sales were $4,332.4 million in the first nine months of 2008, up 9.5 percent from $3,955.7 million, in the first nine months of 2007. The impact of foreign currencies, primarily the Euro, increased sales by $305.1 million, or 8 percent, in the first nine months of 2008 compared with the same period in 2007. Net income was $45.8 million in the first nine months of 2008, or 39 cents per diluted share, compared with $217.3 million, or $1.85 per diluted share in the first nine months of 2007. Excluding one-time adjustments, nine month 2008 net income was $232.2 million or $1.97 per diluted share.

The first nine months of 2007 included a net gain of $16.7 million, or 14 cents per diluted share, related to tax account adjustments, primarily due to a change in the statutory tax rate in Germany. The impact of foreign currencies, primarily the Euro, increased net income by $22.6 million, or 19 cents per diluted share, in the first nine months of 2008 compared with the prior year period.

Excluding the one-time items, operating income was $74.1 million, or 5.6 percent of sales, in third quarter 2008 versus $98.3 million, or 7.5 percent of sales, in third quarter 2007. Research and development spending was $50.7 million in the quarter versus $49.1 million in 2007.

Net cash provided by operating activities was $265.1 million in the first nine months of 2008 versus $366.1 million in the first nine months of 2007. Investments in capital expenditures, including tooling outlays, totaled $265.6 million for the first nine months of 2008, compared with $194.6 million for the same period in 2007. The company repurchased $48.4 million of common stock during the first nine months of 2008. Balance sheet debt increased by $78.0 million at the end of third quarter 2008 compared with the end of 2007.

The company’s capital structure remains strong. The ratio of balance sheet debt to capital was 24 percent at the end of the third quarter. The company has ample liquidity with $136 million of cash on hand at the end of the quarter and no outstanding borrowings under its $600 million revolving credit facility.

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