AUBURN HILLS, Mich. - BorgWarner Inc today reported record sales and earnings for the first quarter of 2008. Demand for its fuel-efficient technologies in Europe and Asia drove the global powertrain systems supplier's strong results, despite weak auto sales in North America.

 First Quarter Highlights:
-  Record sales of $1,498.9 million, up 17% from first quarter 2007, or 8% excluding currency
- Sales outside of the U.S. grew 15% over first quarter 2007, excluding the impact of currency
- Record earnings of $0.75 per diluted share, up 50% from first quarter 2007 adjusted for a two-for-one stock split on December 17, 2007.
- Operating income margin of 8.5%
- 2008 earnings guidance of $2.85 to $3.00 per diluted share reaffirmed

Comment and Outlook: "The year got off to a strong start, with excellent results in Europe and Asia," said Tim Manganello, Chairman and CEO. "Despite recession worries, we are seeing stable growth driven by our product technologies that improve fuel economy, lower emissions and provide better vehicle performance. Our sales outside of the U.S. were up 15%, excluding the impact of currency, compared with vehicle production outside of the U.S. that was up only 4%. Our sales in the U.S. declined 4% due to lower U.S. vehicle production, which was down 8%."

Commenting on the remainder of the year, Manganello pointed to the Company's reaffirmation of its 2008 earnings guidance in the range of $2.85 to $3.00 per diluted share, which implies earnings growth of 20% to 25% compared with 2007. "We expect 2008 to be another record year for BorgWarner," he said. "Consumers want better fuel economy and reduced emissions in every region of the world. These needs are driving demand for BorgWarner's leading powertrain technologies like turbochargers and dual-clutch transmission modules for which we are launching new programs and expanding capacity. The strength of the platforms we are on has allowed us to more than offset general vehicle schedule declines, and will enable our continued growth to outpace that of the industry in the future."

Financial Results: For first quarter 2008, sales were up 17% to $1,498.9 million, compared with $1,277.8 million in first quarter 2007. Net income in the quarter was $88.7 million, or $0.75 per diluted share, compared with $58.4 million, or $0.50 per diluted share in first quarter 2007 adjusted for the two-for-one stock split on December 17, 2007. The impact of foreign currencies, primarily the Euro, increased sales by $115.3 in first quarter 2008 compared with first quarter 2007, and net income by $7.3 million, or $0.06 per diluted share adjusted for the two-for-one stock split.

Operating income was $126.7 million, or 8.5% of sales, in first quarter 2008 versus $89.9 million, or 7.0% of sales, in first quarter 2007. First quarter 2007 operating income and net income were negatively impacted by a warranty related charge of $14.0 million pre-tax or $0.085 per diluted share. Research and development spending was $57.5 million in the quarter versus $50.9 million in 2007.

Net cash provided by operating activities was $74.5 million in first quarter 2008 versus $82.6 million in first quarter 2007. Investments in capital expenditures, including tooling outlays, totaled $75.4 million for the quarter, compared with $58.3 million for the same period in 2007. The company also repurchased $13.5 million of its stock during the quarter.

Balance sheet debt increased by $93 million and cash increased by $15 million in first quarter 2008 compared with the end of 2007.

Engine Group Results: Strong global demand for its turbochargers boosted Engine Group first quarter 2008 sales 23% versus first quarter 2007 to $1,098.1 million with earnings before interest and taxes at $137.9 million. Sales outside of the U.S. were up 16% excluding the impact of foreign currencies. Demand outside of the U.S. for the group's engine timing, ignition, emissions and thermal products helped offset lower domestic sales of those products, which were lower primarily due to lower domestic vehicle production.

Drivetrain Group Results: First quarter 2008 sales were up 5% versus first quarter 2007 to $409.8 million with earnings before interest and income taxes at $18.3 million. Sales outside of the U.S. were up 12%, excluding the impact of foreign currencies, as the group continued to benefit from increased demand for dual-clutch transmission and torque transfer products. Sales in the U.S. were down 10% primarily due to lower domestic vehicle production. The decline in the group's earnings before interest and taxes in the quarter was related to challenging new product launches outside of the U.S. and lower North American sales of light trucks and SUVs equipped with our products.

Recent Highlights: Continued global expansion to meet the demand for its fuel efficient products saw BorgWarner expanding, breaking ground or opening a number of facilities in recent months. In the Engine segment, BorgWarner Turbo & Emissions Systems broke ground for a new production facility in Rzeszow, Poland. BorgWarner Thermal Systems opened a new facility in Ningbo, China and broke ground for a new facility near Chennai, India.

In addition, the company's Board of Directors approved the investment of approximately $125 million to increase its global turbocharger capacity by more than three million units over the next several years. The increased capacity will support new business awards in North America, Europe and Asia. The projects include new facilities to produce turbochargers in Mexico for Ford and in Thailand for a major Japanese automaker. Expansion of facilities in Hungary and Poland will provide turbochargers for both diesel and gasoline engine programs in Europe. The world market for turbochargers is expected to grow over 40% in the next five years.

To serve the growing market for dual-clutch transmission technology, BorgWarner opened its second manufacturing facility on its Drivetrain campus in Arnstadt, Germany, doubling the manufacturing area of the current site. Construction is also underway for a new Drivetrain facility in Ramos, Mexico. The facility will produce dual-clutch transmission modules to serve the North American market in addition to other drivetrain products.

In other action, the company's Board of Directors authorized the repurchase of an additional 5 million shares of common stock. The new authorization was made in anticipation of exhausting the limited number of shares that remain available under the previous program authorized in 2000. The company has maintained share repurchase programs since 1997.

Courtesy: BorgWarner Inc, USA

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Posted by Naresh Koshti on 2 May, 2008 5:39:09 PM IST #