BorgWarner has reported Q3 US GAAP net sales of US$2,214m, up 17.5% compared with third quarter 2015. Excluding the impact of foreign currencies and the Remy acquisition, net sales were up 6.1% compared with third quarter 2015.

US GAAP net earnings of $0.39 per diluted share. Excluding the $(0.39) per diluted share related to non-comparable items (detailed in the table below), net earnings were $0.78 per diluted share, of which $0.02 per diluted share were contributed by the Remy acquisition.

US GAAP operating income of $150m. Excluding the $115m of pretax expenses related to non-comparable items, operating income was $265m, of which $7m was contributed by the Remy acquisition. Excluding the impact of non-comparable items, operating income was 12.0% of net sales. Excluding the impact of non-comparable items and the Remy acquisition operating income was 12.9% of net sales.

Full Year 2016 Guidance: The company has narrowed its 2016 full year net sales and net earnings guidance range. Net sales growth is expected to be within a range of 15.2% to 16.0% compared with 2015. Excluding the impact of foreign currencies and the Remy acquisition, net sales growth is expected to be within a range of 4.3% to 4.8%. Net earnings are expected to be within a range of $3.24 to $3.28 per diluted share, of which approximately $0.12 per diluted share are expected to be contributed by the Remy acquisition. Excluding the impact of non-comparable items, operating income, as a percentage of net sales, is expected to be above 12%. Excluding the impact of non-comparable items and the Remy acquisition, operating income, as a percentage of net sales, is expected to be above 13%.

Fourth Quarter 2016 Guidance: Fourth quarter 2016 net sales growth is expected to be within a range of 14.3% to 17.8% compared with fourth quarter 2015. Excluding the impact of foreign currencies and the Remy acquisition, net sales growth is expected to be within a range of 3.0% to 5.0%. Net earnings are expected to be within a range of $0.82 to $0.86 per diluted share, of which approximately $0.02 per diluted share are expected to be contributed by the Remy acquisition. Excluding the impact of non-comparable items, operating income, as a percentage of net sales, is expected to be above 12%. Excluding the impact of non-comparable items and the Remy acquisition, operating income, as a percentage of net sales, is expected to be above 13%.

Financial Results: Net sales were $2,214m in third quarter 2016, up 17.5% from $1,884m in third quarter 2015. Net earnings in third quarter 2016 were $83m, or $0.39 per diluted share, compared with $157m, or $0.70 per diluted share, in third quarter 2015. Net earnings in third quarter 2016 included non-comparable items of $(0.39) per diluted share. Net earnings in the third quarter 2015 included net non-comparable items of $(0.03) per diluted share. These items are listed in a table below, which is provided by the company for comparison with other results and the most directly comparable US GAAP measures. The impact of foreign currencies was negligible in third quarter 2016 compared with the third quarter 2015.

For the first nine months of 2016, net sales were $6,812m, up 15.5% from $5,900m in the first nine months of 2015. Net earnings in the first nine months of 2016 were $412m, or $1.90 per diluted share, compared with $484m, or $2.14 per diluted share, in the first nine months of 2015. Net earnings in the first nine months of 2016 included net non-comparable items of $(0.52) per diluted share. Net earnings in the first nine months of 2015 included net non-comparable items of $(0.12) per diluted share. These items are listed in a table below, which is provided by the company for comparison with other results and the most directly comparable US GAAP measures. The impact of foreign currencies decreased net sales by approximately $71m and decreased net earnings by approximately $0.03 per diluted share in the first nine months of 2016 compared with the first nine months of 2015.

Net cash provided by operating activities was $593m in the first nine months of 2016 compared with $470m in the first nine months of 2015. Investments in capital expenditures, including tooling outlays, totalled $355m in the first nine months of 2016, compared with $419m in the first nine months of 2015. Balance sheet debt increased by $65m and cash decreased by $59m at the end of third quarter 2016 compared with the end of 2015. The company’s net debt to net capital ratio was 35.6% at the end of third quarter 2016 compared with 35.2% at the end of 2015.

Engine segment results: Engine segment net sales were $1,359m in third quarter 2016 compared with $1,309m in third quarter 2015. Excluding the impact of foreign currencies, net sales were up 3.8% from the prior year’s quarter. Adjusted earnings before interest, income taxes and non-controlling interest (“Adjusted EBIT”) were $218m in third quarter 2016. Excluding the impact of foreign currencies, Adjusted EBIT was $218m, up 2.8% from third quarter 2015.

Drivetrain segment results: Drivetrain segment net sales were $866m in third quarter 2016 compared with $584m in third quarter 2015. Excluding the impact of foreign currencies and the Remy acquisition, net sales were up 11.4% from the prior year’s quarter. Adjusted EBIT was $87m in third quarter 2016. Excluding the impact of foreign currencies, and the Remy acquisition, Adjusted EBIT was $81m, up 14.3% from third quarter 2015.

Recent highlights:
BorgWarner has agreed to sell its REMY light vehicle aftermarket business to an investor group led by Torque Capital Group. The business employs a total of approximately 3,000 people. The purchase price of the transaction is approximately $80m, subject to customary adjustment. Completion of the transaction is expected in the fourth quarter, subject to the satisfaction of customary closing conditions.
The company provides its latest variable turbine geometry (VTG) turbocharging technology for a wide range of Euro 6 diesel engines used for numerous Hyundai and Kia models of the Hyundai Motor Company worldwide.
BorgWarner supplies clutch modules for Hyundai’s 8-speed automatic front-wheel drive transmission. The transmission debuted on the 2016 Kia K7 (known as the Cadenza in the United States) and Hyundai Aslan sedans, built for markets around the world.
BorgWarner produces its latest multi-segment friction plate technology for all six clutch positions in Ford’s new 10-speed automatic transmission. Launched in the 2017 F-150 Raptor pickup truck, the new transmission will drive multiple Ford rear-wheel drive vehicles.
BorgWarner supplies the first combination of its variable cam timing (VCT) technologies, including its patented cam torque actuated (CTA) phasers with mid-position lock and integrated centre bolt, for Hyundai’s improved Lambda II V-6 engines. The 3.0- to 3.8-litre gasoline engines debuted in the 2016 Hyundai Genesis EQ900, G90, G80 and Aslan as well as the Kia K7.