BorgWarner(US:BWA)2025-05-07 15:31PART I. Financial Information Financial Statements The company's financial statements for the three months ended March 31, 2025, show a decrease in net sales and net earnings compared to the same period in 2024, with positive cash flow from operations and a new segment reporting structure Condensed Consolidated Balance Sheets As of March 31, 2025, total assets slightly decreased to $13.83 billion, while total liabilities decreased and total equity increased Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $6,379 | $6,521 | | Total assets | $13,830 | $13,993 | | Total current liabilities | $3,230 | $3,646 | | Total liabilities | $7,940 | $8,287 | | Total equity | $5,890 | $5,706 | Condensed Consolidated Statements of Operations For Q1 2025, net sales decreased to $3.515 billion, operating income fell to $237 million, and net earnings attributable to BorgWarner were $157 million, resulting in diluted EPS of $0.72 Q1 2025 vs Q1 2024 Statement of Operations (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $3,515 | $3,595 | | Gross profit | $639 | $644 | | Operating income | $237 | $295 | | Net earnings attributable to BorgWarner Inc. | $157 | $206 | | Diluted EPS attributable to BorgWarner Inc. | $0.72 | $0.90 | Condensed Consolidated Statements of Cash Flows In Q1 2025, the company generated $82 million in cash from operations, a significant improvement, while cash used in investing and financing activities led to a $387 million net decrease in cash Q1 2025 vs Q1 2024 Cash Flow Summary (in millions) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $82 | $(118) | | Net cash used in investing activities | $(94) | $(175) | | Net cash used in financing activities | $(397) | $(183) | | Net decrease in cash | $(387) | $(497) | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies, including a new four-segment reporting structure, the financial impact of exiting the charging business, revenue disaggregation, restructuring plans, and debt information - Effective July 1, 2024, the company implemented a new four-segment reporting structure, recasting prior period information for Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems, and Battery & Charging Systems21128 - The decision to exit the charging business in February 2025 resulted in $65 million in Q1 2025 charges, including estimated loss on sale, goodwill, and intangible asset impairments343670 Revenue Disaggregation by Product Type (in millions) | Product Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Foundational products | $2,878 | $3,089 | | eProducts | $637 | $506 | | Total | $3,515 | $3,595 | - Restructuring expenses totaled $31 million in Q1 2025, primarily from the 2024 and 2023 Structural Cost Plans47155 - The company repaid its 3.375% senior notes upon maturity on March 15, 202578 - A lawsuit was filed against PHINIA to recover approximately $120 million in VAT refunds from the pre-spin-off period119144 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses a 2% decline in Q1 2025 net sales to $3.5 billion, impacted by foreign currency and market production, offset by eProducts growth, with strong liquidity and a flat to modestly down 2025 sales outlook Results of Operations Net sales for Q1 2025 decreased by $80 million to $3.515 billion due to foreign currency and market production, while operating income fell to $237 million due to impairment and restructuring charges - Net sales decreased 2% year-over-year to $3,515 million, primarily due to a $85 million negative foreign currency impact and a 4% decline in weighted average market production153 - eProducts revenue grew to $637 million in Q1 2025, now representing 18% of total revenue, up from 14% in Q1 2024141 - Operating income was impacted by non-comparable items totaling $0.39 per diluted share, including impairment charges, restructuring expenses, and costs to exit the charging business168 Results by Reportable Segment Turbos & Thermal Technologies and Drivetrain & Morse Systems saw sales declines, PowerDrive Systems sales grew significantly with a narrowed loss, while Battery & Charging Systems sales declined with a widened loss Segment Performance - Q1 2025 vs Q1 2024 (in millions) | Reportable Segment | Net Sales Q1 2025 | Net Sales Q1 2024 | Adj. Op. Income Q1 2025 | Adj. Op. Income Q1 2024 | Adj. Op. Margin % Q1 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Turbos & Thermal Technologies | $1,454 | $1,574 | $235 | $228 | 16.2% | | Drivetrain & Morse Systems | $1,361 | $1,419 | $243 | $253 | 17.9% | | PowerDrive Systems | $561 | $436 | $(43) | $(62) | (7.7)% | | Battery & Charging Systems | $150 | $177 | $(22) | $(15) | (14.7)% | Financial Condition, Capital Resources and Liquidity The company maintained strong liquidity of $3.7 billion, with $82 million in cash from operations, and used $397 million in financing activities primarily for debt repayment - Total liquidity as of March 31, 2025, was $3,707 million, consisting of $1,707 million in cash and a $2,000 million undrawn credit facility177 - Net cash provided by operating activities was $82 million, a significant improvement from $118 million cash used in Q1 2024, driven by adjusted net earnings and working capital changes185 - Financing activities included a $346 million debt repayment for matured senior notes and $24 million in dividend payments187 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is foreign currency exchange rate fluctuations, particularly for the Euro, Chinese Renminbi, and Brazilian Real, which is mitigated through various strategies and derivative instruments - The company's most significant market risk is foreign currency exchange rate risk, primarily exposed to the Euro, Chinese Renminbi, and Brazilian Real196198 - As of March 31, 2025, a deferred gain of $153 million (before tax) for designated hedges was recorded in accumulated other comprehensive income196 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded the company's disclosure controls and procedures are effective as of the reporting period end200 - No material changes to internal control over financial reporting occurred during Q1 2025201 PART II. Other Information Legal Proceedings The company is involved in various legal claims in the normal course of business, which management does not expect to have a material adverse effect on its financial position - The company is party to various legal proceedings but does not expect a material adverse effect on its financial condition204 Risk Factors No material changes to risk factors from the 2024 Form 10-K, except for an updated risk concerning administrative policy changes, particularly tariffs, which could impact costs, supply chain, and demand - The risk factor for tariffs and trade policy has been updated, highlighting that changes in administrative policies could adversely affect the company's supply chain, costs, and product demand206 - In 2024, the company imported approximately $875 million in value to the U.S., with 55% from Mexico and about 10% each from Canada and South Korea207 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company did not repurchase shares under its common stock repurchase program in Q1 2025, with $467 million remaining available for future repurchases - No shares were repurchased under the common stock repurchase program in Q1 2025210 - As of March 31, 2025, $467 million remained available for future repurchases under the plan authorized through December 31, 2027208210 Other Information No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025211 Exhibits This section lists the exhibits filed with the Form 10-Q, including stock incentive plans, officer certifications, and Inline XBRL data files - The report includes filed exhibits such as management compensation plans, CEO/CFO certifications, and XBRL data files212