Borgwarner Inc. · NYSE:BWA

Borgwarner — Investor Presentation (August 2016)

25 slides from Borgwarner's investor presentation, August 2016

  1. Slide 1: Investor Presentation August 2016

    Investor Presentation August 2016

  2. Slide 2: The Strategic Difference

    The Strategic Difference  Technology Leadership  Customer and Geographic Diversity  Financial Strength and Discipline Copyright © 2016 BorgWarner Inc. 2

  3. Slide 3: Attractive Business Model, Difficult to Replicate

    Attractive Business Model, Difficult to Replicate Copyright © 2016 BorgWarner Inc. 3

  4. Slide 4: Stringent Regulations—A Resilient Secular Trend

    Stringent Regulations—A Resilient Secular Trend 60 Korea Enacted E.U. Enacted MPG Equivalent (CAFE/Local Test Cycle) U.S. Enacted 55 50 China Enacted for Passenger Cars 45 40 35 30 25 20 2005 2010 2015 2020 2025 Year Source: International Council on Clean Transportation As of August 2015 Copyright ©

  5. Slide 5: Expanding Our Reach Across the Powertrain

    Expanding Our Reach Across the Powertrain Variable valvetrain VCT Timing Timing ePhaser system chain EGR Exhaust heat Fans/fan recovery system drive cooler Control Eco-LaunchTM solenoid valve Solenoid module Friction Clutch Wet clutch for module manual transmissions Transfer AWD case coupling Perman

  6. Slide 6: Remy Acquisition—Strong Position for the Future

    Remy Acquisition—Strong Position for the Future Copyright © 2016 BorgWarner Inc. 6

  7. Slide 7: Customer and Geographic Diversity

    Customer and Geographic Diversity 2016 Sales Outlook* Asia ex. China Europe Hyundai/Kia 9% VW/Audi 10% Other Asia ex. China 5% Daimler 5% Ford 3% Renault 3% China BMW 2% VW/Audi 3% PSA 2% Ford 2% FCA 2% GM 1% GM 1% Other China 8% CV 3% Other 7% Americas Ford 9% Europe 38% FCA 5% Asia ex. China 14% G

  8. Slide 8: 4% to 6% Organic CAGR thru 2018

    4% to 6% Organic* CAGR thru 2018 $1.1 Billion — $1.65 Billion of Net New Business 2016 thru 2018 Americas**: ~38% Europe: ~18% Asia***: ~44% Domestic OEMs (FCA, Ford, GM) Domestic OEMs (Daimler, FCA, JLR, Porsche, China (BAIC, Chang’an, Chery, CNHDTC, Cummins, FAW, Ford, • Diesel cold start Renault/

  9. Slide 9: 4% to 6% Organic CAGR thru 2018

    4% to 6% Organic* CAGR thru 2018 $1.1 Billion — $1.65 Billion of Net New Business 2016 thru 2018 Ignition Systems Engine Drivetrain Emissions Systems 2% DCT Components 6% Thermal Systems 6% 3% All-Wheel Drive and Remy 18% Engine Timing and VCT 15% Transmission Components 6% Diesel Turbochargers Gas

  10. Slide 10: Sales Growth Continues

    Sales Growth Continues $ in billions 9.3 9.0 8.3 8.0 7.2 7.4 7.1 5.7 2010 2011 2012 2013 2014 2015* 2016E* * Includes net sales from Remy As of July 28, 2016 Copyright © 2016 BorgWarner Inc. 10

  11. Slide 11: BorgWarner 2016 Sales Guidance

    BorgWarner 2016 Sales Guidance $ in millions HIGH end of range $1,003 $9,253 LOW end of range $433 $(59) $8,958 $8,250 $7,876 $236 $(137) $7,975 $983 2015 net sales Market growth, FX 2016 net sales from Remy net sales 2016 net sales excluding Remy price and net new continuing business operations HIG

  12. Slide 12: Strong Operating Income Margins

    Strong Operating Income Margins 12.4% 12.9% 13.0% 11.7% >12% 11.1% 9.3% 2010 2011 2012 2013 2014 2015* 2016E* * Includes impact of Remy operating income, synergies and purchase price accounting adjustments As of July 28, 2016 Copyright © 2016 BorgWarner Inc. 12

  13. Slide 13: BorgWarner 2016 Operating Income Guidance

    BorgWarner 2016 Operating Income* Guidance $ in millions HIGH end of range LOW end of range $(10) $40 $1,138 $58 $15 $1,098 $1,088 $5 $(23) $1,049 $39 $1,035 $32 15%-17% 13.1% incremental >13% >12% margin margin margin margin 2015 operating Market growth, Tailwinds from FX 2016 operating Remy operat

  14. Slide 14: BorgWarner 2016 Diluted EPS Guidance

    BorgWarner 2016 Diluted EPS* Guidance HIGH end of range LOW end of range $0.05 $(0.03) $0.12 $3.32 $0.18 $(0.02) $3.20 $3.16 $0.02 $(0.07) $(0.03) $3.03 $0.12 $3.02 $0.10 2015 EPS Market growth, Tailwinds from FX Incremental 2016 EPS from Remy EPS** 2016 EPS* excluding price, net new restructurings

  15. Slide 15: 2016 Guidance—Other Items

    2016 Guidance—Other Items Free Cash Flow $400-$475 million Share Repurchases $200-$300 million R&D Spending ~ 4.0% of sales Tax Rate ~ 31% Return on Invested Capital ~ 18% $ / Euro Exchange Rate ~ 1.10 As of July 28, 2016 Copyright © 2016 BorgWarner Inc. 15

  16. Slide 16: Strong Capital Structure

    Strong Capital Structure A Strong Balance Sheet = The Flexibility to Take Advantage of Strategic Opportunities As of June 30, 2016 $ in millions Total debt $2,635 Cash 495 Net debt 2,140 Total equity 3,756 Total net capital 5,896 Net debt to net capital 36.3% Net debt to TTM EBITDA 1.5x Copyright ©

  17. Slide 17: Putting Our Cash Flow to Work

    Putting Our Cash Flow to Work $ in millions 350 1,200 140 106 $200 million to $300 million 226 115 117 204 296 Dividend to be maintained 57 165 563 577 5% to 6% of net sales 394 407 418 277 2010* 2011* 2012 2013 2014 2015 2016E Share Repurchases M&A Activity * $358 million and $326 million was spent

  18. Slide 18: Financial Discipline

    Financial Discipline Return on Invested Capital* 21.7% 20.7% 20.0% 19.4% 18.3% ~18% 16.7% 2010 2011 2012 2013 2014 2015 2016E * Invested capital excludes residual goodwill related to $4.8 billion leveraged buyout of BorgWarner Corp. in 1987. If included, this goodwill would have a negative impact on

  19. Slide 19: Thank You for Your Attention

    Thank You for Your Attention Our Vision  A Clean, Energy-Efficient World Our Mission  Deliver Innovative Powertrain Solutions that Improve Fuel Economy, Emissions & Performance Fuel Economy Emissions Performance Copyright © 2016 BorgWarner Inc.

  20. Slide 20: Appendix

    Appendix Copyright © 2016 BorgWarner Inc. 20

  21. Slide 21: BorgWarner Q3 2016 Sales Guidance

    BorgWarner Q3 2016 Sales Guidance $ in millions HIGH end of range $250 $2,276 LOW end of range $145 $(2) $2,026 $2,129 $(41) $1,889 $240 $1,884 $46 Q3 2015 net sales Market growth, FX Q3 2016 net sales Remy net sales Q3 2016 net sales price and net new from continuing business operations HIGH end of

  22. Slide 22: BorgWarner Q3 2016 Diluted EPS Guidance

    BorgWarner Q3 2016 Diluted EPS* Guidance HIGH end of range LOW end of range $0.03 $0.81 $0.04 $0.01 $0.00 $0.00 $0.78 $0.74 $0.01 $0.00 $(0.02) $0.00 $0.72 $0.03 $0.73 Q3 2015 EPS* Market growth, Tailwinds from FX Incremental interest Q3 2016 EPS from Remy EPS** Q3 2016 EPS* price, net new restructu

  23. Slide 23: Drivetrain Segment Adjusted EBIT

    Drivetrain Segment Adjusted EBIT HIGH end of range 2013 to 2016 Tailwind from restructuring LOW end of range $40 $368 $343 $6 $9 $(1) $328 ($16) $20 $25 $8 $5 $(7) $304 $39 $3 $26 $8 $295 $252 ~26% incremental 32% incremental margin margin 10.3% 11.5% ~12% <10% margin margin margin margin 2013 opera

  24. Slide 24: Hybrid and Electric Vehicle Segments

    Hybrid and Electric Vehicle Segments INCREASING ELECTRIFICATION Internal Combustion Engine (ICE) Electric Motor Electric Motor + Electrification + ICE Only ENHANCED ICE HYBRID ELECTRIC “HEV” ELECTRIC DRIVE Mild HEV Full HEV Range Extended Battery Stop/Start Parallel Parallel/Series Electric Vehicle

  25. Slide 25: EPS Reconciliation

    EPS Reconciliation Earnings per diluted share 2010 2011 2012 2013 2014 2015 U.S. GAAP $1.54 $2.23 $2.09 $2.70 $2.86 $2.70 Non-U.S. GAAP adjustments: Non-recurring charges and restructurings 0.08 (0.07) 0.14 0.25 0.39 0.32 Adjustments to tax accounts (0.09) (0.03) 0.08 (0.05) (0.04) Derivatives (Gain

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