BORGWARNER INC
For the period ended Sep 30, 2024. Filed Oct 31, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 31, 2024
BWA$48.81+2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0000908255-24-000036
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0000908255-24-000043
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 142 current paragraphs.
50 unchanged; 58 reworded; 33 added; 11 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
Lawsuit Against PHINIA
Current report
On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA has received or expects to receive from governmental agencies as well as damages and interest, which PHINIA has refused to pay to the Company. These refunds consist of VAT paid by the Company in periods prior to or directly related to the Spin-Off through which the Company established PHINIA as an independent company. Prior to the initiation of the lawsuit, PHINIA had paid certain VAT refund amounts to the Company. The Company asserts PHINIA’s obligation to pay the Company these VAT refunds and related amounts is plainly set forth in a binding tax matters agreement between the Company and PHINIA, which the parties agreed to prior to the Spin-Off. As of September 30, 2024, the Company had an asset related to these VAT refunds of approximately $120 million, which is included in Receivables, net in the Condensed Consolidated Balance Sheet. Because the Company was unable to predict the timing of collection of these VAT refunds from the applicable governmental agencies, the Company has not included these amounts in its 2024 free cash flow guidance.
Current report
North Carolina Facility Hurricane
Current report
On September 26, 2024, a hurricane made landfall in North Carolina disrupting operations at the Company’s facility in Arden, North Carolina (the “Arden Plant”). The Arden Plant was largely untouched, but the Company believes there is some loss or damage to the Company’s assets. While the Company is still assessing the full impact of the damage, the Company expects the loss of assets to be less than $10 million. The Company’s insurance policies (less applicable deductibles) are expected to cover the repair or replacement of the Company’s assets that incurred loss or damage. In addition, the Company’s insurance policies are expected to provide coverage for interruption to its business, including lost profits, and reimbursement for other expenses and costs that have been incurred relating to the damages and losses sustained. The Arden plant resumed limited production in early October 2024; however, has not yet resumed full operations. The Company has not yet determined the full impact to its financial position, results of operations, or cash flows, including the timing of those impacts.
Current report
Economic Conditions. The Company’s financial performance depends on conditions in the global automotive industry. Automotive and truck production and sales are cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit, and consumer spending and preferences. Economic declines that result in significant reduction in automotive or truck production would have an adverse effect on our sales. The weighted average market production, as estimated by the Company for the nine months ended September 30, 2024, was down approximately 2% from the nine months ended September 30, 2023. Weighted average market production reflects light and commercial vehicle production as reported by S&P Global, weighted for the Company’s geographic exposure, as estimated by the Company.
Current report
•A reduction of $39 million related to the Company’s normal contractual customer commodity pass-through arrangements.
Current report
•Acquisitions contributed $9 million in additional sales during the three months ended September 30, 2024.
Current report
•Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $4 million primarily due to the strengthening of the Euro, Chinese Renminbi, and weakening of the Korean Won and Brazilian Real, in each case relative to the U.S. Dollar.
Current report
•Increased employee-related and other administrative costs of $11 million, primarily related to incentive compensation.
Current report
•During the three months ended September 30, 2024, the Company recorded a charge of $6 million related to the estimated loss on an immaterial business that met held for sale accounting criteria.
Current report
•During the three months ended September 30, 2024, the Company recorded $4 million of expense for bonuses related to the ratification of a collective bargaining agreement at a facility in New York.
Current report
•A gain related to merger and acquisition activity of $5 million, during the three months ended September 30, 2024, primarily due to a $6 million revision of the Company’s expected earn-out related to the Drivetek acquisition.
Current report
•A gain of $7 million, during the three months ended September 30, 2023, related to the sale of a European manufacturing facility.
Current report
Interest expense (income), net was an expense of $4 million and income of $19 million for the three months ended September 30, 2024 and 2023, respectively. Included in net interest expense for the three months ended September 30, 2024 and 2023 was a gain on extinguishment of $3 million and $28 million, respectively. The gains on debt extinguishment are primarily due to the partial extinguishment of the Company’s 3.375% and 5.000% senior notes during the three months ended September 30, 2024 and 2023.
Current report
Nine Months Ended September 30, 2024 vs. Nine Months Ended September 30, 2023
Current report
•Acquisitions contributed $26 million in additional sales during the nine months ended September 30, 2024.
Current report
•A reduction of $99 million related to the Company’s normal contractual customer commodity pass-through arrangements.
Current report
•Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $90 million primarily due to the weakening of the Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar.
Current report
•Increased employee-related costs of $23 million, primarily related to incentive compensation.
Current report
•During the three months ended September 30, 2024, the Company recorded $4 million of expense for bonuses related to the ratification of a collective bargaining agreement at a facility in New York.
Current report
•During the nine months ended September 30, 2024, the Company recorded a charge of $3 million, primarily related to the recognition of a $6 million estimated loss on an immaterial business that met held for sale accounting criteria.
Current report
Interest expense, net was $17 million and $3 million for the nine months ended September 30, 2024 and 2023, respectively. This increase in net interest expense was primarily due to a $28 million gain on debt extinguishment recognized in 2023. Excluding the gain on debt extinguishment, net interest expense has decreased year-over-year primarily due to higher cash and cash equivalents balances and interest received on those balances.
Current report
The reportable segment disclosures have been updated accordingly, which included recasting prior period information for the new reporting structure.
Current report
The Turbos & Thermal Technologies segment’s net sales decreased $88 million, or 6%, and Segment Adjusted Operating Income decreased $12 million from the three months ended September 30, 2023. The decrease in net sales was primarily due to approximately $77 million of a reduction in volume, mix, and net new business driven by a decline in market production. Additionally, normal contractual customer commodity pass-through arrangements decreased net sales by $10 million. Segment Adjusted Operating Margin was 14.6% for the three months ended September 30, 2024, compared to 14.5% during the three months ended September 30, 2023. The Segment Adjusted Operating Income decreased primarily due to lower sales, partially offset by purchasing savings and manufacturing efficiencies.
Current report
The Drivetrain & Morse Systems segment’s net sales decreased $84 million, or 6%, and Segment Adjusted Operating Income decreased $2 million from the three months ended September 30, 2023. Foreign currencies resulted in a year-over-year increase in net sales of approximately $2 million primarily due to the strengthening of the Chinese Renminbi and Euro and weakening of the Korean Won, in each case relative to the U.S. Dollar. The decrease excluding the impact of foreign currencies was primarily due to approximately $80 million of volume, mix and net new business driven by a decline in market production. Additionally, normal contractual customer commodity pass-through arrangements decreased net sales by $6 million. Segment Adjusted Operating Margin was 18.4% for the three months ended September 30, 2024, compared to 17.5% during the three months ended September 30, 2023. The Segment Adjusted Operating Income was flat primarily due to lower sales partially offset by purchasing savings, manufacturing efficiencies and restructuring.
Current report
The PowerDrive Systems segment’s net sales decreased $59 million, or 10%, and Segment Adjusted Operating Loss decreased $1 million from the three months ended September 30, 2023. Foreign currencies resulted in a year-over-year increase in net sales of approximately $2 million primarily due to the strengthening of the Chinese Renminbi and Euro and weakening of the Korean Won, in each case relative to the U.S. Dollar. Acquisitions contributed $9 million in additional sales during the three months ended September 30, 2024. The decrease excluding these items was primarily due to approximately $94 million of a reduction in volume, mix and net new business driven by decreased demand for the Company’s light vehicle Foundational products, which was partially offset by $24 million of customer recoveries related to the volume decrease. Segment Adjusted Operating Margin was (3.7)% for the three months ended September 30, 2024, compared to (3.5)% during the three months ended September 30, 2023. The Segment Adjusted Operating Loss was flat primarily due to lower sales offset by purchasing savings, customer volume related recoveries and restructuring.
Current report
The Battery & Charging Systems segment’s net sales increased $51 million, or 35%, and Segment Adjusted Operating Loss decreased $18 million from the three months ended September 30, 2023. The increase in net sales was primarily due to approximately $59 million of volume, mix and net new business driven by increased European demand. Additionally, normal contractual customer commodity pass-through arrangements decreased net sales by $23 million, which was partially offset by other pricing increases of $14 million. Segment Adjusted Operating Margin was (4.1)% for the three months ended September 30, 2024, compared to (17.8)% during the three months ended September 30, 2023. The Segment Adjusted Operating Loss decreased primarily due to conversion on higher sales.
Current report
Nine Months Ended September 30, 2024 vs. Nine Months Ended September 30, 2023
Current report
The Drivetrain & Morse Systems segment’s net sales increased $80 million, or 2%, and Segment Adjusted Operating Income increased $70 million from the nine months ended September 30, 2023. Foreign currencies resulted in a year-over-year decrease in net sales of approximately $52 million primarily due to the weakening of the Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar. The increase excluding the impact of foreign currencies was primarily due to approximately $145 million of volume, mix and net new business driven by increased demand for drivetrain products in Asia. Additionally, normal contractual customer commodity pass-through arrangements decreased net sales by $13 million. Segment Adjusted Operating Margin was 18.2% for the nine months ended September 30, 2024, compared to 16.9% during the nine months ended September 30, 2023. The Segment Adjusted Operating Income increase was primarily due to conversion on higher sales and savings related to purchasing and restructuring.
Current report
The PowerDrive Systems segment’s net sales decreased $212 million, or 13%, and Segment Adjusted
Current report
The Company maintains various liquidity sources, including cash and cash equivalents and the unused portion of its multi-currency revolving credit agreement. As of September 30, 2024, the Company had liquidity of $4,000 million, comprised of cash and cash equivalent balances of $2,000 million and an undrawn revolving credit facility of $2,000 million. On October 17, 2024, the Company announced that the remaining outstanding balance of $343 million on the 5.000% senior notes due in October 2025 will be redeemed in full on November 1, 2024 using cash on hand, in accordance with the terms of the agreement.
Current report
Lawsuit Against PHINIA
Current report
On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA has received or expects to receive from governmental agencies as well as damages and interest, which PHINIA has refused to pay to the Company. These refunds consist of VAT paid by the Company in periods prior to or directly related to the Spin-Off through which the Company established PHINIA as an independent company. Prior to the initiation of the lawsuit, PHINIA had paid certain VAT refund amounts to the Company. The Company asserts PHINIA’s obligation to pay the Company these VAT refunds and related amounts is plainly set forth in a binding tax matters agreement between the Company and PHINIA, which the parties agreed to prior to the Spin-Off. As of September 30, 2024, the Company had an asset related to these VAT refunds of approximately $120 million, which is included in Receivables, net in the Condensed Consolidated Balance Sheet.
Removed paragraphs (11)
Previous report
•Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $62 million primarily due to the weakening of the Chinese Renminbi, Euro and Korean Won, in each case relative to the U.S. Dollar.
Previous report
•Acquisitions contributed $6 million in additional sales during the three months ended June 30, 2024.
Previous report
Interest expense, net was $8 million and $12 million for the three months ended June 30, 2024 and 2023, respectively. This decrease was primarily due to the reduction in interest following a debt extinguishment completed in September 2023 and higher interest rates on cash and cash equivalents balances.
Previous report
Six Months Ended June 30, 2024 vs. Six Months Ended June 30, 2023
Previous report
•Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $94 million primarily due to the weakening of the Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar.
Previous report
•Acquisitions contributed $17 million in additional sales during the six months ended June 30, 2024.
Previous report
Interest expense, net was $13 million and $22 million for the six months ended June 30, 2024 and 2023, respectively. This decrease was primarily due to the reduction in interest following a debt extinguishment completed in September 2023 and higher interest rates on cash and cash equivalents balances.
Previous report
The Drivetrain & Battery Systems segment’s net sales increased $79 million, or 7%, and Segment Adjusted Operating Income increased $34 million from the three months ended June 30, 2023. Foreign currencies resulted in a year-over-year decrease in sales of approximately $20 million primarily due to the weakening of the Chinese Renminbi, Korean Won and Euro, in each case relative to the U.S. Dollar. The increase excluding the impact of foreign currencies was primarily due to approximately $99 million of volume, mix and net new business driven by increased demand for battery system products in Europe and North America and drivetrain system products in Asia. Segment Adjusted Operating Margin was 14.7% for the three months ended June 30, 2024, compared to 12.7% during the three months ended June 30, 2023. The Segment Adjusted Operating Income increase was primarily due to conversion on higher sales and purchasing savings.
Previous report
Six Months Ended June 30, 2024 vs. Six Months Ended June 30, 2023
Previous report
The Air Management segment’s net sales decreased $2 million and Segment Adjusted Operating Income increased $22 million from the six months ended June 30, 2023. Foreign currencies resulted in a year-over-year decrease in sales of approximately $42 million primarily due to the weakening of the Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar. Acquisitions contributed $5 million in additional sales during the six months ended June 30, 2024. The increase excluding these items was primarily due to approximately $35 million of volume, mix and net new business driven by increased demand for the Company’s products. Segment Adjusted Operating Margin was 15.3% for the six months ended June 30, 2024, compared to 14.7% during the six months ended June 30, 2023. The Segment Adjusted Operating Income increase was primarily due to purchasing savings and lower input costs.
Previous report
TheePropulsion segment’s net sales decreased $153 million, or 15%, and Segment Adjusted Operating Loss increased $57 million from the six months ended June 30, 2023. Foreign currencies resulted in a year-over-year decrease in sales of approximately $19 million primarily due to the weakening of the Chinese Renminbi relative to the U.S. Dollar. Acquisitions contributed $12 million in additional sales during the six months ended June 30, 2024. The decrease excluding these items was primarily due to approximately $146 million of a reduction in volume, mix and net new business driven by decreased demand for the Company’s light vehicle eProducts in North America and China. Segment Adjusted Operating Margin was (12.3)% for the six months ended June 30, 2024, compared to (5.1)% during the six months ended June 30, 2023. The Segment Adjusted Operating Loss was primarily due to investments in R&D for eProducts. The Segment Adjusted Operating Loss increased due to lower sales, higher R&D investments and impacts related to the Eldor acquisition.
Reworded paragraphs (58)
Previous wording
During the three and six months ended June 30, 2024, the Company recognized a $3 million and $19 million increase in Net earnings attributable to BorgWarner Inc., respectively, in the Condensed Consolidated Statement of Operations for the correction of misstatements related to certain accruals, of which $12 million related to 2023 (the remainder relates to periods prior to 2023). The Company has evaluated the effect of these out-of-period adjustments for the current reporting period, as well as on the previous interim and annual periods in which they should have been recognized, and concluded that these adjustments are not material to any of the periods affected.
Current wording
During the nine months ended September 30, 2024, the Company recognized a $19 million increase in Net earnings attributable to BorgWarner Inc. in the Condensed Consolidated Statement of Operations for the correction of misstatements related to certain accruals, of which $12 million related to 2023 (the remainder relates to periods prior to 2023). The Company has evaluated the effect of these out-of-period adjustments for the current reporting period, as well as on the previous interim and annual periods in which they should have been recognized, and concluded that these adjustments are not material to any of the periods affected.
Previous wording
In June 2023, the Company announced the next phase of its Charging Forward strategy, which focuses on profitably growing eProducts while maximizing the value of the Company’s Foundational products portfolio. Foundational products include all products utilized on internal combustion engines plus those same products and components that are also included in hybrid powertrains. During the six months ended June 30, 2024 and 2023, the Company’s eProducts revenue was approximately $1,082 million and $922 million, respectively, or 15% and 13% of its total revenue, respectively.
Current wording
In June 2023, the Company announced the next phase of its Charging Forward strategy, which focuses on profitably growing eProducts while maximizing the value of the Company’s Foundational products portfolio. Foundational products include all products utilized on internal combustion engines plus those same products and components that are also included in hybrid powertrains. During the nine months ended September 30, 2024 and 2023, the Company’s eProducts revenue was approximately $1,721 million and $1,494 million, respectively, or 16% and 14% of its total revenue, respectively.
Previous wording
On December 1, 2023, the Company completed its acquisition of the electric hybrid systems business segment of Eldor Corporation (“Eldor”), which is headquartered in Italy. The Company expects the acquisition to complement its existing ePropulsion product portfolio by enhancing the Company’s engineering capabilities in power electronics. The Company paid €72 million ($78 million) at closing and is obligated to remit up to €175 million ($191 million) of earn-out payments that could be paid over the two years following closing.
Current wording
On December 1, 2023, the Company completed its acquisition of the electric hybrid systems business segment of Eldor Corporation (“Eldor”), which is headquartered in Italy. The Company expects the acquisition to complement its existing PowerDrive Systems product portfolio by enhancing the Company’s engineering capabilities in power electronics. The Company paid €72 million ($78 million) at closing and is obligated to remit up to €175 million ($191 million) of earn-out payments that could be paid over the two years following closing.
Previous wording
On March 1, 2023, the Company completed its acquisition of the electric vehicle solution, smart grid and smart energy businesses of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The acquisition is expected to complement the Company’s existing European and North American charging footprint by adding a presence in China. The total consideration was ¥288 million ($42 million), including ¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earn-out payments. The Company paid ¥217 million ($31 million) of the base purchase price in the year ended December 31, 2023. The remaining ¥51 million ($8 million) of base purchase price is payable in two installments with the last payment due before September 30, 2025. In addition, pursuant to the agreement, the Company could be obligated to remit up to ¥103 million ($15 million), in the form of contingent payments over approximately two years following the closing.
Current wording
On March 1, 2023, the Company completed its acquisition of the electric vehicle solution, smart grid and smart energy businesses of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The acquisition is expected to complement the Company’s existing European and North American charging footprint by adding a presence in China. The total consideration was ¥288 million ($42 million), including ¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earn-out payments. The Company paid ¥217 million ($31 million) of the base purchase price in the year ended December 31, 2023. The Company paid ¥25 million ($4 million) during the nine months ended September 30, 2024. The remaining ¥26 million ($4 million) of base purchase price is payable in two installments with the last payment due before October 31, 2025. In addition, pursuant to the agreement, the Company could be obligated to remit up to ¥103 million ($15 million), in the form of contingent payments over approximately two years following the closing.
Previous wording
Commodities and Other Inflationary Impacts. Prices for commodities have started showing a lower level of volatility in comparison to what the Company had experienced from the beginning of 2021. At the same time, many economies, including the United States, are still experiencing elevated levels of inflation, which continues to put pressure on other input costs (e.g. labor, energy, other materials). As a result, the Company expects a trend of slight increasing or flat costs.
Current wording
Commodities and Other Inflationary Impacts. Prices for commodities have started showing a lower level of volatility in comparison to what the Company had experienced from the beginning of 2021. At the same time, many economies, including the United States, are still experiencing elevated levels of inflation, which continues to put pressure on other input costs (e.g. labor, energy, other materials). These pressures have softened in 2024, and as a result, the Company expects a trend of slight decreasing or flat costs.
Previous wording
The Company expects global market production to decrease modestly year-over-year in 2024. However, the Company expects net new business-related sales growth, due to the increased penetration of BorgWarner products, including eProducts, to drive a modest sales increase despite the decreased market production. As a result, the Company expects increased revenue in 2024, excluding the impact of foreign currencies. The Company expects the earnings benefit of this revenue growth to be partially offset by the increased investments made in Research and Development (“R&D”).
Current wording
The Company expects global market production to decrease year-over-year in 2024. However, the Company expects net new business-related sales growth, due to the increased penetration of BorgWarner products, including eProducts, to allow the Company’s year-over-year change in net sales to outperform the market production decline. As a result, the Company expects net sales to be flat to modestly decline in 2024, excluding the impact of foreign currencies. The Company expects its full year earnings to improve year over year driven by BorgWarner’s technology-focused portfolio and strong cost controls.
Previous wording
Net sales for the three months ended June 30, 2024 totaled $3,603 million, a decrease of $68 million, or 2%, compared to the three months ended June 30, 2023. The change in net sales for the three months ended June 30, 2024 was primarily driven by the following:
Current wording
Net sales for the three months ended September 30, 2024 totaled $3,449 million, a decrease of $173 million, or 5%, compared to the three months ended September 30, 2023. The change in net sales for the three months ended September 30, 2024 was primarily driven by the following:
Previous wording
•Lower volume, mix and net new business decreased sales approximately $12 million. This decrease was primarily driven by a decline in market production. The weighted average market production as estimated by the Company was down approximately 2% from the three months ended June 30, 2023. Weighted average market production reflects light and commercial vehicle production as reported by IHS weighted for the Company’s geographic exposure, as estimated by the Company.
Current wording
•Lower volume, mix and net new business decreased sales approximately $147 million. This decrease was primarily driven by a decline in market production. The weighted average market production as estimated by the Company was down approximately 6% from the three months ended September 30, 2023. Weighted average market production reflects light and commercial vehicle production as reported by S&P Global, weighted for the Company’s geographic exposure, as estimated by the Company.
Previous wording
Cost of sales and cost of sales as a percentage of net sales were $2,918 million and 81.0%, respectively, during the three months ended June 30, 2024, compared to $2,991 million and 81.5%, respectively, during the three months ended June 30, 2023. The change in cost of sales for the three months ended June 30, 2024 was primarily driven by the following:
Current wording
Cost of sales and cost of sales as a percentage of net sales were $2,813 million and 81.6%, respectively, during the three months ended September 30, 2024, compared to $2,970 million and 82.0%, respectively, during the three months ended September 30, 2023. The change in cost of sales for the three months ended September 30, 2024 was primarily driven by the following:
Previous wording
•Lower sales volume, mix and net new business and purchasing savings decreased cost of sales by approximately $8 million.
Current wording
•Lower sales volume, mix and net new business and purchasing savings decreased cost of sales by approximately $135 million.
Previous wording
•Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $48 million primarily due to the weakening of the Chinese Renminbi, Korean Won, and Euro, in each case relative to the U.S. Dollar.
Current wording
•Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $4 million primarily due to the strengthening of the Euro, Chinese Renminbi, and weakening of the Korean Won and Brazilian Real, in each case relative to the U.S. Dollar.
Previous wording
Gross profit and gross margin were $685 million and 19.0%, respectively, during the three months ended June 30, 2024, compared to $680 million and 18.5%, respectively, during the three months ended June 30, 2023. The increase in gross margin was primarily due to the factors discussed above.
Current wording
Gross profit and gross margin were $636 million and 18.4%, respectively, during the three months ended September 30, 2024, compared to $652 million and 18.0%, respectively, during the three months ended September 30, 2023. The increase in gross margin was primarily due to the factors discussed above.
Previous wording
SG&A for the three months ended June 30, 2024 was $341 million as compared to $334 million for the three months ended June 30, 2023. SG&A as a percentage of net sales was 9.5% and 9.1% for the three months ended June 30, 2024 and 2023, respectively.
Current wording
SG&A for the three months ended September 30, 2024 was $340 million as compared to $330 million for the three months ended September 30, 2023. SG&A as a percentage of net sales was 9.9% and 9.1% for the three months ended September 30, 2024 and 2023, respectively. The change in SG&A was primarily attributable to:
Previous wording
The change in SG&A was primarily attributable Research and Development (“R&D”) costs that increased by $27 million. R&D costs, net of customer reimbursements, were 5.2% of net sales for the six months ended June 30, 2024, compared to 4.9% of net sales for the six months ended June 30, 2023. The increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment related to the Company’s eProduct portfolio.
Current wording
•Research and Development (“R&D”) costs decreased by $2 million. R&D costs, net of customer reimbursements, were 5.5% of net sales for the three months ended September 30, 2024, compared to 5.3% of net sales for the three months ended September 30, 2023.
Previous wording
Restructuring expense was $25 million and $9 million for the three months ended June 30, 2024 and 2023, respectively, primarily related to employee termination benefits. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.
Current wording
Restructuring expense was $21 million and $56 million for the three months ended September 30, 2024 and 2023, respectively, primarily related to employee termination benefits. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.
Previous wording
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs primarily in its Foundational products businesses. During the three and six months ended June 30, 2024 and 2023, the Company recorded $15 million and $9 million, respectively, of restructuring costs related to this plan. The resulting gross savings related to this plan are expected to be in the range of at least $80 million to $90 million annually by 2027 and are being utilized to sustain overall operating margin profile and cost competitiveness. Nearly all of the restructuring charges are expected to be cash expenditures, funded by cash on hand.
Current wording
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs primarily in its Foundational products businesses. During the three months ended September 30, 2024 and 2023, the Company recorded $18 million and $56 million, respectively, of restructuring costs related to this plan. The resulting gross savings related to this plan are expected to be in the range of at least $80 million to $90 million annually by 2027 and are being utilized to sustain overall operating margin profile and cost competitiveness.
Previous wording
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its ePropulsion segment due to increased market volatility. During the three months ended June 30, 2024, the Company recorded $10 million of restructuring charges related to this plan. The resulting annual cost savings related to this plan is expected to be approximately $100 million by 2026.
Current wording
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its PowerDrive Systems segment due to increased market volatility, which could include realignment of the segment’s manufacturing footprint. During the three months ended September 30, 2024, the Company recorded $3 million of restructuring charges related to this plan. The resulting annual cost savings related to this plan are expected to be approximately $100 million by 2026.
Previous wording
Other operating expense, net was $22 million and $4 million for the three months ended June 30, 2024 and 2023, respectively. The change in Other operating expense, net was primarily due to:
Current wording
Other operating expense (income), net was expense of $5 million and income of $6 million for the three months ended September 30, 2024 and 2023, respectively. The change in Other operating expense (income), net was primarily due to:
Previous wording
Other operating expense, net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.
Current wording
Other operating expense (income), net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.
Previous wording
Equity in affiliates’ earnings, net of tax was $17 million and $13 million for the six months ended June 30, 2024 and 2023, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.
Current wording
Equity in affiliates’ earnings, net of tax was $6 million and $10 million for the three months ended September 30, 2024 and 2023, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.
Previous wording
Unrealized loss on equity and debt securities was $2 million and $69 million for the six months ended June 30, 2024 and 2023, respectively. This line item reflects the net unrealized gains or losses recognized due to valuing the Company’s investments at fair value. For the six months ended June 30, 2023, this primarily related to losses recognized to adjust the Company’s investment in Wolfspeed convertible debt securities to fair value. The Company sold its Wolfspeed convertible debt securities during the third and fourth quarters of 2023.
Current wording
Unrealized (gain) loss on equity and debt securities was a gain of $2 million and a loss of $60 million for the three months ended September 30, 2024 and 2023, respectively. This line item reflects the net unrealized gains or losses recognized due to valuing the Company’s investments at fair value. For the three months ended June 30, 2023, this primarily related to losses recognized to adjust the Company’s investment in Wolfspeed Inc. (“Wolfspeed”) convertible debt securities to fair value. The Company sold its Wolfspeed convertible debt securities during the third and fourth quarters of 2023.
Previous wording
Provision for income taxes was $31 million for the six months ended June 30, 2024, resulting in an effective rate of 5%. This compared to $97 million, or an effective rate of 19%, for the six months ended June 30, 2023. During the six months ended June 30, 2024, the Company recorded a discrete tax benefit of $89 million related to a reduction in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed. In addition, the Company recorded a discrete tax benefit of $4 million related to net changes to valuation allowances. During the six months ended June 30, 2023, a the Company recorded a discrete tax benefit of approximately $29 million in relation to the Spin-Off, a discrete tax benefit of approximately $14 million was recorded related to the resolution of tax audits, a $10 million discrete tax expense for the impact of enacted tax law changes, and a discrete tax benefit of $9 million related to various immaterial tax adjustments.
Current wording
Provision for income taxes was $13 million for the three months ended September 30, 2024, resulting in an effective rate of 5%. This compared to a provision of $133 million, or an effective rate of 56%, for the three months ended September 30, 2023. During the three months ended September 30, 2024, the Company recorded a discrete tax benefit of approximately $18 million related to a reduction in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed, a discrete tax expense of $4 million related to net changes to valuation allowances, a discrete tax benefit of approximately $36 million related to post Spin-Off restructuring and a discrete tax benefit of approximately $1 million related to various changes in filing positions for prior years. During the three months ended September 30, 2023, the Company recorded a discrete tax benefit of approximately $31 million related to various changes in filing positions for prior years, a discrete tax benefit of approximately $12 million in relation to the Spin-Off and a discrete tax expense of approximately $87 million for changes in judgment related to the realization of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies.
Previous wording
Net sales for the six months ended June 30, 2024 totaled $7,198 million, an increase of $144 million, or 2%, compared to the six months ended June 30, 2023. The change in net sales for the six months ended June 30, 2024 was primarily driven by the following:
Current wording
Net sales for the nine months ended September 30, 2024 totaled $10,647 million, a decrease of $29 million, compared to the nine months ended September 30, 2023. The change in net sales for the nine months ended September 30, 2024 was primarily driven by the following:
Previous wording
•Favorable volume, mix and net new business increased sales approximately $221 million, or 3%. This increase was primarily driven by growth despite flat market production, which the Company believes reflects higher demand for its products. The weighted average market production as estimated by the Company, was flat from the six months ended June 30, 2023. Weighted average market production reflects light and commercial vehicle production as reported by IHS weighted for the Company’s geographic exposure, as estimated by the Company.
Current wording
•Favorable volume, mix and net new business increased sales approximately $134 million. This increase was primarily driven by growth despite flat market production, which the Company believes reflects higher demand for its products. The weighted average market production as estimated by the Company, was down approximately 2% from the nine months ended September 30, 2023. Weighted average market production reflects light and commercial vehicle production as reported by S&P Global, weighted for the Company’s geographic exposure, as estimated by the Company.
Previous wording
Cost of sales and cost of sales as a percentage of net sales were $5,869 million and 81.5%, respectively, during the six months ended June 30, 2024, compared to $5,797 million and 82.2%, respectively, during the six months ended June 30, 2023. The change in cost of sales for the six months ended June 30, 2024 was primarily driven by the following:
Current wording
Cost of sales and cost of sales as a percentage of net sales were $8,682 million and 81.5%, respectively, during the nine months ended September 30, 2024, compared to $8,767 million and 82.1%, respectively, during the nine months ended September 30, 2023. The change in cost of sales for the nine months ended September 30, 2024 was primarily driven by the following:
Previous wording
•Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $71 million primarily due to the weakening of the Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar.
Current wording
•Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $67 million primarily due to the weakening of the Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar.
Previous wording
•Higher sales volume, mix and net new business and purchasing savings increased cost of sales by approximately $123 million.
Current wording
•Lower sales volume, mix and net new business and purchasing savings decreased cost of sales by approximately $12 million.
Previous wording
Gross profit and gross margin were $1,329 million and 18.5%, respectively, during the six months ended June 30, 2024, compared to $1,257 million and 17.8%, respectively, during the six months ended June 30, 2023. The increase in gross margin was primarily due to the factors discussed above.
Current wording
Gross profit and gross margin were $1,965 million and 18.5%, respectively, during the nine months ended September 30, 2024, compared to $1,909 million and 17.9%, respectively, during the nine months ended September 30, 2023. The increase in gross margin was primarily due to the factors discussed above.
Previous wording
SG&A for the six months ended June 30, 2024 was $670 million as compared to $633 million for the six months ended June 30, 2023. SG&A as a percentage of net sales was 9.3% and 9.0% for the six months ended June 30, 2024 and 2023, respectively.
Current wording
SG&A for the nine months ended September 30, 2024 was $1,010 million as compared to $963 million for the nine months ended September 30, 2023. SG&A as a percentage of net sales was 9.5% and 9.0% for the nine months ended September 30, 2024 and 2023, respectively. The change in SG&A was primarily attributable to:
Previous wording
The change in SG&A was primarily attributable Research and Development (“R&D”) costs that increased by $6 million. R&D costs, net of customer reimbursements, were 5.2% of net sales for the three months ended June 30, 2024, compared to 5.0% of net sales for the three months ended June 30, 2023. The increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment related to the Company’s eProduct portfolio.
Current wording
•Research and Development (“R&D”) costs that increased $25 million. R&D costs, net of customer reimbursements, were 5.3% of net sales for the nine months ended September 30, 2024, compared to 5.1% of net sales for the nine months ended September 30, 2023. The increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment related to the Company’s eProduct portfolio.
Previous wording
Restructuring expense was $44 million and $12 million for the six months ended June 30, 2024 and 2023, respectively, primarily related to employee termination benefits. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.
Current wording
Restructuring expense was $65 million and $68 million for the nine months ended September 30, 2024 and 2023, respectively, primarily related to employee termination benefits. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.
Previous wording
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs primarily in its Foundational products businesses. During the six months ended June 30, 2024 and 2023, the Company recorded $34 million and $12 million, respectively, of restructuring costs related to this plan.
Current wording
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs primarily in its Foundational products businesses. During the nine months ended September 30, 2024 and 2023, the Company recorded $52 million and $68 million, respectively, of restructuring costs related to this plan.
Previous wording
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its ePropulsion segment due to increased market volatility. During the six months ended June 30, 2024, the Company recorded $10 million of restructuring charges related to this plan.
Current wording
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its PowerDrive Systems segment. During the nine months ended September 30, 2024, the Company recorded $13 million of restructuring charges related to this plan.
Previous wording
Other operating expense, net was $23 million and $5 million for the six months ended June 30, 2024 and 2023, respectively. The change in Other operating expense, net was primarily due to:
Current wording
Other operating expense (income), net was an expense of $28 million and income of $1 million for the nine months ended September 30, 2024 and 2023, respectively. The change in Other operating expense (income), net was primarily due to:
Previous wording
•A loss of approximately $15 million related to the settlement of a commercial contract assumed in its acquisition of the electric hybrid systems business segment of Eldor during the three months ended June 30, 2024.
Current wording
•A loss of approximately $15 million related to the settlement of a commercial contract assumed in its acquisition of the electric hybrid systems business segment of Eldor during the nine months ended September 30, 2024.
Previous wording
•Expense of approximately $11 million primarily for adjustments to net amounts owed to the Company related to the tax matters agreement related to the Spin-Off during the six months ended June 30, 2024.
Current wording
•Expense of approximately $14 million primarily for Spin-Off adjustments to net amounts owed to the Company related to the tax matters agreement during the nine months ended September 30, 2024.
Previous wording
•Merger and acquisition expense of $8 million primarily related to professional fees associated with specific acquisition initiatives during the three months ended June 30, 2023.
Current wording
•Merger and acquisition expense, net was less than $1 million during the nine months ended September 30, 2024, primarily related to professional fees associated with specific acquisition initiatives offset by a gain of $6 million related to the revision of its expected earn-out related to the Drivetek acquisition. Merger acquisition expense, net was $18 million during the nine months ended September 30, 2023, primarily related to professional fees associated with specific acquisition initiatives.
Previous wording
•Gains on the sale of business of $3 million and $5 million were recorded during the six months ended June 30, 2024 and 2023, respectively, that related to the recognition of earn-outs on prior dispositions.
Current wording
•During the nine months ended September 30, 2023, the Company recorded a gain on the sale of businesses of $5 million related to the recognition of earn-outs on prior dispositions.
Previous wording
•A gain of $6 million related to the sale of certain fixed assets during the six months ended June 30, 2023.
Current wording
•A gain of $13 million related to the sale of certain fixed assets during the nine months ended September 30, 2023.
Previous wording
Other operating expense, net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.
Current wording
Other operating expense (income), net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.
Showing the first 40 of 58 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Nearly all of the restructuring charges are expected to be cash expenditures, funded by cash on hand.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
•Expense of approximately $11 million primarily for adjustments to net amounts owed to the Company related to the tax matters agreement between the Company and PHINIA during the three months ended June 30, 2024.
Previous report — wording carried elsewhere
•A loss of approximately $15 million related to the settlement of a commercial contract assumed in its acquisition of the electric hybrid systems business segment of Eldor during the six months ended June 30, 2024.
Previous report — wording carried elsewhere
•Merger and acquisition expense of $5 million and $16 million, primarily related to professional fees associated with specific acquisition initiatives during the six months ended June 30, 2024 and 2023, respectively.