BorgWarner Inc.

Good morning. My name is Sharon, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2019 Fourth Quarter and Full Year Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. If you are using a speakerphone, please pick up the handset before asking your question. I would now like to turn the call over to Patrick Nolan, Vice President of Investor Relations. Mr. Nolan, you may begin your conference.

Thank you, Sharon. Good morning, everyone, and thank you for joining us today. We issued our earnings release earlier this morning. It's posted on our website, borgwarner.com, on our homepage, and on our Investor Relations homepage. With regard to our Investor Relations calendar, we will be attending multiple conferences between now and our next earnings release. Please see the events section of our Investor Relations homepage for a full list. Before we begin to inform you that during this call, we may make forward-looking statements which involve risks and uncertainties as detailed in our 10-K. Our actual results may differ significantly from the matters discussed today. During today's presentation, we'll highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performs and for comparison purposes with prior periods. When you hear us say on a comparable basis, that means excluding the impact of FX, net M&A, and other non-comparable items. When you hear us say adjusted, that means excluding non-comparable items. When you hear us say organic, that means excluding the impact of FX and net M&A. We will also refer to our growth compared to our market. When you hear us say market, that means the change in light vehicle production weighted for our geographic exposure. Our outgrowth is defined as our organic revenue change versus the market. Please note that we've posted an earnings call presentation to the IR page of our website. We encourage you to follow along with these slides during our discussion. With that, I'm happy to turn the call over to Fred.

Thank you, Pat, and good morning, everyone. We're very pleased to share our results for 2019 this morning and provide an overall company update. Let me start with the highlights of the quarter on slide five. I am pleased with our stronger than expected top line and margin performance for the year, driven by the fourth quarter performance. With approximately 10.2 billion in sales, we are up about 0.7% organically. This compares to our market being down approximately 4.6%. So our outgrowth was 530 basis points for the year, which was ahead of our expectations going into the fourth quarter, driven by stronger than expected revenue trends in China and Europe. For the full year, we saw outgrowth in all major regions. We delivered high single-digit outgrowth in Europe and China. Our North American outgrowth was in the mid-single-digit range. 2019 earnings per share came at $4.13, ahead of our guidance driven by the fourth quarter upside. We delivered strong free cash of about $700 million for the year, and we expect this strong free cash to continue in 2020. Our near-term cost actions are supporting our incremental margin, and we have identified additional cost-saving opportunities that we believe will sustain our strong margin profile. As Kevin will discuss in detail later, we believe our backlog supports our targeted single-digit outgrowth going forward. And lastly, our planned acquisition of Delphi Technologies will strengthen our propulsion leadership while supporting our long-term growth outlook. Let's now turn to slide six, which highlights the additional cost restructuring steps that we have announced today. As you will recall, on our Q2 call, we highlighted our intention to find additional ways to adjust our class structure without compromising our longer term aspirations. Over the last six months, the team has identified additional restructuring opportunities in all major regions. These actions will include the restructuring, closure, or consolidation of both manufacturing and technical centers. We have also made the decision to consolidate our turbo and emissions businesses in order to create product differentiation with our turbo and EGR under one roof, as well as consolidating overhead costs. These actions are expected to generate incremental annual cost savings in the range of 90 to 100 million by 2023. Combined with our previously announced restructuring plan, we plan to achieve gross cost savings of 135 to 145 million per year by 2023. Cost improvement is a continuous focus for BoardWarner. We view these actions as proactive steps that we believe will position the company to sustain its strong margin profile, and overall long-term competitiveness. While we must adjust our costs to the challenging global market environment, we continue to focus on pursuing new businesses and new technology. Our Q4 product announcements highlight this focus, and they are summarized on slide 7. We disclose that we will be launching our triple clutch P2 hybrid module and hydraulic control unit with Schengen this year. This module delivers cost-effective hybridization and is compatible with existing vehicle platforms. Next, we disclose our first award for our E-Turbo. This program launches with the European OEM in 2022. It is a great example of combining our mechanical, rotating electric, electronics and software expertise. Lastly, we secured another high voltage coolant heater program with a major European premium OEM. This program launches in 2023 for both hybrid and battery electric vehicle applications. These three programs are great examples of revenue that supports our strong backlog through 2023. On slide 8, I would like to summarize the key points of our planned acquisition of Delphi technologies. First and foremost, it will strengthen our leadership position in electrified propulsion systems as we gain scale, expertise, and capabilities in electronics. at a time when the industry is moving towards electrification. At the same time, it would enhance our combustion, commercial vehicle and aftermarket businesses, driving an even better market balance for us. The combined company would offer a comprehensive portfolio of industry-leading products and systems across propulsion types. As we bring our offering together, I know we will be better positioned than ever before to meet our customers' evolving needs. It is not just a strategic fit we are excited about. We believe the financial benefits are also compelling, as we expect this transaction to have significant synergies and to be meaningfully accretive. We're confident that this transaction will deliver enhanced returns for stockholders, both in the near term and long into the future. I would like to highlight a sampling of the mid-term revenue synergies opportunities from the Delphi Technologies acquisitions on slide 9. As part of our due diligence work, the sales and engineering teams from both BorgWarner and Delphi Technologies focused on identifying the key customers where we expect to pursue modular solutions for various hybrid and electric programs. Within this customer list, we then drill down to hybrid and electric programs that are likely to be awarded by these customers over the next 18 to 24 months. What you see on the slide are the top 15 programs that we identified as our priority pursuits post-closing. A large majority of these programs are expected to launch in the 2024 to 2025 timeframe. There are three takeaways from this slide that I would like to highlight. First, the size of the list reinforces our view that the opportunities in electrification are accelerating. We believe the revenue opportunities are significant with these programs alone representing $0.7 billion in potential additional revenue by 2025 and growing to $1.3 billion by 2027. It is the size and acceleration of these opportunities that supports our view that the acquisition of Delphi Technologies is not only supportive but are creative to our long-term growth outlook. Before I turn it over to Kevin, let me summarize our 2019 results and long-term outlook. We exceeded our expectations for revenue growth and margins. We delivered strong free cash flow. We're taking the necessary cost actions to maintain our margin profile and overall competitiveness. We continue to see strong demand for our products as evidenced by our new program wins and strong net new business backlog. It is the operational and financial strength of this company that allows us to execute the transactions like the planned acquisition of Delphi Technologies that will help support our long-term revenue outgrowth. Now over to you, Kevin.