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BORGWARNER REPORTS THIRD QUARTER 2012 U.S. GAAP EARNINGS OF $0.85 PER DILUTED SHARE

THE COMPANY POSTS RECORD EARNINGS OF $1.19 PER DILUTED SHARE, EXCLUDING NONCOMPARABLE ITEMS, UP 4% FROM THIRD QUARTER 2011 ON A COMPARABLE BASIS REVISES 2012 FULL YEAR SALES AND EARNINGS GUIDANCE DUE TO WEAKENING MARKET CONDITIONS IN EUROPE

Auburn Hills, Michigan, October 31, 2012 – BorgWarner Inc. (NYSE: BWA) today reported third quarter 2012 U.S. GAAP net earnings of $0.85 per diluted share. Excluding non-comparable items, net earnings were $1.19 per diluted share, a new third quarter record for the company. Net sales were $1,695 million in the quarter.

Third Quarter Highlights:

  • Net sales of $1,695 million. Excluding the negative impact of foreign currencies and 2011 dispositions, net sales were up approximately 2% compared with third quarter 2011.
  • U.S. GAAP net earnings of $0.85 per diluted share. Excluding $(0.28) per diluted share of costs associated with disposal and related restructuring activities, and $(0.06) per diluted share related to tax adjustments, net earnings were $1.19 per diluted share, a new third quarter record for the company, up 4% from third quarter 2011 on a comparable basis.
  • Operating income of $163 million. Excluding the $29 million pre-tax costs associated with disposal and related restructuring activities, operating income was $192 million, or 11.3% of net sales, a new third quarter record for the company. Revised Full Year Guidance:
  • The company expects 2012 net sales growth of 0% to 1%. Excluding the negative impact of foreign currencies, the company expects 2012 net sales growth of 5% to 6%.
  • The company expects 2012 net earnings of $4.90 to $5.00 per diluted share, excluding non-comparable items, a record level for BorgWarner and up 10% to 12% compared with 2011.

Third Quarter Performance: “Our operations were very efficient in the quarter,” said Timothy Manganello, Chairman and CEO of BorgWarner. “Despite declines in light vehicle production in Europe, our largest market, the focus on fuel economy and improved emissions around the globe continued to drive growth for BorgWarner. Excluding the impact of foreign currencies and 2011 dispositions, our net sales were up approximately 2% in the third quarter compared with third quarter 2011, in line with global light vehicle production growth of 2%. Light vehicle production in Europe, a geographic market that comprises over half of our sales, was down 6%. In a challenging sales environment, we did an excellent job managing costs, which resulted in a solid operating income margin of 11.3%, excluding non-comparable items.”

2012 Outlook: Based on weakening global economic conditions, particularly in Europe, the company adjusted its net sales and net earnings guidance for 2012. Annual net sales growth is now expected to be 0% to 1%, compared with 4% to 6% previously. Excluding the negative impact of foreign currencies, annual net sales growth is now expected to be 5% to 6%, compared with 9% to 11% previously. Net earnings are now expected to be within a range of $4.90 to $5.00 per diluted share, excluding non-comparable items, down from $5.05 to $5.25 per diluted share previously. “Our outlook for Europe, our largest market, has deteriorated due to the general economic slowdown across the continent and its impact on the automotive industry. Despite this, we expect to deliver record earnings this year," Manganello said.

Financial Results: Net sales were $1,695 million in third quarter 2012, down 5% from $1,792 million in third quarter 2011. Net earnings in the quarter were $101 million, or $0.85 per diluted share, compared with $142 million, or $1.15 per diluted share, in third quarter 2011. Third quarter 2012 net earnings included non-comparable items of $(0.34) per diluted share. These items are listed in a table below as reconciliations of non-U.S. GAAP measures, which are provided by the company for comparison with other results and the most directly comparable U.S. GAAP measures. The impact of foreign currencies, primarily the Euro, decreased net sales by approximately $122 million, and decreased net earnings approximately $0.08 per diluted share, in third quarter 2012 compared with third quarter 2011. For the first nine months of 2012, net sales were $5,464 million, up 2% from $5,341 million in the first nine months of 2011. Net earnings in the first nine months of 2012 were $380 million, or $3.15 per diluted share, compared with $428 million, or $3.45 per diluted share, in the first nine months of 2011. Net earnings in the first nine months of 2012 included non-comparable items of $(0.67) per diluted share. Net earnings in the first nine months of 2011 included non-comparable items of $0.19 per diluted share. These items are listed in a table attached as reconciliations of non-U.S. GAAP measures, which are provided by the company for comparison with other results and the most directly comparable U.S. GAAP measures. The impact of foreign currencies, primarily the Euro, decreased net sales by approximately $303 million, and decreased net earnings approximately $0.20 per diluted share, in the first nine months of 2012 compared it the first nine months of 2011.

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