BorgWarner Reports Third Quarter 2012 U.S. GAAP Earnings Of $0.85 Per Diluted Share

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
NON-COMPARABLE 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

PR Newswire

AUBURN HILLS, Mich., Oct. 31, 2012

AUBURN HILLS, Mich., Oct. 31, 2012 /PRNewswire/ --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:

  oNet sales of $1,695 million.

       oExcluding the negative impact of foreign currencies and 2011
         dispositions, net sales were up approximately 2% compared with third
         quarter 2011.

  oU.S. GAAP net earnings of $0.85 per diluted share.

       oExcluding $(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.

  oOperating income of $163 million.

       oExcluding 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:

  oThe company expects 2012 net sales growth of 0% to 1%.

       oExcluding the negative impact of foreign currencies, the company
         expects 2012 net sales growth of 5% to 6%.

  oThe 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 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 $303 million, and
decreased net earnings approximately $0.20 per diluted share, in the first
nine months of 2012 compared with the first nine months of 2011.



Net earnings per diluted share           Third Quarter   First Nine Months
                                         2012    2011    2012       2011
Non – U.S. GAAP                          $ 1.19  $ 1.15  $  3.81    $ 3.26
Reconciliations:
Loss from disposal activities            (0.11)          (0.37)
Restructuring expense                    (0.17)          (0.17)
Tax adjustments                          (0.06)          (0.13)     0.05
Honeywell patent infringement settlement                            0.14
U.S. GAAP                                $ 0.85  $ 1.15  $  3.15 ^* $ 3.45
*Does not add due to rounding

Net cash provided by operating activities was $543 million in the first nine
months of 2012 compared with $473 million in the first nine months of 2011.
Capital expenditures, including tooling outlays, totaled $283 million in the
first nine months of 2012, compared with $274 million in the first nine months
of 2011. Balance sheet debt decreased by $226 million and cash on hand
increased by $262 million compared with the end of 2011. The $488 million
decrease in balance sheet debt (net of cash) was primarily due to net cash
provided by operating activities and the company's settlement of its
convertible senior notes, which was partially offset by share repurchases. The
ratio of balance sheet debt (net of cash) to capital was 13.4% at the end of
third quarter 2012 compared with 28.3% at the end of 2011.

Engine Group Results: Engine segment net sales were $1,168 million in third
quarter 2012 compared with $1,258 million in third quarter 2011. Excluding the
negative impact of foreign currencies and 2011 dispositions, net sales were up
approximately 1% from the prior year's quarter. Growth in light vehicle
turbocharger sales in Asia and North America and engine timing systems sales
in Asia were offset by volume declines across the Group's product portfolio in
Europe related to the economic slowdown in the region. Adjusted earnings
before interest, income taxes and non-controlling interest ("Adjusted EBIT")
were $184 million in third quarter 2012, down 2% from $188 million in third
quarter 2011.

Drivetrain Group Results: Drivetrain segment net sales were $534 million in
third quarter 2012, compared with $539 million in the prior year's quarter.
Excluding the negative impact of foreign currencies, net sales were up
approximately 5% as a result of strong all-wheel drive system sales around the
world, primarily in North America. Adjusted EBIT was $44 million in third
quarter 2012, flat with $44 million in third quarter 2011.

Recent Highlights:

  oBorgWarner completed the sale of its spark plug business to Federal-Mogul
    Corporation. The spark plug business was a small segment of the BERU
    operations acquired by BorgWarner in 2005. Sales were approximately $80
    million in 2011. In conjunction with the sale, the company wrote down $40
    million of prior purchase accounting adjustments related to the spark plug
    business segment of the BERU acquisition primarily in second quarter 2012
    and incurred $27 million of restructuring-related costs associated with
    the disposal and future requirements of BERU's ongoing business in third
    quarter 2012.

    BorgWarner will continue its focus on expanding the core BERU Systems
    products of glow plugs, diesel cold start systems and other gasoline
    ignition technologies.

  oBorgWarner's regulated three-stage (R3S) turbocharging system, advanced
    compact brushless actuator (CBA) and Visctronic® high speed reservoir
    system have each been named finalists for the prestigious 2013 Automotive
    News PACE Awards.

  oBorgWarner is expanding applications and markets for its exhaust gas
    recirculation (EGR) coolers with Tognum MTU-brand diesel engines for
    off-highway applications. The MTU Series 1600, 2000 and 4000 engines, used
    to power locomotives, mining equipment, and pumps for the oil and gas
    industry, are equipped with BorgWarner's multiple-core EGR coolers to help
    reduce emissions.

  oBorgWarner's Cam Torque Actuated (CTA) variable cam timing (VCT)
    technology with new mid position lock system helps improve fuel economy
    for the 2012 Subaru Impreza, the most fuel-efficient all-wheel drive
    vehicle available in the United States. According to Subaru, the 2012
    Impreza offers 30 percent better fuel economy compared with the previous
    model year and meets U.S. Super Ultra Low Emissions Vehicle (SULEV) and
    Euro 5 emissions standards.

  oBorgWarner Turbo Systems received first prize as one of ten 2011 Porsche
    Supplier of the Year Award winners. BorgWarner Turbo Systems was honored
    for its high quality, reliability and outstanding performance as well as
    its innovative partnership with Porsche in the development of the world's
    first mass-produced variable turbine geometry (VTG) turbocharger for
    gasoline engines.

At 8:30 a.m. ET today, a brief conference call concerning third quarter
results will be webcast at:
http://www.borgwarner.com/en/Investors/Webcasts/default.aspx.

Auburn Hills, Michigan-based BorgWarner Inc. (NYSE: BWA) is a technology
leader in highly engineered components and systems for powertrain applications
worldwide. Operating manufacturing and technical facilities in 57 locations in
19 countries, the company develops products to improve fuel economy, reduce
emissions and enhance performance. Customers include VW/Audi, Ford, Toyota,
Renault/Nissan, General Motors, Hyundai/Kia, Daimler, Chrysler, Fiat, BMW,
Honda, John Deere, PSA, and MAN. For more information, please visit
www.borgwarner.com.

Statements contained in this news release may contain forward-looking
statements as contemplated by the 1995 Private Securities Litigation Reform
Act that are based on management's current expectations, estimates and
projections. Words such as "outlook," "expects," "anticipates," "intends,"
"plans," "believes," "estimates," variations of such words and similar
expressions are intended to identify such forward-looking statements.
Forward-looking statements are subject to risks and uncertainties, many of
which are difficult to predict and generally beyond our control, that could
cause actual results to differ materially from those expressed, projected or
implied in or by the forward-looking statements. Such risks and uncertainties
include: fluctuations in domestic or foreign vehicle production, the continued
use of outside suppliers, fluctuations in demand for vehicles containing our
products, changes in general economic conditions, and other risks detailed in
our filings with the Securities and Exchange Commission, including the Risk
Factors, identified in our most recently filed Annual Report on Form 10-K. We
do not undertake any obligation to update any forward-looking statements.



BorgWarner Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(millions, except per share amounts)
                                    Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                    2012       2011       2012       2011
Net sales                           $ 1,695.2  $ 1,791.8  $ 5,464.1  $ 5,341.0
Cost of sales                       1,351.5    1,441.0    4,341.4    4,290.3
Gross profit                        343.7      350.8      1,122.7    1,050.7
Selling, general and administrative 151.0      151.4      473.1      474.2
expenses
Other (income) expense              29.7       0.6        67.4       (29.9)
Operating income                    163.0      198.8      582.2      606.4
Equity in affiliates' earnings, net (11.1)     (11.5)     (32.8)     (28.0)
of tax
Interest income                     (1.0)      (1.3)      (3.7)      (3.5)
Interest expense and finance        5.0        18.5       32.7       57.4
charges
Earnings before income taxes and    170.1      193.1      586.0      580.5
noncontrolling interest
Provision for income taxes          64.2       46.4       190.2      137.1
Net earnings                        105.9      146.7      395.8      443.4
Net earnings attributable to the    4.8        5.1        16.1       15.3
noncontrolling interest, net of tax
Net earnings attributable to        $ 101.1    $ 141.6    $ 379.7    $ 428.1
BorgWarner Inc.
Reconciliation to diluted earnings
per share:
Net earnings attributable to        $ 101.1    $ 141.6    $ 379.7    $ 428.1
BorgWarner Inc.
Adjustment for net interest expense —          5.4        5.8        16.0
on convertible notes
Diluted net earnings attributable   $ 101.1    $ 147.0    $ 385.5    $ 444.1
to BorgWarner Inc.
Earnings per share — diluted        $ 0.85     $ 1.15     $ 3.15     $ 3.45
Weighted average shares outstanding 118.5      127.9      122.6      128.8
— diluted
Supplemental Information
(Unaudited)
(millions of dollars)
                                    Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                    2012       2011       2012       2011
Capital expenditures, including     $ 94.6     $ 114.2    $ 283.0    $ 274.1
tooling outlays
Depreciation and amortization:
Fixed assets and tooling            $ 63.0     $ 62.0     $ 189.8    $ 187.0
Intangible assets and other         6.8        8.0        21.5       23.1
                                    $ 69.8     $ 70.0     $ 211.3    $ 210.1



BorgWarner Inc.
Net Sales by Reporting Segment (Unaudited)
(millions of dollars)
                                    Three Months Ended    Nine Months Ended

                                    September 30,         September 30,
                                    2012       2011       2012       2011
Engine                              $ 1,168.0  $ 1,258.2  $ 3,745.8  $ 3,805.5
Drivetrain                          534.4      538.7      1,739.7    1,550.8
Inter-segment eliminations          (7.2)      (5.1)      (21.4)     (15.3)
Net sales                           $ 1,695.2  $ 1,791.8  $ 5,464.1  $ 5,341.0
Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest
("Adjusted EBIT") (Unaudited)
(millions of dollars)
                                    Three Months Ended    Nine Months Ended

                                    September 30,         September 30,
                                    2012       2011       2012       2011
Engine                              $ 184.1    $ 188.2    $ 604.4    $ 571.5
Drivetrain                          44.1       43.5       159.9      114.4
Adjusted EBIT                       228.2      231.7      764.3      685.9
Loss from disposal activities       1.8        —          39.7       —
Restructuring expense               27.4       —          27.4       —
Patent infringement settlement, net —          —          —          (29.1)
of legal costs incurred
Corporate, including equity in
affiliates' earnings and            24.9       21.4       82.2       80.6
stock-based compensation
Interest income                     (1.0)      (1.3)      (3.7)      (3.5)
Interest expense and finance        5.0        18.5       32.7       57.4
charges
Earnings before income taxes and    170.1      193.1      586.0      580.5
noncontrolling interest
Provision for income taxes          64.2       46.4       190.2      137.1
Net earnings                        105.9      146.7      395.8      443.4
Net earnings attributable to the    4.8        5.1        16.1       15.3
noncontrolling interest, net of tax
Net earnings attributable to        $ 101.1    $ 141.6    $ 379.7    $ 428.1
BorgWarner Inc.



BorgWarner Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(millions of dollars)
                                           September 30,  December 31,

                                           2012           2011
Assets
Cash                                       $  621.5       $  359.6
Receivables, net                           1,261.4        1,183.0
Inventories, net                           475.3          454.3
Other current assets                       135.4          140.9
Total current assets                       2,493.6        2,137.8
Property, plant and equipment, net         1,698.7        1,664.3
Other non-current assets                   2,154.2        2,156.5
Total assets                               $  6,346.5     $  5,958.6
Liabilities and Equity
Notes payable and other short-term debt    $  231.0       $  196.3
Current portion of long-term debt          5.5            381.5
Accounts payable and accrued expenses      1,276.5        1,297.8
Income taxes payable                       55.4           29.8
Total current liabilities                  1,568.4        1,905.4
Long-term debt                             866.3          751.3
Other non-current liabilities              806.3          848.9
Total BorgWarner Inc. stockholders' equity 3,044.8        2,387.9
Noncontrolling interest                    60.7           65.1
Total equity                               3,105.5        2,453.0
Total liabilities and equity               $  6,346.5     $  5,958.6



BorgWarner Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(millions of dollars)
                                                             Nine Months Ended

                                                             September 30,
                                                             2012      2011
Operating
Net earnings                                                 $  395.8  $ 443.4
Non-cash charges (credits) to operations:
Depreciation and amortization                                211.3     210.1
Loss from disposal activities, net of cash paid              31.7      —
Restructuring expense, net of cash paid                      25.5      —
Bond amortization                                            5.3       15.1
Deferred income tax benefit                                  (0.4)     (24.1)
Other non-cash items                                         25.1      (5.4)
Net earnings adjusted for non-cash charges to operations     694.3     639.1
Changes in assets and liabilities                            (151.7)   (166.0)
Net cash provided by operating activities                    542.6     473.1
Investing
Capital expenditures, including tooling outlays              (283.0)   (274.1)
Net proceeds from asset disposals                            3.9       6.9
Payments for business acquired, net of cash acquired         —         (203.7)
Net proceeds from sale of business                           56.8      2.1
Net cash used in investing activities                        (222.3)   (468.8)
Financing
Net increase in notes payable                                34.7      29.4
Additions to long-term debt, net of debt issuance costs      313.9     357.9
Repayments of long-term debt, including current portion      (203.6)   (196.3)
Payments for purchase of treasury stock                      (200.3)   (268.8)
Proceeds from stock options exercised, including the tax     49.9      43.7
benefit
Taxes paid on employees' restricted stock award vestings     (17.8)    (14.4)
Purchase of noncontrolling interest                          (7.4)     (29.4)
Capital contribution from noncontrolling interest            —         19.5
Dividends paid to noncontrolling stockholders                (20.5)    (10.1)
Net cash used in financing activities                        (51.1)    (68.5)
Effect of exchange rate changes on cash                      (7.3)     (8.7)
Net increase (decrease) in cash                              261.9     (72.9)
Cash at beginning of year                                    359.6     449.9
Cash at end of period                                        $  621.5  $ 377.0





SOURCE BorgWarner Inc.

Website: http://www.borgwarner.com
Contact: Ken Lamb, BorgWarner Inc., +1-248-754-0884