INTERIM FINANCIAL INFORMATION (Unaudited)

The following table presents summary quarterly financial data:



(millions of dollars, except per share amounts)	2017															2016
Quarter ended	Mar-31			Jun-30			Sep-30			Dec-31			Year			Mar-31			Jun-30			Sep-30			Dec-31			Year
Net sales	$	2,407.0		$	2,389.7		$	2,416.2		$	2,586.4		$	9,799.3		$	2,268.6		$	2,329.2		$	2,214.2		$	2,259.0		$	9,071.0
Cost of sales	1,889.7			1,875.5			1,893.5			2,020.5			7,679.2			1,804.3			1,832.5			1,743.1			1,758.0			7,137.9
Gross profit	517.3			514.2			522.7			565.9			2,120.1			464.3			496.7			471.1			501.0			1,933.1
Selling, general and administrative expenses	218.8			215.0			224.8			239.9			898.5			188.4			202.3			209.7			217.1			817.5
Other expense (income), net	5.8			(0.3		)	22.0			117.0			144.5			11.7			25.0			111.1			741.9			889.7
Operating income (loss)	292.7			299.5			275.9			209.0			1,077.1			264.2			269.4			150.3			(458.0		)	225.9
Equity in affiliates’ earnings, net of tax	(9.7		)	(14.4		)	(14.4		)	(12.7		)	(51.2		)	(9.1		)	(10.1		)	(12.4		)	(11.3		)	(42.9		)
Interest income	(1.5		)	(1.4		)	(1.3		)	(1.6		)	(5.8		)	(1.6		)	(1.5		)	(1.6		)	(1.6		)	(6.3		)
Interest expense and finance charges	18.0			18.0			17.6			16.9			70.5			21.3			21.4			22.4			19.5			84.6
Earnings (loss) before income taxes and noncontrolling interest	285.9			297.3			274.0			206.4			1,063.6			253.6			259.6			141.9			(464.6		)	190.5
Provision (benefit) for income taxes	86.3			76.2			79.4			338.4			580.3			80.4			84.2			48.8			(183.1		)	30.3
Net earnings (loss)	199.6			221.1			194.6			(132.0		)	483.3			173.2			175.4			93.1			(281.5		)	160.2
Net earnings attributable to the noncontrolling interest, net of tax	10.4			9.1			9.7			14.2			43.4			9.1			11.0			9.8			11.8			41.7
Net earnings (loss) attributable to BorgWarner Inc. (a)	$	189.2		$	212.0		$	184.9		$	(146.2	)	$	439.9		$	164.1		$	164.4		$	83.3		$	(293.3	)	$	118.5

Earnings per share — basic	$	0.89		$	1.01		$	0.88		$	(0.70	)	$	2.09		$	0.75		$	0.76		$	0.39		$	(1.39	)	$	0.55
Earnings per share — diluted	$	0.89		$	1.00		$	0.88		$	(0.70	)	$	2.08		$	0.75		$	0.76		$	0.39		$	(1.39	)	$	0.55

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(a) The Company's results were impacted by the following:

•

Quarter ended December 31, 2017: The Company recorded an asset impairment expense of $71.0 million to adjust the net book value of the the pipes and thermostat product lines to fair value. Additionally, the Company recorded restructuring expense of $45.2 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $3.6 million. The Company recorded reduction of income tax expenses of $8.9 million, $0.7 million and $18.2 million related to the restructuring expense, merger and acquisition expense and asset impairment expense. The Company also recorded a tax expense of $7.9 million related to other one-time tax adjustments. Additionally, the Company recorded a tax expense of $273.5 million for the change in the tax law related to tax effects of the Act.

•

Quarter ended September 30, 2017: The Company recorded restructuring expense of $13.3 million primarily related to the initiation of actions within its emissions business in the Engine segment designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $6.4 million primarily related to the Sevcon transaction. The Company recorded reduction of income tax expenses of $1.2 million related to restructuring expense, $0.3 million merger and acquisition and $5.1 million related to other one-time tax adjustments.


•	Quarter ended June 30, 2017: The Company recorded a reduction of income tax expense of $3.2 million related to one-time tax adjustments, primarily resulting from tax audit settlements.


•	Quarter ended March 31, 2017: The Company recorded lease termination settlement of $5.3 million related to th termination of a long term property lease in Europe. The Company recorded a tax expense of $3.4 million related to one-time tax adjustments.

•

Quarter ended December 31, 2016: The Company recorded an asbestos-related charge of $703.6 million representing the difference in the total liability from what was previously accrued, consulting fees, less available insurance coverage, and an intangible asset impairment loss of $12.6 million related to the Engine segment Etatech’s ECCOS intellectual technology. Additionally, the Company recorded an incremental loss on divestiture of $20.6 million related to the sale of Remy light vehicle aftermarket business. The Company also recorded merger and acquisition expense of $4.8 million primarily related to the Remy transaction. The Company recorded reduction of income tax expenses of $263.0 million related to asbestos-related charge, $4.4 million related to intangible asset loss, and $4.9 million related to other one-time tax adjustments. The Company also recorded a tax expense of $4.9 million related to the sale of the Remy light vehicle aftermarket business and the reversal of the associated deferred tax balances.

•

Quarter ended September 30, 2016: The Company recorded an asset impairment expense of $106.5 million to adjust the net book value of the Remy light vehicle aftermarket business to fair value, based on the anticipated sale price. Additionally, the Company recorded restructuring expense of $1.3 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $5.9 million primarily related to the Remy transaction. The Company recorded reduction of income tax expenses of $27.6 million related to asset impairment expense, $2.4 million related to other one-time tax adjustments, $0.5 million related to restructuring expense, and $0.4 million related to a gain associated with the release of certain Remy light vehicle aftermarket liabilities due to the expiration of a customer contract.

•

Quarter ended June 30, 2016: The Company recorded restructuring expense of $19.2 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $7.2 million primarily related to the Remy transaction. The Company recorded reduction of income tax expenses of $4.4 million related to restructuring expense and $0.3 million related to other one-time tax adjustments, as well as a tax expense of $2.6 million related to a gain associated with the release of certain Remy light vehicle aftermarket liabilities due to the expiration of a customer contract.

•

Quarter ended March 31, 2016: The Company recorded restructuring expense of $6.4 million related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $5.8 million primarily related to the Remy transaction. The Company recorded reduction of income tax expenses of $1.0 million related to restructuring expense and $1.0 million related to other one-time tax adjustments.