AUBURN HILLS, MI -- BorgWarner posted solid results for the first quarter of 2006.

"Despite the uncertainty facing the industry, BorgWarner continues to deliver," said Tim Manganello, chairman and CEO. "Our results were driven by our technology that is targeted at improvements in fuel economy, emissions reduction and vehicle performance, the fastest growing parts of the market. Our sales were up 7 percent in first quarter 2006, 11 percent excluding the impact of currency, while North American and worldwide vehicle production were up only 3 percent and 4 percent, respectively. Furthermore, our customer and geographic diversity along with a cost reduction focus enabled us to weather tough industry conditions and maintain our margins. On a comparable non-U.S. GAAP basis, earnings increased 13 percent in the quarter versus first quarter 2005."

The company reiterated that it expects 2006 earnings per diluted share, on a U.S. GAAP basis, in a range of $4.22 to $4.57. Also, the company expects to maintain operating margins in 2006 despite continued raw material and energy cost increases, rising health care costs and the costs related to global expansion.

For first quarter 2006, sales were $1,155.2 million, up 7 percent from $1,083.5 million in first quarter 2005. Net income in the quarter was $61.3 million, or $1.06 per diluted share, compared with $77.6 million, or $1.36 per diluted share in first quarter 2005. First quarter 2006 included $(2.9) million of pre-tax expense related to the implementation of FAS 123 ( R ), or (4 cents) per diluted share. First quarter 2005 net income benefited from $21.9 million, or 38 cents per diluted share, related to special items. First quarter 2006 net income excluding the impact of the implementation of FAS 123( R ) and first quarter 2005 net income excluding special items are provided for comparisons with other quarterly results.

The decrease in the Euro and other currencies lowered sales by $(48.1) million in first quarter 2006 compared with first quarter 2005, and net income by $(3.9) million, or (7 cents) per diluted share.

Operating income was $94.3 million or 8.2 percent of sales in first quarter 2006 versus $83.6 million or 7.7 percent of sales in the first quarter 2005. Excluding the impact of FAS 123( R ) from first quarter 2006 and special items from first quarter 2005, first quarter 2006 operating income margin was 8.4 percent, up from 8.2 percent a year ago. Research and development spending was $46 million in the quarter versus $41.1 million in 2005.

Net cash provided by operating activities was $48.1 million in first quarter 2006 versus $45.0 million in first quarter 2005. Investments in capital expenditures of $53.1 million, together with net tooling outlays of $17.2 million, totaled $70.3 million for the quarter, compared with $52.8 million for the same period in 2005.

Balance sheet debt increased by $32.5 million, cash and cash equivalents decreased by $32.9 million, and marketable securities increased by $25.2 million in first quarter 2006 compared with end of fourth quarter 2005.

Engine Group Results: Strong global demand for its products boosted Engine Group first quarter 2006 sales 9 percent versus first quarter 2005 to $785.9 million with a 30 percent increase in earnings before interest and taxes to $96.3 million. Excluding special items in first quarter 2005, first quarter 2006 earnings before interest and taxes were up 15 percent year-over-year. The group continues to benefit from European and Asian automaker demand for turbochargers, timing systems and emissions products, European demand for diesel engine ignition systems, and stronger global commercial vehicle production.

Drivetrain Group Results: First quarter 2006 sales were up 2 percent versus first quarter 2005 to $377 million while segment earnings before interest and income taxes declined 12 percent to $22.7 million. The group continued to benefit from sales growth outside of North America, including increased sales of dual- clutch transmission products, but segment earnings were negatively impacted by the lower domestic production of light trucks and sport-utility vehicles equipped with its torque transfer products and higher health care costs.

Effective January 1, the company assigned an operating facility previously reported in the Engine segment to the Drivetrain segment due to changes in the facility's product mix. Prior period segment amounts have been re-classified to conform to the current year's presentation.

The company and the U.S. Environmental Protection Agency (EPA) recently announced a partnership to develop advanced air management technologies that will enable the automotive and trucking industries to utilize EPA's Clean Diesel Combustion (CDC) and High-Efficiency Gasoline combustion technologies.

Also, the company opened a new operation in Ningbo, China for the assembly of turbochargers and transmission solenoids. The manufacturing facility is the first of several operations planned for a campus that comprises BorgWarner Automotive Components (Ningbo) Co., Ltd., the company's wholly foreign-owned enterprise in the Ningbo Yinzhou industrial zone.

In the Drivetrain Group, NSK-Warner, a 50/50 joint venture between BorgWarner and Nippon Seiko K.K. that produces transmission products in Japan, has opened a facility in Shanghai for the manufacture of friction products, one-way clutches and clutch modules to support Chinese and other automakers there in response to increasing demand for transmission technology in Asia.

In the Engine Group, the company announced that BorgWarner's high-flow air pump, which provides a 30-percent increase in air flow over previous- generation air pumps, is supplying the Porsche 997 Turbo 3.6-liter engine.

For more information about BorgWarner, go to: borgwarner.com .

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