BORGWARNER INC

Previous wording

The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions. During the three months ended June 30, 2026 and 2025, the Company’s revenue from eProducts, which include all products utilized on or for electric vehicles (“EVs”) plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs, was approximately $663 million and $658 million, respectively, or 18% of the Company’s total revenue. During the six months ended June 30, 2026 and 2025, the Company’s eProduct revenue was approximately $1,260 million and $1,295 million, respectively, or 18% and of its total revenue.

Current wording

The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions. During the three months ended September 30, 2026 and 2025, the Company’s revenue from eProducts, which include all products utilized on or for electric vehicles (“EVs”) plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs, was approximately $708 million and $606 million, respectively, or 20% and 17% of the Company’s total revenue. During the nine months ended September 30, 2026 and 2025, the Company’s eProduct revenue was approximately $1,968 million and $1,901 million, respectively, or 18% of its total revenue.

Previous wording

On September 19, 2024, the Company commenced a lawsuit against PHINIA, Inc. (“PHINIA”), seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA received or expected to receive from governmental agencies as well as damages and interest. On October 15, 2025, the Company entered into a settlement agreement with PHINIA, pursuant to which PHINIA agreed to pay the Company $78 million. As of June 30, 2026, the Company had assets related to these VAT refunds of approximately $23 million in Receivables, net in the Company’s Condensed Consolidated Balance Sheet, which is due no later than December 1, 2026. Refer to Part 1, Item 1 of this report for more information.

Current wording

On September 19, 2024, the Company commenced a lawsuit against PHINIA, Inc. (“PHINIA”), seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA received or expected to receive from governmental agencies as well as damages and interest. On October 15, 2025, the Company entered into a settlement agreement with PHINIA, pursuant to which PHINIA agreed to pay the Company $78 million. As of September 30, 2026, the Company had assets related to these VAT refunds of approximately $21 million in Receivables, net in the Condensed Consolidated Balance Sheet, which is due no later than December 1, 2026. Refer to Part 1, Item 1 of this report for more information.

Previous wording

In February 2025, the Company made the decision to exit its charging business within the reportable segment formerly called Battery & Charging Systems. Production operations ceased during the second quarter of 2025. This decision was made following the Company’s continuing evaluation of its product portfolio and future investments. This action was expected to create a more focused portfolio and eliminate approximately $30 million of annualized adjusted operating losses by the end of 2026. In the first quarter of 2026, as a result of the aforementioned disposition, this reportable segment was renamed Battery Energy Systems. The name change reflects the segment’s revised focus after the divestiture. The change did not impact the composition of the segment or require recasting of prior period segment results. Prior periods continue to be presented as previously reported. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Current wording

In February 2025, the Company made the decision to exit its charging business within the reportable segment formerly called Battery & Charging Systems. Production operations ceased during the second quarter of 2025. This decision was made following the Company’s continuing evaluation of its product portfolio and future investments. This action was expected to create a more focused portfolio and eliminate approximately $30 million of annualized adjusted operating losses by the end of 2026. In the first quarter of 2026, as a result of the aforementioned disposition, this reportable segment was renamed Battery Energy Systems. The name change reflects the segment’s revised focus after the divestiture. The change did not impact the composition of the segment or require recasting of prior period segment results. Prior periods continue to be presented as previously reported. Refer to Note 3, “Acquisitions and

Previous wording

Economic Conditions. The Company’s financial performance depends on conditions in the global automotive industry. Automotive and truck production is cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit and consumer spending and preferences. Government policies, such as the imposition of, termination or invalidation of or other changes in tariffs (including retaliatory tariffs), or the commencement or termination of consumer tax incentives, such as EV tax credits and programs to invest in infrastructure, including EV charging stations, may affect consumer preferences. Economic declines or impacts of tariffs that result in a material reduction in automotive or truck production would have an adverse effect on the Company’s sales. The weighted average market production, as estimated by the Company for the six months ended June 30, 2026, was down approximately 1% from the six months ended June 30, 2025. Weighted average market production reflects light vehicle production as reported by S&P Global, weighted for the Company’s geographic exposure, as estimated by the Company.

Current wording

Economic Conditions. The Company’s financial performance depends on conditions in the global automotive industry. Automotive and truck production is cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit and consumer spending and preferences. Government policies, such as the imposition of, termination or invalidation of or other changes in tariffs (including retaliatory tariffs), or the commencement or termination of consumer tax incentives, such as EV tax credits and programs to invest in infrastructure, including EV charging stations, may affect consumer preferences. Economic declines or impacts of tariffs that result in a material reduction in automotive or truck production would have an adverse effect on the Company’s sales. The weighted light vehicle market production, as estimated by the Company for the nine months ended September 30, 2026, was down approximately 1% from the nine months ended September 30, 2025. Weighted light vehicle market production reflects light vehicle production as reported by Mobility Global, weighted for the Company’s geographic exposure, as estimated by the Company.

Previous wording

Tariff Refund Recovery. The Company continues to actively pursue the refund recovery of certain tariffs paid to the U.S. government, which were levied under the International Emergency Economic Powers Act and subsequently invalidated by the U.S. Supreme Court on February 20, 2026. Following this ruling, the Company has submitted, and expects to continue to submit, tariff recovery claims through the U.S. Customs and Border Protection (“CBP”) portal. While the Company has begun to receive, and may continue to receive, refunds of such tariffs, the ultimate recoverability, timing and amount of any such refund amounts remain uncertain and subject to CBP review and further legal, regulatory and administrative developments. As a result, the Company has not recognized a refund receivable as of June 30, 2026, as there remains significant uncertainty regarding the availability, amount and timing of such refunds. The Company will continue to monitor the refund process for further developments.

Current wording

Tariff Refund Recovery. The Company continues to actively pursue the refund recovery of certain tariffs paid to the U.S. government, which were levied under the International Emergency Economic Powers Act and subsequently invalidated by the United States (“U.S.”) Supreme Court on February 20, 2026. Following this ruling, the Company has submitted tariff recovery claims through the U.S. Customs and Border Protection (“CBP”) portal. While the Company has received approximately $35 million in refunds, and may continue to receive refunds of such tariffs, the ultimate recoverability, timing and amount of future refunds continues to remain uncertain and subject to CBP review and further legal, regulatory and administrative developments. As a result, the Company has not recognized a refund receivable as of September 30, 2026. The Company will continue to monitor the refund process for further developments.

Previous wording

The Company expects global industry production to be flat to down 3% year-over-year in 2026. In particular, the Company expects a negative sales impact from declining sales in the Company’s Battery Energy Systems reportable segment. As a result, at the mid-point of its outlook, the Company expects total sales in 2026 to decline year-over-year, excluding the impact of foreign currencies.

Current wording

The Company expects weighted light vehicle market to be down 1% to 2% year-over-year in 2026. In particular, the Company expects a negative sales impact from declining sales in the Company’s Battery Energy Systems reportable segment. As a result, at the mid-point of its outlook, the Company expects total sales in 2026 to decline year-over-year, excluding the impact of foreign currencies.

Previous wording

Net sales for the three months ended June 30, 2026 totaled $3,648 million, an increase of $10 million, which was relatively flat compared to the three months ended June 30, 2025. The change in net sales for the three months ended June 30, 2026 was primarily driven by the following:

Current wording

Net sales for the three months ended September 30, 2026 totaled $3,487 million, a decrease of $104 million, or 3%, compared to the three months ended September 30, 2025. The change in net sales for the three months ended September 30, 2026 was primarily driven by the following:

Previous wording

•Unfavorable volume, mix and net new business decreased sales by approximately $236 million primarily due to a decrease of approximately 1% in the weighted average market production as estimated by the Company and a decrease in the Battery Energy Systems reportable segment.

Current wording

•Unfavorable volume, mix and net new business decreased sales by approximately $100 million, primarily due to a decrease of approximately 2% in the weighted light vehicle market production as estimated by the Company and a decrease in the Battery Energy Systems reportable segment sales.

Previous wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $54 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Current wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $8 million, primarily due to a strengthening of the Chinese Renminbi, partially offset by a weakening of the Euro and Korean Won, in each case relative to the U.S. Dollar.

Previous wording

Cost of sales and cost of sales as a percentage of net sales were $2,927 million and 80.2%, respectively, during the three months ended June 30, 2026, compared to $2,998 million and 82.4%, respectively, during the three months ended June 30, 2025. The change in cost of sales for the three months ended June 30, 2026 was primarily driven by the following:

Current wording

Cost of sales and cost of sales as a percentage of net sales were $2,825 million and 81.0%, respectively, during the three months ended September 30, 2026, compared to $2,927 million and 81.5%, respectively, during the three months ended September 30, 2025. The change in cost of sales for the three months ended September 30, 2026 was primarily driven by the following:

Previous wording

•Purchasing savings and unfavorable volume, mix and net new business, decreased cost of sales by approximately $85 million.

Current wording

•Purchasing savings and unfavorable volume, mix and net new business, decreased cost of sales by approximately $106 million.

Previous wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $44 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Current wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $5 million, primarily due to a strengthening of the Chinese Renminbi, partially offset by a weakening of the Euro and Korean Won, in each case relative to the U.S. Dollar.

Previous wording

Gross profit and gross margin were $721 million and 19.8%, respectively, during the three months ended June 30, 2026, compared to $640 million and 17.6%, respectively, during the three months ended June 30, 2025. The increase in gross margin was primarily due to the factors discussed above.

Current wording

Gross profit and gross margin were $662 million and 19.0%, respectively, during the three months ended September 30, 2026, compared to $664 million and 18.5%, respectively, during the three months ended September 30, 2025. The increase in gross margin was primarily due to the factors discussed above.

Previous wording

SG&A for the six months ended June 30, 2026 was $659 million as compared to $632 million for the six months ended June 30, 2025. SG&A as a percentage of net sales was 9.2% and 8.8% for the six months ended June 30, 2026 and 2025, respectively. The change in SG&A was primarily due to fluctuations in foreign currencies resulting in an unfavorable impact of approximately $29 million, which was partially offset by changes in R&D costs of $10 million.

Current wording

Selling, general and administrative expenses (“SG&A”)SG&A for the three months ended September 30, 2026 was $310 million as compared to $341 million for the three months ended September 30, 2025. SG&A as a percentage of net sales was 8.9% and 9.5% for the three months ended September 30, 2026 and 2025, respectively. The change in SG&A was primarily due to a decrease in net Research & Development (“R&D”) costs of $17 million and fluctuations in foreign currencies resulting in a decrease in SG&A of approximately $5 million.

Previous wording

Restructuring expense was $21 million and $17 million for the three months ended June 30, 2026 and 2025, respectively, related to employee termination benefits primarily for individually approved restructuring actions. Nearly all of the restructuring charges are expected to be cash expenditures, funded by cash on hand. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Current wording

Restructuring expense was $50 million and $23 million for the three months ended September 30, 2026 and 2025, respectively. The increase was primarily due to $25 million of employee termination benefits recognized related to a voluntary separation program approved during the three months ended September 30, 2026. Nearly all of the restructuring charges are expected to be cash expenditures, funded by cash on hand. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Previous wording

•During the three months ended June 30, 2025, the Company recorded charges of $6 million related to duplicative compensation, a loss of $5 million related to the sale of equipment from a closed facility in North America and charges of $4 million related to the exit of its charging business within its Battery Energy Systems reportable segment, which were not recurring in the three months ended June 30, 2026. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

Current wording

•During the three months ended September 30, 2025, the Company recorded charges of $38 million related to a legal settlement, inclusive of associated legal fees and $5 million related to duplicative compensation, which were not recurring in the three months ended September 30, 2026. Refer to Note 20, “Contingencies,”to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Previous wording

Other operating (income) expense, net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s per diluted share and net earnings” below.

Current wording

Other operating expense (income), net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s per diluted share and net earnings” below.

Previous wording

Equity in affiliates’ earnings, net of tax was $10 million and $8 million for the three months ended June 30, 2026 and 2025, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Current wording

Equity in affiliates’ (earnings) loss, net of tax was $10 million and $11 million of earnings for the three months ended September 30, 2026 and 2025, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Previous wording

Provision for income taxes was $81 million for the three months ended June 30, 2026, resulting in an effective rate of 22%. This is compared to $52 million, or an effective rate of 18%, for the three months ended June 30, 2025. During the three months ended June 30, 2026, the Company’s effective tax rate was consistent with the Company’s estimated annual effective tax rate. During thethree months ended June 30, 2025, the Company recorded a discrete tax benefit of$6 million related to various changes in filing positions for prior years and a discrete tax benefit of$3 million related to the exit of the charging business.

Current wording

Provision for income taxes was $65 million for the three months ended September 30, 2026, resulting in an effective rate of 22%, compared to $75 million, or an effective rate of 30%, for the three months ended September 30, 2025. The decrease in the effective tax rate was primarily due to the impact of certain permanent non-deductible expenses incurred in the prior year that did not recur in the current year. Additionally, during the three months ended September 30, 2026, the Company recorded a discrete tax expense of $16 million related to net changes to valuation allowances and a discrete tax benefit of $13 million related to various changes in filing positions for prior years. During thethree months ended September 30, 2025, the Company recordeda discrete tax expense of $7 million related to various changes in filing positions for prior years and a discrete tax benefit of $6 million related to the exit of the charging business.

Previous wording

Net sales for the six months ended June 30, 2026 totaled $7,181 million, an increase of $28 million, which was relatively flat compared to the six months ended June 30, 2025. The change in net sales for the six months ended June 30, 2026 was primarily driven by the following:

Current wording

Net sales for the nine months ended September 30, 2026 totaled $10,668 million, a decrease of $76 million, or 1%, compared to the nine months ended September 30, 2025. The change in net sales for the nine months ended September 30, 2026 was primarily driven by the following:

Previous wording

•Unfavorable volume, mix and net new business decreased sales by approximately $55 million, primarily due to a decrease of approximately 1% in the weighted average market production as estimated by the Company and a decrease in the Battery Energy Systems reportable segment.

Current wording

•Unfavorable volume, mix and net new business decreased sales by approximately $336 million primarily due to a decrease of approximately 1% in the weighted light vehicle market production as estimated by the Company and a decrease in the Battery Energy Systems reportable segment sales.

Previous wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $221 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Current wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $229 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Previous wording

•Customer recoveries relating to tariffs increased sales by approximately $11 million.

Current wording

•Customer recoveries relating to tariffs increased sales by approximately $31 million.

Previous wording

Cost of sales and cost of sales as a percentage of net sales were $5,783 million and 80.5%, respectively, during the six months ended June 30, 2026, compared to $5,874 million and 82.1%, respectively, during the six months ended June 30, 2025. The change in cost of sales for the six months ended June 30, 2026 was primarily driven by the following:

Current wording

Cost of sales and cost of sales as a percentage of net sales were $8,608 million and 80.7%, respectively, during the nine months ended September 30, 2026, compared to $8,801 million and 81.9%, respectively, during the nine months ended September 30, 2025. The change in cost of sales for the nine months ended September 30, 2026 was primarily driven by the following:

Previous wording

•Purchasing savings and unfavorable volume, mix and net new business decreased cost of sales by approximately $233 million.

Current wording

•Purchasing savings and unfavorable volume, mix and net new business decreased cost of sales by approximately $339 million.

Previous wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $182 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Current wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $187 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Previous wording

Gross profit and gross margin were $1,398 million and 19.5%, respectively, during the six months ended June 30, 2026, compared to $1,279 million and 17.9%, respectively, during the six months ended June 30, 2025. The increase in gross margin was primarily due to the factors discussed above.

Current wording

Gross profit and gross margin were $2,060 million and 19.3%, respectively, during the nine months ended September 30, 2026, compared to $1,943 million and 18.1%, respectively, during the nine months ended September 30, 2025. The increase in gross margin was primarily due to the factors discussed above.

Previous wording

SG&A for the three months ended June 30, 2026 was $331 million as compared to $317 million for the three months ended June 30, 2025. SG&A as a percentage of net sales was 9.1% and 8.7% for the three months ended June 30, 2026 and 2025, respectively. The change in SG&A was primarily due to fluctuations in foreign currencies resulting in an unfavorable impact of approximately $17 million, which was partially offset by changes in R&D costs of $6 million.

Current wording

SG&A for the nine months ended September 30, 2026 was $969 million as compared to $973 million for the nine months ended September 30, 2025. SG&A as a percentage of net sales was 9.1% for the nine months ended September 30, 2026 and 2025, respectively. The change in SG&A was primarily due to decreases in R&D costs of $28 million, which was partially offset by fluctuations in foreign currencies resulting in an increase in SG&A of approximately $24 million.

Previous wording

Restructuring expense was $39 million and $48 million for the six months ended June 30, 2026 and 2025, respectively, primarily related to employee termination benefits for individually approved restructuring actions. Nearly all of the restructuring charges are expected to be cash expenditures. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Current wording

Restructuring expense was $89 million and $71 million for the nine months ended September 30, 2026 and 2025, respectively. The increase in restructuring expense was primarily due to $25 million of employee termination benefits for a voluntary separation program approved during the three months ended September 30, 2026. Nearly all of the restructuring charges are expected to be cash expenditures. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Previous wording

Other operating (income) expense, net was $6 million of income and $31 million of expense for the six months ended June 30, 2026 and 2025, respectively. The change in Other operating (income) expense, net was primarily due to:

Current wording

Other operating expense (income), net was $6 million of income and $83 million of expense for the nine months ended September 30, 2026 and 2025, respectively. The change in Other operating expense (income), net was primarily due to:

Previous wording

•During the six months ended June 30, 2025, the Company recorded charges of $23 million related to the exit of its charging business within the Battery Energy Systems reportable segment, charges of $6 million related to duplicative compensation and a loss of $5 million related to the sale of equipment from a closed facility in North America, which were not recurring in the six months ended June 30, 2026. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Current wording

•During the nine months ended September 30, 2025, the Company recorded charges of $38 million related to a legal settlement, inclusive of associated legal fees, $23 million related to the exit of its charging business within the Battery Energy Systems reportable segment, $11 million related to duplicative compensation and a $6 million loss on the sale of equipment from a closed facility in North America, which were not recurring in nine months ended September 30, 2026. Refer to Note 20, “Contingencies” and Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Previous wording

Other operating (income) expense, net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.

Current wording

Other operating expense (income), net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.

Previous wording

Impairment charges were $42 million for the six months ended June 30, 2025. The Company recorded impairments of intangible assets, goodwill and fixed assets related to the planned exit of its charging business and the consolidation of the Company’s North American battery systems business footprint within the Battery Energy Systems reportable segment.

Current wording

Impairment charges were $42 million for the nine months ended September 30, 2025. The Company recorded impairments of intangible assets, goodwill and fixed assets related to the planned exit of its charging business and the consolidation of the Company’s North American battery systems business footprint within the Battery Energy Systems reportable segment. There were no impairment charges for the nine months ended September 30, 2026.

Previous wording

Equity in affiliates’ earnings, net of tax was $16 million and $18 million the six months ended June 30, 2026 and 2025, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Current wording

Equity in affiliates’ (earnings) loss, net of tax was $26 million and $29 million of earnings for the nine months ended September 30, 2026 and 2025, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Previous wording

Provision for income taxes was $154 million and $113 million for the six months ended June 30, 2026 and 2025, respectively, resulting in an effective rate of 22% for the six months ended June 30, 2026 and 2025. During the six months ended June 30, 2026, the Company's effective tax rate was consistent with the Company’s estimated annual effective tax rate. During the six months ended June 30, 2025, the Company recorded a discrete tax expense of $4 million related to net changes to valuation allowances, a discrete tax benefit of $6 million related to the exit of the charging business and a discrete tax benefit of $4 million related to various changes in filing positions for prior years.

Current wording

Provision for income taxes was $219 million and $188 million for the nine months ended September 30, 2026 and 2025, respectively, resulting in an effective rate of 22% and 25% for the nine months ended September 30, 2026 and 2025, respectively. During the nine months ended September 30, 2026, the Company recorded a discrete tax expense of $17 million related to net changes to valuation allowances and a discrete tax benefit of $13 million related to various changes in filing positions for prior years. During the nine months ended September 30, 2025, the Company recorded a discrete tax benefit of $12 million related to the exit of the charging business, a discrete tax expense of $4 million related to net changes to valuation allowances and a discrete tax expense of $3 million related to various changes in filing positions for prior years.

Previous wording

The Company’s earnings per diluted share were $1.34 and $1.03 for the three months ended June 30, 2026 and 2025, respectively and $2.50 and $1.75 for the six months ended June 30, 2026 and 2025, respectively. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for each of the periods then ended. The Company believes the following table is useful in highlighting non-comparable items that impacted its earnings per diluted share:

Current wording

The Company’s earnings per diluted share were $1.08 and $0.73 for the three months ended September 30, 2026 and 2025, respectively, and $3.59 and $2.48 for the nine months ended September 30, 2026 and 2025, respectively. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for each of the periods then ended. The Company believes the following table is useful in highlighting non-comparable items that impacted its earnings per diluted share:

Previous wording

The PowerDrive Systems segment’s net sales increased $84 million, or 14%, and Segment Adjusted Operating Loss decreased $4 million from the three months ended June 30, 2025. Favorable volume, mix and net new business increased net sales by approximately $67 million due to higher sales in Europe and customer recoveries. Additionally, foreign currencies resulted in a year-over-year increase in net sales of approximately $16 million due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. Segment

Current wording

The PowerDrive Systems segment’s net sales increased $123 million, or 21%, and Segment Adjusted Operating Loss decreased $30 million from the three months ended September 30, 2025. Favorable volume, mix and net new business, primarily in Europe, and customer recoveries increased net sales by approximately $114 million. Additionally, foreign currencies resulted in a year-over-year increase in net sales of approximately $9 million due to a strengthening of the Chinese Renminbi, partially offset by a weakening of the Euro and Korean Won, in each case relative to the U.S. Dollar. The Segment Adjusted Operating margin loss decreased primarily due to customer recoveries and restructuring savings, partially offset by manufacturing related issues.

Previous wording

The Turbos & Thermal Technologies segment’s net sales decreased $60 million, or 2%, and Segment Adjusted Operating Income decreased $23 million from the six months ended June 30, 2025. Unfavorable volume, mix and net new business resulted in a decrease in net sales by approximately $181 million due to lower sales in Europe. This was partially offset by the impact of foreign currencies of approximately $105 million due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S Dollar, and $16 million of customer recoveries relating to tariffs. Segment Adjusted Operating margin was 15.3% for the six months ended June 30, 2026, compared to 15.7% during the six months ended June 30, 2025. The Segment Adjusted Operating margin decreased due to lower sales, partially offset by supply chain savings and other cost actions.

Current wording

The Turbos & Thermal Technologies segment’s net sales decreased $125 million, or 3%, and Segment Adjusted Operating Income decreased $41 million from the nine months ended September 30, 2025. Unfavorable volume, mix and net new business resulted in a decrease in net sales by approximately $238 million due to lower volumes in Europe and Asia. This was partially offset by the impact of foreign currencies of approximately $103 million due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. The Segment Adjusted Operating margin decreased due to lower sales, manufacturing-related issues and power generation industrial solutions business start up costs, partially offset by supply chain savings and other cost actions.

Previous wording

The Drivetrain & Morse Systems segment’s net sales increased $26 million, or 2%, and Segment Adjusted Operating Income increased $17 million from the three months ended June 30, 2025. Foreign currencies resulted in a year-over-year increase in net sales of approximately $11 million due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. Favorable volume, mix and net new business increased net sales by approximately $10 million due to strong volumes in North America partially offset by lower volumes in China and broader Asia. Additionally, customer recoveries relating to tariffs increased net sales by approximately $5 million. Segment Adjusted Operating margin was 19.0% for the three months ended June 30, 2026, compared to 18.2% during the three months ended June 30, 2025. The Segment Adjusted Operating margin increased primarily due to manufacturing efficiencies, supply chain savings and lower net tariff expenses.

Current wording

The Drivetrain & Morse Systems segment’s net sales decreased $19 million, or relatively flat, and Segment Adjusted Operating Income increased $17 million from the nine months ended September 30, 2025. Unfavorable volume, mix and net new business resulted in a decrease in net sales by approximately $96 million due to lower volumes in Asia and North America. This was partially offset by the impact of foreign currencies, which resulted in a year-over-year increase in net sales of approximately $61 million primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. The Segment Adjusted Operating margin increased primarily due to manufacturing efficiencies and supply chain savings, partially offset by lower sales.

Previous wording

The PowerDrive Systems segment’s net sales increased $110 million, or 10%, and Segment Adjusted Operating Loss decreased $11 million from the six months ended June 30, 2025. Favorable volume, mix and net new business increased net sales by approximately $62 million due to higher sales in Europe and customer recoveries, partially offset by lower volumes in China. Additionally, foreign currencies resulted in a year-over-year increase in net sales of approximately $47 million primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. Segment Adjusted Operating margin was (5.2)% for the six months ended June 30, 2026, compared to (6.7)% during the six months ended June 30, 2025. The Segment Adjusted Operating margin loss decreased primarily due to customer recoveries and restructuring and supply chain savings, partially offset by launch- related costs and higher manufacturing costs.

Current wording

The PowerDrive Systems segment’s net sales increased $233 million, or 14%, and Segment Adjusted Operating Loss decreased $41 million from the nine months ended September 30, 2025. Favorable volume, mix and net new business, primarily in Europe, and customer recoveries increased net sales by approximately $176 million. Additionally, foreign currencies resulted in a year-over-year increase in net sales of approximately $56 million primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. The Segment Adjusted Operating margin loss decreased primarily due to customer recoveries and restructuring and supply chain savings, partially offset by launch-related costs, manufacturing-related issues and higher manufacturing costs.