|
Delaware
|
|
13-3404508
|
State or other jurisdiction of Incorporation or organization
|
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common Stock, par value $0.01 per share
|
|
BWA
|
|
New York Stock Exchange
|
1.80% Senior Notes due 2022
|
|
BWA22
|
|
New York Stock Exchange
|
Large accelerated filer
|
☑
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☐
|
|
|
|
|
|
|
Document
|
Part of Form 10-K into which incorporated
|
Portions of the BorgWarner Inc. Proxy Statement for the 2019 Annual Meeting of Stockholders
|
Part III
|
|
|
|
|
Page No.
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Engine
|
$
|
6,214
|
|
|
$
|
6,447
|
|
|
$
|
6,062
|
|
Drivetrain
|
4,015
|
|
|
4,140
|
|
|
3,790
|
|
|||
Inter-segment eliminations
|
(61
|
)
|
|
(57
|
)
|
|
(53
|
)
|
|||
Net sales
|
$
|
10,168
|
|
|
$
|
10,530
|
|
|
$
|
9,799
|
|
Joint venture
|
|
Products
|
|
Year organized
|
|
Percentage
owned by the Company |
|
Location of
operation |
|
Joint venture partner
|
|
Fiscal 2019 net sales
(in millions) (a) |
|||
Unconsolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NSK-Warner
|
|
Transmission components
|
|
1964
|
|
50
|
%
|
|
Japan/China
|
|
NSK Ltd.
|
|
$
|
610
|
|
Turbo Energy Private Limited (b)
|
|
Turbochargers
|
|
1987
|
|
32.6
|
%
|
|
India
|
|
Sundaram Finance Limited; Brakes India Limited
|
|
$
|
217
|
|
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
BorgWarner Transmission Systems Korea Ltd. (c)
|
|
Transmission components
|
|
1987
|
|
60
|
%
|
|
Korea
|
|
NSK-Warner
|
|
$
|
238
|
|
Borg-Warner Shenglong (Ningbo) Co. Ltd.
|
|
Fans and fan drives
|
|
1999
|
|
70
|
%
|
|
China
|
|
Ningbo Shenglong Automotive Powertrain Systems Co., Ltd.
|
|
$
|
79
|
|
BorgWarner TorqTransfer Systems Beijing Co. Ltd.
|
|
Transfer cases
|
|
2000
|
|
80
|
%
|
|
China
|
|
Beijing Hainachuan Automotive Parts Holding Co., Ltd.
|
|
$
|
243
|
|
SeohanWarner Turbo Systems Ltd.
|
|
Turbochargers
|
|
2003
|
|
71
|
%
|
|
Korea
|
|
Korea Flange Company
|
|
$
|
199
|
|
BorgWarner United Transmission Systems Co. Ltd.
|
|
Transmission components
|
|
2009
|
|
66
|
%
|
|
China
|
|
China Automobile Development United Investment Co., Ltd.
|
|
$
|
361
|
|
BorgWarner Romeo Power LLC
|
|
Battery module and pack technology
|
|
2019
|
|
60
|
%
|
|
US
|
|
Romeo Systems, Inc.
|
|
$
|
—
|
|
(a)
|
All sales figures are for the year ended December 31, 2019, except NSK-Warner and Turbo Energy Private Limited. NSK-Warner’s sales are reported for the 12 months ended November 30, 2019. Turbo Energy Private Limited’s sales are reported for the 12 months ended September 30, 2019.
|
(b)
|
The Company made purchases from Turbo Energy Private Limited totaling $45 million, $42 million and $32 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company made purchases from NSK-Warner totaling $6 million, $10 million and $12 million for the years ended December 31, 2019, 2018 and 2017, respectively.
|
(c)
|
BorgWarner Inc. owns 50% of NSK-Warner, which has a 40% interest in BorgWarner Transmission Systems Korea Ltd. This gives the Company an additional indirect effective ownership percentage of 20%, resulting in a total effective ownership interest of 80%.
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Gross R&D expenditures
|
$
|
498
|
|
|
$
|
512
|
|
|
$
|
473
|
|
Customer reimbursements
|
(85
|
)
|
|
(72
|
)
|
|
(65
|
)
|
|||
Net R&D expenditures
|
$
|
413
|
|
|
$
|
440
|
|
|
$
|
408
|
|
Product Type: Engine
|
|
Names of Competitors
|
||
Turbochargers:
|
|
Cummins Turbo Technology
|
|
IHI
|
|
|
Garrett Motion, Inc.
|
|
Mitsubishi Heavy Industries (MHI)
|
|
|
BMTS Technology
|
|
Vitesco Technologies
|
|
|
|
|
|
Emissions systems:
|
|
Mahle
|
|
T.RAD
|
|
|
Denso
|
|
Pierburg
|
|
|
Bosch
|
|
NGK
|
|
|
Eldor
|
|
Eberspaecher
|
|
|
|
|
|
Timing systems:
|
|
Denso
|
|
Schaeffler Group
|
|
|
Iwis
|
|
Tsubaki Group
|
|
|
Delphi Technologies
|
|
|
|
|
|
|
|
Thermal systems:
|
|
Horton
|
|
Usui
|
|
|
Mahle
|
|
Xuelong
|
Product Type: Drivetrain
|
|
Names of Competitors
|
||
Torque management systems:
|
|
GKN Driveline
|
|
JTEKT
|
|
|
Magna Powertrain
|
|
|
|
|
|
|
|
Rotating electrical components:
|
|
Denso
|
|
Valeo
|
|
|
SEG Automotive
|
|
Vitesco Technologies
|
|
|
Mitsubishi Electric
|
|
Bosch
|
|
|
|
|
|
Transmission systems:
|
|
Bosch
|
|
FCC
|
|
|
Dynax
|
|
Schaeffler Group
|
|
|
Valeo
|
|
Denso
|
Name
|
|
Age
|
|
Position with the Company
|
Frederic B. Lissalde
|
|
52
|
|
President and Chief Executive Officer
|
Kevin A. Nowlan
|
|
48
|
|
Executive Vice President, Chief Financial Officer
|
Tonit M. Calaway
|
|
51
|
|
Executive Vice President, Chief Legal Officer and Secretary
|
Felecia Pryor
|
|
45
|
|
Executive Vice President, Chief Human Resources Officer
|
Craig D. Aaron
|
|
42
|
|
Vice President and Treasurer
|
Stefan Demmerle
|
|
55
|
|
Vice President
|
Brady D. Ericson
|
|
48
|
|
Vice President
|
Joseph F. Fadool
|
|
53
|
|
Vice President
|
Thomas J. McGill
|
|
53
|
|
Vice President and Controller
|
Volker Weng
|
|
49
|
|
Vice President
|
Hakan Yilmaz
|
|
41
|
|
Vice President, Chief Technology Officer
|
•
|
an inability to find another acquisition, with comparable electronic components, systems and technical capabilities;
|
•
|
a loss of time and resources that our management redirected to matters relating to the proposed transaction that could otherwise have been devoted to pursuing other beneficial opportunities; and
|
•
|
potential negative reactions from the financial markets or from our customers, suppliers, or employees.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Americas
|
|
Europe
|
|
Asia
|
Asheville, North Carolina
|
|
Arcore, Italy
|
|
Aoyama, Japan
|
Auburn Hills, Michigan (d)
|
|
Bradford, England (UK)
|
|
Chennai, India (b)
|
Cadillac, Michigan
|
|
Kirchheimbolanden, Germany
|
|
Chungju-City, South Korea
|
Dixon, Illinois
|
|
Ludwigsburg, Germany
|
|
Taicang, China (b)
|
El Salto Jalisco, Mexico
|
|
Lugo, Italy (b)
|
|
Kakkalur, India
|
Fletcher, North Carolina
|
|
Markdorf, Germany
|
|
Manesar, India
|
Itatiba, Brazil
|
|
Muggendorf, Germany
|
|
Nabari City, Japan
|
Ithaca, New York
|
|
Oberboihingen, Germany
|
|
Ningbo, China (b) (e)
|
Marshall, Michigan
|
|
Oroszlany, Hungary (d)
|
|
Pune, India
|
Ramos, Mexico
|
|
Rzeszow, Poland (d)
|
|
Pyongtaek, South Korea (b) (c)
|
|
|
Tralee, Ireland
|
|
Rayong, Thailand (d)
|
|
|
Viana de Castelo, Portugal
|
|
|
|
|
Vigo, Spain
|
|
|
Americas
|
|
Europe
|
|
Asia
|
Anderson, Indiana (b)
|
|
Arnstadt, Germany
|
|
Beijing, China (b)
|
Bellwood, Illinois
|
|
Gateshead, England (UK)
|
|
Dae-Gu, South Korea (b)
|
Brusque, Brazil (b)
|
|
Heidelberg, Germany
|
|
Dalian, China (b)
|
Frankfort, Illinois
|
|
Ketsch, Germany
|
|
Eumsung, South Korea
|
Irapuato, Mexico
|
|
Landskrona, Sweden (b)
|
|
Fukuroi City, Japan
|
Laredo, Texas (b)
|
|
Tulle, France
|
|
Changnyeong, South Korea
|
Livonia, Michigan
|
|
Wrexham, Wales (UK)
|
|
Ochang, South Korea (b)
|
Melrose Park, Illinois (b)
|
|
|
|
Shanghai, China (b)
|
Noblesville, Indiana (b)
|
|
|
|
Tianjin, China (b)
|
San Luis Potosi, Mexico (b)
|
|
|
|
Wuhan, China (b)
|
Seneca, South Carolina
|
|
|
|
|
Water Valley, Mississippi
|
|
|
|
|
Waterloo, Ontario, Canada
|
|
|
|
|
(a)
|
The table excludes joint ventures owned less than 50% and administrative offices.
|
(b)
|
Indicates leased land rights or a leased facility.
|
(c)
|
City has 2 locations: a wholly owned subsidiary and a joint venture.
|
(d)
|
Location serves both segments.
|
(e)
|
City has 3 locations: 2 wholly owned subsidiaries and a joint venture
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
December 31,
|
|||||||||||||||||
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
||||||||||||
BorgWarner Inc.(1)
|
$
|
100.00
|
|
$
|
79.48
|
|
$
|
73.65
|
|
$
|
96.64
|
|
$
|
66.71
|
|
$
|
84.83
|
|
S&P 500(2)
|
100.00
|
|
101.38
|
|
113.51
|
|
138.29
|
|
132.23
|
|
173.86
|
|
||||||
SIC Code Index(3)
|
100.00
|
|
102.17
|
|
116.88
|
|
155.78
|
|
128.11
|
|
173.86
|
|
|
Number of securities to be issued upon exercise of outstanding options, restricted common stock, warrants and rights
|
|
Weighted average exercise price of outstanding options, restricted common stock, warrants and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
||||
Plan category
|
(a)
|
|
(b)
|
|
(c)
|
||||
Equity compensation plans approved by security holders
|
1,663,812
|
|
|
$
|
44.26
|
|
|
5,984,977
|
|
Equity compensation plans not approved by security holders
|
—
|
|
|
$
|
—
|
|
|
—
|
|
Total
|
1,663,812
|
|
|
44.26
|
|
|
5,984,977
|
|
Item 6.
|
Selected Financial Data
|
|
|
Year Ended December 31,
|
||||||||||||||||||
(in millions)
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Operating results
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
10,168
|
|
|
$
|
10,530
|
|
|
$
|
9,799
|
|
|
$
|
9,071
|
|
|
$
|
8,023
|
|
Operating income (a)
|
|
$
|
1,303
|
|
|
$
|
1,190
|
|
|
$
|
1,072
|
|
|
$
|
973
|
|
|
$
|
888
|
|
Net earnings attributable to BorgWarner Inc.(a)
|
|
$
|
746
|
|
|
$
|
931
|
|
|
$
|
440
|
|
|
$
|
595
|
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share — basic
|
|
$
|
3.63
|
|
|
$
|
4.47
|
|
|
$
|
2.09
|
|
|
$
|
2.78
|
|
|
$
|
2.57
|
|
Earnings per share — diluted
|
|
$
|
3.61
|
|
|
$
|
4.44
|
|
|
$
|
2.08
|
|
|
$
|
2.76
|
|
|
$
|
2.56
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net R&D expenditures
|
|
$
|
413
|
|
|
$
|
440
|
|
|
$
|
408
|
|
|
$
|
343
|
|
|
$
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures, including tooling outlays
|
|
$
|
481
|
|
|
$
|
546
|
|
|
$
|
560
|
|
|
$
|
501
|
|
|
$
|
577
|
|
Depreciation and amortization
|
|
$
|
439
|
|
|
$
|
431
|
|
|
$
|
408
|
|
|
$
|
391
|
|
|
$
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Number of employees
|
|
29,000
|
|
|
30,000
|
|
|
29,000
|
|
|
27,000
|
|
|
30,000
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
832
|
|
|
$
|
739
|
|
|
$
|
545
|
|
|
$
|
444
|
|
|
$
|
578
|
|
Total assets
|
|
$
|
9,702
|
|
|
$
|
10,095
|
|
|
$
|
9,788
|
|
|
$
|
8,835
|
|
|
$
|
9,211
|
|
Total debt
|
|
$
|
1,960
|
|
|
$
|
2,114
|
|
|
$
|
2,188
|
|
|
$
|
2,220
|
|
|
$
|
2,550
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common share information
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividend declared and paid per share
|
|
$
|
0.68
|
|
|
$
|
0.68
|
|
|
$
|
0.59
|
|
|
$
|
0.53
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
205.7
|
|
|
208.2
|
|
|
210.4
|
|
|
214.4
|
|
|
224.4
|
|
|||||
Diluted
|
|
206.8
|
|
|
209.5
|
|
|
211.5
|
|
|
215.3
|
|
|
225.6
|
|
(a)
|
Refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," for discussion of non-comparable items impacting the years ended December 31, 2019 and 2018.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Year Ended December 31,
|
||||||
(in millions, except per share data)
|
2019
|
|
2018
|
||||
Net sales
|
$
|
10,168
|
|
|
$
|
10,530
|
|
Cost of sales
|
8,067
|
|
|
8,300
|
|
||
Gross profit
|
2,101
|
|
|
2,230
|
|
||
Selling, general and administrative expenses
|
873
|
|
|
946
|
|
||
Other (income) expense, net
|
(75
|
)
|
|
94
|
|
||
Operating income
|
1,303
|
|
|
1,190
|
|
||
Equity in affiliates’ earnings, net of tax
|
(32
|
)
|
|
(49
|
)
|
||
Interest income
|
(12
|
)
|
|
(6
|
)
|
||
Interest expense
|
55
|
|
|
59
|
|
||
Other postretirement expense (income)
|
27
|
|
|
(10
|
)
|
||
Earnings before income taxes and noncontrolling interest
|
1,265
|
|
|
1,196
|
|
||
Provision for income taxes
|
468
|
|
|
211
|
|
||
Net earnings
|
797
|
|
|
985
|
|
||
Net earnings attributable to the noncontrolling interest, net of tax
|
51
|
|
|
54
|
|
||
Net earnings attributable to BorgWarner Inc.
|
$
|
746
|
|
|
$
|
931
|
|
Earnings per share — diluted
|
$
|
3.61
|
|
|
$
|
4.44
|
|
|
Year Ended December 31,
|
||||||
Non-comparable items:
|
2019
|
|
2018
|
||||
Restructuring expense
|
$
|
(0.26
|
)
|
|
$
|
(0.24
|
)
|
Pension settlement loss
|
(0.10
|
)
|
|
—
|
|
||
Unfavorable arbitration loss
|
(0.07
|
)
|
|
—
|
|
||
Merger, acquisition and divestiture expense
|
(0.05
|
)
|
|
(0.03
|
)
|
||
Asset impairment and loss on divestiture
|
(0.03
|
)
|
|
(0.09
|
)
|
||
Officer stock awards modification
|
(0.01
|
)
|
|
(0.04
|
)
|
||
Gain on derecognition of subsidiary
|
0.02
|
|
|
—
|
|
||
Asbestos-related adjustments
|
—
|
|
|
(0.08
|
)
|
||
Gain on sale of building
|
—
|
|
|
0.07
|
|
||
Gain on commercial settlement
|
—
|
|
|
0.01
|
|
||
Tax reform adjustments
|
—
|
|
|
0.06
|
|
||
Tax adjustments
|
(0.02
|
)
|
|
0.30
|
|
||
Total impact of non-comparable items per share — diluted:
|
$
|
(0.52
|
)
|
|
$
|
(0.04
|
)
|
•
|
The Company recorded restructuring expense of $72 million primarily related to actions to reduce structural costs. Refer to Note 16, "Restructuring," to the Consolidated Financial Statements in Item 8 of this report for more information. Over the course of the next few years, the Company plans to take additional actions to reduce existing structural costs. These actions are expected to result in primarily cash restructuring costs in the $275 million to $300 million range through the end of 2023. The resulting annual cost savings are expected to be in the range of approximately $90 million to $100 million by 2023. The Company plans to utilize these savings to sustain the Company’s strong operating margin profile and long-term cost competitiveness.
|
•
|
During the year ended December 31, 2019, the Company settled approximately $50 million of its U.S. pension projected benefit obligation by liquidating approximately $50 million in plan assets through a lump-sum pension de-risking disbursement made to an insurance company. Pursuant to this agreement, the insurance company unconditionally and irrevocably guarantees all future payments to certain participants that were receiving payments from the U.S. pension plan. The insurance company assumes all investment risk associated with the assets that were delivered as part of this transaction. Additionally, during 2019, the Company discharged certain U.S. pension plan obligations by making lump-sum payments of $15 million to former employees of the Company. As a result, the Company settled $65 million of projected pension obligation by liquidating an equivalent amount of pension plan assets and recorded a non-cash settlement loss of $27 million related to the accelerated recognition of unamortized losses.
|
•
|
During the year ended December 31, 2019, the Company recorded $14 million of expenses related to the receipt of a final unfavorable arbitration decision associated with the resolution of a matter related to a previous acquisition.
|
•
|
During the year ended December 31, 2019, the Company recorded $11 million of expenses, primarily professional fees, related to the Company's strategic acquisition and divestiture activities, including the transfer of Morse TEC, the anticipated acquisition of Delphi Technologies, and the 20% equity interest in Romeo Systems, Inc. and the divestiture activities for the non-core pipes and thermostat product lines.
|
•
|
During the year ended December 31, 2019, the Company recorded an additional loss on sale of $7 million to account for the cash proceeds and finalization of the purchase price adjustments related to the sale of the non-core pipes and thermostat product lines. Refer to Note 20, "Assets and Liabilities Held for Sale," to the Consolidated Financial Statements in Item 8 of this report for more information.
|
•
|
During the year ended December 31, 2019, the Company recorded a pre-tax gain on the derecognition of BorgWarner Morse TEC LLC ("Morse TEC") of $177 million and removed the asbestos obligations and related insurance assets from the Consolidated Balance Sheet. In addition, the Company recorded tax expense as a result of the reversal of the previously recorded deferred tax assets related to the asbestos liabilities of $173 million, resulting in an after-tax gain of $4 million. Refer to Note 19, "Recent Transactions," to the Consolidated Financial Statements in Item 8 of this report for more information.
|
•
|
The Company's provision for income taxes for the year ended December 31, 2019, includes reductions to tax expense of $19 million related to restructuring and merger, acquisition and divestiture expense and $6 million related to pension settlement loss. This rate also includes increases to tax expense of $22 million due to the U.S. Department of the Treasury’s issuance of the final regulations in the first quarter of 2019 related to the calculation of the one-time transition tax partially offset by reductions to tax expense of $11 million for a global realignment plan and $8 million related to other one-time adjustments.
|
•
|
The Company recorded restructuring expense of $67 million related to Engine and Drivetrain segment actions designed to improve future profitability and competitiveness, primarily related to employee termination benefits, professional fees, and manufacturing footprint rationalization activities.
|
•
|
During the year ended December 31, 2018, the Company recorded an asset impairment expense of $26 million to adjust the net book value of the pipes and thermostat product lines to fair value less costs to sell. Additionally, the Company recorded $6 million of merger, acquisition and divestiture expense primarily related to professional fees associated with divestiture activities for the non-core pipes and thermostat product lines. Refer to Note 20, "Assets and Liabilities Held for Sale," to the Consolidated Financial Statements in Item 8 of this report for more information.
|
•
|
The Company recorded net restricted stock and performance share unit compensation expense of $8 million in the year ended December 31, 2018 as the Company modified the vesting provisions of restricted stock and performance share unit grants made to retiring executive officers to allow certain of the outstanding awards, that otherwise would have been forfeited, to vest upon retirement. Refer to Note 13, "Stock-Based Compensation," to the Consolidated Financial Statements in Item 8 of this report for more information.
|
•
|
During the year ended December 31, 2018, the Company recorded asbestos-related adjustments resulting in an increase to Other Expense of $23 million. This increase was the result of actuarial valuation changes of $23 million associated with the Company's estimate of liabilities for asbestos-related claims asserted but not yet resolved and potential claims not yet asserted. Refer to Note 15, "Contingencies," to the Consolidated Financial Statements in Item 8 of this report for more information.
|
•
|
During the fourth quarter of 2018, the Company recorded a gain of $19 million related to the sale of a building at a manufacturing facility located in Europe.
|
•
|
During the year ended December 31, 2018, the Company recorded a gain of approximately $4 million related to the settlement of a commercial contract for an entity acquired in the 2015 Remy acquisition.
|
•
|
The Company's provision for income taxes for the year ended December 31, 2018 includes reductions of income tax expense of $15 million related to restructuring expense, $6 million related to the asbestos-related adjustments, and $8 million related to asset impairment expense, offset by increases to tax expense of $1 million and $6 million related to a gain on commercial settlement and a gain on the sale of a building, respectively, discussed in Note 4, "Other Expense, Net," to the Consolidated Financial Statements. The provision for income taxes also includes reductions of income tax expense of $13 million related to final adjustments made to measurement period provisional estimates associated with the Tax Cuts and Jobs Act (the "Tax Act"), $22 million related to a decrease in our deferred tax liability due to a tax benefit for certain foreign tax credits now available due to actions the Company took during the year, $9 million related to valuation allowance releases, $3 million related to tax reserve adjustments, and $30 million related to changes in accounting methods and tax filing positions for prior years primarily related to the Tax Act. Refer to Note 5, "Income Taxes," to the Consolidated Financial Statements in Item 8 of this report for more information.
|
|
Year Ended December 31,
|
||||
(percentage of net sales)
|
2019
|
|
2018
|
||
Net sales
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
79.3
|
|
|
78.8
|
|
Gross profit
|
20.7
|
|
|
21.2
|
|
Selling, general and administrative expenses
|
8.6
|
|
|
9.0
|
|
Other (income) expense, net
|
(0.7
|
)
|
|
0.9
|
|
Operating income
|
12.8
|
|
|
11.3
|
|
Equity in affiliates’ earnings, net of tax
|
(0.3
|
)
|
|
(0.5
|
)
|
Interest income
|
(0.1
|
)
|
|
(0.1
|
)
|
Interest expense
|
0.5
|
|
|
0.6
|
|
Other postretirement expense (income)
|
0.3
|
|
|
(0.1
|
)
|
Earnings before income taxes and noncontrolling interest
|
12.4
|
|
|
11.4
|
|
Provision for income taxes
|
4.6
|
|
|
2.0
|
|
Net earnings
|
7.8
|
|
|
9.4
|
|
Net earnings attributable to the noncontrolling interest, net of tax
|
0.5
|
|
|
0.5
|
|
Net earnings attributable to BorgWarner Inc.
|
7.3
|
%
|
|
8.9
|
%
|
|
Year Ended December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Engine
|
$
|
6,214
|
|
|
$
|
6,447
|
|
Drivetrain
|
4,015
|
|
|
4,140
|
|
||
Inter-segment eliminations
|
(61
|
)
|
|
(57
|
)
|
||
Net sales
|
$
|
10,168
|
|
|
$
|
10,530
|
|
|
Year Ended December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Engine
|
$
|
995
|
|
|
$
|
1,040
|
|
Drivetrain
|
443
|
|
|
475
|
|
||
Adjusted EBIT
|
1,438
|
|
|
1,515
|
|
||
Gain on derecognition of subsidiary
|
(177
|
)
|
|
—
|
|
||
Restructuring expense
|
72
|
|
|
67
|
|
||
Unfavorable arbitration loss
|
14
|
|
|
—
|
|
||
Merger, acquisition and divestiture expense
|
11
|
|
|
6
|
|
||
Asset impairment and loss on divestiture
|
7
|
|
|
25
|
|
||
Officer stock awards modification
|
2
|
|
|
8
|
|
||
Asbestos-related adjustments
|
—
|
|
|
23
|
|
||
Gain on sale of building
|
—
|
|
|
(19
|
)
|
||
Lease termination settlement
|
—
|
|
|
—
|
|
||
Other income
|
—
|
|
|
(4
|
)
|
||
Corporate, including stock-based compensation
|
206
|
|
|
219
|
|
||
Equity in affiliates' earnings, net of tax
|
(32
|
)
|
|
(49
|
)
|
||
Interest income
|
(12
|
)
|
|
(6
|
)
|
||
Interest expense
|
55
|
|
|
59
|
|
||
Other postretirement expense (income)
|
27
|
|
|
(10
|
)
|
||
Earnings before income taxes and noncontrolling interest
|
1,265
|
|
|
1,196
|
|
||
Provision for income taxes
|
468
|
|
|
211
|
|
||
Net earnings
|
797
|
|
|
985
|
|
||
Net earnings attributable to the noncontrolling interest, net of tax
|
51
|
|
|
54
|
|
||
Net earnings attributable to BorgWarner Inc.
|
$
|
746
|
|
|
$
|
931
|
|
(in millions)
|
|
||
Balance, January 1, 2019
|
$
|
4,345
|
|
Net earnings
|
797
|
|
|
Purchase of treasury stock
|
(100
|
)
|
|
Stock-based compensation
|
27
|
|
|
Other comprehensive loss
|
(55
|
)
|
|
Noncontrolling interest contributions
|
4
|
|
|
Dividends declared to BorgWarner stockholders
|
(140
|
)
|
|
Dividends declared to noncontrolling stockholders
|
(34
|
)
|
|
Balance, December 31, 2019
|
$
|
4,844
|
|
(in millions)
|
Total
|
|
2020
|
|
2021-2022
|
|
2023-2024
|
|
After 2024
|
||||||||||
Other postretirement employee benefits, excluding pensions (a)
|
$
|
68
|
|
|
$
|
10
|
|
|
$
|
18
|
|
|
$
|
15
|
|
|
$
|
25
|
|
Defined benefit pension plans (b)
|
55
|
|
|
4
|
|
|
11
|
|
|
10
|
|
|
30
|
|
|||||
Notes payable and long-term debt
|
1,973
|
|
|
286
|
|
|
565
|
|
|
1
|
|
|
1,121
|
|
|||||
Projected interest payments
|
757
|
|
|
66
|
|
|
113
|
|
|
95
|
|
|
483
|
|
|||||
Non-cancelable operating leases
|
97
|
|
|
20
|
|
|
28
|
|
|
16
|
|
|
33
|
|
|||||
Capital spending obligations
|
102
|
|
|
102
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
3,052
|
|
|
$
|
488
|
|
|
$
|
735
|
|
|
$
|
137
|
|
|
$
|
1,692
|
|
(a)
|
Other postretirement employee benefits, excluding pensions, include anticipated future payments to cover retiree medical and life insurance benefits. Amount contained in “After 2024” column includes estimated payments through 2029. Refer to Note 12, "Retirement Benefit Plans," to the Consolidated Financial Statements in Item 8 of this report for disclosures related to the Company’s other postretirement employee benefits.
|
(b)
|
Since the timing and amount of payments for funded defined benefit pension plans are usually not certain for future years such potential payments are not shown in this table. Amount contained in “After 2024” column is for unfunded plans and includes estimated payments through 2029. Refer to Note 12, "Retirement Benefit Plans," to the Consolidated Financial Statements in Item 8 of this report for disclosures related to the Company’s pension benefits.
|
•
|
Discount rate: the Company used a 10.7% weighted average cost of capital (“WACC”) as the discount rate for future cash flows. The WACC is intended to represent a rate of return that would be expected by a market participant.
|
•
|
Operating income margin: the Company used historical and expected operating income margins, which may vary based on the projections of the reporting unit being evaluated.
|
•
|
Revenue growth rate: the Company used a global automotive market industry growth rate forecast adjusted to estimate its own market participation for product lines.
|
•
|
The automotive industry is cyclical, and the Company's results of operations would be adversely affected by industry downturns.
|
•
|
The Company is dependent on market segments that use our key products and would be affected by decreasing demand in those segments.
|
•
|
The Company is subject to risks related to international operations.
|
|
Year Ended December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Net sales
|
$
|
10,168
|
|
|
$
|
10,530
|
|
Warranty provision
|
$
|
72
|
|
|
$
|
68
|
|
Warranty provision as a percentage of net sales
|
0.7
|
%
|
|
0.6
|
%
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
25 basis point decrease (income)/expense
|
$
|
(25
|
)
|
|
$
|
(26
|
)
|
25 basis point increase (income)/expense
|
$
|
25
|
|
|
$
|
26
|
|
•
|
Expected long-term rate of return on plan assets: The expected long-term rate of return is used in the calculation of net periodic benefit cost. The required use of the expected long-term rate of return on plan assets may result in recognized returns that are greater or less than the actual returns on those plan assets in any given year. Over time, however, the expected long-term rate of return on plan assets is designed to approximate actual earned long-term returns. The expected long-term rate of return for pension assets has been determined based on various inputs, including historical returns for the different asset classes held by the Company's trusts and its asset allocation, as well as inputs from internal and external sources regarding expected capital market return, inflation and other variables. The Company also considers the impact of active management of the plans' invested assets. In determining its pension expense for the year ended December 31, 2019, the Company used long-term rates of return on plan assets ranging from 1.75% to 5.9% outside of the U.S. and 6.0% in the U.S.
|
•
|
Discount rate: The discount rate is used to calculate pension and other postretirement employee benefit (“OPEB”) obligations. In determining the discount rate, the Company utilizes a full-yield approach in the estimation of service and interest components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The Company used discount rates ranging from 0.74% to 9.0% to determine its pension and other benefit obligations as of December 31, 2019, including weighted average discount rates of 3.17% in the U.S., 1.61% outside of the U.S., and 2.95% for U.S. other postretirement health care plans. The U.S. discount rate reflects the fact that our U.S. pension plan has been closed for new participants since 1989 (1999 for our U.S. health care plan).
|
•
|
Health care cost trend: For postretirement employee health care plan accounting, the Company reviews external data and Company-specific historical trends for health care cost to determine the
|
(in millions)
|
Impact on U.S. 2020 pre-tax pension (expense)/income
|
|
|
Impact on Non-U.S. 2020 pre-tax pension (expense)/income
|
||||
One percentage point decrease in discount rate
|
$
|
—
|
|
*
|
|
$
|
(7
|
)
|
One percentage point increase in discount rate
|
$
|
—
|
|
*
|
|
$
|
7
|
|
One percentage point decrease in expected return on assets
|
$
|
(2
|
)
|
|
|
$
|
(5
|
)
|
One percentage point increase in expected return on assets
|
$
|
2
|
|
|
|
$
|
5
|
|
|
One Percentage Point
|
||||||
(in millions)
|
Increase
|
|
Decrease
|
||||
Effect on other postretirement employee benefit obligation
|
$
|
5
|
|
|
$
|
(5
|
)
|
Effect on total service and interest cost components
|
$
|
—
|
|
|
$
|
—
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
Index to Financial Statements and Supplementary Data
|
|
Page No.
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
December 31,
|
||||||
(in millions, except share and per share amounts)
|
2019
|
|
2018
|
||||
ASSETS
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
832
|
|
|
$
|
739
|
|
Receivables, net
|
1,921
|
|
|
1,988
|
|
||
Inventories, net
|
807
|
|
|
781
|
|
||
Prepayments and other current assets
|
276
|
|
|
250
|
|
||
Assets held for sale
|
—
|
|
|
47
|
|
||
Total current assets
|
3,836
|
|
|
3,805
|
|
||
|
|
|
|
||||
Property, plant and equipment, net
|
2,925
|
|
|
2,904
|
|
||
Investments and other long-term receivables
|
318
|
|
|
592
|
|
||
Goodwill
|
1,842
|
|
|
1,853
|
|
||
Other intangible assets, net
|
402
|
|
|
439
|
|
||
Other non-current assets
|
379
|
|
|
502
|
|
||
Total assets
|
$
|
9,702
|
|
|
$
|
10,095
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
|
|
||
Notes payable and other short-term debt
|
$
|
286
|
|
|
$
|
173
|
|
Accounts payable and accrued expenses
|
1,977
|
|
|
2,144
|
|
||
Income taxes payable
|
66
|
|
|
59
|
|
||
Liabilities held for sale
|
—
|
|
|
23
|
|
||
Total current liabilities
|
2,329
|
|
|
2,399
|
|
||
|
|
|
|
||||
Long-term debt
|
1,674
|
|
|
1,941
|
|
||
|
|
|
|
||||
Other non-current liabilities:
|
|
|
|
|
|
||
Asbestos-related liabilities
|
—
|
|
|
755
|
|
||
Retirement-related liabilities
|
306
|
|
|
298
|
|
||
Other
|
549
|
|
|
357
|
|
||
Total other non-current liabilities
|
855
|
|
|
1,410
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
||||
|
|
|
|
||||
Capital stock:
|
|
|
|
|
|
||
Preferred stock, $0.01 par value; authorized shares: 5,000,000; none issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; authorized shares: 390,000,000; issued shares: (2019 - 246,387,057; 2018 - 246,387,057); outstanding shares: (2019 - 206,407,543; 2018 - 208,214,934)
|
3
|
|
|
3
|
|
||
Non-voting common stock, $0.01 par value; authorized shares: 25,000,000; none issued and outstanding
|
—
|
|
|
—
|
|
||
Capital in excess of par value
|
1,145
|
|
|
1,146
|
|
||
Retained earnings
|
5,942
|
|
|
5,336
|
|
||
Accumulated other comprehensive loss
|
(727
|
)
|
|
(674
|
)
|
||
Common stock held in treasury, at cost: (2019 - 39,979,514 shares; 2018 - 38,172,123 shares)
|
(1,657
|
)
|
|
(1,585
|
)
|
||
Total BorgWarner Inc. stockholders’ equity
|
4,706
|
|
|
4,226
|
|
||
Noncontrolling interest
|
138
|
|
|
119
|
|
||
Total equity
|
4,844
|
|
|
4,345
|
|
||
Total liabilities and equity
|
$
|
9,702
|
|
|
$
|
10,095
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Net sales
|
$
|
10,168
|
|
|
$
|
10,530
|
|
|
$
|
9,799
|
|
Cost of sales
|
8,067
|
|
|
8,300
|
|
|
7,684
|
|
|||
Gross profit
|
2,101
|
|
|
2,230
|
|
|
2,115
|
|
|||
|
|
|
|
|
|
||||||
Selling, general and administrative expenses
|
873
|
|
|
946
|
|
|
899
|
|
|||
Other (income) expense, net
|
(75
|
)
|
|
94
|
|
|
144
|
|
|||
Operating income
|
1,303
|
|
|
1,190
|
|
|
1,072
|
|
|||
|
|
|
|
|
|
||||||
Equity in affiliates’ earnings, net of tax
|
(32
|
)
|
|
(49
|
)
|
|
(51
|
)
|
|||
Interest income
|
(12
|
)
|
|
(6
|
)
|
|
(6
|
)
|
|||
Interest expense
|
55
|
|
|
59
|
|
|
71
|
|
|||
Other postretirement expense (income)
|
27
|
|
|
(10
|
)
|
|
(5
|
)
|
|||
Earnings before income taxes and noncontrolling interest
|
1,265
|
|
|
1,196
|
|
|
1,063
|
|
|||
|
|
|
|
|
|
||||||
Provision for income taxes
|
468
|
|
|
211
|
|
|
580
|
|
|||
Net earnings
|
797
|
|
|
985
|
|
|
483
|
|
|||
|
|
|
|
|
|
||||||
Net earnings attributable to the noncontrolling interest, net of tax
|
51
|
|
|
54
|
|
|
43
|
|
|||
Net earnings attributable to BorgWarner Inc.
|
$
|
746
|
|
|
$
|
931
|
|
|
$
|
440
|
|
|
|
|
|
|
|
||||||
Earnings per share — basic
|
$
|
3.63
|
|
|
$
|
4.47
|
|
|
$
|
2.09
|
|
|
|
|
|
|
|
||||||
Earnings per share — diluted
|
$
|
3.61
|
|
|
$
|
4.44
|
|
|
$
|
2.08
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|||
Basic
|
205.7
|
|
|
208.2
|
|
|
210.4
|
|
|||
Diluted
|
206.8
|
|
|
209.5
|
|
|
211.5
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Net earnings attributable to BorgWarner Inc.
|
$
|
746
|
|
|
$
|
931
|
|
|
$
|
440
|
|
|
|
|
|
|
|
||||||
Other comprehensive (loss) income
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
(55
|
)
|
|
(148
|
)
|
|
237
|
|
|||
Hedge instruments*
|
—
|
|
|
2
|
|
|
(6
|
)
|
|||
Defined benefit postretirement plans*
|
4
|
|
|
(23
|
)
|
|
—
|
|
|||
Other*
|
(2
|
)
|
|
(1
|
)
|
|
1
|
|
|||
Total other comprehensive (loss) income attributable to BorgWarner Inc.
|
(53
|
)
|
|
(170
|
)
|
|
232
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive income attributable to BorgWarner Inc.*
|
693
|
|
|
761
|
|
|
672
|
|
|||
|
|
|
|
|
|
||||||
Net earnings attributable to noncontrolling interest, net of tax*
|
51
|
|
|
54
|
|
|
43
|
|
|||
Other comprehensive (loss) income attributable to the noncontrolling interest*
|
(2
|
)
|
|
(8
|
)
|
|
11
|
|
|||
Comprehensive income
|
$
|
742
|
|
|
$
|
807
|
|
|
$
|
726
|
|
*
|
Net of income taxes.
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
OPERATING
|
|
|
|
|
|
|
|
|
|||
Net earnings
|
$
|
797
|
|
|
$
|
985
|
|
|
$
|
483
|
|
Adjustments to reconcile net earnings to net cash flows from operations:
|
|
|
|
|
|
|
|
|
|||
Non-cash charges (credits) to operations:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
439
|
|
|
431
|
|
|
408
|
|
|||
Deferred income tax provision (benefit)
|
186
|
|
|
(57
|
)
|
|
42
|
|
|||
Stock-based compensation expense
|
42
|
|
|
53
|
|
|
52
|
|
|||
Restructuring expense, net of cash paid
|
30
|
|
|
33
|
|
|
27
|
|
|||
Pension settlement loss
|
27
|
|
|
—
|
|
|
—
|
|
|||
Tax reform adjustments to provision for income taxes
|
16
|
|
|
(13
|
)
|
|
274
|
|
|||
Asset impairment and loss on divestiture
|
7
|
|
|
26
|
|
|
71
|
|
|||
Gain on derecognition of subsidiary
|
(177
|
)
|
|
—
|
|
|
—
|
|
|||
Equity in affiliates’ earnings, net of dividends received, and other
|
—
|
|
|
(12
|
)
|
|
(32
|
)
|
|||
Net earnings adjusted for non-cash charges to operations
|
1,367
|
|
|
1,446
|
|
|
1,325
|
|
|||
Derecognition of a subsidiary
|
(172
|
)
|
|
—
|
|
|
—
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|||
Receivables
|
19
|
|
|
(43
|
)
|
|
(168
|
)
|
|||
Inventories
|
(36
|
)
|
|
(53
|
)
|
|
(85
|
)
|
|||
Prepayments and other current assets
|
(18
|
)
|
|
(19
|
)
|
|
1
|
|
|||
Accounts payable and accrued expenses
|
(123
|
)
|
|
(76
|
)
|
|
233
|
|
|||
Prepaid taxes and income taxes payable
|
(8
|
)
|
|
(85
|
)
|
|
(43
|
)
|
|||
Other assets and liabilities
|
(21
|
)
|
|
(44
|
)
|
|
(83
|
)
|
|||
Net cash provided by operating activities
|
1,008
|
|
|
1,126
|
|
|
1,180
|
|
|||
INVESTING
|
|
|
|
|
|
|
|
|
|||
Capital expenditures, including tooling outlays
|
(481
|
)
|
|
(546
|
)
|
|
(560
|
)
|
|||
Payments for investments in equity securities
|
(53
|
)
|
|
(6
|
)
|
|
(3
|
)
|
|||
Payments for businesses acquired, including restricted cash, net of cash acquired
|
(10
|
)
|
|
—
|
|
|
(186
|
)
|
|||
Proceeds from sale of businesses, net of cash divested
|
24
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from (payments for) settlement of net investment hedges
|
22
|
|
|
2
|
|
|
(8
|
)
|
|||
Proceeds from asset disposals and other
|
9
|
|
|
36
|
|
|
5
|
|
|||
Net cash used in investing activities
|
(489
|
)
|
|
(514
|
)
|
|
(752
|
)
|
|||
FINANCING
|
|
|
|
|
|
|
|
|
|||
Net decrease in notes payable
|
—
|
|
|
(34
|
)
|
|
(88
|
)
|
|||
Additions to debt, net of debt issuance costs
|
63
|
|
|
59
|
|
|
3
|
|
|||
Repayments of long term debt, including current portion
|
(204
|
)
|
|
(66
|
)
|
|
(20
|
)
|
|||
Payments for debt issuance cost
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||
Payments for purchase of treasury stock
|
(100
|
)
|
|
(150
|
)
|
|
(100
|
)
|
|||
Payments for stock-based compensation items
|
(15
|
)
|
|
(15
|
)
|
|
(2
|
)
|
|||
Capital contribution from noncontrolling interest
|
4
|
|
|
—
|
|
|
—
|
|
|||
Dividends paid to BorgWarner stockholders
|
(140
|
)
|
|
(142
|
)
|
|
(124
|
)
|
|||
Dividends paid to noncontrolling stockholders
|
(28
|
)
|
|
(35
|
)
|
|
(30
|
)
|
|||
Net cash used in financing activities
|
(420
|
)
|
|
(383
|
)
|
|
(363
|
)
|
|||
Effect of exchange rate changes on cash
|
(6
|
)
|
|
(35
|
)
|
|
36
|
|
|||
Net increase in cash and cash equivalents
|
93
|
|
|
194
|
|
|
101
|
|
|||
Cash and cash equivalents at beginning of year
|
739
|
|
|
545
|
|
|
444
|
|
|||
Cash and cash equivalents at end of year
|
$
|
832
|
|
|
$
|
739
|
|
|
$
|
545
|
|
|
|
|
|
|
|
||||||
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|||
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|||
Interest
|
$
|
72
|
|
|
$
|
84
|
|
|
$
|
92
|
|
Income taxes, net of refunds
|
$
|
243
|
|
|
$
|
316
|
|
|
$
|
280
|
|
Non-cash investing transactions
|
|
|
|
|
|
||||||
Liabilities assumed from business acquired
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
Number of shares
|
|
BorgWarner Inc. stockholder's equity
|
|
|
||||||||||||||||||||||||
(in millions, except share data)
|
Issued common stock
|
|
Common stock held in treasury
|
|
Issued common stock
|
|
Capital in excess of par value
|
|
Treasury stock
|
|
Retained earnings
|
|
Accumulated other comprehensive income (loss)
|
|
Noncontrolling interests
|
||||||||||||||
Balance, January 1, 2017
|
246,387,057
|
|
|
(34,124,092
|
)
|
|
$
|
3
|
|
|
$
|
1,104
|
|
|
$
|
(1,382
|
)
|
|
$
|
4,215
|
|
|
$
|
(722
|
)
|
|
$
|
84
|
|
Dividends declared ($0.59 per share) *
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(124
|
)
|
|
—
|
|
|
(29
|
)
|
||||||
Stock incentive plans
|
—
|
|
|
473,419
|
|
|
—
|
|
|
(11
|
)
|
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net issuance for executive stock plan
|
—
|
|
|
73,935
|
|
|
—
|
|
|
21
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net issuance of restricted stock
|
—
|
|
|
402,184
|
|
|
—
|
|
|
4
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchase of treasury stock
|
—
|
|
|
(2,399,710
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Business divestiture
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
440
|
|
|
—
|
|
|
43
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
232
|
|
|
11
|
|
||||||
Balance, December 31, 2017
|
246,387,057
|
|
|
(35,574,264
|
)
|
|
$
|
3
|
|
|
$
|
1,118
|
|
|
$
|
(1,445
|
)
|
|
$
|
4,531
|
|
|
$
|
(490
|
)
|
|
$
|
109
|
|
Adoption of accounting standards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
(14
|
)
|
|
—
|
|
||||||
Dividends declared ($0.68 per share) *
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(142
|
)
|
|
—
|
|
|
(36
|
)
|
||||||
Net issuance for executive stock plan
|
—
|
|
|
154,642
|
|
|
—
|
|
|
18
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net issuance of restricted stock
|
—
|
|
|
284,946
|
|
|
—
|
|
|
10
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchase of treasury stock
|
—
|
|
|
(3,037,447
|
)
|
|
—
|
|
|
—
|
|
|
(150
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Business divestiture
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
931
|
|
|
—
|
|
|
54
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(170
|
)
|
|
(8
|
)
|
||||||
Balance, December 31, 2018
|
246,387,057
|
|
|
(38,172,123
|
)
|
|
$
|
3
|
|
|
$
|
1,146
|
|
|
$
|
(1,585
|
)
|
|
$
|
5,336
|
|
|
$
|
(674
|
)
|
|
$
|
119
|
|
Dividends declared ($0.68 per share) *
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
|
(34
|
)
|
||||||
Noncontrolling interest contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Net issuance for executive stock plan
|
—
|
|
|
199,135
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net issuance of restricted stock
|
—
|
|
|
571,996
|
|
|
—
|
|
|
(1
|
)
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchase of treasury stock
|
—
|
|
|
(2,578,522
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
746
|
|
|
—
|
|
|
51
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
|
(2
|
)
|
||||||
Balance, December 31, 2019
|
246,387,057
|
|
|
(39,979,514
|
)
|
|
$
|
3
|
|
|
$
|
1,145
|
|
|
$
|
(1,657
|
)
|
|
$
|
5,942
|
|
|
$
|
(727
|
)
|
|
$
|
138
|
|
*
|
The dividends declared relate to BorgWarner common stock.
|
NOTE 1
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
|
Year Ended December 31, 2019
|
||||||||||
(In millions)
|
|
Engine
|
|
Drivetrain
|
|
Total
|
||||||
North America
|
|
$
|
1,584
|
|
|
$
|
1,791
|
|
|
$
|
3,375
|
|
Europe
|
|
2,980
|
|
|
830
|
|
|
3,810
|
|
|||
Asia
|
|
1,468
|
|
|
1,365
|
|
|
2,833
|
|
|||
Other
|
|
121
|
|
|
29
|
|
|
150
|
|
|||
Total
|
|
$
|
6,153
|
|
|
$
|
4,015
|
|
|
$
|
10,168
|
|
|
|
Year Ended December 31, 2018
|
||||||||||
(In millions)
|
|
Engine
|
|
Drivetrain
|
|
Total
|
||||||
North America
|
|
$
|
1,573
|
|
|
$
|
1,799
|
|
|
$
|
3,372
|
|
Europe
|
|
3,074
|
|
|
948
|
|
|
4,022
|
|
|||
Asia
|
|
1,621
|
|
|
1,362
|
|
|
2,983
|
|
|||
Other
|
|
122
|
|
|
31
|
|
|
153
|
|
|||
Total
|
|
$
|
6,390
|
|
|
$
|
4,140
|
|
|
$
|
10,530
|
|
|
|
Year Ended December 31, 2017
|
||||||||||
(In millions)
|
|
Engine
|
|
Drivetrain
|
|
Total
|
||||||
North America
|
|
$
|
1,509
|
|
|
$
|
1,691
|
|
|
$
|
3,200
|
|
Europe
|
|
2,783
|
|
|
952
|
|
|
3,735
|
|
|||
Asia
|
|
1,615
|
|
|
1,116
|
|
|
2,731
|
|
|||
Other
|
|
102
|
|
|
31
|
|
|
133
|
|
|||
Total
|
|
$
|
6,009
|
|
|
$
|
3,790
|
|
|
$
|
9,799
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Gross R&D expenditures
|
$
|
498
|
|
|
$
|
512
|
|
|
$
|
473
|
|
Customer reimbursements
|
(85
|
)
|
|
(72
|
)
|
|
(65
|
)
|
|||
Net R&D expenditures
|
$
|
413
|
|
|
$
|
440
|
|
|
$
|
408
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Gain on derecognition of subsidiary
|
$
|
(177
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Restructuring expense
|
72
|
|
|
67
|
|
|
58
|
|
|||
Unfavorable arbitration loss
|
14
|
|
|
—
|
|
|
—
|
|
|||
Merger, acquisition and divestiture expense
|
11
|
|
|
6
|
|
|
10
|
|
|||
Asset impairment and loss on divestiture
|
7
|
|
|
25
|
|
|
71
|
|
|||
Asbestos-related adjustments
|
—
|
|
|
23
|
|
|
—
|
|
|||
Gain on sale of building
|
—
|
|
|
(19
|
)
|
|
—
|
|
|||
Gain on commercial settlement
|
—
|
|
|
(4
|
)
|
|
—
|
|
|||
Lease termination settlement
|
—
|
|
|
—
|
|
|
5
|
|
|||
Other income
|
(2
|
)
|
|
(4
|
)
|
|
—
|
|
|||
Other (income) expense, net
|
$
|
(75
|
)
|
|
$
|
94
|
|
|
$
|
144
|
|
NOTE 5
|
INCOME TAXES
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Earnings before income taxes:
|
|
|
|
|
|
||||||
U.S.
|
$
|
310
|
|
|
$
|
220
|
|
|
$
|
203
|
|
Non-U.S.
|
955
|
|
|
976
|
|
|
860
|
|
|||
Total
|
$
|
1,265
|
|
|
$
|
1,196
|
|
|
$
|
1,063
|
|
Provision for income taxes:
|
|
|
|
|
|
|
|
|
|||
Current:
|
|
|
|
|
|
|
|
|
|||
Federal
|
$
|
32
|
|
|
$
|
17
|
|
|
$
|
36
|
|
State
|
4
|
|
|
5
|
|
|
5
|
|
|||
Foreign
|
245
|
|
|
259
|
|
|
247
|
|
|||
Total current
|
281
|
|
|
281
|
|
|
288
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
150
|
|
|
(40
|
)
|
|
324
|
|
|||
State
|
23
|
|
|
(8
|
)
|
|
2
|
|
|||
Foreign
|
14
|
|
|
(22
|
)
|
|
(34
|
)
|
|||
Total deferred
|
187
|
|
|
(70
|
)
|
|
292
|
|
|||
Total provision for income taxes
|
$
|
468
|
|
|
$
|
211
|
|
|
$
|
580
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Income taxes at U.S. statutory rate of 21% for 2019 and 2018 (35% for 2017)
|
$
|
266
|
|
|
$
|
251
|
|
|
$
|
372
|
|
Increases (decreases) resulting from:
|
|
|
|
|
|
|
|
|
|||
Impact of transactions
|
124
|
|
|
(1
|
)
|
|
4
|
|
|||
Reserve adjustments, settlements and claims
|
46
|
|
|
32
|
|
|
8
|
|
|||
Foreign rate differentials
|
35
|
|
|
28
|
|
|
(100
|
)
|
|||
Net tax on remittance of foreign earnings
|
22
|
|
|
(22
|
)
|
|
80
|
|
|||
U.S. tax on non-U.S. earnings
|
15
|
|
|
37
|
|
|
171
|
|
|||
Other foreign taxes
|
10
|
|
|
8
|
|
|
8
|
|
|||
State taxes, net of federal benefit
|
3
|
|
|
6
|
|
|
2
|
|
|||
Non-deductible transaction costs
|
3
|
|
|
3
|
|
|
11
|
|
|||
Impact of foreign derived intangible income
|
(1
|
)
|
|
(15
|
)
|
|
—
|
|
|||
Valuation allowance adjustments
|
(2
|
)
|
|
(11
|
)
|
|
12
|
|
|||
Affiliates' earnings
|
(7
|
)
|
|
(10
|
)
|
|
(18
|
)
|
|||
Changes in accounting methods and filing positions
|
(7
|
)
|
|
(30
|
)
|
|
(2
|
)
|
|||
Tax credits
|
(17
|
)
|
|
(26
|
)
|
|
(24
|
)
|
|||
Tax holidays
|
(26
|
)
|
|
(28
|
)
|
|
(31
|
)
|
|||
Revaluation of U.S. deferred taxes
|
—
|
|
|
(4
|
)
|
|
64
|
|
|||
Other
|
4
|
|
|
(7
|
)
|
|
23
|
|
|||
Provision for income taxes, as reported
|
$
|
468
|
|
|
$
|
211
|
|
|
$
|
580
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Balance, January 1
|
$
|
120
|
|
|
$
|
92
|
|
|
$
|
91
|
|
Additions based on tax positions related to current year
|
7
|
|
|
24
|
|
|
17
|
|
|||
Additions/(reductions) for tax positions of prior years
|
26
|
|
|
18
|
|
|
(2
|
)
|
|||
Reductions for closure of tax audits and settlements
|
—
|
|
|
(8
|
)
|
|
(20
|
)
|
|||
Reductions for lapse in statute of limitations
|
(6
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Translation adjustment
|
(1
|
)
|
|
(6
|
)
|
|
7
|
|
|||
Balance, December 31
|
$
|
146
|
|
|
$
|
120
|
|
|
$
|
92
|
|
Tax jurisdiction
|
|
Years no longer subject to audit
|
|
Tax jurisdiction
|
|
Years no longer subject to audit
|
U.S. Federal
|
|
2014 and prior
|
|
Japan
|
|
2018 and prior
|
China
|
|
2012 and prior
|
|
Mexico
|
|
2013 and prior
|
France
|
|
2015 and prior
|
|
Poland
|
|
2013 and prior
|
Germany
|
|
2011 and prior
|
|
South Korea
|
|
2013 and prior
|
Hungary
|
|
2013 and prior
|
|
|
|
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Deferred tax assets:
|
|
|
|
||||
Research and development capitalization
|
$
|
74
|
|
|
$
|
92
|
|
Net operating loss and capital loss carryforwards
|
70
|
|
|
84
|
|
||
Other comprehensive loss
|
53
|
|
|
64
|
|
||
Unrecognized tax benefits
|
49
|
|
|
41
|
|
||
Employee compensation
|
32
|
|
|
24
|
|
||
Pension and other postretirement benefits
|
25
|
|
|
19
|
|
||
State tax credits
|
21
|
|
|
20
|
|
||
Warranty
|
15
|
|
|
14
|
|
||
Foreign tax credits
|
13
|
|
|
—
|
|
||
Asbestos-related
|
—
|
|
|
172
|
|
||
Other
|
67
|
|
|
80
|
|
||
Total deferred tax assets
|
$
|
419
|
|
|
$
|
610
|
|
Valuation allowance
|
(71
|
)
|
|
(86
|
)
|
||
Net deferred tax asset
|
$
|
348
|
|
|
$
|
524
|
|
Deferred tax liabilities:
|
|
|
|
|
|
||
Goodwill and intangible assets
|
(174
|
)
|
|
(183
|
)
|
||
Fixed assets
|
(144
|
)
|
|
(118
|
)
|
||
Unremitted foreign earnings
|
(56
|
)
|
|
(57
|
)
|
||
Other
|
(20
|
)
|
|
(19
|
)
|
||
Total deferred tax liabilities
|
$
|
(394
|
)
|
|
$
|
(377
|
)
|
Net deferred taxes
|
$
|
(46
|
)
|
|
$
|
147
|
|
NOTE 6
|
BALANCE SHEET INFORMATION
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Receivables, net:
|
|
|
|
|
|
||
Customers
|
$
|
1,713
|
|
|
$
|
1,728
|
|
Indirect taxes
|
106
|
|
|
114
|
|
||
Other
|
108
|
|
|
153
|
|
||
Gross receivables
|
1,927
|
|
|
1,995
|
|
||
Bad debt allowance (a)
|
(6
|
)
|
|
(7
|
)
|
||
Total receivables, net
|
$
|
1,921
|
|
|
$
|
1,988
|
|
Inventories, net:
|
|
|
|
|
|
||
Raw material and supplies
|
$
|
502
|
|
|
$
|
485
|
|
Work in progress
|
113
|
|
|
114
|
|
||
Finished goods
|
207
|
|
|
199
|
|
||
FIFO inventories
|
822
|
|
|
798
|
|
||
LIFO reserve
|
(15
|
)
|
|
(17
|
)
|
||
Total inventories, net
|
$
|
807
|
|
|
$
|
781
|
|
Prepayments and other current assets:
|
|
|
|
|
|
||
Prepaid taxes
|
$
|
95
|
|
|
$
|
84
|
|
Prepaid tooling
|
83
|
|
|
83
|
|
||
Other
|
98
|
|
|
83
|
|
||
Total prepayments and other current assets
|
$
|
276
|
|
|
$
|
250
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
||
Land and land use rights
|
$
|
105
|
|
|
$
|
108
|
|
Buildings
|
755
|
|
|
763
|
|
||
Machinery and equipment
|
2,971
|
|
|
2,851
|
|
||
Capital leases
|
1
|
|
|
3
|
|
||
Construction in progress
|
360
|
|
|
426
|
|
||
Property, plant and equipment, gross
|
4,192
|
|
|
4,151
|
|
||
Accumulated depreciation
|
(1,513
|
)
|
|
(1,474
|
)
|
||
Property, plant and equipment, net, excluding tooling
|
2,679
|
|
|
2,677
|
|
||
Tooling, net of amortization
|
246
|
|
|
227
|
|
||
Property, plant and equipment, net
|
$
|
2,925
|
|
|
$
|
2,904
|
|
Investments and other long-term receivables:
|
|
|
|
|
|
||
Investment in equity affiliates
|
$
|
256
|
|
|
$
|
244
|
|
Cost method investments
|
60
|
|
|
8
|
|
||
Other long-term asbestos-related insurance receivables*
|
—
|
|
|
303
|
|
||
Other long-term receivables*
|
2
|
|
|
37
|
|
||
Total investments and other long-term receivables
|
$
|
318
|
|
|
$
|
592
|
|
Other non-current assets:
|
|
|
|
|
|
||
Operating leases
|
$
|
85
|
|
|
$
|
—
|
|
Deferred income taxes*
|
79
|
|
|
198
|
|
||
Deferred asbestos-related insurance asset*
|
—
|
|
|
83
|
|
||
Other
|
215
|
|
|
221
|
|
||
Total other non-current assets
|
$
|
379
|
|
|
$
|
502
|
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Accounts payable and accrued expenses:
|
|
|
|
|
|
||
Trade payables
|
$
|
1,325
|
|
|
$
|
1,485
|
|
Payroll and employee related
|
233
|
|
|
233
|
|
||
Customer related
|
71
|
|
|
49
|
|
||
Product warranties
|
63
|
|
|
56
|
|
||
Indirect taxes
|
61
|
|
|
73
|
|
||
Severance
|
34
|
|
|
25
|
|
||
Operating leases
|
18
|
|
|
—
|
|
||
Interest
|
18
|
|
|
19
|
|
||
Insurance
|
17
|
|
|
12
|
|
||
Retirement related
|
15
|
|
|
16
|
|
||
Dividends payable to noncontrolling shareholders
|
14
|
|
|
17
|
|
||
Asbestos-related*
|
—
|
|
|
50
|
|
||
Other
|
108
|
|
|
109
|
|
||
Total accounts payable and accrued expenses
|
$
|
1,977
|
|
|
$
|
2,144
|
|
Other non-current liabilities:
|
|
|
|
|
|
||
Deferred income taxes
|
$
|
125
|
|
|
$
|
51
|
|
Operating leases
|
67
|
|
|
—
|
|
||
Product warranties
|
53
|
|
|
47
|
|
||
Deferred revenue
|
49
|
|
|
51
|
|
||
Other
|
255
|
|
|
208
|
|
||
Total other non-current liabilities
|
$
|
549
|
|
|
$
|
357
|
|
*
|
Relates to the derecognition of Morse TEC, refer to Note 19, “Recent Transactions” to the Consolidated Financial Statements for more information.
|
(a) Bad debt allowance:
|
2019
|
|
2018
|
|
2017
|
||||||
Beginning balance, January 1
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
|
$
|
(3
|
)
|
Provision
|
(1
|
)
|
|
(5
|
)
|
|
(3
|
)
|
|||
Write-offs
|
2
|
|
|
4
|
|
|
—
|
|
|||
Ending balance, December 31
|
$
|
(6
|
)
|
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
NOTE 7
|
GOODWILL AND OTHER INTANGIBLES
|
•
|
Discount rate: the Company used a 10.7% weighted average cost of capital (“WACC”) as the discount rate for future cash flows. The WACC is intended to represent a rate of return that would be expected by a market participant.
|
•
|
Operating income margin: the Company used historical and expected operating income margins, which may vary based on the projections of the reporting unit being evaluated.
|
•
|
Revenue growth rate: the Company used a global automotive market industry growth rate forecast adjusted to estimate its own market participation for product lines.
|
•
|
The automotive industry is cyclical, and the Company's results of operations would be adversely affected by industry downturns.
|
•
|
The Company is dependent on market segments that use our key products and would be affected by decreasing demand in those segments.
|
•
|
The Company is subject to risks related to international operations.
|
|
2019
|
|
2018
|
||||||||||||
(in millions)
|
Engine
|
|
Drivetrain
|
|
Engine
|
|
Drivetrain
|
||||||||
Gross goodwill balance, January 1
|
$
|
1,343
|
|
|
$
|
1,012
|
|
|
$
|
1,360
|
|
|
$
|
1,024
|
|
Accumulated impairment losses, January 1
|
(502
|
)
|
|
—
|
|
|
(502
|
)
|
|
—
|
|
||||
Net goodwill balance, January 1
|
$
|
841
|
|
|
$
|
1,012
|
|
|
$
|
858
|
|
|
$
|
1,024
|
|
Goodwill during the year:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisitions*
|
—
|
|
|
7
|
|
|
—
|
|
|
2
|
|
||||
Translation adjustment and other
|
(6
|
)
|
|
(12
|
)
|
|
(17
|
)
|
|
(14
|
)
|
||||
Ending balance, December 31
|
$
|
835
|
|
|
$
|
1,007
|
|
|
$
|
841
|
|
|
$
|
1,012
|
|
*
|
Acquisitions relate to the Company's 2019 purchase of Rinehart Motion Systems LLC and AM Racing LLC and the 2017 purchase of Sevcon.
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
(in millions)
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
carrying
amount
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
carrying
amount
|
||||||||||||
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patented and unpatented technology
|
$
|
154
|
|
|
$
|
70
|
|
|
$
|
84
|
|
|
$
|
152
|
|
|
$
|
61
|
|
|
$
|
91
|
|
Customer relationships
|
481
|
|
|
224
|
|
|
257
|
|
|
490
|
|
|
201
|
|
|
289
|
|
||||||
Miscellaneous
|
10
|
|
|
4
|
|
|
6
|
|
|
8
|
|
|
4
|
|
|
4
|
|
||||||
Total amortized intangible assets
|
645
|
|
|
298
|
|
|
347
|
|
|
650
|
|
|
266
|
|
|
384
|
|
||||||
Unamortized trade names
|
55
|
|
|
—
|
|
|
55
|
|
|
55
|
|
|
—
|
|
|
55
|
|
||||||
Total other intangible assets
|
$
|
700
|
|
|
$
|
298
|
|
|
$
|
402
|
|
|
$
|
705
|
|
|
$
|
266
|
|
|
$
|
439
|
|
(in millions)
|
2019
|
|
2018
|
||||
Beginning balance, January 1
|
$
|
705
|
|
|
$
|
730
|
|
Acquisitions*
|
5
|
|
|
—
|
|
||
Translation adjustment
|
(10
|
)
|
|
(25
|
)
|
||
Ending balance, December 31
|
$
|
700
|
|
|
$
|
705
|
|
*
|
Acquisitions relate to the Company's 2019 purchase of Rinehart Motion Systems LLC and AM Racing LLC and the 2017 purchase of Sevcon.
|
(in millions)
|
2019
|
|
2018
|
||||
Beginning balance, January 1
|
$
|
266
|
|
|
$
|
237
|
|
Amortization
|
39
|
|
|
40
|
|
||
Translation adjustment
|
(7
|
)
|
|
(11
|
)
|
||
Ending balance, December 31
|
$
|
298
|
|
|
$
|
266
|
|
NOTE 8
|
PRODUCT WARRANTY
|
(in millions)
|
2019
|
|
2018
|
||||
Beginning balance, January 1
|
$
|
103
|
|
|
$
|
112
|
|
Provisions for current period sales
|
63
|
|
|
56
|
|
||
Adjustments of prior estimates
|
9
|
|
|
12
|
|
||
Payments
|
(57
|
)
|
|
(73
|
)
|
||
Translation adjustment
|
(2
|
)
|
|
(4
|
)
|
||
Ending balance, December 31
|
$
|
116
|
|
|
$
|
103
|
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Accounts payable and accrued expenses
|
$
|
63
|
|
|
$
|
56
|
|
Other non-current liabilities
|
53
|
|
|
47
|
|
||
Total product warranty liability
|
$
|
116
|
|
|
$
|
103
|
|
NOTE 9
|
NOTES PAYABLE AND LONG-TERM DEBT
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Short-term debt
|
|
|
|
||||
Short-term borrowings
|
$
|
34
|
|
|
$
|
33
|
|
|
|
|
|
||||
Long-term debt
|
|
|
|
||||
8.00% Senior notes due 10/01/19 ($134 million par value)
|
—
|
|
|
135
|
|
||
4.625% Senior notes due 09/15/20 ($250 million par value)
|
251
|
|
|
251
|
|
||
1.80% Senior notes due 11/7/22 (€500 million par value)
|
558
|
|
|
570
|
|
||
3.375% Senior notes due 03/15/25 ($500 million par value)
|
497
|
|
|
497
|
|
||
7.125% Senior notes due 02/15/29 ($121 million par value)
|
119
|
|
|
119
|
|
||
4.375% Senior notes due 03/15/45 ($500 million par value)
|
494
|
|
|
494
|
|
||
Term loan facilities and other
|
7
|
|
|
15
|
|
||
Total long-term debt
|
$
|
1,926
|
|
|
$
|
2,081
|
|
Less: current portion
|
252
|
|
|
140
|
|
||
Long-term debt, net of current portion
|
$
|
1,674
|
|
|
$
|
1,941
|
|
(in millions)
|
|
||
2020
|
$
|
286
|
|
2021
|
3
|
|
|
2022
|
562
|
|
|
2023
|
1
|
|
|
2024
|
—
|
|
|
After 2024
|
1,121
|
|
|
Total payments
|
$
|
1,973
|
|
Less: unamortized discounts
|
13
|
|
|
Total
|
$
|
1,960
|
|
Level 1:
|
Observable inputs such as quoted prices for identical assets or liabilities in active markets;
|
Level 2:
|
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
Level 3:
|
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
A.
|
Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.
|
B.
|
Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).
|
C.
|
Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).
|
|
|
|
Basis of fair value measurements
|
|
|
||||||||||||
|
Balance at December 31, 2019
|
|
Quoted prices in active markets for identical items
(Level 1) |
|
Significant other observable inputs
(Level 2) |
|
Significant unobservable inputs
(Level 3) |
|
Valuation technique
|
||||||||
(in millions)
|
|
|
|
|
|||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net investment hedge contracts
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
A
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
A
|
Net investment hedge contracts
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
A
|
|
|
|
Basis of fair value measurements
|
|
|
||||||||||||
(in millions)
|
Balance at December 31, 2018
|
|
Quoted prices in active markets for identical items
(Level 1) |
|
Significant other observable inputs
(Level 2) |
|
Significant unobservable inputs
(Level 3) |
|
Valuation technique
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
A
|
Other long-term receivables (insurance settlement agreement note receivable)
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
—
|
|
|
C
|
Net investment hedge contracts
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
A
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
A
|
|
|
|
Basis of fair value measurements
|
||||||||||||||||||
(in millions)
|
Balance at December 31, 2019
|
|
Quoted prices in active markets for identical items
(Level 1) |
|
Significant other observable inputs
(Level 2) |
|
Significant unobservable inputs
(Level 3) (a) |
|
Valuation technique
|
|
Assets measured at NAV
(b) |
||||||||||
U.S. Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed income securities
|
$
|
88
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
88
|
|
|
Equity securities
|
59
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
A
|
|
51
|
|
|||||
Real estate and other
|
29
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
A
|
|
14
|
|
|||||
|
$
|
176
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
153
|
|
Non-U.S. Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed income securities
|
$
|
168
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
168
|
|
|
Equity securities
|
185
|
|
|
111
|
|
|
—
|
|
|
—
|
|
|
A
|
|
74
|
|
|||||
Insurance contract and other
|
152
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
C
|
|
42
|
|
|||||
|
$
|
505
|
|
|
$
|
111
|
|
|
$
|
—
|
|
|
$
|
110
|
|
|
|
|
$
|
284
|
|
|
|
|
Basis of fair value measurements
|
||||||||||||||||||
(in millions)
|
Balance at December 31, 2018
|
|
Quoted prices in active markets for identical items
(Level 1) |
|
Significant other observable inputs
(Level 2) |
|
Significant unobservable inputs
(Level 3) |
|
Valuation technique
|
|
Assets measured at NAV
(b)
|
||||||||||
U.S. Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed income securities
|
$
|
122
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
A
|
|
121
|
|
|
Equity securities
|
71
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
A
|
|
60
|
|
|||||
Real estate and other
|
23
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
A
|
|
5
|
|
|||||
|
$
|
216
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
186
|
|
Non-U.S. Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed income securities
|
$
|
239
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
239
|
|
|
Equity securities
|
163
|
|
|
93
|
|
|
—
|
|
|
—
|
|
|
A
|
|
70
|
|
|||||
Other
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
36
|
|
|||||
|
$
|
438
|
|
|
$
|
93
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
345
|
|
(a)
|
In 2019, the BW Plan, a defined benefit plan in the United Kingdom, purchased an insurance contract that guarantees payment of specified pension liabilities. The Company measures the fair value of the insurance asset by projecting expected future cash flows from the contract and discounting them to present value based on current market rates, including an assessment for non-performance risk of the insurance company. The assumptions used to project expected future cash flows are based on actuarial estimates and are unobservable; therefore, the contract is categorized within Level 3 of the hierarchy.
|
(b)
|
Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. These amounts represent investments in commingled and managed funds which have underlying assets in fixed income securities, equity securities, and other assets.
|
|
|
Fair Value Measurements
|
||
(in millions)
|
|
Using Significant Unobservable Inputs (Level 3)
|
||
Balance at December 31, 2018
|
|
$
|
—
|
|
Purchase of insurance contract
|
|
106
|
|
|
Unrealized gains on assets still held at the reporting date
|
|
2
|
|
|
Translation adjustment
|
|
2
|
|
|
Balance at December 31, 2019
|
|
$
|
110
|
|
NOTE 11
|
FINANCIAL INSTRUMENTS
|
|
|
Commodity derivative contracts
|
||||||||
|
|
Volume hedged
|
|
Volume hedged
|
|
|
|
|
||
Commodity
|
|
December 31, 2019
|
|
December 31, 2018
|
|
Units of measure
|
|
Duration
|
||
Copper
|
|
203
|
|
|
257
|
|
|
Metric Tons
|
|
Dec - 20
|
Foreign currency derivatives (in millions)
|
||||||||||
Functional currency
|
|
Traded currency
|
|
Notional in traded currency
December 31, 2019 |
|
Notional in traded currency
December 31, 2018 |
|
Ending duration
|
||
Brazilian real
|
|
Euro
|
|
1
|
|
|
4
|
|
|
Mar - 20
|
Brazilian real
|
|
US dollar
|
|
—
|
|
|
5
|
|
|
Jun - 19
|
British pound
|
|
Euro
|
|
9
|
|
|
—
|
|
|
Mar - 20
|
British pound
|
|
US dollar
|
|
4
|
|
|
—
|
|
|
Mar - 20
|
Chinese renminbi
|
|
US dollar
|
|
2
|
|
|
—
|
|
|
Aug - 20
|
Euro
|
|
British pound
|
|
—
|
|
|
7
|
|
|
Oct - 19
|
Euro
|
|
Japanese yen
|
|
383
|
|
|
—
|
|
|
Dec - 20
|
Euro
|
|
Swedish krona
|
|
—
|
|
|
540
|
|
|
Jun - 19
|
Euro
|
|
US dollar
|
|
18
|
|
|
19
|
|
|
Dec - 20
|
Japanese yen
|
|
Chinese renminbi
|
|
—
|
|
|
89
|
|
|
Dec - 19
|
Japanese yen
|
|
Korean won
|
|
—
|
|
|
5,785
|
|
|
Dec - 19
|
Japanese yen
|
|
US dollar
|
|
—
|
|
|
3
|
|
|
Dec - 19
|
Korean won
|
|
Euro
|
|
13
|
|
|
6
|
|
|
Dec - 20
|
Korean won
|
|
Japanese yen
|
|
409
|
|
|
266
|
|
|
Dec - 20
|
Korean won
|
|
US dollar
|
|
4
|
|
|
7
|
|
|
Dec - 20
|
Swedish krona
|
|
Euro
|
|
3
|
|
|
56
|
|
|
Jan - 20
|
US dollar
|
|
Euro
|
|
14
|
|
|
—
|
|
|
Dec - 20
|
US dollar
|
|
Mexican peso
|
|
—
|
|
|
575
|
|
|
Dec - 19
|
|
Cross-currency swaps
|
||||||||
(in millions)
|
December 31, 2019
|
|
December 31, 2018
|
|
Ending duration
|
||||
US dollar to Euro:
|
|
|
|
|
|
||||
Fixed receiving notional
|
$
|
500
|
|
|
$
|
250
|
|
|
Mar - 25
|
Fixed paying notional
|
€
|
450
|
|
|
€
|
206
|
|
|
Mar - 25
|
US dollar to Japanese yen:
|
|
|
|
|
|
||||
Fixed receiving notional
|
$
|
100
|
|
|
$
|
100
|
|
|
Feb - 23
|
Fixed paying notional
|
¥
|
10,978
|
|
|
¥
|
10,978
|
|
|
Feb - 23
|
(in millions)
|
|
Assets
|
|
Liabilities
|
||||||||||||||||
Derivatives designated as hedging instruments Under Topic 815:
|
|
Location
|
|
December 31, 2019
|
|
December 31, 2018
|
|
Location
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||
Foreign currency
|
|
Prepayments and other current assets
|
|
$
|
—
|
|
|
$
|
2
|
|
|
Accounts payable and accrued expenses
|
|
$
|
1
|
|
|
$
|
2
|
|
Net investment hedges
|
|
Other non-current assets
|
|
$
|
3
|
|
|
$
|
12
|
|
|
Other non-current liabilities
|
|
$
|
8
|
|
|
$
|
—
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency
|
|
Prepayments and other current assets
|
|
$
|
—
|
|
|
$
|
1
|
|
|
Accounts payable and accrued expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
(in millions)
|
|
Deferred gain (loss) in AOCI at
|
|
Gain (loss) expected to be reclassified to income in one year or less
|
||||||||
Contract Type
|
|
December 31, 2019
|
|
December 31, 2018
|
|
|||||||
Net investment hedges:
|
|
|
|
|
|
|
||||||
Foreign currency
|
|
5
|
|
|
4
|
|
|
—
|
|
|||
Cross-currency swaps
|
|
16
|
|
|
12
|
|
|
—
|
|
|||
Foreign currency denominated debt
|
|
(17
|
)
|
|
(30
|
)
|
|
—
|
|
|||
Total
|
|
$
|
4
|
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
|
Year Ended December 31, 2019
|
||||||||||||||
(in millions)
|
|
Net sales
|
|
Cost of sales
|
|
Selling, general and administrative expenses
|
|
Other comprehensive income
|
||||||||
Total amounts of earnings and other comprehensive income line items in which the effects of cash flow hedges are recorded
|
|
$
|
10,168
|
|
|
$
|
8,067
|
|
|
$
|
873
|
|
|
$
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) on cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in other comprehensive income
|
|
|
|
|
|
|
|
$
|
(1
|
)
|
||||||
Gain (loss) reclassified from AOCI to income
|
|
$
|
(5
|
)
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
|
Year Ended December 31, 2018
|
||||||||||||||
(in millions)
|
|
Net sales
|
|
Cost of sales
|
|
Selling, general and administrative expenses
|
|
Other comprehensive income
|
||||||||
Total amounts of earnings and other comprehensive income line items in which the effects of cash flow hedges are recorded
|
|
$
|
10,530
|
|
|
$
|
8,300
|
|
|
$
|
946
|
|
|
$
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) on cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in other comprehensive income
|
|
|
|
|
|
|
|
$
|
(1
|
)
|
||||||
Gain (loss) reclassified from AOCI to income
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Year Ended December 31, 2017
|
||||||||||||||
(in millions)
|
|
Net sales
|
|
Cost of sales
|
|
Selling, general and administrative expenses
|
|
Other comprehensive income
|
||||||||
Total amounts of earnings and other comprehensive income line items in which the effects of cash flow hedges are recorded
|
|
$
|
9,799
|
|
|
$
|
7,684
|
|
|
$
|
899
|
|
|
$
|
232
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) on cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in other comprehensive income
|
|
|
|
|
|
|
|
$
|
(5
|
)
|
||||||
Gain (loss) reclassified from AOCI to income
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commodity
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in other comprehensive income
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Gain (loss) reclassified from AOCI to income
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(in millions)
|
|
Year Ended December 31,
|
||||||||||
Net investment hedges
|
|
2019
|
|
2018
|
|
2017
|
||||||
Foreign currency
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
(8
|
)
|
Cross-currency swaps
|
|
$
|
4
|
|
|
$
|
12
|
|
|
$
|
—
|
|
Foreign currency denominated debt
|
|
$
|
13
|
|
|
$
|
27
|
|
|
$
|
(84
|
)
|
(in millions)
|
|
Year Ended December 31,
|
||||||||||
Net investment hedges
|
|
2019
|
|
2018
|
|
2017
|
||||||
Foreign currency
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Cross-currency swaps
|
|
$
|
11
|
|
|
$
|
9
|
|
|
$
|
—
|
|
(in millions)
|
|
|
|
Year Ended December 31,
|
||||||||||
Contract Type
|
|
Location
|
|
2019
|
|
2018
|
|
2017
|
||||||
Foreign Currency
|
|
Selling, general and administrative expenses
|
|
$
|
(3
|
)
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
NOTE 12
|
RETIREMENT BENEFIT PLANS
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Defined contribution expense
|
$
|
37
|
|
|
$
|
35
|
|
|
$
|
34
|
|
Defined benefit pension expense
|
45
|
|
|
8
|
|
|
12
|
|
|||
Other postretirement employee benefit expense
|
—
|
|
|
—
|
|
|
1
|
|
|||
Total
|
$
|
82
|
|
|
$
|
43
|
|
|
$
|
47
|
|
|
Pension benefits
|
|
Other postretirement
|
||||||||||||||||||||
|
Year Ended December 31,
|
|
employee benefits
|
||||||||||||||||||||
|
2019
|
|
2018
|
|
Year Ended December 31,
|
||||||||||||||||||
(in millions)
|
US
|
|
Non-US
|
|
US
|
|
Non-US
|
|
2019
|
|
2018
|
||||||||||||
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Projected benefit obligation, January 1
|
$
|
253
|
|
|
$
|
612
|
|
|
$
|
283
|
|
|
$
|
629
|
|
|
$
|
87
|
|
|
$
|
107
|
|
Service cost
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
||||||
Interest cost
|
8
|
|
|
12
|
|
|
9
|
|
|
12
|
|
|
3
|
|
|
3
|
|
||||||
Plan amendments
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||||
Settlement and curtailment
|
(65
|
)
|
|
(5
|
)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
||||||
Actuarial (gain) loss
|
17
|
|
|
75
|
|
|
(18
|
)
|
|
5
|
|
|
3
|
|
|
(6
|
)
|
||||||
Currency translation
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
—
|
|
||||||
Benefits paid
|
(15
|
)
|
|
(16
|
)
|
|
(21
|
)
|
|
(20
|
)
|
|
(12
|
)
|
|
(17
|
)
|
||||||
Projected benefit obligation, December 31
|
$
|
198
|
|
|
$
|
695
|
|
|
$
|
253
|
|
|
$
|
612
|
|
|
$
|
81
|
|
|
$
|
87
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fair value of plan assets, January 1
|
$
|
216
|
|
|
$
|
438
|
|
|
$
|
240
|
|
|
$
|
483
|
|
|
|
|
|
|
|
||
Actual return on plan assets
|
29
|
|
|
68
|
|
|
(11
|
)
|
|
(18
|
)
|
|
|
|
|
|
|
||||||
Employer contribution
|
10
|
|
|
16
|
|
|
7
|
|
|
19
|
|
|
|
|
|
|
|
||||||
Settlements
|
(65
|
)
|
|
(5
|
)
|
|
—
|
|
|
(4
|
)
|
|
|
|
|
|
|
||||||
Currency translation
|
—
|
|
|
4
|
|
|
—
|
|
|
(22
|
)
|
|
|
|
|
|
|
||||||
Benefits paid
|
(14
|
)
|
|
(16
|
)
|
|
(20
|
)
|
|
(20
|
)
|
|
|
|
|
|
|
||||||
Fair value of plan assets, December 31
|
$
|
176
|
|
|
$
|
505
|
|
|
$
|
216
|
|
|
$
|
438
|
|
|
|
|
|
||||
Funded status
|
$
|
(22
|
)
|
|
$
|
(190
|
)
|
|
$
|
(37
|
)
|
|
$
|
(174
|
)
|
|
$
|
(81
|
)
|
|
$
|
(87
|
)
|
Amounts in the Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-current assets
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
(1
|
)
|
|
(4
|
)
|
|
—
|
|
|
(5
|
)
|
|
(10
|
)
|
|
(11
|
)
|
||||||
Non-current liabilities
|
(21
|
)
|
|
(214
|
)
|
|
(37
|
)
|
|
(186
|
)
|
|
(71
|
)
|
|
(76
|
)
|
||||||
Net amount
|
$
|
(22
|
)
|
|
$
|
(190
|
)
|
|
$
|
(37
|
)
|
|
$
|
(174
|
)
|
|
$
|
(81
|
)
|
|
$
|
(87
|
)
|
Amounts in accumulated other comprehensive loss consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net actuarial loss
|
$
|
82
|
|
|
$
|
211
|
|
|
$
|
113
|
|
|
$
|
193
|
|
|
$
|
16
|
|
|
$
|
13
|
|
Net prior service (credit) cost
|
(5
|
)
|
|
2
|
|
|
(6
|
)
|
|
2
|
|
|
(8
|
)
|
|
(12
|
)
|
||||||
Net amount
|
$
|
77
|
|
|
$
|
213
|
|
|
$
|
107
|
|
|
$
|
195
|
|
|
$
|
8
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total accumulated benefit obligation for all plans
|
$
|
198
|
|
|
$
|
660
|
|
|
$
|
253
|
|
|
$
|
583
|
|
|
|
|
|
|
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Accumulated benefit obligation
|
$
|
(633
|
)
|
|
$
|
(650
|
)
|
Plan assets
|
425
|
|
|
450
|
|
||
Deficiency
|
$
|
(208
|
)
|
|
$
|
(200
|
)
|
Pension deficiency by country:
|
|
|
|
|
|
||
United States
|
$
|
(22
|
)
|
|
$
|
(37
|
)
|
Germany
|
(107
|
)
|
|
(95
|
)
|
||
Other
|
(79
|
)
|
|
(68
|
)
|
||
Total pension deficiency
|
$
|
(208
|
)
|
|
$
|
(200
|
)
|
|
December 31,
|
|
Target Allocation
|
||||
|
2019
|
|
2018
|
|
|||
U.S. Plans:
|
|
|
|
|
|
|
|
Real estate and other
|
16
|
%
|
|
11
|
%
|
|
0% - 15%
|
Fixed income securities
|
50
|
%
|
|
56
|
%
|
|
45% - 65%
|
Equity securities
|
34
|
%
|
|
33
|
%
|
|
25% - 45%
|
|
100
|
%
|
|
100
|
%
|
|
|
Non-U.S. Plans:
|
|
|
|
|
|
|
|
Insurance contract, real estate and other
|
30
|
%
|
|
8
|
%
|
|
0% - 36%
|
Fixed income securities
|
33
|
%
|
|
55
|
%
|
|
29% - 62%
|
Equity securities
|
37
|
%
|
|
37
|
%
|
|
30% - 43%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
Pension benefits
|
|
Other postretirement employee benefits
|
||||||||||||||||||||||||||||||||
|
Year Ended December 31,
|
|
|||||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||
(in millions)
|
US
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
|
Non-US
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||||||||
Service cost
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
8
|
|
|
12
|
|
|
9
|
|
|
12
|
|
|
9
|
|
|
11
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|||||||||
Expected return on plan assets
|
(11
|
)
|
|
(22
|
)
|
|
(14
|
)
|
|
(27
|
)
|
|
(13
|
)
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Settlements, curtailments and other
|
27
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Amortization of unrecognized prior service (credit) cost
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
|
(4
|
)
|
|||||||||
Amortization of unrecognized loss
|
4
|
|
|
9
|
|
|
4
|
|
|
7
|
|
|
4
|
|
|
8
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|||||||||
Net periodic cost (income)
|
$
|
27
|
|
|
$
|
18
|
|
|
$
|
(2
|
)
|
|
$
|
10
|
|
|
$
|
(1
|
)
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
December 31,
|
||
(percent)
|
2019
|
|
2018
|
U.S. pension plans:
|
|
|
|
Discount rate
|
3.17
|
|
4.24
|
Rate of compensation increase
|
N/A
|
|
N/A
|
U.S. other postretirement employee benefit plans:
|
|
|
|
Discount rate
|
2.95
|
|
4.05
|
Rate of compensation increase
|
N/A
|
|
N/A
|
Non-U.S. pension plans:
|
|
|
|
Discount rate
|
1.61
|
|
2.28
|
Rate of compensation increase
|
3.05
|
|
2.99
|
|
Year Ended December 31,
|
||
(percent)
|
2019
|
|
2018
|
U.S. pension plans:
|
|
|
|
Discount rate - service cost
|
4.24
|
|
3.55
|
Effective interest rate on benefit obligation
|
3.88
|
|
3.13
|
Expected long-term rate of return on assets
|
6.00
|
|
6.00
|
Average rate of increase in compensation
|
N/A
|
|
N/A
|
U.S. other postretirement plans:
|
|
|
|
Discount rate - service cost
|
3.43
|
|
2.65
|
Effective interest rate on benefit obligation
|
3.68
|
|
2.86
|
Expected long-term rate of return on assets
|
N/A
|
|
N/A
|
Average rate of increase in compensation
|
N/A
|
|
N/A
|
Non-U.S. pension plans:
|
|
|
|
Discount rate - service cost
|
2.55
|
|
2.71
|
Effective interest rate on benefit obligation
|
2.06
|
|
1.98
|
Expected long-term rate of return on assets
|
5.23
|
|
5.73
|
Average rate of increase in compensation
|
3.03
|
|
2.98
|
|
|
Pension benefits
|
|
Other postretirement employee benefits
|
||||||||
(in millions)
|
|
|
|
|
|
|||||||
Year
|
|
U.S.
|
|
Non-U.S.
|
|
|||||||
2020
|
|
$
|
20
|
|
|
$
|
20
|
|
|
$
|
10
|
|
2021
|
|
15
|
|
|
23
|
|
|
9
|
|
|||
2022
|
|
14
|
|
|
23
|
|
|
9
|
|
|||
2023
|
|
14
|
|
|
24
|
|
|
8
|
|
|||
2024
|
|
14
|
|
|
24
|
|
|
7
|
|
|||
2025-2029
|
|
62
|
|
|
137
|
|
|
25
|
|
|
One Percentage Point
|
||||||
(in millions)
|
Increase
|
|
Decrease
|
||||
Effect on other postretirement employee benefit obligation
|
$
|
5
|
|
|
$
|
(5
|
)
|
Effect on total service and interest cost components
|
$
|
—
|
|
|
$
|
—
|
|
NOTE 13
|
STOCK-BASED COMPENSATION
|
|
Shares (thousands)
|
|
Weighted average exercise price
|
|
Weighted average remaining contractual life
(in years)
|
|
Aggregate intrinsic value
(in millions)
|
|||||
Outstanding at January 1, 2017
|
473
|
|
|
$
|
17.47
|
|
|
0.1
|
|
$
|
10.4
|
|
Exercised
|
(473
|
)
|
|
$
|
17.47
|
|
|
|
|
$
|
10.4
|
|
Outstanding at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
0.0
|
|
$
|
—
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Outstanding at December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
0.0
|
|
$
|
—
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Outstanding at December 31, 2019
|
—
|
|
|
$
|
—
|
|
|
0.0
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|||||
Options exercisable at December 31, 2019
|
—
|
|
|
$
|
—
|
|
|
0.0
|
|
$
|
—
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Proceeds from stock options exercised — gross
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Tax benefit
|
—
|
|
|
—
|
|
|
8
|
|
|||
Proceeds from stock options exercised, net of tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
Year Ended December 31,
|
||||||||||
(in millions, except per share data)
|
2019
|
|
2018
|
|
2017
|
||||||
Restricted stock compensation expense
|
$
|
30
|
|
|
$
|
26
|
|
|
$
|
27
|
|
Restricted stock compensation expense, net of tax
|
$
|
23
|
|
|
$
|
20
|
|
|
$
|
20
|
|
|
Shares subject to restriction
(thousands) |
|
Weighted average grant date fair value
|
|||
Nonvested at January 1, 2017
|
1,429
|
|
|
$
|
44.12
|
|
Granted
|
804
|
|
|
$
|
40.10
|
|
Vested
|
(521
|
)
|
|
$
|
56.53
|
|
Forfeited
|
(119
|
)
|
|
$
|
38.97
|
|
Nonvested at December 31, 2017
|
1,593
|
|
|
$
|
38.86
|
|
Granted
|
737
|
|
|
$
|
51.70
|
|
Vested
|
(556
|
)
|
|
$
|
42.25
|
|
Forfeited
|
(258
|
)
|
|
$
|
44.51
|
|
Nonvested at December 31, 2018
|
1,516
|
|
|
$
|
42.97
|
|
Granted
|
1,082
|
|
|
$
|
41.66
|
|
Vested
|
(724
|
)
|
|
$
|
36.81
|
|
Forfeited
|
(210
|
)
|
|
$
|
44.82
|
|
Nonvested at December 31, 2019
|
1,664
|
|
|
$
|
44.26
|
|
|
Year Ended December 31,
|
||||||||||
(in millions, except share data)
|
2019
|
|
2018
|
|
2017
|
||||||
Expense
|
$
|
5
|
|
|
$
|
9
|
|
|
$
|
10
|
|
Number of shares
|
—
|
|
|
—
|
|
|
—
|
|
|
Number of shares
(thousands) |
|
Weighted average grant date fair value
|
|||
Nonvested at January 1, 2017
|
410
|
|
|
$
|
43.99
|
|
Granted
|
201
|
|
|
$
|
45.57
|
|
Forfeited
|
(256
|
)
|
|
$
|
61.40
|
|
Nonvested at December 31, 2017
|
355
|
|
|
$
|
32.35
|
|
Granted
|
287
|
|
|
$
|
68.38
|
|
Forfeited
|
(345
|
)
|
|
$
|
38.26
|
|
Nonvested at December 31, 2018
|
297
|
|
|
$
|
60.35
|
|
Granted
|
196
|
|
|
$
|
51.52
|
|
Vested
|
(160
|
)
|
|
$
|
45.78
|
|
Forfeited
|
(93
|
)
|
|
$
|
55.82
|
|
Nonvested at December 31, 2019
|
240
|
|
|
$
|
64.61
|
|
|
Year Ended December 31,
|
||||||||||
(in millions, except share data)
|
2019
|
|
2018
|
|
2017
|
||||||
Expense
|
$
|
7
|
|
|
$
|
18
|
|
|
$
|
16
|
|
Number of shares
|
315,000
|
|
|
249,000
|
|
|
126,000
|
|
|
Number of shares
(thousands) |
|
Weighted average grant date fair value
|
|||
Nonvested at January 1, 2017
|
320
|
|
|
$
|
38.62
|
|
Granted
|
198
|
|
|
$
|
40.08
|
|
Vested
|
(156
|
)
|
|
$
|
38.62
|
|
Forfeited
|
(7
|
)
|
|
$
|
39.20
|
|
Nonvested at December 31, 2017
|
355
|
|
|
$
|
39.42
|
|
Granted
|
287
|
|
|
$
|
50.82
|
|
Vested
|
(166
|
)
|
|
$
|
38.62
|
|
Forfeited
|
(179
|
)
|
|
$
|
45.82
|
|
Nonvested at December 31, 2018
|
297
|
|
|
$
|
47.03
|
|
Granted
|
196
|
|
|
$
|
41.90
|
|
Vested
|
(160
|
)
|
|
$
|
40.10
|
|
Forfeited
|
(93
|
)
|
|
$
|
44.30
|
|
Nonvested at December 31, 2019
|
240
|
|
|
$
|
48.52
|
|
(in millions)
|
|
Foreign currency translation adjustments
|
|
Hedge instruments
|
|
Defined benefit postretirement plans
|
|
Other
|
|
Total
|
||||||||||
Beginning Balance, January 1, 2017
|
|
$
|
(530
|
)
|
|
$
|
5
|
|
|
$
|
(198
|
)
|
|
$
|
1
|
|
|
$
|
(722
|
)
|
Comprehensive (loss) income before reclassifications
|
|
236
|
|
|
(4
|
)
|
|
(5
|
)
|
|
2
|
|
|
229
|
|
|||||
Income taxes associated with comprehensive (loss) income before reclassifications
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||||
Reclassification from accumulated other comprehensive (loss) income
|
|
—
|
|
|
(4
|
)
|
|
9
|
|
|
—
|
|
|
5
|
|
|||||
Income taxes reclassified into net earnings
|
|
—
|
|
|
1
|
|
|
(3
|
)
|
|
—
|
|
|
(2
|
)
|
|||||
Ending Balance December 31, 2017
|
|
$
|
(294
|
)
|
|
$
|
(1
|
)
|
|
$
|
(198
|
)
|
|
$
|
3
|
|
|
$
|
(490
|
)
|
Adoption of accounting standard
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
(14
|
)
|
|||||
Comprehensive (loss) income before reclassifications
|
|
(153
|
)
|
|
(2
|
)
|
|
(42
|
)
|
|
(1
|
)
|
|
(198
|
)
|
|||||
Income taxes associated with comprehensive (loss) income before reclassifications
|
|
5
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
19
|
|
|||||
Reclassification from accumulated other comprehensive (loss) income
|
|
—
|
|
|
4
|
|
|
8
|
|
|
—
|
|
|
12
|
|
|||||
Income taxes reclassified into net earnings
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
|
—
|
|
|
(3
|
)
|
|||||
Ending Balance December 31, 2018
|
|
$
|
(442
|
)
|
|
$
|
—
|
|
|
$
|
(234
|
)
|
|
$
|
2
|
|
|
$
|
(674
|
)
|
Comprehensive (loss) income before reclassifications
|
|
(51
|
)
|
|
(1
|
)
|
|
(29
|
)
|
|
(2
|
)
|
|
(83
|
)
|
|||||
Income taxes associated with comprehensive (loss) income before reclassifications
|
|
(4
|
)
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|||||
Reclassification from accumulated other comprehensive (loss) income
|
|
—
|
|
|
1
|
|
|
37
|
|
|
—
|
|
|
38
|
|
|||||
Income taxes reclassified into net earnings
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
|||||
Ending Balance December 31, 2019
|
|
$
|
(497
|
)
|
|
$
|
—
|
|
|
$
|
(230
|
)
|
|
$
|
—
|
|
|
$
|
(727
|
)
|
NOTE 15
|
CONTINGENCIES
|
|
2019
|
|
2018
|
||
Beginning claims January 1
|
8,598
|
|
|
9,225
|
|
New claims received
|
1,667
|
|
|
1,932
|
|
Dismissed claims
|
(967
|
)
|
|
(2,189
|
)
|
Settled claims
|
(237
|
)
|
|
(370
|
)
|
Derecognized claims
|
(9,061
|
)
|
|
—
|
|
Ending claims December 31
|
—
|
|
|
8,598
|
|
(in millions)
|
2019
|
|
2018
|
||||
Beginning asbestos liability as of January 1
|
$
|
805
|
|
|
$
|
828
|
|
Actuarial revaluation
|
—
|
|
|
23
|
|
||
Claim resolution costs and defense related costs
|
(37
|
)
|
|
(46
|
)
|
||
Derecognized liability
|
(768
|
)
|
|
—
|
|
||
Ending asbestos liability as of December 31
|
$
|
—
|
|
|
$
|
805
|
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Assets:
|
|
|
|
|
|
||
Other long-term asbestos-related insurance receivables
|
$
|
—
|
|
|
$
|
303
|
|
Deferred asbestos-related insurance asset
|
—
|
|
|
83
|
|
||
Total insurance assets
|
$
|
—
|
|
|
$
|
386
|
|
Liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
—
|
|
|
$
|
50
|
|
Other non-current liabilities
|
—
|
|
|
755
|
|
||
Total accrued liabilities
|
$
|
—
|
|
|
$
|
805
|
|
|
|
Severance Accruals
|
||||||||||
(in millions)
|
|
Drivetrain
|
|
Engine
|
|
Total
|
||||||
Balance at January 1, 2018
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
5
|
|
Provision
|
|
7
|
|
|
35
|
|
|
42
|
|
|||
Cash payments
|
|
(7
|
)
|
|
(15
|
)
|
|
(22
|
)
|
|||
Balance at December 31, 2018
|
|
4
|
|
|
21
|
|
|
25
|
|
|||
Provision
|
|
1
|
|
|
43
|
|
|
44
|
|
|||
Cash payments
|
|
(1
|
)
|
|
(34
|
)
|
|
(35
|
)
|
|||
Balance at December 31, 2019
|
|
$
|
4
|
|
|
$
|
30
|
|
|
$
|
34
|
|
NOTE 17
|
LEASES AND COMMITMENTS
|
(in millions)
|
|
|
December 31, 2019
|
|
|
Assets
|
Location
|
|
|
||
Operating leases
|
Other non-current assets
|
|
$
|
85
|
|
Total operating leases
|
|
|
$
|
85
|
|
|
|
|
|
||
Liabilities
|
|
|
|
||
Operating leases
|
Accounts payable and accrued expenses
|
|
$
|
18
|
|
Operating leases
|
Other non-current liabilities
|
|
67
|
|
|
Total operating lease liabilities
|
|
|
$
|
85
|
|
(in millions)
|
|
Operating leases
|
||
2020
|
|
$
|
20
|
|
2021
|
|
15
|
|
|
2022
|
|
13
|
|
|
2023
|
|
9
|
|
|
2024
|
|
7
|
|
|
After 2024
|
|
33
|
|
|
Total (undiscounted) lease payments
|
|
$
|
97
|
|
Less: Imputed interest
|
|
12
|
|
|
Present value of lease liabilities
|
|
$
|
85
|
|
Operating leases
|
As of December 31, 2019
|
|
Weighted-average remaining lease term (years)
|
8
|
|
Weighted-average discount rate
|
2.8
|
%
|
NOTE 18
|
EARNINGS PER SHARE
|
|
Year Ended December 31,
|
||||||||||
(in millions except share and per share amounts)
|
2019
|
|
2018
|
|
2017
|
||||||
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|||
Net earnings attributable to BorgWarner Inc.
|
$
|
746
|
|
|
$
|
931
|
|
|
$
|
440
|
|
Weighted average shares of common stock outstanding
|
205.7
|
|
|
208.2
|
|
|
210.4
|
|
|||
Basic earnings per share of common stock
|
$
|
3.63
|
|
|
$
|
4.47
|
|
|
$
|
2.09
|
|
|
|
|
|
|
|
||||||
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||
Net earnings attributable to BorgWarner Inc.
|
$
|
746
|
|
|
$
|
931
|
|
|
$
|
440
|
|
|
|
|
|
|
|
||||||
Weighted average shares of common stock outstanding
|
205.7
|
|
|
208.2
|
|
|
210.4
|
|
|||
Effect of stock-based compensation
|
1.1
|
|
|
1.3
|
|
|
1.1
|
|
|||
Weighted average shares of common stock outstanding including dilutive shares
|
206.8
|
|
|
209.5
|
|
|
211.5
|
|
|||
Diluted earnings per share of common stock
|
$
|
3.61
|
|
|
$
|
4.44
|
|
|
$
|
2.08
|
|
|
|
|
|
|
|
||||||
Antidilutive stock-based awards excluded from the calculation of diluted earnings per share
|
0.1
|
|
|
0.1
|
|
|
—
|
|
NOTE 19
|
RECENT TRANSACTIONS
|
(in millions)
|
|
|
||
Cash and cash equivalents
|
|
$
|
(172
|
)
|
Receivables, net
|
|
(9
|
)
|
|
Investments and other long-term receivables
|
|
(371
|
)
|
|
Other non-current assets
|
|
(223
|
)
|
|
Accounts payable and accrued expenses
|
|
7
|
|
|
Asbestos-related and environmental liabilities
|
|
772
|
|
|
Gain on derecognition of subsidiary, net
|
|
$
|
4
|
|
NOTE 20
|
ASSETS AND LIABILITIES HELD FOR SALE
|
|
December 31,
|
||
(in millions)
|
2018
|
||
Receivables, net
|
$
|
15
|
|
Inventories, net
|
42
|
|
|
Prepayments and other current assets
|
12
|
|
|
Property, plant and equipment, net
|
45
|
|
|
Goodwill
|
7
|
|
|
Other intangible assets, net
|
20
|
|
|
Other assets
|
—
|
|
|
Impairment of carrying value
|
(94
|
)
|
|
Total assets held for sale
|
$
|
47
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
18
|
|
Other liabilities
|
5
|
|
|
Total liabilities held for sale
|
$
|
23
|
|
NOTE 21
|
REPORTING SEGMENTS AND RELATED INFORMATION
|
2019 Segment information
|
|
|
|
|
|
|
|
||||||||||||||||
|
Net sales
|
|
Year-end assets
|
|
Depreciation/ amortization
|
|
Long-lived asset expenditures (a)
|
||||||||||||||||
(in millions)
|
Customers
|
|
Inter-segment
|
|
Net
|
|
|
|
|||||||||||||||
Engine
|
$
|
6,153
|
|
|
$
|
61
|
|
|
$
|
6,214
|
|
|
$
|
4,536
|
|
|
$
|
227
|
|
|
$
|
219
|
|
Drivetrain
|
4,015
|
|
|
—
|
|
|
4,015
|
|
|
4,075
|
|
|
183
|
|
|
254
|
|
||||||
Inter-segment eliminations
|
—
|
|
|
(61
|
)
|
|
(61
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
10,168
|
|
|
—
|
|
|
10,168
|
|
|
8,611
|
|
|
410
|
|
|
473
|
|
||||||
Corporate (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,091
|
|
|
29
|
|
|
8
|
|
||||||
Consolidated
|
$
|
10,168
|
|
|
$
|
—
|
|
|
$
|
10,168
|
|
|
$
|
9,702
|
|
|
$
|
439
|
|
|
$
|
481
|
|
2018 Segment information
|
|
|
|
|
|
|
|
||||||||||||||||
|
Net sales
|
|
Year-end assets
|
|
Depreciation/ amortization
|
|
Long-lived asset expenditures (a)
|
||||||||||||||||
(in millions)
|
Customers
|
|
Inter-segment
|
|
Net
|
|
|
|
|||||||||||||||
Engine
|
$
|
6,390
|
|
|
$
|
57
|
|
|
$
|
6,447
|
|
|
$
|
4,731
|
|
|
$
|
226
|
|
|
$
|
278
|
|
Drivetrain
|
4,140
|
|
|
—
|
|
|
4,140
|
|
|
3,920
|
|
|
175
|
|
|
254
|
|
||||||
Inter-segment eliminations
|
—
|
|
|
(57
|
)
|
|
(57
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
10,530
|
|
|
—
|
|
|
10,530
|
|
|
8,651
|
|
|
401
|
|
|
532
|
|
||||||
Corporate (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,444
|
|
|
30
|
|
|
14
|
|
||||||
Consolidated
|
$
|
10,530
|
|
|
$
|
—
|
|
|
$
|
10,530
|
|
|
$
|
10,095
|
|
|
$
|
431
|
|
|
$
|
546
|
|
2017 Segment information
|
|
|
|
|
|
|
|
||||||||||||||||
|
Net sales
|
|
Year-end assets
|
|
Depreciation/ amortization
|
|
Long-lived asset
expenditures (a) |
||||||||||||||||
(in millions)
|
Customers
|
|
Inter-segment
|
|
Net
|
|
|
|
|||||||||||||||
Engine
|
$
|
6,009
|
|
|
$
|
53
|
|
|
$
|
6,062
|
|
|
$
|
4,733
|
|
|
$
|
219
|
|
|
$
|
305
|
|
Drivetrain
|
3,790
|
|
|
—
|
|
|
3,790
|
|
|
3,904
|
|
|
161
|
|
|
242
|
|
||||||
Inter-segment eliminations
|
—
|
|
|
(53
|
)
|
|
(53
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
9,799
|
|
|
—
|
|
|
9,799
|
|
|
8,637
|
|
|
380
|
|
|
547
|
|
||||||
Corporate (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,151
|
|
|
28
|
|
|
13
|
|
||||||
Consolidated
|
$
|
9,799
|
|
|
$
|
—
|
|
|
$
|
9,799
|
|
|
$
|
9,788
|
|
|
$
|
408
|
|
|
$
|
560
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Engine
|
$
|
995
|
|
|
$
|
1,040
|
|
|
$
|
992
|
|
Drivetrain
|
443
|
|
|
475
|
|
|
448
|
|
|||
Adjusted EBIT
|
1,438
|
|
|
1,515
|
|
|
1,440
|
|
|||
Gain on derecognition of subsidiary
|
(177
|
)
|
|
—
|
|
|
—
|
|
|||
Restructuring expense
|
72
|
|
|
67
|
|
|
58
|
|
|||
Unfavorable arbitration loss
|
14
|
|
|
—
|
|
|
—
|
|
|||
Merger, acquisition and divestiture expense
|
11
|
|
|
6
|
|
|
10
|
|
|||
Asset impairment and loss on divestiture
|
7
|
|
|
25
|
|
|
71
|
|
|||
Officer stock awards modification
|
2
|
|
|
8
|
|
|
—
|
|
|||
Asbestos-related adjustments
|
—
|
|
|
23
|
|
|
—
|
|
|||
Gain on sale of building
|
—
|
|
|
(19
|
)
|
|
—
|
|
|||
Lease termination settlement
|
—
|
|
|
—
|
|
|
5
|
|
|||
Other (income) expense
|
—
|
|
|
(4
|
)
|
|
2
|
|
|||
Corporate, including stock-based compensation
|
206
|
|
|
219
|
|
|
222
|
|
|||
Equity in affiliates' earnings, net of tax
|
(32
|
)
|
|
(49
|
)
|
|
(51
|
)
|
|||
Interest income
|
(12
|
)
|
|
(6
|
)
|
|
(6
|
)
|
|||
Interest expense
|
55
|
|
|
59
|
|
|
71
|
|
|||
Other postretirement expense (income)
|
27
|
|
|
(10
|
)
|
|
(5
|
)
|
|||
Earnings before income taxes and noncontrolling interest
|
1,265
|
|
|
1,196
|
|
|
1,063
|
|
|||
Provision for income taxes
|
468
|
|
|
211
|
|
|
580
|
|
|||
Net earnings
|
797
|
|
|
985
|
|
|
483
|
|
|||
Net earnings attributable to the noncontrolling interest, net of tax
|
51
|
|
|
54
|
|
|
43
|
|
|||
Net earnings attributable to BorgWarner Inc.
|
$
|
746
|
|
|
$
|
931
|
|
|
$
|
440
|
|
|
Net sales
|
|
Long-lived assets
|
||||||||||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
United States
|
$
|
2,335
|
|
|
$
|
2,394
|
|
|
$
|
2,280
|
|
|
$
|
752
|
|
|
$
|
729
|
|
|
$
|
719
|
|
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Germany
|
1,507
|
|
|
1,665
|
|
|
1,653
|
|
|
328
|
|
|
371
|
|
|
413
|
|
||||||
Poland
|
627
|
|
|
519
|
|
|
522
|
|
|
180
|
|
|
171
|
|
|
152
|
|
||||||
Hungary
|
589
|
|
|
687
|
|
|
656
|
|
|
164
|
|
|
153
|
|
|
148
|
|
||||||
Other Europe
|
1,087
|
|
|
1,151
|
|
|
904
|
|
|
285
|
|
|
282
|
|
|
274
|
|
||||||
Total Europe
|
3,810
|
|
|
4,022
|
|
|
3,735
|
|
|
957
|
|
|
977
|
|
|
987
|
|
||||||
China
|
1,711
|
|
|
1,801
|
|
|
1,560
|
|
|
605
|
|
|
589
|
|
|
555
|
|
||||||
Mexico
|
1,040
|
|
|
978
|
|
|
920
|
|
|
247
|
|
|
223
|
|
|
201
|
|
||||||
South Korea
|
786
|
|
|
859
|
|
|
877
|
|
|
221
|
|
|
235
|
|
|
244
|
|
||||||
Other foreign
|
486
|
|
|
476
|
|
|
427
|
|
|
152
|
|
|
151
|
|
|
158
|
|
||||||
Total
|
$
|
10,168
|
|
|
$
|
10,530
|
|
|
$
|
9,799
|
|
|
$
|
2,934
|
|
|
$
|
2,904
|
|
|
$
|
2,864
|
|
|
|||||||||||||||||||||||||||||||||||||||
(in millions, except per share amounts)
|
2019
|
|
2018
|
||||||||||||||||||||||||||||||||||||
Quarter ended
|
Mar-31
|
|
Jun-30
|
|
Sep-30
|
|
Dec-31
|
|
Year
|
|
Mar-31
|
|
Jun-30
|
|
Sep-30
|
|
Dec-31
|
|
Year
|
||||||||||||||||||||
Net sales
|
$
|
2,566
|
|
|
$
|
2,551
|
|
|
$
|
2,492
|
|
|
$
|
2,559
|
|
|
$
|
10,168
|
|
|
$
|
2,784
|
|
|
$
|
2,694
|
|
|
$
|
2,478
|
|
|
$
|
2,574
|
|
|
$
|
10,530
|
|
Cost of sales
|
2,047
|
|
|
2,038
|
|
|
1,968
|
|
|
2,014
|
|
|
8,067
|
|
|
2,193
|
|
|
2,114
|
|
|
1,963
|
|
|
2,030
|
|
|
8,300
|
|
||||||||||
Gross profit
|
519
|
|
|
513
|
|
|
524
|
|
|
545
|
|
|
2,101
|
|
|
591
|
|
|
580
|
|
|
515
|
|
|
544
|
|
|
2,230
|
|
||||||||||
Selling, general and administrative expenses
|
226
|
|
|
212
|
|
|
230
|
|
|
205
|
|
|
873
|
|
|
253
|
|
|
237
|
|
|
230
|
|
|
226
|
|
|
946
|
|
||||||||||
Other expense (income), net
|
29
|
|
|
16
|
|
|
18
|
|
|
(138
|
)
|
|
(75
|
)
|
|
5
|
|
|
30
|
|
|
7
|
|
|
52
|
|
|
94
|
|
||||||||||
Operating income
|
264
|
|
|
285
|
|
|
276
|
|
|
478
|
|
|
1,303
|
|
|
333
|
|
|
313
|
|
|
278
|
|
|
266
|
|
|
1,190
|
|
||||||||||
Equity in affiliates’ earnings, net of tax
|
(9
|
)
|
|
(9
|
)
|
|
(7
|
)
|
|
(7
|
)
|
|
(32
|
)
|
|
(10
|
)
|
|
(13
|
)
|
|
(15
|
)
|
|
(11
|
)
|
|
(49
|
)
|
||||||||||
Interest income
|
(3
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
(12
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
(6
|
)
|
||||||||||
Interest expense
|
14
|
|
|
14
|
|
|
15
|
|
|
12
|
|
|
55
|
|
|
16
|
|
|
15
|
|
|
14
|
|
|
14
|
|
|
59
|
|
||||||||||
Other postretirement expense (income)
|
—
|
|
|
27
|
|
|
(1
|
)
|
|
1
|
|
|
27
|
|
|
(3
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(2
|
)
|
|
(10
|
)
|
||||||||||
Earnings before income taxes and noncontrolling interest
|
262
|
|
|
255
|
|
|
273
|
|
|
475
|
|
|
1,265
|
|
|
332
|
|
|
314
|
|
|
283
|
|
|
267
|
|
|
1,196
|
|
||||||||||
Provision for income taxes
|
91
|
|
|
73
|
|
|
66
|
|
|
238
|
|
|
468
|
|
|
95
|
|
|
30
|
|
|
67
|
|
|
19
|
|
|
211
|
|
||||||||||
Net earnings
|
171
|
|
|
182
|
|
|
207
|
|
|
237
|
|
|
797
|
|
|
237
|
|
|
284
|
|
|
216
|
|
|
248
|
|
|
985
|
|
||||||||||
Net earnings attributable to the noncontrolling interest, net of tax
|
11
|
|
|
10
|
|
|
13
|
|
|
17
|
|
|
51
|
|
|
12
|
|
|
12
|
|
|
12
|
|
|
18
|
|
|
54
|
|
||||||||||
Net earnings attributable to BorgWarner Inc. (a)
|
$
|
160
|
|
|
$
|
172
|
|
|
$
|
194
|
|
|
$
|
220
|
|
|
$
|
746
|
|
|
$
|
225
|
|
|
$
|
272
|
|
|
$
|
204
|
|
|
$
|
230
|
|
|
$
|
931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Earnings per share — basic
|
$
|
0.77
|
|
|
$
|
0.84
|
|
|
$
|
0.94
|
|
|
$
|
1.07
|
|
|
$
|
3.63
|
|
|
$
|
1.07
|
|
|
$
|
1.30
|
|
|
$
|
0.98
|
|
|
$
|
1.11
|
|
|
$
|
4.47
|
|
Earnings per share — diluted
|
$
|
0.77
|
|
|
$
|
0.83
|
|
|
$
|
0.94
|
|
|
$
|
1.06
|
|
|
$
|
3.61
|
|
|
$
|
1.07
|
|
|
$
|
1.30
|
|
|
$
|
0.98
|
|
|
$
|
1.10
|
|
|
$
|
4.44
|
|
•
|
Quarter ended December 31, 2019: The Company recorded a pre-tax gain on the derecognition of Morse TEC of $177 million. In addition, the Company recorded tax expense as a result of the reversal of the previously recorded deferred tax assets related to the asbestos liabilities of $173 million, resulting in an after-tax gain of $4 million. The Company recorded restructuring expense of $31 million primarily related to actions to reduce structural costs. The Company recorded $7 million of additional loss on sale related to the finalization of the purchase price adjustments related to the sale of the non-core pipes and thermostat product lines. The Company recorded reductions of income tax expense of $11 million related to a global realignment plan and $8 million related to restructuring expense, partially offset by an increase in income tax of $5 million related to other one-time adjustments.
|
•
|
Quarter ended September 30, 2019: The Company recorded restructuring expense of $14 million primarily related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company recorded expenses, primarily professional fees, related to the Company's review of strategic acquisition and divestiture targets, including the 20% equity interest in Romeo, and the divestiture activities for the non-core pipes and thermostat product lines of $4 million. The Company recorded reductions of income tax expense of $4 million related to restructuring expense and $9 million related to other one-time adjustments.
|
•
|
Quarter ended June 30, 2019: The Company recorded restructuring expense of $13 million primarily related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company recorded expenses, primarily professional fees, related to the Company's review of strategic acquisition and divestiture targets, including the 20% equity interest in Romeo, and the divestiture activities for the non-core pipes and thermostat product lines of $5 million. The Company recorded reductions of income tax expense of $4 million related to restructuring expense, $6 million related to pension settlement loss, partially offset by an increase in income tax of $1 million related to other one-time adjustments.
|
•
|
Quarter ended March 31, 2019: The Company recorded restructuring expense of $14 million primarily related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. The Company recorded expenses, primarily professional fees, associated with divestiture activities for the non-core pipes and thermostat product lines of $1 million. The Company recorded $14 million of expense related to the receipt of a final unfavorable arbitration decision associated with the resolution of a matter related to a previous acquisition. The Company recorded reductions of income tax expense of $3 million related to restructuring expense and $5 million related to other one-time adjustments. The Company recorded an increase in income tax expense of $22 million due to the U.S. Department of the Treasury's issuance of the final regulations in the first quarter of 2019 related to the calculation of the one-time transition tax.
|
•
|
Quarter ended December 31, 2018: The Company recorded an asset impairment expense of $26 million to adjust the net book value of the pipes and thermostat product lines to fair value. The Company recorded asbestos-related adjustments resulting in a net increase to Other Expense of $23 million. The Company recorded restructuring expense of $23 million primarily related to the Engine and Drivetrain segment actions designed to improve future profitability and competitiveness. The Company recorded a gain of $19 million related to the sale of a building at a manufacturing facility located in Europe. The Company also recorded merger and acquisition expense of $1 million primarily related to professional fees associated with divestiture activities for the non-core pipes and thermostat product line. The Company recorded reductions of income tax expense of $6 million related to restructuring expense, $6 million related to asbestos-related adjustments, $8 million related to asset impairment expense, $9 million related to valuation allowance releases, $3 million related to tax reserve adjustments, and $19 million related to changes in accounting methods and tax filing positions for prior years primarily related to the Tax Act. Additionally, the Company recorded income tax expense of $6 million related to a gain on the sale of a building, and $7 million related to adjustments to measurement period provisional estimates associated with the Tax Act.
|
•
|
Quarter ended September 30, 2018: The Company recorded restructuring expense of $6 million primarily related to the actions within its Engine segment designed to improve future profitability and competitiveness. The Company also recorded merger and acquisition expense of $2 million primarily related to professional fees associated with divestiture activities for the non-core pipes and thermostat product line. The Company recorded reductions of income tax expense of $1 million related to restructuring expense, $7 million related to adjustments to measurement period provisional estimates associated with the Tax Act, $1 million related to a decrease in our deferred tax liability due to the Company's ability to record a tax benefit for certain foreign tax credits available due to actions the Company took during the year, and $2 million related to other one-time tax adjustments, primarily due to changes in tax filing positions.
|
•
|
Quarter ended June 30, 2018: The Company recorded restructuring expense of $31 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 $1 million primarily related to professional fees associated with divestiture activities for the non-core pipes and thermostat product line. The Company recorded reductions of income tax expenses of $8 million associated with restructuring expense, $13 million related to adjustments to measurement period provisional estimates associated with the Tax Act, $21 million related to a decrease in our deferred tax liability due to the Company's ability to record a tax benefit for certain foreign tax credits available due to actions the Company took in the second quarter, and $10 million related to other one-time tax adjustments.
|
•
|
Quarter ended March 31, 2018: The Company recorded restructuring expense of $8 million primarily related to Engine and Drivetrain segment actions designed to improve future profitability and competitiveness. The Company recorded a gain of approximately $4 million related to the settlement of a commercial contract for an entity acquired in the 2015 Remy acquisition. The Company also recorded merger and acquisition expense of $2 million primarily related to professional fees associated with divestiture activities for the non-core pipes product line. The Company recorded income tax expenses of $1 million, and reductions of income tax expense of $1 million which is associated with restructuring expense.
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
Item 16.
|
Form 10-K Summary
|
Exhibit Number
|
Description
|
|||
|
|
|
||
|
2.1
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
|
|
†10.2
|
|
|
|
|
|
|
|
|
|
†10.3
|
|
|
|
|
|
|
|
Exhibit Number
|
Description
|
|||
|
|
|
||
|
†10.4
|
|
|
|
|
|
|
|
|
|
†10.5
|
|
|
|
|
|
|
|
|
|
†10.6
|
|
|
|
|
|
|
|
|
|
†10.7
|
|
|
|
|
|
|
|
|
|
†10.8
|
|
|
|
|
|
|
|
|
|
†10.9
|
|
|
|
|
|
|
|
|
|
†10.10
|
|
|
|
|
|
|
|
|
|
†10.11
|
|
|
|
|
|
|
|
|
|
†10.12
|
|
|
|
|
|
|
|
|
|
†10.13
|
|
|
|
|
|
|
|
|
|
†10.14
|
|
|
|
|
|
|
|
|
|
†10.15
|
|
|
|
|
|
|
|
|
|
†10.16
|
|
|
|
|
|
|
|
|
|
†10.17
|
|
|
|
|
|
|
|
Exhibit Number
|
Description
|
|||
|
|
|
||
|
†10.18
|
|
|
|
|
|
|
|
|
|
†10.19
|
|
|
|
|
|
|
|
|
|
†10.20
|
|
|
|
|
|
|
|
|
|
†10.21
|
|
|
|
|
|
|
|
|
|
†10.22
|
|
|
|
|
|
|
|
|
|
†10.23
|
|
|
|
|
|
|
|
|
|
†10.24
|
|
|
|
|
|
|
|
|
|
†10.25
|
|
|
|
|
|
|
|
|
|
†10.26
|
|
|
|
|
|
|
|
|
|
†10.27
|
|
|
|
|
|
|
|
|
|
†10.28
|
|
|
|
|
|
|
|
|
|
†10.29
|
|
|
|
|
|
|
|
|
|
†10.30
|
|
|
|
|
|
|
|
Exhibit Number
|
Description
|
|||
|
|
|
||
|
†10.31
|
|
|
|
|
|
|
|
|
|
†10.32
|
|
|
|
|
|
|
|
|
|
†10.33
|
|
|
|
|
|
|
|
|
|
†10.34
|
|
|
|
|
|
|
|
|
|
†10.35
|
|
|
|
|
|
|
|
|
|
†10.36
|
|
|
|
|
|
|
|
|
|
†10.37
|
|
|
|
|
|
|
|
|
|
10.38
|
|
|
|
|
|
|
|
|
|
10.39
|
|
|
|
|
|
|
|
|
|
10.40
|
|
|
|
|
|
|
|
|
|
10.41
|
|
|
|
|
|
|
|
|
|
21.1
|
|
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
|
|
|
BORGWARNER INC.
|
By:
|
/s/ Frederic B. Lissalde
|
|
Frederic B. Lissalde
|
|
President and Chief Executive Officer
|
Signature
|
|
Title
|
||
|
||||
/s/ Frederic B. Lissalde
|
|
President and Chief Executive Officer
|
||
Frederic B. Lissalde
|
|
(Principal Executive Officer) and Director
|
||
|
||||
/s/ Kevin A. Nowlan
|
|
Executive Vice President and Chief Financial Officer
|
||
Kevin A. Nowlan
|
|
(Principal Financial Officer)
|
||
|
||||
/s/ Thomas J. McGill
|
|
Vice President and Controller
|
||
Thomas J. McGill
|
|
(Principal Accounting Officer)
|
||
|
||||
/s/ Jan Carlson
|
|
|
||
Jan Carlson
|
|
Director
|
||
|
|
|
||
/s/ Dennis C. Cuneo
|
|
|
||
Dennis C. Cuneo
|
|
Director
|
||
|
||||
/s/ Michael S. Hanley
|
|
|
||
Michael S. Hanley
|
|
Director
|
||
|
|
|
||
/s/ John R. McKernan, Jr.
|
|
|
||
John R. McKernan, Jr.
|
|
Director
|
||
|
|
|
||
/s/ Deborah D. McWhinney
|
|
|
||
Deborah D. McWhinney
|
|
Director
|
||
|
|
|
||
/s/ Paul A. Mascarenas
|
|
|
||
Paul A. Mascarenas
|
|
Director
|
||
|
|
|
||
/s/ Alexis P. Michas
|
|
|
||
Alexis P. Michas
|
|
Director and Non-Executive Chairman
|
||
|
|
|
||
/s/ Vicki L. Sato
|
|
|
||
Vicki L. Sato
|
|
Director
|
•
|
No cumulative voting. Under the DGCL and our Certificate of Incorporation, stockholders are not entitled to cumulate votes in the election of directors.
|
•
|
Requirements for removal of directors. Our Certificate of Incorporation provides that any director may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors.
|
•
|
Special meeting of stockholders. Our Certificate of Incorporation provides that special meetings of the stockholders may only be called by the at the direction of a majority of the directors of the Company or upon the request of stockholders owning of record 20% or more of our outstanding shares of Common Stock.
|
•
|
Stockholder advance notice procedures. Our By-laws establish advance notice procedures with respect to stockholders proposals and the nominations of candidates for election as directors. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed.
|
•
|
Action by written consent of the stockholders. Holders of Common Stock may act by written consent provided they meet the procedural requirements in Article VII, Section 1(b) of our Certificate of Incorporation. These requirements could delay or deter stockholders’ ability to take action with respect to the Company without convening a meeting.
|
•
|
the business combination or the transaction which resulted in the stockholder becoming an interested stockholder is approved by the board of directors prior to the time the interested stockholder obtained such status;
|
•
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or
|
•
|
at or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
|
•
|
100% of the principal amount of the Senior Notes being redeemed plus unpaid interest, if any, accrued thereon to, but excluding, the redemption date; and
|
•
|
the Make-Whole Amount, as defined below, if any, with respect to such Senior Notes.
|
•
|
the aggregate present value as of the date of redemption of each euro of principal being redeemed and the amount of interest, excluding unpaid interest, if any, accrued thereon to, but excluding, the date of redemption that would have been payable in respect of each euro if the redemption payment had not been made (determined by discounting, on an annual basis (ACTUAL/ACTUAL (ICMA) (as defined in the rulebook of the International Capital Markets Association)), the principal and interest at the Reinvestment Rate, from the respective dates on which the principal and interest would have been payable if the redemption payment had not been made, to the date of redemption), over
|
•
|
the aggregate principal amount of the Senior Notes being redeemed.
|
•
|
accept for payment all Senior Notes or portions of the Senior Notes properly tendered pursuant to our offer;
|
•
|
deposit with the paying agent an amount equal to the aggregate purchase price in respect of all Senior Notes or portions of the Senior Notes properly tendered; and
|
•
|
deliver or cause to be delivered to the trustee the Senior Notes properly accepted, together with an officers’ certificate stating the aggregate principal amount of the Senior Notes being purchased by us.
|
•
|
mortgages existing on the date the debt securities are originally issued or mortgages provided for under the terms of agreements existing on such date;
|
•
|
mortgages on Current Assets securing Current Liabilities;
|
•
|
mortgages on any property we or any of our Subsidiaries acquire, construct, alter or improve after the date of the Indenture that are created or assumed contemporaneously with or within one year after such acquisition (or, in the case of property constructed, altered or improved, after the completion and commencement of commercial operation of such property, whichever is later) to secure or provide for the payment of the purchase price or cost of such property, provided that in the case of any such construction, alteration or improvement the mortgages shall not apply to any property we or any of our Subsidiaries theretofore owned, other than (1) the property so altered or improved and (2) any theretofore unimproved real property on which the property so constructed or altered, or the improvement, is located;
|
•
|
existing mortgages on property we or any of our Subsidiaries acquire (including mortgages on any property acquired from a Person that is consolidated with or merged with or into us or any of our Subsidiaries) or mortgages outstanding at the time any Person becomes one of our Subsidiaries that are not incurred in connection with such entity becoming one of our Subsidiaries;
|
•
|
mortgages in our or any of our Subsidiaries’ favor;
|
•
|
mortgages on any property (1) in favor of domestic or foreign governmental bodies to secure partial, progress, advance or other payments pursuant to any contract or statute, (2) securing indebtedness incurred to finance all or any part of the purchase price or cost of constructing, installing or improving the property subject to such mortgages, including mortgages to secure Debt of the pollution control or industrial revenue bond type, or (3) securing indebtedness issued or guaranteed by the United States, any state, any foreign country or any department, agency, instrumentality or political subdivision of any such jurisdiction; and
|
•
|
any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any mortgage referred to in the foregoing bullet points; provided, however, that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement, together with the reasonable costs related to such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property that secured the mortgage so extended, renewed or replaced (plus improvements on such property).
|
•
|
default in the payment of any interest on any debt security when it becomes due and payable, and continuance of such default for a period of 30 days;
|
•
|
default in the payment of the principal of any debt security at its maturity;
|
•
|
default in our performance (or our breach) of any of our covenants or agreements in Indenture, continued for 90 days after we receive written notice;
|
•
|
acceleration of, or any failure to pay at final maturity, any of our or our Subsidiaries’ Debt (other than the debt securities or Non-Recourse Indebtedness) in an aggregate amount in excess of $25 million if such acceleration is not rescinded or annulled, or such indebtedness shall not have been discharged, within 15 days after we receive written notice thereof; and
|
•
|
certain events of our or of one of our Significant Subsidiaries’ bankruptcy, insolvency or reorganization.
|
•
|
change the maturity of the principal of, or any installment of interest on, the debt securities;
|
•
|
reduce the principal amount of, or the rate of interest on, the debt securities;
|
•
|
change the place or currency of payment of principal of, or interest on, the debt securities;
|
•
|
impair the right to institute suit for the enforcement of any such payment on or after the maturity thereof;
|
•
|
reduce the percentage of holders necessary to modify or amend the Indenture or to consent to any waiver thereunder or reduce the requirements for voting or quorum described below; or
|
•
|
modify the foregoing requirements or reduce the percentage of outstanding debt securities necessary to waive any past default.
|
•
|
to evidence the succession of another Person to our company and the assumption by such Person of our covenants contained in Indenture and the debt securities;
|
•
|
to add covenants of our company for the benefit of the holders or to surrender any right or power conferred upon our company;
|
•
|
to add Events of Default;
|
•
|
to secure the debt securities;
|
•
|
to evidence and provide for the acceptance of appointment by a successor trustee;
|
•
|
to cure any ambiguity, defect or inconsistency in the Indenture; provided such action does not adversely affect the interests of the holders;
|
•
|
to supplement any of the provisions of Indenture to the extent necessary to permit or facilitate defeasance and discharge of the debt securities; provided such action shall not adversely affect the interests of the holders; or
|
•
|
to conform with the requirements of the Trust Indenture Act.
|
•
|
we must irrevocably deposit with the trustee in trust, for the benefit of the holders, cash in United States dollars, U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and interest on the outstanding debt securities to maturity;
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•
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we must deliver to the trustee an opinion of counsel to the effect that the holders of the outstanding debt securities will not recognize income, gain or loss for federal income tax purposes as a result of such Defeasance or Covenant Defeasance, and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance or Covenant Defeasance had not occurred (in the case of Defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service issued, or a change in applicable federal income tax laws occurring, after the date hereof);
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•
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no Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as the last bullet point under the first paragraph under “—Events of Default” of the Senior Notes prospectus is concerned, at any time during the period ending the 91st day after the date of deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period);
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•
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such Defeasance or Covenant Defeasance shall not cause the trustee to have a conflicting interest (as defined by the Trust Indenture Act) with respect to any of our securities;
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•
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such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, the Indenture or any material agreement or instrument to which we are a party or by which we are bound; and
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•
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we shall have delivered to the trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent under the Indenture to either Defeasance or Covenant Defeasance, as the case may be, have been complied with and that no violations under agreements governing any other outstanding Debt would result.
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1.
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I have reviewed this annual report on Form 10-K of BorgWarner Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: February 13, 2020
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/s/ Frederic B. Lissalde
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Frederic B. Lissalde
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President and Chief Executive Officer
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1.
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I have reviewed this annual report on Form 10-K of BorgWarner Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: February 13, 2020
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/s/ Kevin A. Nowlan
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Kevin A. Nowlan
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Vice President, Interim Chief Financial Officer and Treasurer
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Dated: February 13, 2020
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/s/ Frederic B. Lissalde
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Frederic B. Lissalde
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President and Chief Executive Officer
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/s/ Kevin A. Nowlan
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Kevin A. Nowlan
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Vice President, Interim Chief Financial Officer and Treasurer
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