☑
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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☐
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware
|
|
13-3404508
|
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State or other jurisdiction of
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(I.R.S. Employer
|
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Incorporation or organization
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Identification No.)
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3850 Hamlin Road,
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Auburn Hills,
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Michigan
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48326
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
|
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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BWA
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New York Stock Exchange
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1.80% Senior Notes due 2022
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BWA22
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New York Stock Exchange
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Large accelerated filer
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☑
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page No.
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(in millions)
|
March 31,
2020 |
|
December 31,
2019 |
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
901
|
|
|
$
|
832
|
|
Receivables, net
|
1,735
|
|
|
1,921
|
|
||
Inventories, net
|
847
|
|
|
807
|
|
||
Prepayments and other current assets
|
258
|
|
|
276
|
|
||
Total current assets
|
3,741
|
|
|
3,836
|
|
||
|
|
|
|
|
|
||
Property, plant and equipment, net
|
2,839
|
|
|
2,925
|
|
||
Investments and other long-term receivables
|
315
|
|
|
318
|
|
||
Goodwill
|
1,818
|
|
|
1,842
|
|
||
Other intangible assets, net
|
383
|
|
|
402
|
|
||
Other non-current assets
|
406
|
|
|
379
|
|
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Total assets
|
$
|
9,502
|
|
|
$
|
9,702
|
|
|
|
|
|
|
|
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LIABILITIES AND EQUITY
|
|
|
|
|
|
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Notes payable and other short-term debt
|
$
|
286
|
|
|
$
|
286
|
|
Accounts payable and accrued expenses
|
1,793
|
|
|
1,977
|
|
||
Income taxes payable
|
45
|
|
|
66
|
|
||
Total current liabilities
|
2,124
|
|
|
2,329
|
|
||
|
|
|
|
|
|
||
Long-term debt
|
1,664
|
|
|
1,674
|
|
||
|
|
|
|
||||
Other non-current liabilities:
|
|
|
|
||||
Retirement-related liabilities
|
302
|
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|
306
|
|
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Other
|
548
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|
|
549
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Total other non-current liabilities
|
850
|
|
|
855
|
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||
|
|
|
|
|
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Common stock
|
3
|
|
|
3
|
|
||
Capital in excess of par value
|
1,109
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|
|
1,145
|
|
||
Retained earnings
|
6,036
|
|
|
5,942
|
|
||
Accumulated other comprehensive loss
|
(801
|
)
|
|
(727
|
)
|
||
Common stock held in treasury, at cost
|
(1,623
|
)
|
|
(1,657
|
)
|
||
Total BorgWarner Inc. stockholders’ equity
|
4,724
|
|
|
4,706
|
|
||
Noncontrolling interest
|
140
|
|
|
138
|
|
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Total equity
|
4,864
|
|
|
4,844
|
|
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Total liabilities and equity
|
$
|
9,502
|
|
|
$
|
9,702
|
|
|
Three Months Ended March 31,
|
||||||
(in millions, except per share amounts)
|
2020
|
|
2019
|
||||
Net sales
|
$
|
2,279
|
|
|
$
|
2,566
|
|
Cost of sales
|
1,832
|
|
|
2,047
|
|
||
Gross profit
|
447
|
|
|
519
|
|
||
|
|
|
|
||||
Selling, general and administrative expenses
|
213
|
|
|
226
|
|
||
Other expense, net
|
45
|
|
|
29
|
|
||
Operating income
|
189
|
|
|
264
|
|
||
|
|
|
|
||||
Equity in affiliates’ earnings, net of tax
|
(5
|
)
|
|
(9
|
)
|
||
Interest income
|
(2
|
)
|
|
(3
|
)
|
||
Interest expense
|
12
|
|
|
14
|
|
||
Other postretirement income
|
(2
|
)
|
|
—
|
|
||
Earnings before income taxes and noncontrolling interest
|
186
|
|
|
262
|
|
||
|
|
|
|
||||
Provision for income taxes
|
49
|
|
|
91
|
|
||
Net earnings
|
137
|
|
|
171
|
|
||
Net earnings attributable to the noncontrolling interest, net of tax
|
8
|
|
|
11
|
|
||
Net earnings attributable to BorgWarner Inc.
|
$
|
129
|
|
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$
|
160
|
|
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|
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Earnings per share — basic
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$
|
0.63
|
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$
|
0.77
|
|
|
|
|
|
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Earnings per share — diluted
|
$
|
0.63
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|
$
|
0.77
|
|
|
|
|
|
||||
Weighted average shares outstanding:
|
|
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|
||||
Basic
|
205.7
|
|
|
206.5
|
|
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Diluted
|
206.2
|
|
|
207.1
|
|
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Three Months Ended March 31,
|
||||||
(in millions)
|
2020
|
|
2019
|
||||
Net earnings attributable to BorgWarner Inc.
|
$
|
129
|
|
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$
|
160
|
|
|
|
|
|
||||
Other comprehensive income (loss)
|
|
|
|
||||
Foreign currency translation adjustments*
|
(74
|
)
|
|
(9
|
)
|
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Hedge instruments*
|
(2
|
)
|
|
—
|
|
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Defined benefit postretirement plans*
|
2
|
|
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8
|
|
||
Total other comprehensive loss attributable to BorgWarner Inc.
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(74
|
)
|
|
(1
|
)
|
||
|
|
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|
||||
Comprehensive income attributable to BorgWarner Inc.*
|
55
|
|
|
159
|
|
||
|
|
|
|
||||
Net earnings attributable to noncontrolling interest, net of tax
|
8
|
|
|
11
|
|
||
Other comprehensive (loss) income attributable to the noncontrolling interest*
|
(3
|
)
|
|
1
|
|
||
Comprehensive income
|
$
|
60
|
|
|
$
|
171
|
|
*
|
Net of income taxes.
|
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Three Months Ended March 31,
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||||||
(in millions)
|
2020
|
|
2019
|
||||
OPERATING
|
|
|
|
||||
Net earnings
|
$
|
137
|
|
|
$
|
171
|
|
Adjustments to reconcile net earnings to net cash flows from operations:
|
|
|
|
||||
Depreciation and amortization
|
112
|
|
|
107
|
|
||
Stock-based compensation expense
|
10
|
|
|
8
|
|
||
Asset impairment
|
9
|
|
|
—
|
|
||
Restructuring expense, net of cash paid
|
2
|
|
|
7
|
|
||
Deferred income tax benefit
|
(5
|
)
|
|
(2
|
)
|
||
Tax reform adjustments to provision for income taxes
|
—
|
|
|
22
|
|
||
Equity in affiliates’ earnings, net of dividends received, and other
|
(4
|
)
|
|
6
|
|
||
Net earnings adjusted for non-cash charges to operations
|
261
|
|
|
319
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Receivables
|
152
|
|
|
(95
|
)
|
||
Inventories
|
(58
|
)
|
|
(31
|
)
|
||
Prepayments and other current assets
|
(8
|
)
|
|
(23
|
)
|
||
Accounts payable and accrued expenses
|
(96
|
)
|
|
(120
|
)
|
||
Prepaid taxes and income taxes payable
|
8
|
|
|
(12
|
)
|
||
Other assets and liabilities
|
4
|
|
|
2
|
|
||
Net cash provided by operating activities
|
263
|
|
|
40
|
|
||
|
|
|
|
|
|
||
INVESTING
|
|
|
|
|
|
||
Capital expenditures, including tooling outlays
|
(117
|
)
|
|
(117
|
)
|
||
Payments for business acquired, net of cash acquired
|
(2
|
)
|
|
(10
|
)
|
||
Proceeds from settlement of net investment hedges
|
1
|
|
|
—
|
|
||
Proceeds from sale of business, net of cash divested
|
—
|
|
|
23
|
|
||
Payments for investments in equity securities
|
—
|
|
|
(1
|
)
|
||
Proceeds from asset disposals and other, net
|
(2
|
)
|
|
1
|
|
||
Net cash used in investing activities
|
(120
|
)
|
|
(104
|
)
|
||
|
|
|
|
|
|
||
FINANCING
|
|
|
|
|
|
||
Additions to debt, net of debt issuance costs
|
13
|
|
|
11
|
|
||
Repayments of debt, including current portion
|
(14
|
)
|
|
(26
|
)
|
||
Payments for purchase of treasury stock
|
—
|
|
|
(67
|
)
|
||
Payments for stock-based compensation items
|
(12
|
)
|
|
(14
|
)
|
||
Dividends paid to BorgWarner stockholders
|
(35
|
)
|
|
(35
|
)
|
||
Dividends paid to noncontrolling stockholders
|
(14
|
)
|
|
(22
|
)
|
||
Net cash used in financing activities
|
(62
|
)
|
|
(153
|
)
|
||
Effect of exchange rate changes on cash
|
(12
|
)
|
|
(5
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
69
|
|
|
(222
|
)
|
||
Cash and cash equivalents, including restricted cash at beginning of year
|
832
|
|
|
739
|
|
||
Cash and cash equivalents, including restricted cash at end of period
|
$
|
901
|
|
|
$
|
517
|
|
|
|
|
|
||||
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|||
Cash paid during the period for:
|
|
|
|
|
|||
Interest
|
$
|
29
|
|
|
$
|
26
|
|
Income taxes, net of refunds
|
$
|
43
|
|
|
$
|
68
|
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
|
2020
|
|
2019
|
||||||||||||||||||||
(In millions)
|
|
Engine
|
|
Drivetrain
|
|
Total
|
|
Engine
|
|
Drivetrain
|
|
Total
|
||||||||||||
North America
|
|
$
|
387
|
|
|
$
|
423
|
|
|
$
|
810
|
|
|
$
|
412
|
|
|
$
|
445
|
|
|
$
|
857
|
|
Europe
|
|
711
|
|
|
191
|
|
|
902
|
|
|
801
|
|
|
227
|
|
|
1,028
|
|
||||||
Asia
|
|
291
|
|
|
242
|
|
|
533
|
|
|
340
|
|
|
303
|
|
|
643
|
|
||||||
Other
|
|
30
|
|
|
4
|
|
|
34
|
|
|
31
|
|
|
7
|
|
|
38
|
|
||||||
Total
|
|
$
|
1,419
|
|
|
$
|
860
|
|
|
$
|
2,279
|
|
|
$
|
1,584
|
|
|
$
|
982
|
|
|
$
|
2,566
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
2020
|
|
2019
|
||||
Gross R&D expenditures
|
$
|
118
|
|
|
$
|
121
|
|
Customer reimbursements
|
(9
|
)
|
|
(17
|
)
|
||
Net R&D expenditures
|
$
|
109
|
|
|
$
|
104
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
2020
|
|
2019
|
||||
Merger, acquisition and divestiture expense
|
$
|
21
|
|
|
$
|
1
|
|
Restructuring expense
|
15
|
|
|
14
|
|
||
Asset impairment
|
9
|
|
|
—
|
|
||
Unfavorable arbitration loss
|
—
|
|
|
14
|
|
||
Other expense, net
|
$
|
45
|
|
|
$
|
29
|
|
|
March 31,
|
|
December 31,
|
||||
(in millions)
|
2020
|
|
2019
|
||||
Raw material and supplies
|
$
|
536
|
|
|
$
|
502
|
|
Work in progress
|
114
|
|
|
113
|
|
||
Finished goods
|
211
|
|
|
207
|
|
||
FIFO inventories
|
861
|
|
|
822
|
|
||
LIFO reserve
|
(14
|
)
|
|
(15
|
)
|
||
Inventories, net
|
$
|
847
|
|
|
$
|
807
|
|
|
March 31,
|
|
December 31,
|
||||
(in millions)
|
2020
|
|
2019
|
||||
Land, land use rights and buildings
|
$
|
869
|
|
|
$
|
860
|
|
Machinery and equipment
|
3,056
|
|
|
2,971
|
|
||
Construction in progress
|
334
|
|
|
360
|
|
||
Finance lease assets
|
—
|
|
|
1
|
|
||
Total property, plant and equipment, gross
|
4,259
|
|
|
4,192
|
|
||
Less: accumulated depreciation
|
(1,657
|
)
|
|
(1,513
|
)
|
||
Property, plant and equipment, net, excluding tooling
|
2,602
|
|
|
2,679
|
|
||
Tooling, net of amortization
|
237
|
|
|
246
|
|
||
Property, plant and equipment, net
|
$
|
2,839
|
|
|
$
|
2,925
|
|
(in millions)
|
2020
|
|
2019
|
||||
Beginning balance, January 1
|
$
|
116
|
|
|
$
|
103
|
|
Provisions for current period sales
|
15
|
|
|
15
|
|
||
Adjustments of prior estimates
|
5
|
|
|
7
|
|
||
Payments
|
(18
|
)
|
|
(18
|
)
|
||
Translation adjustment
|
(2
|
)
|
|
—
|
|
||
Ending balance, March 31
|
$
|
116
|
|
|
$
|
107
|
|
|
March 31,
|
|
December 31,
|
||||
(in millions)
|
2020
|
|
2019
|
||||
Accounts payable and accrued expenses
|
$
|
64
|
|
|
$
|
63
|
|
Other non-current liabilities
|
52
|
|
|
53
|
|
||
Total product warranty liability
|
$
|
116
|
|
|
$
|
116
|
|
|
March 31,
|
|
December 31,
|
||||
(in millions)
|
2020
|
|
2019
|
||||
Short-term debt
|
|
|
|
|
|
||
Short-term borrowings
|
$
|
34
|
|
|
$
|
34
|
|
|
|
|
|
|
|
||
Long-term debt
|
|
|
|
|
|
||
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)
|
549
|
|
|
558
|
|
||
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
|
6
|
|
|
7
|
|
||
Total long-term debt
|
1,916
|
|
|
1,926
|
|
||
Less: current portion
|
252
|
|
|
252
|
|
||
Long-term debt, net of current portion
|
$
|
1,664
|
|
|
$
|
1,674
|
|
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
|
|
|
||||||||||||
(in millions)
|
Balance at
March 31, 2020 |
|
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
|
Interest rate swaption contracts
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
A
|
Net investment hedge contracts
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
A
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
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)
|
|
Valuation
technique
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Net investment hedge contracts
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
A
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
A
|
Net investment hedge contracts
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
A
|
|
|
Commodity derivative contracts
|
|||||||
Commodity
|
|
Volume hedged March 31, 2020
|
Volume hedged December 31, 2019
|
|
Units of measure
|
|
Duration
|
||
Copper
|
|
148
|
|
203
|
|
|
Metric Tons
|
|
Dec - 20
|
|
Cross-Currency Swaps
|
||||||||
(in millions)
|
Notional
in USD
|
|
Notional
in Local Currency
|
|
Duration
|
||||
Fixed $ to fixed €
|
$
|
500
|
|
|
€
|
450
|
|
|
Mar - 25
|
Fixed $ to fixed ¥
|
$
|
100
|
|
|
¥
|
10,978
|
|
|
Feb - 23
|
(in millions)
|
|
Assets
|
|
Liabilities
|
||||||||||||||||
Derivatives designated as hedging instruments Under 815:
|
|
Location
|
|
March 31, 2020
|
|
December 31, 2019
|
|
Location
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||
Foreign currency
|
|
Prepayments and other current assets
|
|
$
|
2
|
|
|
$
|
—
|
|
|
Accounts payable and accrued expenses
|
|
$
|
4
|
|
|
$
|
1
|
|
Net investment hedges
|
|
Other non-current assets
|
|
$
|
30
|
|
|
$
|
3
|
|
|
Other non-current liabilities
|
|
$
|
—
|
|
|
$
|
8
|
|
Commodity
|
|
Prepayments and other current assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Accounts payable and accrued expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
Swaption
|
|
Prepayments and other current assets
|
|
$
|
1
|
|
|
$
|
—
|
|
|
Accounts payable and accrued expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
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
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|||||||
Foreign currency
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
Interest rate swaption
|
|
1
|
|
|
—
|
|
|
—
|
|
|||
Net investment hedges:
|
|
|
|
|
|
|
||||||
Foreign currency
|
|
6
|
|
|
5
|
|
|
—
|
|
|||
Cross-currency swaps
|
|
51
|
|
|
16
|
|
|
—
|
|
|||
Foreign currency denominated debt
|
|
(9
|
)
|
|
(17
|
)
|
|
—
|
|
|||
Total
|
|
$
|
46
|
|
|
$
|
4
|
|
|
$
|
(3
|
)
|
|
|
Three Months Ended March 31, 2020
|
||||||||||||||
(in millions)
|
|
Net sales
|
|
Cost of sales
|
|
Selling, general and administrative expenses
|
|
Other comprehensive income(loss)
|
||||||||
Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded
|
|
$
|
2,279
|
|
|
$
|
1,832
|
|
|
$
|
213
|
|
|
$
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) on cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in other comprehensive income
|
|
|
|
|
|
|
|
$
|
(3
|
)
|
||||||
Gain (loss) reclassified from AOCI to income
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||
(in millions)
|
|
Net sales
|
|
Cost of sales
|
|
Selling, general and administrative expenses
|
|
Other comprehensive income(loss)
|
||||||||
Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded
|
|
$
|
2,566
|
|
|
$
|
2,047
|
|
|
$
|
226
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) on cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in other comprehensive income
|
|
|
|
|
|
|
|
$
|
—
|
|
||||||
Gain (loss) reclassified from AOCI to income
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
(in millions)
|
|
Three Months Ended March 31,
|
||||||
Net investment hedges
|
|
2020
|
|
2019
|
||||
Foreign currency
|
|
$
|
1
|
|
|
$
|
—
|
|
Cross-currency swaps
|
|
$
|
35
|
|
|
$
|
9
|
|
Foreign currency denominated debt
|
|
$
|
8
|
|
|
$
|
12
|
|
(in millions)
|
|
Three Months Ended March 31,
|
||||||
Net investment hedges
|
|
2020
|
|
2019
|
||||
Cross-currency swaps
|
|
$
|
4
|
|
|
$
|
3
|
|
(in millions)
|
|
|
|
Three Months Ended March 31,
|
||||||
Contract Type
|
|
Location
|
|
2020
|
|
2019
|
||||
Foreign Currency
|
|
Selling, general and administrative expenses
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
|
Pension benefits
|
|
Other postretirement
employee benefits
|
||||||||||||||||||||
(in millions)
|
|
2020
|
|
2019
|
|
|||||||||||||||||||
Three Months Ended March 31,
|
|
US
|
|
Non-US
|
|
US
|
|
Non-US
|
|
2020
|
|
2019
|
||||||||||||
Service cost
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
|
1
|
|
|
1
|
|
||||||
Expected return on plan assets
|
|
(3
|
)
|
|
(6
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of unrecognized prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Amortization of unrecognized loss
|
|
1
|
|
|
3
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit (income) cost
|
|
$
|
(1
|
)
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Shares subject to restriction
(thousands)
|
|
Weighted average grant date fair value
|
|||
Nonvested at December 31, 2019
|
1,664
|
|
|
$
|
44.26
|
|
Granted
|
766
|
|
|
$
|
34.05
|
|
Vested
|
(466
|
)
|
|
$
|
46.00
|
|
Forfeited
|
(9
|
)
|
|
$
|
42.23
|
|
Nonvested at March 31, 2020
|
1,955
|
|
|
$
|
39.87
|
|
•
|
Total Stockholder Return Units: based on the Company's total stockholder return relative to a peer group of companies.
|
•
|
Relative Revenue Growth Units: based on the Company's revenue growth relative to the vehicle market.
|
•
|
Adjusted Earnings Per Share Units: introduced in the first quarter of 2020, this performance metric is based on the Company’s earnings per share adjusted for certain one-time items and non-operating gains and losses against a 3-year defined target.
|
|
Total Stockholder Return
|
|
Relative Revenue Growth
|
|
Adjusted Earnings Per Share
|
|||||||||||||||
|
Number of shares (thousands)
|
|
Weighted average grant date fair value
|
|
Number of shares (thousands)
|
|
Weighted average grant date fair value
|
|
Number of shares (thousands)
|
|
Weighted average grant date fair value
|
|||||||||
Nonvested at December 31, 2019
|
240
|
|
|
$
|
64.61
|
|
|
240
|
|
|
$
|
48.52
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
142
|
|
|
$
|
28.55
|
|
|
142
|
|
|
$
|
34.11
|
|
|
115
|
|
|
$
|
34.11
|
|
Vested
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Nonvested at March 31, 2020
|
382
|
|
|
$
|
48.02
|
|
|
382
|
|
|
$
|
41.54
|
|
|
115
|
|
|
$
|
34.11
|
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
|
2020
|
|
2019
|
||||
Total Stockholder Return
|
|
$
|
1
|
|
|
$
|
3
|
|
Relative Revenue Growth
|
|
2
|
|
|
(1
|
)
|
||
Total compensation expense (reduction)
|
|
$
|
3
|
|
|
$
|
2
|
|
|
BorgWarner Inc. stockholders' equity
|
|
|
||||||||||||||||||||
(in millions)
|
Issued common stock
|
|
Capital in excess of par value
|
|
Treasury stock
|
|
Retained earnings
|
|
Accumulated other comprehensive income (loss)
|
|
Noncontrolling interests
|
||||||||||||
Balance, December 31, 2019
|
$
|
3
|
|
|
$
|
1,145
|
|
|
$
|
(1,657
|
)
|
|
$
|
5,942
|
|
|
$
|
(727
|
)
|
|
$
|
138
|
|
Dividends declared ($0.17 per share*)
|
—
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
(3
|
)
|
||||||
Net issuance for executive stock plan
|
—
|
|
|
(16
|
)
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net issuance of restricted stock
|
—
|
|
|
(20
|
)
|
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
129
|
|
|
—
|
|
|
8
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
(3
|
)
|
||||||
Balance, March 31, 2020
|
$
|
3
|
|
|
$
|
1,109
|
|
|
$
|
(1,623
|
)
|
|
$
|
6,036
|
|
|
$
|
(801
|
)
|
|
$
|
140
|
|
|
BorgWarner Inc. stockholders' equity
|
|
|
||||||||||||||||||||
(in millions)
|
Issued common stock
|
|
Capital in excess of par value
|
|
Treasury stock
|
|
Retained earnings
|
|
Accumulated other comprehensive income (loss)
|
|
Noncontrolling interests
|
||||||||||||
Balance, December 31, 2018
|
$
|
3
|
|
|
$
|
1,146
|
|
|
$
|
(1,585
|
)
|
|
$
|
5,336
|
|
|
$
|
(674
|
)
|
|
$
|
119
|
|
Dividends declared ($0.17 per share*)
|
—
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
(20
|
)
|
||||||
Net issuance for executive stock plan
|
—
|
|
|
(10
|
)
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net issuance of restricted stock
|
—
|
|
|
(25
|
)
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
(69
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
160
|
|
|
—
|
|
|
11
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
||||||
Balance, March 31, 2019
|
$
|
3
|
|
|
$
|
1,111
|
|
|
$
|
(1,626
|
)
|
|
$
|
5,461
|
|
|
$
|
(675
|
)
|
|
$
|
111
|
|
(in millions)
|
|
Foreign currency translation adjustments
|
|
Hedge instruments
|
|
Defined benefit retirement plans
|
|
Other
|
|
Total
|
||||||||||
Beginning balance, December 31, 2019
|
|
$
|
(497
|
)
|
|
$
|
—
|
|
|
$
|
(230
|
)
|
|
$
|
—
|
|
|
$
|
(727
|
)
|
Comprehensive (loss) income before reclassifications
|
|
(64
|
)
|
|
(2
|
)
|
|
6
|
|
|
—
|
|
|
(60
|
)
|
|||||
Income taxes associated with comprehensive (loss) income before reclassifications
|
|
(10
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(12
|
)
|
|||||
Reclassification from accumulated other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||||
Income taxes reclassified into net earnings
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|||||
Ending balance, March 31, 2020
|
|
$
|
(571
|
)
|
|
$
|
(2
|
)
|
|
$
|
(228
|
)
|
|
$
|
—
|
|
|
$
|
(801
|
)
|
(in millions)
|
|
Foreign currency translation adjustments
|
|
Hedge instruments
|
|
Defined benefit retirement plans
|
|
Other
|
|
Total
|
||||||||||
Beginning balance, December 31, 2018
|
|
$
|
(441
|
)
|
|
$
|
—
|
|
|
$
|
(235
|
)
|
|
$
|
2
|
|
|
$
|
(674
|
)
|
Comprehensive (loss) income before reclassifications
|
|
(5
|
)
|
|
—
|
|
|
3
|
|
|
—
|
|
|
(2
|
)
|
|||||
Income taxes associated with comprehensive (loss) income before reclassifications
|
|
(4
|
)
|
|
—
|
|
|
3
|
|
|
—
|
|
|
(1
|
)
|
|||||
Reclassification from accumulated other comprehensive loss
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|||||
Income taxes reclassified into net earnings
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Ending balance, March 31, 2019
|
|
$
|
(450
|
)
|
|
$
|
—
|
|
|
$
|
(227
|
)
|
|
$
|
2
|
|
|
$
|
(675
|
)
|
|
|
Severance Accruals
|
||||||||||
(in millions)
|
|
Drivetrain
|
|
Engine
|
|
Total
|
||||||
Balance at December 31, 2019
|
|
$
|
4
|
|
|
$
|
30
|
|
|
$
|
34
|
|
Provision
|
|
1
|
|
|
11
|
|
|
12
|
|
|||
Cash payments
|
|
—
|
|
|
(13
|
)
|
|
(13
|
)
|
|||
Balance at March 31, 2020
|
|
$
|
5
|
|
|
$
|
28
|
|
|
$
|
33
|
|
|
|
Severance Accruals
|
||||||||||
(in millions)
|
|
Drivetrain
|
|
Engine
|
|
Total
|
||||||
Balance at December 31, 2018
|
|
$
|
4
|
|
|
$
|
21
|
|
|
$
|
25
|
|
Provision
|
|
—
|
|
|
7
|
|
|
7
|
|
|||
Cash payments
|
|
—
|
|
|
(20
|
)
|
|
(20
|
)
|
|||
Balance at March 31, 2019
|
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
12
|
|
|
Three Months Ended March 31,
|
||||||
(in millions, except per share amounts)
|
2020
|
|
2019
|
||||
Basic earnings per share:
|
|
|
|
||||
Net earnings attributable to BorgWarner Inc.
|
$
|
129
|
|
|
$
|
160
|
|
Weighted average shares of common stock outstanding
|
205.7
|
|
|
206.5
|
|
||
Basic earnings per share of common stock
|
$
|
0.63
|
|
|
$
|
0.77
|
|
|
|
|
|
||||
Diluted earnings per share:
|
|
|
|
||||
Net earnings attributable to BorgWarner Inc.
|
$
|
129
|
|
|
$
|
160
|
|
|
|
|
|
||||
Weighted average shares of common stock outstanding
|
205.7
|
|
|
206.5
|
|
||
Effect of stock-based compensation
|
0.5
|
|
|
0.6
|
|
||
Weighted average shares of common stock outstanding including dilutive shares
|
206.2
|
|
|
207.1
|
|
||
Diluted earnings per share of common stock
|
$
|
0.63
|
|
|
$
|
0.77
|
|
|
|
|
|
||||
Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share:
|
—
|
|
|
0.5
|
|
|
Three Months Ended
March 31, |
||||||
(in millions)
|
2020
|
|
2019
|
||||
Engine
|
$
|
1,434
|
|
|
$
|
1,598
|
|
Drivetrain
|
860
|
|
|
982
|
|
||
Inter-segment eliminations
|
(15
|
)
|
|
(14
|
)
|
||
Net sales
|
$
|
2,279
|
|
|
$
|
2,566
|
|
|
Three Months Ended
March 31, |
||||||
(in millions)
|
2020
|
|
2019
|
||||
Engine
|
$
|
208
|
|
|
$
|
241
|
|
Drivetrain
|
63
|
|
|
105
|
|
||
Adjusted EBIT
|
271
|
|
|
346
|
|
||
Merger, acquisition and divestiture expense
|
21
|
|
|
1
|
|
||
Restructuring expense
|
15
|
|
|
14
|
|
||
Asset impairment
|
9
|
|
|
—
|
|
||
Unfavorable arbitration loss
|
—
|
|
|
14
|
|
||
Officer stock awards modification
|
—
|
|
|
2
|
|
||
Corporate, including stock-based compensation
|
37
|
|
|
51
|
|
||
Equity in affiliates' earnings, net of tax
|
(5
|
)
|
|
(9
|
)
|
||
Interest income
|
(2
|
)
|
|
(3
|
)
|
||
Interest expense
|
12
|
|
|
14
|
|
||
Other postretirement income
|
(2
|
)
|
|
—
|
|
||
Earnings before income taxes and noncontrolling interest
|
186
|
|
|
262
|
|
||
Provision for income taxes
|
49
|
|
|
91
|
|
||
Net earnings
|
137
|
|
|
171
|
|
||
Net earnings attributable to the noncontrolling interest, net of tax
|
8
|
|
|
11
|
|
||
Net earnings attributable to BorgWarner Inc.
|
$
|
129
|
|
|
$
|
160
|
|
|
March 31,
|
|
December 31,
|
||||
(in millions)
|
2020
|
|
2019
|
||||
Engine
|
$
|
4,388
|
|
|
$
|
4,536
|
|
Drivetrain
|
3,887
|
|
|
4,075
|
|
||
Total
|
8,275
|
|
|
8,611
|
|
||
Corporate *
|
1,227
|
|
|
1,091
|
|
||
Total assets
|
$
|
9,502
|
|
|
$
|
9,702
|
|
*
|
Corporate assets include cash and cash equivalents, investments and other long-term receivables, and certain deferred income taxes.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
a temporary 20% reduction in base salaries of the Company's senior executive leadership team and annual retainers of the Company’s non-employee directors;
|
•
|
up to 10% temporary base pay reductions for other salaried employees; and
|
•
|
reducing discretionary spending, such as outside professional services
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Non-comparable items:
|
|
|
|
||||
Merger, acquisition and divestiture expense
|
$
|
(0.10
|
)
|
|
$
|
(0.01
|
)
|
Restructuring expense
|
(0.06
|
)
|
|
(0.05
|
)
|
||
Asset impairment
|
(0.04
|
)
|
|
—
|
|
||
Unfavorable arbitration loss
|
—
|
|
|
(0.07
|
)
|
||
Officer stock awards modification
|
—
|
|
|
(0.01
|
)
|
||
Tax adjustments
|
0.06
|
|
|
(0.09
|
)
|
||
Total impact of non-comparable items per share — diluted
|
$
|
(0.14
|
)
|
|
$
|
(0.23
|
)
|
|
Three Months Ended
March 31, |
||||||
(in millions)
|
2020
|
|
2019
|
||||
Engine
|
$
|
1,434
|
|
|
$
|
1,598
|
|
Drivetrain
|
860
|
|
|
982
|
|
||
Inter-segment eliminations
|
(15
|
)
|
|
(14
|
)
|
||
Net sales
|
$
|
2,279
|
|
|
$
|
2,566
|
|
|
Three Months Ended
March 31, |
||||||
(in millions)
|
2020
|
|
2019
|
||||
Engine
|
$
|
208
|
|
|
$
|
241
|
|
Drivetrain
|
63
|
|
|
105
|
|
||
Adjusted EBIT
|
271
|
|
|
346
|
|
||
Merger, acquisition and divestiture expense
|
21
|
|
|
1
|
|
||
Restructuring expense
|
15
|
|
|
14
|
|
||
Asset impairment
|
9
|
|
|
—
|
|
||
Unfavorable arbitration loss
|
—
|
|
|
14
|
|
||
Officer stock awards modification
|
—
|
|
|
2
|
|
||
Corporate, including stock-based compensation
|
37
|
|
|
51
|
|
||
Equity in affiliates' earnings, net of tax
|
(5
|
)
|
|
(9
|
)
|
||
Interest income
|
(2
|
)
|
|
(3
|
)
|
||
Interest expense
|
12
|
|
|
14
|
|
||
Other postretirement income
|
(2
|
)
|
|
—
|
|
||
Earnings before income taxes and noncontrolling interest
|
186
|
|
|
262
|
|
||
Provision for income taxes
|
49
|
|
|
91
|
|
||
Net earnings
|
137
|
|
|
171
|
|
||
Net earnings attributable to the noncontrolling interest, net of tax
|
8
|
|
|
11
|
|
||
Net earnings attributable to BorgWarner Inc.
|
$
|
129
|
|
|
$
|
160
|
|
Item 1.
|
Legal Proceedings
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 6.
|
Exhibits
|
|
|
|
|
|
Exhibit 2.1
|
|
Transaction Agreement, dated January 28, 2020 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of BorgWarner Inc. filed on January 29, 2020).
|
|
|
|
|
|
Exhibit 4.1
|
|
Fourth Amended and Restated Credit Agreement, dated as of March 13, 2020, among BorgWarner Inc., Bank of America, N.A., as Administrative Agent for the Lenders and as Swingline Lender, and the Lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of BorgWarner Inc. filed on March 16, 2020).
|
|
|
|
|
|
Exhibit 10.1
|
|
|
|
|
|
|
|
Exhibit 10.2
|
|
|
|
|
|
|
|
Exhibit 10.3
|
|
|
|
|
|
|
|
Exhibit 31.1
|
|
|
|
|
|
|
|
Exhibit 31.2
|
|
|
|
|
|
|
|
Exhibit 32.1
|
|
|
|
|
|
|
|
Exhibit 101.SCH
|
|
XBRL Taxonomy Extension Schema Document.*
|
|
|
|
|
|
Exhibit 101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.*
|
|
|
|
|
|
Exhibit 101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.*
|
|
|
|
|
|
Exhibit 101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.*
|
|
|
|
|
|
Exhibit 101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.*
|
|
|
|
|
|
Exhibit 104.1
|
|
The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL.*
|
|
|
|
|
|
|
|
|
BorgWarner Inc.
|
|
|
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
By
|
|
/s/ Thomas J. McGill
|
|
|
|
|
(Signature)
|
|
|
|
|
|
|
|
|
|
Thomas J. McGill
|
|
|
|
|
|
|
|
|
|
Vice President and Controller
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
1.
|
Restriction Period. Except as otherwise provided in this Agreement, the Restriction Period for the Restricted Stock awarded to the Employee under this Agreement shall commence with the Grant Date set forth above and shall end, for the percentage of the Shares indicated below (each percentage of Shares and the associated vesting date is referred to as a “Tranche”), on the date when the Restricted Stock shall have vested in accordance with the following schedule provided that the Employee remains continuously employed by or in the service of the Company or an Affiliate through the applicable vesting date:
|
2.
|
Issuance of Share Certificates or Book Entry Record.
|
(a)
|
The Company shall, as soon as administratively feasible after execution of this Agreement by the Employee, either (1) issue one or more certificates in the name of the Employee representing the Shares covered by this Award, or (2)
|
(b)
|
In the event that the Company issues one or more certificates for the Restricted Stock covered by this Award in lieu of book entry, during the applicable Restriction Period:
|
(i)
|
The certificate or certificates shall bear the following legend:
“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the 2018 Stock Incentive Plan and a Restricted Stock Agreement. Copies of such Plan and Restricted Stock Agreement are on file at the headquarters offices of BorgWarner Inc.” |
(ii)
|
The certificates shall be held in custody by the Company until the restrictions set forth herein shall have lapsed; and
|
(iii)
|
As a condition to receipt of this Award, the Employee hereby authorizes the Company to issue such instructions to the transfer agent as the Company may deem necessary or proper to comply with the intent and purposes of this Agreement and the Plan, including provisions regarding forfeiture. This paragraph shall be deemed to constitute the stock power, endorsed in blank, contemplated by Section 8.2 of the Plan.
|
(c)
|
At the Employee’s request, if and when the applicable Restriction Period expires for a Share or Shares granted hereunder without a prior forfeiture, the Company will deliver certificate(s) for such Share(s) to the Employee.
|
3.
|
Termination of Employment. Except as otherwise provided in this Section 3 or Section 4, the Employee shall forfeit the Shares that are unvested as of the effective date of the Employee’s Termination of Employment. Notwithstanding the foregoing, except as otherwise determined by the Committee, in its sole discretion, at the time of the Employee’s Termination of Employment, the following provisions shall apply.
|
(a)
|
Death or Disability. If the Employee’s Termination of Employment is due to the Employee’s death or Disability, then all the unvested Shares shall immediately vest.
|
(b)
|
Retirement. If the Employee’s Termination of Employment is due to Retirement, then the Committee may, in its sole discretion, cause all or a portion of the unvested Shares to vest.
|
(c)
|
Effective Date of Termination of Employment. For purposes of this Agreement, any Termination of Employment shall be effective as of the earlier of (1) the date that the Company receives the Employee’s notice of resignation of employment, or (2) the date that the Employee ceases to actively provide services. In connection with the foregoing, the applicable termination date shall not be extended by any notice period mandated under local law (e.g., “garden leave” or
|
4.
|
Change in Control. In the event of a Change in Control, this Award shall be treated in accordance with Section 15 of the Plan, provided, however, that for purposes of Section 15.1(a)(5), the Employee will be considered to have terminated the Employee’s employment or service for “good reason” if the Employee’s termination either (a) meets the requirements set forth in Exhibit A attached to this Agreement or (b) constitutes a “good reason” termination under the Employee’s employment, retention, change in control, severance or similar agreement with the successor, purchaser, the Company, or any affiliate thereof, if any.
|
5.
|
Stockholder Rights. Subject to the restrictions imposed by this Agreement and the Plan, the Employee shall have, with respect to the Restricted Stock covered by this Award, all of the rights of a stockholder of the Company holding Stock, including the right to vote the Shares and the right to receive dividends; provided, however, that any cash dividends payable with respect to the Restricted Stock covered by this Award shall be automatically reinvested in additional Shares of Restricted Stock, the number of which shall be determined by multiplying (a) the number of Shares that the Employee has been issued under this Agreement as of the dividend record date that have not vested as of such record date by (b) the dividend paid on each Share, and dividing the result by (c) the Fair Market Value of a Share on the dividend payment date. Such additional Shares so awarded shall vest at the same time, and to the same extent, as the Restricted Stock to which it relates and shall be subject to the same restrictions, terms and conditions contained herein. Dividends payable with respect to the Restricted Stock covered by this Award that are payable in Stock shall also be paid in the form of additional Shares of Restricted Stock and shall vest at the same time, and to the same extent, as the Restricted Stock to which it relates and shall be subject to the same restrictions, terms, and conditions contained herein.
|
6.
|
Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require the Employee or beneficiary to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Agreement.
The Employee acknowledges that the ultimate liability for all taxes legally due by the Employee is and remains the Employee’s responsibility, and the Company: (a) makes no representations or undertakings regarding the tax treatment of this Award; and (b) does not commit to structure the terms of this Award to reduce or eliminate the Employee’s tax liability. |
7.
|
Acquisition of Shares For Investment Purposes Only. By accepting this Award, the Employee hereby agrees with the Company as follows:
|
(a)
|
The Employee is acquiring the Shares covered by this Award for investment purposes only and not with a view to resale or other distribution thereof to the public in violation of the Securities Act of 1933, as amended (the “1933 Act”), and
|
(b)
|
If any of the Shares covered by this Award shall be registered under the 1933 Act, no public offering (otherwise than on a national securities exchange, as defined in the Exchange Act) of any such Shares shall be made by the Employee (or any other person) under such circumstances that he or she (or any other such person) may be deemed an underwriter, as defined in the 1933 Act; and
|
(c)
|
The Company shall have the authority to endorse upon the certificate or certificates representing the Shares covered by this Agreement such legends referring to the foregoing.
|
8.
|
Miscellaneous.
|
(a)
|
Nontransferability. This Award may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise permitted by the Company, and shall not be subject to execution, attachment or similar process.
|
(b)
|
Notices. Any written notice required or permitted under this Agreement shall be deemed given when delivered personally, as appropriate, either to the Employee or to the Executive Compensation Department of the Company, or when deposited in a United States Post Office as registered mail, postage prepaid, addressed, as appropriate, either to the Employee at his or her address set forth above under the heading “Grant Information,” or to Attention: Executive Compensation, BorgWarner Inc., at its headquarters office or such other address as the Company may designate in writing to the Employee.
|
(c)
|
Failure To Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
|
(d)
|
Governing Law. The Award made and actions taken under the Plan and this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without taking into account its conflict of laws provisions.
|
(e)
|
Provisions of Plan. This Award is granted pursuant to the Plan, and this Award and this Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement solely by reference or expressly cited herein. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Employee. If there is any conflict between the terms of this Agreement and the terms of the Plan, other than with respect to any provisions relating to Termination of Employment or Change in Control, the Plan’s terms shall supersede and replace the conflicting terms of this Agreement to the minimum extent necessary to resolve the conflict. Notwithstanding any terms of the Plan to the contrary, the
|
(f)
|
Section 16 Compliance. To the extent necessary to comply with, or to avoid disgorgement of profits under the short-swing matching rules of, Section 16 of the Exchange Act, the Employee shall not sell or otherwise dispose of the Shares.
|
(g)
|
No Right to Continued Employment. Nothing contained in the Plan or this Agreement shall confer upon the Employee any right to continued employment nor shall it interfere in any way with the right of the Company or any subsidiary or Affiliate to terminate the employment of the Employee at any time.
|
(h)
|
Discretionary Nature of Plan; No Right to Additional Awards. The Employee acknowledges and agrees that the Plan is discretionary in nature and limited in duration and may be amended, cancelled, or terminated by the Company, in its sole discretion, at any time. The grant of an Award under the Plan is a one-time benefit and does not create any contractual or other right to receive an Award or benefits in lieu of an Award. Future awards, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of an award, the number of Shares subject to the award, and the vesting provisions.
|
(i)
|
Termination Indemnities. The value of this Award is an extraordinary item of compensation outside the scope of the Employee’s employment contract, if any. As such, Awards are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension, or retirement benefits or similar payments.
|
(j)
|
Acceptance of Award. By accepting this Award, the Employee agrees to accept all the terms and conditions of the Award, as set forth in this Agreement and in the Plan. This Agreement shall not be effective as a Restricted Stock Award if a copy of this Agreement is not signed by the Employee and returned to the Company (unless the Employee accepts this award in an alternative means approved by the Company, which may include electronic acceptance).
|
(k)
|
Binding Effect. Subject to the limitations stated above, this Agreement shall be binding upon and inure to the benefit of the parties’ respective heirs, legal representatives successors and assigns.
|
(l)
|
Amendment of the Agreement. Except as otherwise provided in the Plan, the Company and the Employee may amend this Agreement only by a written instrument signed by both parties.
|
(m)
|
Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute but one Agreement.
|
(n)
|
Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Award by electronic means. The Employee hereby consents to receive such documents by electronic delivery and agrees to
|
(o)
|
Entire Agreement; Headings. This Agreement is the entire agreement between the parties hereto, and all prior oral and written representations are merged into this Agreement. The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof.
|
a)
|
the assignment to the Employee of any duties inconsistent in any respect with the Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as of the date of the Change in Control or any higher position, authority, duties or responsibilities assigned to the Employee after the date of the Change in Control, or any other diminution in the Employee’s position, authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; or
|
b)
|
any failure by the Company to:
|
1.
|
pay the Employee an annual base salary at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Employee by the Company and its affiliated companies in respect of the twelve‑month period immediately preceding the month in which the Change in Control occurs; or
|
2.
|
provide the Employee, for each fiscal year ending during the applicable Restriction Period (or, if earlier, before the second anniversary of the effective date of the Change in Control), an annual bonus (the “Annual Bonus”) opportunity at least equal to the Employee’s average of the bonuses paid or payable under the Company’s Management Incentive Bonus Plan, or any comparable annual bonus under any predecessor or successor plan, in respect of the last three full fiscal years prior to the date of the Change in Control (or, if the Employee was first employed by the Company after the beginning of the earliest of such three fiscal years, the average of the bonuses paid or payable under such plan(s) in respect of the fiscal years ending before the date of the Change in Control during which the Employee was employed by the Company, with such bonus being annualized with respect to any such fiscal year if the Employee was not employed by the Company for the whole of such fiscal year),
|
c)
|
the Company’s requiring the Employee, without the Employee’s consent, to:
|
1.
|
be based at any office or location that is more than 35 miles from the location where the Employee was employed immediately preceding the date of the Change in Control; or
|
2.
|
travel on Company business to a substantially greater extent than required immediately prior to the date of the Change in Control.
|
1.
|
Vesting of Stock Units. Subject to the terms and conditions of this Agreement and to the provisions of the Plan, the Stock Units shall vest in accordance with the following schedule, provided that the Employee remains continuously employed or in the service of the Company or an Affiliate through the applicable vesting date:
|
2.
|
Tracking and Settlement of Award.
|
(a)
|
Bookkeeping Account. On the Grant Date, the Company shall credit the Employee’s Stock Units to a Stock Units account established and maintained for the Employee on the books of the Company. The account shall constitute the record of the Stock Units awarded to the Employee under this Agreement, is solely for accounting purposes, and shall not require a segregation of any Company assets.
|
(b)
|
Issuance of Shares or Cash Payment. The Company shall deliver Shares to the Employee in settlement of the Stock Units awarded by this Agreement equal to the number of the Employee's vested Stock Units (including any additional Stock Units acquired as a result of dividend equivalents that have vested). Payment shall be made to the Employee as soon as practicable on or after the specified vesting date, but in no
|
3.
|
Termination of Employment. Except as otherwise provided in this Section 3 or Section 4, the Employee shall forfeit the Stock Units that are unvested as of the effective date of the Employee’s Termination of Employment. Notwithstanding the foregoing, except as otherwise determined by the Committee, in its sole discretion, at the time of the Employee’s Termination of Employment, the following provisions shall apply.
|
(a)
|
Death or Disability. If the Employee’s Termination of Employment is due to the Employee’s death or Disability, then all the unvested Stock Units shall immediately vest.
|
(b)
|
Retirement. If the Employee’s Termination of Employment is due to Retirement, then then Committee may, in its sole discretion, cause all or a portion of the unvested Stock Units to vest.
|
(c)
|
Effective Date of Termination of Employment. For purposes of this Agreement, any Termination of Employment shall be effective as of the earlier of (1) the date that the Company receives the Employee’s notice of resignation of employment, or (2) the date that the Employee ceases to actively provide services. In connection with the foregoing, the applicable termination date shall not be extended by any notice period mandated under local law (e.g., “garden leave” or similar period pursuant to local law), and the Company shall have the exclusive discretion to determine when the Employee is no longer actively providing service for purposes of the Stock Units. Notwithstanding the foregoing, the Employee will be deemed to have experienced a Termination of Employment upon the Employee’s “separation from service” within the meaning of Section 409A of the Code to the extent this Award is subject to Section 409A of the Code.
|
4.
|
Change in Control. In the event of a Change in Control, this Award shall be treated in accordance with Section 15 of the Plan, provided, however, that for purposes of Section 15.1(a)(5), an Employee will be considered to have terminated the Employee’s employment or service for “good reason” if the Employee’s termination either (a) meets the requirements set forth in Exhibit A attached to this Agreement or (b) constitutes a “good reason” termination under the Employee’s employment, retention, change in control, severance or similar agreement with the successor, purchaser, the Company, or any affiliate thereof, if any.
|
5.
|
Stockholder Rights; Dividend Equivalents.
|
(a)
|
No Stockholder Rights. Prior to the actual delivery of Shares to the Employee in settlement of the Stock Units awarded and vested hereunder (if any), the Employee shall have no rights as a stockholder with respect to the Stock Units or any underlying Shares, including but not limited to voting or dividend rights.
|
(b)
|
Dividend Equivalents. If the Company pays any cash or other dividend or makes any other distribution in respect of the Stock before the Stock Units are settled in accordance with Section 2(b) of this Agreement, the Employee’s Stock Units account shall be credited with an additional number of Stock Units (including fractions thereof) determined by
|
6.
|
Tax and Social Insurance Contributions Withholding. Regardless of any action the Company and/or the affiliate that employs the Employee (the “Employer”) take with respect to any or all income tax (including U.S. federal, state and local taxes and/or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Employee acknowledges that the ultimate liability for all Tax-Related Items legally due by the Employee is and remains the Employee’s responsibility, and the Company and the Employer: (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Stock Units, including the grant of the Stock Units, the vesting of the Stock Units, the subsequent sale of any Stock acquired pursuant to the Stock Units and the receipt of any dividends or dividend equivalents; and (ii) do not commit to structure the terms of the grant or any aspect of the Stock Units to reduce or eliminate the Employee’s liability for Tax-Related Items.
|
7.
|
Acquisition of Shares For Investment Purposes Only. By accepting this Award, the Employee hereby agrees with the Company as follows:
|
(a)
|
The Employee is acquiring the Shares covered by this Award for investment purposes only and not with a view to resale or other distribution thereof to the public in violation of the Securities Act of 1933, as amended (the “1933 Act”), and shall not dispose of any of the Shares in transactions which, in the opinion of counsel to the Company, violate the
|
(b)
|
If any of the Shares covered by this Award shall be registered under the 1933 Act, no public offering (otherwise than on a national securities exchange, as defined in the Exchange Act) of any such Shares shall be made by the Employee (or any other person) under such circumstances that he or she (or any other such person) may be deemed an underwriter, as defined in the 1933 Act; and
|
(c)
|
The Company shall have the authority to endorse upon the certificate or certificates representing the Shares covered by this Agreement such legends referring to the foregoing.
|
8.
|
Miscellaneous.
|
(a)
|
Nontransferability. This Award may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise permitted by the Company, and shall not be subject to execution, attachment or similar process.
|
(b)
|
Notices. Any written notice required or permitted under this Agreement shall be deemed given when delivered personally, as appropriate, either to the Employee or to the Executive Compensation Department of the Company, or when deposited in a United States Post Office as registered mail, postage prepaid, addressed, as appropriate, either to the Employee at his or her address set forth above under the heading “Grant Information,” or such other address as he or she may designate in writing to the Company, or to the Attention: Executive Compensation, BorgWarner Inc., at its headquarters office or such other address as the Company may designate in writing to the Employee.
|
(c)
|
Failure To Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
|
(d)
|
Governing Law. The Award made and actions taken under the Plan and this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without taking into account its conflict of laws provisions.
|
(e)
|
Provisions of Plan. This Award is granted pursuant to the Plan, and this Award and this Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement solely by reference or expressly cited herein. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Employee. If there is any conflict between the terms of this Agreement and the terms of the Plan, other than with respect to any provisions relating to Termination of Employment or Change in Control, the Plan’s terms shall supersede and replace the conflicting terms of this Agreement to the minimum extent necessary to resolve the conflict. Notwithstanding any terms of the Plan to the contrary, the termination provisions of Section 3 and the change in control provisions of Section 4 of this Award control.
|
(f)
|
Section 16 Compliance. To the extent necessary to comply with, or to avoid disgorgement of profits under the short-swing matching rules of, Section 16 of the Exchange Act, the Employee shall not sell or otherwise dispose of the Shares issued as payment for any earned Stock Units.
|
(g)
|
409A Six Month Delay. If the Employee is a “specified employee” within the meaning of Section 409A of the Code at the time of the Employee’s Termination of Employment, then any payment made to the Employee as a result of such Termination of Employment shall be delayed for six months following the Employee’s termination to the extent required by Section 409A of the Code.
|
(h)
|
No Right to Continued Employment. Nothing contained in the Plan or this Agreement shall confer upon the Employee any right to continued employment nor shall it interfere in any way with the right of the Employer to terminate the employment of the Employee at any time.
|
(i)
|
Discretionary Nature of Plan; No Right to Additional Awards. The Employee acknowledges and agrees that the Plan is discretionary in nature and limited in duration, and may be amended, cancelled, or terminated by the Company, in its sole discretion, at any time. The grant of an Award under the Plan is a one-time benefit and does not create any contractual or other right to receive an Award or benefits in lieu of an Award. Future Awards, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of an award, the number of Shares subject to the award, and the vesting provisions.
|
(j)
|
Termination Indemnities. The value of this Award is an extraordinary item of compensation outside the scope of the Employee’s employment contract, if any. As such, Awards are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension, or retirement benefits or similar payments.
|
(k)
|
Acceptance of Award. By accepting this Award, the Employee agrees to accept all the terms and conditions of the Award, as set forth in this Agreement and in the Plan. This Agreement shall not be effective as a Restricted Stock Award if a copy of this Agreement is not signed by the Employee and returned to the Company (unless the Employee accepts this award in an alternative means approved by the Company, which may include electronic acceptance).
|
(l)
|
Binding Effect. Subject to the limitations stated above, this Agreement shall be binding upon and inure to the benefit of the parties’ respective heirs, legal representatives successors and assigns.
|
(l)
|
Amendment of the Agreement. Except as otherwise provided in the Plan, the Company and the Employee may amend this Agreement only by a written instrument signed by both parties.
|
(m)
|
Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute but one agreement.
|
(n)
|
Entire Agreement; Headings. This Agreement is the entire agreement between the parties hereto, and all prior oral and written representations are merged into this Agreement. The headings in this Agreement are inserted for convenience and
|
(o)
|
Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Award by electronic means. The Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
|
(p)
|
Private Placement. The grant of the Stock Units is not intended to be a public offering of securities in the Employee’s country of residence (or country of employment, if different) but instead is intended to be a private placement. As a private placement, the Company has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law), and the grant of the Stock Units is not subject to the supervision of the local securities authorities.
|
(q)
|
Consent to Collection, Processing and Transfer of Personal Data. Pursuant to applicable personal data protection laws, the Company and the Employer hereby notify the Employee of the following in relation to the Employee’s personal data and the collection, use, processing and transfer of such data in relation to the Company’s grant of this Award and the Employee’s participation in the Plan. The collection, use, processing and transfer of the Employee’s personal data is necessary for the Company’s administration of the Plan and the Employee’s participation in the Plan. The Employee’s denial and/or objection to the collection, use, processing and transfer of personal data may affect the Employee’s participation in the Plan. As such, the Employee voluntarily acknowledges and consents (where required under applicable law) to the collection, use, processing and transfer of personal data as described herein.
|
(r)
|
EU Age Discrimination. For purposes of this Agreement, if the Employee is a local national of and employed in a country that is a member of the European Union, the grant of the Stock Units and the terms and conditions governing the Award are intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Age Discrimination Rules”). To the extent a court or tribunal of competent jurisdiction determines that any provision of the Award is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local law.
|
(s)
|
Repatriation; Compliance with Laws. The Employee agrees, as a condition of the grant of the Stock Units, to repatriate all payments attributable to the Stock Units and/or cash acquired under the Plan (including, but not limited to, dividends, dividend equivalents, and any proceeds derived from the sale of the Stock acquired pursuant to the Stock Units) in accordance with all foreign exchange rules and regulations applicable to the Employee. In addition, the Employee also agrees to take any and all actions, and consents to any and all actions taken by the Company and its subsidiaries and Affiliates, as may be required to allow the Company and its subsidiaries and Affiliates to comply with all applicable laws, rules and regulations. Finally, the Employee agrees to take any and all actions as may be required to comply with the Employee’s personal legal and tax obligations under all applicable laws, rules and regulations.
|
(t)
|
English Language. The Employee acknowledges and agrees that it is the Employee’s express intent that this Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Stock Units, be drawn up in English. If the Employee has received this Agreement, the Plan or any other documents related to the Stock Units translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version shall control.
|
(u)
|
Additional Requirements. The Company reserves the right to impose other requirements on the Stock Units, any Shares acquired pursuant to the Stock Units, and the Employee’s participation in the Plan, to the extent the Company determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Stock Units
|
(v)
|
Addendum. Notwithstanding any provisions herein to the contrary, the Stock Units shall be subject to any special terms and conditions for the Employee’s country of residence (and country of employment, if different), as may be set forth in an addendum to this Agreement (the “Addendum”). Further, if the Employee transfers the Employee’s residence and/or employment to another country reflected in an Addendum, the special terms and conditions for such country will apply to the Employee to the extent the Company determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Stock Units and the Plan (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Employee’s transfer). In all circumstances, any applicable Addendum shall constitute part of this Agreement.
|
a)
|
the assignment to the Employee of any duties inconsistent in any respect with the Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as of the date of the Change in Control or any higher position, authority, duties or responsibilities assigned to the Employee after the date of the Change in Control, or any other diminution in the Employee’s position, authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; or
|
b)
|
any failure by the Company to:
|
1.
|
pay the Employee an annual base salary at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Employee by the Company and its affiliated companies in respect of the twelve‑month period immediately preceding the month in which the Change in Control occurs; or
|
2.
|
provide the Employee, for each fiscal year ending prior to the second anniversary of the effective date of the Change in Control, an annual bonus (the “Annual Bonus”) opportunity at least equal to the Employee’s average of the bonuses paid or payable under the Company’s Management Incentive Bonus Plan, or any comparable annual bonus under any predecessor or successor plan, in respect of the last three full fiscal years prior to the date of the Change in Control (or, if the Employee was first employed by the Company after the beginning of the earliest of such three fiscal years, the average of the bonuses paid or payable under such plan(s) in respect of the fiscal years ending before the date of the Change in Control during which the Employee was employed by the Company, with such bonus being annualized with respect to any such fiscal year if the Employee was not employed by the Company for the whole of such fiscal year),
|
c)
|
the Company’s requiring the Employee, without the Employee’s consent, to:
|
1.
|
be based at any office or location that is more than 35 miles from the location where the Employee was employed immediately preceding the date of the Change in Control; or
|
2.
|
travel on Company business to a substantially greater extent than required immediately prior to the date of the Change in Control.
|
(a)
|
Company’s Total Shareholder Return Percentile Rank Among Total Shareholder Return of the Peer Group Companies
|
(b)
|
Relative Revenue Growth
|
(c)
|
Adjusted Earnings Per Share
|
1.
|
Performance Goals.
|
(a)
|
The number of Performance Shares specified in (a) to be earned under this Agreement shall be based upon the Company’s Total Shareholder Return as compared to the Total Shareholder Return of companies in the Peer Group (identified in Exhibit A) for the Performance Period. For this purpose, “Total Shareholder Return” shall be determined as follows:
|
Percentile Rank
|
|
Company Rank minus one
|
=
|
Total Number of Companies in the Peer Group.
|
(b)
|
The number of Performance Shares specified in (b) to be earned under this Agreement shall be based upon the Company’s Relative Revenue Growth. For this purpose, Relative Revenue Growth is defined as the percentage by which the Company’s compound annual percentage change in revenue, excluding the impact of changes in foreign currency exchange rates and merger, acquisition and divestiture activity, for the Performance Period exceeds the compound annual percentage change in the vehicle market for the Performance Period.
|
Company’s Percentage Change in Revenue above Weighted Percentage Change in Vehicle Market
|
Percent of Target Number of Performance Shares Earned
|
6% and above
|
200.00%
|
4%
|
100.00%
|
2%
|
50.00%
|
Less than 2%
|
0.00%
|
(c)
|
The number of Performance Shares specified in (c) to be earned under this Agreement shall be based upon the Company’s adjusted 2022 Earnings Per Share (EPS). For this purpose, adjusted EPS is defined as the
|
2022 Adjusted Earnings Per Share
|
Percent of Target Number of Performance Shares Earned
|
$5.90
|
200.00%
|
$5.20
|
100.00%
|
$4.50
|
50.00%
|
Less than $4.50
|
0.00%
|
2.
|
Form and Timing of Payment of Performance Shares. The Company shall deliver to the Employee one Share in settlement of each earned Performance Share. At the end of the Performance Period, the Committee shall determine, in its sole discretion, the number of Performance Shares that have been earned based on the achievement of the Performance Goals described in Section 1 of this Agreement. Except as otherwise provided in Section 4, payment shall be made as soon as administratively practicable in the year after the year in which the Performance Period ends, but in any event, no later than March 15 of the year following the year in which the Performance Period ends.
|
3.
|
Termination of Employment. Except as otherwise provided in this Section 3 or Section 4, the Employee shall be eligible for payment of earned Performance Shares, as specified in Section 2, only if the Employee’s employment with the Company continues through the end of the Performance Period and the Employee does not give notice of the Employee’s voluntary Termination of Employment on or before the end of the Performance Period. Notwithstanding the foregoing, unless otherwise determined by the Committee, in its sole discretion, at the time of the Employee’s Termination of Employment, the following provisions shall apply.
|
(a)
|
Termination for Cause. If the Employee experiences a Termination of Employment for Cause at any time prior to the payment of Shares in settlement of this Award, then the Employee shall forfeit any rights under this Award, including, for the avoidance of doubt, rights with respect to any earned Performance Shares.
|
(b)
|
Death, Disability, Retirement or Involuntary Termination without Cause . If the Employee experiences a Termination of Employment prior to the end of the Performance Period due to the Employee’s death, Disability, Retirement or involuntary termination without Cause, the Committee at its sole discretion, may waive the requirement that the participant must be employed by the Company through the end of the Performance Period. In such case, the Employee shall be eligible for all or that proportion of the Performance Shares earned (determined at the end of the Performance Period and based on actual results). Such proportion shall be calculated as follows, rounded down to the nearest whole number: (i) the total number of Performance Shares that the Employee would have earned absent the Employee’s Termination of Employment, calculated according to Section 1 of this Agreement multiplied by (ii) a fraction, the numerator of which equals the total number of full months that the Employee was employed during the Performance Period, and the denominator of which equals the total number of full months during the Performance Period.
|
(c)
|
Effective Date of Termination of Employment. For purposes of this Agreement, any Termination of Employment shall be effective as of the earlier of (1) the date that the Company receives the Employee’s notice of resignation of employment, or (2) the date that the Employee ceases to actively provide services. In connection with the foregoing, the applicable termination date shall not be extended by any notice period mandated under local law (e.g., “garden leave” or similar period pursuant to local law), and the Company shall have the exclusive discretion to determine when the Employee is no longer actively providing services for purposes of this Award. Notwithstanding the foregoing, the Employee will be deemed to have experienced a Termination of Employment upon the Employee’s “separation from service” within the meaning of Section 409A of the Code to the extent this Award is subject to Section 409A of the Code.
|
4.
|
Change in Control. In the event of a Change in Control, this Award shall be treated in accordance with Section 15 of the Plan, provided, however, that for purposes of Section 15.1(a)(5), an Employee will be considered to have terminated the Employee’s employment or service for “good reason” if the Employee’s
|
5.
|
Stockholder Rights. The Employee shall have no rights as a stockholder, (including rights to dividends) with respect to the Stock underlying the Performance Shares unless and until Shares are delivered to the Employee under this Agreement.
|
6.
|
Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require the Employee or beneficiary to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Agreement. The Employee acknowledges that the ultimate liability for all taxes legally due by the Employee is and remains the Employee’s responsibility, and the Company: (a) makes no representations or undertakings regarding the tax treatment of this Award; and (b) does not commit to structure the terms of this Award to reduce or eliminate the Employee’s tax liability.
|
7.
|
Acquisition of Shares for Investment Purposes Only. By accepting this Award, the Employee hereby agrees with the Company as follows:
|
(a)
|
The Employee shall acquire the Shares issuable with respect to the Performance Shares granted hereunder for investment purposes only and not with a view to resale or other distribution thereof to the public in violation of the Securities Act of 1933, as amended (the “1933 Act”), and shall not dispose of any such Shares in transactions which, in the opinion of counsel to the Company, violate the 1933 Act, or the rules and regulations thereunder, or any applicable state securities or “blue sky” laws.
|
(b)
|
If any Shares acquired with respect to the Performance Shares shall be registered under the 1933 Act, no public offering (otherwise than on a national securities exchange, as defined in the Exchange Act) of any such Shares shall be made by the Employee under such circumstances that he or she (or such other person) may be deemed an underwriter, as defined in the 1933 Act; and
|
(c)
|
The Company shall have the authority to endorse upon the certificate or certificates representing the Shares acquired hereunder such legends referring to the foregoing.
|
8.
|
Miscellaneous.
|
(a)
|
Nontransferability. Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise permitted by the Company, and shall not be subject to execution, attachment or similar process.
|
(b)
|
Notices. Any written notice required or permitted under this Agreement shall be deemed given when delivered personally, as appropriate, either to the Employee or to the Executive Compensation Department of the Company, or when deposited in a United States Post Office as registered mail, postage prepaid, addressed, as appropriate, either to the Employee at his or her address set forth above under the heading “Grant Information,” or such other address as he or she may designate in writing to the Company, or to the Attention: Executive Compensation, BorgWarner Inc., at its headquarters office or such other address as the Company may designate in writing to the Employee.
|
(c)
|
Failure To Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
|
(d)
|
Governing Law. This grant of Performance Shares and actions taken under the Plan and this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without taking into account its conflict of laws provisions.
|
(e)
|
Provisions of Plan. The Performance Shares provided for herein are granted pursuant to the Plan, and said Performance Shares and this Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement solely by reference or expressly cited herein. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Employee. If there is any conflict between the terms of this Agreement and the terms of the Plan, other than with respect to any provisions relating to Termination of Employment or Change in Control, the Plan’s terms shall supersede and replace the conflicting terms of this Agreement to the minimum extent necessary to resolve the conflict. Notwithstanding any terms of the Plan to the contrary, the termination provisions of Section 3 and the change in control provisions of Section 4 of this Award control.
|
(f)
|
Section 16 Compliance. To the extent necessary to comply with, or to avoid disgorgement of profits under the short-swing matching rules of, Section 16 of the Exchange Act, the Employee shall not sell or otherwise dispose of the Shares issued as payment for any earned Performance Shares.
|
(g)
|
409A Six Month Delay. If the Employee is a “specified employee” within the meaning of Section 409A of the Code at the time of the Employee’s Termination of Employment, then any payment made to the Employee as a result of such Termination of Employment shall be delayed for six months following the Employee’s termination to the extent required by Section 409A of the Code.
|
(h)
|
No Right to Continued Employment. Nothing contained in the Plan or this Agreement shall confer upon the Employee any right to continued employment nor shall it interfere in any way with the right of the Employer to terminate the employment of the Employee at any time.
|
(i)
|
Discretionary Nature of Plan; No Right to Additional Awards. The Employee acknowledges and agrees that the Plan is discretionary in nature and limited in duration, and may be amended, cancelled, or terminated by the Company, in its sole discretion, at any time. The grant of an Award under the Plan is a one-time benefit and does not create any contractual or other right to receive an Award or benefits in lieu of an Award. Future Awards, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of an award, the number of Shares subject to the award, and the vesting provisions.
|
(j)
|
Termination Indemnities. The value of this Award is an extraordinary item of compensation outside the scope of the Employee’s employment contract, if any. As such, Awards are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension, or retirement benefits or similar payments.
|
(k)
|
Acceptance of Award. By accepting this Award, the Employee agrees to accept all the terms and conditions of the Award, as set forth in this Agreement and in the Plan. This Agreement shall not be effective as a Performance Share Award if a copy of this Agreement is not signed by the
|
(l)
|
Binding Effect. Subject to the limitations stated above, this Agreement shall be binding upon and inure to the benefit of the parties’ respective heirs, legal representatives successors and assigns.
|
(m)
|
Amendment of the Agreement. Except as otherwise provided in the Plan, the Company and the Employee may amend this Agreement only by a written instrument signed by both parties.
|
(n)
|
Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute but one Agreement.
|
(o)
|
Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Performance Shares by electronic means. The Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
|
(p)
|
Entire Agreement; Headings. This Agreement is the entire agreement between the parties hereto, and all prior oral and written representations are merged into this Agreement. The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof.
|
(q)
|
Year. All references to “year” in this Agreement refer to the calendar year, unless otherwise stated.
|
American Axle & Manufacturing Holdings, Inc.
|
Flowserve Corporation
|
PACCAR Inc.
|
Aptiv PLC
|
Goodyear Tire & Rubber Company
|
Parker-Hannifin Corporation
|
Autoliv, Inc.
|
Ingersoll-Rand Plc
|
Stanley Black & Decker, Inc.
|
Cooper-Standard Holdings Inc.
|
Lear Corporation
|
Tenneco Inc.
|
Cummins Inc.
|
Meritor, Inc.
|
Terex Corporation
|
Dana Holding Corporation
|
Navistar International Corporation
|
Textron Inc.
|
Eaton Corporation plc
|
Oshkosh Corporation
|
Visteon Corporation
|
a)
|
the assignment to the Employee of any duties inconsistent in any respect with the Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as of the date of the Change in Control or any higher position, authority, duties or responsibilities assigned to the Employee after the date of the Change in Control, or any other diminution in the Employee’s position, authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; or
|
b)
|
any failure by the Company to:
|
1.
|
pay the Employee an annual base salary at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Employee by the Company and its affiliated companies in respect of the twelve‑month period immediately preceding the month in which the Change in Control occurs; or
|
2.
|
provide the Employee, for each fiscal year ending prior to the second anniversary of the effective date of the Change in Control, an annual bonus (the “Annual Bonus”) opportunity at least equal to the Employee’s average of the bonuses paid or payable under the Company’s Management Incentive Bonus Plan, or any comparable annual bonus under any predecessor or successor plan, in respect of the last three full fiscal years prior to the date of the Change in Control (or, if the Employee was first employed by the Company after the beginning of the earliest of such three fiscal years, the average of the bonuses paid or payable under such plan(s) in respect of the fiscal years ending before the date of the Change in Control during which the Employee was employed by the Company, with such bonus being annualized with respect to any such fiscal year if the Employee was not employed by the Company for the whole of such fiscal year),
|
c)
|
the Company’s requiring the Employee, without the Employee’s consent, to:
|
1.
|
be based at any office or location that is more than 35 miles from the location where the Employee was employed immediately preceding the date of the Change in Control; or
|
2.
|
travel on Company business to a substantially greater extent than required immediately prior to the date of the Change in Control.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of BorgWarner Inc.;
|
2.
|
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;
|
3.
|
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;
|
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;
|
(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;
|
(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
|
(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
|
5.
|
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 controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(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.
|
Date: May 6, 2020
|
|
|
|
/s/ Frederic B. Lissalde
|
|
Frederic B. Lissalde
|
|
President and Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of BorgWarner Inc.;
|
2.
|
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;
|
3.
|
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;
|
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;
|
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;
|
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
|
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
|
5.
|
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 controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
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.
|
Date: May 6, 2020
|
|
|
|
/s/ Kevin A. Nowlan
|
|
Kevin A. Nowlan
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
Dated: May 6, 2020
|
|
|
|
/s/ Frederic B. Lissalde
|
|
Frederic B. Lissalde
|
|
President and Chief Executive Officer
|
|
|
|
/s/ Kevin A. Nowlan
|
|
Kevin A. Nowlan
|
|
Executive Vice President and Chief Financial Officer
|
|