UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q
QUARTERLY REPORT(Mark One)☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2024
OR
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period fromtoCommission file number: 1-12162

BORGWARNER INC.
________________________________________________(Exact name of registrant as specified in its charter)
Delaware13-3404508(State or other jurisdiction of(I.R.S. Employer

Incorporation or organization)

Identification No.)

3850 Hamlin Road,

Auburn Hills,

Michigan48326(Address of principal executive offices)(Zip Code)Registrant’s telephone number, including area code: (248) 754-9200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class

Trading Symbol(s)Name of each exchange
on which registered

Common Stock, par value $0.01 per share

BWA

New York Stock Exchange

1.00% Senior Notes due 2031

BWA31

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to besubmitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files).
Yes ☑ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, asmaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”“smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Emerging growth company☑
☐

Accelerated filer☐

Non-accelerated filer☐

Smaller reporting company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of July 26, 2024, the registrant had 227,768,975 shares of voting common stock outstanding.

BORGWARNER INC.
FORM 10-Q
THREE AND SIX MONTHS ENDED JUNE 30, 2024
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (Unaudited)1

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024
and 2023 (Unaudited)2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months
ended June 30, 2024 and 2023 (Unaudited)3

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023
(Unaudited)

4

Notes to Condensed Consolidated Financial Statements (Unaudited)

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

38

Item 3. Quantitative and Qualitative Disclosures About Market Risk

53

Item 4. Controls and Procedures

54

PART II. Other Information
Item 1. Legal Proceedings

55

Item 1A. Risk Factors

55

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

55

Item 5. Other Information

56

Item 6. Exhibits

56

SIGNATURES

57

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CAUTIONARY STATEMENTS FOR FORWARD-LOOKING STATEMENTS
Statements in this Quarterly Report on Form 10-Q (this “Form 10-Q” or “report”) (including Management’s
Discussion and Analysis of Financial Condition and Results of Operations) may constitute forward-looking
statements as contemplated by the 1995 Private Securities Litigation Reform Act (the “Act”) that are
based on management's current outlook, expectations, estimates and projections. Words such as“anticipates,” “believes,” “continues,” “could,” “designed,” “effect,” “estimates,” “evaluates,” “expects,”“forecasts,” “goal,” “guidance,” “initiative,” “intends,” “may,” “outlook,” “plans,” “potential,” “predicts,”“project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” and variations of such words andsimilar expressions are intended to identify such forward-looking statements. Further, all statements,
other than statements of historical fact contained or incorporated by reference in this Form 10-Q, that we
expect or anticipate will or may occur in the future regarding our financial position, business strategy andmeasures to implement that strategy, including changes to operations, competitive strengths, goals,
expansion and growth of our business and operations, plans, references to future success and othersuch matters, are forward-looking statements. Accounting estimates, such as those described under theheading “Critical Accounting Policies and Estimates” in Item 7 of our Annual Report on Form 10-K for theyear ended December 31, 2023 (“Form 10-K”), are inherently forward-looking. All forward-looking
statements are based on assumptions and analyses made by us in light of our experience and our
perception of historical trends, current conditions and expected future developments, as well as otherfactors we believe are appropriate under the circumstances. Forward-looking statements are notguarantees of performance, and the Company’s actual results may differ materially from thoseexpressed, projected, or implied in or by the forward-looking statements.
You should not place undue reliance on these forward-looking statements, which speak only as of thedate of this Form 10-Q. Forward-looking statements are subject to risks and uncertainties, many of which
are difficult to predict and generally beyond our control, that could cause actual results to differ materiallyfrom those expressed, projected or implied in or by the forward-looking statements. These risks anduncertainties, among others, include supply disruptions impacting us or our customers, commodity
availability and pricing, and an inability to achieve expected levels of recoverability in commercial
negotiations with customers concerning these costs; competitive challenges from existing and newcompetitors, including original equipment manufacturer (“OEM”) customers; the challenges associatedwith rapidly changing technologies, particularly as they relate to electric vehicles, and our ability toinnovate in response; the difficulty in forecasting demand for electric vehicles and our electric vehicles
revenue growth; potential disruptions in the global economy caused by wars or other geopoliticalconflicts; the ability to identify targets and consummate acquisitions on acceptable terms; failure to realize
the expected benefits of acquisitions on a timely basis; the possibility that our 2023 tax-free spin-off of ourformer Fuel Systems and Aftermarket segments into a separate publicly traded company will not achieve
its intended benefits; the failure to promptly and effectively integrate acquired businesses; the potential
for unknown or inestimable liabilities relating to the acquired businesses; our dependence on automotive
and truck production, which is highly cyclical and subject to disruptions; our reliance on major OEM
customers; impacts of any future strikes involving any of our OEM customers and any actions such OEM
customers take in response; fluctuations in interest rates and foreign currency exchange rates; ourdependence on information systems; the uncertainty of the global economic environment; the outcome ofexisting or any future legal proceedings, including litigation with respect to various claims, orgovernmental investigations, including related litigation; future changes in laws and regulations, including,by way of example, taxes and tariffs, in the countries in which we operate; impacts from any potential
future acquisition or disposition transactions; and the other risks noted in reports that we file with the
Securities and Exchange Commission, including Item 1A, “Risk Factors” in our most recently-filed Form
10-K. We do not undertake any obligation to update or announce publicly any updates to or revisions to
any of the forward-looking statements in this Form 10-Q to reflect any change in our expectations or any
change in events, conditions, circumstances, or assumptions underlying the statements.

Table of Contents

This section and the discussions contained in Item 1A, “Risk Factors,” and in Item 7, subheading “Critical
Accounting Policies and Estimates,” in our most recently-filed Form 10-K are intended to provide
meaningful cautionary statements for purposes of the safe harbor provisions of the Act. This should not
be construed as a complete list of all of the economic, competitive, governmental, technological and otherfactors that could adversely affect our expected consolidated financial position, results of operations or
liquidity. Additional risks and uncertainties, including without limitation those not currently known to us orthat we currently believe are immaterial, also may impair our business, operations, liquidity, financial
condition and prospects.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with accounting principles generally accepted in the UnitedStates of America (“GAAP”), this report includes non-GAAP financial measures. We believe that these
non-GAAP financial measures provide additional information that is useful to investors in understanding
the underlying performance and trends of the Company. Readers should be aware that non-GAAP
financial measures have inherent limitations and should be cautious with respect to the use of suchmeasures. To compensate for these limitations, we use non-GAAP measures as comparative tools,
together with GAAP measures, to assist in the evaluation of our operating performance or financial
condition. We ensure that these measures are calculated using the appropriate GAAP components intheir entirety and that they are computed in a manner intended to facilitate consistent period-to-period
comparisons. Our method of calculating these non-GAAP measures may differ from methods used byother companies. These non-GAAP measures should not be considered in isolation or as a substitute forthose financial measures prepared in accordance with GAAP. Where non-GAAP financial measures areused, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to
the most directly comparable GAAP financial measure, can be found in this report.

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30,2024(in millions)

December 31,
2023

ASSETS
Cash, cash equivalents and restricted cash

$

1,288

$

1,534

Receivables, net

3,111

3,109

Inventories, net

1,322

1,313

Prepayments and other current assets

283

261

6,004

6,217

3,736

3,783

342

364

2,965

3,013

Other intangible assets, net

521

564

Other non-current assets

540

512

Total current assets
Property, plant and equipment, net
Investments and long-term receivables
Goodwill

Total assets$

14,108$445$

14,453

LIABILITIES AND EQUITY
Short-term debt$

73

Accounts payable

2,202

2,546

Other current liabilities

1,065

1,148

3,712

3,767

3,283

3,707

Retirement-related liabilities

141

146

Other non-current liabilities

687

767

7,823

8,387

Total current liabilities
Long-term debt

Total liabilities
Commitments and contingencies
Common stock3

3

Capital in excess of par value

2,645

2,689

Retained earnings

6,620

6,152

Accumulated other comprehensive loss

(938)

(828)

Common stock held in treasury, at cost

(2,237)(2,188)

6,093

5,828

192

238

Total BorgWarner Inc. stockholders’ equity
Noncontrolling interest
Total equity

6,285

Total liabilities and equity$

14,108See accompanying Notes to Condensed Consolidated Financial Statements.

1

6,066
$

14,453

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BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30,(in millions, except per share amounts)

2024

Net sales$

Six Months Ended June 30,

2023

3,603

$

2024

3,671

$

2023

7,198

$

7,054

Cost of sales

2,918

2,991

5,869

5,797

Gross profit

685

680

1,329

1,257

Selling, general and administrative expenses

341

334

670

633

Restructuring expense

25

9

44

12

Other operating expense, net

22

4

23

5

297

333

592

607

Equity in affiliates’ earnings, net of tax

(12)

(12)

(17)

(13)

Unrealized loss on equity and debt securities

—

54

2

69

Interest expense, net

8

12

13

22

Other postretirement expense

3

3

6

5

298

276

588

524

(31)

30

31

97

329

246

557

427

Operating income

Earnings from continuing operations before income taxes andnoncontrolling interest(Benefit) provision for income taxes
Net earnings from continuing operations
Net (loss) earnings from discontinued operations
Net earnings
Net earnings from continuing operations attributable tononcontrolling interest
Net earnings attributable to BorgWarner Inc.

(12)

(24)

(19)

25

317

222

538

452

14

18

29

31

$

303

$

204

$

509

$

421

$

315

$

228

$

528

$

396

Amounts attributable to BorgWarner Inc.:
Net earnings from continuing operations
Net (loss) earnings from discontinued operations(12)

Net earnings attributable to BorgWarner Inc.
Earnings per share from continuing operations — basic

(24)

(19)

25

$

303

$

204

$

509

$

421

$

1.39

$

0.98

$

2.33

$

1.70

(Loss) earnings per share from discontinued operations — basic(0.05)(0.10)(0.08)

0.11

Earnings per share attributable to BorgWarner Inc. — basic

$

1.34

$

0.88

$

2.25

$

1.81

Earnings per share from continuing operations — diluted

$

1.39

$

0.97

$

2.32

$

1.69

(Loss) earnings per share from discontinued operations —diluted(0.05)

Earnings per share attributable to BorgWarner Inc. — diluted

$

1.34

(0.10)$

0.87(0.08)
$

2.24

0.11
$

1.80

Weighted average shares outstanding:
Basic

226.1

233.4

227.0

233.1

Diluted

227.2

234.4

227.9

234.3

See accompanying Notes to Condensed Consolidated Financial Statements.

2

Table of Contents

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(UNAUDITED)
Three Months Ended June 30,(in millions)2024

Net earnings attributable to BorgWarner Inc.

$

Six Months Ended June 30,

2023

303

$

2024

204

$

2023

509

$

421

Other comprehensive loss
Foreign currency translation adjustments

(31)

(95)

(97)

(56)

1

(26)

24

(18)

38

Postretirement defined benefit plans1

2

(3)

5

(4)

(55)

(74)

(110)

(22)

248

130

399

399

14

18

29

31

(3)

(13)

(8)

(14)

Hedge instruments

Total other comprehensive loss attributable to BorgWarner
Inc.
Comprehensive income attributable to BorgWarner Inc.1
Net earnings from continuing operations attributable tononcontrolling interest
1

Other comprehensive loss attributable to noncontrolling interest
Comprehensive income

$

259

$

135

$

420

____________________________________
1

Net of income taxes.

See accompanying Notes to Condensed Consolidated Financial Statements.

3

$

416

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BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,(in millions)

2024

2023

OPERATING ACTIVITIES OF CONTINUING OPERATIONSNet cash provided by operating activities of continuing operations (see Note 23)

$

344

$

289

INVESTING ACTIVITIES OF CONTINUING OPERATIONSCapital expenditures, including tooling outlays

(355)

(439)

Payments for businesses acquired, net of cash acquired

—

(30)

Proceeds from settlement of net investment hedges, net

36

13(Payments for) proceeds from investments in debt and equity securities, net(4)

6

Proceeds from the sale of business, net

8—Proceeds from asset disposals and other, net

2

14

(313)

(436)

—

3

Net cash used in investing activities from continuing operations
FINANCING ACTIVITIES OF CONTINUING OPERATIONSNet increase in notes payable
Additions to debt

2

1

Repayments of debt, including current portion

(15)

(6)

Payments for purchase of treasury stock

(100)

—

Payments for stock-based compensation items

(23)

(25)

Payments for contingent consideration

(1)

(23)

Purchase of noncontrolling interest

—

(15)

Dividends paid to BorgWarner stockholders

(50)

(79)

Dividends paid to noncontrolling stockholders
Net cash used in financing activities from continuing operations

(55)

(64)

(242)

(208)

(18)

(21)

CASH FLOWS FROM DISCONTINUED OPERATIONS
Operating activities of discontinued operations
Investing activities of discontinued operations
Net cash used in discontinued operations
Effect of exchange rate changes on cash

—

(85)

(18)

(106)

(17)

(29)

Net decrease in cash, cash equivalents and restricted cash

(246)

(490)

Cash, cash equivalents and restricted cash at beginning of year

1,534

1,338

Cash, cash equivalents and restricted cash at end of period

$

1,288

$

848

Less: Cash, cash equivalents and restricted cash of discontinued operations at end of period

$

—

$

215

Cash, cash equivalents and restricted cash of continuing operations at end of period

$

1,288

$

633

See accompanying Notes to Condensed Consolidated Financial Statements.

4

Table of Contents

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements of BorgWarner Inc. andConsolidated Subsidiaries (the “Company”) have been prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes necessary for a comprehensive presentation of financial position, results ofoperations and cash flow activity required by GAAP for complete financial statements. In the opinion ofmanagement, all normal recurring adjustments necessary for a fair statement of results have been
included. Certain prior period amounts have been reclassified to conform to the current period
presentation. Additionally, in the three and six months ended June 30, 2024, the Company recognized a$3 million and $19 million increase in Net earnings attributable to BorgWarner Inc., respectively, in theCondensed Consolidated Statement of Operations for the correction of misstatements related to certain
accruals, of which $12 million related to 2023 (the remainder relates to periods prior to 2023). The
Company has evaluated the effect of these out-of-period adjustments for the current reporting periods, aswell as on the previous interim and annual periods in which they should have been recognized, andconcluded that these adjustments are not material to any of the periods affected. Operating results for thethree and six months ended June 30, 2024 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2024. The balance sheet as of December 31, 2023 wasderived from the audited financial statements as of that date. For further information, refer to theConsolidated Financial Statements and Footnotes thereto included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2023.
Management makes estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the financial statements andaccompanying notes, as well as the amounts of revenues and expenses reported during the periods
covered by those financial statements and accompanying notes. Actual results could differ from theseestimates.
On July 3, 2023, BorgWarner completed the previously announced spin-off (“Spin-Off”) of its Fuel
Systems and Aftermarket segments in a transaction intended to qualify as tax free to the Company’s
stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of 100%of the outstanding common stock of PHINIA, Inc. (“PHINIA”) to holders of record of common stock of theCompany on a pro-rata basis. Each holder of record of common stock of the Company received one
share of PHINIA common stock for every five shares of common stock of the Company held on June 23,
2023, the record date for the distribution (“Distribution Date”). In lieu of fractional shares of PHINIA,
stockholders of the Company received cash. PHINIA is an independent public company trading under thesymbol “PHIN” on the New York Stock Exchange.
The historical results of operations of PHINIA for periods prior to the Spin-Off are presented as
discontinued operations in these Condensed Consolidated Financial Statements.
In connection with the Spin-Off, the Company entered into several agreements with PHINIA on or prior to
the Distribution Date that, among other things, provide a framework for the Company’s relationship with
PHINIA after the Spin-Off, including a separation and distribution agreement, an employee mattersagreement, a tax matters agreement, an intellectual property cross-license agreement and a transition
services agreement through which the Company and PHINIA will continue to provide certain services toeach other following the Spin-Off. The Company substantially completed the performance under thetransition services agreement as of June 30, 2024.

5

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NOTE 2 NEW ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements
to Reportable Segment Disclosures.” It requires incremental disclosures related to an entity’s reportablesegments, including (i) significant segment expense categories and amounts for each reportable segmentthat are provided to the chief operating decision maker (“CODM”), (ii) an aggregate amount anddescription of other segment items included in each reported measure, (iii) all annual disclosures about areportable segment’s profit or loss and assets required by Topic 280 to be disclosed in interim periods,(iv) the title and position of the individual or the name of the group identified as the CODM and (v) an
explanation of how the CODM uses the reported measures of segment profit or loss to assess
performance and allocate resources to the segment. The standard improves transparency by providing
disaggregated expense information about an entity’s reportable segments. The standard does not change
the definition of a segment, the method for determining segments or the criteria for aggregating operating
segments into reportable segments. This guidance is effective for annual reporting periods beginning
after December 15, 2023, and interim reporting periods beginning after December 15, 2024. The
Company does not expect this guidance to have a material impact on the identification of its reportablesegments or its Consolidated Financial Statements.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements toIncome Tax Disclosures.” It requires entities to disaggregate information related to the effective tax rate
reconciliation and income taxes paid. The standard improves transparency by providing more detailed
income tax disclosures that would be useful in making capital allocation decisions. This guidance iseffective for annual reporting periods beginning after December 15, 2024. The Company does not expect
this guidance to have a material impact on its Consolidated Financial Statements.
NOTE 3 ACQUISITIONSIn accordance with ASC Topic 805, “Business Combinations,” acquisitions are recorded using theacquisition method of accounting. The Company recognizes and measures the acquisition date fair valueof the identifiable assets acquired, liabilities assumed, and any non-controlling interest using a range of
methodologies as indicated by generally accepted valuation practices. Various valuation techniques areused to determine the fair value of intangible assets, with the primary techniques being forms of theincome approach, specifically the relief-from-royalty and multi-period excess earnings valuation methods.
Under these valuation approaches, the Company is required to make estimates and assumptions from amarket participant perspective and may include revenue growth rates, estimated earnings, royalty rates,
obsolescence factors, contributory asset charges, customer attrition and discount rates.
Due to the insignificant size of the Company’s 2023 and 2022 acquisitions, both individually and in theaggregate, relative to the Company, supplemental pro forma financial information for the current and priorreporting periods is not provided.
Eldor Corporation’s Electric Hybrid Systems Business
On December 1, 2023, the Company completed its acquisition of the electric hybrid systems businesssegment of Eldor Corporation (“Eldor”), which is headquartered in Italy. The Company expects theacquisition to complement its existing ePropulsion product portfolio by enhancing the Company’sengineering capabilities in power electronics. The Company paid €72 million ($78 million) at closing andis obligated to remit up to €175 million ($191 million) of earn-out payments that could be paid over the twoyears following closing. The earn-out payments are contingent upon booked business for future periods
from new customer awards. The Company’s estimate at closing indicated that the minimum threshold forthe earn-out target would not be achieved; thus, no amount of the potential earn-out payments were6

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included in the purchase consideration. As of June 30, 2024, the Company’s estimate has not changed;
thus, no amount is included in the Company’s Condensed Consolidated Balance Sheet.
The purchase price was allocated on a preliminary basis as of December 1, 2023. Assets acquired andliabilities assumed were recorded at estimated fair values based on management’s estimates, available
information, and supportable assumptions that management considered reasonable. Certain estimatedvalues for the acquisition, including goodwill, tangible and intangible assets and deferred taxes, are notyet finalized, and the preliminary purchase price allocations are subject to change as the Company
completes its analysis of the fair value at the date of acquisition. The final valuation of assets acquired
and liabilities assumed may be materially different than the estimated values shown below.
The estimated fair values of assets acquired and liabilities assumed as of December 1, 2023 were assets
of $86 million, including goodwill and intangibles of $25 million, and liabilities of $8 million.
Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill.
Goodwill of $14 million was recorded within the Company’s ePropulsion segment. Goodwill consists of
the Company’s expected future economic benefits that will be realized from expanding the Company’s
electric vehicle portfolio as electric vehicle production continues to increase. Goodwill is not deductible fortax purposes in Italy.
(in millions)

Estimated
Fair Value

Estimated Life

Developed technology

6 years

Customer relationships

10 years

Total other intangible assets

$

9
2

$

11

Identifiable intangible assets were valued using the market approach.
Hubei Surpass Sun Electric Charging Business
On March 1, 2023, the Company completed its acquisition of 100% of the electric vehicle solution, smart
grid and smart energy businesses (“SSE”) of Hubei Surpass Sun Electric, pursuant to an Equity Transfer
Agreement. The acquisition complements the Company’s existing European and North American
charging footprint by adding a presence in China. The total consideration was ¥288 million ($42 million),including ¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earnout payments. The Company paid ¥217 million ($31 million) of base purchase price in the year ended
December 31, 2023. Of the remaining ¥51 million ($8 million) of base purchase price, ¥31 million ($5million) is payable by July 31, 2024 and is recorded in Other current liabilities in the Company’s
Condensed Consolidated Balance Sheet as of June 30, 2024. The remaining ¥20 million ($3 million) of
base purchase price is payable before September 30, 2025 and is recorded in Other non-current
liabilities in the Company’s Condensed Consolidated Balance Sheet as of June 30, 2024.
Pursuant to the agreement, the Company’s obligation to remit up to ¥103 million ($15 million) of earn-out
payments is contingent upon the achievement of certain revenue and pre-tax profit margin targets in
2023 and 2024 as well as the retention of key employees during the same time period. In the threemonths ended June 30, 2024, the company paid ¥10 million ($1 million) of earnout related to the 2023
measurement period. The Company’s current estimate of the earn-out payments related to the 2024
measurement period was unchanged at approximately ¥10 million ($2 million), which is recorded in Other
non-current liabilities in the Company’s Condensed Consolidated Balance Sheet.
The Company finalized its valuation of the assets and liabilities of the SSE acquisition during the third
quarter of 2023. Any excess of the purchase price over the estimated fair value of net assets wasrecognized as goodwill. Goodwill of $2 million was recorded within the Company’s Air Management
7

Table of Contentssegment. Goodwill consists of the Company’s expected future economic benefits that will be realized
from expanding the Company’s electric vehicle portfolio as electric vehicle production continues toincrease. Goodwill is not deductible for tax purposes in China.
The following table summarizes the other intangible assets acquired:(in millions)

Estimated
Fair Value

Estimated Life

Developed technology

5 years

Customer relationships

6 years

Total other intangible assets

$

2
1

$

3

The impact of the SSE acquisition on net sales and net earnings was immaterial for the three and six
months ended June 30, 2023.
Drivetek AG
On December 1, 2022, the Company completed its acquisition of 100% of Drivetek AG (“Drivetek”), an
engineering and product development company located in Switzerland. This acquisition strengthens theCompany’s power electronics capabilities in auxiliary inverters, which the Company expects will help toaccelerate the growth of its High Voltage eFan business. The total consideration was ₣37 million ($39
million), including ₣27 million ($29 million) of base purchase price and ₣10 million ($10 million) of
estimated earn-out payments. The Company paid ₣27 million ($29 million) of base purchase price atclosing. The Company’s obligation to remit up to ₣10 million ($10 million) of earn-out payments, over thethree years following closing, is contingent upon achievement of estimated future sales targets
associated with newly awarded business and future turnover rate targets. As of June 30, 2024, theCompany’s estimate of the earn-out payments was approximately ₣10 million ($11 million), which isrecorded in Other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet.
Rhombus Energy Solutions
On July 29, 2022, the Company completed its acquisition of 100% of Rhombus Energy Solutions(“Rhombus”), a provider of charging solutions in the North American market, pursuant to the terms of an
Agreement and Plan of Merger (the “Agreement”). The acquisition complements the Company’s existing
European charging footprint to accelerate organic growth and adds North American regional presence toits charging business.
The Company paid $131 million at closing. Pursuant to the Agreement, the Company is obligated to remit
up to $30 million of earn-out payments, payable in 2025, contingent upon achievement of certain sales
dollars, sales volume, and gross margin targets. The Company’s estimate at closing indicated that theminimum thresholds for these earn-out targets would not be achieved; thus, no amount of the potential
earn-out payments were included in the purchase consideration. As of June 30, 2024, the Company’s
estimate has not changed; thus, no amount is included in the Company’s Condensed Consolidated
Balance Sheet. Additionally, pursuant to the Agreement, the Company is obligated to remit up to $25
million over the three years following closing in key employee retention-related payments, which include
certain performance targets. The amounts are being accounted for as post-combination expense.
Santroll Automotive Components
On March 31, 2022, the Company completed its acquisition of 100% of Santroll Automotive Components(“Santroll”), a carve-out of Santroll Electric Auto’s eMotor business, pursuant to the terms of an Equity
Transfer Agreement (“ETA”). The acquisition is expected to strengthen the Company’s vertical integration,
scale and portfolio breadth in light vehicle eMotors while allowing for increased speed to market.

8

Table of Contents

The total final consideration was $192 million, including approximately ¥1.0 billion ($152 million) of basepurchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The Company
paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended December 31,
2022 and no longer expects to recapture a previously anticipated $5 million of post-closing adjustments,
which was recorded in Other operating expense, net during the three months ended March 31, 2023.
Pursuant to the ETA, the obligation of the Company to remit up to ¥0.3 billion (approximately $47 million)of earn-out payments was contingent upon achievement of certain sales volume targets and certain
estimated future volume targets associated with newly awarded business. During the second quarter of2023, the Company paid approximately ¥0.2 billion ($24 million) to settle the remaining earn-out liability
and related adjustments.
NOTE 4 REVENUE FROM CONTRACTS WITH CUSTOMERSThe Company manufactures and sells products, primarily to OEMs of light vehicles and, to a lesser
extent, to other OEMs of commercial vehicles and off-highway vehicles, to certain tier one vehicle
systems suppliers and into the aftermarket. The Company’s payment terms are based on customarybusiness practices and vary by customer type and products offered. The Company evaluated the terms of
its arrangements and determined that they do not contain significant financing components.
Generally, revenue is recognized upon shipment or delivery; however, a limited number of the Company’s
customer arrangements for its highly customized products with no alternative use provide the Company
with the right to payment during the production process. As a result, for these limited arrangements,
revenue is recognized as goods are produced and control transfers to the customer using the input costto-cost method. The Company recorded a contract asset of $16 million and $18 million at June 30, 2024
and December 31, 2023, respectively, for these arrangements. These amounts are reflected in
Prepayments and other current assets in the Company’s Condensed Consolidated Balance Sheets.
In limited instances, certain customers have provided payments in advance of receiving related products,
typically at the onset of an arrangement prior to the beginning of production. These contract liabilities arereflected as Other current liabilities in the Condensed Consolidated Balance Sheets and were $15 million
at June 30, 2024 and $18 million at December 31, 2023. These amounts are reflected as revenue over
the term of the arrangement (typically 3 to 7 years) as the underlying products are shipped and represent
the Company’s remaining performance obligations as of the end of the period.
The Company continually seeks business development opportunities and, at times, provides customer
incentives for new program awards. When the Company determines that the payments are incremental
and incurred only if the new business is obtained and expects to recover these amounts from thecustomer over the term of the new business arrangement, the Company capitalizes these amounts. As ofJune 30, 2024 and December 31, 2023, the Company recorded customer incentive payments of $25
million and $27 million, respectively, in Prepayments and other current assets, and $38 million and $58
million, respectively, in Other non-current assets in the Condensed Consolidated Balance Sheets.

9Table of Contents

The Company’s products can be disaggregated by two types: eProducts and Foundational products.
eProducts include all products utilized on or for electric vehicles (“EVs”) plus those same products andcomponents that are included in hybrid powertrains whose underlying technologies are adaptable orapplicable to those used in or for EVs. Foundational products include all products utilized on internal
combustion engines plus those same products and components that are also included in hybrid
powertrains. The following table represents a disaggregation of revenue from contracts with customers byFoundational products and eProducts for the three and six months ended June 30, 2024 and 2023.
Three Months Ended June 30,(in millions)2024

Foundational products$

eProducts

3,027

$

576

Total

$

10

Six Months Ended June 30,

2023

3,603

2024

3,164

$

507
$

3,671

6,116

2023

$

1,082
$

7,198

6,132
922

$

7,054

Table of Contents

The following tables represent a disaggregation of revenue from contracts with customers by reportablesegment and region. Refer to Note 22, “Reportable Segments,” to the Condensed Consolidated Financial
Statements for more information.
Three Months Ended June 30, 2024
(in millions)

Air
Management

Drivetrain &Battery Systems

North America

$

$

529

427

ePropulsion

$

Total

92

$

1,048

Europe

864

368

128

1,360

Asia

509

390

235

1,134

Other
Total

50
$

1,952

11
$

1,196

—
$

455

61
$

3,603

Three Months Ended June 30, 2023
(in millions)

Air
Management

Drivetrain &Battery Systems

North America

$

$

558

414

ePropulsion

$

Total

142

$

1,114

Europe

863

351

70

1,284

Asia

529

350

334

1,213

Other

56

2

2

60

Total

$

2,006

$

1,117

$

548

$

3,671

Six Months Ended June 30, 2024
(in millions)

Air
Management

Drivetrain &Battery Systems

North America

$

$

1,089

828

ePropulsion

$

Total

144

$

2,061

Europe

1,773

754

247

2,774

Asia

997

756

494

2,247

Other

101

15

—

116

Total

$

3,960

$

2,353

$

885

$

7,198

Six Months Ended June 30, 2023
(in millions)

Air
Management

Drivetrain &Battery Systems

North America

$

$

1,080

785

ePropulsion

$

Total

270

$

2,135

Europe

1,758

651

132

2,541

Asia

1,020

633

610

2,263

Other

108

3

4

115

Total

$

3,966

$

2,072

$

1,016

$

7,054

NOTE 5 RESTRUCTURING
The Company undertakes restructuring activities, as necessary, to execute management’s strategy andstreamline operations, consolidate and take advantage of available capacity and resources, andultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize
the Company’s business and to relocate operations to best-cost locations.
The Company’s restructuring expenses consist primarily of employee termination benefits (principally
severance and/or termination benefits) and other costs, which are primarily professional fees and costs
related to facility closures and exits.

11

Table of Contents

The following tables display the Company’s restructuring expense by reportable segment:
Three Months Ended June 30, 2024
(in millions)

Air Management

Drivetrain &Battery Systems

Employee termination benefits

$

$

Other
Total restructuring expense

6

—

4
$

10

ePropulsion

$

10

—
$

—

Corporate

$

1

4
$

14

Total

$

17

—
$

1

8
$

25

Three Months Ended June 30, 2023
(in millions)

Air Management

Drivetrain &Battery Systems

Employee termination benefits

$

$

Other
Total restructuring expense

7

—

2
$

9

ePropulsion

$

—
$

—

Corporate

—

$

—

—
$

—

Total

$

7

—
$

2

—

$

1

$

9

Six Months Ended June 30, 2024
(in millions)

Air Management

Drivetrain &Battery Systems

Employee termination benefits

$

12

$

$

19

Other
Total restructuring expense

77

ePropulsion

10

$

17

—
$

7

Corporate

$

$

7

Total

30

—
$

1

14
$

44

Six Months Ended June 30, 2023
(in millions)

Air Management

Drivetrain &Battery Systems

Employee termination benefits

$

$

Other
Total restructuring expense

9

—

3
$

12

ePropulsion

$

—
$

—

12

—

Corporate

$

—
$

—

Total

—

$

—
$

—

9
3

$

12

Table of Contents

The following tables display rollforwards of the restructuring liability recorded within the Company’s
Condensed Consolidated Balance Sheets and the related cash flow activity:
Employee
Termination
Benefits(in millions)

Balance at January 1, 2024

$

68

Other

$

Total

7

$

75

Restructuring expense, net

30

14

44

Cash payments

(21)

(14)

(35)

Foreign currency translation adjustment and other

(2)

—

(2)

Balance at June 30, 2024

75

7

82

Less: Non-current restructuring liability

8

—

8

Current restructuring liability at June 30, 2024

$

67

$

Employee
Termination
Benefits(in millions)

Balance at January 1, 2023$

Restructuring expense, net

39

7

$

Other

$

74

Total

9

$

48

9

3

12

(26)

(5)

(31)

Foreign currency translation adjustment and other

—

1

1

Balance at June 30, 2023

22

8

30

Less: Non-current restructuring liability

7

—

7

Cash payments

Current restructuring liability at June 30, 2023

$

15

$

8

$

23

2023 Structural Costs Plan In 2023, the Company announced a $130 million to $150 million
restructuring plan to address structural costs primarily in its Foundational products businesses. During
the three and six months ended June 30, 2024, the Company recorded $15 million and $34 million,
respectively, of restructuring charges related to this plan. During the three and six months ended June 30,
2023, the Company recorded $9 million and $12 million, respectively, of restructuring costs related to thisplan. Cumulatively, the Company has incurred $113 million of restructuring charges related to this plan.
2024 Structural Costs Plan In June 2024, the Company approved an approximately $75 million
restructuring plan to address the cost structure in its ePropulsion segment due to increased market
volatility. During the three and six months ended June 30, 2024, the Company recorded $10 million of
restructuring charges related to this plan.
The following provides details of restructuring expense incurred by the Company’s reportable segments
during the three and six months ended June 30, 2024 and 2023, related to the plans discussed above:
Air Management
2023 Structural Costs Plan
• During the three and six months ended June 30, 2024, the segment recorded $10 million
and $19 million, respectively, of restructuring costs under this plan. These costs primarily
related to $12 million of employee termination benefits and $7 million of professional feesand equipment relocation costs for programs in Europe, China and the U.S.
•

During the three and six months ended June 30, 2023, the segment recorded $9 million
and $12 million, respectively, of restructuring costs under this plan. These costs primarily

13

Table of Contents

related to $9 million for a voluntary termination program during the six months ended June30, 2023.
Drivetrain & Battery Systems
2023 Structural Costs Plan
• During the six months ended June 30, 2024, the segment recorded $7 million of
restructuring costs under this plan, primarily related to employee termination benefits for a
program in Europe.
ePropulsion
2023 Structural Costs Plan
• During the three and six months ended June 30, 2024, the segment recorded $4 million
and $7 million of restructuring costs under this plan, respectively, primarily related tocontract cancellations and equipment relocation costs.
2024 Structural Costs Plan
• During the six months ended June 30, 2024, the segment recorded $10 million of
restructuring costs under this plan, primarily related to employee termination benefits.
The Company estimates restructuring expense based on information available at the time such charges
are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual
amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company
may record revisions of previous estimates by adjusting previously established accruals.
The Company continues to evaluate different options across its operations to reduce existing structural
costs over the next few years. The Company will recognize restructuring expense associated with any
future actions at the time they are approved and become probable or are incurred. Any future actions
could result in significant restructuring expense.
NOTE 6 RESEARCH AND DEVELOPMENT COSTS
The Company’s net Research & Development (“R&D”) expenditures are included in Selling, general andadministrative expenses on the Condensed Consolidated Statements of Operations. Customer
reimbursements are netted against gross R&D expenditures as they are considered a recovery of cost.
Customer reimbursements for prototypes are recorded net of prototype costs based on customer
contracts, typically either when the prototype is shipped or when it is accepted by the customer.
Customer reimbursements for engineering services are recorded when performance obligations are
satisfied in accordance with the contract. Financial risks and rewards transfer upon shipment, acceptanceof a prototype component by the customer or upon completion of the performance obligation, as stated in
the respective customer agreement. The Company has contracts with several customers relating to R&D
activities that the Company performs at the Company’s various R&D locations.
The following table presents the Company’s gross and net expenditures on R&D activities:
Three Months Ended June 30,(in millions)2024

Gross R&D expenditures$

Customer reimbursements

220

$

(31)

Net R&D expenditures$

14

Six Months Ended June 30,

2023

189

2024

213

$

(30)
$

183

2023

438

$

(62)
$

376

410
(61)

$

349

Table of Contents

NOTE 7 OTHER OPERATING EXPENSE, NET
Items included in Other operating expense, net consist of:Three Months Ended June 30,(in millions)2024

Commercial contract settlement$

Six Months Ended June 30,

2023

15

$

2024

—

$

2023

15

$

—

Adjustments associated with Spin-Off related balances

11

—

11

—

Merger and acquisition expense

—

8

5

16

Gain on sale of businesses

—

(5)

(3)

(5)

Service and lease agreement termination

—

9

—

9

Gain on sale of assets

—

(6)

—

(6)

Other income, net(4)Other operating expense, net

$

22

(2)
$

4

(5)
$

23

(9)
$

5

Commercial contract settlement: During the three months ended June 30, 2024, the Company
recorded a loss of approximately $15 million related to the settlement of a commercial contract assumed
in its acquisition of the electric hybrid systems business segment of Eldor.
Adjustments associated with Spin-Off related balances: During the three months ended June 30,
2024, the Company recorded expense of approximately $11 million primarily for adjustments to net
amounts owed to the Company related to the tax matters agreement between the Company and PHINIA.
Merger and acquisition expense: During the six months ended June 30, 2024, the Company recorded
merger and acquisition expense of $5 million primarily related to professional fees associated withspecific acquisition initiatives. During the three and six months ended June 30, 2023, the Company
recorded merger and acquisition expense of $8 million and $16 million, respectively, primarily related toprofessional fees associated with specific acquisition initiatives.
NOTE 8 INCOME TAXESThe Company’s provision for income taxes is based upon an estimated annual tax rate for the year
applied to federal, state and foreign income. On a quarterly basis, the annual effective tax rate isadjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those
forecasted at the beginning of the fiscal year and each interim period thereafter.
The Company’s effective tax rate for the three months ended June 30, 2024 and 2023 was (10)% and11%, respectively. During the three months ended June 30, 2024, the Company recorded a discrete tax
benefit of $89 million related to a reduction in certain unrecognized tax benefits and accrued interest for
matters where the statute of limitations lapsed. In addition, the Company recorded a discrete tax benefitof $4 million related to net changes to valuation allowances. During the three months ended June 30,
2023, the Company recorded a discrete tax benefit of approximately $29 million in relation to the Spin-Off
and a $10 million discrete tax benefit relating to various immaterial tax adjustments.
The Company’s effective tax rate for the six months ended June 30, 2024 and 2023 was 5% and 19%,
respectively. During the six months ended June 30, 2024, the Company recorded a discrete tax benefit of$89 million related to a reduction in certain unrecognized tax benefits and accrued interest for matterswhere the statute of limitations lapsed. In addition, the Company recorded a discrete tax benefit of$4 million related to net changes to valuation allowances. During the six months ended June 30, 2023,
the Company recorded a discrete tax benefit of approximately $29 million in relation to the Spin-Off, adiscrete tax benefit of approximately $14 million was recorded related to the resolution of tax audits, a15

Table of Contents$10 million discrete tax expense for the impact of enacted tax law changes and a discrete tax benefit of$9 million related to various immaterial tax adjustments.
The Company’s annual effective tax rates differ from the U.S. statutory rate primarily due to foreign rates
that vary from those in the U.S., jurisdictions with pretax losses for which no tax benefit could be realized,
U.S. taxes on foreign earnings, the realization of certain business tax credits (including foreign tax
credits), and permanent differences between book and tax treatment for certain items (including theForeign-Derived Intangible Income (“FDII”) deduction and the enhanced deduction of research anddevelopment expenses in certain jurisdictions).
The Company estimates that it is reasonably possible there could be a decrease of approximately$18 million in unrecognized tax benefits and interest in the next 12 months related to the conclusion of
tax audits and the lapse of statutes of limitations subsequent to the reporting period in certain taxing
jurisdictions.
NOTE 9 INVENTORIES, NET
A summary of Inventories, net is presented below:(in millions)

Raw material and supplies$

Work in progress

June 30,

December 31,

2024

2023

982

$

165

991
160

Finished goods

206

194

FIFO inventories

1,353

1,345

(31)

(32)

LIFO reserve
Inventories, net

$

16

1,322

$

1,313

Table of Contents

NOTE 10 OTHER ASSETS
Additional detail related to assets is presented below:(in millions)

June 30,

December 31,

2024

2023

Prepayments and other current assets:
Prepaid tooling

$

101

$

89

Prepaid taxes

41

38

Customer incentive payments (Note 4)

25

27

Derivative instruments

22

32

Contract assets (Note 4)

16

18

Other

78

57

Total prepayments and other current assets

$

283

$

261

$

221

$

237

Investments and long-term receivables:
Investment in equity affiliates
Investment in equity securities

69

Long-term receivables

71

52

Total investments and long-term receivables

56

$

342

$

364

$

268

$

257

Other non-current assets:
Deferred income taxes
Operating leases

142

143

Derivative instruments

53

15

Customer incentive payments (Note 4)

38

58

Other

39

39

Total other non-current assets

$

540

$

512

NOTE 11 GOODWILL AND OTHER INTANGIBLES
During the fourth quarter of each year, the Company assesses its goodwill and indefinite-lived intangible
assets assigned to each of its reporting units. In addition, the Company may test goodwill in between
annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce thefair value of a reporting unit below its carrying value.
During the first quarter of 2024, the Company reduced the outlook of its ePropulsion business in
response to volatility in actual and expected customer production schedules. This was viewed as a
triggering event, and as a result the Company performed an interim quantitative analysis of the fair valueof the ePropulsion reporting unit. The estimated fair value was determined using a combined income andmarket approach, consistent with the Company’s analysis performed during the fourth quarter of 2023.
The most critical assumptions used in the calculation of the fair value of the ePropulsion reporting unit
were projected revenue growth rates, projected operating income margin, and discount rates.
Additionally, at the time of that assessment, the carrying value of the ePropulsion reporting unit was
higher than the carrying value used in the most recent quantitative analysis in 2023 due to capital
investments made in the business.
Based on this interim impairment test, the ePropulsion reporting unit had an estimated fair value thatexceeded its carrying value, including goodwill, by approximately 5%, resulting in no impairment.
The fair value of the ePropulsion reporting unit’s goodwill is sensitive to differences between estimatedand actual cash flows, including changes in the projected revenue, projected operating margin anddiscount rate used to evaluate the fair value of these assets and market multiples assumptions applied by17

Table of Contents

the Company. Future changes in the judgments, assumptions and estimates from those used in
valuations and goodwill impairment testing, including discount rates or future operating results andrelated cash flow projections, could result in significantly different estimates of the fair values in the future.
An increase in discount rates, a reduction in projected cash flows or a combination of the two could leadto a reduction in the estimated fair values, which may result in impairment charges that could materiallyaffect the Company’s financial statements in any given year.
Other than as described above, the Company noted no events or circumstances related to any of theCompany’s reporting units in the three and six months ended June 30, 2024 that required additional
assessment or testing.
A summary of the changes in the carrying amount of goodwill are as follows:(in millions)

Air
Management

Drivetrain &Battery
Systems

ePropulsion

Gross goodwill balance, December 31, 2023

$

$

$

1,579

Accumulated impairment losses, December 31, 2023

(502)

Net goodwill balance, December 31, 2023

$

1,077

$

1,065

1,455

481

—
$

1,455

$

1,433

Total

$

—
$

481

$

467

3,515
(502)

$

3,013

$

2,965

Goodwill during the period:
Other, primarily translation adjustment(12)

Ending balance, June 30, 2024

(22)

(14)

(48)

The Company’s other intangible assets, primarily from acquisitions, consist of the following:
June 30, 2024

(in millions)

Estimated
useful lives(years)Gross
Carrying
AmountDecember 31, 2023
Net
Carrying
AmountAccumulated
Amortization

Gross
Carrying
AmountNet
Carrying
AmountAccumulated
Amortization

Amortized intangible assets:
Patented and unpatented
technology

5 - 15

Customer relationships

6 - 15

625

313

312

641

305

336

Miscellaneous

2-5

9

7

2

9

6

3

992

477

515

1,014

456

558

6

—

6

6

—

6

$

Total amortized intangible
assetsUnamortized trade names
Total other intangible assets

$

358

998

$

157

$

477

18

$

$

201

521

$

$

364

1,020

$

$

145

456

$

$

219

564

Table of Contents

NOTE 12 PRODUCT WARRANTYThe Company provides warranties on some, but not all, of its products. The warranty terms are typicallyfrom one to three years. Provisions for estimated expenses related to product warranty are made at thetime products are sold. These estimates are established using historical information about the nature,
frequency and average cost of warranty claim settlements, as well as product manufacturing and industry
developments and recoveries from third parties. The Company actively studies trends of warranty claims
and takes action to improve product quality and minimize warranty claims. The Company believes thatthe warranty accrual is appropriate; however, actual claims incurred could differ from the original
estimates, requiring adjustments to the accrual. The product warranty accrual is allocated to current andnon-current liabilities in the Condensed Consolidated Balance Sheets.
The following table summarizes the activity in the product warranty accrual accounts:(in millions)2024

Beginning balance, January 1

$

2023

196

Provisions for current period sales

$

185

38

Adjustments of prior estimates
Payments
Other, primarily translation adjustment

46

6

(4)

(31)

(37)

(5)

Ending balance, June 30

$

204

(2)
$

188

The product warranty liability is classified in the Condensed Consolidated Balance Sheets as follows:
June 30,(in millions)

December 31,

2024

Other current liabilities$

Other non-current liabilities

2023

83

$

121

Total product warranty liability

$

19

204

91
105

$

196

Table of Contents

NOTE 13 DEBTAs of June 30, 2024 and December 31, 2023, the Company had debt outstanding as follows:
June 30,(in millions)

December 31,

2024

Short-term borrowings

$

2023

57

$

70

Long-term debt
3.375% Senior notes due 03/15/25 ($384 million par value)

384

1

384

5.000% Senior notes due 10/01/25 ($453 million par value)

471

477

2.650% Senior notes due 07/01/27 ($1,100 million par value)

1,094

1,093

7.125% Senior notes due 02/15/29 ($121 million par value)

120

120

1.000% Senior notes due 05/19/31 (€1,000 million par value)

1,057

1,088

4.375% Senior notes due 03/15/45 ($500 million par value)

495

495

Term loan facilities, finance leases and other

50

53

3,671

3,710

Total long-term debt
Less: current portion

388

Long-term debt, net of current portion

$

3,283

3
$

3,707

_____________________________
1

These notes include the fair value step up of $18 million and $24 million as of June 30, 2024 and December 31, 2023, respectively, related to
the Delphi Technologies acquisition in 2020. The fair value step up was calculated based on observable market data and is amortized as a
reduction to interest expense over the remaining life of the instrument using the effective interest method.

The Company may utilize uncommitted lines of credit for short-term working capital requirements. As ofJune 30, 2024 and December 31, 2023, the Company had $57 million and $70 million, respectively, inborrowings under these facilities, which are classified in Short-term debt in the Condensed Consolidated
Balance Sheets. The short-term borrowings primarily relate to a European money market loan with aninterest rate of Euribor plus 1.75% that is callable upon immediate notice by either party.
The following table provides details on Interest expense, net included in the Condensed Consolidated
Statements of Operations:Three Months Ended June 30,(in millions)2024

Interest expense$

Interest income

2023

17

$

(9)

Interest expense, net$

Six Months Ended June 30,

8

2024

19

$

(7)
$

12

2023

32

$

(19)
$

13

36
(14)

$

22

The Company has a $2 billion multi-currency revolving credit facility that allows the Company to increase
the facility by $1 billion with bank group approval. This facility matures in September 2028. The credit
agreement contains customary events of default and one key financial covenant which is a debt-toEBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratio. The Company was incompliance with the financial covenant at June 30, 2024. At June 30, 2024 and December 31, 2023, theCompany had no outstanding borrowings under this facility.
The Company’s commercial paper program allows the Company to issue up to $2 billion of short-term,
unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under
this program, the Company may issue notes from time to time and use the proceeds for general
corporate purposes. The Company had no outstanding borrowings under this program as of June 30,2024 and December 31, 2023.
The total current combined borrowing capacity under the multi-currency revolving credit facility andcommercial paper program cannot exceed $2 billion.
20

Table of Contents

As of June 30, 2024 and December 31, 2023, the estimated fair values of the Company’s seniorunsecured notes totaled $3,254 million and $3,304 million, respectively. The estimated fair values were$367 million lower than their carrying value at June 30, 2024 and $353 million lower than their carrying
value at December 31, 2023. Fair market values of the senior unsecured notes are developed using
observable values for similar debt instruments, which are considered Level 2 inputs as defined by ASC
Topic 820. The carrying values of the Company's multi-currency revolving credit facility, commercial paper
program and other debt facilities approximate fair value. The fair value estimates do not necessarilyreflect the values the Company could realize in the current markets.
The Company had outstanding letters of credit of $29 million and $37 million at June 30, 2024 andDecember 31, 2023, respectively. The letters of credit typically act as guarantees of payment to certain
third parties in accordance with specified terms and conditions.
NOTE 14 OTHER LIABILITIES
Additional detail related to liabilities is presented in the table below:(in millions)

June 30,

December 31,

2024

2023

Other current liabilities:
Payroll and employee related

$

268

$

329

Customer related

166

124

Indirect taxes

115

121

Product warranties (Note 12)

83

91

Employee termination benefits (Note 5)

67

61

Income taxes payable

37

103

Operating leases

36

37

Accrued freight

26

26

Supplier related

22

16

Insurance

17

16

Interest

15

26

Contract liabilities (Note 4)

15

18

Dividends payable to noncontrolling stockholders

12—

Other non-income taxes

12

12Retirement related

11

11

Deferred engineering

10

13

Other

153

Total other current liabilities

144

$

1,065

$

1,148

$

162

$

160

Other non-current liabilities:
Deferred income taxes
Other income tax liabilities

133

226

Product warranties (Note 12)

121

105

Operating leases

110

112

Deferred income

72

83

Earn-out liability (Note 3)

13

13

Employee termination benefits (Note 5)

8

7

Other

68

61

Total other non-current liabilities

$

21

687

$

767

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NOTE 15 FAIR VALUE MEASUREMENTS
ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity-specificmeasurement. Therefore, a fair value measurement should be determined based on assumptions thatmarket participants would use in pricing an asset or liability. As a basis for considering market participant
assumptions in fair value measurements, ASC Topic 820 establishes a fair value hierarchy, whichprioritizes the inputs used in measuring fair values as follows:
Level 1:
Level 2:
Level 3:Observable inputs such as quoted prices for identical assets or liabilities in active markets;
Inputs, other than quoted prices in active markets, that are observable either directly or
indirectly; andUnobservable inputs for which there is little or no market data, which require the reporting
entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following three valuation
techniques noted in ASC Topic 820:
A.

B.
C.

Market approach: Prices and other relevant information generated by market transactions
involving identical or comparable assets, liabilities or a group of assets or liabilities, suchas a business.
Cost approach: Amount that would be required to replace the service capacity of an asset(replacement cost).
Income approach: Techniques to convert future amounts to a single present amountbased upon market expectations (including present value techniques, option-pricing andexcess earnings models).

The following tables classify assets and liabilities measured at fair value on a recurring basis as ofJune 30, 2024 and December 31, 2023:
Basis of fair value measurements

Balance atJune 30, 2024

Quoted prices in
active markets for
identical items(Level 1)

Significant otherobservable inputs(Level 2)

Investment in equity
securities

$

24

$

—

$

—

$

—

—

$

24

Foreign currency contracts

$

25

$

—

$

25

$

—

A

$

—

Net investment hedge
contracts

$

50

$

—

$

50

$

—

A

$

—

Non-current earn-out liability $

13

$

—

$

—

$

13

C

$

—

Foreign currency contracts

11

$

—

$

11

$

—

A

$

—

(in millions)

Significant
unobservable
inputs(Level 3)

Valuationtechnique

Assetsmeasuredat NAV1

Assets:Liabilities:$

22

Table of Contents

Basis of fair value measurements
Balance at
December 31,
2023

Quoted prices in
active markets for
identical items(Level 1)

Significant otherobservable inputs(Level 2)

Current earn-out receivable

$

5

$

—

$

—

$

5

C

$

—

Investment in equity
securities

$

26

$

—

$

—

$

—

—

$

26

Foreign currency contracts

$

33

$

—

$

33

$

—

A

$

—

Net investment hedge
contracts

$

14

$

—

$

14

$

—

A

$

—

(in millions)

Significant
unobservable
inputs(Level 3)

Valuationtechnique

Assetsmeasuredat NAV1

Assets:Liabilities:
Current earn-out liability

$

2

$

—

$

—

$

2

C

$

—

Non-current earn-out liability $

13

$

—

$

—

$

13

C

$

—

Foreign currency contracts

$

3

$

—

$

3

$

—

A

$

—

Net investment hedge
contracts

$

2

$

—

$

2

$

—

A

$

—

_____________________________
1

Certain assets that are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient
have not been classified in the fair value hierarchy. These amounts represent investments in commingled and managed funds
that have underlying assets in fixed income securities, equity securities, and other assets and the fair values have been
estimated using the net asset value of the Company's ownership interest in partners' capital. The Company’s redemption of its
investments with the funds is governed by the partnership agreements and subject to approval from the general partners. With
the exception of annual distributions in connection with the Company’s deemed tax liability, distributions from each fund will bereceived as the underlying investments of the funds are liquidated, the timing of which is unknown.

The following table provides a reconciliation of the Company’s Level 3 earn-out assets and liabilities:
Fair Value Measurements Using Significant Unobservable
Inputs (Level 3)(in millions)

Current earn-out
receivables

Current earn-out
liabilities

Non-current earnout liabilities

Balance at January 1, 2023

$

$

$

Contingent earn-out recognized upon acquisition or disposition

95

Change in fair value of contingent consideration

5(9)

Balance at December 31, 2023

$

5

21

3

(24)
$

2

10
—

$

13

Change in fair value of contingent consideration

3

(1)

—

Earn-out settlements

(8)

(1)

—

Balance at June 30, 2024

$

—

$

—

$

13

Refer to Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements for more
information regarding earn-outs.
NOTE 16 FINANCIAL INSTRUMENTS
The Company’s financial instruments include cash and cash equivalents, marketable securities andaccounts receivable. Due to the short-term nature of these instruments, their book value approximates
their fair value. The Company’s financial instruments may also include long-term debt, investments inequity securities, interest rate and cross-currency swaps, commodity derivative contracts and foreign
currency derivative contracts. All derivative contracts are placed with counterparties that have an S&P, orequivalent, investment grade credit rating at the time of the contracts’ placement. An adjustment for nonperformance risk is considered in the estimate of fair value in derivative assets based on the counterparty
credit default swap (“CDS”) rate. When the Company is in a net derivative liability position, the non-23

Table of Contents

performance risk adjustment is based on its CDS rate. At June 30, 2024 and December 31, 2023, theCompany had no derivative contracts that contained credit-risk-related contingent features.
Cash Flow Hedges
The Company, at times, uses certain commodity derivative contracts to protect against commodity pricechanges related to forecasted raw material and component purchases. At June 30, 2024 andDecember 31, 2023, the Company had no material commodity derivative contracts.
The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while
attempting to optimize its interest costs. The Company, at times, selectively uses interest rate swaps andoptions to reduce market value risk associated with changes in interest rates. At June 30, 2024 andDecember 31, 2023, the Company had no outstanding interest rate swaps or options.
The Company uses foreign currency forward and option contracts to protect against exchange rate
movements for forecasted cash flows, including capital expenditures, purchases, operating expenses orsales transactions designated in currencies other than the functional currency of the operating unit.
Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign
currency in exchange for the operating units’ local currency.
Effectiveness for cash flow hedges is assessed at the inception of the hedging relationship and quarterly,
thereafter. Gains and losses arising from these contracts that are included in the assessment ofeffectiveness are deferred into accumulated other comprehensive income (loss) (“AOCI”) and reclassified
into income as the underlying operating transactions are recognized. These realized gains or losses
offset the hedged transaction and are recorded on the same line in the statement of operations. The initialvalue of any component excluded from the assessment of effectiveness is recognized in income using asystematic and rational method over the life of the hedging instrument. Any difference between thechange in fair value of the excluded component and amounts recognized in income under that systematicand rational method is recognized in AOCI.
At June 30, 2024 and December 31, 2023, the following foreign currency derivative contracts were
outstanding and mature through the ending duration noted below:
Foreign currency derivatives (in millions)*
Notional in tradedcurrency
June 30,2024

Notional in tradedcurrency
December 31, 2023

Functional Currency

Traded Currency

British Pound

Euro

82

83

Ending Duration

Chinese Renminbi

U.S. Dollar

243

209

Jun - 26

Euro

British Pound

104

15

Aug - 24

Euro

Hungarian Forint

9,235

8,233

Jun - 26

Euro

Swiss Franc

37

24

Jun - 26

Euro

Polish Zloty

598

573

Jun - 26

Euro

U.S. Dollar

183

152

Jun - 26

Thai Baht

U.S. Dollar

28

30

Jun - 25

Jun - 26

U.S. Dollar

Chinese Renminbi

582

582

Sep - 24

U.S. Dollar

Korean Won

67,882

34,209Nov - 25

U.S. Dollar

Mexican Peso

4,332

3,280

Jun - 26

U.S. Dollar

Thai Baht

—

2,100

Jun - 24

*Table above excludes non-significant traded currency pairings with total notional amounts less than $10 million U.S. Dollar equivalent as ofJune 30, 2024 and December 31, 2023.

24

Table of Contents

Net Investment Hedges
In addition, the Company is also exposed to the risk that adverse changes in foreign currency exchange
rates could impact its net investment in non-U.S. subsidiaries.
The Company selectively uses cross-currency swaps to hedge that foreign currency exposure. At
June 30, 2024 and December 31, 2023, the following cross-currency swap contracts were outstanding:
Cross-currency swaps(in millions)

June 30, 2024

December 31, 2023

Ending duration

U.S. Dollar to Euro:
Fixed receiving notional

$

1,100

$

1,100

Jul - 27

Fixed paying notional

€

976

€

976

Jul - 27

Fixed receiving notional

$

—

$

500

Mar - 25

Fixed paying notional

€

—

€

450

Mar - 25

Fixed receiving notional

$

500

$

—

Mar - 29

Fixed paying notional

€

470

€

—

Mar - 29

U.S. Dollar to Euro:

U.S. Dollar to Japanese yen:Fixed receiving notional

$

100

$

100

Feb - 29

Fixed paying notional¥

12,724¥

12,724

Feb - 29

In April 2024, the Company terminated its $500 million cross-currency swap contract originally maturingin March 2025, resulting in cash proceeds of $23 million, which is expected to remain in accumulated
other comprehensive loss until the net investment is sold, completely liquidated or substantiallyliquidated. Concurrently, the Company executed a $500 million cross-currency swap contract maturing inMarch 2029.
In addition, the Company has designated the €1,000 million 1.000% Senior Notes due May 19, 2031, as
a net investment hedge of the foreign currency exposure of its investments in certain Euro-denominatedsubsidiaries. Refer to Note 13, “Debt,” to the Condensed Consolidated Financial Statements for more
information.
The Company assesses the effectiveness for net investment hedges at the inception of the hedging
relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in
the assessment of effectiveness are deferred into foreign currency translation adjustments and only
released when the subsidiary being hedged is sold or substantially liquidated. The initial value of any
component excluded from the assessment of effectiveness is recognized in income using a systematicand rational method over the life of the hedging instrument. Any difference between the change in fairvalue of the excluded component and amounts recognized in income under that systematic and rational
method is recognized in AOCI.

25

Table of Contents

Fair Value of Derivative Instruments in the Balance Sheet
At June 30, 2024 and December 31, 2023, the following amounts were recorded in the Condensed
Consolidated Balance Sheets as being payable to or receivable from counterparties for derivative
instruments under ASC Topic 815, “Derivatives and Hedging”:(in millions)
Derivatives designated as
hedging instruments Under
815:

AssetsLiabilities

June 30,
2024

Location

December 31,
2023

Location

June 30,2024

December 31,
2023

Foreign currency

Prepayments andother current
assets

$

21

$

30

Other current
liabilities

$

7

$

2

Foreign currency

Other non-current
assets$3$

1

Other non-current
liabilities

$

4

$

—

Net investment hedges

Other non-current
assets

$

50

$

14

Other non-current
liabilities

$

—

$

2

Prepayments andother current
assets$1$

2

Other current
liabilities

$

—

$

1

Derivatives not designated as
hedging instruments:

Foreign currency

Effect of Derivatives on the Statements of Operations and Statements of Comprehensive Income(Loss)The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to bereclassified to income in one year or less for designated net investment hedges. The amount expected tobe reclassified to income in one year or less assumes no change in the current relationship of the hedged
item at June 30, 2024 market rates.
(in millions)

December 31, 2023

Gain (loss) expected to bereclassified to income in one
year or less$$Deferred gain (loss) in AOCI at

Contract Type

June 30, 2024

Net investment hedges:
Cross-currency swaps$

50

Foreign currency-denominated debt
Total

132
$

182

26

12
100

$

112

—
—

$

—

Table of Contents

Derivative instruments designated as hedging instruments as defined by ASC Topic 815 held during theperiod resulted in the gains and losses recorded in income shown in the table below. Certain prior periodamounts have been revised and moved to these tables from the table disclosing gains recorded onderivatives not designated as hedging instruments.
Three Months Ended June 30, 2024
(in millions)

Total amounts of earnings and othercomprehensive income (loss) line items inwhich the effects of cash flow hedges arerecorded

Net sales

$

3,603

Cost of sales

Selling, general andadministrative expenses

$

$

2,918

341

Other comprehensive
income (loss)

$

(55)

$

(14)

$

—

Gain (loss) on cash flow hedging
relationships:
Foreign currency:
Gain (loss) recognized in othercomprehensive income
Gain (loss) reclassified from AOCI toincome

$

—

$

12

$

—

Six Months Ended June 30, 2024
(in millions)

Total amounts of earnings and othercomprehensive income (loss) line items inwhich the effects of cash flow hedges arerecorded

Net sales

$

7,198

Cost of sales

Selling, general andadministrative expenses

$

$

5,869

670

Other comprehensive
income (loss)

$

(110)

$

4

$

—

Gain (loss) on cash flow hedging
relationships:
Foreign currency:
Gain (loss) recognized in othercomprehensive income
Gain (loss) reclassified from AOCI toincome

$

—

$

22

$

—

Three Months Ended June 30, 2023
(in millions)

Total amounts of earnings and othercomprehensive income (loss) line items inwhich the effects of cash flow hedges arerecorded

Net sales

$

3,671

Cost of sales

Selling, general andadministrative expenses

$

$

2,991

334

Other comprehensive
income (loss)

$

(74)

$

35

$

—

Gain (loss) on cash flow hedging
relationships:
Foreign currency:
Gain (loss) recognized in othercomprehensive income
Gain (loss) reclassified from AOCI toincome

$

—

$

27

—

$

11

Table of Contents

Six Months Ended June 30, 2023
(in millions)

Net sales

Total amounts of earnings and othercomprehensive income (loss) line items inwhich the effects of cash flow hedges arerecorded$

7,054

Cost of sales

Selling, general andadministrative expenses

$

$

5,797

Other comprehensive
income (loss)

633

$

(22)

$

48

$

—

Gain (loss) on cash flow hedging
relationships:
Foreign currency:
Gain (loss) recognized in othercomprehensive income
Gain (loss) reclassified from AOCI toincome

$

—

$

—

$

10

The gains or losses recorded in income related to components excluded from the assessment ofeffectiveness for derivative instruments designated as cash flow hedges were immaterial for the periods
presented.
Gains and losses on derivative instruments designated as net investment hedges were recognized inother comprehensive income (loss) during the periods presented below.
(in millions)Three Months Ended June 30,

Net investment hedges

2024

Six Months Ended June 30,

2023

2024

2023

Foreign currency

$

—

$

3

$

—

$

3

Cross-currency swaps

$

2

$

(24) $

38

$

(29)

Foreign currency-denominated debt

$

8

$

(7) $

32

$

(21)

Derivatives designated as net investment hedge instruments, as defined by ASC Topic 815, held during
the period resulted in the following gains recorded in Interest expense on components excluded from theassessment of effectiveness:(in millions)Three Months Ended June 30,

Net investment hedges

2024

Cross-currency swaps$

Six Months Ended June 30,

2023

5

$

2024

6

$

2023

11

$

12

There were no gains or losses recorded in income related to components excluded from the assessmentof effectiveness for foreign currency-denominated debt designated as net investment hedges. There were
no gains and losses reclassified from AOCI for net investment hedges during the periods presented.
Derivatives Not Designated as Hedges
Derivatives not designated as hedging instruments are used to hedge remeasurement exposures ofmonetary assets and liabilities denominated in currencies other than the operating units’ functional
currency. These derivatives resulted in the gains (losses) recorded in income as shown in the tablebelow. Certain prior period amounts have been moved from this table to the table disclosing gains andlosses recorded on derivatives designated as hedging instruments(in millions)Three Months Ended June 30,

Contract Type

Location

Foreign Currency

Selling, general and administrative expenses

2024

28

$

2023

—

$

Six Months Ended June 30,2024(18) $

2023

—

$

(18)

Table of Contents

NOTE 17 RETIREMENT BENEFIT PLANS
The Company has defined benefit pension plans and other postemployment benefit plans covering
eligible salaried and hourly employees and their dependents. The estimated contributions to theCompany’s defined benefit pension plans for 2024 range from $20 million to $30 million, of which$11 million has been contributed through the six months ended June 30, 2024. The otherpostemployment benefit plans, which provide medical and life insurance benefits, are funded on a payas-you-go basis.
The components of net periodic benefit expense recorded in the Condensed Consolidated Statements ofOperations are as follows:
Pension benefits(in millions)2024

Three Months Ended June 30,

Service cost

US$

Non-US—Interest cost

Other postemployment
benefits

2023

$

2

4

US

$

Non-US

—

5

$

1

3

2024

$

2023

—

5

1

Expected return on plan assets

(2)

(4)

(1)

(3)

—

Amortization of unrecognized prior service credit

—

—

—

—

(1)

Amortization of unrecognized loss

1

1

—

1

—

Net periodic benefit cost

$

1

$

6

$

—

$

6

Pension benefits(in millions)

2024

Six Months Ended June 30,

Service cost

US

$

—

$

7

US

$

Non-US

—

—

$

—
1
—
(1)
—
—

Other postemployment
benefits

2023
Non-US

$

$

$

7

2024

$

2023

—

$

—

Interest cost

3

10

3

11

1

1

Expected return on plan assets

(3)

(8)

(3)

(8)

—

—

Amortization of unrecognized prior service credit

—

—

—

—

(1)

(1)

Amortization of unrecognized loss

2

2

1

1

—

—

Net periodic benefit cost

$

2

$

11

$

1

$

11

$

—

$

The components of net periodic benefit expense other than the service cost component are included in
Other postretirement expense in the Condensed Consolidated Statements of Operations.

29—

Table of Contents

NOTE 18 STOCKHOLDERS' EQUITY
The changes of the Stockholders’ Equity items during the three and six months ended June 30, 2024 and2023, are as follows:
BorgWarner Inc. stockholders' equity(in millions)
Balance, March 31, 2024

Issuedcommonstock$

3Capital inexcess ofpar value

$

2,632

Treasurystock$ (2,236) $

(25)

—

(20)

(45)

—

—

—

—

3

10

(1)

—

—

—

9

—

—

—

303

—

14

317

—

—

—

—

(55)

(3)

(58)

—

—

—

17

—

—

17

(938) $

192

—

—

—

—

3

Issuance of restricted stock, net oftax—

Net earnings
Other comprehensive loss
Spin-Off of PHINIA

$

3

$

2,645

$ (2,237) $

6,620

$

Total

201

Issuance for executive stock plan, netof tax6,325

Noncontrollinginterests(883) $

Dividends declared ($0.11 pershare*)

Balance, June 30, 2024

Retainedearnings

Accumulated
othercomprehensive
income (loss)

$

$

$

6,042

6,285

BorgWarner Inc. stockholders' equity(in millions)
Balance, March 31, 2023

Issuedcommonstock$

3Capital inexcess ofpar value

$

2,661

Treasurystock$ (2,031) $Retainedearnings

7,632

Accumulated
othercomprehensive
income (loss)$

Noncontrollinginterests(824) $

238

Total

$

7,679

Dividends declared ($0.17 pershare*)

—

—

—

(40)

—

—

(40)

Issuance for executive stock plan, netof tax

—

10

—

—

—

—

10

Issuance of restricted stock, net of
tax

—

(12)

24

—

—

—

12

Purchase of noncontrolling interest

—

(2)

—

—

—

(13)

(15)

Net earnings

—

—

—

204

—

18

222

—

Other comprehensive loss
Balance, June 30, 2023

$

3

—
$

2,657

—
$ (2,007) $

30

—
7,796

$

(74)

(13)

(898) $

230

(87)
$

7,781

Table of Contents

BorgWarner Inc. stockholders' equity(in millions)
Balance, December 31, 2023

Issuedcommonstock$

3Capital inexcess ofpar value

$

2,689

Treasurystock

Accumulated
othercomprehensive
income (loss)

Retainedearnings$ (2,188) $

6,152

$

Noncontrollinginterests(828) $

238

Total

$

6,066

Dividends declared ($0.22 pershare*)

—

—

—

(50)

—

(67)

(117)

Issuance for executive stock plan,
net of tax

—

(22)

21

—

—

—

(1)

Issuance of restricted stock, net of
tax

—

(22)

30

—

—

—

8

Purchase of treasury stock

—

—

(100)

—

—

—

(100)

Net earnings

—

—

—

509

—

29

538

Other comprehensive loss

—

—

—

—

(110)

(8)

(118)

Spin-Off of PHINIA

—

—

—

9

—

—

9

(938) $

192

Balance, June 30, 2024

$

3

$

2,645

$ (2,237) $

6,620

$

$

6,285

BorgWarner Inc. stockholders' equity(in millions)
Balance, December 31, 2022

Issuedcommonstock$

3Capital inexcess ofpar value

$

2,675

Treasurystock$ (2,032) $

(79)

—

(58)

(137)

5

—

—

—

5

(16)

20

—

—

—

4

(2)

—

—

—

(13)

(15)

—

—

—

421

—

31

452

—

—

—

—

(22)

(14)

(36)

(898) $

230

—

—

—

—

—

Issuance of restricted stock, net oftax—

Purchase of noncontrolling interest—

Net earnings
Other comprehensive loss

$

3

$

2,657

$ (2,007) $__________________________________* Per share dividends amount declared relate to BorgWarner common stock.

31

7,796

$

Total

284

Issuance for executive stock plan,
net of tax

7,454

Noncontrollinginterests(876) $

Dividends declared ($0.34 pershare*)

Balance, June 30, 2023

Retainedearnings

Accumulated
othercomprehensive
income (loss)

$

$

$

7,508

7,781

Table of Contents

NOTE 19 ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables summarize the activity within accumulated other comprehensive loss during thethree and six months ended June 30, 2024 and 2023. Certain prior period amounts have been updated toreflect the gains and losses on hedge instruments that were reclassified to the income statement.
Foreigncurrencytranslation
adjustments(in millions)

Beginning balance, March 31, 2024$

Defined benefit
retirement
plans

Hedge
instruments(785) $

36

Comprehensive (loss) income before reclassifications(24)

Income taxes associated with comprehensive (loss) income
before reclassifications
Reclassification from accumulated other comprehensive (loss)
incomeIncome taxes associated with comprehensive income (loss)
reclassified into net earnings
Ending balance, June 30, 2024$

(in millions)

Beginning balance, March 31, 2023$

Comprehensive (loss) income before reclassifications
Income taxes associated with comprehensive (loss) income
before reclassifications
Reclassification from accumulated other comprehensive (loss)
incomeEnding balance, June 30, 2023

$

(883)

(14)

2

(36)

(7)

—

(1)

(8)

—

(12)

(1)

(13)

—

—

2

2

(816) $

10(132) $

(938)

Beginning balance, December 31, 2023$$

Defined benefit
retirement
plans

Hedge
instruments

$

Total

(711) $

18(131) $

(824)

(102)

35

(2)

(69)

7

—

(1)

6

—

(11)

(806) $

42

Foreigncurrencytranslation
adjustments(in millions)

Total(134) $

Foreigncurrencytranslation
adjustments

$

$

—

(11)

(134) $

(898)

Defined benefit
retirement
plans

Hedge
instruments(719) $

28(137) $

(828)

Comprehensive income (loss) before reclassifications

(76)

4

8

(64)

Income taxes associated with comprehensive income (loss)
before reclassifications

(21)

—

(1)

(22)

Reclassification from accumulated other comprehensive (loss)
income

—

(22)

(3)

(25)

Income taxes associated with comprehensive income (loss)
reclassified into net earnings
Ending balance, June 30, 2024

$

—

—

(816) $

10

Foreigncurrencytranslation
adjustments(in millions)

Beginning balance, December 31, 2022

$

$

Total

$

1

1

(132) $

(938)

Defined benefit
retirement
plans

Hedge
instruments(750) $

4(130) $

(876)

Comprehensive income (loss) before reclassifications

(68)

48

(4)

(24)

Income taxes associated with comprehensive income (loss)
before reclassifications

12

—

(1)

11

—

(10)

(806) $

42

Reclassification from accumulated other comprehensive (loss)
incomeEnding balance, June 30, 2023

$

32

$

Total

$

1

(9)

(134) $

(898)

Table of Contents

NOTE 20 CONTINGENCIESIn the normal course of business, the Company is party to various commercial and legal claims, actions
and complaints, including matters involving warranty claims, intellectual property claims, governmental
investigations and related proceedings, general liability and other risks. It is not possible to predict withcertainty whether or not the Company will ultimately be successful in any of these commercial and legal
matters or, if not, what the impact might be. The Company does not believe that adverse outcomes in anyof these commercial and legal claims, actions and complaints are reasonably likely to have a material
adverse effect on the Company’s results of operations, financial position or cash flows. An adverse
outcome could, nonetheless, be material to the results of operations or cash flows as the ultimate
resolutions of these matters are inherently unpredictable.
Environmental
The Company and certain of its current and former direct and indirect corporate predecessors,
subsidiaries and divisions have been identified by the United States Environmental Protection Agency
and certain state environmental agencies and private parties as potentially responsible parties (“PRPs”)
at various hazardous waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act (“Superfund”) and equivalent state laws and, as such, may be presently
liable for the cost of clean-up and other remedial activities at 17 such sites as of both June 30, 2024 andDecember 31, 2023. Responsibility for clean-up and other remedial activities at a Superfund site is
typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters, individually or in the aggregate, will have a material
adverse effect on its results of operations, financial position or cash flows. Generally, this is because
either the estimates of the maximum potential liability at a site are not material or the liability will beshared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any
such matter.
The Company had an accrual for environmental liabilities of $6 million as of both June 30, 2024 andDecember 31, 2023, included in Other current and Other non-current liabilities in the Condensed
Consolidated Balance Sheets. As of June 30, 2024, this accrual, which relates to five of the sites, isbased on information available to the Company (which, in most cases, includes an estimate of allocationof liability among PRPs; the probability that other PRPs, many of which are large, solvent publiccompanies, will fully pay the cost apportioned to them; currently available information from PRPs and/or
federal or state environmental agencies concerning the scope of contamination and estimatedremediation and consulting costs; and remediation alternatives). Clean-up and other remedial activities
are complete or nearing completion at the other 12 sites, for which there was no accrual as of June 30,
2024.
NOTE 21 EARNINGS PER SHAREThe Company presents both basic and diluted earnings per share of common stock (“EPS”) amounts.
Basic EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average
shares of common stock outstanding during the reporting period. Diluted EPS is calculated by dividing
net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock andcommon stock equivalents outstanding during the reporting period.
The dilutive impact of stock-based compensation is calculated using the treasury stock method. The
treasury stock method assumes that the Company uses the assumed proceeds from the exercise ofawards to repurchase common stock at the average market price during the period. The assumed
proceeds under the treasury stock method include the purchase price that the grantee will pay in the
future and compensation cost for future service that the Company has not yet recognized. The dilutive
33

Table of Contents

effects of performance-based stock awards are included in the computation of diluted earnings per shareat the level the related performance criteria are met through the respective balance sheet date. There
were 1.1 million and 0.9 million performance share units excluded from the computation of the diluted
earnings for the three months ended June 30, 2024 and 2023, respectively. There were 1.2 million and
0.7 million performance share units excluded from the computation of the diluted earnings for the six
months ended June 30, 2024 and 2023, respectively. These units were excluded because the related
performance criteria had not been met as of the balance sheet dates.
The following table reconciles the numerators and denominators used to calculate basic and diluted
earnings per share of common stock:Three Months Ended June 30,(in millions, except per share amounts)

2024

Six Months Ended June 30,

2023

2024

2023

Basic earnings per share:
Net earnings from continuing operations$

Weighted average shares of common stock outstanding

315

$

226.1

Basic earnings per share of common stock

228

$

233.4

528

$

227.0

396
233.1

$

1.39

$

0.98

$

2.33

$

1.70

$

315

$

228

$

528

$

396

Diluted earnings per share:
Net earnings from continuing operations
Weighted average shares of common stock outstanding
Effect of stock-based compensation
Weighted average shares of common stock outstanding including
dilutive shares
Diluted earnings per share of common stock

$

226.1

233.4

227.0

233.1

1.1

1.0

0.9

1.2

227.2

234.4

227.9

234.3

1.39

$

0.97

$

2.32

$

1.69

NOTE 22 REPORTABLE SEGMENTS
The Company’s business is aggregated into three reportable segments: Air Management, Drivetrain &Battery Systems, and ePropulsion. These segments are strategic business groups that are managed
separately as each represents a specific grouping of related automotive components and systems.
In the second quarter of 2024, the Company announced a new business unit and management structure
designed to further enhance the execution of the Company’s Charging Forward strategy effective July 1,
2024. As of June 30, 2024, management continued to assess the performance of reportable segments
using the structure that was in place at December 31, 2023. Beginning with the third quarter of 2024, theCompany will assess performance using the new structure and expects to report its financial results infour reportable segments: Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive
Systems and Battery & Charging Systems.
Segment Adjusted Operating Income (Loss) is the measure of segment income or loss used by theCompany. Segment Adjusted Operating Income (Loss) is comprised of operating income for theCompany’s reportable segments adjusted for restructuring, merger, acquisition and divestiture expense,
intangible asset amortization expense, impairment charges and other items not reflective of ongoing
operating income or loss. The Company believes Segment Adjusted Operating Income (Loss) is mostreflective of the operational profitability or loss of our reportable segments.

34

Table of Contents

The following tables show segment information and Segment Adjusted Operating Income (Loss) for theCompany’s reportable segments:
Net Sales by Reportable Segment
Three Months Ended June 30, 2024
(in millions)

Air Management

Customers

$

1,952

Drivetrain & Battery Systems$

Customers

1,974

$

4,004

2,353

2

2,355

464

885

15

900

Customers

Drivetrain & Battery Systems

Net

$

1,196

3,603

$

44

9
(31)
$

—

(31)
$

3,603

—
$

Three Months Ended June 30, 2023

Air Management

Inter-segment

$

—

—

(in millions)

3,960

455

Inter-segment eliminations
$

Net

22

1,196

ePropulsion
Net salesInter-segment$

Six Months Ended June 30, 2024

2,006Inter-segment

$

1,117

$

(61)
$

—

(61)
$

7,198

Six Months Ended June 30, 2023

Net

21

7,198

Customers

2,027

$

3,966

—

1,117

2,072

Inter-segment

$

40

Net

$

4,006

1

2,073

ePropulsion

548

18

566

1,016

37

1,053

Inter-segment eliminations

—

(39)

(39)

—

(78)

(78)

Net sales

$

3,671

$

—

$

3,671

$

7,054

$

—

$

7,054

Segment Adjusted Operating Income (Loss)
Three Months Ended June 30,(in millions)

Air Management

2024

$

Drivetrain & Battery Systems

304

$

176

ePropulsion

Six Months Ended June 30,

2024

2023

305

$

2023
612

142

334

$

590
253

(49)

(19)

(111)

(54)

431

428

835

789

Corporate, including stock-based compensation

55

61

120

122

Restructuring expense (Note 5)

25

9

44

12

Intangible asset amortization expense

17

17

34

34

Commercial contract settlement

15

—

15

—

Adjustments associated with Spin-Off related balances

11

—

11

—

Accelerated depreciation

8

—

8

3

Merger and acquisition expense

—

8

5

16

Gain on sale of businesses

—

(5)

(3)

(5)

Service and lease agreement termination

—

9

—

9

Gain on sale of assets

—

(6)

—

(6)

Segment Adjusted Operating Income

Other non-comparable items

3

2

9

(3)

Equity in affiliates’ earnings, net of tax

(12)

(12)

(17)

(13)

Unrealized loss on equity and debt securities

—

54

2

69

Interest expense, net

8

12

13

22

Other postretirement expense

3

3

6

5

Earnings from continuing operations before income taxes
and noncontrolling interest

$

35

298

$

276

$

588

$

524

Table of Contents

NOTE 23 OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION
Six Months Ended June 30,(in millions)

2024

2023

OPERATING ACTIVITIES OF CONTINUING OPERATIONSNet earnings

$

538

$

452

Net (loss) earnings from discontinued operations

(19)

25

Net earnings from continuing operations

557

427

Depreciation and tooling amortization

276

250

Intangible asset amortization

34

34

Restructuring expense, net of cash paid

15

10

Stock-based compensation expense

29

30

Adjustments to reconcile net earnings from continuing operations to net cash provided byoperating activities from continuing operations:

Gain on sale of businesses

(3)

(5)

Deferred income tax benefit

(32)

(50)

Unrealized loss on equity and debt securities

2

69

Other non-cash adjustments

20

(4)

341

334

(11)

(10)

Receivables

(83)

(459)

Inventories

(45)

(111)

Prepayments and other current assets

(21)

(9)

Accounts payable and accrued expenses

(269)

84

Prepaid taxes and income taxes payable

(62)

(13)

Adjustments to reconcile net earnings from continuing operations to net cash provided
by operating activities from continuing operations
Retirement plan contributions
Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign
currency translation adjustments:

Other assets and liabilities(63)

Net cash provided by operating activities from continuing operations

46

$

344

$

289

Interest

$

70

$

57

Income taxes, net of refunds

$

197

$

200

SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the period for:

Balance as of:June 30,2024

Non-cash investing transactions:
Period end accounts payable related to property, plant and equipment purchases

36$

December 31,
2023

111

$

148

Table of Contents

NOTE 24 DISCONTINUED OPERATIONS
The following table summarizes the financial results from discontinued operations of PHINIA.
(in millions)Three Months Ended June 30,

Net sales$

2024

Six Months Ended June 30,

2023

—

$

2024

887

$

2023

—

$

1,723

Cost of sales

—

699

—

1,362

Gross profit

—

188

—

361

Selling, general and administrative expenses

—

88

—

173

Restructuring expense

—

3

—

7

Other operating expense, net

14

47

24

65

Operating (loss) income

(14)

50

(24)

116

—

(2)

—

(5)

(14)

52

(24)

121

(2)

76

(5)

96

(12) $(24) $(19) $

25

Equity in affiliates’ earnings, net of tax(Loss) earnings from discontinued operations before income
taxes(Benefit) provision for income taxes
Net (loss) earnings from discontinued operations attributable to
PHINIA$In connection with the Spin-Off, the Company entered into a transition services agreement through which
the Company and PHINIA provided certain services to each other following the Spin-Off. These services
were related to information technology, human resources, finance, facilities, procurement, sales,
intellectual property and engineering. The Company substantially completed the performance under thetransition services agreement as of June 30, 2024. The combined impact of these services is reported inresults of continuing operations in the Condensed Consolidated Financial Statements. During the threeand six months ended June 30, 2024, the Company provided services at a cost of $3 million and$7 million to PHINIA, respectively, and PHINIA provided services at a cost of $1 million and $2 million to
the Company, respectively.
The Company incurred $14 million and $24 million of costs relating to the Spin-Off during the three andsix months ended June 30, 2024, respectively. The Company incurred $48 million and $67 million of costs
relating to the Spin-Off during the three and six months ended June 30, 2023, respectively. These costs
are reflected within Net (loss) earnings from discontinued operations in the Company’s Condensed
Consolidated Statements of Operations. Spin-Off costs are primarily comprised of professional fees andcosts to separate certain operational activities, including costs to separate information technology
systems which the Company expects to decrease and ultimately conclude over the second half of 2024.

37

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
BorgWarner Inc. and Consolidated Subsidiaries (the “Company” or “BorgWarner”) is a global productleader in clean and efficient technology solutions for combustion, hybrid and electric vehicles.
BorgWarner’s products help improve vehicle performance, propulsion efficiency, stability and air quality.
The Company manufactures and sells these products worldwide, primarily to original equipment
manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles (“SUVs”), vans and lighttrucks). The Company’s products are also sold to other OEMs of commercial vehicles (medium-duty
trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machineryand marine applications). The Company also manufactures and sells its products to certain tier one
vehicle systems suppliers and into the aftermarket for light, commercial and off-highway vehicles. The
Company operates manufacturing facilities serving customers in Europe, the Americas and Asia and is an
original equipment supplier to nearly every major automotive OEM in the world.
During the three and six months ended June 30, 2024, the Company recognized a $3 million and$19 million increase in Net earnings attributable to BorgWarner Inc., respectively, in the Condensed
Consolidated Statement of Operations for the correction of misstatements related to certain accruals, ofwhich $12 million related to 2023 (the remainder relates to periods prior to 2023). The Company has
evaluated the effect of these out-of-period adjustments for the current reporting period, as well as on theprevious interim and annual periods in which they should have been recognized, and concluded thatthese adjustments are not material to any of the periods affected.
Charging Forward - Electrification Portfolio Strategy
In 2021, the Company announced its strategy to aggressively grow its eProducts over time throughorganic investments and technology-focused acquisitions. eProducts include all products utilized on or forelectric vehicles (“EVs”) plus those same products and components that are included in hybrid
powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs. The
Company believes it is well positioned for the industry’s anticipated migration to EVs.
In June 2023, the Company announced the next phase of its Charging Forward strategy, which focuseson profitably growing eProducts while maximizing the value of the Company’s Foundational products
portfolio. Foundational products include all products utilized on internal combustion engines plus thosesame products and components that are also included in hybrid powertrains. During the six months
ended June 30, 2024 and 2023, the Company’s eProducts revenue was approximately $1,082 million and$922 million, respectively, or 15% and 13% of its total revenue, respectively.
On July 3, 2023, BorgWarner completed the previously announced spin-off (“Spin-Off”) of its Fuel
Systems and Aftermarket segments in a transaction intended to qualify as tax free to the Company’s
stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of 100%of the outstanding common stock of PHINIA, Inc. (“PHINIA”) to holders of record of common stock of theCompany on a pro-rata basis. Each holder of record of common stock of the Company received one
share of PHINIA common stock for every five shares of common stock of the Company held on June 23,
2023, the record date for the distribution. In lieu of fractional shares of PHINIA, stockholders of theCompany received cash. PHINIA is an independent public company trading under the symbol “PHIN” on
the New York Stock Exchange.
The historical results of operations of PHINIA for periods prior to the Spin-Off are presented as
discontinued operations in the accompanying Condensed Consolidated Financial Statements.

38

Table of Contents

Acquisitions
Eldor Corporation’s Electric Hybrid Systems Business
On December 1, 2023, the Company completed its acquisition of the electric hybrid systems businesssegment of Eldor Corporation (“Eldor”), which is headquartered in Italy. The Company expects theacquisition to complement its existing ePropulsion product portfolio by enhancing the Company’sengineering capabilities in power electronics. The Company paid €72 million ($78 million) at closing andis obligated to remit up to €175 million ($191 million) of earn-out payments that could be paid over the twoyears following closing.
Hubei Surpass Sun Electric Charging Business
On March 1, 2023, the Company completed its acquisition of the electric vehicle solution, smart grid andsmart energy businesses of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The
acquisition is expected to complement the Company’s existing European and North American charging
footprint by adding a presence in China. The total consideration was ¥288 million ($42 million), including¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earn-out
payments. The Company paid ¥217 million ($31 million) of the base purchase price in the year ended
December 31, 2023. The remaining ¥51 million ($8 million) of base purchase price is payable in two
installments with the last payment due before September 30, 2025. In addition, pursuant to theagreement, the Company could be obligated to remit up to ¥103 million ($15 million), in the form ofcontingent payments over approximately two years following the closing.
Drivetek AG
On December 1, 2022, the Company acquired Drivetek AG, an engineering and product development
company located in Switzerland. This acquisition is expected to strengthen the Company’s powerelectronics capabilities in auxiliary inverters to accelerate the growth of the High Voltage eFan business.
The Company paid ₣27 million ($29 million) of base purchase price at closing, and up to ₣10 million ($10
million) could be paid in the form of contingent earn-out payments over three years following the closing.
Rhombus Energy Solutions
On July 29, 2022, the Company acquired Rhombus Energy Solutions, a provider of charging solutions in
the North American market. The acquisition is expected to complement the Company’s existing European
charging footprint to accelerate organic growth and adds North American regional presence to its
charging business. The Company paid $131 million at closing, and up to $30 million could be paid in theform of contingent earn-out payments over three years following the closing. The Company’s current
estimates indicate that the minimum thresholds for these earn-out targets will not be achieved; thus, noamount for the earn-out payments has been included in the purchase consideration.

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Table of Contents

Santroll Automotive Components
On March 31, 2022, the Company acquired Santroll Automotive Components, a carve-out of Santroll
Electric Auto’s eMotor business. The acquisition is expected to strengthen the Company’s vertical
integration, scale and portfolio breadth in light vehicle eMotors while allowing for increased speed tomarket. The total final consideration was $192 million, including approximately ¥1.0 billion ($152 million)of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The
Company paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended
December 31, 2022 and no longer expects to recapture a previously anticipated $5 million of post-closing
adjustments, which was recorded in Other operating expense, net during the three months ended March
31, 2023. Pursuant to the Equity Transfer Agreement for the acquisition, the obligation of the Company toremit up to ¥0.3 billion (approximately $47 million) of earn-out payments was contingent uponachievement of certain sales volume targets and certain estimated future volume targets associated with
newly awarded business. During the second quarter of 2023, the Company paid approximately ¥0.2
billion ($24 million) to settle the remaining earn-out liability and related adjustments.
Refer to Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements in Item 1 of thisreport for more information.
Key Trends and Economic Factors
Commodities and Other Inflationary Impacts. Prices for commodities have started showing a lower levelof volatility in comparison to what the Company had experienced from the beginning of 2021. At the sametime, many economies, including the United States, are still experiencing elevated levels of inflation,
which continues to put pressure on other input costs (e.g. labor, energy, other materials). As a result, theCompany expects a trend of slight increasing or flat costs.
Outlook
The Company expects global market production to decrease modestly year-over-year in 2024. However,
the Company expects net new business-related sales growth, due to the increased penetration of
BorgWarner products, including eProducts, to drive a modest sales increase despite the decreased
market production. As a result, the Company expects increased revenue in 2024, excluding the impact offoreign currencies. The Company expects the earnings benefit of this revenue growth to be partially offset
by the increased investments made in Research and Development (“R&D”).
The Company maintains a positive long-term outlook for its global business and is committed to new
product development and strategic investments to enhance its product leadership strategy. There areseveral trends that are driving the Company’s long-term growth that management expects to continue,
including adoption of product offerings for electrified vehicles and increasingly stringent global emissions
standards that the Company believes support demand for the Company’s products that drive vehicle
efficiency.

40

Table of Contents

RESULTS OF OPERATIONS
Three Months Ended June 30, 2024 vs. Three Months Ended June 30, 2023
The following table presents a summary of our operating results:
Three Months Ended June 30,(in millions, except per share data)

2024

2023
% of netsales

Net sales
Air Management$

Drivetrain & Battery Systems
ePropulsion
Inter-segment eliminations

1,974

54.8 %

1,196
464% of net
sales

$

2,027

55.2 %

33.2

1,117

30.4

12.9

566

15.4

(31)

(0.9)

(39)

(1.1)

Total net sales

3,603

100.0

3,671

100.0

Cost of sales

2,918

81.0

2,991

81.5

Gross profit

685

19.0

680

18.5

Selling, general and administrative expenses - R&D, net

189

5.2

183

5.0

Selling, general and administrative expenses - Other

152

4.2

151

4.1

Restructuring expense

25

0.7

9

0.2

Other operating expense, net

22

0.6

4

0.1

297

8.2

333

9.1

Equity in affiliates’ earnings, net of tax

(12)

(0.3)

(12)

(0.3)

Unrealized loss on equity and debt securities

—

—

54

1.5

Interest expense, net

8

0.2

12

0.3

Other postretirement expense

3

0.1

3

0.1

298

8.3

276

7.5

(31)

(0.9)

30

0.8

Operating income

Earnings from continuing operations before income taxes andnoncontrolling interest(Benefit) provision for income taxes
Net earnings from continuing operations

329

9.1

246

6.7

Net loss from discontinued operations

(12)

(0.3)

(24)

(0.7)

Net earnings

317

8.8

222

6.0

14

0.4

18

0.5

8.4 %

$

204

5.6 %

$

0.97

Net earnings from continuing operations attributable tononcontrolling interest
Net earnings attributable to BorgWarner Inc.

$

303

Earnings per share from continuing operations — diluted

$

1.39

Net sales
Net sales for the three months ended June 30, 2024 totaled $3,603 million, a decrease of $68 million, or
2%, compared to the three months ended June 30, 2023. The change in net sales for the three months
ended June 30, 2024 was primarily driven by the following:••

Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately$62 million primarily due to the weakening of the Chinese Renminbi, Euro and Korean Won, ineach case relative to the U.S. Dollar.
Lower volume, mix and net new business decreased sales approximately $12 million. Thisdecrease was primarily driven by a decline in market production. The weighted average market
production as estimated by the Company was down approximately 2% from the three months
ended June 30, 2023. Weighted average market production reflects light and commercial vehicle
production as reported by IHS weighted for the Company’s geographic exposure, as estimated by
the Company.

41

Table of Contents•

Acquisitions contributed $6 million in additional sales during the three months ended June 30,
2024.

Cost of sales and gross profit
Cost of sales and cost of sales as a percentage of net sales were $2,918 million and 81.0%, respectively,
during the three months ended June 30, 2024, compared to $2,991 million and 81.5%, respectively,
during the three months ended June 30, 2023. The change in cost of sales for the three months ended
June 30, 2024 was primarily driven by the following:••

Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales ofapproximately $48 million primarily due to the weakening of the Chinese Renminbi, Korean Won,and Euro, in each case relative to the U.S. Dollar.
Lower sales volume, mix and net new business and purchasing savings decreased cost of sales
by approximately $8 million.

Gross profit and gross margin were $685 million and 19.0%, respectively, during the three months ended
June 30, 2024, compared to $680 million and 18.5%, respectively, during the three months ended
June 30, 2023. The increase in gross margin was primarily due to the factors discussed above.
Selling, general and administrative expenses (“SG&A”)
SG&A for the three months ended June 30, 2024 was $341 million as compared to $334 million for thethree months ended June 30, 2023. SG&A as a percentage of net sales was 9.5% and 9.1% for the threemonths ended June 30, 2024 and 2023, respectively.
The change in SG&A was primarily attributable Research and Development (“R&D”) costs that increased
by $6 million. R&D costs, net of customer reimbursements, were 5.2% of net sales for the three months
ended June 30, 2024, compared to 5.0% of net sales for the three months ended June 30, 2023. The
increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment
related to the Company’s eProduct portfolio.
Restructuring expense was $25 million and $9 million for the three months ended June 30, 2024 and2023, respectively, primarily related to employee termination benefits. Refer to Note 5, “Restructuring,” tothe Condensed Consolidated Financial Statements in Item 1 of this report for more information.
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural
costs primarily in its Foundational products businesses. During the three and six months ended June 30,2024 and 2023, the Company recorded $15 million and $9 million, respectively, of restructuring costs
related to this plan. The resulting gross savings related to this plan are expected to be in the range of atleast $80 million to $90 million annually by 2027 and are being utilized to sustain overall operating margin
profile and cost competitiveness. Nearly all of the restructuring charges are expected to be cash
expenditures, funded by cash on hand.
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its
ePropulsion segment due to increased market volatility. During the three months ended June 30, 2024,
the Company recorded $10 million of restructuring charges related to this plan. The resulting annual costsavings related to this plan is expected to be approximately $100 million by 2026.
Other operating expense, net was $22 million and $4 million for the three months ended June 30, 2024
and 2023, respectively. The change in Other operating expense, net was primarily due to:•

A loss of approximately $15 million related to the settlement of a commercial contract assumed in
its acquisition of the electric hybrid systems business segment of Eldor during the three months
ended June 30, 2024.
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Table of Contents••

Expense of approximately $11 million primarily for adjustments to net amounts owed to theCompany related to the tax matters agreement between the Company and PHINIA during thethree months ended June 30, 2024.
Merger and acquisition expense of $8 million primarily related to professional fees associated withspecific acquisition initiatives during the three months ended June 30, 2023.

Other operating expense, net is primarily comprised of items included within the subtitle “Non-comparable
items impacting the Company’s earnings per diluted share and net earnings” below.
Equity in affiliates’ earnings, net of tax was $12 million for both the three months ended June 30, 2024
and 2023, respectively. This line item is driven by the results of the Company’s unconsolidated joint
ventures.
Unrealized loss on equity and debt securities was $54 million for the three months ended June 30,
2023. This line item reflects the net unrealized gains or losses recognized due to valuing the Company’s
investments at fair value. For the three months ended June 30, 2023, this primarily related to losses
recognized to adjust the Company’s investment in Wolfspeed Inc. (“Wolfspeed”) convertible debt
securities to fair value. The Company sold its Wolfspeed convertible debt securities during the third andfourth quarters of 2023.
Interest expense, net was $8 million and $12 million for the three months ended June 30, 2024 and2023, respectively. This decrease was primarily due to the reduction in interest following a debt
extinguishment completed in September 2023 and higher interest rates on cash and cash equivalentsbalances.
(Benefit) provision for income taxes was a benefit of $31 million for the three months ended June 30,
2024, resulting in an effective rate of (10)%. This compared to a provision of $30 million, or an effective
rate of 11%, for the three months ended June 30, 2023. During the three months ended June 30, 2024,
the Company recorded a discrete tax benefit of $89 million related to a reduction in certain unrecognizedtax benefits and accrued interest for matters where the statute of limitations lapsed. In addition, theCompany recorded a discrete tax benefit of $4 million related to net changes to valuation allowances.
During the three months ended June 30, 2023, the Company recorded a discrete tax benefit ofapproximately $29 million in relation to the Spin-Off and a $10 million discrete tax benefit relating tovarious immaterial tax adjustments.

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Table of Contents

Six Months Ended June 30, 2024 vs. Six Months Ended June 30, 2023
The following table presents a summary of our operating results:
Six Months Ended June 30,(in millions, except per share data)

2024

2023
% of netsales

Net sales
Air Management$% of net
sales

4,004

55.6 %

4,006

56.8 %

2,355

32.7

2,073

29.4

ePropulsion

900

12.5

1,053

14.9

Inter-segment eliminations

(61)

(0.8)

(78)

(1.1)

Total net sales

7,198

100.0

7,054

100.0

Cost of sales

5,869

81.5

5,797

82.2

Gross profit

Drivetrain & Battery Systems

$

1,329

18.5

1,257

17.8

Selling, general and administrative expenses - R&D, net

376

5.2

349

4.9

Selling, general and administrative expenses - Other

294

4.1

284

4.0

Restructuring expense

44

0.6

12

0.2

Other operating expense, net

23

0.3

5

0.1

592

8.2

607

8.6

(17)

(0.2)

(13)

(0.2)

Operating income
Equity in affiliates’ earnings, net of tax
Unrealized loss on equity and debt securities

2

—

69

1.0

Interest expense, net

13

0.2

22

0.3

Other postretirement expense

6

0.1

5

0.1

588

8.2

524

7.4

31

0.4

97

1.4

Earnings from continuing operations before income taxes andnoncontrolling interest
Provision for income taxes
Net earnings from continuing operations

557

7.7

427

6.1

Net (loss) earnings from discontinued operations

(19)

(0.3)

25

0.4

Net earnings

538

7.5

452

6.4

Net earnings from continuing operations attributable tononcontrolling interest

29

0.4

Net earnings attributable to BorgWarner Inc.

$

509

7.1 %

Earnings per share from continuing operations — diluted

$

2.32

31

0.4

$

421

6.0 %

$

1.69

Net sales
Net sales for the six months ended June 30, 2024 totaled $7,198 million, an increase of $144 million, or
2%, compared to the six months ended June 30, 2023. The change in net sales for the six months ended
June 30, 2024 was primarily driven by the following:••

Favorable volume, mix and net new business increased sales approximately $221 million, or 3%.
This increase was primarily driven by growth despite flat market production, which the Company
believes reflects higher demand for its products. The weighted average market production as
estimated by the Company, was flat from the six months ended June 30, 2023. Weighted average
market production reflects light and commercial vehicle production as reported by IHS weighted
for the Company’s geographic exposure, as estimated by the Company.
Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately$94 million primarily due to the weakening of the Chinese Renminbi and Korean Won, in eachcase relative to the U.S. Dollar.

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Acquisitions contributed $17 million in additional sales during the six months ended June 30,
2024.

Cost of sales and gross profit
Cost of sales and cost of sales as a percentage of net sales were $5,869 million and 81.5%, respectively,
during the six months ended June 30, 2024, compared to $5,797 million and 82.2%, respectively, during
the six months ended June 30, 2023. The change in cost of sales for the six months ended June 30, 2024
was primarily driven by the following:••

Higher sales volume, mix and net new business and purchasing savings increased cost of sales
by approximately $123 million.
Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales ofapproximately $71 million primarily due to the weakening of the Chinese Renminbi and Korean
Won, in each case relative to the U.S. Dollar.

Gross profit and gross margin were $1,329 million and 18.5%, respectively, during the six months ended
June 30, 2024, compared to $1,257 million and 17.8%, respectively, during the six months ended June30, 2023. The increase in gross margin was primarily due to the factors discussed above.
Selling, general and administrative expenses (“SG&A”)
SG&A for the six months ended June 30, 2024 was $670 million as compared to $633 million for the six
months ended June 30, 2023. SG&A as a percentage of net sales was 9.3% and 9.0% for the six months
ended June 30, 2024 and 2023, respectively.
The change in SG&A was primarily attributable Research and Development (“R&D”) costs that increased
by $27 million. R&D costs, net of customer reimbursements, were 5.2% of net sales for the six months
ended June 30, 2024, compared to 4.9% of net sales for the six months ended June 30, 2023. The
increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment
related to the Company’s eProduct portfolio.
Restructuring expense was $44 million and $12 million for the six months ended June 30, 2024 and2023, respectively, primarily related to employee termination benefits. Refer to Note 5, “Restructuring,” tothe Condensed Consolidated Financial Statements in Item 1 of this report for more information.
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural
costs primarily in its Foundational products businesses. During the six months ended June 30, 2024 and2023, the Company recorded $34 million and $12 million, respectively, of restructuring costs related tothis plan.
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its
ePropulsion segment due to increased market volatility. During the six months ended June 30, 2024, theCompany recorded $10 million of restructuring charges related to this plan.
Other operating expense, net was $23 million and $5 million for the six months ended June 30, 2024
and 2023, respectively. The change in Other operating expense, net was primarily due to:••

A loss of approximately $15 million related to the settlement of a commercial contract assumed in
its acquisition of the electric hybrid systems business segment of Eldor during the six months
ended June 30, 2024.
Expense of approximately $11 million primarily for adjustments to net amounts owed to theCompany related to the tax matters agreement related to the Spin-Off during the six months
ended June 30, 2024.

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Table of Contents

•

•

•

Merger and acquisition expense of $5 million and $16 million, primarily related to professional fees
associated with specific acquisition initiatives during the six months ended June 30, 2024 and2023, respectively.
Gains on the sale of business of $3 million and $5 million were recorded during the six months
ended June 30, 2024 and 2023, respectively, that related to the recognition of earn-outs on priordispositions.
A gain of $6 million related to the sale of certain fixed assets during the six months ended June30, 2023.

Other operating expense, net is primarily comprised of items included within the subtitle “Non-comparable
items impacting the Company’s earnings per diluted share and net earnings” below.
Equity in affiliates’ earnings, net of tax was $17 million and $13 million for the six months ended June30, 2024 and 2023, respectively. This line item is driven by the results of the Company’s unconsolidated
joint ventures.
Unrealized loss on equity and debt securities was $2 million and $69 million for the six months ended
June 30, 2024 and 2023, respectively. This line item reflects the net unrealized gains or losses
recognized due to valuing the Company’s investments at fair value. For the six months ended June 30,
2023, this primarily related to losses recognized to adjust the Company’s investment in Wolfspeed
convertible debt securities to fair value. The Company sold its Wolfspeed convertible debt securities
during the third and fourth quarters of 2023.
Interest expense, net was $13 million and $22 million for the six months ended June 30, 2024 and 2023,
respectively. This decrease was primarily due to the reduction in interest following a debt extinguishment
completed in September 2023 and higher interest rates on cash and cash equivalents balances.
Provision for income taxes was $31 million for the six months ended June 30, 2024, resulting in an
effective rate of 5%. This compared to $97 million, or an effective rate of 19%, for the six months ended
June 30, 2023. During the six months ended June 30, 2024, the Company recorded a discrete tax benefitof $89 million related to a reduction in certain unrecognized tax benefits and accrued interest for matterswhere the statute of limitations lapsed. In addition, the Company recorded a discrete tax benefit of$4 million related to net changes to valuation allowances. During the six months ended June 30, 2023, a
the Company recorded a discrete tax benefit of approximately $29 million in relation to the Spin-Off, adiscrete tax benefit of approximately $14 million was recorded related to the resolution of tax audits, a$10 million discrete tax expense for the impact of enacted tax law changes, and a discrete tax benefit of$9 million related to various immaterial tax adjustments.

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Non-comparable items impacting the Company’s earnings per diluted share
The Company’s earnings per diluted share were $1.39 and $0.97 for the three months ended June 30,2024 and 2023, respectively and $2.32 and $1.69 for the six months ended June 30, 2024 and 2023,
respectively. The non-comparable items presented below are calculated after tax using the corresponding
effective tax rate discrete to each item and the weighted average number of diluted shares for each of theperiods then ended. The Company believes the following table is useful in highlighting non-comparable
items that impacted its earnings per diluted share:
Three Months Ended June 30,
Non-comparable items:

2024

Restructuring expense$

Six Months Ended June 30,

2023

2024

(0.08) $(0.03)

Commercial contract settlement(0.05)

Adjustments associated with Spin-Off related balances(0.05)

Accelerated depreciation

$

2023

(0.14) $(0.04)—(0.05)——(0.05)—(0.03)—(0.03)(0.01)

Merger and acquisition expense—(0.03)(0.02)(0.07)

Gain on sale of businesses

—

0.02

0.01

0.02

Service and lease agreement termination—(0.03)—(0.03)

Gain on sale of assets

—

0.02

—

0.02

—

(0.18)(0.01)(0.23)

0.42

0.17

0.42

0.18

Unrealized loss on equity and debt securities
Tax adjustments
Other non-comparable items(0.01)

Total impact of non-comparable items per share - diluted

$

0.20

(0.01)$(0.07)(0.03)
$

0.10

0.01
$

(0.15)

Results by Reportable Segment
The Company’s business is aggregated into three reportable segments: Air Management, Drivetrain &Battery Systems, and ePropulsion. These segments are strategic business groups that are managed
separately as each represents a specific grouping of related automotive components and systems.
In the second quarter of 2024, the Company announced a new business unit and management structure
designed to further enhance the execution of the Company’s Charging Forward strategy effective July 1,
2024. As of June 30, 2024, management continued to assess the performance of reportable segments
using the structure that was in place at December 31, 2023. Beginning with the third quarter of 2024, theCompany will assess performance using the new structure and expects to report its financial results infour reportable segments: Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive
Systems and Battery & Charging Systems.
Segment Adjusted Operating Income (Loss) is the measure of segment income or loss used by theCompany. Segment Adjusted Operating Income (Loss) is comprised of operating income for theCompany’s reportable segments adjusted for restructuring, merger, acquisition and divestiture expense,
intangible asset amortization expense, impairment charges and other items not reflective of ongoing
operating income or loss. The Company believes Segment Adjusted Operating Income (Loss) is mostreflective of the operational profitability or loss of our reportable segments.

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Table of Contents

The following tables present net sales and Segment Adjusted Operating Income (Loss) for theCompany’s reportable segments:
Three Months Ended June 30, 2024 vs. Three Months Ended June 30, 2023

(in millions)

Air Management

Three Months Ended June 30, 2024

Three Months Ended June 30, 2023

Segment
Adjusted
Operating
Income(Loss)

Segment
Adjusted
Operating
Income(Loss)Net sales$304

15.4 %

305

15.0 %

14.7 %

1,117

142

12.7 %

ePropulsion

464

(49)

(10.6)%

566(19)(3.4)%

Inter-segment eliminations

(31)

—

(39)

—

$

3,603

$

431

$

$

2,027

3,671

$

% margin

176

Totals$

Net sales

1,196

Drivetrain & Battery Systems

1,974% margin$428

The Air Management segment’s net sales decreased $53 million, or 3%, and Segment Adjusted
Operating Income decreased $1 million from the three months ended June 30, 2023. Foreign currencies
resulted in a year-over-year decrease in sales of approximately $33 million primarily due to theweakening of the Euro, Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar. The
decrease excluding the impact of foreign currencies was primarily due to approximately $20 million of areduction in volume, mix, and net new business driven by lower non-contractual commercial negotiations
and normal contractual customer commodity pass-through arrangements with the Company’s customers.
Segment Adjusted Operating Margin was 15.4% for the three months ended June 30, 2024, compared to
15.0% during the three months ended June 30, 2023. The Segment Adjusted Operating Income remained
flat primarily due to lower customer recoveries, offset by savings related to purchasing and restructuring.
The Drivetrain & Battery Systems segment’s net sales increased $79 million, or 7%, and Segment
Adjusted Operating Income increased $34 million from the three months ended June 30, 2023. Foreign
currencies resulted in a year-over-year decrease in sales of approximately $20 million primarily due to theweakening of the Chinese Renminbi, Korean Won and Euro, in each case relative to the U.S. Dollar. The
increase excluding the impact of foreign currencies was primarily due to approximately $99 million of
volume, mix and net new business driven by increased demand for battery system products in Europe
and North America and drivetrain system products in Asia. Segment Adjusted Operating Margin
was 14.7% for the three months ended June 30, 2024, compared to 12.7% during the three months
ended June 30, 2023. The Segment Adjusted Operating Income increase was primarily due to conversion
on higher sales and purchasing savings.
The ePropulsion segment’s net sales decreased $102 million, or 18%, and Segment Adjusted Operating
Loss increased $30 million from the three months ended June 30, 2023. Foreign currencies resulted in a
year-over-year decrease in sales of approximately $9 million primarily due to the weakening of theChinese Renminbi relative to the U.S. Dollar. Acquisitions contributed $6 million in additional sales during
the three months ended June 30, 2024. The decrease excluding these items was primarily due toapproximately $99 million of a reduction in volume, mix and net new business driven by decreased
demand for the Company’s light vehicle eProducts in North America and China. Segment
Adjusted Operating Margin was (10.6)% for the three months ended June 30, 2024, compared to (3.4)%
during the three months ended June 30, 2023. The Segment Adjusted Operating Loss was primarily due
to investments in R&D for eProducts. The Segment Adjusted Operating Loss increased due to lower
sales, higher R&D investments and impacts related to the Eldor acquisition.

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Table of Contents

Six Months Ended June 30, 2024 vs. Six Months Ended June 30, 2023

(in millions)

Air Management

Six Months Ended June 30, 2024

Six Months Ended June 30, 2023

Segment
Adjusted
Operating
Income(Loss)

Segment
Adjusted
Operating
Income(Loss)Net sales$612

15.3 %

590

14.7 %

14.2 %

2,073

253

12.2 %

ePropulsion

900

(111)

(12.3)%

1,053

(54)

(5.1)%

Inter-segment eliminations

(61)

—

(78)

—

$

7,198

$

835

$

$

4,006

7,054

$

% margin334

Totals$

Net sales

2,355

Drivetrain & Battery Systems

4,004% margin$789

The Air Management segment’s net sales decreased $2 million and Segment Adjusted Operating
Income increased $22 million from the six months ended June 30, 2023. Foreign currencies resulted in a
year-over-year decrease in sales of approximately $42 million primarily due to the weakening of theChinese Renminbi and Korean Won, in each case relative to the U.S. Dollar. Acquisitions contributed $5
million in additional sales during the six months ended June 30, 2024. The increase excluding these
items was primarily due to approximately $35 million of volume, mix and net new business driven byincreased demand for the Company’s products. Segment Adjusted Operating Margin was 15.3% for thesix months ended June 30, 2024, compared to 14.7% during the six months ended June 30, 2023. The
Segment Adjusted Operating Income increase was primarily due to purchasing savings and lower input
costs.
The Drivetrain & Battery Systems segment’s net sales increased $282 million, or 14%, and Segment
Adjusted Operating Income increased $81 million from the six months ended June 30, 2023. Foreign
currencies resulted in a year-over-year decrease in sales of approximately $33 million primarily due to theweakening of the Chinese Renminbi and Korean Won, in each case relative to the U.S. Dollar. The
increase excluding the impact of foreign currencies was primarily due to approximately $315 million of
volume, mix and net new business driven by increased demand for battery system products in Europe
and North America and drivetrain system products in Asia. Segment Adjusted Operating Margin
was 14.2% for the six months ended June 30, 2024, compared to 12.2% during the six months ended
June 30, 2023. The Segment Adjusted Operating Income increase was primarily due to conversion onhigher sales and lower input costs, partially offset by investments in R&D for battery systems.
The ePropulsion segment’s net sales decreased $153 million, or 15%, and Segment Adjusted Operating
Loss increased $57 million from the six months ended June 30, 2023. Foreign currencies resulted in a
year-over-year decrease in sales of approximately $19 million primarily due to the weakening of theChinese Renminbi relative to the U.S. Dollar. Acquisitions contributed $12 million in additional sales
during the six months ended June 30, 2024. The decrease excluding these items was primarily due toapproximately $146 million of a reduction in volume, mix and net new business driven by decreased
demand for the Company’s light vehicle eProducts in North America and China. Segment
Adjusted Operating Margin was (12.3)% for the six months ended June 30, 2024, compared to (5.1)%
during the six months ended June 30, 2023. The Segment Adjusted Operating Loss was primarily due toinvestments in R&D for eProducts. The Segment Adjusted Operating Loss increased due to lower sales,
higher R&D investments and impacts related to the Eldor acquisition.

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FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
The Company maintains various liquidity sources, including cash and cash equivalents and the unused
portion of its multi-currency revolving credit agreement. As of June 30, 2024, the Company had liquidity of$3,288 million, comprised of cash, cash equivalent and restricted cash balances of $1,288 million and an
undrawn revolving credit facility of $2,000 million. The Company was in full compliance with its covenants
under the revolving credit facility and had full access to its undrawn revolving credit facility. Given the
Company’s strong liquidity position, management believes that it will have sufficient liquidity and will
maintain compliance with all covenants through at least the next 12 months.
As of June 30, 2024, cash and cash equivalent balances of $744 million were held by the Company’s
subsidiaries outside the United States. Cash and cash equivalents held by these subsidiaries are used tofund foreign operational activities and future investments, including acquisitions. The majority of cash
held outside the United States is available for repatriation. The Company uses its U.S. liquidity primarily
for various corporate purposes, including but not limited to debt service, share repurchases, dividend
distributions, acquisitions and other corporate expenses.
The Company has a $2.0 billion multi-currency revolving credit facility that includes a feature allowing theCompany the ability to increase the facility by $1.0 billion with bank group approval. This facility maturesin September 2028. The credit facility agreement contains customary events of default and one key
financial covenant, which is a debt-to-EBITDA (Earnings Before Interest, Taxes, Depreciation andAmortization) ratio. The Company was in compliance with the financial covenant at June 30, 2024. At
June 30, 2024 and December 31, 2023, the Company had no outstanding borrowings under this facility.
The Company’s commercial paper program allows the Company to issue up to $2.0 billion of short-term,
unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under
this program, the Company may issue notes from time to time and use the proceeds for general
corporate purposes. The Company had no outstanding borrowings under this program as of June 30,2024 and December 31, 2023.
The total current combined borrowing capacity under the multi-currency revolving credit facility andcommercial paper program cannot exceed $2.0 billion.
In addition to the revolving credit facility, the Company’s universal shelf registration statement filed with
the U.S. Securities and Exchange Commission provides the Company with the ability to issue various
debt and equity securities subject to market conditions.
On February 7, 2024, April 24, 2024 and July 23, 2024, the Company’s Board of Directors declared
quarterly cash dividends of $0.11 per share of common stock, respectively. The dividends declared in thefirst quarter and second quarter were paid on March 15, 2024 and June 17, 2024, respectively. The
dividend declared in the third quarter will be paid on September 16, 2024.
From a credit quality perspective, the Company has a credit rating of BBB from Standard & Poor’s, Baa1
from Moody’s and BBB+ from Fitch Ratings. The current outlook from each of Fitch, Standard & Poor’s
and Moody’s is stable. None of the Company's debt agreements requires accelerated repayment in theevent of a downgrade in credit ratings.

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Table of Contents

Cash Flows
Operating Activities
Six Months Ended June 30,(in millions)

2024

2023

OPERATING ACTIVITIES OF CONTINUING OPERATIONSNet earnings from continuing operations

$

557

$

427

Adjustments to reconcile net earnings from continuing operations to net cash provided byoperating activities from continuing operations:
Depreciation and tooling amortization

276

250

Intangible asset amortization

34

34

Restructuring expense, net of cash paid

15

10

Stock-based compensation expense

29

30

Gain on sale of businesses

(3)

(5)

Deferred income tax benefit

(32)

(50)

Unrealized loss on equity and debt securities

2

69

Other non-cash adjustments

20

(4)

341

334

(11)

(10)

Receivables

(83)

(459)

Inventories

(45)

(111)

Accounts payable and accrued expenses

(269)

84

Other assets and liabilities

(146)

24

Adjustments to reconcile net earnings from continuing operations to net cash
provided by operating activities from continuing operations
Retirement plan contributions
Changes in assets and liabilities, excluding effects of acquisitions, divestitures andforeign currency translation adjustments:

Net cash provided by operating activities from continuing operations

$

344

$

289

Net cash provided by operating activities was $344 million for the six months ended June 30, 2024
compared to $289 million for the six months ended June 30, 2023. The increase for the six months ended
June 30, 2024 compared with the six months ended June 30, 2023 was primarily due to higher net
earnings adjusted for non-cash charges and changes in working capital.
Investing Activities
Six Months Ended June 30,(in millions)

2024

2023

INVESTING ACTIVITIES OF CONTINUING OPERATIONSCapital expenditures, including tooling outlays(355) $

(439)

Payments for businesses acquired, net of cash acquired

$

—

(30)

Proceeds from settlement of net investment hedges, net

36

13(Payments for) proceeds from investments in debt and equity securities, net(4)

6

Proceeds from the sale of business, net

8—Proceeds from asset disposals and other, net

214(313) $

(436)

Net cash used in investing activities from continuing operations$

Net cash used in investing activities was $313 million during the first six months of 2024 compared to$436 million during the first six months of 2023. In 2023, the Company acquired the electric vehicle
solution, smart grid and smart energy businesses of Hubei Surpass Sun Electric. As a percentage ofsales, capital expenditures were 4.9% and 6.2% for the six months ended June 30, 2024 and 2023,
respectively. The year-over-year reduction in capital expenditures was primarily due to lower eProductinvestments.
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Financing Activities
Six Months Ended June 30,(in millions)

2024

2023

FINANCING ACTIVITIES OF CONTINUING OPERATIONSNet increase in notes payable$

Additions to debt

—

$

2

3
1

Repayments of debt, including current portion

(15)

(6)

Payments for purchase of treasury stock

(100)

—

Payments for stock-based compensation items

(23)

(25)

Payments for contingent consideration

(1)

(23)

Purchase of noncontrolling interest

—

(15)

Dividends paid to BorgWarner stockholders

(50)

(79)

Dividends paid to noncontrolling stockholders
Net cash used in financing activities from continuing operations

$

(55)

(64)

(242) $

(208)

Net cash used in financing activities was $242 million during the first six months of 2024 compared to$208 million during the first six months of 2023. Net cash used in financing activities during the six
months ended June 30, 2024 was primarily related to the $100 million of BorgWarner share repurchases,$50 million in dividends paid to the Company’s stockholders and $55 million in dividends paid tononcontrolling stockholders of the Company’s consolidated joint ventures.
CONTINGENCIESIn the normal course of business, the Company is party to various commercial and legal claims, actions
and complaints, including matters involving warranty claims, intellectual property claims, governmental
investigations and related proceedings, general liability and other risks. It is not possible to predict withcertainty whether or not the Company will ultimately be successful in any of these commercial and legal
matters or, if not, what the impact might be. The Company does not believe that adverse outcomes in anyof these commercial and legal claims, actions and complaints are reasonably likely to have a material
adverse effect on the Company’s results of operations, financial position or cash flows. An adverse
outcome could, nonetheless, be material to the results of operations or cash flows.
Environmental
The Company and certain of its current and former direct and indirect corporate predecessors,
subsidiaries and divisions have been identified by the United States Environmental Protection Agency
and certain state environmental agencies and private parties as potentially responsible parties (“PRPs”)
at various hazardous waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act (“Superfund”) and equivalent state laws and, as such, may be presently
liable for the cost of clean-up and other remedial activities at 17 such sites as of both June 30, 2024 andDecember 31, 2023. Responsibility for clean-up and other remedial activities at a Superfund site is
typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters, individually or in the aggregate, will have a material
adverse effect on its results of operations, financial position or cash flows. Generally, this is because
either the estimates of the maximum potential liability at a site are not material or the liability will beshared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any
such matter.

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Refer to Note 20, “Contingencies,” to the Condensed Consolidated Financial Statements in Item 1 of thisreport for further details and information with respect to the Company’s environmental liability.
New Accounting Pronouncements
Refer to Note 2, “New Accounting Pronouncements,” to the Condensed Consolidated Financial
Statements in Item 1 of this report for a detailed description of new applicable accounting
pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the information concerning the Company’s exposures to interest
rate risk or commodity price risk as stated in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2023.
Foreign currency exchange rate risk is the risk that the Company will incur economic losses due toadverse changes in foreign currency exchange rates. Currently, the Company’s most significant currency
exposures relate to the Brazilian Real, British Pound, Chinese Renminbi, Euro, Korean Won, Mexican
Peso, Polish Zloty, Singaporean Dollar and Thai Baht. The Company mitigates its foreign currency
exchange rate risk by establishing local production facilities and related supply chain participants in themarkets it serves, by invoicing customers in the same currency as the source of the products and by
funding some of its investments in foreign markets through local currency loans. The Company also
monitors its foreign currency exposure in each country and implements strategies to respond to changing
economic and political environments. In addition, the Company regularly enters into forward currency
contracts, cross-currency swaps and foreign currency-denominated debt designated as net investment
hedges to reduce exposure to translation exchange rate risk. As of June 30, 2024 and December 31,
2023, the Company recorded a deferred gain of $182 million and $112 million, respectively, both before
taxes, for designated net investment hedges within accumulated other comprehensive income (loss).
The significant foreign currency translation adjustments during the three and six months ended June 30,2024 and 2023 are shown in the following tables, which provide the percentage change in U.S. Dollar
against the respective currencies and the approximate impacts of these changes recorded within othercomprehensive income (loss) for the respective periods.
(in millions, except for percentages)

Three Months Ended June 30, 2024

Six Months Ended June 30, 2024Euro(1)% $(2)(3)% $(37)

Chinese Renminbi(1)% $(11)(2)% $(40)

Korean Won(3)% $(10)(6)% $(15)(in millions, except for percentages)

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

Brazilian Real

6% $

14

10 % $

24

Euro

1% $

13

2% $

35

British Pound

3% $

11

5% $

17

Korean Won(1)% $(7)(4)% $(19)

Chinese Renminbi(5)% $(131)(5)% $(122)

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Table of Contents

Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed
to ensure that information required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms. Under the supervision and with the participation of the Company’s
management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company
has evaluated the effectiveness of the design and operation of its disclosure controls and procedures asof the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer have concluded that these controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that occurred during the period
covered by this report that have materially affected, or are reasonably likely to materially affect, theCompany’s internal control over financial reporting.

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Table of Contents

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to a number of claims and judicial and administrative proceedings (some ofwhich involve substantial amounts) arising out of the Company’s business or relating to matters for which
the Company may have a contractual indemnity obligation. Refer to Note 20, “Contingencies,” to theCondensed Consolidated Financial Statements in Part 1, Item 1 of this report for a discussion ofenvironmental and other litigation which is incorporated herein by reference.
Item 1A. Risk Factors
During the six months ended June 30, 2024, there have been no material changes from the risk factors
disclosed in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity
Securities
In November 2023, the Company’s Board of Directors authorized the purchase of up to $544 million of
the Company’s common stock, which replaced the previous repurchase authorization. By its terms, thisshare repurchase authorization had an expiration date of December 31, 2027. As of June 30, 2024, theCompany had repurchased $277 million of common stock under this repurchase program. In April 2024,
the Company’s Board of Directors authorized the purchase of up to $767 million of the Company’scommon stock, which replaces the previous authorization. By its terms, this share repurchaseauthorization expires on December 31, 2027. Shares purchased under this authorization may be
repurchased in the open market at prevailing prices and at times and in amounts to be determined bymanagement as market conditions and the Company's capital position warrant. The Company may use
Rule 10b5-1 and 10b-18 plans to facilitate share repurchases. Repurchased shares will be deemedcommon stock held in treasury and may subsequently be reissued.
Employee transactions include restricted stock withheld to offset statutory minimum tax withholding that
occurs upon vesting of restricted stock. The BorgWarner Inc. 2023 Stock Incentive Plan provides that thewithholding obligations be settled by the Company retaining stock that is part of the award. Withheld
shares will be deemed common stock held in treasury and may subsequently be reissued for general
corporate purposes.

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Table of Contents

The following table provides information about the Company’s purchases of its equity securities that areregistered pursuant to Section 12 of the Exchange Act during the quarter ended June 30, 2024:
Issuer Purchases of Equity Securities
Total number ofshares purchased

PeriodAverage price per
share

Total number of sharespurchased as part ofpublicly announcedplans or programs

Approximate dollar value ofshares that may yet bepurchased under plans orprograms (in millions)

April 1, 2024 - April 30, 2024

—

$

—

—

1,443

$

35.04

—

Common Stock Repurchase Program

—

$

—

—

Employee transactions

—

$

—

—

—

$

—

—

3,090

$

32.24

—

Common Stock Repurchase Program
Employee transactions

$

767

$

767

$

767

May 1, 2024 - May 31, 2024

June 1, 2024 - June 30, 2024
Common Stock Repurchase Program
Employee transactions

Item 5. Other Information
During the three months ended March 31, 2024, no director or Section 16 officer of the Company adopted
or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as eachterm is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
Exhibit 10.1†

BorgWarner Inc. Executive Severance Plan.*

Exhibit 10.2†

Restricted Stock Award Agreement – Retention Award, dated July 1, 2024 between the
Company and Tonit Calaway.*

Exhibit 10.3†

Form of 2024 BorgWarner Inc. 2023 Stock Incentive Plan Restricted Stock Agreement for
Non-Employee Directors.*

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.*

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer.*

Exhibit 32.1

Section 1350 Certifications.*

Exhibit 101.INS

Inline XBRL Instance Document - the instance document does not appear in theinteractive data file because its XBRL tags are embedded within the Inline XBRL
document.*

Exhibit 101.SCH

Inline XBRL Taxonomy Extension Schema Document.*

Exhibit 101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.*

Exhibit 101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.*

Exhibit 101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.*

Exhibit 101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

Exhibit 104.1

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).*____________________________________*Filed herewith.
† Indicates a management contract or compensatory plan or arrangement.

56

SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized, and the undersigned also has signed
this report in her capacity as the Registrant’s Vice President and Chief Accounting Officer (Principal
Accounting Officer).
BorgWarner Inc.
(Registrant)
By/s/ Amy B. Kulikowski(Signature)
Amy B. Kulikowski
Vice President and Chief Accounting Officer(Principal Accounting Officer)

Date: July 31, 202457