UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT

(Mark One)

Securities registered pursuant to Section 12(b) of the Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  

Statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) (including Management'sManagement’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,"“anticipates,” “believes,” “continues,” “could,” “designed,” “effect,” “estimates,” “evaluates,” “expects,” “forecasts,” “goal,” “initiative,” “intends,” “may,” “outlook,” “plans,” “potential,” “predicts,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” and variations of such words and similar 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 and measures 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 other such matters, are forward-looking statements. Accounting estimates, such as those described under the heading "Critical“Critical Accounting Policies"Policies and Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 20192020 (“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 other factors we believe are appropriate inunder the circumstances. Forward-looking statements are not guarantees of performance and the Company'sCompany’s actual results may differ materially from those expressed, 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 the date 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 materially from those expressed, projected or implied in or by the forward-looking statements. These risks and uncertainties, among others, include: uncertainties regarding the extent and duration of impacts of matters associated with the COVID-19/coronavirus ("COVID-19"pandemic (“COVID-19”), including additional production disruptions; the failure to realize the expected benefits of the acquisition of Delphi Technologies PLC that the Company completed on October 1, 2020; the failure to promptly and effectively integrate acquired businesses; the potential for unknown or inestimable liabilities relating to the acquired businesses; the possibility that the proposed transaction between the Company and AKASOL AG (“Proposed Transaction”) will not be consummated; failure to satisfy any of the conditions to the proposed transaction; failure to realize the expected benefits of the Proposed Transaction; our dependence on automotive and truck production, both of which are highly cyclical;cyclical and subject to disruptions; our reliance on major original equipment manufacturer ("OEM"(“OEM”) customers; commodities availability and pricing; supply disruptions; fluctuations in interest rates and foreign currency exchange rates; availability of credit; our dependence on key management; our dependence on information systems; the uncertainty of the global economic environment; the outcome of existing or any future legal proceedings, including litigation with respect to various claims; future changes in laws and regulations, including, by way of example, tariffs, in the countries in which we operate; and the other risks, including, by way of example, pandemics and quarantines, noted in reports that we file with the Securities and Exchange Commission, including Item 1A, "Risk Factors"“Risk Factors” in our most recently-filed Form 10-K as updated by Item 1A of this report. 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.

This section and the discussions contained in Item 1A, "Risk“Risk Factors,"” and in Item 7, subheading "Critical“Critical Accounting Policies"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 other

factors 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 or that we currently believe are immaterial, also may impair our business, operations, liquidity, financial condition and prospects.

The accompanying unaudited Condensed Consolidated Financial Statements of BorgWarner Inc. and Consolidated 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 the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flow activity required by GAAP for complete financial statements. In the opinion of management, 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. Operating results for the three and nine months ended September 30, 2020March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021. The balance sheet as of December 31, 20192020 was derived from the audited financial statements as of that date. For further information, refer to the Consolidated Financial Statements and Footnotes thereto included in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.

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 and accompanying 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 these estimates.

Throughout 2020, COVID-19 materially impacted the Company’s business and results of COVID-19/coronavirus ("COVID-19")operations. During the first quarter of 2020, the impact of COVID-19 was first identifiedinitially experienced primarily by operations in Wuhan, China in December 2019 and subsequently declaredChina. Following the declaration of COVID-19 as a global pandemic by the World Health Organization on March 11, 2020. To date, COVID-19 has surfaced in nearly all regions2020, government authorities around the world began to impose shelter-in-place orders and has resulted, at times, in travel restrictions, closing of borders and business slowdowns or shutdowns in affected areas.other restrictions. As a result, COVID-19 has impacted the Company's business globally. Manymany OEMs temporarily suspended certainbegan suspending manufacturing operations, particularly in North America and Europe, dueEurope. This led to market conditions and matters associated with COVID-19. Additionally, as a global manufacturer, during the nine months ended September 30, 2020, the Company responded to shelter-in-place and similar government orders in various locations around the world, including throughout the United States and Europe, which resulted in the temporary closures of, or reduced operations at, the Company'sCompany’s manufacturing facilities, late in the first quarter of 2020 and assembly facilities.

The Company's business is comprisedfollowing tables represent a disaggregation of 2revenue from contracts with customers by reporting segments: Enginesegment and Drivetrain.region and reflects the results of former Delphi Technologies entities in the three months ended March 31, 2021. Refer to Note 20, "Reporting22, “Reporting Segments" And Related Information,” to the Condensed Consolidated Financial Statements for more information. The following table represents a disaggregation of revenue from contracts with customers by segment and region:

The Company’s net Research & Development ("(“R&D"&D”) expenditures are included in Selling, general and administrative expenses of 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

The following table presents the Company’s gross and net expenditures on R&D activities:

Items included in Other operating expense, net consist of:

The Company'sCompany’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 is adjusted, 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.

Additional detail related to $174 million atassets is presented below:

During the fourth quarter of each year, the Company assesses its goodwill assigned to each of its reporting units. In addition, the issuanceCompany may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of final U.S. Treasury regulationsa reporting unit below its carrying value. No events or circumstances were noted in the thirdfirst quarter of 2020.2021 requiring additional assessment or testing. Future changes in the judgments, assumptions and estimates from those used in acquisition-related valuations and goodwill impairment testing, including discount rates or future operating results and related 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 lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect the Company’s financial statements in any given year.

The following table summarizes the activity in the product warranty accrual accounts: