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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 September 30, 2021
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission file number: 1-12162
BORGWARNER INC.
________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 13-3404508
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3850 Hamlin Road,Auburn Hills,Michigan 48326
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (248754-9200
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 shareBWANew York Stock Exchange
1.00% Senior Notes due 2031BWA31New 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 to file 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 be submitted 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, a smaller 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 filerAccelerated filerNon-accelerated filerSmaller reporting company
Emerging growth company
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. ☐  
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 October 29, 2021, the registrant had 239,771,275 shares of voting common stock outstanding.



BORGWARNER INC.
FORM 10-Q
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
INDEX
 Page No.
 
  
 
  
  
  
  
  
  
  
  
 
  
  
  


CAUTIONARY STATEMENTS FOR FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) (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 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 Accounting Policies and Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 (“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 under the circumstances. Forward-looking statements are not guarantees of performance, and the Company’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: supply disruptions impacting us or our customers, such as the current shortage of semiconductor chips that has impacted original equipment manufacturer (“OEM”) customers and their suppliers, including us; commodities availability and pricing; competitive challenges from existing and new competitors including OEM customers; the challenges associated with rapidly-changing technologies, particularly as relates to electric vehicles, and our ability to innovate in response; uncertainties regarding the extent and duration of impacts of matters associated with the COVID-19/coronavirus pandemic (“COVID-19”), including additional production disruptions; the failure to realize the expected benefits of the acquisition of Delphi Technologies PLC that we completed on October 1, 2020; the failure to realize the expected benefits of the acquisition of AKASOL AG (“AKASOL”) or a delay in the ability to realize those benefits; the failure to successfully execute on a timely basis our taking private strategy with respect to AKASOL; the difficulty in forecasting demand for electric vehicles and our electric vehicles revenue growth to 2030; the ability to identify targets and consummate acquisitions on acceptable terms; failure to realize the expected benefits of acquisitions; the ability to identify appropriate combustion portfolio businesses for disposition and consummate planned dispositions on acceptable terms; the failure to promptly and effectively integrate acquired businesses; the potential for unknown or inestimable liabilities relating to acquired businesses; our dependence on automotive and truck production, both of which are highly cyclical and subject to disruptions; our reliance on major OEM customers; 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; impacts from any potential future acquisition or divestiture transactions; 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” 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.

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 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.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), this report includes non-GAAP financial measures. The Company believes 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 such measures. 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 in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. The Company's method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP. Where non-GAAP financial measures are used, 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.



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions)September 30,
2021
December 31,
2020
ASSETS
Cash and cash equivalents$1,507 $1,650 
Restricted cash3  
Receivables, net2,890 2,919 
Inventories, net1,649 1,286 
Prepayments and other current assets308 312 
Assets held for sale105  
Total current assets6,462 6,167 
Property, plant and equipment, net4,398 4,591 
Goodwill3,285 2,627 
Other intangible assets, net1,134 1,096 
Investments and other long-term receivables513 820 
Other non-current assets699 728 
Total assets$16,491 $16,029 
LIABILITIES AND EQUITY
Notes payable and other short-term debt$54 $49 
Accounts payable2,131 2,352 
Other current liabilities1,430 1,409 
Liabilities held for sale22  
Total current liabilities3,637 3,810 
Long-term debt4,288 3,738 
Retirement-related liabilities518 576 
Other non-current liabilities1,028 1,181 
Total liabilities9,471 9,305 
Commitments and contingencies
Common stock3 3 
Capital in excess of par value2,617 2,614 
Retained earnings6,582 6,296 
Accumulated other comprehensive loss(746)(651)
Common stock held in treasury, at cost(1,810)(1,834)
Total BorgWarner Inc. stockholders’ equity6,646 6,428 
Noncontrolling interest374 296 
Total equity7,020 6,724 
Total liabilities and equity$16,491 $16,029 

See accompanying Notes to Condensed Consolidated Financial Statements.
1

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except per share amounts)2021 20202021 2020
Net sales$3,416 $2,534 $11,183 $6,239 
Cost of sales2,766 2,017 8,953 5,101 
Gross profit650 517 2,230 1,138 
Selling, general and administrative expenses343 204 1,084 601 
Other operating expense, net54 29 173 133 
Operating income253 284 973 404 
Equity in affiliates’ earnings, net of tax(12)(3)(40)(10)
Unrealized loss on equity securities61  337 9 
Interest income(3)(3)(9)(8)
Interest expense21 20 84 50 
Other postretirement income(10)(2)(33)(5)
Earnings before income taxes and noncontrolling interest196 272 634 368 
Provision for income taxes79 143 149 186 
Net earnings117 129 485 182 
Net earnings attributable to noncontrolling interest, net of tax21 18 77 40 
Net earnings attributable to BorgWarner Inc. $96 $111 $408 $142 
Earnings per share attributable to BorgWarner Inc. — basic$0.40 $0.54 $1.71 $0.69 
Earnings per share attributable to BorgWarner Inc. — diluted$0.40 $0.53 $1.70 $0.69 
Weighted average shares outstanding:       
Basic238.2 206.0 238.0 205.9 
Diluted239.8 207.3 239.3 206.7 

See accompanying Notes to Condensed Consolidated Financial Statements.
2

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Net earnings attributable to BorgWarner Inc. $96 $111 $408 $142 
Other comprehensive income (loss)
Foreign currency translation adjustments*(81)49 (111)(11)
Hedge instruments*(1)1 (3) 
Defined benefit postretirement plans*9 7 19 8 
Total other comprehensive (loss) income attributable to BorgWarner Inc.(73)57 (95)(3)
Comprehensive income attributable to BorgWarner Inc.*23 168 313 139 
Net earnings attributable to noncontrolling interest, net of tax21 18 77 40 
Other comprehensive (loss) income attributable to noncontrolling interest*(6)6 (11)3 
Comprehensive income$38 $192 $379 $182 
____________________________________
*    Net of income taxes.

See accompanying Notes to Condensed Consolidated Financial Statements.

3

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
(in millions)20212020
OPERATING
Net cash provided by operating activities (see Note 24)
$764 $808 
INVESTING 
Capital expenditures, including tooling outlays(494)(262)
Capital expenditures for damage to property, plant and equipment(2)(18)
Insurance proceeds received for damage to property, plant and equipment5 23 
Payments for businesses acquired, net of cash and restricted cash acquired(759)(2)
Proceeds from settlement of net investment hedges, net21 12 
Payments for investments in equity securities(15)(2)
Proceeds from asset disposals and other, net6  
Net cash used in investing activities(1,238)(249)
FINANCING 
Net (decrease) increase in notes payable(8)6 
Additions to debt1,273 1,163 
Payments for debt issuance costs(10)(11)
Repayments of debt, including current portion(698)(308)
Payments for stock-based compensation items(14)(13)
Purchase of noncontrolling interest(33) 
Dividends paid to BorgWarner stockholders(122)(105)
Dividends paid to noncontrolling stockholders(38)(21)
Net cash provided by financing activities350 711 
Effect of exchange rate changes on cash(16)19 
Net (decrease) increase in cash, cash equivalents and restricted cash(140)1,289 
Cash and cash equivalents at beginning of year1,650 832 
Cash, cash equivalents and restricted cash at end of period$1,510 $2,121 

See accompanying Notes to Condensed Consolidated Financial Statements.
4

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 BASIS OF PRESENTATION

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, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The balance sheet as of December 31, 2020 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’s Annual Report on Form 10-K for the year ended December 31, 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.

COVID-19 Pandemic and Other Supply Disruptions

Throughout 2020, COVID-19 materially impacted the Company’s business and results of operations. During the first quarter of 2020, the impact of COVID-19 was initially experienced primarily by operations in China. Following the declaration of COVID-19 as a global pandemic on March 11, 2020, government authorities around the world began to impose shelter-in-place orders and other restrictions. As a result, many OEMs began suspending manufacturing operations, particularly in North America and Europe. This led to various temporary closures of, or reduced operations at, the Company’s manufacturing facilities, late in the first quarter of 2020 and throughout the second quarter of 2020. During the second half of 2020, as global management of COVID-19 evolved and government restrictions were removed or lessened, production levels improved, and substantially all of the Company’s production facilities resumed closer to normal operations by the end of the third quarter of 2020.

During 2021, trailing impacts of the shut downs and production declines related, in part, to COVID-19 created component supply constraints, particularly semiconductor chips, that have and are expected to continue to have significant impacts on global industry production levels. In addition, it is possible a resurgence of the COVID-19 pandemic could result in adverse impacts in the future. Management cannot reasonably estimate the full impact the ongoing supply constraints or the COVID-19 pandemic could have on the Company’s financial condition, results of operations or cash flows in the future.

5

NOTE 2 NEW ACCOUNTING PRONOUNCEMENTS

In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-1, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” It clarifies the interaction among the accounting for equity securities, equity method investments, and certain derivative instruments. Specifically, for the purposes of applying the ASC Topic 321 measurement alternative, a company should consider observable transactions immediately before applying or upon discontinuing the equity method. Additionally, when determining the accounting for certain forward contracts and purchased options entered into to purchase securities, a company should not consider if the underlying securities would be accounted for under the equity method (ASC Topic 323) or fair value option (ASC Topic 825). This guidance was effective for interim and annual periods beginning after December 15, 2020. The Company adopted this guidance as of January 1, 2021, and there was no impact on its Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.” It removes certain exceptions to the general principles in ASC Topic 740 and improves consistent application of and simplifies GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This guidance was effective for interim and annual reporting periods beginning after December 15, 2020. The Company adopted this guidance as of January 1, 2021, and the impact on its Consolidated Financial Statements was immaterial.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20).” It (i) requires the removal of disclosures that are no longer considered cost beneficial; (ii) clarifies specific requirements of certain disclosures; and (iii) adds new disclosure requirements, including the weighted average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and reasons for significant gains and losses related to changes in the benefit obligation. This guidance was effective for annual periods beginning after December 15, 2020. The Company adopted this guidance as of January 1, 2021, and there was no impact on these Condensed Consolidated Financial Statements; however, the Company will include the annual disclosures as required in its Annual Report on Form 10-K.


6

NOTE 3 ACQUISITIONS

In accordance with ASC Topic 805, “Business Combinations,” acquisitions are recorded using the acquisition method of accounting. The Company recognizes and measures the identifiable assets acquired, liabilities assumed, and any non-controlling interest as of the acquisition date fair value. Various valuation techniques are used to determine the fair value of intangible assets, with the primary techniques being forms of the income 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 a market participant perspective and may include revenue growth rates, estimated earnings, royalty rates, obsolescence factors, contributory asset charges, customer attrition and discount rates.

AKASOL AG

On June 4, 2021, the Company completed its voluntary public takeover offer for shares of AKASOL AG (“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. The Company paid approximately €648 million ($788 million) to settle the offer from current cash balances, which included proceeds received from its public offering of 1.00% Senior Notes due 2031 completed on May 19, 2021. Refer to Note 14, “Notes Payable And Debt,” to the Condensed Consolidated Financial Statements for more information. Following the settlement of the offer, AKASOL became a consolidated majority-owned subsidiary of the Company. Upon that settlement, the Company also consolidated approximately €64 million ($77 million) of gross debt of AKASOL. Subsequent to the completion of the voluntary public takeover offer, the Company purchased additional shares of AKASOL for €28 million ($33 million) increasing its ownership to 93% as of September 30, 2021. The acquisition further strengthens BorgWarner’s commercial vehicle and industrial electrification capabilities, which positions the Company to capitalize on what it believes to be a fast-growing battery module and pack market.

On August 2, 2021, the Company initiated a merger squeeze-out process under German law for the purpose of acquiring 100% of AKASOL. To determine the appropriate cash compensation for all outstanding AKASOL shares, the Company has engaged a valuation firm to determine the current fair value of the shares, the adequacy of which will be subsequently examined by an independent, court-appointed auditor. The overall process will take several months and will require a resolution to be passed by AKASOL’s shareholders in a general meeting.

The purchase price was allocated on a preliminary basis as of June 4, 2021. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable. Certain estimated values for the acquisition, including goodwill and deferred taxes, are not yet 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 from the estimated values shown below.


7

The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of June 4, 2021, the acquisition date:
(in millions)Initial AllocationMeasurement Period AdjustmentsRevised Allocation
ASSETS
Cash and cash equivalents (including restricted cash of $16 million)
$29 $ $29 
Receivables, net16  16 
Inventories, net42 (2)40 
Prepayments and other current assets5  5 
Property, plant and equipment, net106 4 110 
Goodwill707 (4)703 
Other intangible assets, net130  130 
Total assets acquired1,035 (2)1,033 
LIABILITIES
Notes payable and other short-term debt8  8 
Accounts payable22  22 
Other current liabilities13 5 18 
Long-term debt69  69 
Other non-current liabilities39 (7)32 
Total liabilities assumed151 (2)149 
Noncontrolling interest96  96 
Net assets and noncontrolling interest acquired$788 $ $788 

Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $703 million, including the impact of measurement period adjustments, was recorded within the Company’s Air Management segment. The goodwill consists of the Company’s expected future economic benefits that will arise from acquiring this business, which is established in making next-generation products for electric vehicles and the potential development and deployment of future technologies, across a global customer base, in this market and across adjacent industries. The goodwill is not expected to be deductible for tax purposes.

The following table summarizes the other intangible assets acquired:
(in millions)Estimated LifeEstimated Fair Value
Amortized intangible assets:
Developed technology5 years$70 
Customer relationships11 years25 
Total amortized intangible assets95 
Unamortized trade nameIndefinite35 
Total other intangible assets$130 

Generally accepted valuation practice indicates that assets and liabilities may be valued using a range of methodologies. The property, plant and equipment acquired were valued using a combination of cost and market approaches. Goodwill and identifiable intangible assets were valued using the income approach. Noncontrolling interests were valued using a market approach. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values; however, management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate.

8

The impact of the AKASOL acquisition on net sales and net earnings was immaterial for the three and nine months ended September 30, 2021. Due to its insignificant size relative to the Company, supplemental pro forma financial information of the combined entity for the current and prior reporting period is not provided.

Delphi Technologies PLC

On October 1, 2020, the Company completed its acquisition of 100% of the outstanding ordinary shares of Delphi Technologies PLC (“Delphi Technologies”) from the shareholders of Delphi Technologies pursuant to the terms of the Transaction Agreement, dated January 28, 2020, as amended on May 6, 2020, by and between the Company and Delphi Technologies (the “Transaction Agreement”). Pursuant to the terms of the Transaction Agreement, the Company issued, in exchange for each Delphi Technologies share, 0.4307 of a share of common stock of the Company, par value $0.01 per share and cash in lieu of any fractional share. In the aggregate, the Company delivered consideration of approximately $2.4 billion. The acquisition strengthens the Company’s electronics and power electronics products, capabilities and scale, positions the Company for greater growth as electrified propulsion systems gain momentum and enhances key combustion, commercial vehicle and aftermarket product offerings. Upon closing, the Company also assumed approximately $800 million (par value) in aggregate principal amount of Delphi Technologies’ outstanding 5.000% Senior Notes due 2025 (the “DT Notes”).

On October 5, 2020, the Company completed its offer to exchange new BorgWarner notes for the DT Notes. Approximately $776 million in aggregate principal amount of outstanding DT Notes, representing 97% of the $800 million total outstanding principal amount of the DT Notes, were validly exchanged and cancelled for new BorgWarner notes. Following such cancellation, approximately $24 million in aggregate principal amount of the DT Notes remain outstanding. Since the majority of the DT Notes were exchanged, for the DT notes that remain outstanding, the Company was able to eliminate substantially all of the restrictive covenants and events of default not related to payment on the $800 million in outstanding senior notes of the Company.

The following table summarizes the purchase price for Delphi Technologies:
(in millions, except for share data)
BorgWarner common stock issued for purchase of Delphi Technologies37,188,819
BorgWarner share price at October 1, 2020$39.54 
Fair value of stock consideration$1,470 
Stock compensation consideration7
Total stock consideration$1,477 
Cash consideration18 
Repayment of Delphi Technologies’ debt896 
Total consideration$2,391 

The Company finalized its valuation of the assets and liabilities of the Delphi Technologies acquisition during the third quarter of 2021. During the nine months ended September 30, 2021, the Company made measurement period adjustments based on new information about facts and circumstances that existed as of the acquisition date.

9

The following table summarizes the final fair values of assets acquired and liabilities assumed as of the acquisition date and subsequent measurement period adjustments:
(in millions)Initial AllocationMeasurement Period AdjustmentsRevised Allocation
ASSETS
Cash and cash equivalents$460 $ $460 
Receivables, net901 (4)897 
Inventories, net398 (5)393 
Prepayments and other current assets77 2 79 
Property, plant and equipment, net1,548 (31)1,517 
Investments and other long-term receivables103 (1)102 
Goodwill710 44 754 
Other intangible assets, net760  760 
Other non-current assets359 1 360 
Total assets acquired5,316 6 5,322 
LIABILITIES
Notes payable and other short-term debt2  2 
Accounts payable692 1 693 
Other current liabilities609 9 618 
Long-term debt934  934 
Other non-current liabilities:
Retirement-related313  313 
Other non-current liabilities286 (4)282 
Total liabilities assumed2,836 6 2,842 
Noncontrolling interest89  89 
Net assets and noncontrolling interest acquired$2,391 $ $2,391 

Any excess of the purchase price over the fair value of net assets was recognized as goodwill. Goodwill of $754 million, including the impact of measurement period adjustments, was allocated across the Company’s four segments, as noted in the table below. The goodwill consists of the Company’s expected future economic benefits that will arise from expected future product sales and operational synergies from combining Delphi Technologies with its existing business and is not deductible for tax purposes.

(in millions)
Air Management$150 
e-Propulsion & Drivetrain301 
Fuel Injection 
Aftermarket303 
Total acquisition date goodwill$754 
10

The following table summarizes the other intangible assets acquired:

(in millions)Estimated LifeEstimated Fair Value
Amortized intangible assets:
Developed technology14 years$270 
Customer relationships15 years380 
Total amortized intangible assets650 
Unamortized trade nameIndefinite110 
Total other intangible assets$760 

Generally accepted valuation practice indicates that assets and liabilities may be valued using a range of methodologies. The property, plant and equipment and inventory acquired were valued using a combination of cost and market approaches. Goodwill, identifiable intangible assets, noncontrolling interests and the equity method investment were valued using the income approach. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values; however, management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate.

On a pro forma basis, the combined net sales of the Company and Delphi Technologies for the three and nine months ended September 30, 2020 were $3,588 million and $8,866 million, respectively.

Romeo Power, Inc.

In May 2019, the Company invested $50 million in exchange for a 20% equity interest in Romeo Systems, Inc., now known as Romeo Power, Inc., (“Romeo”) a technology-leading battery module and pack supplier that was then privately held. The Company accounted for this investment in Series A-1 Preferred Stock of Romeo under the measurement alternative in ASC Topic 321, “Investments - Equity Securities” for equity securities without a readily determinable fair value. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. In September 2019, the Company and Romeo contributed total equity of $10 million and formed a new joint venture, BorgWarner Romeo Power LLC (“Romeo JV”), in which the Company owns a 60% interest. Romeo JV is a variable interest entity focusing on producing battery module and pack technology. The Company is the primary beneficiary of Romeo JV and consolidates Romeo JV in its consolidated financial statements.

On December 29, 2020, through the business combination of Romeo Systems, Inc. and special purpose acquisition company RMG Acquisition Corporation, a new entity, Romeo Power, Inc., became a publicly listed company. The Company’s ownership in Romeo was reduced to 14%, and the investment no longer qualified for the measurement alternative under ASC Topic 321 as the investment now has a readily determinable fair value. Therefore, during the fourth quarter 2020, a gain of $391 million was recorded to adjust the carrying value of the Company’s investment to fair value of $432 million as of December 31, 2020. The investment is recorded at fair value on an ongoing basis with changes in fair value being recognized in Unrealized loss on equity securities in the Condensed Consolidated Statements of Operations. During the three and nine months ended September 30, 2021, the Company recorded a loss of $61 million and $337 million, respectively, to adjust the carrying value of the Company’s investment to fair value. As of September 30, 2021, the investment’s fair value was $95 million, which is reflected in Investments and other long-term receivables in the Company’s Condensed Consolidated Balance Sheets.

Prior to December 29, 2020, there was not a readily determinable fair value of Romeo and the Company assessed it for any impairment indicators or other changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. In the first quarter of 2020
11

after completing a qualitative assessment which indicated the Company’s equity securities in Romeo may have been impaired, the Company recorded a $9 million impairment charge to reflect this investment at its estimated fair value of $41 million. The estimated fair value of Romeo was determined using unobservable inputs including quantitative information from lower valuations in recently completed or proposed financings and the liquidation preferences included in the Romeo stock agreements. These unobservable inputs are considered Level 3.


NOTE 4 REVENUE FROM CONTRACTS WITH CUSTOMERS

The 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 customary business practices and vary by customer type and products offered. We have evaluated the terms of our 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 cost-to-cost method. The Company recorded a contract asset of $21 million and $16 million at September 30, 2021 and December 31, 2020, 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 are reflected as Other current liabilities and Other non-current liabilities in the Condensed Consolidated Balance Sheets and were $23 million and $1 million at September 30, 2021 and $22 million and $6 million at December 31, 2020, respectively. 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.
Sales to certain aftermarket customers provide to the customers a right of return. The Company recognizes an estimated return asset (and adjusts for cost of sales) for the right to recover the products returned by the customer. ASC Topic 606 requires that return assets be presented separately from inventory. As of September 30, 2021 and December 31, 2020, the Company had return assets of $9 million and $8 million, respectively, recorded in Prepayments and other current assets in the Company’s Condensed Consolidated Balance Sheets.

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 the customer over the term of the new business arrangement, the Company capitalizes these amounts. As of September 30, 2021 and December 31, 2020, the Company recorded customer incentive payments of $38 million and $43 million, respectively, in Prepayments and other current assets, and $142 million and $166 million, respectively, in Other non-current assets in the Condensed Consolidated Balance Sheets.

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The following tables represent a disaggregation of revenue from contracts with customers by reporting segment and region and reflects the results of former Delphi Technologies entities in the three and nine months ended September 30, 2021. Refer to Note 23, “Reporting Segments And Related Information,” to the Condensed Consolidated Financial Statements for more information.

Three Months Ended September 30, 2021
(In millions)Air Managemente-Propulsion & DrivetrainFuel InjectionAftermarketTotal
North America$460 $471 $13 $81 $1,025 
Europe647 183 201 114 1,145 
Asia483 524 144 16 1,167 
Other43 6 16 14 79 
Total$1,633 $1,184 $374 $225 $3,416 
Three Months Ended September 30, 2020
(In millions)Air Managemente-Propulsion & DrivetrainFuel InjectionAftermarketTotal
North America$384 $456 $ $ $840 
Europe658 186   844 
Asia391 429   820 
Other26 4   30 
Total$1,459 $1,075 $ $ $2,534 
Nine Months Ended September 30, 2021
(In millions)Air Managemente-Propulsion & DrivetrainFuel InjectionAftermarketTotal
North America$1,456 $1,459 $17 $232 $3,164 
Europe2,265 710 731 324 4,030 
Asia1,586 1,710 428 46 3,770 
Other112 18 48 41 219 
Total$5,419 $3,897 $1,224 $643 $11,183 
Nine Months Ended September 30, 2020
(In millions)Air Managemente-Propulsion & DrivetrainFuel InjectionAftermarketTotal
North America$938 $1,069 $ $ $2,007 
Europe1,707 467   2,174 
Asia988 995   1,983 
Other64 11   75 
Total$3,697 $2,542 $ $ $6,239 


NOTE 5 RESTRUCTURING

The Company’s restructuring activities are undertaken, as necessary, to execute management’s strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company’s business and to relocate operations to best cost locations.

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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.

Three Months Ended September 30, 2021
(in millionsAir Managemente-Propulsion & DrivetrainFuel InjectionCorporateTotal
Employee termination benefits$7 $2 $29 $ $38 
Other4 9   13 
Total restructuring expense$11 $11 $29 $ $51 
Three Months Ended September 30, 2020
Air Managemente-Propulsion & DrivetrainFuel InjectionCorporateTotal
Employee termination benefits$9 $ $ $1 $10 
Other5 4  1 10 
Total restructuring expense$14 $4 $ $2 $