form10k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
x Annual
Report Pursuant to Section 13 or 15(d) of
the Securities
Exchange Act of 1934
For the Fiscal Year
Ended December 31, 2007
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 of
Incorporation)
|
|
(I.R.S.
Employer Identification No.)
|
3850 Hamlin
Road
Auburn Hills,
Michigan 48326
(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:
|
|
|
Name of each
exchange on
|
Title of each
class
|
which
registered
|
Common Stock,
par value $0.01 per share
|
New York
Stock Exchange
|
Securities
registered Pursuant to Section 12(g) of the Act: None
______________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities
Act. Yes x No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the
Act. Yes No x
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 x No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K. X
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated
filer x Accelerated
filer Non-accelerated
filer
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the
Act). Yes No x
The aggregate market value of the voting common stock of the registrant held by
stockholders (not including voting common stock held by directors and executive
officers of the registrant) on June 30, 2007 (the last business day of the
most recently completed second fiscal quarter) was approximately
$5.0 billion. As of February 14, 2008, the registrant had 116,396,879
shares of voting common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the following documents are incorporated herein by reference into
the Part of the Form 10-K indicated.
|
|
Part of
Form 10-K
|
|
|
into
which
|
Document
|
|
incorporated
|
|
|
|
BorgWarner
Inc. 2007 Summary Annual Report to Stockholders
|
|
Parts I, II
and IV
|
BorgWarner
Inc. Proxy Statement for the 2008
Annual Meeting of Stockholders
|
|
Part III
|
FORM 10-K
YEAR
ENDED DECEMBER 31, 2007
INDEX
Item
|
|
|
Number
|
|
Page
|
|
|
|
PART I
|
1.
|
Business
|
4 |
1A.
|
R Risk
Factors
|
14 |
1B.
|
Unresolved Staff Comments
|
17 |
2.
|
Properties
|
17 |
3.
|
Legal Proceedings
|
18 |
4.
|
Submission of Matters to a Vote of Security Holders
|
19 |
PART II
|
5.
|
Market for the Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
|
19
|
6.
|
Selected Financial Data
|
20
|
7.
|
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
20
|
7A.
|
Quantitative and Qualitative Disclosure About Market
Risk
|
21
|
8.
|
Financial Statements and Supplementary Data
|
21
|
9.
|
C Changes
in and Disagreements with Accountants on Accounting
and Financial Disclosure
|
21
|
9A.
|
Controls and Procedures
|
24
|
9B.
|
Other Information
|
|
PART III
|
10.
|
Directors, Executive Officers and Corporate Governance
|
24
|
11.
|
Executive Compensation
|
24
|
12.
|
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
|
24
|
13.
|
Certain Relationships and Related Transactions and Director
Independence
|
24
|
14.
|
Principal Accountant Fees and Services
|
24
|
PART IV
|
15.
|
Exhibits and Financial Statement Schedules
|
25
|
|
|
|
|
|
|
CAUTIONARY STATEMENTS FOR FORWARD-LOOKING
INFORMATION
BorgWarner Inc. and
its consolidated subsidiaries (the “Company”) make forward-looking statements in
this document that are based on management’s current expectations, estimates,
and projections. Words such as "expects,” “anticipates,” “intends,” “plans,”
“believes,” “estimates,” variations of such words and similar expressions are
intended to identify such forward-looking statements. Our forward-looking
statements are subject to risks and uncertainties, many of which are difficult
to predict and generally beyond our control. Such risks and uncertainties could
cause our actual results to differ materially from those expressed, projected,
or implied in or by our forward-looking statements. Such risks and uncertainties
include: fluctuations in global or regional vehicle production, the continued
use of outside suppliers by original equipment manufacturers, fluctuations in
demand for vehicles containing our products, general economic conditions, as
well as the other risks noted under “Risk Factors.” We do not undertake any
obligation to update any of our forward-looking statements.
The Company is a
Delaware corporation that was incorporated in 1987. The Company is a
leading, global supplier of highly engineered automotive systems and components,
primarily for powertrain applications. The Company’s products help improve
vehicle performance, fuel efficiency, stability and air
quality. These products are manufactured and sold worldwide,
primarily to original equipment manufacturers (“OEMs”) of light-vehicles
(passenger cars, sport-utility vehicles, vans and light-trucks). The Company’s
products are also sold to other OEMs of commercial trucks, buses and
agricultural and off-highway vehicles. The Company also manufactures and sells
its products to certain Tier One vehicle systems suppliers and into the
aftermarket for light and commercial vehicles. The Company operates
manufacturing facilities serving customers in the Americas, Europe and Asia, and
is an original equipment supplier to every major automotive OEM in the
world.
Financial
Information About Segments
Incorporated herein
by reference is Note 20 to the Consolidated Financial Statements in the
Company’s Summary Annual Report for the year ended December 31, 2007 (the
“Company’s Summary Annual Report”) filed as an exhibit to this
report.
Narrative
Description of Reporting Segments
The Company reports
its results under two reporting segments: Engine and Drivetrain. Net revenues by
segment for the three years ended December 31, 2007, 2006 and 2005 are as
follows (in millions of dollars):
|
|
Year
Ended December 31,
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Engine
|
|
$
|
3,761.3
|
|
|
$
|
3,154.9
|
|
|
$
|
2,855.4
|
|
Drivetrain
|
|
|
1,598.8
|
|
|
|
1,461.4
|
|
|
|
1,472.9
|
|
Inter-segment eliminations
|
|
|
(31.5
|
)
|
|
|
(30.9
|
)
|
|
|
(34.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
5,328.6
|
|
|
$
|
4,585.4
|
|
|
$
|
4,293.8
|
|
|
|
|
|
|
|
|
|
|
|
The sales information
presented above excludes the sales by the Company’s unconsolidated joint
ventures (See “Joint Ventures” section). Such sales totaled approximately
$720 million in 2007, $676 million in 2006 and $635 million in
2005.
Engine
The Engine Group
develops products to manage engines for fuel efficiency, reduced emissions, and
enhanced performance. Its products currently fall into the following major
categories: turbochargers, chain products, emissions systems, thermal systems,
diesel cold start and gasoline ignition technology and diesel cabin
heaters.
The Engine Group
provides turbochargers for light-vehicle, commercial-vehicle and off-road
applications for diesel and gasoline engine manufacturers in Europe, North
America, South America and Asia. The Engine Group has greatly
benefited from the growth in turbocharger demand in Europe. This
growth is linked to increasing demand for diesel engines in light vehicles which
typically utilize turbochargers and for turbocharged gasoline
engines. Benefits of turbochargers in both light-vehicle and
commercial-vehicle applications include increased power for a given engine size,
improved fuel economy and significantly reduced emissions.
Sales of
turbochargers for light-vehicles represented approximately 21%, 18%, and 16% of
the Company’s total revenues for 2007, 2006 and 2005, respectively. The Company
currently supplies light-vehicle turbochargers to many OEMs including
Volkswagen, Renault, PSA, Daimler, Hyundai, Fiat and BMW. The Company
also supplies commercial-vehicle turbochargers to Caterpillar, John Deere,
Daimler, International, Deutz and MAN.
In 2005, the Company
announced the start of production of its regulated two-stage turbocharging
system known as R2S® for medium diesel truck applications. The system
provides continuously variable adaptation of the turbine and compressor side for
every operating point of the engine The Company also announced it would supply
turbochargers for VW/Audi’s 2.0 liter gasoline direct injection engine and for
their first dual-charged 1.4 liter gasoline direct injection engine. In 2006,
the Company launched a high temperature variable turbine geometry ("VTG™")
for a Porsche 3.6 liter gasoline application, another R2S application for a
Daimler light-truck called the Sprinter and a VTG for the Hyundai A-engine
family. In 2007, the Company began supplying its R2S turbocharger technology
combined with variable turbine geometry to International Engine Group’s
PowerStroke 6.4-liter V8 diesel engine used in Ford’s F-Series heavy-duty pickup
trucks. Turbochargers are manufactured in facilities in Europe, North
America, South America and Asia.
The Engine Group
designs and manufactures products to control emissions and improve fuel
economy. These products include electric air pumps, turbo actuators
that use integrated electronics to precisely control turbocharger speed and
pressure ratio, and exhaust gas recirculation valves for gasoline and diesel
applications. The Engine Group also manufactures a wide variety of fluid pumps,
including engine oil pumps for engine and transmission lubrication, and products
for engine air intake management. These products are provided from
facilities in North America, Europe and Asia.
The Engine
Group’s chain and chain systems products include timing chain and
timing drive systems, crankshaft and camshaft sprockets, tensioners, guides and
snubbers, HY-VO®
Front-Wheel Drive (“FWD”) transmission chain and Four-Wheel Drive (“4WD”) chain,
and MORSE GEMINI® chain
systems for light-vehicle and commercial-vehicle applications.
The Company’s timing
chain systems are used on Ford’s family of overhead cam engines, including the
Duratech and Modular, and in-line 4 cylinder engines, as well as on Chrysler’s
2.7 liter, 3.7 liter and 4.7 liter, overhead cam engines, including
the 5.7 liter and 6.1 liter Hemi applications. In addition, the
Company provides timing systems to a number of Asian OEMs and their North
American transplant operations, including Honda, Nissan, and Hyundai, and to
several European OEMs. The Company believes that it is the world’s leading
manufacturer of timing chain systems.
The Engine Group has
reached full production of its first high-volume variable cam timing (“VCT”)
systems for a family of GM V6 engines. VCT is a means of precisely controlling
the flow of air into and out of an engine by allowing the camshaft to be
dynamically phased relative to its crankshaft. The Company’s VCT system includes
Torsional Assist™ technology, which utilizes camshaft torque as its main
actuation energy, instead of the conventional oil-pressure actuated approach.
The VCT systems are utilized by GM’s 3.5 liter and 3.9 liter V-6 engines in the
Saturn Aura, Chevrolet Impala and Pontiac G6. HY-VO chain is
used to transfer power from the engine to the drivetrain. The Company’s MORSE
GEMINI chain system emits significantly less chain pitch frequency noise than
conventional transmission chain systems. The chain in a transfer case
distributes power between a vehicle’s front and rear output shafts which, in
turn, provide torque to the front and rear wheels. The Company believes it is
the world’s leading manufacturer of chain for FWD transmissions and 4WD transfer
cases. These products are provided from facilities in North America,
Europe and Asia.
The Engine Group
believes it is a leading global provider of engine thermal solutions for truck,
agricultural and off-highway applications. The group designs,
manufactures and markets viscous fan drives that control fans to sense and
respond to multiple cooling requirements The Engine Group also
manufactures and markets polymer fans for engine cooling systems. The Company’s
thermal products provide improved vehicle fuel economy and reduced engine
emissions while minimizing parasitic horsepower loss. These advanced thermal
systems products are provided from facilities in North America, South America,
Europe and Asia. The Company has been awarded the "standard position" (the
OEM-designated preferred supplier of component systems available to the
end-customer) at the major global heavy truck producers.
In 2005, the Company
acquired approximately 69.4% of the outstanding shares of BERU
Aktiengesellschaft (“BERU”), headquartered in Ludwigsburg, Germany. In 2007, the
Company increased its ownership to approximately 82.2%. See Note 19 to the
Consolidated Financial Statements in the Company’s Summary Annual Report. BERU’s
operating results are included within the Company’s Engine Group segment. BERU
is a leading global automotive supplier of diesel cold starting technology (glow
plugs and instant starting systems); gasoline ignition
technology (spark
plugs and ignition coils); and electronic control units and sensor technology
(tire pressure sensors, diesel cabin heaters and selected sensors). BERU is
represented in Europe, Asia and North America.
Drivetrain
The Drivetrain Group
leverages the Company’s expertise in wet friction clutches, mechanical coupling
devices, and control systems, enabling efficient transmission of engine torque
to the vehicle drivetrain, and management of torque distribution to the driven
wheels. The Drivetrain Group’s major products are transmission components and
systems, and 4WD and AWD torque management systems.
The Drivetrain Group
designs and manufactures automatic transmission components and modules in North
America, Asia and Europe. The Company is a supplier to virtually every major
automatic transmission manufacturer in the world for both conventional
automatics and new dual-clutch transmissions.
“Shift quality” products are provided in four
principal categories. Dual-clutch transmission products include
dual-clutch modules, torsional vibration dampers and mechatronic control
modules. Friction products include friction plates, transmission
bands, torque converter clutches, and friction clutch modules.
One-way clutches and torsional vibration
dampers are mechanical products. The controls products line features
electro-hydraulic solenoids, solenoid modules and high pressure solenoids for
automated manual transmissions ("AMT"s).
The Company’s 50%-owned joint venture in Japan,
NSK-Warner Kabushiki Kaisha ("NSK-Warner"), is a leading producer of friction
plates and one-way clutches in Japan. NSK-Warner is also the joint venture
partner with a 40% interest in the Drivetrain Group’s Korean subsidiary,
BorgWarner Transmission Systems Korea, Inc.
The Company has led the globalization of
today’s dual-clutch transmission technology for over ten
years. Following the development of its dual-clutch transmission
technology in the 1990s, the Company established its industry-leading position
in Europe in 2003 with the production launch of its award-winning DualTronic®
innovations with VW/Audi. In 2006, the Company was awarded the first
dual-clutch program in China with SAIC. In 2007, the Company
announced its first North American program and launched its first dual-clutch
technology application in a Japanese transmission with Nissan.
The Company has announced programs with
customers that include VW, Audi, Bugatti, SAIC, Nissan, and Getrag dual-clutch
transmission programs with five additional global automakers. In addition, the
Company is working on over 20 programs with OEMs around the
world. BorgWarner DualTronic technology provides both better
fuel-efficiency and a great driving experience, enabling a conventional, manual
gearbox to function as a fully automatic transmission by eliminating the
interruption that occurs when a manual transmission shifts gears.
In conventional automatic transmissions, there
has been a global market trend from four and five speeds to six, seven, and even
eight speed transmissions. Transmissions with more speeds improve fuel economy
and vehicle performance and offer the Company growth
opportunities.
In 2006 the Drivetrain Group acquired
the high-pressure solenoid product lines of Eaton Corporation. Among these
solenoids are those used in AMTs. AMTs are a growing niche of the entry-level
city-car and light commercial-vehicle segments in Europe and some Asian
markets.
The
Drivetrain Group's torque management products include rear-wheel drive
(“RWD”)/all-wheel drive (“AWD”) transfer cases and systems, and front–wheel
drive (“FWD”)/ all-wheel drive (“AWD”) electromagnetic couplings and systems to
transfer torque within the drivetrain. The company’s focus is on electronically
controlled (active) torque management devices and systems. Other torque
management products include synchronizer rings and systems for application in
manual, automated manual and dual clutch transmissions.
Transfer cases are installed primarily on
light-trucks, sport-utility vehicles ("SUV"s), and rear-wheel drive based
cross-over utility vehicles ("CUV"s) and passenger cars. A transfer case
attaches to the transmission and distributes torque to the front and rear axles
improving vehicle traction and stability in dynamic driving conditions. The
Company pioneered the first active on-demand all-wheel drive system,
Torque-on-Demand® (“TOD”) transfer case technology, revolutionizing the
all-wheel drive market. On-demand systems created a
completely new
genre of transfer cases, focusing on accurately managing torque and allowing
vehicle driveline downsizing and efficiency gains. The TOD® transfer case has
become an industry standard known around the world. Over five million TOD®
transfer cases have been manufactured by the Company and used in vehicles
produced by Ford, Isuzu, KIA, GM and SAIC (Ssangyong). The latest
product evolution within the TOD® transfer case family is the ITM® transfer case
launched in 2007 on the all-new Cadillac CTS.
Sales of rear-wheel drive based transfer cases
and components represented approximately 9%, 10% and 12% of the Company’s total
revenues for 2007, 2006 and 2005, respectively. The Company supplies
the majority of the transfer cases used by Ford, including those installed in
the Ford Explorer, the Ford Expedition, the Ford F-150, Ranger pick-up trucks,
the Mercury Mountaineer and the Lincoln Navigator. The Company also supplies
transfer cases to a number of General Motors applications including the Hummer
H2 and H3; the Cadillac Escalade, CTS, STS and SRX; and the GMC Yukon Denali.
The Company began supplying transfer cases for the Audi Q7 in 2005 and to Great
Wall Motor Company Limited, a leading light-truck and SUV manufacturer in China,
in 2006. The Company also supplies transfer cases to several other Asia-based
OEMs.
The Company is actively involved in the FWD,
AWD market with the i-Trac™ series products developed for FWD based CUVs, SUVs,
and passenger cars. The i-Trac series’ electromagnetic couplings use
electronically controlled clutches to distribute power to the rear wheels
instantaneously as traction is required. The Company has produced over 1 million
i-Trac series products under the brand names of ITM I™ and T-Trac™ for vehicles
produced by Hyundai, KIA, and Honda. A derivative of this electronically
controlled clutch incorporating a third friction element, known as ITM 3e™, went
into production on the 2006 Porsche 911 Turbo, Hyundai Santa Fe, Chrysler
Pacifica, and all-new Dodge Journey. NexTrac™ is the latest product
innovation in the i-Trac™ series. It is an active on-demand all-wheel drive
system that produces outstanding stability and traction while promoting better
fuel economy through a more compact, lighter, and efficient package. In 2007,
the Company was selected by Chery Automobile Company, in China, as the driveline
system integrator for a new all-wheel drive SUV, which will feature the
Company’s patented NexTrac technology along with the Company’s control systems.
As a driveline integrator, the Company will specify system requirements and
coordinate design and execution to provide a competitive edge in the
marketplace. Additional applications of NexTrac will launch in early
2008 on a top five CUV program with an Asian car manufacturer.
The Company’s
drivetrain products are manufactured in North America, Europe and
Asia.
Joint
Ventures
As of
December 31, 2007, the Company had 12 joint ventures in which it had a
less-than-100% ownership interest. Results from the seven ventures in which the
Company is the majority owner are consolidated as part of the Company’s results.
Results from the five ventures in which the Company’s effective ownership
interest is 50% or less, were reported by the Company using the equity method of
accounting.
Management of the
unconsolidated joint ventures is shared with the Company’s respective joint
venture partners. Certain information concerning the Company’s joint ventures is
set forth below:
Joint
Venture
|
|
Products
|
|
Year Organized
|
|
|
Percentage Owned by the Company
(a)
|
|
|
Location of Operation
|
|
Joint
Venture Partner
|
|
Fiscal 2007 Sales ($ in millions)
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NSK-Warner
K.K.
|
|
Transmission
components
|
|
|
1964
|
|
|
|
50
|
%
|
|
Japan
|
|
Nippon Seiko
K.K.
|
|
$
|
552.1
|
|
Turbo Energy
Limited(c)
|
|
Turbochargers
|
|
|
1987
|
|
|
|
32.6
|
%
|
|
India
|
|
Sundaram
Finance Limited; Brakes India Limited
|
|
$
|
117.6
|
|
Impco-BERU
Technologies B.V.
|
|
Alternative
Drive Systems and equipment for gas engines
|
|
|
1999
|
|
|
|
49
|
%
|
|
Netherlands
|
|
Impco
Technologies Inc.
|
|
$
|
27.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BERU Diesel
Start Systems Pvt. Ltd.
|
|
Glow
Plugs
|
|
|
1996
|
|
|
|
49
|
%
|
|
India
|
|
Jayant
Dave
|
|
$
|
3.8
|
|
BERU-Eichenauer
GmbH
|
|
Sub-systems
for diesel cabin heaters
|
|
|
2000
|
|
|
|
50
|
%
|
|
Germany
|
|
Fritz
Eichenauer GmbH & Co. KG
|
|
$
|
18.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BorgWarner
Transmission Systems Korea, Inc.
|
|
Transmission
components
|
|
|
1987
|
|
|
|
60
|
%(d)
|
|
Korea
|
|
NSK-Warner
K.K.
|
|
$
|
140.1
|
|
Divgi-Warner
Pvt. Ltd.
|
|
Transfer
cases and automatic locking hubs
|
|
|
1995
|
|
|
|
60
|
%
|
|
India
|
|
Divgi
Metalwares, Ltd.
|
|
$
|
20.0
|
|
Borg-Warner
Shenglong (Ningbo) Co. Ltd.
|
|
Fans, fan
drives
|
|
|
1999
|
|
|
|
70
|
%
|
|
China
|
|
Ningbo
Shenglong Group Co., Ltd.
|
|
$
|
22.9
|
|
BorgWarner
TorqTransfer Systems Beijing Co. Ltd.
|
|
Transfer
cases
|
|
|
2000
|
|
|
|
80
|
%
|
|
China
|
|
Beijing
Automotive Industry Corporation
|
|
$
|
28.9
|
|
BorgWarner
Morse TEC Murugappa Pvt. Ltd
|
|
Chain
products and engine timing system components
|
|
|
2002
|
|
|
|
74
|
%
|
|
India
|
|
TI
Diamond Chain Ltd.
|
|
$
|
6.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SeohanWarner
TurboSystems Ltd.
|
|
Turbochargers
|
|
|
2003
|
|
|
|
71
|
%
|
|
Korea
|
|
Korea
Flange Company
|
|
$
|
47.5
|
|
BERU Korea
Co. Ltd.
|
|
Ignition
coils and pumps
|
|
|
2001
|
|
|
|
51
|
%
|
|
Korea
|
|
Mr.
K.B. Mo and Mr. D.H. Kim
|
|
$
|
38.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The Company
owns 82.2% of the outstanding shares of BERU. For the joint ventures in
which BERU is a party, the percentage of ownership for each joint venture
reflects BERU’s ownership
percentage.
|
(b)
|
|
All sales
figures are for the year ended December 31, 2007, except for
NSK-Warner and Turbo Energy Limited. NSK-Warner’s sales are reported for
the 12 months ended November 30, 2007. Turbo Energy Limited’s
sales are reported for the 12 months ended September 30,
2007.
|
|
|
|
(c)
|
|
The Company
made purchases from Turbo Energy Limited totaling $25.3 million,
$25.1 million and $18.7 million for the years ended
December 31, 2007, 2006, and 2005, respectively.
|
|
|
|
(d)
|
|
BorgWarner
Inc. owns 50% of NSK-Warner, which has a 40% interest in BorgWarner
Transmission Systems Korea, Inc. This gives the Company an additional
indirect effective ownership percentage of 20%. This results in a total
effective ownership interest of
80%.
|
Financial
Information About Geographic Areas
See Note 20 to
the Consolidated Financial Statements in the Company’s Summary Annual Report for
financial information about geographic areas, which is incorporated herein by
reference.
Approximately 66% of
the Company’s consolidated sales for 2007 was outside the United States,
including exports. However, a portion of such sales was to OEMs headquartered
outside the United States that produce vehicles that are, in turn, exported to
the United States.
Customers
Approximately 73% of
the Company’s total sales in 2007 was for light-vehicle applications, with the
remaining 27% of the Company’s sales to a diversified group of commercial truck,
bus, construction and agricultural vehicle manufacturers, and to distributors of
aftermarket replacement parts.
For the most recent
three-year period, the Company’s worldwide sales to the following customers were
approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Volkswagen
|
|
|
15%
|
|
|
|
13%
|
|
|
|
13%
|
|
Ford
|
|
|
12%
|
|
|
|
13%
|
|
|
|
16%
|
|
Daimler
|
|
|
6%
|
|
|
|
11%
|
|
|
|
12%
|
|
Daimler divested
Chrysler in 2007. No other single customer accounted for more
than 10% of our consolidated sales in any year of the periods
presented.
The Company’s
automotive products are generally sold directly to OEMs substantially pursuant
to negotiated annual contracts, long-term supply agreements or terms and
conditions as may be modified by the parties. Deliveries are subject to periodic
authorizations based upon the production schedules of the OEMs. The Company
typically ships its products directly from its plants to the OEMs.
Sales
and Marketing
Each of the Company’s
business units within its two reporting segments has its own sales function.
Account executives for each of our business units are assigned to serve specific
OEM customers for one or more of a business unit’s products. Our account
executives spend the majority of their time in direct contact with OEM
purchasing and engineering employees and are responsible for servicing existing
business and for identifying and obtaining new business. Because of their
close relationship with OEMs, account executives are able to identify and meet
customers’ needs based upon their knowledge of our customer’s needs and our
products and design and manufacturing capabilities. Upon securing a new order,
account executives participate in product launch team activities and serve as a
key interface with the customers.
In addition, the
sales and marketing employees of our Engine segment and Drivetrain segment often
work together to explore cross-development opportunities for the business units.
The development of DualTronic, the Company’s wet-clutch and control-system
technology for a new-concept automated transmission, is an example of a
successful collaboration.
Seasonality
The Company’s
business is moderately seasonal because the Company’s largest North American
customers typically halt vehicle production for approximately two weeks in July
and one week in December. Additionally, customers in Europe and Asia typically
shut down vehicle production during portions of July or August and one week in
the fourth quarter. Accordingly, the Company’s third and fourth quarters may
reflect those practices.
Research
and Development
The Company conducts
advanced engine and drivetrain research at the segment level. This advanced
engineering function looks to leverage electronics and the Company’s expertise
across product lines to create new engine and drivetrain systems and modules
that can be commercialized. A venture capital fund that was created by the
Company as seed money for new innovation and collaboration across businesses is
managed by this function.
In addition, each of
the Company’s operating segments has its own research and development
(“R&D”) organization. The Company has approximately 800 employees,
including engineers, mechanics and technicians, engaged in R&D activities at
facilities worldwide. The Company also operates testing facilities such as
prototype, measurement and calibration, life cycle testing and dynamometer
laboratories.
By working closely
with the OEMs and anticipating their future product needs, the Company’s R&D
personnel conceive, design, develop and manufacture new proprietary automotive
components and systems. R&D personnel also work to improve current products
and production processes. The Company believes its commitment to R&D will
allow it to obtain new orders from its OEM customers.
The following table
presents the Company's gross and net expenditures on
R&D activities:
millions
of dollars
Year
Ended December 31,
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Gross
R&D expenditures
|
|
$
|
246.7
|
|
$
|
219.5
|
|
$
|
194.3
|
|
Customer
reimbursements
|
|
|
(
35.9
|
)
|
|
(31.8
|
)
|
|
(33.3
|
)
|
Net
R&D expenditures
|
|
$
|
210.8
|
|
$
|
187.7
|
|
$
|
161.0
|
|
The Company's net
R&D expenditures are included in the selling, general, and administrative
expenses of the Consolidated Statements of Operations. Customer
reimbursements are netted against gross R&D expenditures upon billing of
services performed. The Company has contracts with several customers at
the Company's various R&D locations. No such contract exceeded $6.0
million in any of the years presented.
Patents
and Licenses
The Company has
approximately 3,800
active domestic and foreign patents and patent applications pending or under
preparation, and receives royalties from licensing patent rights to others.
While it considers its patents on the whole to be important, the Company does
not consider any single patent, any group of related patents or any single
license essential to its operations in the aggregate or to the operations of any
of the Company’s business groups individually. The expiration of the patents
individually and in the aggregate is not expected to have a material effect on
the Company’s financial position or future operating results. The Company owns
numerous trademarks, some of which are valuable, but none of which are essential
to its business in the aggregate.
The Company owns the
“BorgWarner” and “Borg-Warner Automotive” trade names and housemarks, and
variations thereof, which are material to the Company’s business.
Competition
The Company’s
operating segments compete worldwide with a number of other manufacturers and
distributors which produce and sell similar products. Many of these competitors
are larger and have greater resources than the Company. Price, quality,
delivery, technological innovation, application engineering development and
program launch support are the primary elements of competition.
The Company’s major
competitors by product type follow:
Product
Type: Engine
|
Name
of Competitor
|
|
|
Turbochargers:
|
Honeywell
Mitsubishi
Heavy Industries (MHI)
IHI
|
Chains:
|
Tsubaki
Group
Iwis
Schaeffler
Group
|
Emissions
products:
|
Pierburg
Valeo
Bosch
|
Thermal products:
|
Behr
Horton/Sachs
Usui
|
Diesel cold start technology:
|
Bosch
NGK
|
|
|
Product Type:
Drivetrain
|
Name of
Competitor
|
|
|
Torque
transfer products:
|
Magna
JTEKT
GKN
|
Transmission products:
|
Dynax
Schaeffler
Group
Bosch
Denso
|
In addition, a number
of the Company’s major OEM customers manufacture, for their own use and for
others, products which compete with the Company’s products. Although these OEM
customers have indicated that they will continue to rely on outside suppliers,
the OEMs could elect to manufacture products to meet their own requirements or
to compete with the Company. There can be no assurance that the Company’s
business will not be adversely affected by increased competition in the markets
in which it operates.
For many of its
products, the Company’s competitors include suppliers in other parts of the
world that enjoy economic advantages such as lower labor costs, lower health
care costs and, in some cases, export subsidies and/or raw materials subsidies.
See also Item 1A. Risk Factors.
Employees
As of
December 31, 2007, the Company and its consolidated subsidiaries had
approximately 17,700 salaried and hourly employees (as compared with
approximately 17,400 employees at December 31, 2006), of which
approximately 6,700 were U.S. employees. Approximately 25% of
the Company’s U.S. workforce is unionized. The hourly employees at certain
of our international facilities are also unionized. The Company believes its
present relations with employees to be satisfactory.
Our two most
significant domestic collective bargaining agreements are for our Muncie,
Indiana plant and our Ithaca and Cortland, New York facilities. The
Muncie agreement expires in April 2009. Workers at the New York
facilities elected a new union in December 2007. It is expected that
both parties will bargain in good faith beginning in the first quarter of
2008. It is our expectation that an agreement will be reached, though
no assurances can be given.
Raw
Materials
Continuing a trend
which began in 2004, several raw materials used in the Company’s products hit
record pricing levels in 2007, including steel, copper, resins, nickel and
certain alloying elements. This was due to a host of supply and demand
factors.
Despite these
challenges, the Company used a variety of tactics in order to limit the impact
of inflationary prices and supply shortages. The Company formed a global
procurement organization to accelerate: cost reductions, purchases from lower
cost regions, risk mitigation efforts, and collaborative buying activities. In
addition, the Company used long-term contracts, cost sharing arrangements,
design changes, customer buy programs, and hedging instruments to help control
costs. The Company intends to use similar measures in 2008 and
beyond. See Note 10 to the Consolidated Financial Statements in the
Company’s Summary Annual Report.
For 2008, the Company
believes that its supplies of raw materials and energy are adequate and
available from multiple sources to support its manufacturing requirements.
Manufacturing operations for each of the Company’s operating segments are
dependent upon natural gas, fuel oil, and electricity.
Environmental Regulation and
Proceedings
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 presently be liable for the cost of clean-up and other remedial
activities at 34
such sites. 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 large or the liability will be shared
with other PRPs, although no assurance can be given with respect to the
ultimate outcome of any such matter.
Based on information
available to the Company (which in most cases includes: an estimate of
allocation of liability among PRPs; the probability that other PRPs, many of
whom are large, solvent public companies, 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 estimated
remediation and consulting costs; remediation alternatives; and estimated legal
fees), the Company has established an accrual for indicated environmental
liabilities with a balance at December 31, 2007 of $14.5 million.
Excluding the Crystal Springs site discussed below for which $4.9 million has
been accrued, the Company has accrued amounts that do not
exceed $3.0 million
related to any individual site and management does not believe that the costs
related to any of these other individual sites will have a material adverse
effect on the Company's results of operations, cash flows or financial
condition. The Company expects to pay out substantially all of the
amounts accrued for environmental liability over the next three to five
years.
In connection with
the sale of Kuhlman Electric Corporation, the Company agreed to indemnify the
buyer and Kuhlman Electric for certain environmental liabilities then unknown to
the Company relating to certain operations of Kuhlman Electric that
pre-date the Company's 1999 acquisition of Kuhlman Electric. During 2000,
Kuhlman Electric notified the Company that it discovered potential environmental
contamination at its Crystal Springs, Mississippi plant while undertaking an
expansion of the plant. The Company is continuing to work with the
Mississippi Department of Environmental Quality and Kuhlman Electric to
investigate and remediate to the extent necessary, historical contamination
at the plant and surrounding area. Kuhlman Electric and others, including
the Company, were sued in numerous related lawsuits, in which multiple claimants
alleged personal injury and property damage. In 2005, the Company and
other defendants entered into settlements that resolved approximately 99% of the
then known personal injury and property damage claims relating to the alleged
environmental contamination. Those settlements involved payments by the
Company of $28.5 million in the second half of 2005 and $15.7 million in the
first quarter of 2006, in exchange for, among other things, the dismissal with
prejudice of these lawsuits.
In December 2007, a
lawsuit was filed against Kuhlman Electric and others, including the Company, on
behalf of approximately 209 plaintiffs, alleging personal injury relating to
alleged environmental contamination. Given the early stage of the
litigation, the Company cannot make any prediction as to the outcome but its
current intention is to vigorously defend against the
suit.
Available
Information
Through its Internet
website (www.borgwarner.com), the Company makes available, free of charge, its
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, all amendments to those reports, and other filings
with the Securities and Exchange Commission, as soon as reasonably practicable
after they are filed or furnished. The Company also makes the following
documents available on its Internet website: the Audit Committee Charter; the
Compensation Committee Charter; the Corporate Governance Committee Charter; the
Company’s Corporate Governance Guidelines; the Company’s Code of Ethical
Conduct; and the Company’s Code of Ethics for CEO and Senior Financial Officers.
You may also obtain a copy of any of the foregoing documents, free of charge, if
you submit a written request to Mary Brevard, Vice President, Investor
Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326.
Executive
Officers of the Registrant
Set
forth below are the names, ages, positions and certain other information
concerning the executive officers of the Company as of February 14,
2008.
Name
|
Age
|
Position
With Company
|
|
|
|
Timothy M. Manganello
|
|
58
|
Chairman and
Chief Executive Officer
|
Robin J. Adams
|
|
54
|
Executive
Vice President, Chief Financial Officer and Chief Administrative
Officer
|
Angela J. D’Aversa
|
|
61
|
Vice
President, Human Resources
|
John
J. Gasparovic
|
|
50
|
Vice
President, General Counsel & Secretary
|
Anthony D. Hensel
|
|
49
|
Vice
President and Treasurer
|
Bernd W. Matthes
|
|
47
|
Vice
President
|
Cynthia A. Niekamp
|
|
48
|
Vice
President
|
Jeffrey L. Obermayer
|
|
52
|
Vice
President and Controller
|
Alfred Weber
|
|
50
|
Vice
President
|
Roger J. Wood
|
|
45
|
Vice
President
|
Mr. Manganello
has been Chairman of the Board since June 2003 and Chief Executive Officer since
February 2003. He was also President and Chief Operating Officer of the Company
from February 2002 until February 2003. He was Executive Vice President from
June 2001 until February 2002. He was Vice President of the Company from
February 1999 to June 2001 and President and General Manager of BorgWarner
TorqTransfer Systems Inc. (“TorqTransfer Systems”) from February 1999 until
February 2002.
Mr. Adams has
been Executive Vice President, Chief Financial Officer and Chief Administrative
Officer since April 2004 and was elected to the Board of Directors in April
2005. He was Executive Vice President — Finance and Chief Financial Officer
of American Axle & Manufacturing Holdings Inc. (“American Axle”) from
July 1999 until April 2004. Prior to joining American Axle, he was Vice
President and Treasurer and principal financial officer of BorgWarner from May
1993 until June 1999.
Ms. D’Aversa has
been Vice President, Human Resources of the Company since October 2004. She was
Acting Vice President, Human Resources from April 2004 until September 2004 and
Senior Director, Management and Organization Development from April 2004 until
September 2004. She was Director Management & Organization Development
from January 1995 until March 2004.
Mr. Gasparovic
has been Vice President, General Counsel and Secretary of the Company since
January 2007. After working as a private investor from January 2004 until
January 2005, he was Senior Vice President and General Counsel of
Federal-Mogul Corporation from February 2005 until December 2006.
From February 2003 until December 2003, he was Executive Vice President, General
Counsel, Corporate Secretary and Chief Compliance Officer and from May 2000
until January 2003 he was Vice President , General Counsel (and Secretary since
January 2001) of Roadway Corporation.
Mr. Hensel has
been Vice President of the Company since July 2002 and Treasurer since December
2004. He was Vice President, Business Development of the Company from July 2002
until December 2004. He was Vice President, Finance of BorgWarner Morse TEC Inc.
from July 1999 to June 2002.
Dr. Matthes has
been Vice President of the Company and President and General Manager of
BorgWarner Transmission Systems Inc. (“Transmission Systems”) since July 2005.
He was General Manager, Operations Europe for Transmission Systems from August
2004 to July 2005. He was Vice President — Operations Europe for
Transmission Systems from January 2003 to August 2004. He was Managing Director
for Transmission Systems Europe from December 2002 to January 2003. He was
General Manager, DualTronicTM from
November 2000 to July 2005.
Ms. Niekamp has
been Vice President of the Company and President and General Manager of
TorqTransfer Systems since July 2004. She was Senior Vice President and Chief
Financial Officer of Mead Westvaco Corporation ("Mead") from April 2003
until March 2004. She was Senior Vice President, Strategy & Specialty
Operations of Mead from February 2002 until April 2003. She was President
and General Manager of the Mead Specialty Paper Division from July 1998 until
January 2002.
Mr. Obermayer
has been Vice President of the Company since December 1999 and Controller since
December 2004. He was Vice President and Treasurer of the Company from December
1999 until December 2004.
Mr. Weber has
been Vice President of the Company since July 2002. He has been President and
General Manager of BorgWarner Morse TEC Inc. (“Morse TEC”) since August 2005 and
BorgWarner Thermal Systems Inc. since January 2003. He was President and General
Manager of BorgWarner Emissions Systems Inc. from July 2002 until July 2005. He
was Vice President, Passenger Car Operations, BorgWarner Turbo Systems Inc. from
January 1999 to June 2002.
Mr. Wood has
been Vice President of the Company since January 2001 and President of
BorgWarner Turbo Systems Inc. and BorgWarner Emissions Systems Inc. since August
2005. He was President and General Manager of Morse TEC from January 2001 until
July 2005.
Our
industry is cyclical and our results of operations will be adversely affected by
industry downturns.
Automotive and
truck production and sales are cyclical and sensitive to general economic
conditions and other factors. Significant reduction in automotive or truck
production would have a material adverse effect on our sales to original
equipment manufacturers and our financial position, operating results and cash
flows.
We
are dependent on sport-utility vehicle and light-truck market segments and are
affected by decreasing demand in those segments.
Some of our
products, in particular four-wheel drive transfer cases, are currently used in
four-wheel drive systems primarily for sport-utility vehicles and
light-trucks. Any significant reduction in production in this market
segment or loss of business in this market segment could have a material adverse
effect on our sales to original equipment manufacturers and our financial
position, operating results and cash flows.
We
face strong competition.
We
compete worldwide with a number of other manufacturers and distributors that
produce and sell products similar to ours. Price, quality and technological
innovation are the primary elements of competition. Our competitors include
vertically integrated units of our major original equipment manufacturer
customers, as well as a large number of independent domestic and international
suppliers. We are not as large as a number of these companies and do not have as
many financial or other resources. The competitive environment has changed
dramatically over the past few years as our traditional U.S. original equipment
manufacturer customers, faced with intense international competition, have
expanded their worldwide sourcing of components. As a result, we have
experienced competition from suppliers in other parts of the world that enjoy
economic advantages, such as lower labor costs, lower health care costs and, in
some cases, export or raw materials subsidies. Increased competition could
adversely affect our businesses.
We
are under substantial pressure from original equipment manufacturers to reduce
the prices of our products.
There is
substantial and continuing pressure on original equipment manufacturers to
reduce costs, including costs of products we supply. Although original equipment
manufacturers have indicated that they will continue to rely on outside
suppliers, a number of our major original equipment manufacturer customers
manufacture products for their own uses that directly compete with our products.
These original equipment manufacturers could elect to manufacture such products
for their own uses in place of the products we currently supply. We believe that
our ability to develop proprietary new products and to control our costs will
allow us to remain competitive. However, we cannot assure you that we will be
able to improve or maintain our gross margins on product sales to original
equipment manufacturers or that the recent trend by original equipment
manufacturers towards increased outsourcing will continue.
Annual price
reductions to original equipment manufacturer customers appear to have become a
permanent feature of our business environment. In 2007, the combination of price
reductions to customers and cost increases for material, labor and overhead,
totaled approximately $136 million. To maintain our profit margins, we seek
price reductions from our suppliers, improve production processes to increase
manufacturing efficiency, update product designs to reduce costs and develop new
products, the benefits of which support stable or increased prices. Our ability
to pass through increased raw material costs to our original equipment
manufacturer customers is limited, with cost recovery less than 100% and often
on a delayed basis. We cannot assure you that we will be able to reduce costs in
an amount equal to annual price reductions and increases in raw material
costs.
We
are sensitive to the effects of our major customers’ labor
relations.
All three of our
primary North American customers, Ford, Chrysler and General Motors, have major
union contracts with the United Automobile, Aerospace and Agricultural Implement
Workers of America. Because of domestic original equipment manufacturers’
dependence on a single union, we are affected by labor difficulties and work
stoppages at original equipment manufacturers’ facilities. Similarly, a majority
of our global customers’ operations outside of North America are also
represented by various unions. Any extended work stoppage could have an adverse
effect on our financial position, operating results and cash flows.
Part
of our labor force is unionized.
As
of December 31, 2007, approximately 25% of our U.S. workforce was unionized. Our
two most significant domestic collective bargaining agreements are for our
Muncie, Indiana plant and our Ithaca and Cortland, New
York facilities. The Muncie agreement expires in April
2009. Workers at the New York facilities elected a new union in
December 2007. It is expected that both parties will bargain in good
faith beginning in the first quarter 2008. It is our expectation that
an agreement will be reached though no assurances can be given. The
hourly employees at certain of our international facilities are also unionized.
While we believe that our relations with our employees are satisfactory, a
prolonged dispute with our employees could have an adverse effect on our
financial position, operating results and cash flows.
We
are subject to extensive environmental regulations.
Our operations are
subject to laws governing, among other things, emissions to air, discharges to
waters and the generation, handling, storage, transportation, treatment and
disposal of waste and other materials. We believe that our business, operations
and activities have been and are being operated in compliance in all material
respects with applicable environmental and health and safety laws. However, the
operation of automotive parts manufacturing plants entails risks in these areas,
and we cannot assure you that we will not incur material costs or liabilities as
a result. Furthermore, through various acquisitions over the years, we have
acquired a number of manufacturing facilities, and we cannot assure you that we
will not incur materials costs and liabilities relating to activities that
predate our ownership. In addition, potentially significant expenditures could
be required in order to comply with evolving environmental and health and safety
laws that may be adopted in the future.
We
believe that the overall impact of compliance with regulations and legislation
protecting the environment will not have a material adverse effect on our future
financial position, operating results and cash flows, but we cannot assure you
that this will always be the case. Capital expenditures and expenses in 2007
attributable to compliance with environmental laws were not
material.
We have
contingent liabilities related to environmental, product
warranties, regulatory matters, litigation and other claims.
We
and certain of our 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 at various hazardous
waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act and equivalent state laws. As a result, as of
December 31, 2007, we may be liable for the cost of clean-up and other remedial
activities at 34 of
these sites.
We
work with outside experts to determine a range of potential liability for
environmental sites. The ranges for each individual site are then
aggregated into a loss range for the total accrued liability. Management's
estimate of the loss range for 2007 is between $14.4 million and $25.1
million. We record an accrual at the most probable amount within the range
unless one cannot be determined; in which case we record the accrual at the low
end of the range. Based on information available to us, we have
established an accrual in our financial statements for indicated environmental
liabilities, including our conditional asset retirement obligation under FIN 47,
with a total balance of $15.5 million at December 31, 2007. We currently
expect the substantial portion of this amount to be expended over the next three
to five years.
We
believe that none of these matters, individually or in the aggregate, will have
a material adverse effect on our future financial position or operating results,
either because estimates of the maximum potential liability at a site are not
large or because liability will be shared with other potentially responsible
parties. However, we cannot assure you of the ultimate outcome.
We
provide warranties to our customers for some of our products. Under these
warranties, we may be required to bear costs and expenses for the repair or
replacement of these products. We cannot assure you that costs and expenses
associated with these product warranties will not be material, or that those
costs will not exceed any amounts accrued for such warranties in our financial
statement.
Based upon information available to us, we have
established an accrual in our financial statements for product warranties
of $70.1 million at December 31, 2007.
We are also party to, or have an obligation to
defend a party to, various legal proceedings, including those described in Note
14 to the Notes to the Consolidated Financial Statements in the Company's
Summary Annual Report. Although we believe that none of these matters is likely
to have a material adverse effect on our financial condition or future operating
results, there can be no assurance as to the ultimate outcome of any such matter
or proceeding.
Our
growth strategy may prove unsuccessful.
We have a stated goal of increasing revenues
and operating revenues at a rate greater than global vehicle production by
increasing content per vehicle with innovative new components and through select
acquisitions. We may not meet our goal because of any of the following:
(a) the failure to develop new products which will be purchased by our
customers; (b) technology changes rendering our products obsolete; (c) a
reversal of the trend of supplying systems (which allows us to increase content
per vehicle) instead of components; and (d) the failure to find suitable
acquisition targets or the failure to integrate operations of acquired
businesses quickly and cost effectively.
We
are subject to risks related to our international operations.
We
have manufacturing and technical facilities in many regions and countries,
including North America, Europe, China, India, South Korea, Japan, and Brazil
and sell our products worldwide. For 2007, approximately 66% of our sales were
outside North America. Consequently, our results could be affected by changes in
trade, monetary and fiscal policies, trade restrictions or prohibitions, import
or other charges or taxes, and fluctuations in foreign currency exchange rates,
changing economic conditions, and political instability and disputes. See Note
20 to Consolidated Financial Statements in the Company's Summary Annual
Report.
We
may not realize sales represented by awarded business.
We base our growth projections, in part, on
commitments made by our customers. These commitments generally renew yearly
during a program life cycle. If actual production orders from our customers do
not approximate such commitments, it could adversely affect on our growth and
financial performance.
We
are impacted by the rising cost of providing pension and other post employment
benefits.
The automotive
industry, like other industries, continues to be impacted by the rising cost of
providing pension and other post employment benefits. To partially address this
impact, we announced adjustments to certain retiree medical and pension plans to
be effective January 1, 2009. See Note 11 to the Consolidated
Financial Statements in the Company's Summary Annual
Report.
Certain
defined benefit pension plans we sponsor are currently underfunded.
We sponsor certain defined benefit pension
plans worldwide that are underfunded and will require cash payments.
Additionally, if the performance of the assets in our pension plans does not
meet our expectations, or if other actuarial assumptions are modified, our
required contributions may be higher than we expect. See Note 11 to the
Consolidated Financial Statements in the Company's Summary Annual
Report.
Negative
or unexpected tax consequences could adversely affect our results of
operations.
Adverse changes in the underlying profitability
and financial outlook of our operations in several jurisdictions could lead to
changes in our valuation allowances against deferred tax assets and other tax
accruals that could adversely affect our financial performance.
Additionally, we are subject to tax audits by
governmental authorities in the U.S. and numerous non-U.S.
jurisdictions. Because the results of tax audits are inherently
uncertain, negative or unexpected results from one or more such tax audits could
adversely affect our financial performance.
We
rely on sales to major customers.
Our worldwide sales
in 2007 to Volkswagen and Ford constituted approximately 15% and 12%,
respectively, of our 2007 consolidated sales. Credit rating agencies rate
one of these customers below investment grade. No other single customer
accounted for more than 10% of our consolidated sales in 2007. The loss of
a major customer could adversely affect our financial performance.
Economic
distress of suppliers could result in disruption of our operations and have a
material effect on our business.
Some automotive parts
suppliers continue to experience cost pressures and the effects of industry
overcapacity. These factors have increased pressure on the industry's
supply base, as suppliers cope with higher commodity costs, lower production
volumes and other challenges. The Company receives certain of its raw
materials from sole suppliers or a limited number of suppliers. The
inability of a supplier to fulfill supply requirements of the Company could
adversely affect our future financial performance.
Increase
in the cost of raw materials could harm our business.
We use various raw materials in our business
such as nickel, aluminum, magnesium, copper, plastic resins, molybdenum and
others. The prices for these raw materials fluctuate depending on
market conditions. In recent years, we have experienced increases in
freight charges and energy costs as well. Substantial changes in
these prices affect our operating costs, and to the extent they cannot be
recouped through price increases to our customers, could reduce our
profitability.
The Company has
received no written comments regarding its periodic or current reports from the
staff of the Securities and Exchange Commission that were issued 180 days
or more preceding the end of its 2007 fiscal year and that remain
unresolved.
As of
December 31, 2007, the Company had 64 manufacturing, assembly, and
technical locations worldwide. In addition to its 15
U.S. manufacturing locations, the Company has 10 locations in Germany, five
locations in each of India and Korea, three locations in each of the United
Kingdom, France and China, two locations in each of Japan, Mexico, Hungary,
and Italy, and one location in each of Brazil, Canada, Ireland, Monaco, Spain,
and Taiwan. The Company also has several sales offices, warehouses and technical
centers. The Company’s worldwide headquarters are located in a leased facility
in Auburn Hills, Michigan. In 2002, the Company completed construction of the
BorgWarner Powertrain Technical Center (the “PTC”) in Auburn Hills, Michigan,
which serves as a primary research and development facility and contains many of
the administrative personnel for the Engine and Drivetrain segments. There are
approximately 500 employees located at the PTC. In general, the Company believes
its facilities to be suitable and adequate to meet its current and reasonably
anticipated needs. The majority of the locations are operating at normal levels
based on capacity.
The following is
additional information concerning the principal manufacturing, assembly, and
technical facilities operated by the Company, its subsidiaries, and
affiliates.(1)
ENGINE
|
|
|
|
|
Americas:
|
|
Europe:
|
|
Asia:
|
Asheville, North Carolina
|
|
Arcore, Italy
|
|
Aoyama, Japan
|
Auburn Hills, Michigan
|
|
Biassano,
Italy (2)
|
|
Changwon, South Korea (2)
|
Cadillac, Michigan
|
|
Bradford,
England
|
|
Chennai, India
|
Campinas, Brazil
|
|
Bretten, Germany
|
|
Chennai, India
|
Civac-Juitepec, Mexico (2)
|
|
Chazelles, France
|
|
Chungju-City, South Korea
|
Cortland, New York
|
|
Diss,
England
|
|
Kakkalur, India
|
Dixon, Illinois
|
|
Kandel, Germany (2)
|
|
Nabari
City, Japan
|
Fletcher, North Carolina
|
|
Kirchheimbolanden, Germany
|
|
Ningbo, China
|
Guadalajara, Mexico
|
|
La
Ferte Mace, France
|
|
Ningbo, China
|
Ithaca, New York
|
|
Ludwigsburg, Germany
|
|
Pune,
India
|
Marshall, Michigan
|
|
Markdorf, Germany
|
|
Pyongtaek, South Korea (2)
|
Sallisaw, Oklahoma
|
|
Muggendorf,
Germany
|
|
Shihung-City, South Korea
|
Simcoe, Ontario, Canada
|
|
Neuhaus, Germany
|
|
Tainan
Shien, Taiwan
|
|
|
Oroszlany, Hungary
|
|
|
|
|
Tiszakecske, Hungary
|
|
|
|
|
Tralee, Ireland
|
|
|
|
|
Vitoria, Spain
|
|
|
DRIVETRAIN
|
|
|
|
|
Americas:
|
|
Europe:
|
|
Asia:
|
Auburn Hills, Michigan
|
|
Arnstadt, Germany
|
|
Beijing, China
|
Bellwood, Illinois
|
|
Heidelberg, Germany
|
|
Eumsung, South Korea
|
Frankfort, Illinois
|
|
Ketsch, Germany
|
|
Fukuroi City, Japan
|
Livonia, Michigan
|
|
Margam, Wales
|
|
Ningbo, China
|
Longview, Texas
|
|
Principality of Monaco
|
|
Ochang, South Korea (2)
|
Muncie, Indiana (3)
|
|
Tulle,
France
|
|
Pune,
India
|
Seneca, South Carolina
|
|
|
|
Shanghai, China
|
Water
Valley, Mississippi
|
|
|
|
Sirsi,
India
|
|
|
(1)
|
The table
excludes joint ventures owned less than 50% and administrative offices in
Auburn Hills, Michigan USA and Shanghai, China.
|
|
|
(2)
|
Indicates a
leased facility.
|
|
|
(3)
|
Announced
closure plans for 2009.
|
Item
3. Legal Proceedings
The Company is
subject to a number of claims and judicial and administrative proceedings (some
of which involve substantial amounts) arising out of the Company’s business or
relating to matters for which the Company may have a contractual indemnity
obligation. See Note 14 to the Consolidated Financial Statements in the
Company’s Summary Annual Report for a discussion of environmental, asbestos and
other litigation, which is incorporated herein by reference.
A declaratory
judgment action was filed by a subsidiary of the Company, BorgWarner Diversified
Transmission Products Inc. (“DTP”), in January 2006 in the United Stated
District Court, Southern District of Indiana, Indianapolis Division, against the
United Automobile, Aerospace, and Agricultural Implements Workers of America,
Local No. 287 and Gerald Poor, individually and as the representative of a
defendant class. DTP is seeking the Court’s affirmation that DTP did not violate
the Labor-Management Relations Act or the Employee Retirement Income Security
Act by amending certain retirees’ medical plans, effective March 12, 2006.
DTP believes that it is within its rights to amend the plan and that it will be
successful on the merits of the lawsuit, although there can be no guarantee of
success in any litigation.
There were no matters
submitted to the Company’s security holders during the fourth quarter of
2007.
The Company’s Common
Stock is listed for trading on the New York Stock Exchange under the symbol BWA.
As of February 11, 2008, there were 2,546 holders of record of Common
Stock.
The Company has
increased its dividend during each of the last four years. Cash
dividends declared and paid per share, adjusted for stock splits in 2004 and
2007, were as follows:
|
2007
|
2006
|
2005
|
2004
|
2003
|
Dividend
Amount
|
$0.34
|
$0.32
|
$0.28
|
$0.25
|
$0.18
|
While the Company
currently expects that comparable quarterly cash dividends will continue to be
paid in the future, the dividend policy is subject to review and change at the
discretion of the Board of Directors.
High and low sales
prices* (as reported on the New York Stock Exchange composite tape) for the
Common Stock for each quarter in 2006 and 2007 were:
Quarter
Ended
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
March 31, 2006
|
|
$
|
30.89
|
|
|
$
|
26.61
|
|
June 30, 2006
|
|
$
|
33.74
|
|
|
$
|
29.24
|
|
September 30, 2006
|
|
$
|
32.68
|
|
|
$
|
25.23
|
|
December 31, 2006
|
|
$
|
30.79
|
|
|
$
|
27.92
|
|
March
31, 2007
|
|
$
|
39.31
|
|
|
$
|
29.02
|
|
June
30, 2007
|
|
$
|
43.43
|
|
|
$
|
36.63
|
|
September 30,
2007
|
|
$
|
48.08
|
|
|
$
|
37.73
|
|
December 31,
2007
|
|
$
|
53.00
|
|
|
$
|
46.11
|
|
*All amounts have
been restated, per the 2-for-1 stock split that was effected through a stock
dividend on December 17, 2007.
Repurchases
of Equity Securities
The Company’s Board of Directors previously
authorized the purchase of up to 4.8 million shares (adjusted for the company’s
2007 two-for-one stock split) of the Company’s common stock. As of
December 31, 2007, the Company has repurchased 3,958,320 shares.
All shares purchased under this authorization
have been and will continue to be repurchased in the open market at prevailing
prices and at times the amounts to be determined by management as market
conditions and the Company’s capital position warrant. The Company
may use Rule 10b5-1 plans to facilitate share
repurchases. Repurchased shares will be deemed treasury shares and
may subsequently be reissued for general corporate purposes.
The following table provides information about
Company purchases of its equity securities that are registered pursuant to
Section 12 of the Exchange Act during the quarter ended December 31, 2007, at a
total cost of $9.2 million:
ISSUER
PURCHASES OF EQUITY SECURITIES
Period
|
|
Total Number
of
Shares
Purchased
|
|
Average Price
Paid
per
Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans
or Programs
|
|
Maximum Number
of Shares
that
May Yet Be
Purchased Under
the
Plans or Programs
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
Month Ended
October 31, 2007
|
|
80,000
|
|
$
|
48.04
|
|
80,000
|
|
$
|
954,280
|
Month Ended
November 30, 2007
|
|
112,600
|
|
|
47.93
|
|
112,600
|
|
|
841,680
|
Month Ended
December 31, 2007
|
|
-
|
|
|
-
|
|
-
|
|
|
841,680
|
Total for the
quarter
|
|
192,600
|
|
$
|
47.98
|
|
192,600
|
|
$
|
841,680
|
Note: all purchases
were made on the open market.
Equity
Compensation Plan Information
As
of December 31, 2007, the number of stock options outstanding under our equity
compensation plans, the weighted average exercise price of outstanding options,
and the number of securities remaining available for issuance were as
follows:
|
|
|
|
|
|
|
|
Number
of Securities
|
|
|
|
|
|
|
|
|
|
Remaining
Available
|
|
|
|
Number
of Securities
|
|
|
|
|
|
for
Future Issuance
|
|
|
|
to
be Issued Upon
|
|
|
Weighted-Average
|
|
|
Under
Equity
|
|
|
|
Exercise
of
|
|
|
Exercise
Price of
|
|
|
Compensation
Plans
|
|
|
|
Outstanding
Options,
|
|
|
Outstanding
Options,
|
|
|
(excluding
securities
|
|
Plan
Category
|
|
Warrants and
Rights
|
|
|
Warrants and
Rights
|
|
|
Reflected in
column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security
holders
|
|
|
6,330,612
|
|
|
$
|
27.75
|
|
|
|
2,786,978
|
|
Equity compensation plans not approved by security
holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,330,612
|
|
|
$
|
27.75
|
|
|
|
2,786,978
|
|
See Selected
Financial Data for the five years ended December 31, 2007 in Note 20 to the
Consolidated Financial Statements in the Company’s Summary Report. See the
material incorporated herein by reference in response to Item 7 of this
report for a discussion of the factors that materially affect the comparability
of the information contained in such data.
The Management’s
Discussion and Analysis of Financial Condition and Results of Operations pages 1
to 64 of the Company’s Summary Annual Report to Stockholders is incorporated
herein by reference and made a part of this report.
Information with
respect to interest rate risk and foreign currency exchange risk is contained in
Note 10 to the Consolidated Financial Statements in the Company’s Summary
Annual Report and is incorporated herein by reference. Information with respect
to the levels of indebtedness subject to interest rate fluctuation is contained
in Note 9 to the Consolidated Financial Statements in the Company’s Summary
Annual Report and is incorporated herein by reference. Information with respect
to the Company’s level of business outside the United States which is subject to
foreign currency exchange rate market risk is contained in Note 20 to the
Consolidated Financial Statements under the caption “Geographic Information” in
the Company’s Summary Annual Report and is incorporated herein by
reference.
The Consolidated
Financial Statements (including the notes thereto, except as noted below) of the
Company and the Independent Registered Public Accounting Firm’s Report as set
forth in the Company’s Summary Annual Report are incorporated herein by
reference and made a part of this report. For a list of financial statements
filed as part of this report, see Item 15, “Exhibits and Financial
Statement Schedules” beginning on page 25.
Not
applicable.
Disclosure
Controls and Procedures
The Company has
adopted and maintains disclosure controls and procedures that are designed
to provide reasonable assurance that information required to be
disclosed in the reports filed under the Exchange Act, such as this
Form 10-K, is collected, recorded, processed, summarized and reported
within the time periods specified in the rules of the Securities and
Exchange Commission. The Company’s disclosure controls and procedures are also
designed to ensure that such information is accumulated and communicated to
management to allow timely decisions regarding required disclosure. As required
under Exchange Act Rule 13a-15, the Company’s management, including the
Chief Executive Officer and Chief Financial Officer, has conducted an evaluation
of the effectiveness of disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the disclosure controls and
procedures are effective.
Management’s
Report on Internal Control Over Financial Reporting
The Company’s
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Exchange Act
Rule 13a-15(f). The Company's internal control over financial reporting is
designed to provide reasonable assurance to the Company's management and Board
of Directors regarding the preparation and fair presentation of published
financial statements. Management conducted an assessment of the Company’s
internal control over financial reporting based on the framework and criteria
established by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control — Integrated Framework. Based on the
assessment, management concluded that, as of December 31, 2007, the
Company’s internal control over financial reporting is effective based on those
criteria. The Company's management report on internal control over
financial reporting is set forth on pages 25 - 26 of the Company's Summary
Annual Report and is incorporated herein by this reference.
The Company’s
management, including its Chief Executive Officer and the Chief Financial
Officer, does not expect that the Company’s disclosure controls and procedures
and its internal control processes will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be
considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of error or fraud, if any, within the Company have been detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
may not be detected. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
Deloitte and Touche LLP, an independent
registered public accounting firm, has audited the Company’s consolidated
financial statements and the effectiveness of internal controls over financial
reporting as of December 31, 2007 as stated in their report below.
Changes
in Internal Control
There have been
no changes in internal controls over the financial reporting that occurred
during the most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.
Attestation Report of the Registered Public
Accounting Firm
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of BorgWarner Inc.:
Auburn Hills, Michigan
We have audited the
internal control over financial reporting of BorgWarner Inc. and Consolidated
Subsidiaries (the “Company”) as of December 31, 2007, based on criteria
established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our
audit.
We conducted our
audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal
control over financial reporting is a process designed by, or under the
supervision of, the company’s principal executive and principal financial
officers, or persons performing similar functions, and effected by the company’s
board of directors, management, and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
Because of the
inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely
basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that
the controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2007, based on the criteria
established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited,
in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements as of and for the
year ended December 31, 2007 of the Company and our report dated
February 14, 2008 expressed an unqualified opinion on those financial
statements and included an explanatory paragraph regarding the Company's changes
in its methods of accounting in 2007 for income taxes as a result of adopting
FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes.
/s/
DELOITTE & TOUCHE LLP
Detroit,
Michigan
February 14,
2008
Not
applicable.
|
|
Item 10.
|
Directors,
Executive Officers and Corporate
Governance
|
The following
information from the Company’s Proxy Statement is incorporated herein by
reference and made a part of this report: “Election of Directors”; “Information
on Nominees for Directors and Continuing Directors”; “Board of Directors and Its
Committees”; “Section 16(a) Beneficial Ownership Reporting Compliance”; and
“Code of Ethics”. Information with respect to executive officers of the Company
is set forth in Part I of this report.
|
|
Item 11.
|
Executive
Compensation
|
Information with
respect to compensation of executive officers and directors of the Company under
the captions “Director Compensation”, “Executive Compensation,” “Compensation
Discussion and Analysis,” “Stock Options,” “Long-Term Incentives,” and “Change
of Control Employment Agreements” in the Company’s Proxy Statement is
incorporated herein by reference and made a part of this report.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
Information under the
captions “Security Ownership of Certain Beneficial Owners and Management” and
“Equity Compensation Plan Information” in the Company’s Proxy Statement is
incorporated herein by reference and made a part of this report.
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
None.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Information with
respect to the fees and services of our principal accountant under the caption
“Independent Registered Public Accounting Firm” in the Company’s Proxy Statement
is incorporated herein by reference and made a part of this report.
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
|
|
|
1. The
following consolidated financial statements of the Company in the
Company’s Summary Annual Report are incorporated herein by
reference:
|
Independent Registered Public Accounting Firm’s Report
|
21
|
|
Consolidated Statements of Operations — years ended
December 31, 2007,
2006 and 2005
|
22
|
|
Consolidated Balance Sheets — December 31, 2007 and
2006
|
23
|
|
Consolidated Statements of Cash Flows — years ended
December 31, 2007,
2006 and 2005
|
24
|
|
Consolidated Statements of Stockholders’ Equity and
Comprehensive Income —
years ended December 31, 2007, 2006 and 2005
|
25
|
|
Notes to Consolidated Financial Statements
|
26
|
|
|
|
|
2.
Financial Statement Schedules. All other financial statement schedules are
omitted because they are not applicable, or the required information is
shown in the financial statements or notes thereto.
|
|
|
|
Financial
statements of 50 percent or less-owned companies accounted for under
the equity method of accounting, have been omitted because the
proportionate share of their profit before income taxes and total assets
is less than 20 percent of consolidated amounts and investments in
such companies are less than 20 percent of our total consolidated
assets for all periods presented.
|
|
|
|
3. The
exhibits filed in response to Item 601 of Regulation S-K are
listed in the Exhibit Index on
page A-1.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
|
By:
/s/ Timothy M. Manganello
|
|
Timothy
M. Manganello
|
|
Chairman
and Chief Executive Officer
|
Date:
February 14, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 14th day of
February, 2008.
|
|
|
|
|
Signature
|
|
Title
|
|
/s/ Timothy
M. Manganello
Timothy M.
Manganello
|
|
Chairman and
Chief Executive Officer
(Principal
Executive Officer)
|
|
/s/ Robin J.
Adams
Robin J.
Adams
|
|
Executive
Vice President, Chief Financial Officer and Chief Administrative Officer
& Director
(Principal
Financial Officer)
|
|
/s/ Jeffrey
L. Obermayer
Jeffrey L.
Obermayer
|
|
Vice
President and Controller
(Principal
Accounting Officer)
|
|
/s/ Phyllis
O. Bonanno
Phyllis O.
Bonanno
|
|
Director
|
|
/s/ David T.
Brown
David T.
Brown
|
|
Director
|
|
/s/ Jere A.
Drummond
Jere A.
Drummond
|
|
Director
|
|
/s/ Paul E.
Glaske
Paul E.
Glaske
|
|
Director
|
|
/s/ Alexis P.
Michas
Alexis P.
Michas
|
|
Director
|
|
/s/ Ernest J.
Novak, Jr.
Ernest J.
Novak, Jr.
|
|
Director
|
|
|
|
/s/ Richard
O. Schaum
Richard O.
Schaum
|
|
Director
|
|
|
|
/s/ Thomas T.
Stallkamp
Thomas T.
Stallkamp
|
|
Director
|
EXHIBIT
INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
|
*3
|
.1
|
|
Amendment to
Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit No. 3.1 of the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004).
|
|
*3
|
.2
|
|
Amended and
Restated By-laws of the Company (incorporated by reference to Exhibit No.
3.1 of the Company’s Report on Form 8-K filed November 14,
2007).
|
|
*3
|
.3
|
|
Certificate
of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (incorporated by reference to
Exhibit 3.3 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 1999).
|
|
*3
|
.4
|
|
Certificate
of Ownership and Merger Merging BorgWarner Inc. into Borg-Warner
Automotive, Inc. (incorporated by reference to Exhibit 99.1 of the
Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000).
|
|
*4
|
.1
|
|
Indenture,
dated as of February 15, 1999, between Borg-Warner Automotive, Inc.
and The First National Bank of Chicago (incorporated by reference to
Exhibit No. 4.1 to Amendment No. 1 to Registration Statement No.
333-66879).
|
|
*4
|
.2
|
|
Indenture,
dated as of September 23, 1999, between Borg-Warner Automotive, Inc.
and Chase Manhattan Trust Company, National Association, as trustee,
(incorporated by reference to Exhibit No. 4.1 to the Company's Report
on Form 8-K filed October 6, 1999).
|
|
*4
|
.3
|
|
Rights
Agreement, dated as of July 22, 1998, between Borg-Warner Automotive,
Inc. and ChaseMellon Shareholder Services, L.L.C. (incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form 8-A filed on July 24, 1998).
|
|
*4
|
.4
|
|
First
Supplemental Indenture by and between the registrant and The Bank of New
York Trust Company, N.A., as the indenture trustee (incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K filed
on October 30, 2006).
|
|
*10
|
.1
|
|
Credit
Agreement dated as of July 22, 2004 among BorgWarner Inc., as
Borrower, the Lenders Party Hereto, JPMorgan Chase Bank, Administrative
Agent, Bank of America, N.A. as Syndication Agent and Calyon New York
Branch (incorporated by reference to Exhibit No. 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2004).
|
|
†*10
|
.2
|
|
BorgWarner
Inc. 2004 Deferred Compensation Plan (incorporated by reference to Exhibit
No. 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004).
|
|
*10
|
.3
|
|
Form of
BorgWarner Inc. 2004 Stock Incentive Plan, Non-Qualified Stock Option
Award Agreement (incorporated by reference to Exhibit No. 99.1 to the
Current Report on Form 8-K dated July 27,
2005).
|
|
†*10
|
.4
|
|
BorgWarner
Inc. Amended and Restated 2004 Stock Incentive Plan (incorporated by
reference to Appendix B of the Company’s Proxy Statement dated
March 23, 2006 for its 2006 Annual Meeting of
Stockholders).
|
|
*10
|
.5
|
|
Distribution
and Indemnity Agreement dated January 27, 1993 between Borg-Warner
Automotive, Inc. and Borg-Warner Security Corporation (incorporated by
reference to Exhibit No. 10.2 to Registration Statement No.
33-64934).
|
|
*10
|
.6
|
|
Tax Sharing
Agreement dated January 27, 1993 between Borg-Warner Automotive, Inc.
and Borg-Warner Security Corporation (incorporated by reference to Exhibit
No. 10.3 to Registration Statement
No. 33-64934).
|
|
*10
|
.7
|
|
Receivables
Transfer Agreement dated as of January 28, 1994 among BWA Receivables
Corporation, ABN AMRO Bank N.V. as Agent and the Program LOC Provider and
Windmill Funding Corporation (incorporated by reference to Exhibit
No. 10.12 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 1993).
|
|
*10 |
.8 |
|
Second
Amended and Restated Receivables Loan Agreement dated as of
December 6, 2004 Among BWA Receivables Corporation, as Borrower,
BorgWarner Inc., as Collection Agent, ABN AMRO Bank N.V., as Agent, The
Banks from Time to Time Party Hereto, and Windmill Funding Corporation
(incorporated by reference to Exhibit 10.10 of the Company's Annual Report
on Form 10-K for the year ended December 31,
2005).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
|
*10
|
.9
|
|
First
Amendment dated as of April 29, 2005 to Second Amended and Restated
Receivables Loan Agreement (incorporated by reference to Exhibit 10.11 of
the Company's Annual Report on Form 10-K for the year ended December 31,
2005).
|
|
*10.
|
10
|
|
Second
Amendment Dated as of April 28, 2006 to Second Amended and
Restated Receivables Loan Agreement (incorporated by reference to
Exhibit No. 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006).
|
|
†*10
|
.11
|
|
Borg-Warner
Automotive, Inc. Management Incentive Bonus Plan dated January 1,
1994 (incorporated by reference to Exhibit 10.18 the Company’s Annual
Report on Form 10-K for the year ended December 31,
1993).
|
|
†*10
|
.12
|
|
Borg-Warner
Automotive, Inc. Retirement Savings Excess Benefit Plan dated
January 27, 1993 (incorporated by reference to Exhibit No. 10.20
of the Company’s Annual Report on Form 10-K for the year ended
December 31, 1993).
|
|
†*10
|
.13
|
|
Borg-Warner
Automotive, Inc. Retirement Savings Plan dated January 27, 1993 as
further amended and restated effective as of April 1, 1994
(incorporated by reference to Exhibit 10.18 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
1995).
|
|
†*10
|
.14
|
|
BorgWarner Inc.
Board of Directors Deferred Compensation Plan dated April 18, 1995
and further amended effective January 1, 2007 (incorporated by reference
to Exhibit No. 10.23 of the Company’s Annual Report on Form 10-K
for the year ended December 31, 2002).
|
|
†*10
|
.15
|
|
Form of
Change of Control Employment Agreement for Executive Officers
(incorporated by reference to Exhibit No. 10.1 to the Company’s
Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1997).
|
|
*10
|
.16
|
|
Assignment of
Trademarks and License Agreement (incorporated by reference to Exhibit
No. 10.0 of the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994).
|
|
*10
|
.17
|
|
Amendment to
Assignment of Trademarks and License Agreement (incorporated by reference
to Exhibit No. 10.23 of the Company’s Form 10-K for the year
ended December 31, 1998).
|
|
†*10
|
.18
|
|
Borg-Warner
Automotive, Inc. Executive Stock Performance Plan, Revised and Re-approved
February 2, 2000 (incorporated by reference to Appendix B of the
Company’s Proxy Statement dated March 22, 2000).
|
|
†*10
|
.19
|
|
BorgWarner
Inc. 2005 Executive Incentive Plan (incorporated by reference to
Appendix B of the Company’s Proxy Statement dated March 24,
2005).
|
|
†*10
|
.20
|
|
Form of
BorgWarner Inc. 2004 Stock Incentive Plan Performance Share Award
Agreement (incorporated by reference to Exhibit 10.1 of Current
Report on Form 8-K dated February 7, 2005).
|
|
†*10
|
.21
|
|
Form of
BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan Restricted
Stock Agreement for Employees (incorporated by reference to
Exhibit 10.1 of Current Report on Form 8-K dated
February 7, 2008).
|
|
13
|
.1
|
|
Summary
Annual Report to Stockholders for the year ended December 31, 2007
with manually signed Independent Registered Public Accounting Firm’s
Report. (The Annual Report, except for those portions which are expressly
incorporated by reference in the Form 10-K, is furnished for the
information of the Commission and is not deemed filed as part of the
Form 10-K).
|
|
21
|
.1
|
|
Subsidiaries
of the Company.
|
|
23
|
.1
|
|
Independent
Registered Public Accounting Firm’s Consent.
|
|
31
|
.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification by Chief Executive Officer.
|
|
31 |
.2 |
|
Rule 13a-14(a)/15d-14(a)
Certification by Chief Financial Officer.
|
|
32 |
.1 |
|
Section 1350
Certifications.
|
*
Incorporated by reference.
† Indicates
a management contract or compensatory plan or arrangement required to be
filed pursuant to
Item 14(c).
|