BORGWARNER INC

Previous wording

The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions. During the three months ended March 31, 2026 and 2025, the Company’s revenue from eProducts, which include all products utilized on or for electric vehicles (“EVs”) plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs, was approximately $597 million and $637 million, respectively, or 17% and 18% of the Company’s total revenue, respectively.

Current wording

The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions. During the three months ended June 30, 2026 and 2025, the Company’s revenue from eProducts, which include all products utilized on or for electric vehicles (“EVs”) plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs, was approximately $663 million and $658 million, respectively, or 18% of the Company’s total revenue. During the six months ended June 30, 2026 and 2025, the Company’s eProduct revenue was approximately $1,260 million and $1,295 million, respectively, or 18% and of its total revenue.

Previous wording

On September 19, 2024, the Company commenced a lawsuit against PHINIA, Inc. (“PHINIA”), seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA received or expected to receive from governmental agencies as well as damages and interest. These refunds consisted of VAT paid by the Company in periods prior to or directly related to the spin-off (“Spin-Off”) that established PHINIA as an independent company. PHINIA responded to the lawsuit and also asserted counterclaims against the Company. On October 15, 2025, the Company entered into a settlement agreement (the “Settlement Agreement”) with PHINIA, pursuant to which PHINIA agreed to pay the Company $78 million, resolving the lawsuit and certain other matters relating to the Spin-Off. In connection with the Settlement Agreement, the Company and PHINIA also entered into an amended and restated tax matters agreement that, among other things, limits the Company’s responsibility to certain defined tax obligations. During the year ended December 31, 2025, the Company recorded a net charge of $40 million, for the reduction of VAT-related receivables, the elimination of certain Company liabilities under the amended and restated tax matters agreement and related legal fees. As of March 31, 2026, after giving effect to the Settlement Agreement and the $52 million received in total, the Company had assets related to these VAT refunds of approximately $26 million in Receivables, net in the Company’s Condensed Consolidated Balance Sheet, which is due no later than December 1, 2026.Refer toPart 1, Item 1 of this report for more information.

Current wording

On September 19, 2024, the Company commenced a lawsuit against PHINIA, Inc. (“PHINIA”), seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA received or expected to receive from governmental agencies as well as damages and interest. On October 15, 2025, the Company entered into a settlement agreement with PHINIA, pursuant to which PHINIA agreed to pay the Company $78 million. As of June 30, 2026, the Company had assets related to these VAT refunds of approximately $23 million in Receivables, net in the Company’s Condensed Consolidated Balance Sheet, which is due no later than December 1, 2026. Refer to Part 1, Item 1 of this report for more information.

Previous wording

In February 2025, the Company made the decision to exit its charging business within the reportable segment formerly called Battery & Charging Systems. Production operations ceased during the second quarter of 2025. This decision was made following the Company’s continuing evaluation of its product portfolio and future investments. This action was expected to create a more focused portfolio and eliminate approximately $30 million of annualized adjusted operating losses by 2026. In the first quarter of 2026, as a result of the aforementioned disposition, this reportable segment was renamed Battery Energy Systems. The name change reflects the segment’s revised focus after the divestiture. The change did not impact the composition of the segment or require recasting of prior period segment results. Prior periods continue to be presented as previously reported. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Current wording

In February 2025, the Company made the decision to exit its charging business within the reportable segment formerly called Battery & Charging Systems. Production operations ceased during the second quarter of 2025. This decision was made following the Company’s continuing evaluation of its product portfolio and future investments. This action was expected to create a more focused portfolio and eliminate approximately $30 million of annualized adjusted operating losses by the end of 2026. In the first quarter of 2026, as a result of the aforementioned disposition, this reportable segment was renamed Battery Energy Systems. The name change reflects the segment’s revised focus after the divestiture. The change did not impact the composition of the segment or require recasting of prior period segment results. Prior periods continue to be presented as previously reported. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Previous wording

In February 2025, the Company also made the decision to consolidate its North American battery systems business, which is expected to align the business’ cost structure to current market dynamics. This action is expected to result in annual cost savings of approximately $20 million by 2026.

Current wording

In February 2025, the Company also made the decision to consolidate its North American battery systems business, which is expected to align the business’ cost structure to current market dynamics. This action was expected to result in annual cost savings of approximately $20 million by the end of 2026.

Previous wording

Acquisitions have been an integral component of the Company’s growth and value creation strategy. Refer to Note 3, “Acquisitions and Dispositions,” to the Consolidated Financial Statements in Part 1, Item 1 of this report for more information, including a summary of recent acquisitions.

Current wording

Acquisitions have been an integral component of the Company’s growth and value creation strategy. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information, including a summary of recent acquisitions.

Previous wording

Economic Conditions. The Company’s financial performance depends on conditions in the global automotive industry. Automotive and truck production is cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit and consumer spending and preferences. Government policies, such as the imposition of, termination or invalidation of or other changes in tariffs (including retaliatory tariffs), or the commencement or termination of consumer tax incentives, such as EV tax credits and programs to invest in infrastructure, including EV charging stations, may affect consumer preferences. Economic declines or impacts of tariffs that result in a material reduction in automotive or truck production would have an adverse effect on the Company’s sales. The weighted average market production, as estimated by the Company for the three months ended March 31, 2026, was down approximately 3% from the three months ended March 31, 2025. Weighted average market production reflects light and commercial vehicle production as reported by S&P Global, weighted for the Company’s geographic exposure, as estimated by the Company.

Current wording

Economic Conditions. The Company’s financial performance depends on conditions in the global automotive industry. Automotive and truck production is cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit and consumer spending and preferences. Government policies, such as the imposition of, termination or invalidation of or other changes in tariffs (including retaliatory tariffs), or the commencement or termination of consumer tax incentives, such as EV tax credits and programs to invest in infrastructure, including EV charging stations, may affect consumer preferences. Economic declines or impacts of tariffs that result in a material reduction in automotive or truck production would have an adverse effect on the Company’s sales. The weighted average market production, as estimated by the Company for the six months ended June 30, 2026, was down approximately 1% from the six months ended June 30, 2025. Weighted average market production reflects light vehicle production as reported by S&P Global, weighted for the Company’s geographic exposure, as estimated by the Company.

Previous wording

Tariff Refund Recovery. The Company is actively pursuing refund recovery of certain tariffs the Company paid that the U.S. government levied under the International Emergency Economic Powers Act and subsequently invalidated by the U.S. Supreme Court on February 20, 2026. The availability, amount and timing of such refunds is uncertain and subject to further developments.

Current wording

Tariff Refund Recovery. The Company continues to actively pursue the refund recovery of certain tariffs paid to the U.S. government, which were levied under the International Emergency Economic Powers Act and subsequently invalidated by the U.S. Supreme Court on February 20, 2026. Following this ruling, the Company has submitted, and expects to continue to submit, tariff recovery claims through the U.S. Customs and Border Protection (“CBP”) portal. While the Company has begun to receive, and may continue to receive, refunds of such tariffs, the ultimate recoverability, timing and amount of any such refund amounts remain uncertain and subject to CBP review and further legal, regulatory and administrative developments. As a result, the Company has not recognized a refund receivable as of June 30, 2026, as there remains significant uncertainty regarding the availability, amount and timing of such refunds. The Company will continue to monitor the refund process for further developments.

Previous wording

The Company expects global industry production to be flat to down modestly year-over-year in 2026. In particular, the Company expects a negative sales impact from declining sales in the Company’s Battery Energy Systems reportable segment. As a result, at the mid-point of its outlook, the Company expects total sales in 2026 to decline year-over-year, excluding the impact of foreign currencies.

Current wording

The Company expects global industry production to be flat to down 3% year-over-year in 2026. In particular, the Company expects a negative sales impact from declining sales in the Company’s Battery Energy Systems reportable segment. As a result, at the mid-point of its outlook, the Company expects total sales in 2026 to decline year-over-year, excluding the impact of foreign currencies.

Previous wording

The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy. There are several trends that are driving the Company’s long-term growth that management expects to continue, including adoption of product offerings for electrified vehicles and increasingly stringent global emissions standards that support demand for the Company’s products that drive vehicle efficiency as well as power generation industrial solutions growth. The Company expects its power generation industrial solutions growth to be approximately $300 million in 2027.

Current wording

The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy. There are several trends that are driving the Company’s long-term growth that management expects to continue, including adoption of product offerings for electrified vehicles and increasingly stringent global emissions standards that support demand for the Company’s products that drive vehicle efficiency as well as power generation industrial solutions growth. The Company expects its power generation industrial solutions sales to be approximately $300 million in 2027.

Previous wording

Net sales for the three months ended March 31, 2026 totaled $3,533 million, an increase of $18 million, or 1%, compared to the three months ended March 31, 2025. The change in net sales for the three months ended March 31, 2026 was primarily driven by the following:

Current wording

Net sales for the three months ended June 30, 2026 totaled $3,648 million, an increase of $10 million, which was relatively flat compared to the three months ended June 30, 2025. The change in net sales for the three months ended June 30, 2026 was primarily driven by the following:

Previous wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $167 million, primarily due to the strengthening of the Euro and Chinese Renminbi, in each case relative to the U.S. Dollar.

Current wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $54 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Previous wording

•Customer recoveries relating to tariffs increased sales by approximately $32 million.

Current wording

•Customer recoveries relating to tariffs increased sales by approximately $11 million.

Previous wording

•Unfavorable volume, mix and net new business decreased sales by approximately $181 million, primarily due a decrease of approximately 3% in the weighted average market production as estimated by the Company and a decrease in the Battery Energy Systems reportable segment.

Current wording

•Unfavorable volume, mix and net new business decreased sales by approximately $55 million, primarily due to a decrease of approximately 1% in the weighted average market production as estimated by the Company and a decrease in the Battery Energy Systems reportable segment.

Previous wording

Cost of sales and cost of sales as a percentage of net sales were $2,856 million and 80.8%, respectively, during the three months ended March 31, 2026, compared to $2,876 million and 81.8%, respectively, during the three months ended March 31, 2025. The change in cost of sales for the three months ended March 31, 2026 was primarily driven by the following:

Current wording

Cost of sales and cost of sales as a percentage of net sales were $2,927 million and 80.2%, respectively, during the three months ended June 30, 2026, compared to $2,998 million and 82.4%, respectively, during the three months ended June 30, 2025. The change in cost of sales for the three months ended June 30, 2026 was primarily driven by the following:

Previous wording

•Purchasing savings and unfavorable volume, mix and net new business, decreased cost of sales by approximately $148 million.

Current wording

•Purchasing savings and unfavorable volume, mix and net new business, decreased cost of sales by approximately $85 million.

Previous wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $138 million, primarily due to the strengthening of the Euro and Chinese Renminbi, in each case relative to the U.S. Dollar.

Current wording

•Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $44 million, primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar.

Previous wording

Gross profit and gross margin were $677 million and 19.2%, respectively, during the three months ended March 31, 2026, compared to $639 million and 18.2%, respectively, during the three months ended March 31, 2025. The increase in gross margin was primarily due to the factors discussed above.

Current wording

Gross profit and gross margin were $721 million and 19.8%, respectively, during the three months ended June 30, 2026, compared to $640 million and 17.6%, respectively, during the three months ended June 30, 2025. The increase in gross margin was primarily due to the factors discussed above.

Previous wording

SG&A for the three months ended March 31, 2026 was $328 million as compared to $315 million for the three months ended March 31, 2025. SG&A as a percentage of net sales was 9.3% and 9.0% for the three months ended March 31, 2026 and 2025, respectively. The change in SG&A was primarily due to fluctuations in foreign currencies, which was primarily due to the strengthening of the Euro and Chinese Renminbi, in each case relative to the U.S. Dollar.

Current wording

SG&A for the three months ended June 30, 2026 was $331 million as compared to $317 million for the three months ended June 30, 2025. SG&A as a percentage of net sales was 9.1% and 8.7% for the three months ended June 30, 2026 and 2025, respectively. The change in SG&A was primarily due to fluctuations in foreign currencies resulting in an unfavorable impact of approximately $17 million, which was partially offset by changes in R&D costs of $6 million.

Previous wording

Nearly all of the restructuring charges are expected to be cash expenditures, funded by cash on hand.

Current wording

Restructuring expense was $21 million and $17 million for the three months ended June 30, 2026 and 2025, respectively, related to employee termination benefits primarily for individually approved restructuring actions. Nearly all of the restructuring charges are expected to be cash expenditures, funded by cash on hand. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Previous wording

Other operating (income) expense, net was $5 million of income and $17 million of expense for the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2025, the Company recorded charges of $19 million related to the exit of its charging business within its Battery Energy Systems reportable segment. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

Current wording

•During the three months ended June 30, 2025, the Company recorded charges of $6 million related to duplicative compensation, a loss of $5 million related to the sale of equipment from a closed facility in North America and charges of $4 million related to the exit of its charging business within its Battery Energy Systems reportable segment, which were not recurring in the three months ended June 30, 2026. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

Previous wording

Equity in affiliates’ earnings, net of tax was $6 million and $10 million for the three months ended March 31, 2026 and 2025, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Current wording

Equity in affiliates’ earnings, net of tax was $10 million and $8 million for the three months ended June 30, 2026 and 2025, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Previous wording

Interest expense, net was $11 million and $12 million for the three months ended March 31, 2026 and 2025, respectively. Interest expense, net was relatively flat for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Current wording

Interest expense, net was $10 million and $12 million for the three months ended June 30, 2026 and 2025, respectively. Interest expense, net was relatively flat for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

Previous wording

Provision for income taxes was $73 million for the three months ended March 31, 2026, resulting in an effective rate of 22%. This is compared to $61 million, or an effective rate of 26%, for the three months ended March 31, 2025. During the three months ended March 31, 2026, the Company’s effective tax rate did not differ materially from the estimated annual effective tax rate. During the three months ended March 31, 2025, the Company recorded a discrete tax expense of $4 million related to net changes to valuation allowances, a discrete tax benefit of $3 million related to the exit of the charging business and a discrete tax expense of $2 million related to various changes in filing positions for prior years.

Current wording

Provision for income taxes was $81 million for the three months ended June 30, 2026, resulting in an effective rate of 22%. This is compared to $52 million, or an effective rate of 18%, for the three months ended June 30, 2025. During the three months ended June 30, 2026, the Company’s effective tax rate was consistent with the Company’s estimated annual effective tax rate. During thethree months ended June 30, 2025, the Company recorded a discrete tax benefit of$6 million related to various changes in filing positions for prior years and a discrete tax benefit of$3 million related to the exit of the charging business.

Previous wording

•Tariff expense increased cost of sales by approximately $27 million.

Current wording

•Tariff expense increased cost of sales by approximately $29 million.

Previous wording

Restructuring expense was $18 million and $31 million for the three months ended March 31, 2026 and 2025, respectively, primarily related to employee termination benefits. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Current wording

Restructuring expense was $39 million and $48 million for the six months ended June 30, 2026 and 2025, respectively, primarily related to employee termination benefits for individually approved restructuring actions. Nearly all of the restructuring charges are expected to be cash expenditures. Refer to Note 5, “Restructuring,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for more information.

Previous wording

Impairment chargeswas $39 million for the three months ended March 31, 2025. The Company recorded impairments of intangible assets, goodwill and fixed assets related to the exit of its charging business within its Battery Energy Systems reportable segment. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information. The Company did not recognize any impairment charge for the three months ended March 31, 2026.

Current wording

Impairment charges were $42 million for the six months ended June 30, 2025. The Company recorded impairments of intangible assets, goodwill and fixed assets related to the planned exit of its charging business and the consolidation of the Company’s North American battery systems business footprint within the Battery Energy Systems reportable segment.

Previous wording

The Company’s earnings per diluted share were $1.16 and $0.72 for the three months ended March 31, 2026 and 2025, respectively. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for each of the periods then ended. The Company believes the following table is useful in highlighting non-comparable items that impacted its earnings per diluted share:

Current wording

The Company’s earnings per diluted share were $1.34 and $1.03 for the three months ended June 30, 2026 and 2025, respectively and $2.50 and $1.75 for the six months ended June 30, 2026 and 2025, respectively. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for each of the periods then ended. The Company believes the following table is useful in highlighting non-comparable items that impacted its earnings per diluted share:

Previous wording

The Turbos & Thermal Technologies segment’s net sales decreased $21 million, or 1%, and Segment Adjusted Operating Income decreased $21 million from the three months ended March 31, 2025. Unfavorable volume, mix and net new business resulted in a decrease in net sales by approximately $115 million due to lower volumes in Europe. This was partially offset by the impact of foreign currencies, which resulted in a year-over-year increase in net sales of approximately $81 million due to a strengthening in the Euro and Chinese Renminbi, in each case relative to the U.S. Dollar and $13 million of customer recoveries relating to tariffs. Segment Adjusted Operating margin was 14.9% for the three months ended March 31, 2026, compared to 16.2% during the three months ended March 31, 2025. The Segment Adjusted Operating margin decreased due to lower sales partially offset by supply chain savings.

Current wording

The Turbos & Thermal Technologies segment’s net sales decreased $39 million, or 3%, and Segment Adjusted Operating Income decreased $2 million from the three months ended June 30, 2025. Unfavorable volume, mix and net new business resulted in a decrease in net sales of approximately $66 million due to lower sales in Europe. This was partially offset by the impact of foreign currencies, which resulted in a year-over-year increase in net sales of approximately $24 million due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar, and $3 million of customer recoveries relating to tariffs. Segment Adjusted Operating margin was 15.6% for the three months ended June 30, 2026, compared to 15.3% during the three months ended June 30, 2025. The Segment Adjusted Operating margin increased due to supply chain savings and other cost actions, partially offset by lower sales.

Previous wording

The Drivetrain & Morse Systems segment’s net sales increased $61 million, or 4%, and Segment Adjusted Operating Income increased $17 million from the three months ended March 31, 2025. Foreign currencies resulted in a year-over-year increase in net sales of approximately $49 million due to the strengthening in the Euro and Chinese Renminbi, in each case relative to the U.S. Dollar. Additionally, customer recoveries relating to tariffs increased net sales by approximately $17 million. This was partially offset by unfavorable volume, mix and net new business of approximately $5 million due to lower volumes in China offset by strong volumes in North America. Segment Adjusted Operating margin was 18.3% for the three months ended March 31, 2026, compared to 17.9% during the three months ended March 31, 2025. The Segment Adjusted Operating margin increased primarily due to manufacturing efficiencies and supply chain savings.

Current wording

The Drivetrain & Morse Systems segment’s net sales increased $26 million, or 2%, and Segment Adjusted Operating Income increased $17 million from the three months ended June 30, 2025. Foreign currencies resulted in a year-over-year increase in net sales of approximately $11 million due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. Favorable volume, mix and net new business increased net sales by approximately $10 million due to strong volumes in North America partially offset by lower volumes in China and broader Asia. Additionally, customer recoveries relating to tariffs increased net sales by approximately $5 million. Segment Adjusted Operating margin was 19.0% for the three months ended June 30, 2026, compared to 18.2% during the three months ended June 30, 2025. The Segment Adjusted Operating margin increased primarily due to manufacturing efficiencies, supply chain savings and lower net tariff expenses.

Previous wording

The Battery Energy Systems segment’s net sales decreased $48 million, or 32%, and Segment Adjusted Operating Loss decreased $20 million from the three months ended March 31, 2025. Unfavorable volume, mix and net new business decreased net sales by approximately $54 million primarily due to lower battery pack volumes.This decrease was partially offset by the impact of foreign currencies, which resulted in a year-over-year increase in net sales of approximately $6 million due to the strengthening in the Euro, relative to the U.S. Dollar. Segment Adjusted Operating margin was (2.0)% for the three months ended March 31, 2026, compared to (14.7)% during the three months ended March 31, 2025. The Segment Adjusted Operating margin increased primarily due to the exit of the charging business and restructuring savings.

Current wording

The Battery Energy Systems segment’s net sales decreased $59 million, or 37%, and Segment Adjusted Operating Loss decreased $10 million from the three months ended June 30, 2025. Unfavorable volume, mix and net new business decreased net sales by approximately $64 million primarily due to lower battery pack sales. This decrease was partially offset by the impact of foreign currencies, which resulted in a year-over-year increase in net sales of approximately $3 million due to a strengthening of the Euro, relative to the U.S. Dollar. Segment Adjusted Operating margin was (2.0)% for the three months ended June 30, 2026, compared to (7.5)% during the three months ended June 30, 2025. The Segment Adjusted Operating margin loss decreased primarily due to the exit of the charging business and restructuring savings.

Previous wording

The PowerDrive Systems segment’s net sales increased $26 million, or 5%, and Segment Adjusted Operating Loss decreased $7 million from the three months ended March 31, 2025. Foreign currencies resulted in a year-over-year increase in net sales of approximately $31 million due to the strengthening in the Euro and Chinese Renminbi, in each case relative to the U.S. Dollar. This was partially offset by unfavorable volume, mix and net new business of approximately $5 million due to lower volumes in China. Segment Adjusted Operating margin was (6.1)% for the three months ended March 31, 2026, compared to (7.7)% during the three months ended March 31, 2025. The Segment Adjusted Operating margin increased primarily due to restructuring and supply chain savings, partially offset by launch related costs.

Current wording

The PowerDrive Systems segment’s net sales increased $110 million, or 10%, and Segment Adjusted Operating Loss decreased $11 million from the six months ended June 30, 2025. Favorable volume, mix and net new business increased net sales by approximately $62 million due to higher sales in Europe and customer recoveries, partially offset by lower volumes in China. Additionally, foreign currencies resulted in a year-over-year increase in net sales of approximately $47 million primarily due to a strengthening of the Euro and Chinese Renminbi, partially offset by a weakening of the Korean Won, in each case relative to the U.S. Dollar. Segment Adjusted Operating margin was (5.2)% for the six months ended June 30, 2026, compared to (6.7)% during the six months ended June 30, 2025. The Segment Adjusted Operating margin loss decreased primarily due to customer recoveries and restructuring and supply chain savings, partially offset by launch- related costs and higher manufacturing costs.

Previous wording

The Company maintains various liquidity sources, including cash and cash equivalents and the undrawn portion of its multi-currency revolving credit agreement. As of March 31, 2026, the Company had liquidity of $4.1 billion, comprised of cash and cash equivalent balances of $2.1 billion and an undrawn multi-currency revolving credit facility of $2.0 billion. As of March 31, 2026, the Company was in full compliance with its covenants under the revolving credit facility and had full access to the undrawn amount under the revolving credit facility. Given the Company’s strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants under the revolving credit facility through at least the next 12 months.

Current wording

As of June 30, 2026, the Company was in full compliance with its covenants under the revolving credit facility and had full access to the undrawn amount under the revolving credit facility. Given the Company’s strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants under the revolving credit facility through at least the next 12 months.

Previous wording

As of March 31, 2026, cash balances of $1.2 billion were held by the Company’s subsidiaries outside the United States. Cash and cash equivalents held by these subsidiaries are used to fund foreign operational activities and future investments, including acquisitions. The majority of cash and cash equivalents held outside the United States is available for repatriation. The Company uses its U.S. liquidity primarily for various corporate purposes, including but not limited to debt service, share repurchases, dividend distributions, acquisitions and other corporate expenses.

Current wording

As of June 30, 2026, cash balances of $1.4 billion were held by the Company’s subsidiaries outside of the United States. Cash and cash equivalents held by these subsidiaries are used to fund foreign operational activities and future investments, including acquisitions. The majority of cash and cash equivalents held outside the United States is available for repatriation. The Company uses its U.S. liquidity primarily for various corporate purposes, including but not limited to debt service, share repurchases, dividend distributions, acquisitions and other corporate expenses.

Previous wording

On each of February 5, 2026 and April 29, 2026, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per share of common stock. The dividend declared in the first quarter was paid on March 16, 2026, and the dividend declared in the second quarter will be paid on June 15, 2026.

Current wording

On each of February 5, 2026, April 29, 2026 and July 30, 2026, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per share of common stock. The dividends declared in the first quarter and second quarter were paid on March 16, 2026, and June 15, 2026, respectively. The dividend declared in the third quarter will be paid on September 15, 2026.

Previous wording

Net cash provided by operating activities was $152 million during the three months ended March 31, 2026 compared to $82 million for the three months ended March 31, 2025. The increase for the three months ended March 31, 2026 was primarily due to changes in working capital.

Current wording

Net cash provided by operating activities was $738 million during the six months ended June 30, 2026 compared to $661 million for the six months ended June 30, 2025. The increase for the six months ended June 30, 2026 was primarily due to stronger accounts receivable and payable performance.

Previous wording

Net cash used in investing activities was $130 million during the three months ended March 31, 2026 compared to $94 million during the three months ended March 31, 2025. As a percentage of sales, capital expenditures, net of customer advances, were 3.9% and 3.3% for the three months ended March 31, 2026 and 2025, respectively. The year-over-year increase in capital expenditures was primarily driven higher eProduct and power generation industrial solutions investments.

Current wording

Net cash used in investing activities was $225 million during the six months ended June 30, 2026 compared to $158 million during the six months ended June 30, 2025. As a percentage of sales, capital expenditures, net of customer advances, were 3.2% and 2.6% for the six months ended June 30, 2026 and 2025, respectively. The year-over-year increase in capital expenditures was primarily driven by higher eProduct and power generation industrial solutions investments.

Previous wording

Net cash used in financing activities was $218 million during the three months ended March 31, 2026 compared to $397 million during the three months ended March 31, 2025. Net cash used in financing activities during the three months ended March 31, 2026 was primarily related to $150 million of BorgWarner share repurchases and $35 million in dividends paid to the Company’s stockholders. Net cash used in financing activities during the three months ended March 31, 2025, was primarily related to $346 million of debt repayments associated with the maturity of the Company’s 3.375% senior notes on March 15, 2025, and $24 million in dividends paid to the Company’s stockholders.

Current wording

Net cash used in financing activities was $368 million during the six months ended June 30, 2026 compared to $606 million during the six months ended June 30, 2025. Net cash used in financing activities during the six months ended June 30, 2026 was primarily related to $250 million of BorgWarner share repurchases and $69 million in dividends paid to the Company’s stockholders. Net cash used in financing activities during the six months ended June 30, 2025, was primarily related to $403 million of debt repayments associated with the maturity of the Company’s 3.375% senior notes on March 15, 2025, $108 million of BorgWarner share repurchases and $48 million in dividends paid to the Company’s stockholders.